KB Home Reports 2024 Third Quarter Results
Revenues Increased 10% to
Repurchased
“In the third quarter, we achieved strong year-over-year growth in both revenues and diluted earnings per share,” said
“While we navigate current market dynamics, we continue to position our Company to accomplish our longer-term objectives of profitably expanding our scale and driving higher returns. At the same time, we are maintaining a balanced approach in redeploying our cash toward reinvesting in our growth and returning capital to our stockholders. In the third quarter, we increased our investment in land acquisition and development by more than 50% year over year, to nearly
Three Months Ended
-
Revenues grew 10% to
$1.75 billion . - Homes delivered increased 8% to 3,631.
-
Average selling price rose 3% to
$480,900 . -
Homebuilding operating income increased 5% to
$189.0 million . The homebuilding operating income margin was 10.8%, compared to 11.3%. Excluding total inventory-related charges of$1.2 million for the current quarter and$.6 million for the year-earlier quarter, the homebuilding operating income margin was 10.9%, compared to 11.4%.- The housing gross profit margin was 20.6%, compared to 21.5%. Excluding the above-mentioned inventory-related charges, the housing gross profit margin was 20.7%, compared to 21.5%. These decreases were mainly due to product and geographic mix.
- Selling, general and administrative expenses as a percentage of housing revenues were 9.8%, compared to 10.2%, primarily reflecting increased operating leverage from higher housing revenues.
-
Financial services pretax income grew 11% to
$11.0 million , mainly due to increased equity in income of the Company’s mortgage banking joint venture. This reflected a higher volume of both loan originations and interest rate locks, as 88% of the buyers financing their home purchases in the current quarter used the joint venture, up from 84%. -
Net income rose 5% to
$157.3 million . Diluted earnings per share grew 13% to$2.04 , driven by higher net income and the favorable impact of the Company’s common stock repurchases over the past several quarters.- The effective tax rate was 24.2%, compared to 22.9%.
Nine Months Ended
-
Revenues increased 4% to
$4.93 billion . - Homes delivered were up 4% to 10,191.
-
Average selling price was
$481,400 , compared to$479,200 . -
Net income grew 6% to
$464.4 million . -
Diluted earnings per share increased 15% to
$5.94 .
Backlog and
-
Net orders for the quarter were essentially the same at 3,085. Net order value increased 2% to
$1.54 billion , reflecting a higher average selling price of net orders.- Monthly net orders per community were 4.1, compared to 4.3.
- The cancellation rate as a percentage of gross orders improved to 15% from 21%.
-
Ending backlog homes totaled 5,724, compared to 7,008. Ending backlog value was
$2.92 billion , compared to$3.40 billion . - The Company’s ending community count grew 10% to 254, and the average community count for the quarter increased 5% to 251. On a sequential basis, the ending community count was up 3%.
Balance Sheet as of
-
The Company had total liquidity of
$1.46 billion , including$374.9 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 grew by
$515.3 million , or 10%, to$5.65 billion .-
The Company’s investments in land and land development for the nine months ended
August 31, 2024 increased 59% to$2.10 billion , compared to$1.32 billion for the year-earlier period. -
The Company’s lots owned or under contract grew 24% to 69,279, of which approximately 58% were owned and 42% were under contract. By comparison, approximately 73% of the Company’s total lots were owned and 27% were under contract as of
November 30, 2023 .
-
The Company’s investments in land and land development for the nine months ended
-
Notes payable of
$1.69 billion were approximately the same. The Company’s debt to capital ratio improved 90 basis points to 29.8%, compared to 30.7%. -
Stockholders’ equity increased to
$3.99 billion , compared to$3.81 billion , primarily reflecting higher net income that was partially offset by common stock repurchases and cash dividends.-
In the 2024 third quarter, the Company repurchased 1,869,292 shares of its outstanding common stock at a cost of
$150.0 million , bringing its total repurchases in 2024 to 3,460,697 shares at a cost of$250.0 million , or$72.24 per share. The total repurchases represented approximately 5% of the Company’s outstanding common stock as of the beginning of the current fiscal year. As ofAugust 31, 2024 , the Company had$800.0 million remaining under its current common stock repurchase authorization. -
Based on the Company’s 73.3 million outstanding shares as of
August 31, 2024 , book value per share of$54.37 expanded 13% year over year.
-
In the 2024 third quarter, the Company repurchased 1,869,292 shares of its outstanding common stock at a cost of
Guidance
The Company is providing the following guidance for its 2024 full year:
-
Housing revenues in the range of
$6.85 billion to$6.95 billion . -
Average selling price of approximately
$490,000 . -
Homebuilding operating income as a percentage of revenues in the range of 11.1% to 11.2%, assuming no inventory-related charges.
- Housing gross profit margin in the range of 21.1% to 21.2%, assuming no inventory-related charges.
- Selling, general and administrative expenses as a percentage of housing revenues of approximately 10.0%.
- Effective tax rate of approximately 23%.
- Ending community count in the range of 250 to 255.
The Company plans to also provide guidance for its 2024 fourth quarter on its conference call today.
Conference Call
The conference call to discuss the Company’s 2024 third 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 the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, 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 and Nine Months Ended |
|||||||||||||||
(In Thousands, Except Per Share Amounts – Unaudited) |
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Total revenues |
$ |
1,752,608 |
|
|
$ |
1,587,011 |
|
|
$ |
4,930,187 |
|
|
$ |
4,736,641 |
|
Homebuilding: |
|
|
|
|
|
|
|
||||||||
Revenues |
$ |
1,745,979 |
|
|
$ |
1,579,719 |
|
|
$ |
4,909,189 |
|
|
$ |
4,716,102 |
|
Costs and expenses |
|
(1,557,029 |
) |
|
|
(1,400,477 |
) |
|
|
(4,374,380 |
) |
|
|
(4,178,269 |
) |
Operating income |
|
188,950 |
|
|
|
179,242 |
|
|
|
534,809 |
|
|
|
537,833 |
|
Interest income and other |
|
4,073 |
|
|
|
5,492 |
|
|
|
29,379 |
|
|
|
7,688 |
|
Equity in income (loss) of unconsolidated joint ventures |
|
3,453 |
|
|
|
(112 |
) |
|
|
3,232 |
|
|
|
(1,182 |
) |
Homebuilding pretax income |
|
196,476 |
|
|
|
184,622 |
|
|
|
567,420 |
|
|
|
544,339 |
|
Financial services: |
|
|
|
|
|
|
|
||||||||
Revenues |
|
6,629 |
|
|
|
7,292 |
|
|
|
20,998 |
|
|
|
20,539 |
|
Expenses |
|
(1,608 |
) |
|
|
(1,530 |
) |
|
|
(4,627 |
) |
|
|
(4,360 |
) |
Equity in income of unconsolidated joint venture |
|
5,932 |
|
|
|
4,149 |
|
|
|
19,422 |
|
|
|
11,157 |
|
Financial services pretax income |
|
10,953 |
|
|
|
9,911 |
|
|
|
35,793 |
|
|
|
27,336 |
|
Total pretax income |
|
207,429 |
|
|
|
194,533 |
|
|
|
603,213 |
|
|
|
571,675 |
|
Income tax expense |
|
(50,100 |
) |
|
|
(44,600 |
) |
|
|
(138,800 |
) |
|
|
(131,800 |
) |
Net income |
$ |
157,329 |
|
|
$ |
149,933 |
|
|
$ |
464,413 |
|
|
$ |
439,875 |
|
Earnings per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
2.10 |
|
|
$ |
1.86 |
|
|
$ |
6.12 |
|
|
$ |
5.34 |
|
Diluted |
$ |
2.04 |
|
|
$ |
1.80 |
|
|
$ |
5.94 |
|
|
$ |
5.18 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
74,476 |
|
|
|
80,175 |
|
|
|
75,339 |
|
|
|
81,790 |
|
Diluted |
|
76,630 |
|
|
|
82,732 |
|
|
|
77,565 |
|
|
|
84,332 |
|
|
|||||||
CONSOLIDATED BALANCE SHEETS |
|||||||
(In Thousands – Unaudited) |
|||||||
|
|
|
