Financial Performance - Homebuilding revenues for Q1 2025 decreased by 5% year over year to $1.39 billion, with a 9% decrease in homes delivered to 2,770[107]. - Net income for Q1 2025 was $109.6 million, down 21% from the previous year, and diluted earnings per share decreased by 15% to $1.49[107]. - Operating income for Q1 2025 was $127.3 million, down 19% year over year, with operating income as a percentage of revenues at 9.2% compared to 10.8% in the prior year[110]. - Interest income for Q1 2025 was $2.1 million, a decrease from $5.9 million in the same quarter last year, due to lower average balances and interest rates[121]. - Financial services revenues decreased by 22% year-over-year to $4.7 million, primarily due to declines in insurance commissions and title services revenues[140]. - The equity in income of the unconsolidated joint venture for financial services was $4.3 million, down from $7.1 million in the prior year, reflecting a loss in fair value of IRLCs[141]. - In the first quarter of 2025, the company reported revenues of $1.28 billion, with a net income of $106.8 million, reflecting a pretax income of $136.4 million[182]. Sales and Orders - The company experienced a 17% year-over-year decline in net orders, totaling 2,772 for Q1 2025, with a monthly net order pace per community of 3.6 compared to 4.6[108]. - Net orders for Q1 2025 decreased by 17% year-over-year, totaling 2,772, compared to 3,323 in Q1 2024[124]. - The net order value for Q1 2025 was $1,346,067, reflecting a 15% decline from $1,582,191 in Q1 2024[127]. - The cancellation rate increased to 16% in Q1 2025 from 14% in Q1 2024, indicating a slight rise in contract cancellations[130]. - The company implemented targeted sales strategies, including mortgage-related concessions and selective price reductions, to stimulate demand[109]. - The company implemented targeted sales strategies, including mortgage-related concessions, to improve affordability and stimulate demand[125]. Backlog and Inventory - The ending backlog value decreased by 21% year over year to approximately $2.20 billion, reflecting a soft start to the Spring selling season[113]. - Ending backlog of homes decreased by 23% year-over-year to 4,436 homes, with a backlog value of $2,201,933, down 21% from $2,791,744[128]. - The ending community count grew by 7% year-over-year to 255, with an average community count also increasing by 7%[129]. Market Segments - Revenues for the West Coast segment increased by 8% to $601,649, while operating income remained nearly flat at $66,492[134]. - The Southwest segment reported a 3% decline in revenues to $312,879, but operating income increased by 5% to $58,775[135]. - Central segment revenues for the three months ended February 28, 2025, were $275.6 million, a 14% decrease from $320.5 million in the prior year[136]. - Southeast segment revenues for the same period were $196.9 million, down 24% from $259.8 million year-over-year[137]. - The backlog value decline was observed across all homebuilding reporting segments, with the Southeast segment experiencing a 25% decrease[128]. - Operating income for the Central segment declined 34% to $25.5 million, while the Southeast segment's operating income fell 59% to $13.1 million[136][137]. - The average selling price in the Central segment increased by 1% to $367,000, while in the Southeast segment, it decreased by 4% to $400,200[136][137]. Investments and Liquidity - Investments in land and land development increased by 57% year over year to $920.3 million, while share repurchases totaled 753,939 shares at a cost of $50 million[112]. - Cash and cash equivalents totaled $267.8 million as of February 28, 2025, down from $598.0 million at November 30, 2024[149]. - Total liquidity decreased to $1,249,573 thousand as of February 28, 2025, compared to $1,679,713 thousand on November 30, 2024[157]. - The company plans to continue investing in land positions within attractive submarkets throughout 2025, depending on market conditions[154]. - The carrying value of lots owned or controlled under land option contracts increased by 7% to $5,942,547 thousand as of February 28, 2025, compared to $5,528,020 thousand on November 30, 2024[155]. - The total number of lots owned or controlled increased by 2% to 78,233 lots as of February 28, 2025, from 76,703 lots on November 30, 2024[155]. - The company had $100.0 million in cash borrowings under the Credit Facility as of February 28, 2025[160]. Future Outlook - The company expects housing revenues for the second quarter of 2025 to be between $1.45 billion and $1.55 billion, compared to $1.70 billion in the same quarter of 2024[195]. - The anticipated average selling price for homes in the second quarter of 2025 is approximately $488,000, compared to $483,000 in the prior year[195]. - The company projects a homebuilding operating income margin of approximately 8.5% for the second quarter of 2025, down from 11.1% in the same quarter of 2024[195]. - For the full year 2025, the company expects housing revenues to range from $6.60 billion to $7.00 billion, compared to $6.90 billion in 2024[195]. - The company plans to continue investing in land positions while anticipating a sequential decrease in land-related investments in the second quarter of 2025[191]. - The effective tax rate for the second quarter of 2025 is expected to be approximately 24.0%, compared to 23.8% in the same quarter of 2024[195]. Risks and Challenges - The company is subject to risks including general economic conditions, population growth, and conditions in capital markets[199]. - The company faces potential increases in material and trade costs, particularly for ENERGY STAR certified homes[199]. - The company is impacted by changes in interest rates set by the Federal Reserve, which may affect mortgage loans[200]. - The company must navigate competition from other sellers of new and resale homes[200]. - The company is exposed to risks from regulatory instability and changes in government policies affecting the housing market[200]. - The company has to manage the availability and cost of land in desirable areas for new home developments[200]. - The company is at risk from disruptions in supply chains due to geopolitical conflicts and sanctions[200]. - The company has to comply with regulatory requirements that may incur additional costs or liabilities[200].
KB Home(KBH) - 2025 Q1 - Quarterly Report