Fourth Quarter Revenues of $1.67 Billion;
Diluted Earnings Per Share of $1.85 Repurchased 3.6 Million
Shares
KB Home (NYSE: KBH) today reported results for its fourth
quarter and year ended November 30, 2023.
“We ended the year with solid fourth quarter results,
outperforming on key financial metrics relative to our guidance,
including homes delivered that exceeded our expectations,
reflecting improved build times. In addition, we generated
considerable cash flow and continued to return capital to
shareholders, repurchasing a significant amount of our common stock
at well-below book value,” said Jeffrey Mezger, Chairman, President
and Chief Executive Officer. “Our performance for the quarter,
against a backdrop of evolving market conditions, contributed to
healthy fiscal 2023 results. For the full year, we produced
revenues of $6.4 billion and diluted earnings per share above
$7.00, which together with our repurchasing 11.0% of our
outstanding shares since the start of the fiscal year, drove our
book value per share to over $50.00, up 15% from the previous
year.”
“We have experienced a meaningful sequential increase in our net
orders for the first five weeks of our 2024 first quarter, as
consumers are responding favorably to the recent decline in
mortgage rates. With improving market conditions and our projected
community count growth for 2024, we believe we are well-positioned
to meet buyer demand. Our objectives remain consistent, focused on
growing our profitable business and allocating our substantial cash
flow to both land acquisition and development, as well as an
ongoing return of capital to our shareholders, supporting our
commitment toward driving long-term value,” concluded Mezger.
Three Months Ended November 30, 2023
(comparisons on a year-over-year basis)
- Revenues totaled $1.67 billion, compared to $1.94 billion.
- Homes delivered decreased 10% to 3,407.
- Average selling price was $487,300, compared to $510,400.
- Homebuilding operating income totaled $180.9 million, compared
to $278.2 million. The homebuilding operating income margin was
10.9%, compared to 14.4%. Excluding total inventory-related charges
of $1.2 million for the current quarter and $27.9 million for the
year-earlier quarter, the homebuilding operating income margin was
10.9%, compared to 15.8%.
- The housing gross profit margin of 20.7% decreased 170 basis
points. Excluding the above-mentioned inventory-related charges,
the housing gross profit margin was 20.8%, down from 23.9%, mainly
due to price decreases and other homebuyer concessions, and higher
construction costs.
- Selling, general and administrative expenses as a percentage of
housing revenues increased 190 basis points to 9.9%, primarily due
to higher costs associated with certain performance-based employee
compensation plans and sales commissions, as well as reduced
operating leverage from lower housing revenues.
- Financial services pretax income rose to $12.2 million from
$6.7 million, primarily due to an increase in the equity in income
of the Company’s mortgage banking joint venture.
- Net income and diluted earnings per share were $150.3 million
and $1.85, respectively, compared to $216.4 million and $2.47.
- The effective tax rate was 24.7%, compared to 24.0%, with each
period including the favorable impact of federal tax credits the
Company recognized from building energy-efficient homes.
Twelve Months Ended November 30, 2023
(comparisons on a year-over-year basis)
- Revenues totaled $6.41 billion, compared to $6.90 billion.
- Homes delivered of 13,236 were down 4%.
- Average selling price was $481,300, compared to $500,800.
- Net income was $590.2 million, compared to $816.7 million.
- Diluted earnings per share were $7.03, compared to $9.09.
Backlog and Net Orders (comparisons on
a year-over-year basis, except as noted)
- Net orders for the fourth quarter were up 176% to 1,909, and
net order value grew 157% to $932.6 million. These increases
reflected improved demand and a lower cancellation rate as compared
to the year-earlier quarter.
- Monthly net orders per community increased to 2.7 from
1.0.
- Gross orders for the quarter were up 23% to 2,667, and the
cancellation rate as a percentage of gross orders improved to 28%,
compared to 68%.
