Core Insights - KB Home reported a total revenue of approximately $1.1 billion and diluted earnings per share of $0.52 for the quarter ended February 28, with housing revenue down 23% year over year to $1.07 billion [2][4] - The average selling price of homes fell 10% year over year to $452,000, attributed to regional and product mix as well as broader market conditions [1][7] - The company is shifting back to a built-to-order (BTO) sales model, which is expected to improve margins and predictability, with a target of at least 70% BTO in the second half of fiscal 2026 [3][6][8] Financial Performance - Total revenue for the quarter was reported at $1.08 billion, with 2,370 homes delivered, reflecting a significant decline in housing revenue [2][7] - The adjusted housing gross profit margin was 15.5%, down approximately 480 basis points from the previous year, primarily due to pricing pressure and higher land costs [1][7] - The company lowered its full-year guidance to $4.8 billion to $5.5 billion in revenue and 10,000 to 11,500 deliveries due to weaker orders and geopolitical uncertainty [4][16] Strategic Initiatives - Management emphasized a strategic "reset" towards a predominantly built-to-order sales mix, which is expected to enhance margins and build backlog [3][6] - The BTO sales mix improved from 44% to over 70% in early March, with expectations for continued growth in the second half of the year [6][8] - The transition to the BTO model may create a temporary decline in deliveries as inventory starts are intentionally slowed [9] Market Conditions and Demand - Consumer confidence remains "tepid," with elevated mortgage rates and affordability pressures impacting demand [13] - Despite healthy traffic and the lowest cancellation rates in four years, orders were below internal expectations, leading to a reduction in delivery guidance [14][16] - The company expects backlog turnover of roughly 60% to 70% under the BTO approach, which is anticipated to improve cash management [10] Capital Allocation and Balance Sheet - KB Home repurchased 843,000 shares for $50 million in Q1, with $850 million remaining under its repurchase authorization [5][19] - The company ended the quarter with $1.2 billion in liquidity, including $201 million in cash, and a debt-to-capital ratio of 32.9% [21] - KB Home invested $567 million in land and development during the quarter, while also controlling over 63,000 lots [20]