KB Home revenues dip but defeat expectations in Q2 report

A labourer does work to a home’s roof. (Image: Adobe Stock)

Here’s a look at some highlights and notes from the company’s annual second quarter release:

Revenues, deliveries, and backlog fell but home prices, income increased

The company delivered 3,523 homes in the quarter – 143 less than 2023 – and, although revenue dipped around 3.4% year-over-year, the average selling price-per-unit increased to $483,000, said KB Home.

The company’s ending backlog was listed at 6,270 with a value of $3.1 billion, which was down 14% and 10%, respectively.

“The year-over-year decreases narrowed for the fourth consecutive quarter,” said KB Home.

The company’s average community count (the number of sites where the company has homes or properties for sale) for the quarter was also down 4% to 243, and ending community count stayed nearly flat at 247 (although, on a sequential basis, the ending community count expanded 4%).

KB Home also reported operating income decreased to $188 million, down from $202 million.

As for the gains, the company reported a 7% increased to its net order value, which led to a 2% increase in net income.

Monthly net new orders per community were also up to 5.5 from 5.2 in 2023. KB Home said this was one of its ‘highest levels’ in years, and the company credited build-to-order schemes as helping with the boost.

Jeffrey Mezger, KB Home chairman and CEO, said, “Buyers remained resilient in their desire for homeownership despite the volatility in mortgage interest rates.

“Our pace of monthly net orders per community was one of our highest second quarter levels in many years, which we believe reflected the compelling personalized choice that our built to Order model offers to meet each buyer’s lifestyle and budget.”

Land acquisition and development investment increases 64%

KB Home significantly boosted its investment in land acquisition and development by a significant 64%, bringing its total land and development venture to a value of $1.3 billion (compared to $763 million last year).

Notably, the company’s owned and controlled lot count expanded, said Mezger, though an exact figure or growth rate was not provided.

“Our business is generating substantial cash flows, and we are continuing our balanced approach in allocating this capital, focused on both expanding our scale and returning cash to our stockholders.

“In the 2024 second quarter, we significantly increased our investment in land acquisition and development… with a healthy expansion in our owned and controlled lot count, as well as our planned community openings.” Mezger added.

KB Home figures on operational margins and costs

The housing gross profit margin remained stable at 21.1%, with an adjusted margin of 21.2% excluding inventory-related charges.

Selling, general, and administrative expenses increased to 10.1% of housing revenues, reflecting higher costs associated with marketing and planned community expansions, said the company.

The effective tax rate for the quarter was 23.8%. Additionally, financial services pretax income rose by 16% to $13.3 million, driven by increased activity in the company’s mortgage banking joint venture.

“This was largely driven by a higher volume of both interest rate locks and loan originations, as 86% of the buyers financing their home purchases in the current quarter used the joint venture, up from 80%,” said KB Home.

Outlook

For the full year 2024, the company anticipates revenues between $6.7 billion to $6.9 billion, with an average selling price ranging from $485,000 to $495,000.