- The number of homes in the Company’s ending backlog totaled
5,510, compared to 7,662. Ending backlog value was $2.67 billion,
compared to $3.69 billion.
- The Company’s average community count was essentially flat at
236, and ending community count decreased slightly to 242. On a
sequential basis, the ending community count increased 5%.
Balance Sheet as of November 30, 2023
(comparisons to November 30, 2022, except as noted)
- Cash and cash equivalents increased to $727.1 million, compared
to $328.5 million, primarily due to cash generated from operations,
partly offset by cash used for common stock repurchases and
repayments of cash borrowings under the Company’s unsecured
revolving credit facility.
- The Company had total liquidity of $1.81 billion, including
cash and cash equivalents and $1.08 billion of available capacity
under its unsecured revolving credit facility, with no cash
borrowings outstanding.
- Inventories totaled $5.13 billion, down 7%, reflecting the
Company’s lower land-related investments and fewer homes under
construction due to improved build times.
- The Company’s total investments in land and land development of
$1.80 billion for the year were down 25%, reflecting lower
land-related expenditures in the 2023 first half. For the 2023
fourth quarter, the Company’s investments in land and land
development increased to $483.3 million, up 9% compared to the
year-earlier period.
- The Company’s lots owned or under contract totaled 55,976,
compared to 68,795, mainly reflecting homes delivered, reduced land
acquisition and the abandonment of previously controlled lots. On a
sequential basis, the Company’s lot count was down slightly.
- Of the Company’s total lots, approximately 73% were owned and
27% were under contract, compared to 70% owned and 30% under
contract.
- Notes payable decreased by $148.6 million to $1.69 billion,
mainly due to repayments under the Company’s unsecured revolving
credit facility. The Company’s debt to capital ratio improved 270
basis points to 30.7%, compared to 33.4%.
- Stockholders’ equity increased to $3.81 billion, compared to
$3.66 billion, mainly reflecting net income, partly offset by
common stock repurchases.
- In the 2023 fourth quarter, the Company repurchased
approximately 3.6 million shares of its outstanding common stock at
a total cost of $161.8 million, bringing its total repurchases in
2023 to approximately 9.2 million shares at a total cost of $411.4
million, or $44.51 per share. As of November 30, 2023, the Company
had $163.6 million remaining under its current common stock
repurchase authorization.
- Based on the Company’s outstanding shares of 75.9 million, book
value per share of $50.22 increased 15% year over year.
- Return on equity was 15.7%, compared to 24.6%.
Guidance
The Company is providing the following guidance for its 2024
full year:
- Housing revenues in the range of $6.40 billion to $6.80
billion.
- Average selling price in the range of $480,000 to
$490,000.
- Homebuilding operating income as a percentage of revenues of
approximately 11.0%, assuming no inventory-related charges.
- Housing gross profit margin of approximately 21.0%, assuming no
inventory-related charges.
- Selling, general and administrative expenses as a percentage of
housing revenues of about 10.0%.
- Effective tax rate of approximately 24.0%.
- Ending community count of approximately 270, up 12%.
Conference Call
The conference call to discuss the Company’s 2023 fourth quarter
earnings will be broadcast live TODAY at 2:00 p.m. Pacific Time,
5:00 p.m. Eastern Time. To listen, please go to the Investor
Relations section of the Company’s website at kbhome.com.
About KB Home
KB Home is one of the largest and most recognized homebuilders
in the United States, operating in 47 markets from coast to coast,
and building over 680,000 quality homes in our more than 65-year
history. What sets KB Home apart is our focus on building strong,
personal relationships with every customer — from those buying
their first home to experienced buyers — so they have a real
partner in the homebuying process. No two KB homes are the same.
That’s because every home is uniquely built for each customer, at a
price that fits their budget. As the leader in energy-efficient
homebuilding, KB Home was the first national builder to make a
broad commitment to building ENERGY STAR® certified homes, a
standard that fewer than 10% of new homes nationwide meet, and KB
Home has built more ENERGY STAR certified homes than any other
builder. An energy-efficient KB home helps lower the cost of
ownership and is designed to deliver greater comfort and well-being
than new homes without certification. Reflecting the company’s
commitment to creating an exceptional homebuying experience, KB
Home is the #1 customer-ranked national homebuilder based on
homebuyer satisfaction surveys from a leading third-party review
site. Learn more about how we build homes built on relationships by
visiting kbhome.com.
Forward-Looking and Cautionary
Statements
Certain matters discussed in this press release, including any
statements that are predictive in nature or concern future market
and economic conditions, business and prospects, our future
financial and operational performance, or our future actions and
their expected results are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on current expectations and
projections about future events and are not guarantees of future
performance. We do not have a specific policy or intent of updating
or revising forward-looking statements. If we update or revise any
such statement(s), no assumption should be made that we will
further update or revise that statement(s) or update or revise any
other such statement(s). Actual events and results may differ
materially from those expressed or forecasted in forward-looking
statements due to a number of factors. The most important risk
factors that could cause our actual performance and future events
and actions to differ materially from such forward-looking
statements include, but are not limited to the following: general
economic, employment and business conditions; population growth,
household formations and demographic trends; conditions in the
capital, credit and financial markets; our ability to access
external financing sources and raise capital through the issuance
of common stock, debt or other securities, and/or project
financing, on favorable terms; the execution of any securities
repurchases pursuant to our board of directors’ authorization;
material and trade costs and availability, including building
materials and appliances, and delays related to state and municipal
construction, permitting, inspection and utility processes, which
have been disrupted by key equipment shortages; consumer and
producer price inflation; changes in interest rates, including
those set by the Federal Reserve, which the Federal Reserve has
increased sharply over the past year and may further increase to
moderate inflation, and those available in the capital markets or
from financial institutions and other lenders, and applicable to
mortgage loans; our debt level, including our ratio of debt to
capital, and our ability to adjust our debt level and maturity
schedule; our compliance with the terms of our revolving credit
facility and our senior unsecured term loan; the ability or
willingness of the applicable lenders and financial institutions,
or any substitute or additional lenders and financial institutions,
to meet their commitments or fund borrowings, extend credit or
provide payment guarantees to or for us under our revolving credit
facility or unsecured letter of credit facility; volatility in the
market price of our common stock; home selling prices, including
our homes’ selling prices, being unaffordable relative to consumer
incomes; weak or declining consumer confidence, either generally or
specifically with respect to purchasing homes; competition from
other sellers of new and resale homes; weather events, significant
natural disasters and other climate and environmental factors, such
as a lack of adequate water supply to permit new home communities
in certain areas; any failure of lawmakers to agree on a budget or
appropriation legislation to fund the federal government’s
operations (also known as a government shutdown), and financial
markets’ and businesses’ reactions to any such failure; government
actions, policies, programs and regulations directed at or
affecting the housing market (including the tax benefits associated
with purchasing and owning a home, and the standards, fees and size
limits applicable to the purchase or insuring of mortgage loans by
government-sponsored enterprises and government agencies), the
homebuilding industry, or construction activities; changes in