|
||||
Assets |
|
|
|
||||
Homebuilding: |
|
|
|
||||
Cash and cash equivalents |
$ |
374,911 |
|
$ |
727,076 |
||
Receivables |
|
373,536 |
|
|
|
366,862 |
|
Inventories |
|
5,648,930 |
|
|
|
5,133,646 |
|
Investments in unconsolidated joint ventures |
|
62,984 |
|
|
|
59,128 |
|
Property and equipment, net |
|
89,290 |
|
|
|
88,309 |
|
Deferred tax assets, net |
|
113,775 |
|
|
|
119,475 |
|
Other assets |
|
113,675 |
|
|
|
96,987 |
|
|
|
6,777,101 |
|
|
|
6,591,483 |
|
Financial services |
|
62,779 |
|
|
|
56,879 |
|
Total assets |
$ |
6,839,880 |
|
|
$ |
6,648,362 |
|
|
|
|
|
||||
Liabilities and stockholders’ equity |
|
|
|
||||
Homebuilding: |
|
|
|
||||
Accounts payable |
$ |
401,768 |
|
|
$ |
388,452 |
|
Accrued expenses and other liabilities |
|
757,928 |
|
|
|
758,227 |
|
Notes payable |
|
1,691,060 |
|
|
|
1,689,898 |
|
|
|
2,850,756 |
|
|
|
2,836,577 |
|
Financial services |
|
2,030 |
|
|
|
1,645 |
|
Stockholders’ equity |
|
3,987,094 |
|
|
|
3,810,140 |
|
Total liabilities and stockholders’ equity |
$ |
6,839,880 |
|
|
$ |
6,648,362 |
|
|
|||||||||||||||
SUPPLEMENTAL INFORMATION |
|||||||||||||||
For the Three Months and Nine Months Ended |
|||||||||||||||
(In Thousands, Except Average Selling Price – Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Homebuilding revenues: |
|
|
|
|
|
|
|
||||||||
Housing |
$ |
1,745,979 |
|
|
$ |
1,573,684 |
|
|
$ |
4,905,617 |
|
|
$ |
4,710,067 |
|
Land |
|
— |
|
|
|
6,035 |
|
|
|
3,572 |
|
|
|
6,035 |
|
Total |
$ |
1,745,979 |
|
|
$ |
1,579,719 |
|
|
$ |
4,909,189 |
|
|
$ |
4,716,102 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Homebuilding costs and expenses: |
|
|
|
|
|
|
|
||||||||
Construction and land costs |
|
|
|
|
|
|
|
||||||||
Housing |
$ |
1,385,563 |
|
|
$ |
1,235,469 |
|
|
$ |
3,872,092 |
|
|
$ |
3,704,848 |
|
Land |
|
— |
|
|
|
4,911 |
|
|
|
2,101 |
|
|
|
4,911 |
|
Subtotal |
|
1,385,563 |
|
|
|
1,240,380 |
|
|
|
3,874,193 |
|
|
|
3,709,759 |
|
Selling, general and administrative expenses |
|
171,466 |
|
|
|
160,097 |
|
|
|
500,187 |
|
|
|
468,510 |
|
Total |
$ |
1,557,029 |
|
|
$ |
1,400,477 |
|
|
$ |
4,374,380 |
|
|
$ |
4,178,269 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Interest expense: |
|
|
|
|
|
|
|
||||||||
Interest incurred |
$ |
26,583 |
|
|
$ |
26,810 |
|
|
$ |
79,665 |
|
|
$ |
80,609 |
|
Interest capitalized |
|
(26,583 |
) |
|
|
(26,810 |
) |
|
|
(79,665 |
) |
|
|
(80,609 |
) |
Total |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Other information: |
|
|
|
|
|
|
|
||||||||
Amortization of previously capitalized interest |
$ |
28,180 |
|
|
$ |
29,305 |
|
|
$ |
83,872 |
|
|
$ |
87,373 |
|
Depreciation and amortization |
|
10,289 |
|
|
|
10,078 |
|
|
|
30,861 |
|
|
|
29,511 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Average selling price: |
|
|
|
|
|
|
|
||||||||
|
$ |
661,400 |
|
|
$ |
692,400 |
|
|
$ |
667,600 |
|
|
$ |
694,500 |
|
Southwest |
|
459,300 |
|
|
|
418,800 |
|
|
|
452,400 |
|
|
|
431,100 |
|
Central |
|
347,500 |
|
|
|
402,700 |
|
|
|
358,800 |
|
|
|
