Revenues Grew 6% to
Net Orders Up 55%; Net Order Value Increased 58% to
Repurchased
"Fiscal 2024 is off to a strong start, as we generated solid results in our first quarter that were either at or above the high end of our guidance ranges. Market conditions have improved since the end of our 2023 fiscal year, contributing to the significant year‐over‐year increase in our net orders for the quarter,” said
“With a healthy balance sheet and strong cash flow, we continue to prioritize investing in land acquisition and development, as well as returning capital to our stockholders. In the 2024 first quarter, we increased our investments in land and land development and continued to repurchase our common stock. While positioning the Company for growth, we also intend to make additional share repurchases in 2024, as we remain focused on creating long‐term stockholder value,” concluded Mezger.
Three Months Ended
-
Revenues up 6% to
$1.47 billion . - Homes delivered increased 9% to 3,037.
-
Average selling price was
$480,100 , compared to$494,500 . -
Homebuilding operating income totaled
$157.7 million , up slightly from$156.5 million . The homebuilding operating income margin was 10.8%, compared to 11.4%. Excluding total inventory-related charges of$1.3 million for the current quarter and$5.3 million for the year-earlier quarter, the homebuilding operating income margin was 10.9%, compared to 11.7%.- The housing gross profit margin of 21.5% was even with the year-earlier quarter. Excluding the above-mentioned inventory-related charges, the housing gross profit margin was 21.6%, compared to 21.8%.
- Selling, general and administrative expenses as a percentage of housing revenues were 10.8%, compared to 10.1%, mainly reflecting higher costs including marketing, advertising and other expenses associated with the planned increase in our community count during the year as we position our operations for growth.
-
Financial services pretax income rose to
$11.6 million from$6.0 million , primarily due to increased equity in income of the Company’s mortgage banking joint venture. This was largely driven by a higher volume of both interest rate locks and loan originations, as more homes were delivered in the current period and 85% of the buyers financing their home purchases used the joint venture, up from 79%. -
Net income increased 10% to
$138.7 million . Diluted earnings per share grew 21% to$1.76 , reflecting the favorable impact of the Company’s common stock repurchases over the past several quarters.- The effective tax rate was 20.6%, compared to 22.6%, largely due to an increase in tax benefits related to stock-based compensation in the current period.
Backlog and
-
Net orders grew 55% to 3,323 due to improved demand and a lower cancellation rate as compared to the year-earlier quarter. Net order value rose 58% to
$1.58 billion , reflecting the growth in net orders and a higher average selling price of those orders.- Monthly net orders per community increased to 4.6 from 2.8.
- Gross orders were up 15% to 3,873, and the cancellation rate as a percentage of gross orders improved to 14%, compared to 36%.
-
The number of homes in the Company’s ending backlog totaled 5,796, compared to 7,016. Ending backlog value was
$2.79 billion , compared to$3.31 billion . Ending backlog homes and value each increased 5% from the previous quarter. - The Company’s average community count was down 4% to 240, and ending community count decreased 7% to 238. On a sequential basis, the average community count expanded 2%.
Balance Sheet as of
-
The Company had total liquidity of
$1.75 billion , including$668.1 million of cash and cash equivalents and$1.08 billion of available capacity under its unsecured revolving credit facility, with no cash borrowings outstanding. -
Inventories totaled
$5.24 billion , up 2%.-
The Company’s total investments in land and land development of
$587.1 million increased 60% from the year-earlier quarter. - The Company’s lots owned or under contract totaled 55,509, of which approximately 72% were owned and 28% were under contract.
-
The Company’s total investments in land and land development of
-
Notes payable of
$1.69 billion were essentially unchanged. The Company’s debt to capital ratio improved 30 basis points to 30.4%, compared to 30.7%. On a year-over-year basis, the debt to capital ratio improved 220 basis points from 32.6%. -
Stockholders’ equity increased to
$3.88 billion , compared to$3.81 billion , mainly reflecting net income, partly offset by common stock repurchases and cash dividends.-
In the 2024 first quarter, the Company repurchased 826,663 shares of its outstanding common stock at a total cost of
$50.0 million . As ofFebruary 29, 2024 , the Company had$113.6 million remaining under its current common stock repurchase authorization. -
Based on the Company’s 75.9 million outstanding shares as of
February 29, 2024 , book value per share of$51.14 increased 14% year over year.
-
In the 2024 first quarter, the Company repurchased 826,663 shares of its outstanding common stock at a total cost of
Guidance
The Company is providing the following guidance for its 2024 full year:
-
Housing revenues in the range of
$6.50 billion to$6.90 billion . -
Average selling price in the range of
$480,000 to$490,000 . -
Homebuilding operating income as a percentage of revenues in the range of 10.9% to 11.3%, assuming no inventory-related charges.