existing tax laws or enacted corporate income tax rates, including
those resulting from regulatory guidance and interpretations issued
with respect thereto, such as the Internal Revenue Service’s recent
guidance regarding heightened qualification requirements for
federal tax credits for building energy-efficient homes; changes in
U.S. trade policies, including the imposition of tariffs and duties
on homebuilding materials and products, and related trade disputes
with and retaliatory measures taken by other countries; disruptions
in world and regional trade flows, economic activity and supply
chains due to the military conflict and other attacks in the Middle
East region and military conflict in Ukraine, including those
stemming from wide-ranging sanctions the U.S. and other countries
have imposed or may further impose on Russian business sectors,
financial organizations, individuals and raw materials, the impact
of which may, among other things, increase our operational costs,
exacerbate building materials and appliance shortages and/or reduce
our revenues and earnings; the adoption of new or amended financial
accounting standards and the guidance and/or interpretations with
respect thereto; the availability and cost of land in desirable
areas and our ability to timely and efficiently develop acquired
land parcels and open new home communities; impairment, land option
contract abandonment or other inventory-related charges, including
any stemming from decreases in the value of our land assets; our
warranty claims experience with respect to homes previously
delivered and actual warranty costs incurred; costs and/or charges
arising from regulatory compliance requirements or from legal,
arbitral or regulatory proceedings, investigations, claims or
settlements, including unfavorable outcomes in any such matters
resulting in actual or potential monetary damage awards, penalties,
fines or other direct or indirect payments, or injunctions, consent
decrees or other voluntary or involuntary restrictions or
adjustments to our business operations or practices that are beyond
our current expectations and/or accruals; our ability to
use/realize the net deferred tax assets we have generated; our
ability to successfully implement our current and planned
strategies and initiatives related to our product, geographic and
market positioning, gaining share and scale in our served markets
and in entering into new markets; our operational and investment
concentration in markets in California; consumer interest in our
new home communities and products, particularly from first-time
homebuyers and higher-income consumers; our ability to generate
orders and convert our backlog of orders to home deliveries and
revenues, particularly in key markets in California; our ability to
successfully implement our business strategies and achieve any
associated financial and operational targets and objectives,
including those discussed in this release or in any of our other
public filings, presentations or disclosures; income tax expense
volatility associated with stock-based compensation; the ability of
our homebuyers to obtain homeowners and flood insurance policies,
and/or typical or lender-required policies for other hazards or
events, for their homes, which may depend on the ability and
willingness of insurers or government-funded or -sponsored programs
to offer coverage at an affordable price or at all; the ability of
our homebuyers to obtain residential mortgage loans and mortgage
banking services, which may depend on the ability and willingness
of lenders and financial institutions to offer such loans and
services to our homebuyers; the performance of mortgage lenders to
our homebuyers; the performance of KBHS; the ability and
willingness of lenders and financial institutions to extend credit
facilities to KBHS to fund its originated mortgage loans;
information technology failures and data security breaches; an
epidemic, pandemic or significant seasonal or other disease
outbreak, and the control response measures that international,
federal, state and local governments, agencies, law enforcement
and/or health authorities implement to address it, which may
precipitate or exacerbate one or more of the above-mentioned and/or
other risks, and significantly disrupt or prevent us from operating
our business in the ordinary course for an extended period;
widespread protests and/or civil unrest, whether due to political
events, social movements or other reasons; and other events outside
of our control. Please see our periodic reports and other filings
with the Securities and Exchange Commission for a further
discussion of these and other risks and uncertainties applicable to
our business.
KB HOME
CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Three Months and Twelve
Months Ended November 30, 2023 and 2022
(In Thousands, Except Per Share
Amounts)
Three Months Ended November
30,
Twelve Months Ended November
30,
2023
2022
2023
2022
Total revenues
$
1,673,988
$
1,940,030
$
6,410,629
$
6,903,776
Homebuilding:
Revenues
$
1,665,004
$
1,932,494
$
6,381,106
$
6,880,362
Costs and expenses
(1,484,100
)
(1,654,252
)
(5,662,369
)
(5,842,988
)
Operating income
180,904
278,242
718,737
1,037,374
Interest income
6,071
437
13,759
704
Equity in income (loss) of unconsolidated
joint ventures
469
(478
)
(713
)
(865
)
Loss on early extinguishment of debt
—
—
—
(3,598
)
Homebuilding pretax income
187,444
278,201
731,783
1,033,615
Financial services:
Revenues
8,984
7,536
29,523
23,414
Expenses
(1,366
)
(1,543
)
(5,726
)
(5,762
)
Equity in income of unconsolidated joint
ventures
4,540
716
15,697
20,799
Financial services pretax income
12,158
6,709
39,494
38,451
Total pretax income
199,602
284,910
771,277
1,072,066
Income tax expense
(49,300
)
(68,500
)
(181,100
)
(255,400
)
Net income
$
150,302
$
216,410
$
590,177
$
816,666
Earnings per share:
Basic
$
1.91
$
2.54
$
7.25
$
9.35
Diluted
$
1.85
$
2.47
$
7.03
$
9.09
Weighted average shares
outstanding:
Basic
77,986
84,821
80,842
86,861
Diluted
80,511
87,160
83,380
89,348
KB HOME
CONSOLIDATED BALANCE
SHEETS
(In Thousands)
November 30, 2023
November 30, 2022
Assets
Homebuilding:
Cash and cash equivalents
$
727,076
$
328,517
Receivables
366,862
322,767
Inventories
5,133,646
5,543,176
Investments in unconsolidated joint
ventures
59,128
46,785
Property and equipment, net
88,309
89,234
Deferred tax assets, net
119,475
160,868
Other assets
96,987
101,051
6,591,483
6,592,398
Financial services
56,879
59,532
Total assets
$
6,648,362
$
6,651,930
Liabilities and stockholders’
equity
Homebuilding:
Accounts payable
$
388,452
$
412,525
Accrued expenses and other liabilities
758,227
736,971
Notes payable
1,689,898
1,838,511
2,836,577
2,988,007
Financial services
1,645
3,128
Stockholders’ equity
3,810,140
3,660,795
Total liabilities and stockholders’
equity
$
6,648,362
$
6,651,930
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Twelve
Months Ended November 30, 2023 and 2022
(In Thousands, Except Average
Selling Price)
Three Months Ended November
30,
Twelve Months Ended November
30,
2023
2022
2023
2022
Homebuilding revenues:
Housing
$
1,660,354
$
1,932,494
$
6,370,421
$
6,880,362
Land
4,650
—
10,685
—
Total
$
1,665,004
$
1,932,494
$
6,381,106
$
6,880,362
Homebuilding costs and
expenses:
Construction and land costs
Housing
$
1,315,935
$
1,498,939
$
5,020,783
$
5,210,802
Land
4,581
—
9,492
2,541
Subtotal
1,320,516
1,498,939
5,030,275
5,213,343
Selling, general and administrative
expenses
163,584
155,313
632,094
629,645
Total
$
1,484,100
$
1,654,252
$
5,662,369
$
5,842,988
Interest expense:
Interest incurred
$
26,477
$
31,757
$
107,086
$
120,859
Interest capitalized
(26,477
)
(31,757
)
(107,086
)
(120,859
)
Total
$
—
$
—
$
—
$
—
Other information:
Amortization of previously capitalized
interest
$
30,832
$
36,727
$
118,205
$
136,484
Depreciation and amortization
10,283
8,896
39,794
34,641
Average selling price:
West Coast
$
679,400
$
736,900
$
689,800
$
728,700
Southwest
431,500
439,700
431,200
428,300
Central
381,300
432,100
405,500
403,100
Southeast
405,200
385,200
396,900
370,300
Total
$
487,300
$
510,400
$
481,300
$
500,800
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Twelve
Months Ended November 30, 2023 and 2022
(Dollars in Thousands)
Three Months Ended November
30,
Twelve Months Ended November
30,
2023
2022
2023
2022
Homes delivered:
West Coast
1,045
1,087
3,365
4,186
Southwest
668
654
2,699
2,592
Central
1,011
1,197
4,506
4,339
Southeast
683
848
2,666
2,621
Total
3,407
3,786
13,236
13,738
Net orders:
West Coast
561
330
3,623
3,032
Southwest
471
193
2,386
2,090
Central
466
100
2,784
3,417
Southeast
411
69
2,291
2,317
Total
1,909
692
11,084
10,856
Net order value:
West Coast
$
379,128
$
200,933
$
2,423,459
$
2,208,610
Southwest
212,791
87,081
1,032,334
947,758
Central
165,058
48,139
965,994
1,520,520
Southeast
175,667
