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10/09/2025 | Press release | Distributed by Public on 10/09/2025 14:34

Quarterly Report for Quarter Ending August 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
OVERVIEW
Revenues are generated from our homebuilding and financial services operations. The following table presents a summary of our consolidated results of operations (dollars in thousands, except per share amounts):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024
Variance
2025 2024
Variance
Revenues:
Homebuilding $ 1,614,462 $ 1,745,979 (8) % $ 4,526,219 $ 4,909,189 (8) %
Financial services 6,012 6,629 (9) 15,617 20,998 (26)
Total revenues $ 1,620,474 $ 1,752,608 (8) % $ 4,541,836 $ 4,930,187 (8) %
Pretax income:
Homebuilding $ 134,542 $ 196,476 (32) % $ 400,595 $ 567,420 (29) %
Financial services 8,686 10,953 (21) 24,373 35,793 (32)
Total pretax income 143,228 207,429 (31) 424,968 603,213 (30)
Income tax expense
(33,400) (50,100) 33 (97,700) (138,800) 30
Net income $ 109,828 $ 157,329 (30) % $ 327,268 $ 464,413 (30) %
Diluted earnings per share
$ 1.61 $ 2.04 (21) % $ 4.60 $ 5.94 (23) %
The 2025 third quarter housing market environment was softer compared to the year-earlier period, primarily due to ongoing affordability concerns and tepid consumer confidence that caused homebuyers to hesitate on making purchase decisions during the first nine months of our fiscal year. Despite these near-term headwinds, the longer-term outlook for the housing market remains favorable, driven by demographic trends and the continued undersupply of homes.
Consumer interest in homebuying was resilient during the third quarter, as we experienced a steady level of traffic in our communities. Additionally, we were encouraged to see stabilization in demand early in the third quarter, which was sustained as the quarter progressed along with a moderation in mortgage interest rates. However, reflecting the prevailing market conditions, our 2,950 net orders for the quarter decreased 4% year over year. We generated a monthly net order pace per community of 3.8, compared to 4.1 for the year-earlier quarter when we had a lower average community count. The average community count for the 2025 third quarter increased 3% year over year to 259, while our ending community count rose 4% to 264, as we continued to invest in our business to support long-term growth.
In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand, we reduced selling prices relative to applicable market conditions. We also lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. Reflecting the price reductions we have made with this strategy, the value of our net orders for the 2025 third quarter was down 15% year over year, driven by the 4% decline in net orders and an 11% decrease in their average selling price to $445,600.
Homebuilding revenues for the three months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. For the three months ended August 31, 2024, homebuilding revenues were generated solely from housing operations. Our 2025 third-quarter housing revenues were down 8% year over year to $1.61 billion, due to a 7% decrease in the number of homes delivered to 3,393 and a slight decline in their average selling price to $475,700. Approximately 50% of our homes delivered in the 2025 third quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the beginning of the quarter grew to 71% for the 2025 third quarter, from 58% for the year-earlier quarter, mainly due to our improved build times and an increase in the percentage of homes sold and delivered within the same quarter. Homebuilding operating income for the three months ended August 31, 2025 was $131.2 million, compared to $189.0 million for the year-earlier period. As a percentage of revenues, homebuilding operating income was 8.1% for the 2025 third quarter compared to 10.8% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin. Excluding total inventory-related charges of $11.3 million for the current quarter and $1.2 million for the year-earlier quarter, the homebuilding operating income margin was 8.8%, compared to 10.9%. Our housing gross profit margin for the 2025 third quarter decreased to 18.2%,
compared to 20.6% for the year-earlier quarter, reflecting price reductions, higher relative land costs, and geographic mix, partly offset by lower construction costs. Excluding the above-mentioned inventory-related charges, the housing gross profit margin for the current quarter was 18.9%, compared to 20.7% for the year-earlier quarter. Our selling, general and administrative expenses as a percentage of housing revenues of 10.0% for the 2025 third quarter increased 20 basis points year over year, primarily due to decreased operating leverage from lower housing revenues, partly offset by lower general and administrative expenses. Total pretax income for the 2025 third quarter was $143.2 million, down from $207.4 million for the year-earlier quarter. Net income and diluted earnings per share for the three months ended August 31, 2025 decreased 30% and 21%, respectively, year over year. Our diluted earnings per share for the 2025 third quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters.
We take a balanced approach in allocating capital, relative to prevailing market conditions, toward our priorities of investing in land and land development to support future growth and returning capital to our stockholders. In the current environment and given our existing land pipeline, we began scaling back our investments in land and land development in the 2025 second quarter while increasing our share repurchases. In our 2025 third quarter, we maintained our land investments at a level that we believe will support our current growth projections. Our investments for the 2025 third quarter decreased by 39% year over year to $514.1 million, and we repurchased $188.5 million of our outstanding common stock, compared to $150.0 million in the year-earlier quarter. For the nine months ended August 31, 2025, we invested $1.95 billion in land and land development, representing a 7% decrease from the corresponding year-earlier period, and repurchased approximately 7.8 million shares of our common stock at a total cost of $438.5 million, compared to approximately 3.5 million shares of our common stock at a total cost of $250.0 million in the year-earlier period. We ended the 2025 third quarter with total liquidity of $1.16 billion, including cash and cash equivalents and $831.7 million of available capacity under the Credit Facility. We had $250.0 million of cash borrowings outstanding under the Credit Facility at August 31, 2025.
Although our ending backlog value at August 31, 2025 decreased 32% year over year to approximately $1.99 billion, we believe we are well positioned to achieve our updated projections for the 2025 fourth quarter and full year, as described below under "Outlook."
HOMEBUILDING
Financial Results. The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Revenues:
Housing $ 1,613,975 $ 1,745,979 $ 4,525,732 $ 4,905,617
Land 487 - 487 3,572
Total 1,614,462 1,745,979 4,526,219 4,909,189
Costs and expenses:
Construction and land costs
Housing (1,320,611) (1,385,563) (3,658,080) (3,872,092)
Land (536) - (536) (2,101)
Total (1,321,147) (1,385,563) (3,658,616) (3,874,193)
Selling, general and administrative expenses (162,152) (171,466) (477,638) (500,187)
Total (1,483,299) (1,557,029) (4,136,254) (4,374,380)
Operating income 131,163 188,950 389,965 534,809
Interest income and other
1,870 4,073 5,628 29,379
Equity in income of unconsolidated joint ventures
1,509 3,453 5,002 3,232
Homebuilding pretax income $ 134,542 $ 196,476 $ 400,595 $ 567,420
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Homes delivered 3,393 3,631 9,283 10,191
Average selling price $ 475,700 $ 480,900 $ 487,500 $ 481,400
Housing gross profit margin as a percentage of housing revenues 18.2 % 20.6 % 19.2 % 21.1 %
Adjusted housing gross profit margin as a percentage of housing revenues 18.9 % 20.7 % 19.6 % 21.1 %
Selling, general and administrative expenses as a percentage of housing revenues 10.0 % 9.8 % 10.6 % 10.2 %
Operating income as a percentage of revenues 8.1 % 10.8 % 8.6 % 10.9 %
Revenues. Homebuilding revenues for the three months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. In the three months ended August 31, 2024, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2025 third quarter declined 8% from the year-earlier quarter, driven by a 7% decrease in the number of homes delivered and a slight decline in their overall average selling price. Our 2025 third-quarter housing revenues reflected year-over-year decreases of 13% in our West Coast homebuilding reporting segment and 17% in our Central segment, partially offset by increases of 7% and 1% in our Southwest and Southeast segments, respectively. The decline in the number of homes delivered mainly reflected our having 24% fewer homes in backlog at the beginning of the 2025 third quarter, as compared to the year-earlier quarter.
For the nine months ended August 31, 2025 and 2024, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the nine months ended August 31, 2025 decreased 8% from the corresponding 2024 period due to a 9% decline in the number of homes delivered, partly offset by a slight increase in their average selling price.
Land sale revenues for the three months and nine months ended August 31, 2025 totaled $.5 million. There were no land sales during the three months ended August 31, 2024. For the nine months ended August 31, 2024, land sale revenues totaled $3.6 million. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.
Operating Income. Our homebuilding operating income for the three months ended August 31, 2025 decreased 31% year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2025 third quarter included inventory-related charges of $11.3 million, compared to $1.2 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended August 31, 2025 was 8.1%, compared to 10.8% for the corresponding 2024 period, mainly due to a lower housing gross profit margin. Excluding inventory-related charges, our operating income as a percentage of revenues was 8.8% for the 2025 third quarter, compared to 10.9% for the year-earlier quarter.
For the nine months ended August 31, 2025, our homebuilding operating income declined 27% from the year-earlier period, reflecting a decrease in housing gross profits and the absence of land sale profits, partly offset by lower selling, general and administrative expenses. Operating income for the nine months ended August 31, 2025 included inventory-related charges of $18.4 million, compared to $3.7 million of such charges for the corresponding 2024 period. As a percentage of revenues, our operating income for the nine months ended August 31, 2025 decreased 230 basis points year over year to 8.6%, mainly reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues. Excluding inventory-related charges, our operating income as a percentage of revenues declined 200 basis points to 9.0% for the nine months ended August 31, 2025 from 11.0% for the corresponding year-earlier period.
•Housing Gross Profits - Housing gross profits of $293.4 million for the three months ended August 31, 2025 were down 19% year over year, reflecting lower housing revenues and a 240 basis-point decrease in our housing gross profit margin to 18.2%. The decline in the housing gross profit margin reflected price reductions, higher relative land costs, and geographic mix, partly offset by lower construction costs. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.7% for the three months ended August 31, 2025 and 1.6% for the three months ended August 31, 2024. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 18.9% for the 2025 third quarter decreased 180 basis points year over year.
For the nine months ended August 31, 2025, our housing gross profits of $867.7 million decreased from $1.03 billion for the year-earlier period due to lower housing revenues and a 190 basis-point decline in our housing gross profit margin. The housing gross profit margin primarily reflected the same factors described above for the three months ended August 31, 2025. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for both the nine months ended August 31, 2025 and 2024. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 19.6% for the nine months ended August 31, 2025 decreased 150 basis points year over year.
The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under "Non-GAAP Financial Measures."
•Land Sale Profits - Land sales generated essentially break-even results for the three months and nine months ended August 31, 2025. There were no land sales during the three months ended August 31, 2024, while land sale profits for the nine months ended August 31, 2024 totaled $1.5 million.
•Selling, General and Administrative Expenses - The following table presents the components of our selling, general and administrative expenses (dollars in thousands):
Three Months Ended August 31, Nine Months Ended August 31,
2025 % of Housing Revenues 2024 % of Housing Revenues 2025 % of Housing Revenues 2024 % of Housing Revenues
Marketing expenses $ 39,894 2.4 % $ 39,700 2.3 % $ 122,159 2.7 % $ 115,944 2.4 %
Commission expenses (a) 56,062 3.5 59,961 3.4 155,742 3.5 172,171 3.5
General and administrative expenses 66,196 4.1 71,805 4.1 199,737 4.4 212,072 4.3
Total $ 162,152 10.0 % $ 171,466 9.8 % $ 477,638 10.6 % $ 500,187 10.2 %
(a)Commission expenses include sales commissions on homes delivered paid to internal sales counselors and external real estate brokers.
Reflecting our continued focus on prudently managing our costs and aligning our overhead structure with our volume of homes delivered, selling, general and administrative expenses for both the three-month and nine-month periods ended August 31, 2025 decreased 5% from the corresponding year-earlier periods. As a percentage of housing revenues, our selling, general and administrative expenses for the three-month and nine-month periods ended August 31, 2025 increased 20 basis points and 40 basis points, respectively, year over year. The increase in selling, general and administrative expenses as a percentage of revenues for the three months ended August 31, 2025 primarily reflected decreased operating leverage from lower housing revenues, partly offset by lower general and administrative expenses. For the nine months ended August 31, 2025, selling, general and administrative expenses as a percentage of revenues rose from the corresponding year-earlier period mainly due to higher marketing expenses and decreased operating leverage, partly offset by lower general and administrative expenses.
Interest Income/Expense and Other. Interest income and other for the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024 was comprised solely of interest income. For the nine months ended August 31, 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we had an ownership interest.
Interest income, which is generated from short-term investments, was $1.9 million for the three months ended August 31, 2025, compared to $4.1 million for the year-earlier quarter. For the nine months ended August 31, 2025, interest income was $5.6 million, compared to $16.9 million for the corresponding 2024 period. The year-over-year decreases for the three-month and nine-month periods ended August 31, 2025 reflected our lower average balance of cash equivalents and a lower interest rate in the 2025 periods. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.
We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month and nine-month periods ended August 31, 2025 and 2024 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our
interest incurred and capitalized is provided in Note 6 - Inventories in the Notes to Consolidated Financial Statements in this report.
Equity in Income of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $1.5 million for the three months ended August 31, 2025, compared to $3.5 million for the year-earlier period, mainly reflecting a decrease in the number of homes delivered by an unconsolidated joint venture in California, which delivered its first homes in the 2024 second quarter. For the nine months ended August 31, 2025, our equity in income of unconsolidated joint ventures increased to $5.0 million, compared to $3.2 million for the corresponding 2024 period, primarily due to an increase in the number of homes delivered by the same California-based unconsolidated joint venture. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 - Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.
Net Orders, Cancellation Rates, Backlog and Community Count. The following table presents information about our net orders, cancellation rate, ending backlog and community count (dollars in thousands):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Net orders 2,950 3,085 9,182 10,405
Net order value (a) $ 1,314,607 $ 1,543,148 $ 4,271,688 $ 5,157,242
Cancellation rate (b) 17 % 15 % 16 % 14 %
Ending backlog - homes 4,333 5,724 4,333 5,724
Ending backlog - value $ 1,988,863 $ 2,919,304 $ 1,988,863 $ 2,919,304
Ending community count 264 254 264 254
Average community count 259 251 258 245
(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period.
(b) Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.
Net Orders. Net orders for the 2025 third quarter decreased 4%, compared to the year-earlier quarter, and the pace of monthly net orders per community was 3.8 in the 2025 third quarter, compared to 4.1 in the corresponding 2024 quarter, driven by both lower net orders and a higher average community count. The decreases in our net orders and monthly pace per community reflected prevailing market conditions in the 2025 third quarter, with softer demand relative to the year-earlier quarter due to ongoing affordability concerns and tepid consumer confidence that caused homebuyers to hesitate on making purchase decisions during the first nine months of our fiscal year.
In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand, we reduced selling prices relative to applicable market conditions. We also lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. Reflecting the price reductions we have made with this strategy, the value of our net orders for the 2025 third quarter was down 15% year over year driven by the 4% decline in net orders and an 11% decrease in their average selling price to $445,600.
Our cancellation rate as a percentage of gross orders for the three months ended August 31, 2025 increased slightly from the year-earlier period.
Backlog. The number of homes in our backlog at August 31, 2025 decreased 24% compared to August 31, 2024. Our overall backlog value at August 31, 2025 declined 32% year over year due to the lower number of homes in backlog and a 10% decrease in their average selling price, reflecting the price reductions implemented during 2025. Backlog value was down year over year in each of our homebuilding reporting segments, with decreases ranging from 14% in our Southeast segment to 48% in our Southwest segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.
Community Count. We use the term "community count" to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our ending community count for the 2025 third quarter grew 4% from the year-earlier quarter. Our average community count for the three months ended August 31, 2025 increased 3% from the year-earlier period. While we continued to invest in land and land development during the nine months ended August 31, 2025 to help drive future growth, as discussed below under "Liquidity and Capital Resources," we began scaling back these investments in the 2025 second quarter in response to softer market conditions. As a result, our investments in land and land development for the three-month and nine-month periods ended August 31, 2025 decreased 39% and 7%, respectively, compared to the corresponding year-earlier periods.
HOMEBUILDING REPORTING SEGMENTS
Operational Data.The following tables present information about our homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands):
Three Months Ended August 31,
Homes Delivered Net Orders Cancellation Rates
Segment 2025 2024 2025 2024 2025 2024
West Coast 972 1,150 870 958 18 % 15 %
Southwest 681 681 459 616 15 11
Central 943 1,073 795 871 17 15
Southeast 797 727 826 640 17 18
Total 3,393 3,631 2,950 3,085 17 % 15 %
Net Order Value Average Community Count
Segment 2025 2024 Variance 2025 2024 Variance
West Coast $ 550,753 $ 678,783 (19) % 89 83 7 %
Southwest 218,931 290,229 (25) 36 44 (18)
Central 255,530 313,108 (18) 66 77 (14)
Southeast 289,393 261,028 11 68 47 45
Total $ 1,314,607 $ 1,543,148 (15) % 259 251 3 %
Nine Months Ended August 31,
Homes Delivered Net Orders Cancellation Rates
Segment 2025 2024 2025 2024 2025 2024
West Coast 2,789 3,021 2,872 3,134 15 % 13 %
Southwest 2,020 2,110 1,561 2,099 14 10
Central 2,505 2,971 2,545 3,188 16 14
Southeast 1,969 2,089 2,204 1,984 19 19
Total 9,283 10,191 9,182 10,405 16 % 14 %
Nine Months Ended August 31,
Net Order Value Average Community Count
Segment 2025 2024 Variance 2025 2024 Variance
West Coast $ 1,886,073 $ 2,214,666 (15) % 88 77 14 %
Southwest 757,074 967,880 (22) 38 44 (14)
Central 823,869 1,162,855 (29) 67 77 (13)
Southeast 804,672 811,841 (1) 65 47 38
Total $ 4,271,688 $ 5,157,242 (17) % 258 245 5 %
August 31,
Backlog - Homes Backlog - Value
Segment 2025 2024 Variance 2025 2024 Variance
West Coast 1,294 1,658 (22) % $ 833,715 $ 1,223,121 (32) %
Southwest 675 1,368 (51) 326,959 629,995 (48)
Central 1,173 1,484 (21) 390,780 555,474 (30)
Southeast 1,191 1,214 (2) 437,409 510,714 (14)
Total 4,333 5,724 (24) % $ 1,988,863 $ 2,919,304 (32) %
The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course. In addition, with our Built to Order business model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design choices and options buyers select. These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods.
Financial Results. Below is a discussion of the financial results for each of our homebuilding reporting segments. Further information regarding these segments, including their pretax income (loss), is included in Note 2 - Segment Information in the Notes to Consolidated Financial Statements in this report. The difference between each homebuilding reporting segment's operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures and/or interest income and expense.
In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $36.4 million and $37.9 million in the three months ended August 31, 2025 and 2024, respectively. For the nine months ended August 31, 2025, Corporate and other had an operating loss of $113.3 million, compared to $111.6 million for the corresponding year-earlier period.
The financial results of our homebuilding reporting segments for the three months ended August 31, 2025 and 2024 were impacted to varying degrees by price reductions and other homebuyer concessions we extended to buyers in conjunction with our sales strategies, as well as product and geographic mix shifts of homes delivered.
West Coast. The following table presents financial information related to our West Coast segment (dollars in thousands, except average selling price):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 Variance 2025 2024 Variance
Revenues $ 664,880 $ 760,617 (13) % $ 1,926,722 $ 2,017,336 (4) %
Construction and land costs (549,332) (617,497) 11 (1,579,624) (1,629,350) 3
Selling, general and administrative expenses (45,899) (47,451) 3 (135,363) (139,297) 3
Operating income $ 69,649 $ 95,669 (27) % $ 211,735 $ 248,689 (15) %
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 Variance 2025 2024 Variance
Homes delivered 972 1,150 (15) % 2,789 3,021 (8) %
Average selling price $ 684,000 $ 661,400 3 % $ 690,800 $ 667,600 3 %
Operating income as a percentage of revenues 10.5 % 12.6 % (210) bps 11.0 % 12.3 % (130) bps
In the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024, this segment's revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment's revenues were comprised of housing revenues and nominal land sale revenues. The year-over-year decline in housing revenues for the three months ended August 31, 2025 was due to a decrease in the number of homes delivered, partly offset by an increase in their average selling price. For the nine months ended August 31, 2025, housing revenues were down 4% from $2.02 billion for the corresponding year-earlier period, reflecting the same factors. Operating income for the three months and nine months ended August 31, 2025 declined year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income as a percentage of revenues for the 2025 third quarter was down from the year-earlier quarter due to a 140 basis-point decrease in the housing gross profit margin to 17.4% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 6.9%. For the nine months ended August 31, 2025, operating income as a percentage of revenues declined from the corresponding 2024 period, mainly reflecting a 120 basis-point decrease in the housing gross profit margin to 18.0% and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.0%.
The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2025 was primarily due to higher relative land costs, partly offset by lower construction costs. For the three months ended August 31, 2025, inventory-related charges associated with housing operations were $1.1 million, compared to $.5 million for the year-earlier period. For the nine months ended August 31, 2025, inventory-related charges associated with housing operations were $3.0 million, compared to $2.4 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for both the three months and nine months ended August 31, 2025 was primarily due to reduced operating leverage from lower housing revenues and higher marketing and other expenses associated with our expanded community count in this segment. For the nine months ended August 31, 2025, these impacts were partly offset by lower general and administrative costs.