- Housing gross profit margin in the range of 21.0% to 21.4%, assuming no inventory-related charges.
- Selling, general and administrative expenses as a percentage of housing revenues of approximately 10.2%.
- Effective tax rate of approximately 23.0%.
- Ending community count of about 260, up 7% year over year.
The Company plans to also provide guidance for its 2024 second quarter on its conference call today.
Conference Call
The conference call to discuss the Company’s 2024 first quarter earnings will be broadcast live TODAY at
About
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
|
|||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
For the Three Months Ended |
|||||||
(In Thousands, Except Per Share Amounts – Unaudited) |
|||||||
|
Three Months Ended |
||||||
|
|
|
|
||||
Total revenues |
$ |
1,467,766 |
|
|
$ |
1,384,314 |
|
Homebuilding: |
|
|
|
||||
Revenues |
$ |
1,461,698 |
|
|
$ |
1,378,537 |
|
Costs and expenses |
|
(1,304,022 |
) |
|
|
(1,222,048 |
) |
Operating income |
|
157,676 |
|
|
|
156,489 |
|
Interest income |
|
5,857 |
|
|
|
467 |
|
Equity in loss of unconsolidated joint ventures |
|
(445 |
) |
|
|
(757 |
) |
Homebuilding pretax income |
|
163,088 |
|
|
|
156,199 |
|
Financial services: |
|
|
|
||||
Revenues |
|
6,068 |
|
|
|
5,777 |
|
Expenses |
|
(1,546 |
) |
|
|
(1,358 |
) |
Equity in income of unconsolidated joint ventures |
|
7,055 |
|
|
|
1,582 |
|
Financial services pretax income |
|
11,577 |
|
|
|
6,001 |
|
Total pretax income |
|
174,665 |
|
|
|
162,200 |
|
Income tax expense |
|
(36,000 |
) |
|
|
(36,700 |
) |
Net income |
$ |
138,665 |
|
|
$ |
125,500 |
|
Earnings per share: |
|
|
|
||||
Basic |
$ |
1.81 |
|
|
$ |
1.49 |
|
Diluted |
$ |
1.76 |
|
|
$ |
1.45 |
|
Weighted average shares outstanding: |
|
|
|
||||
Basic |
|
75,894 |
|
|
|
83,468 |
|
Diluted |
|
78,264 |
|
|
|
85,995 |
|
|
|||||||
CONSOLIDATED BALANCE SHEETS |
|||||||
(In Thousands – Unaudited) |
|||||||
|
|
|
|
||||
Assets |
|
|
|
||||
Homebuilding: |
|
|
|
||||
Cash and cash equivalents |
$ |
668,084 |
|
$ |
727,076 |
||
Receivables |
|
354,728 |
|
|
|
366,862 |
|
Inventories |
|
5,243,581 |
|
|
|
5,133,646 |
|
Investments in unconsolidated joint ventures |
|
59,674 |
|
|
|
59,128 |
|
Property and equipment, net |
|
88,433 |
|
|
|
88,309 |
|
Deferred tax assets, net |
|
117,175 |
|
|
|
119,475 |
|
Other assets |
|
93,411 |
|
|
|
96,987 |
|
|
|
6,625,086 |
|
|
|
6,591,483 |
|
Financial services |
|
58,406 |
|
|
|
56,879 |
|
Total assets |
$ |
6,683,492 |
|
|
$ |
6,648,362 |
|
|
|
|
|
||||
Liabilities and stockholders’ equity |
|
|
|
||||
Homebuilding: |
|
|
|
||||
Accounts payable |
$ |
378,906 |
|
|
$ |
388,452 |
|
Accrued expenses and other liabilities |
|
728,328 |
|
|
|
758,227 |
|
Notes payable |
|
1,692,729 |
|
|
|
1,689,898 |
|
|
|
2,799,963 |
|
|
|
2,836,577 |
|
Financial services |
|
859 |
|
|
|
1,645 |
|
Stockholders’ equity |
|
3,882,670 |
|
|
|
3,810,140 |
|
Total liabilities and stockholders’ equity |
$ |
6,683,492 |
|
|
$ |
6,648,362 |
|
|
|||||||
SUPPLEMENTAL INFORMATION |
|||||||
For the Three Months Ended |
|||||||
(In Thousands, Except Average Selling Price – Unaudited) |
|||||||
|
|
|
|
||||
|
Three Months Ended |
||||||
|
|
|
|
||||
Homebuilding revenues: |
|
|
|
||||
Housing |
$ |
1,458,126 |
|
|
$ |
1,378,537 |
|
Land |
|
3,572 |
|
|
|
— |
|
Total |
$ |
1,461,698 |
|
|
$ |
1,378,537 |
|
|
|
|
|
||||
|
|
|
|
||||
Homebuilding costs and expenses: |
|
|
|