26,586
924,754
943,308
Total
$
932,644
$
362,739
$
5,346,541
$
5,620,196
November 30, 2023
November 30, 2022
Homes
Value
Homes
Value
Backlog data:
West Coast
1,545
$
1,025,381
1,287
$
923,015
Southwest
1,379
616,717
1,692
748,296
Central
1,267
458,593
2,989
1,319,862
Southeast
1,319
566,988
1,694
700,386
Total
5,510
$
2,667,679
7,662
$
3,691,559
KB HOME
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In Thousands, Except
Percentages)
This press release contains, and Company management’s discussion
of the results presented in this press release may include,
information about the Company’s adjusted housing gross profit
margin, which is not calculated in accordance with generally
accepted accounting principles (“GAAP”). The Company believes this
non-GAAP financial measure is relevant and useful to investors in
understanding its operations, and may be helpful in comparing the
Company with other companies in the homebuilding industry to the
extent they provide similar information. However, because it is not
calculated in accordance with GAAP, this non-GAAP financial measure
may not be completely comparable to other companies in the
homebuilding industry and, thus, should not be considered in
isolation or as an alternative to operating performance and/or
financial measures prescribed by GAAP. Rather, this non-GAAP
financial measure should be used to supplement the most directly
comparable GAAP financial measure in order to provide a greater
understanding of the factors and trends affecting the Company’s
operations.
Adjusted Housing Gross Profit
Margin
The following table reconciles the Company’s housing gross
profit margin calculated in accordance with GAAP to the non-GAAP
financial measure of the Company’s adjusted housing gross profit
margin:
Three Months Ended November
30,
Twelve Months Ended November
30,
2023
2022
2023
2022
Housing revenues
$
1,660,354
$
1,932,494
$
6,370,421
$
6,880,362
Housing construction and land costs
(1,315,935
)
(1,498,939
)
(5,020,783
)
(5,210,802
)
Housing gross profits
344,419
433,555
1,349,638
1,669,560
Add: Inventory-related charges (a)
1,217
27,930
11,424
34,760
Adjusted housing gross profits
$
345,636
$
461,485
$
1,361,062
$
1,704,320
Housing gross profit margin
20.7
%
22.4
%
21.2
%
24.3
%
Adjusted housing gross profit margin
20.8
%
23.9
%
21.4
%
24.8
%
(a)
Represents inventory impairment and land
option contract abandonment charges associated with housing
operations.
Adjusted housing gross profit margin is a non-GAAP financial
measure, which the Company calculates by dividing housing revenues
less housing construction and land costs excluding housing
inventory impairment and land option contract abandonment charges
(as applicable) recorded during a given period, by housing
revenues. The most directly comparable GAAP financial measure is
housing gross profit margin. The Company believes adjusted housing
gross profit margin is a relevant and useful financial measure to
investors in evaluating the Company’s performance as it measures
the gross profits the Company generated specifically on the homes
delivered during a given period. This non-GAAP financial measure
isolates the impact that housing inventory impairment and land
option contract abandonment charges have on housing gross profit
margins, and allows investors to make comparisons with the
Company’s competitors that adjust housing gross profit margins in a
similar manner. The Company also believes investors will find
adjusted housing gross profit margin relevant and useful because it
represents a profitability measure that may be compared to a prior
period without regard to variability of housing inventory
impairment and land option contract abandonment charges. This
financial measure assists management in making strategic decisions
regarding community location and product mix, product pricing and
construction pace.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240109638215/en/
Jill Peters, Investor Relations Contact (310) 893-7456 or
jpeters@kbhome.com Cara Kane, Media Contact (321) 299-6844 or
ckane@kbhome.com
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