412,500 |
|
Southeast |
|
412,200 |
|
|
|
389,200 |
|
|
|
415,600 |
|
|
|
394,100 |
|
Total |
$ |
480,900 |
|
|
$ |
466,300 |
|
|
$ |
481,400 |
|
|
$ |
479,200 |
|
|
|||||||||||||||
SUPPLEMENTAL INFORMATION |
|||||||||||||||
For the Three Months and Nine Months Ended |
|||||||||||||||
(Dollars in Thousands – Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Homes delivered: |
|
|
|
|
|
|
|
||||||||
|
|
1,150 |
|
|
732 |
|
|
3,021 |
|
|
2,320 |
||||
Southwest |
|
681 |
|
|
|
717 |
|
|
|
2,110 |
|
|
|
2,031 |
|
Central |
|
1,073 |
|
|
|
1,258 |
|
|
|
2,971 |
|
|
|
3,495 |
|
Southeast |
|
727 |
|
|
|
668 |
|
|
|
2,089 |
|
|
|
1,983 |
|
Total |
|
3,631 |
|
|
|
3,375 |
|
|
|
10,191 |
|
|
|
9,829 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net orders: |
|
|
|
|
|
|
|
||||||||
|
|
958 |
|
|
|
906 |
|
|
|
3,134 |
|
|
|
3,062 |
|
Southwest |
|
616 |
|
|
|
656 |
|
|
|
2,099 |
|
|
|
1,915 |
|
Central |
|
871 |
|
|
|
865 |
|
|
|
3,188 |
|
|
|
2,318 |
|
Southeast |
|
640 |
|
|
|
670 |
|
|
|
1,984 |
|
|
|
1,880 |
|
Total |
|
3,085 |
|
|
|
3,097 |
|
|
|
10,405 |
|
|
|
9,175 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net order value: |
|
|
|
|
|
|
|
||||||||
|
$ |
678,783 |
|
|
$ |
638,643 |
|
|
$ |
2,214,666 |
|
|
$ |
2,044,331 |
|
Southwest |
|
290,229 |
|
|
|
296,811 |
|
|
|
967,880 |
|
|
|
819,543 |
|
Central |
|
313,108 |
|
|
|
296,255 |
|
|
|
1,162,855 |
|
|
|
800,936 |
|
Southeast |
|
261,028 |
|
|
|
280,671 |
|
|
|
811,841 |
|
|
|
749,087 |
|
Total |
$ |
1,543,148 |
|
|
$ |
1,512,380 |
|
|
$ |
5,157,242 |
|
|
$ |
4,413,897 |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
||||||||||||
|
Homes |
|
Value |
|
Homes |
|
Value |
||||||||
Backlog data: |
|
|
|
|
|
|
|
||||||||
|
|
1,658 |
|
|
$ |
1,223,121 |
|
|
|
2,029 |
|
|
$ |
1,356,175 |
|
Southwest |
|
1,368 |
|
|
|
629,995 |
|
|
|
1,576 |
|
|
|
692,175 |
|
Central |
|
1,484 |
|
|
|
555,474 |
|
|
|
1,812 |
|
|
|
678,994 |
|
Southeast |
|
1,214 |
|
|
|
510,714 |
|
|
|
1,591 |
|
|
|
668,045 |
|
Total |
|
5,724 |
|
|
$ |
2,919,304 |
|
|
|
7,008 |
|
|
$ |
3,395,389 |
|
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 |
|
Nine Months Ended |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Housing revenues |
$ |
1,745,979 |
|
|
$ |
1,573,684 |
|
|
$ |
4,905,617 |
|
|
$ |
4,710,067 |
|
Housing construction and land costs |
|
(1,385,563 |
) |
|
|
(1,235,469 |
) |
|
|
(3,872,092 |
) |
|
|
(3,704,848 |
) |
Housing gross profits |
|
360,416 |
|
|
|
338,215 |
|
|
|
1,033,525 |
|
|
|
1,005,219 |
|
Add: Inventory-related charges (a) |
|
1,177 |
|
|
|
631 |
|
|
|
3,685 |
|
|
|
10,207 |
|
Adjusted housing gross profits |
$ |
361,593 |
|
|
$ |
338,846 |
|
|
$ |
1,037,210 |
|
|
$ |
1,015,426 |
|
Housing gross profit margin |
|
20.6 |
% |
|
|
21.5 |
% |
|
|
21.1 |
% |
|
|
21.3 |
% |
Adjusted housing gross profit margin |
|
20.7 |
% |
|
|
21.5 |
% |
|
|
21.1 |
% |
|
|
21.6 |
% |
(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/20240924731601/en/
(310) 893-7456 or jpeters@kbhome.com
(321) 299-6844 or ckane@kbhome.com
Source: