KB Home Announces First Quarter 2025 Financial Results
KB Home has released its financial results for the first quarter, which ended on February 28, 2025.
Market Conditions and CEO Statement
Jeffrey Mezger, Chairman and CEO of KB Home, noted that consumer hesitancy due to affordability concerns and macroeconomic and geopolitical uncertainties impacted homebuying decisions. While community traffic remained strong, the demand at the beginning of the spring selling season was softer than historical trends.
To address this challenge, KB Home adjusted its community pricing and offerings in mid-February to provide greater value to buyers. These changes led to a noticeable improvement in sales, with weekly transaction rates stabilizing over the past five weeks. However, due to the lower-than-expected net orders in the first quarter, the company is revising its revenue guidance for the full fiscal year 2025.
Despite these headwinds, Mezger expressed confidence in the company’s ability to adapt to market fluctuations and meet its objectives while maintaining a strong focus on customer satisfaction.
First Quarter 2025 Financial Highlights (Year-over-Year Comparisons)
- Total Revenues: $1.39 billion, a 5% decline from $1.47 billion in Q1 2024.
- Homes Delivered: 2,770, reflecting a 9% decrease.
- Average Selling Price: Increased by 4% to $500,700.
- Homebuilding Operating Income: $127.3 million, down from $157.7 million.
- Operating Margin: 9.2%, compared to 10.8%, primarily due to lower housing gross profit margins.
- Inventory-Related Charges: $1.5 million, slightly higher than the $1.3 million recorded in Q1 2024.
- Housing Gross Profit Margin: Declined to 20.2% from 21.5%, mainly due to higher land costs, buyer concessions, and reduced operating leverage.
- Selling, General & Administrative Expenses: Increased slightly to 11.0% of housing revenues from 10.8%.
- Financial Services Pre-Tax Income: Fell 35% to $7.5 million, largely due to reduced income from KB Home’s mortgage banking joint venture, which saw lower loan originations.
- Net Income: Decreased 21% to $109.6 million.
- Diluted Earnings Per Share: $1.49, a 15% decline, offset partially by the company’s stock repurchase program.
- Effective Tax Rate: 21.4%, up from 20.6%.
Net Orders and Backlog
- Net Orders: 2,772, marking a 17% decrease.
- Backlog Homes: 4,436, contributing to a 21% reduction in backlog value to $2.20 billion.
- Monthly Net Orders Per Community: Declined from 4.6 to 3.6.
- Cancellation Rate: Increased slightly to 16% from 14%.
- Average Community Count: 257, reflecting a 7% year-over-year increase.
- Ending Community Count: 255, also up 7% from Q1 2024.
Balance Sheet Overview (Comparisons to November 30, 2024)
- Total Liquidity: $1.25 billion, including $267.8 million in cash and cash equivalents and $981.7 million in available capacity under its unsecured revolving credit facility.
- Inventories: Increased by 7% to $5.94 billion and grew 13% on a year-over-year basis.
- Land and Land Development Investments: Increased by 57% to $920.3 million, compared to $587.1 million in Q1 2024.
- Lot Portfolio: Expanded to 78,233 lots, with 54% owned and 46% under contract, reflecting a 41% year-over-year increase from 55,509 lots.
- Notes Payable: Rose to $1.79 billion, up from $1.69 billion, reflecting additional cash borrowings.
- Debt-to-Capital Ratio: 30.5%, compared to 29.4% at the end of Q4 2024.
- Stockholders’ Equity: Grew to $4.09 billion from $4.06 billion, driven by net income, partially offset by stock repurchases and dividends.
- Stock Repurchase Program: 753,939 shares repurchased for $50.0 million at an average price of $66.32 per share.
- Book Value Per Share: $57.05, up 12% year over year.
2025 Full-Year Guidance
Given the first-quarter performance, KB Home has updated its guidance for fiscal 2025:
- Housing Revenues: Projected between $6.60 billion and $7.00 billion.
- Average Selling Price: Estimated between $480,000 and $495,000.
- Homebuilding Operating Income Margin: Expected at approximately 9.4%, assuming no inventory-related charges.
- Housing Gross Profit Margin: Forecasted between 19.2% and 20.0%.
- Selling, General & Administrative Expenses: Anticipated to range from 10.0% to 10.4% of housing revenues.
- Effective Tax Rate: Expected to be around 24%.
- Ending Community Count: Projected at approximately 250.