Southwest. The following table presents financial information related to our Southwest segment (dollars in thousands, except average selling price):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 Variance 2025 2024 Variance
Revenues $ 335,505 $ 312,812 7 % $ 962,486 $ 954,602 1 %
Construction and land costs
(254,515) (233,638) (9) (723,639) (719,134) (1)
Selling, general and administrative expenses
(23,544) (24,258) 3 (67,245) (69,979) 4
Operating income $ 57,446 $ 54,916 5 % $ 171,602 $ 165,489 4 %
Homes delivered 681 681 - % 2,020 2,110 (4) %
Average selling price $ 492,700 $ 459,300 7 % $ 476,500 $ 452,400 5 %
Operating income as a percentage of revenues 17.1 % 17.6 % (50) bps 17.8 % 17.3 % 50 bps
In the three-month and nine-month periods ended August 31, 2025 and 2024, this segment's revenues were generated solely from housing operations. This segment's housing revenues for the three months ended August 31, 2025 increased year over year, driven by a higher average selling price of homes delivered, as the number of homes delivered was consistent with the prior-year period. For the nine months ended August 31, 2025, this segment's housing revenues rose slightly compared to the year-earlier period, reflecting an increase in the average selling price of homes delivered, largely offset by a decrease in the number of homes delivered. Operating income for the three-month and nine-month periods ended August 31, 2025 increased year over year due to higher housing gross profits and lower selling, general and administrative expenses. As a percentage of revenues, this segment's operating income for the 2025 third quarter declined from the year-earlier quarter, reflecting a 120 basis-point decrease in the housing gross profit margin to 24.1%, partly offset by a 70 basis-point improvement in selling,
general and administrative expenses as a percentage of housing revenues to 7.0%. For the nine months ended August 31, 2025, operating income as a percentage of revenues grew from the corresponding 2024 period due to a 40 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.0% and a 10 basis-point increase in the housing gross profit margin to 24.8%.
The year-over-year decrease in the housing gross profit margin for the three months ended August 31, 2025 primarily reflected higher relative land costs, partly offset by lower construction costs and increased operating leverage on higher housing revenues. Inventory-related charges associated with housing operations for the three months ended August 31, 2025 were $.5 million, compared to no such charges for the year-earlier period. For the nine months ended August 31, 2025, the housing gross profit margin mainly reflected lower construction costs, largely offset by higher relative land costs. Inventory-related charges associated with housing operations for the nine months ended August 31, 2025 were $1.6 million, compared to a nominal amount for the corresponding year-earlier period. The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for both the three months and nine months ended August 31, 2025 was primarily due to increased operating leverage from higher housing revenues and lower general and administrative expenses.
Central. The following table presents financial information related to our Central segment (dollars in thousands, except average selling price):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 Variance 2025 2024 Variance
Revenues $ 310,603 $ 372,862 (17) % $ 869,182 $ 1,069,136 (19) %
Construction and land costs
(261,299) (291,734) 10 (712,516) (834,195) 15
Selling, general and administrative expenses
(31,096) (37,836) 18 (92,291) (106,515) 13
Operating income $ 18,208 $ 43,292 (58) % $ 64,375 $ 128,426 (50) %
Homes delivered 943 1,073 (12) % 2,505 2,971 (16) %
Average selling price $ 329,400 $ 347,500 (5) % $ 347,000 $ 358,800 (3) %
Operating income as a percentage of revenues 5.9 % 11.6 % (570) bps 7.4 % 12.0 % (460) bps
In the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024, this segment's revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment's revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended August 31, 2025 were down from the year-earlier period due to decreases in both the number of homes delivered and their average selling price. For the nine months ended August 31, 2025, housing revenues decreased 18% year over year, from $1.07 billion, for the same reasons. Land sale revenues totaled $3.2 million for the nine months ended August 31, 2024. Operating income for the three months and nine months ended August 31, 2025 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Also contributing to the year-over-year decrease in operating income for the nine months ended August 31, 2025 was the absence of land sales in the current period, compared to $1.1 million of land sale profits in the corresponding year-earlier period. This segment's operating income as a percentage of revenues for the 2025 third quarter decreased from the year-earlier period, primarily due to a 590 basis-point decline in the housing gross profit margin to 15.9%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 10.0%. For the nine months ended August 31, 2025, this segment's operating income as a percentage of revenues decreased from the year-earlier period, mainly reflecting a 390 basis-point decline in the housing gross profit margin to 18.0% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.6%.
The housing gross profit margin for the three months ended August 31, 2025 declined year over year mainly due to price reductions, higher relative land costs, geographic mix, an increase in inventory-related charges and reduced operating leverage from lower housing revenues. Inventory-related charges associated with housing operations for the three months ended August 31, 2025 were $7.2 million, compared to $.5 million for the year-earlier period. For the nine months ended August 31, 2025, the year-over-year decrease in the housing gross profit margin primarily reflected the same reasons described above for the three months ended August 31, 2025, partly offset by lower construction costs. Inventory-related charges associated with housing operations for the nine months ended August 31, 2025 were $9.4 million, compared to $.7 million for the year-earlier period. The inventory-related charges in the three months and nine months ended August 31, 2025 mainly reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in a certain
community in this segment. For the three months ended August 31, 2025, the year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues was mainly due to lower general and administrative expenses, partly offset by decreased operating leverage from lower housing revenues. For the nine months ended August 31, 2025, the year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues primarily reflected higher marketing expenses and decreased operating leverage from lower housing revenues.
Southeast. The following table presents financial information related to our Southeast segment (dollars in thousands, except average selling price):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 Variance 2025 2024 Variance
Revenues $ 303,474 $ 299,688 1 % $ 767,829 $ 868,115 (12) %
Construction and land costs
(254,025) (239,753) (6) (637,145) (686,442) 7
Selling, general and administrative expenses
(27,224) (26,932) (1) (75,152) (77,868) 3
Operating income $ 22,225 $ 33,003 (33) % $ 55,532 $ 103,805 (47) %
Homes delivered 797 727 10 % 1,969 2,089 (6) %
Average selling price $ 380,200 $ 412,200 (8) % $ 389,700 $ 415,600 (6) %
Operating income as a percentage of revenues 7.3 % 11.0 % (370) bps 7.2 % 12.0 % (480) bps
This segment's revenues for the three months and nine months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. For the three months and nine months ended August 31, 2024, this segment's revenues were generated solely from housing operations. Housing revenues for the three months ended August 31, 2025 rose slightly from the year-earlier period to $303.0 million due to an increase in the number of homes delivered, partly offset by a decrease in their average selling price. Housing revenues for the nine months ended August 31, 2025 declined 12% from the corresponding year-earlier period to $767.3 million due to decreases in both the number of homes delivered and their average selling price. Operating income for the three months and nine months ended August 31, 2025 was down year over year, mainly reflecting lower housing gross profits. As a percentage of revenues, operating income for the 2025 third quarter declined from the year-earlier quarter due to a 370 basis-point decline in the housing gross profit margin to 16.3%, with selling, general and administrative expenses as a percentage of housing revenues remaining flat at 9.0%. Operating income as a percentage of revenues for the nine months ended August 31, 2025 decreased from the corresponding year-earlier period due to a 390 basis-point decline in the housing gross profit margin to 17.0% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.8%.
The year-over-year decrease in the housing gross profit margin for the three months ended August 31, 2025 mainly reflected price reductions, higher relative land costs, geographic mix, and an increase in inventory-related charges, partly offset by increased operating leverage from higher housing revenues. Inventory-related charges associated with housing operations for the three months ended August 31, 2025 were $2.5 million, compared to $.2 million for the year-earlier quarter. For the nine months ended August 31, 2025, the year-over-year decline in the housing gross profit margin was primarily due to price reductions, higher relative land costs, geographic mix, increased inventory-related charges, and decreased operating leverage from lower housing revenues, partly offset by lower construction costs. Inventory-related charges associated with housing operations for the nine months ended August 31, 2025 were $4.4 million, compared to $.4 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the nine months ended August 31, 2025 was mainly due to decreased operating leverage from lower housing revenues as well as higher costs, including higher marketing and other expenses associated with our expanded community count in this segment.
FINANCIAL SERVICES REPORTING SEGMENT
The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Revenues $ 6,012 $ 6,629 $ 15,617 $ 20,998
Expenses (1,580) (1,608) (4,689) (4,627)
Equity in income of unconsolidated joint venture
4,254 5,932 13,445 19,422
Pretax income $ 8,686 $ 10,953 $ 24,373 $ 35,793
Total originations (a):
Loans 2,314 2,704 6,630 7,332
Principal $ 917,658 $ 1,080,071 $ 2,717,138 $ 2,916,804
Percentage of homebuyers using KBHS 83 % 88 % 86 % 87 %
Average FICO score 740 742 743 743
Loans sold (a):
Loans sold to GR Alliance 1,786 2,188 5,021 6,722
Principal $ 712,367 $ 857,274 $ 2,034,811 $ 2,661,191
Loans sold to third parties 469 368 1,457 551
Principal $ 189,837 $ 155,094 $ 631,511 $ 227,610
(a)Loan originations and sales occurred within KBHS.
Revenues. Financial services revenues for the three months and nine months ended August 31, 2025 declined 9% and 26%, respectively, from the corresponding year-earlier periods due to decreases in both insurance commissions and title services revenues. Insurance commissions were lower in the 2025 periods due to less variability in the contract assets for estimated future renewal commissions, compared to the corresponding prior-year periods. For the three months ended August 31, 2025, a modest increase in the average commission per policy was mostly offset by a modest decrease in the number of policies in force. For the nine months ended August 31, 2025, an increase in the number of policies in force was largely offset by a decrease in the average commission per policy. In contrast, the corresponding 2024 periods benefited from growth in the contract assets for estimated future renewal commissions driven by an increase in the number of policies in force, partly offset by a decrease in the average commission rates. Title services revenues decreased year over year mainly due to fewer homes delivered in the 2025 periods.
Pretax income.Financial services pretax income for the three months and nine months ended August 31, 2025 was down 21% and 32%, respectively, from the corresponding year-earlier periods. These declines were due to the above-mentioned decreases in insurance commissions and title services revenues as well as a decrease in the equity in income of our unconsolidated joint venture, KBHS. For the three months and nine months ended August 31, 2025, the equity in income of our unconsolidated joint venture was down 28% and 31%, respectively, from the corresponding year-earlier periods, reflecting a decrease in KBHS' income. The year-over-year decline in KBHS' income for the three months ended August 31, 2025 mainly reflected a loss in the fair value of IRLCs of $3.0 million in the current period, compared to a $.4 million loss in the year-earlier period. For the nine months ended August 31, 2025, the decrease in KBHS' income primarily reflected a loss in the fair value of IRLCs of $6.6 million in the current period, compared to a gain in the fair value of IRLCs of $3.8 million in the year-earlier period. Also contributing to the year-over-year decrease in KBHS' income for the three months and nine months ended August 31, 2025 was a decline in the number of loans originated, which reflected a decrease in the number of homes we delivered as well as a lower percentage of homebuyers using KBHS.
Further information regarding our investments in unconsolidated joint ventures, including KBHS, is provided in Note 9 - Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.
INCOME TAXES
Income Tax Expense. Our income tax expense and effective tax rates were as follows (dollars in thousands):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Income tax expense $ 33,400 $ 50,100 $ 97,700 $ 138,800
Effective tax rate 23.3 % 24.2 % 23.0 % 23.0 %
Our effective tax rate for the three months ended August 31, 2025 decreased from the year-earlier period, primarily reflecting a $1.4 million increase in Section 45L tax credits, mainly due to additional tax credits recognized based on certifications verified during the quarter, and a $.2 million increase in excess tax benefits related to stock-based compensation, partly offset by a $1.2 million increase in non-deductible executive compensation expense. For the nine months ended August 31, 2025, our effective tax rate remained consistent with the year-earlier period.
IRS guidance issued in 2023 heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states. This guidance, along with our decision to build homes in many of our markets beginning in 2025 that are highly energy efficient and qualify for ENERGY STAR certification but do not qualify for Section 45L tax credits, impacted the tax credits we recognized for the nine months ended August 31, 2025 relative to the corresponding prior-year period. We believe the additional costs necessary to satisfy the higher standards for some of our homes outweigh the possible benefits of meeting those standards for both our business and our buyers.
On July 4, 2025, the OBBBA was signed into law. Among its provisions is the repeal of Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026. As a result, beginning in our 2026 third quarter, our income tax expense and effective tax rate will no longer reflect a benefit from such tax credits as to homes delivered after the effective date. We are currently evaluating other elements of the legislation, but do not expect it to have a material effect on our effective tax rate for the year ending November 30, 2025.
Further information regarding our income taxes is provided in Note 13 - Income Taxes in the Notes to Consolidated Financial Statements in this report.
NON-GAAP FINANCIAL MEASURES
This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with GAAP. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations, and may be helpful in comparing us 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 our operations.
Adjusted Housing Gross Profit Margin.The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands):
Three Months Ended August 31, Nine Months Ended August 31,
2025 2024 2025 2024
Housing revenues $ 1,613,975 $ 1,745,979 $ 4,525,732 $ 4,905,617
Housing construction and land costs (1,320,611) (1,385,563) (3,658,080) (3,872,092)
Housing gross profits 293,364 360,416 867,652 1,033,525
Add: Inventory-related charges (a)
11,338 1,177 18,351 3,685
Adjusted housing gross profits $ 304,702 $ 361,593 $ 886,003 $ 1,037,210
Housing gross profit margin as a percentage of housing revenues 18.2 % 20.6 % 19.2 % 21.1 %
Adjusted housing gross profit margin as a percentage of housing revenues 18.9 % 20.7 % 19.6 % 21.1 %
(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 we calculate 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. We believe adjusted housing gross profit margin is a relevant and useful financial measure to investors in evaluating our performance as it measures the gross profits we generated specifically on the homes delivered during a given period. This non-GAAP financial measure isolates the impact that the housing inventory impairment and land option contract abandonment charges have on housing gross profit margins, and allows investors to make comparisons with our competitors that adjust housing gross profit margins in a similar manner. We also believe 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 us in making strategic decisions regarding community location and product mix, product pricing and construction pace.
Liquidity and Capital Resources
Overview. We have funded our homebuilding and financial services activities over the last several years with:
•internally generated cash flows;
•public issuances of debt securities;
•borrowings under the Credit Facility;
•the Term Loan;
•land option contracts and other similar contracts and seller notes;
•public issuances of our common stock; and
•letters of credit and performance bonds.
We manage our use of cash in the operation of our business to support the execution of our primary strategic goals. Over the past several years, we have primarily used cash for:
•land acquisitions and land development;
•home construction;
•operating expenses;
•principal and interest payments on notes payable;
•repayments of borrowings under the Credit Facility;
•dividends paid to stockholders; and
•repurchases of our common stock.
We ended the 2025 third quarter with total liquidity of $1.16 billion, including cash and cash equivalents and $831.7 million of available capacity under the Credit Facility, with $250.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $330.6 million at August 31, 2025, compared to $598.0 million at November 30, 2024. Cash equivalents included in the total were $164.7 million at August 31, 2025 and $385.1 million at November 30, 2024, and were mainly invested in interest-bearing bank deposit accounts and money market funds. Based on our financial position as of August 31, 2025, and our business forecast as discussed below under "Outlook," we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.
Cash Requirements. In the nine months ended August 31, 2025, there have been no significant changes in our cash requirements from those reported in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended November 30, 2024.
Investments in Land and Land Development.In the 2025 first quarter, our investments in land and land development increased 57% year over year to $920.3 million, which included our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out. As a result of the heightened first-quarter investment level, our existing land pipeline and softer market conditions, however, we began scaling back our investments in land and land development in the 2025 second quarter. In our 2025 third quarter, we maintained our land investments at a level that we believe will support our current growth projections. Our investments for the 2025 third quarter decreased 39% year over year to $514.1 million. For the nine months ended August 31, 2025, our investments in land and land development declined 7% year over year to $1.95 billion. Land acquisition expenditures, which are included in our investments in land and land development, decreased to $771.3 million, or 40% of our total investments, for the nine months ended August 31, 2025, compared to $916.9 million, or approximately 44% of our total investments, for the corresponding period of 2024. While we made investments in land and land development in each of our homebuilding reporting segments during the
nine months ended August 31, 2025 and 2024, approximately 51% and 55%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.
For the 2025 fourth quarter, although we expect a year-over-year decrease in our land-related investments, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities that meet our investment return standards.
The following table presents the number of lots we owned or controlled under land option contracts and other similar contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands):
August 31, 2025 November 30, 2024 Variance
Segment Lots Carrying Value Lots Carrying Value Lots Carrying Value
West Coast 21,030 $ 3,116,438 23,956 $ 2,915,543 (2,926) $ 200,895
Southwest 10,666 925,458 13,117 845,910 (2,451) 79,548
Central 20,531 838,656 21,056 839,920 (525) (1,264)
Southeast 13,024 958,264 18,574 926,647 (5,550) 31,617
Total 65,251 $ 5,838,816 76,703 $ 5,528,020 (11,452) $ 310,796
The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2025 increased 6% from November 30, 2024, mainly due to land and land development investments during the nine months ended August 31, 2025. The number of lots we owned or controlled as of August 31, 2025 decreased 15% from November 30, 2024, largely reflecting homes delivered and our strategic abandonment of 21,054 previously controlled lots, partly offset by newly optioned lots during the period. The number of lots in inventory as of August 31, 2025 included 6,310 lots under contract where the associated deposits were refundable at our discretion, compared to 18,923 of such lots at November 30, 2024. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 42% at August 31, 2025, compared to 49% at November 30, 2024. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.
Land Option Contracts and Other Similar Contracts. As discussed in Note 8 - Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at August 31, 2025, we estimate the remaining purchase price to be paid would be as follows: 2025 - $392.5 million; 2026 - $894.3 million; 2027 - $372.0 million; 2028 - $148.0 million; 2029 - $69.3 million; and thereafter - $0.
Liquidity. The table below summarizes our cash and cash equivalents, and total liquidity (in thousands):
August 31,
2025 		November 30,
2024
Cash and cash equivalents $ 330,586 $ 597,973
Credit Facility commitment 1,090,000 1,090,000
Borrowings outstanding under the Credit Facility (250,000) -
Letters of credit outstanding under the Credit Facility (8,260) (8,260)
Credit Facility availability 831,740 1,081,740
Total liquidity $ 1,162,326 $ 1,679,713
Capital Resources. Our notes payable consisted of the following (in thousands):
August 31,
2025 		November 30,
2024 		Variance
Credit Facility $ 250,000 $ - $ 250,000
Term Loan 359,329 358,826 503
Senior notes 1,331,104 1,329,704 1,400
Mortgages and land contracts due to land sellers and other loans 3,149 3,149 -
Total
$ 1,943,582 $ 1,691,679 $ 251,903
Our financial leverage, as measured by the ratio of debt to capital, increased 380 basis points to 33.2% at August 31, 2025, compared to 29.4% at November 30, 2024 due to cash borrowings outstanding under the Credit Facility. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders' equity).
LOC Facility. We maintain the LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, which expires on February 13, 2028, we may issue up to $100.0 million of letters of credit. As of August 31, 2025 and November 30, 2024, we had letters of credit outstanding under the LOC Facility of $62.4 million and $73.3 million, respectively.
Performance Bonds. As discussed in Note 16 - Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.39 billion and $1.33 billion of performance bonds outstanding at August 31, 2025 and November 30, 2024, respectively.
Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments. The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility. As of August 31, 2025, we had $250.0 million of cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 14 - Notes Payable in the Notes to Consolidated Financial Statements in this report.
Under the terms of the Credit Facility and the Term Loan, we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, Leverage Ratio, and either an Interest Coverage Ratio or minimum liquidity level, each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from comparable GAAP or other commonly used terms. The financial covenant requirements under the Credit Facility and the Term Loan are set forth below:
•Consolidated tangible net worth - We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021.
•Leverage Ratio - We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter. The Leverage Ratio is calculated as the ratio of our consolidated total indebtedness to the sum of consolidated total indebtedness and consolidated tangible net worth, all as defined under the Credit Facility and the Term Loan.
•Interest Coverage Ratio or liquidity - We are also required to maintain either (a) an Interest Coverage Ratio of greater than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both. The Interest Coverage Ratio is the ratio of our consolidated adjusted EBITDA to consolidated interest incurred, each as defined under the Credit Facility and the Term Loan, in each case for the previous 12 months. Our minimum liquidity is required to be greater than or equal to consolidated interest incurred, as defined under the Credit Facility and the Term Loan, for the four most recently ended fiscal quarters in the aggregate.
In addition, under the Credit Facility and the Term Loan, our equity investments in joint ventures and non-guarantor subsidiaries and other unconsolidated entities as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million and (b) 20% of consolidated tangible net worth. Further, for so long as we do not hold an investment grade rating, as defined under the Credit Facility and the Term Loan, the Credit Facility and the Term Loan do not permit our borrowing base
indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries' outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our inventory and unrestricted cash assets).
The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants that we are subject to with respect to our notes payable. The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of August 31, 2025:
Financial Covenants and Other Requirements Covenant Requirement Actual
Consolidated tangible net worth > $3.29 billion $3.86 billion
Leverage Ratio <</span> .600 .336
Interest Coverage Ratio (a) > 1.500 8.027
Minimum liquidity (a) > $102.3 million $80.6 million
Investments in joint ventures and non-guarantor subsidiaries <</span> $876.5 million $445.5 million
Borrowing base in excess of borrowing base indebtedness (as defined) n/a $2.55 billion
(a) Under the terms of the Credit Facility and the Term Loan, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.
The indenture governing our senior notes does not contain any financial covenants. Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in sale-leaseback transactions involving property above a certain specified value. In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets.
As of August 31, 2025, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility and the mortgages and land contracts due to land sellers and other loans. Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. Our ability to access the Credit Facility's full borrowing capacity, as well as the LOC Facility's full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments.
There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).
Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At August 31, 2025, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $24.4 million.
Senior Unsecured Term Loan. We have a $360.0 million Term Loan with the lenders party thereto that will mature on August 25, 2026, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions). The Term Loan is further described in Note 14 - Notes Payable in the Notes to Consolidated Financial Statements in this report.
Unconsolidated Joint Ventures. As discussed in Note 9 - Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. As of August 31, 2025, one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets. None of our other homebuilding unconsolidated joint ventures had outstanding debt at August 31, 2025.
Consolidated Cash Flows. The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands):
Nine Months Ended August 31,
2025 2024
Net cash provided by (used in):
Operating activities $ 31,840 $ 81
Investing activities (42,237) (38,138)
Financing activities (256,498) (313,592)
Net decrease in cash and cash equivalents
$ (266,895) $ (351,649)
Operating Activities. Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability. Our net cash provided by operating activities for the nine months ended August 31, 2025 mainly reflected net income of $327.3 million and a net decrease in receivables of $7.2 million, partly offset by a net increase in inventories of $330.0 million and a net decrease in accounts payable, accrued expenses and other liabilities of $63.8 million. In the nine months ended August 31, 2024, our net cash provided by operating activities primarily reflected net income of $464.4 million and a net decrease in receivables of $6.2 million, partly offset by a net increase in inventories of $504.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $14.4 million.
Investing Activities. In the nine months ended August 31, 2025, our net cash used in investing activities reflected $34.6 million used for net purchases of property and equipment and $10.6 million for contributions to unconsolidated joint ventures, partially offset by a $3.0 million return of investments in unconsolidated joint ventures. In the nine months ended August 31, 2024, the net cash used in investing activities included $29.2 million for net purchases of property and equipment and $12.6 million for contributions to unconsolidated joint ventures, partly offset by a $2.0 million return of investments in unconsolidated joint ventures and $1.7 million of proceeds from the sale of a privately held technology company in which we had an ownership interest.
Financing Activities. In the nine months ended August 31, 2025, cash was used for stock repurchases of $438.5 million, dividend payments on our common stock of $52.8 million, and tax payments associated with stock-based compensation awards of $15.9 million. The cash used was partly offset by $250.0 million of net borrowings under the Credit Facility and $.7 million of issuances of common stock under employee stock plans. In the nine months ended August 31, 2024, our uses of cash included stock repurchases of $250.0 million, dividend payments on our common stock of $53.5 million, tax payments associated with stock-based compensation awards of $16.5 million, and payments on mortgages and land contracts due to land sellers and other loans of $2.8 million. The cash used was partially offset by $9.3 million of issuances of common stock under employee stock plans.
Dividends. In the 2025 and 2024 third quarters, our board of directors declared, and we paid, a quarterly cash dividend of $.25 per share. Quarterly dividends declared and paid during the nine months ended August 31, 2025 and 2024 totaled $.75 and $.70 per share, respectively. The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.
Share Repurchase Program. On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock. As of November 30, 2024, there was $700.0 million of remaining availability under this share repurchase authorization. In the 2025 first nine months, we repurchased 7.8 million shares of our common stock at a total cost of $438.5 million. Repurchases under the authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management's discretion and dependent on market, business and other conditions. This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares. As of August 31, 2025, there was $261.5 million of remaining availability under this share repurchase authorization.
As of the date of this report, and as stated above, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. For the 2025 fourth quarter, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions. During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity securities or potential new issuances of debt or equity securities to support our
business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire. Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or other factors, including those described below under "Outlook," and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions.
Supplemental Guarantor Financial Information
As of August 31, 2025, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $250.0 million of borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan. Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, "Non-Guarantor Subsidiaries"), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary's best interest. See Note 14 - Notes Payable in the Notes to Consolidated Financial Statements in this report for additional information regarding the terms of our senior notes, the Credit Facility and the Term Loan.
The guarantees are full and unconditional, and the Guarantor Subsidiaries are 100% owned by us. The guarantees are senior unsecured obligations of each of the Guarantor Subsidiaries and rank equally in right of payment with all unsecured and unsubordinated indebtedness and guarantees of such Guarantor Subsidiaries. The guarantees are effectively subordinated to any secured indebtedness of such Guarantor Subsidiaries to the extent of the value of the assets securing such indebtedness, and structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries.
Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and the Term Loan, if any of the Guarantor Subsidiaries ceases to be a "significant subsidiary" as defined by Rule 1-02 of Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes, the Credit Facility and the Term Loan so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries' indebtedness are terminated at or prior to the time of such release.
The following tables present summarized financial information for KB Home and the Guarantor Subsidiaries on a combined basis, excluding unconsolidated joint ventures and after the elimination of (a) intercompany transactions and balances between KB Home and the Guarantor Subsidiaries and (b) equity in earnings from and investments in the Non-Guarantor Subsidiaries. See Note 9 - Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report for additional information regarding our unconsolidated joint ventures.
August 31,
2025 		November 30,
2024
Summarized Balance Sheet Data (in thousands)
Assets
Cash $ 274,523 $ 543,233
Inventories 5,240,220 4,981,097
Amounts due from Non-Guarantor Subsidiaries 520,833 500,321
Total assets 6,672,704 6,657,479
Liabilities and Stockholders' Equity
Notes payable $ 1,943,582 $ 1,691,679
Amounts due to Non-Guarantor Subsidiaries 420,888 382,356
Total liabilities 3,133,492 2,928,169
Stockholders' equity 3,539,212 3,729,310
Summarized Statement of Operations Data (in thousands)
Nine Months Ended
August 31, 2025
Revenues $ 4,107,293
Construction and land costs (3,291,449)
Selling, general and administrative expenses (446,500)
Interest income from Non-Guarantor Subsidiaries 25,865
Pretax income 399,679
Net income 307,879
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires the use of judgment in the application of accounting policies and estimates of uncertain matters. There have been no significant changes to our critical accounting policies and estimates during the nine months ended August 31, 2025 from those disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended November 30, 2024.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements.
Outlook
We continue to view the long-term outlook for the housing market favorably, based on demographic trends and the continued undersupply of homes. While market conditions were softer in the first three quarters of 2025 relative to the corresponding year-earlier periods, demand stabilized in the third quarter, which was sustained as the quarter progressed along with a moderation in mortgage interest rates. Looking ahead to the fourth quarter, we expect ongoing affordability concerns and cautious consumer sentiment to continue to temper housing demand. At the same time, we are encouraged by the moderation in mortgage interest rates in the third quarter and believe that continued moderation, if it occurs, should support greater demand for homeownership by improving affordability.
Reflecting the prevailing environment, despite a steady level of traffic in our communities, we experienced year-over-year decreases in our 2025 third quarter net orders of 4%, ending backlog of 24% and ending backlog value of 32%. The value of our net orders for the 2025 third quarter was down 15% year over year driven by the decline in net orders and an 11% decrease in their average selling price to $445,600, largely due to price reductions we implemented beginning in mid-February 2025 as part of our strategic focus on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. We expect these price reductions to moderate our overall average selling price and housing gross profit margin on homes delivered for the 2025 fourth quarter.
In navigating the current environment, we intend to remain nimble, balancing pace and price at the community level to optimize our assets for the highest possible returns. In executing on this approach in the fourth quarter, which is a seasonally inelastic demand period in which other builders have typically pursued aggressive, incentive-oriented sales strategies, we plan to focus on generating net orders that maximize margins, returns and cash flow over volume. We will also emphasize our Built to Order homes while continuing to sell through our inventory. Our Built to Order homes are our core competency, a key competitive differentiator, and, particularly with the significant reduction in our build times since 2024, an appealing proposition to buyers.
In the 2025 fourth quarter, we expect to continue to invest in and develop land positions within attractive submarkets and acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities. However, given our existing land pipeline, since the 2025 second quarter, we have been scaling back our investments in land and land development to align with current conditions. As a result, we anticipate a year-over-year decrease in our land-related investments in the 2025 fourth quarter. Additionally, we intend to continue to prioritize capital efficiency, developing lots where possible in smaller phases and balancing development with our starts pace to manage our inventory of finished lots.
At the same time, and consistent with our balanced approach to capital allocation, we plan to continue returning capital to our stockholders, primarily through additional share repurchases. As of August 31, 2025, we had $261.5 million of remaining availability under our current board of directors share repurchase authorization. This provides us the opportunity to repurchase
our common stock in the 2025 fourth quarter, with the pace, volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions. Subject to these factors, we expect to repurchase between $50.0 million and $150.0 million of our common stock in our 2025 fourth quarter, and to continue repurchases in our 2026 fiscal year.
Considering the foregoing, we have revised our projections for 2025 that were made in our Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2025. Our present outlook for the 2025 fourth quarter and the 2025 full year as to certain metrics is as follows:
2025 Fourth Quarter
•We expect to generate housing revenues in the range of $1.60 billion to $1.70 billion, compared to $1.99 billion for the corresponding 2024 period, and anticipate our average selling price to be between $465,000 and $475,000, compared to $501,000 in the year-earlier period.
•We expect our homebuilding operating income margin as a percentage of revenues to be in the range of 8.5% to 8.9%, assuming no inventory-related charges, compared to 11.5% for the year-earlier quarter.
•We expect our housing gross profit margin will be in the range of 18.0% to 18.4%, assuming no inventory-related charges, compared to 20.9% for the corresponding 2024 quarter.
•We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 9.3% to 9.7%, compared to 9.4% for the 2024 fourth quarter.
•We expect our effective tax rate will be approximately 23.0%, compared to 23.1% for the year-earlier quarter.
2025 Full Year
•We expect our housing revenues to be in the range of $6.10 billion to $6.20 billion, compared to $6.90 billion for 2024.
•We expect our average selling price will be approximately $483,000, compared to $486,900 for 2024.
•We expect our homebuilding operating income margin as a percentage of revenues to be approximately 8.9%, assuming no inventory-related charges, compared to 11.1% for 2024.
•We expect our housing gross profit margin to be in the range of 19.2% to 19.3%, assuming no inventory-related charges, compared to 21.1% for 2024.
•We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 10.2% to 10.3%, compared to 10.0% for 2024.
•We expect our effective tax rate will be approximately 23.0%, essentially the same as 2024.
•We expect our ending community count to be approximately 260, compared to 258 for 2024.
In addition to factors discussed elsewhere in this report, our future performance and the strategies we implement (and adjust or refine as necessary or appropriate) will depend significantly on prevailing economic, employment, homebuilding industry and capital, credit and financial market conditions and on a fairly stable and constructive political and regulatory environment (particularly in regard to housing and mortgage loan financing policies). This includes U.S. trade policy and recently implemented and proposed tariffs, and other countries' countervailing measures, on raw building materials, such as steel, lumber, drywall and concrete, and/or finished products. Though certain tariffs and countervailing measures instituted in 2025 have influenced pricing in adjacent sectors, we have not experienced significant cost increases or raw material/finished product availability constraints as of the date of this filing. However, if the U.S. or foreign governments take actions that cause tariff-related cost or availability pressures to escalate or expand, we could experience significant construction cost increases and/or supply chain disruptions that, in turn, would impact our business and our consolidated financial statements in future reporting periods. Additionally, while the Federal Reserve reduced interest rates in September 2025, and may lower rates further in 2025 or later periods, we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes, will positively affect demand or our business, results of operations or consolidated financial statements. The potential extent and effect of these and other factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in the three months and nine months ended August 31, 2025, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues, margins and returns.
Forward-Looking Statements
Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "hope," and similar expressions constitute forward-looking statements. In addition, any statements that we may make or provide concerning future financial or operating performance (including without limitation future revenues, community count, homes delivered, net orders, selling prices, sales pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings per share, or growth or growth rates), future market conditions, future interest rates, and other economic conditions, ongoing business strategies or prospects, future dividends and changes in dividend levels, the value of our backlog (including amounts that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries), the value of our net orders, potential future asset acquisitions and the impact of completed acquisitions, future share issuances or repurchases, future debt issuances, repurchases or redemptions and other possible future actions are also forward-looking statements as defined by the Act. Forward-looking statements are based on our current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding industry, among other things. These statements are not guarantees of future performance, and we have no specific policy or intention to update these 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). In addition, forward-looking and other statements in this report and in other public or oral disclosures that express or contain opinions, views or assumptions about market or economic conditions; the success, performance, effectiveness and/or relative positioning of our strategies, initiatives or operational activities; and other matters, may be based in whole or in part on general observations of our management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical investigation, inquiry or analysis.
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 Federal Reserve, 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 the Credit Facility and the Term Loan;
•the ability and 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 the Credit Facility or LOC Facility;
•volatility in the market price of our common stock;
•our obtaining adequate levels of affordable insurance for our business and our ability to cover any incurred costs, liabilities or losses that are not covered by the insurance we have procured or that are due to our deciding not to procure certain types or amounts of insurance coverage;
•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;
•regulatory instability associated with the current U.S. presidential administration, and the impact on the economy or financial markets therefrom;
•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, and the potential significant scaling back or ending of the federal conservatorship of the government-sponsored enterprises), 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 IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes, and the potential accelerated phaseout of such tax credits in 2026;
•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, and financial markets' and businesses' reactions to any such policies;
•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, including implementing state climate-related disclosure rules, 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, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, 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, and the costs and margin impact we incur from any incentives or concessions we may provide to buyers to do so;
•our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report 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 or afford 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 Annual Report on Form 10-K for the year ended November 30, 2024 and other filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our business.
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