||||
Construction and land costs |
|
|
|
||||
Housing |
$ |
1,144,427 |
|
|
$ |
1,082,821 |
|
Land |
|
2,101 |
|
|
|
— |
|
Subtotal |
|
1,146,528 |
|
|
|
1,082,821 |
|
Selling, general and administrative expenses |
|
157,494 |
|
|
|
139,227 |
|
Total |
$ |
1,304,022 |
|
|
$ |
1,222,048 |
|
|
|
|
|
||||
|
|
|
|
||||
Interest expense: |
|
|
|
||||
Interest incurred |
$ |
26,505 |
|
|
$ |
27,804 |
|
Interest capitalized |
|
(26,505 |
) |
|
|
(27,804 |
) |
Total |
$ |
— |
|
|
$ |
— |
|
|
|
|
|
||||
|
|
|
|
||||
Other information: |
|
|
|
||||
Amortization of previously capitalized interest |
$ |
26,503 |
|
|
$ |
26,136 |
|
Depreciation and amortization |
|
10,195 |
|
|
|
9,547 |
|
|
|
|
|
||||
|
|
|
|
||||
Average selling price: |
|
|
|
||||
|
$ |
673,800 |
|
|
$ |
687,000 |
|
Southwest |
|
450,700 |
|
|
|
447,000 |
|
Central |
|
364,700 |
|
|
|
417,100 |
|
Southeast |
|
417,700 |
|
|
|
393,600 |
|
Total |
$ |
480,100 |
|
|
$ |
494,500 |
|
|
||||||||||||||
SUPPLEMENTAL INFORMATION |
||||||||||||||
For the Three Months Ended |
||||||||||||||
(Dollars in Thousands – Unaudited) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
Three Months Ended |
|||||||||
|
|
|
|
|
|
|
|
|||||||
Homes delivered: |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
828 |
|
|
|
786 |
|
|||
Southwest |
|
|
|
|
|
717 |
|
|
|
536 |
|
|||
Central |
|
|
|
|
|
870 |
|
|
|
935 |
|
|||
Southeast |
|
|
|
|
|
622 |
|
|
|
531 |
|
|||
Total |
|
|
|
|
|
3,037 |
|
|
|
2,788 |
|
|||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Net orders: |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
950 |
|
|
|
857 |
|
|||
Southwest |
|
|
|
|
|
698 |
|
|
|
470 |
|
|||
Central |
|
|
|
|
|
1,017 |
|
|
|
411 |
|
|||
Southeast |
|
|
|
|
|
658 |
|
|
|
404 |
|
|||
Total |
|
|
|
|
|
3,323 |
|
|
|
2,142 |
|
|||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Net order value: |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
$ |
633,400 |
|
$ |
535,539 |
|||||
Southwest |
|
|
|
|
|
314,863 |
|
|
|
177,392 |
|
|||
Central |
|
|
|
|
|
363,923 |
|
|
|
139,468 |
|
|||
Southeast |
|
|
|
|
|
270,005 |
|
|
|
149,469 |
|
|||
Total |
|
|
|
|
$ |
1,582,191 |
|
|
$ |
1,001,868 |
|
|||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|||||||||||
|
Homes |
|
Value |
|
Homes |
|
Value |
|||||||
Backlog data: |
|
|
|
|
|
|
|
|||||||
|
1,667 |
|
$ |
1,100,889 |
|
|
1,358 |
|
|
$ |
918,535 |
|
||
Southwest |
1,360 |
|
|
|
608,455 |
|
|
|
1,626 |
|
|
|
686,101 |
|
Central |
1,414 |
|
|
|
505,194 |
|
|
|
2,465 |
|
|
|
1,069,380 |
|
Southeast |
1,355 |
|
|
|
577,206 |
|
|
|
1,567 |
|
|
|
640,874 |
|
Total |
5,796 |
|
|
$ |
2,791,744 |
|
|
|
7,016 |
|
|
$ |
3,314,890 |
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
(In Thousands, Except Percentages – Unaudited) |
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 |
||||||
|
|
|
|
||||
Housing revenues |
$ |
1,458,126 |
|
|
$ |
1,378,537 |
|
Housing construction and land costs |
|
(1,144,427 |
) |
|
|
(1,082,821 |
) |
Housing gross profits |
|
313,699 |
|
|
|
295,716 |
|
Add: Inventory-related charges (a) |
|
1,298 |
|
|
|
5,289 |
|
Adjusted housing gross profits |
$ |
314,997 |
|
|
$ |
301,005 |
|
Housing gross profit margin |
|
21.5 |
% |
|
|
21.5 |
% |
Adjusted housing gross profit margin |
|
21.6 |
% |
|
|
21.8 |
% |
(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/20240320665090/en/
(310) 893-7456 or jpeters@kbhome.com
(321) 299-6844 or ckane@kbhome.com
Source: