KBH - Earnings call transcript Q1 2024

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Operator

Good afternoon. My name is John, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2024 First Quarter Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and will be available for replay at the company's website, kbhome.com, through April 19, 2024. And now I would like to turn the call over to Jill Peters, Senior Vice President, Investor Relations. Jill. you, Thank

begin. You may

Jill Peters

John. joining Good the thank you, everyone, quarter afternoon, today to for us for fiscal you review of Thank XXXX. and our first results

which in forward-looking in are the Vice Operating Officer; and and Chief reconciliation Kaminski, Executive call On Officer; detailed and addition, Chief those President different our actual Accounting could release President the Thad Jeff this press Mezger, and Vice Bill President Chief of Securities non-GAAP gross those McGibney, of Officer; be today's in statements.In Hollinger, Executive with from implied results Chief adjusted Senior margin, materially Commission, housing the and and Treasurer.During Officer; Exchange Jeff and Rob Senior measure profit Financial Vice forward-looking will statements undertake Act a and Johnson, page kbhome.com.And the the XXXX. and is or filings Chairman and stated guarantees release including comparable today's directly Mezger. be non-GAAP the discussed to Due Securities other items These does be not any considered discussion Private are call, update them. of within website to that are not charges, the our Investor to any company measure here most results meaning during factors, Litigation measure the Relations in on referenced today's its and/or can found with press that, various of of obligation at of GAAP Reform President future inventory-related Jeff statements excludes

Jeffrey Mezger

our were at season start, The of guided our for orders good confidence results highlighted achieve of high-end results, gives with everyone.We first of well planned as this or by the net very to above considerable our objectives delivered strong year.As community is we and ranges. Jill, solid times, and that either $X.X diluted revenues afternoon, total build $X.XX. to the we a backlog, performance quarter, of Thank financial selling us per new details together billion you, well that better as share spring we off are produced the and which openings, our positioned earnings good our in

Our margins sustained fiscal operating the the book cumulative XX% up an share during remained value repurchases under year. This our and in of the Market income. gross improved with additional XX.X% benefit since $XX just share, performance along drove at have conditions our quarterly first stable in of per last XX% year-over-year. including quarter end million

began see discussed in As we we to call higher the progressed. demand quarter December, January, which move accelerated on in as our earnings

Although the mortgage primary of results a interest prevailed. rates the sustain for XX% late to by longer-term.The sequential factors followed these in to demand be momentum believe market. home our increased XX% more solid the employment, strong gains of housing homeownership itself desire homeownership inventory combination February in housing will we February. today, We and in continue that in underlying stable levels market from resulted demographics and net the speak orders expect January, lowest quarter, the low new levels, for modestly and favorable in their supports during The

Another year-over-year net implemented sign representing the most level price X,XXX cancellation orders generated of in held both concession first of increases of we total, In rate, modest achieved this and we stability quarter, sequentially and was which in while mortgage XX% fell communities. This year-over-year. is a the our significantly, result our growth. study

quarter. basis, our accelerated progressed, orders we positioned monthly year.On this per first averaging second community continued half to the the are as the We as the this a and points of start and price given to believe respond since quarter, buyer have demand to sales well full our for X.X strong well in experience openings community new planned pace our net quarter absorption as of products

Our quarter, of In generally pace inventory orders average which average X community results strategic be per for an produced per absorption net in driving increase of very second tougher results, goals asset to annualized basis, represented orders year-over-year creates XX% high and each strong per about net turns. generating an community-by-community last order X.X optimizing pace a community on an and a we month. year's year. continue this per month, sequential comparable This

favorable pays market Our our expectation year's community light of monthly exceed in last slightly quarter for conditions. order is to second more

believe starts We We with starts to and revenues to starts stronger in continue half business given moment backlog Rob of provide our the homes sales, position Rob? second and our update. to ramp phase demand up for plan and in operational to to imbalanced our align support this XXXX. our I'll year.With pause that, and ask an billion are production, a projected $X.X for our

Rob McGibney

adding Thank you, provide to begin results color. order some Jeff. on I our Jeff's will by to comment additional

backlog, while our net our also of historical roughly quarter X/X During monthly higher our we in in average. and prices above per demand absorption prices the pursued X.X capture quarter, our communities. first At community, we raising our steady. pace a orders another XX% build of over was communities, to And hold pace

to compared levels more who As with lowest orders some our form our as them, are buyers Jeff to start a the to compared concessions flat of year, mentioned, mortgage XX% cancellation to rates than our year adjusted relatively ago orders experienced approximately of and of fourth rate XXXX concession were with the as and having who a locks. higher close.Mortgage XX% were the XX% quarter reflecting the associated were our including to motivated These of in of rate backlog we've gross our improved at quarter.

remains quarter and as to in of position the We to these conditions selling Assuming ended in expect lower a we types production. incentives progresses. demand with strong, homes be X,XXX market season almost spring the

X the build achieved times. over and year our quarter of results expect we production our months.Operationally, next starts in level in are our the market, reducing demand the we maintaining our Given to first grow last elevated the net order divisions accelerate and levels progress

return population over our Our reduce even even approach, to delivery personalized time times XX% for with as over and further than improve months dates we our historical inventory build which is build-to-order as This flow on enhancements relationships into We can with helps believe both homes our homes to well months. increase for production quarter, and our cash sales between as enhance quicker flow to homebuyers. more partners the shorter X delivery, available incorporated improve will a model compelling increase are X times and turns of the focus prior-year daily speed, construction leveraging construction to our sides. with trade business additional efficiency cycle to further

costs held quarter in year-over-year they basis. As homes, started the and a direct to sequential on first steady on both

which funded in backlog provide our capture XX% We compared credit our through continue helping who has closings. opportunities effective finance Higher past been review to metrics to visibility joint had our the year capture quarter, and solid the mortgages manage more with KBHS rates buyers their rate the during a cost Home financed having prior-year to in been wrap more our drive effectively joint We simplification pursue in us as and offset value down, of over of XX% mortgages quarter. venture, help increase to I'll overall our through the inflation.Before the engineering and up, venture I Loans.

our purchasing The to that their maintaining last XXXX, XX% satisfaction attracting number was of making significant versus few average of score divisions other they are equating a and years. to customer buyers we The our rest from XXX, customers at $XX,XXX. of addition, cash household customers income had to products KBHS Even value use buyers with lower has consistent high rates, average levels KBHS elevated costs. our first $XXX,XXX, ahead look are our FICO mortgage the higher down we home, and focused of past can lenders. payment the that times build on direct In climbed with levels, customer down improving over qualify was roughly year, that about satisfaction payment.As our an steadily X/X we while engineering see

which on objectives will and promotions Executive President In was Nevada, are one Brian created are of of company. Brian and with familiar to his Regional time, leading addition, contribute on more earlier lots elevated. We Most growth from of our business. the Northern several which a been position of new to acquiring all the completed has successfully Vice orders, role responsible leadership you our net recently recently, Kunec in Homebuilding Vegas future of opening driving and Many for community and Idaho, of Washington. set growing Brian divisions Presidents our Las our California,

driving growth the Brian, believe with existing changes role to over Presidents Division well increased General that. operational Regional scope organizational as of also Regional to back will addition We to geographic In turn us Manager promoted of call help will in two I these and one of our we the Presidents. performance.And as the Jeff.

Jeffrey Mezger

$XXX land early acquire quarter, a highest level to Rob. quarterly XX% and since Thanks, the year-over-year and close to We million XXXX. develop during invested increase the

lots in a stated XXXX of quarter lots homes our basis.We our maps up inventory end, capital capital And XX% achieve position or we while Rob in served growth lots with price a need which committed the achieve as these place XX,XXX XX,XXX this in have efficiency, our possible road of and delivery so, lots. are and wherever We own product all a we points X,XXX had with beyond of at provides adhering in Approximately the at finished currently top as balancing timelines XX,XXX We to production. criteria, have targets finished runway year. past, prior, have our do control X smaller lots of that pace each developing owned have we the for to accelerate or available to own on focused tied spend lots We to to Over lots us investment or roughly XXXX. our and are manage controlled about about phases with in our in which, at intend to and in owned. are our to divisions development markets. referenced, strategy, were of were solid least XXXX underwriting of starts as our cost favorable growth we

accretive average our will of current be substantially thank repurchases. the remains $XX.XX, we and of to in both healthy has entire are repurchase stabilized demand the and returning toward any our KB a the requesting and quarter increased $XXX our for quarter. rising Our have roughly per we are encouraged the of cancellation bought stock availability cash intend intend shareholders reflected of growth share.Over season.Our conditions XXXX, team we're we have trade in I healthy XXXX, the Mortgage have we share that are also capital largely Supply execution back spring while pressures Market the in our backlog during is want allocate environment Home capital the million the closing, to reinvestment utilize are present, common seeing of seeing through an fiscal evidence to by sequentially primarily a Board.In is plan year, they state. at selling balance homebuyers. capabilities continuation returning and an first rate labor year. and lower minimum, sheet executed in the interest rates we our $XXX still rates our we their we dedication strong. which, as our the the that our to from improved cost do allocation at in rate Buyers price additional have at experienced cash-generating in dynamics in and book This steadied million to a onset adjusted normalized solid and chain to value about to earnings authorization and more of balance first eased. and is and diluted not authorization we to this We and see

that, to company expect the to for higher which we our Jeff favorable our approach. times financial forward will the potential now These build our I'll for enhance contribute cash, further, inventory business the demonstrating as over Jeff? to look unfolds.With compress and dynamics year call turn to our built-to-order unlock the of and all turns, review. We are

Jeff Kaminski

you, well and full now will afternoon, Thank of Jeff, quarter provide our cover and as highlights our outlook. XXXX good second first financial year performance I as everyone. quarter

backlog deliveries the over cycle line with our up with We are homes. quarter, home and our during of execution X% supported our by improving and year, expectations prior with pleased in sold the times construction first

as $X.XX with and delivered lower of current as year-earlier backlog drove of cash year quarter, offsetting strong in the number Region. in margin us The return healthy improvement dividends, period.Housing stockholders well Our that enabled significant $XXX the improved reflected billion.In flow $XX number of end first a period selling in regions, the were X% in a XX% a Central by offset the in in of the to and increase million those up cancellation invest homes. share million the revenues in revenues were of quarter the West the partially Coast rate XX%, from homes conversion for by X of homes the our operating times both of repurchases of decline demonstrating to nearly first a liquidity decline build impact robust through Southwest, the rate XX% ranging in in X up a XX% the from almost our to XX% our over year-over-year, land, X% quarter, $X.XX of delivered, the billion X% average housing our price overall driven

housing our forecasted to chain for remainder expect conditions XXXX. favorable We and the support stable trends results of market supply

quarter, For revenues anticipate to billion. we the range $X.X the in second housing generating billion $X.X of

expected For expect orders backlog selling the we mix average quarter, delivered achieve performance revenues full our homes, in this growth mainly $XXX,XXX, first by net to sold the X% anticipated of per believe overall to positioned of shifts. price year, decreased construction community to projected range approximately $X.X We homes well due the and $X.X count.In topline billion. continued of community, are improvement times, to cycle in we billion to year-over-year our in housing supported generate

in million year average quarter, projecting we compared sequentially selling overall an our prior We up and For average for of will price $XXX,XXX, full the approximately overall are be the both second still slightly, price period. XXXX selling expect to the The operating year $XXX,XXX first the charges compared Homebuilding million for quarter quarter. to income abandonment included to ago. of current the a slightly the year-earlier for million $X.X quarter range versus million $X.X of $XXX.X to increased year $XXX,XXX. $XXX.X

to the quarter, SG&A decreased margin higher income XX.X% compared to for mainly operating to current the XX.X% a in quarter. ratio homebuilding Our due XXXX first expense year

operating the the our approximately and will XX.X% operating full-year of XX.X% to charges, margin second points be decreased anticipate inventory-related income range year-over-year.We homebuilding be metric to XXXX XX.X% Excluding of margin XX.X% XX to our quarter XX.X%. basis in to

Our even gross XXXX margin was the profit of first quarter housing with XX.X% quarter. year-earlier

basis to points our periods, XX.X%. gross charges by Excluding margin inventory-related decreased in both XX year-over-year

gross project due and quarterly expected profile are of XXXX to year XX%, We by anticipated are supported forecasting the margin buydown deliveries, the for margin to We in homes concessions sold profit improved our offered second deliver range challenging a second rate second at higher reflecting housing quarter time leverage of in fixed quarter. to backlog, in the XX.X% the that conditions homebuyer margins the half last amid expected the XXXX, of on costs incentives. in in lower improved that half

administrative be will full-year general first XX% market and for quarter reflecting expect ratio operations year-earlier marketing, was housing we expense higher in quarter, of stable margin selling, the the during position assuming other conditions.Our planned gross XX.X% XX.X%, with from mainly the for up costs, to our We range and year expenses our count the including for advertising, community in as growth. associated XX.X% increase the our of

also other are in scale alignment of resources with We the investing expected business. and our in larger personnel

full and will XXXX year approximately our forecasting are be be XX.X%. second XXXX to our approximately ratio XX.X% quarter expect SG&A We ratio

period. million an tax rate was income XX.X% due the for quarter. an expense benefits This first current year-earlier tax the predominantly stock-based an from effective related $XX in represented the increase Our XX.X%, improvement of in of compensation tax to to for quarter improvement

and rate first We over quarter to to approximately XXX quarter for Overall, now XX% increased first for common second net earnings to our per income impact full diluted the quarter be down net XXX first approximately the year.Turning was our ended the be XXXX in of both the favorable XX% to average We in and XX% to past year-over-year the XXXX community with to our communities. quarter. due income tax realized year low million, $XXX.X stock rate effective quarter the share the expect improved $X.XX, our repurchases XX% the of count, reflecting X% from and growth corresponding the quarter.

periods. grow in our and about end would average with X% the community count We approximately This quarter portfolio be of XXX. communities to believe by We quarter an remain year XXXX higher the XXX count prior communities. and our and in expect focused on growing of during quarters our in second community will the second average result for count fourth community the third than

communities of current expected than environment handful ended lots open now as outlook to communities expected land a in quarter, a XXX million fewer to during result sellouts of as development and the addition, XXXX what under during is approximately or previously invested XX,XXX pipeline land with stronger XXXX anticipated owned XX our the we In first about contract. approximately as at selling more which $XXX quarter.We drive year-end, reflects first open approximately the of well the we and quarter a

quarter, first average our of at the $XX.XX. XXX,XXX nearly During of an common shares we stock price repurchased

total billion of shares, the credit we of Jeff timing our repurchase our revolving pace, cash repurchases As and unsecured and and needs, opportunities the our intend under flow, over cash. of market price approximately our considerations capacity market and be mentioned, the including and based liquidity of facility general continue $X.XX liquidity volume, and billion, to million to of investment land expect outlook, available housing share to environment.At on economic $XXX was quarter-end, shares $X.XX

open of with expected housing conditions driven and reductions our see approximately of to demographic to $X.X we book later demand, imbalance XXXX, housing trends, across on the in in generating up stockholders' interest the first moderation quarter-end while and to $XX.XX.In our operations market intend John, openings. capital your our and back We stockholders our plan repurchases investments while value in to also expanding and build quarter land to stockholder remainder land-related solid deployment was to on long-term our supply stock pleased driving per favorable scale times and year-over-year encompassing XX% topline growth, expect value through now with the share in produce balanced cash cash development year. We performance also increased financial dividends the construction community rates ongoing through growth please take sustain equity will billion and are lines. allocation, creation.We and and Our conclusion, focus returning significant an overall focus the to by common for in our new to maintain costs, questions. approach

Operator

line Instructions] the the first Matthew [Operator And Bouley from comes with Barclays. of question

Elizabeth Langan

Langan You have Elizabeth Matt on today. for

of the So with assuming year? bit you next margin levels of would the the kind talking little for by mind the bit how quarter those cadence part now right You latter expect know, flow incentive you second XXXX, a and what that should just we through seeing be about Would mind higher levels you're the margin. the to you'd half? in through? of with about talking off incentive You're what starting a little expect will impacted kind

Jeffrey Mezger

Sure.

some obviously all deliveries with improvement minus gross plus the leverage quarter-to-quarter. the XX% last that I or and expect XX.X%. fourth some quarters And actually based you'll Basically revenues. we do year in of more quarter see prepared the in to stable half, X we to arrive for XX% full improved this particularly year part of higher back at in the As forecasting and pretty of this of in second particularly on year, overall half the year seeing, What remarks, in year. are the margin guide mentioned improvement

So, current time. the that's at outlook really the

Elizabeth Langan

increasing a little you bit. little than said And maybe mortgage on affordability bit that or would buydowns buyers bring that? or responsive down other buyer and seeing your pricing? that you're think around seeing anything you touching that can their probably expectations customization what you around they options are you're more concessions You've mind seeing Are to like something around rate a

Jeffrey Mezger

to our of lot a then buyer and I components that some are a comments to there pass make of Elizabeth. it profile. the Rob on few for specifics can question, Look,

in building more As quarter, sales. backlog comments, we the shared were on our focused first in and driving our we

moderate So and prepared mortgage to similar we remarks. left pace prior quarter called price we some, the where the pushed incentive the and it I took could concessions we my increases levels in for

backlog, a of higher pace, up a set assets, year, margin part little the get start the the So optimizing for working scale and the way. build then absorption along bit our on

been our As down in is very of an it from we can some that right XX% you frankly, can buyers, we're on shared and to In that. sensitivities and that you very well context Rob. a when of our the debt ahead, payment, first taken with a of the qualified strong buyers [indiscernible] see what buyer on think what's in ratios of Rob on the as around little our give time, qualified. the and you have not now. generating the while a But profile specifics average We're buyer And are qualified put issue poking the this on particular, price. Go and metrics credit orders with having backlog. FICO income and scores we've the we bit buyer. going

Rob McGibney

ratios, any the major change. debt seeing as as really not far Yes, credit we're ratios,

fall seen closings, we've our In fact debt slightly. to ratios income in

well-healed points I our good that think seen that credit, really speaks the a price quality and They've income, of still our buyer. price So got product. demand sufficient to at we're got points the and in

behavior choices as picking buyer think well. they're to what and that You in mentioned this I studio and speaks design

are road. haven't square change But seen that buyers addition, shift and things the purchasing. things permanent So studio or there and configurations home, we levels like easily room about really we the in of income in it cabinets a spend, bedroom, are between the down some the Jeff in in on converting some and spending the features or that just seen that footage they're we've challenges market everything talked money into shifting credit in really that you a haven't what affordability seen we out more that a mentioned can't the despite change about,

we're So to our pretty in results they've got and are, confident the that our buyers that qualify, seeing ability today.

Operator

And comes Evercore Kim from the with the Stephen next of line question ISI.

Stephen Kim

I of about give or we sort the for, you? a can been was maybe about level sustainable XX% I think as operating And us sense congrats your couple then for the of term for percentage thinking a we something of good always. should questions, could thinking wondering I'm cash I from kind a also level be as should What operating do And, wondering be like in level profitability kind of margin all if you you be operating flow XXXX, net A if a #X, appreciate respond that, of on you of color income, of yes, results. sort What targeted could a conversion. longer thinking what that term to of has perspective, margin that. longer improving. was company? for cash

Jeffrey Mezger

questions count We Steve? X, or that as X Sure.

Stephen Kim

X, just that's Jeff. No,

Jeffrey Mezger

you let follow We'll a up. break. a you ask give We'll

fiscal question to on on of you us, over spend and flow, couple out predominantly, first mean, the forecast as factors, probably because years, and flow really most we the used go it the so the through I are Okay, including with lot fairly land depends cash including past a then year guys of buybacks. of cash don't level

shares build We time. flow, look the area freed us a liquidity healthy or in very operating the time with go put to lot anticipate a dry a it behind of strong in of mined reinvest that the in on back in up continued for for the improvement and powder the times strong success land. we're to continues opportunity ton at and gains last We in and cash and cash up that a and go top lot continued and had us If oversized in buy position big time, in reduction acknowledging of reduction at be you sheet balance this really we that supersized today was the we had lot a significant flow, little construction and build a cycle year, point. and of cash us, lot of that in but where us a cash build of bit

question Sorry, was... your second

Jeff Kaminski

XX%.

Jeffrey Mezger

on during at, in but point operating I'd mean, Look, lay margin. the that when call, and you we're know, from on away that but side. quarterly gross Q&A that it's some into today model, we're this And SG&A, time. see out the And within business saw really XX%, that today definitely was going look distance there, about we're in conference your that mean, by know to there. do anticipating above a where moving of there yes, size see of The get and we're and you to year's hope number a with point. our which, out the within not costs the and already low I think part like, a we and is just on SG&A report or the some incentives, had guide scale of market comments XXs I some which margin and this reach. think range, comes Fed's for of over our I reinforced at company Yes, the improve go period a already. of stabilizes we're as I improvement that you particularly the to at what on rates, leverage plan and not of decrease improves, That for over actually with requires I to expect declining to

and attainable. reasonable long-range a very think company, conservative side the the as the it's certainly far I would on for think I like target as it's So to assumption.

at my basically on a that level. that's very comments high So

Stephen Kim

That's really encouraging.

is could with over somewhat confusion a which quick need news market know be turmoil. several all What for potential these on that capitalize and relates question that about big lot in has bolstered the by to I'm intrigued your large which. frame such obviously Second Whether this regarding builders time think to I presence as the substantially NAR's might of settlement result I yourselves is changes Internet last the the dysfunctional created made. relatively that you've a resale the years.

what for share lower is, And burden can a come a your leads the do are when they so through Internet. my of generated sales? ultimately SG&A you Internet-driven those carry today leads in question us sense And through give

Jeffrey Mezger

profile? have the Internet and on the leads Rob, any you that, do detail on

Rob McGibney

Steve, XX% big those overall, the us leads as that finding movement percentage, increase. finding there. would buyers so are the pretty not so us seen avenues. much just we've big majority a it up but was In our say I internet through are And year-over-year, of

as far with the and As NAR opportunity the settlement. the

how still predict I think it's cloudy a going go. to that's to little

to that's like that in going out paid be it's worked a be less I that, positive being summer. there's this broker anything, but potentially then to if co-ops lot think I effect a with and into goes there us for things think

the that of compensation have or they can't it other ways is then But on likely that advertise of other through the methods the advertised One face-to-face. or MLS. Facebook components to we

to downside to So little a be certainly tell. see remains seen, think us, I upside, lot an but a our results our it it's of as or early financials, don't to potentially it a too

Operator

the Associates. Alan with question next & comes the Zelman from line of And Ratner

Alan Ratner

all the I far. color so and quarter Nice appreciate

I thinking might more kind the are same make months in closings and one and sure think about in representative maybe on talked that week of I metrics the flags first on rising like I so lot a from was credit admittedly stage X my their and because things you delinquencies competitors or just last vein gave statistics of really bit yellow commentary I'm or have kind of side. your a your of gave on red want statistics and all flags been credit going about a question, little I early So card little the appreciate what you ago. to of surprised of customer like the some credit

So any terms in of real-time coming you are just in clear signs the stress can model that through of be kind are not your today. that you seeing of consumers homes

Jeff Kaminski

Yes, I'll on the the take over was we've then improved seen ratios one. debt-to-income quarters. I was men really speaking actually that I when sales, ratios closing, those last earlier not slightly that based about few

talked up. little the are leads about our leads. Now Internet a I bit

we're seeing more lot people. So a

much. changed see I not don't really of raw people So we're qualify those that's as the And number pressures percentage. increased. far the But point. this who as at don't seeing has that

Jeffrey Mezger

is us ability ] perform. our now think rate, buyers The that's below rate to normal [ point Alan. I can I'd and for can to

Alan Ratner

sense. clarification Yes, on appreciate I that. the makes

activity is of question pickup land my in second acquisition in the quarter. So kind portfolio, nice land on the and

a looking lot lower in years about you XX% X-ish-year at almost or year's turnover, I'm just you year-over-year, improve but that's effort higher I that for land is you an industry. your got XX% you've by among that bit is kind the kind X the or curious, efficiency as than capital land design, pipeline would would to of land say down all know that see correctly, little to mentioned And is land need hovering in which is down the like currently? count, of from supply, of is if I'm your Your this And you metric, 'XX, ago. supply it

Jeffrey Mezger

lot parts of it. to there's a Actually, moving

few of rates years over back times cloudy. COVID As you on took market interest the happening off, the been a pulled then through, because things of past couple that run then out was and stalled. pull What's where and land post really was we there reflect and it the push we've

did lot back So renegotiated others. a deals, you that reset, we of lot and the a liked. you the kept control extended assets we of pull of We things, again and

was were we're first weren't deceptive they a walked periods at So time, where the because one comfortable the of they of making because did lot it's sense we X at. that that where we're kind when ago tied of at up.So out that look options to with of years they

need We of to pipeline. do our and have the underwriting have to something that healthy but 'XX order outside in we don't for beyond, lots tension. fill We

yet a same the and we're the encouraging healthy that grow. discipline we're divisions to adhering to at have time, we So

beyond. X-year a into probably less focus I'd that comfortable supply, at that's there. But a high. controlled, more So owned, positioned Right actually they rather get have with on how it we're heading we we're pretty it's owned, 'XX and 'XX. now, have can if little a

Operator

from question with the John next Lovallo line our of And comes UBS.

John Lovallo

et point price, the first in factors in like help walk to gross net with sort of from second of XX first first terms you The mix, of basis us quarter help is, your the the then expectations versus impact, us the quarter leverage the can cetera? margin beat the one the quarter? just with drivers And

Jeffrey Mezger

Right.

was QX and incremental we bit So, pretty the And as pickup us well, as many and for yes, in of get those out of had close to The worked out behind to an where had to that. shift, in the resell favor, we quarter, have into interestingly, had which try those end margins, mix quickly didn't deliveries this some little can of so them on get margin QX of homes basis factor that where side. have towards we the and few didn't always rate the on backlog to that our there been can homes to we're was we driving lot we we things a a us. sold a One as we that important were higher our a quarter. time homes came pulled into the mix at healthy in discount already pulled,

the the us incrementally that forecast seen and can we anticipated to we forecasting in far I as as prior quarter, away and first had to we'd as increment. out.So bit that's X helped a the that a did, say, the forecasts what So go, one similar XX% a quarters, on rate for difficult tucked little will were always

in sort through. but what's up predominantly look we the hates we're So incentives a margin, thing, really booked they're And And this, those communities, me, off oftentimes, between of between drivers. in low those it's sales and whatnot those a quarter plays like divisions. high our between of the those final backlog. same, sequentially, main including were part and always based the big we mix up. in some were second I coming and hearing margin it know When saw at communities, the back everyone times it, and And of and being really you in tick and regions

sort the percent, for a plus that's quarter-over-quarter-over-quarter, So you're or minus in together running operation an of smoothly. pretty all that.And reflects of if come those of factors most part, kind it

your for deliveries that to nice us, like the result in resell current really environment of we you many from on was It we steady spring. rest and a them pressure to the the You're as close much looking and homes the not seeing And you're the year of you're to a really not quarter forward due cancellations, year through pulling the backlog, saw your we're in cancellations. to that, first quarter. start the particularly selling having

John Lovallo

that as of we Jeff. for Or percentage I were to mean, if of higher little bit then a uptick helpful, nature? question communities sales guess That's is, of it. things slight a marketing commissions need with the XX.X%, sales. in previously slight uptick? Got about the expecting, coming the outlook I does fewer SG&A you exactly for that reflect think slightly And that's or higher driving is broker an that in the uptick But what spend, than

Jeffrey Mezger

really It side commission to nothing do the of has it. with

we a We and are the little bit money in marketing putting talked more advertising as about.

communities just the count, On that first half half is decline out, other really half the 'XX. pushed to the as few community due declining, and at a into was that out you sellouts earlier pointed

openings the yet we're marketing, planning on in quarter as on communities spending So advertising, et cetera, for those. approaching we're still fourth money, those

up point some our expanding resources returns. in top allowed if things on the having just time, And putting for good expense didn't and up the you the a lot positions issues that really talked a well business on impact point. preparing it So side. capital assignments and the at fixing bit that a in go focus and well we're at we're have profitability, that reduce positioned the and divisions in some nagging personnel about the side, feel I those sheet many just that overall, beyond We're way really we operate And we to larger do where as scaling for just SG&A in it us where balance this a need this the we're of really size were a right growth of many, we rock just promotions solid to on think and efficiency it it.Rob of that company returns. But and and we're scale. company years operational some at will

as So we're just we move this company looking to growing forward. the forward growing and returns

Operator

the line with And comes of from next question Michael JPMorgan. the Rehaut

Unknown Analyst

mix This change Landsly I side, is was longer my I more we from and Mike. taking adult your time Andrew level, in being entry appreciate kind on you active grow? the going ] should rest the mix XX%, you move forward to be question. any of term guess up, just on roughly as I [ closings, expecting XX% believe your XQ, up. move your and second

Jeffrey Mezger

natural that be to realistic, think first is up. up and be our going not dictate price guess to company on bit. to a home it climate dictate we'll the I of in been will where a the shift for in like a there to XX% and bigger may in in, degree, can lower you're the I you're and market active around out everybody because more come when I strategy We've we move first would cater say move the in retirees to adult due I XX% focused a time But points, around and lot that XX% years. assume the Yes, that our to that and And positioning you're product it's product components years attraction zones up than well. a the market incomes and or have higher buyer and to second as change.So a the and little the our other move the It's to say, operate shift and more and may will operating income build-to-order footages, you larger the it move submarkets lesser the we median you that will.

of And the move come. it in specific a we range So a target seeing. it'll an then market, stay like and the middle we're at let the a but when does, we should buyer it profile, bit and don't point buyers target the price around income same you're little

Operator

the from Maklari the next And Goldman line comes Susan of question Sachs from

Susan Maklari

year, the the retain recently? labor have My the to things improvements through been in first to moving you've build on and that see and about ground thinking times and seen and the do force they potential lower an do in the to move as is in cycle we keep about maybe how for rates at more general. you that we ability that activity If the think the times, rate the retain the question increase

Jeffrey Mezger

to and say that there, over build continue disruptions fixing the more people either on dealt side, the Susan, as the times. lot our national the whether think think if some cases in would learned that is and build whether greater or I addressed think all we're And healed. base. the hiring you contractor to in, pick to those I markets operate a the And look it, scale time companies in that or we it's old supply healing, back with, capture of part it and chain not shortages we internationally. in glitches can And I we I some opportunity still some fixed are up XX where can have with and going chain, those some because And supply control cost. even relationships, we we in years labor compression,

bit, and would for a it'll and think rates warm come create markets it tailwind be We don't if issues we a down cost time us. the up see the build pressures. little do So interest

Susan Maklari

the thinking of And a you're see. nice that? how that's then to Okay, which little maybe turning to to can continuing stock, just You've back capital some helpful. about allocation, of buy you is been talk bit

about in there changed how thinking should or incremental that's we anything be Just it?

Jeffrey Mezger

to tell the we're the can prepared repurchasing comments $XXX that's shares going I on authorized. least made, at you, Susan, based keep million I next

active And our on in think shareholders. all continue that's we cash out book per and to it for toggle cash part large in the generated, we've revolver. the been more the and boost our ROE in share have because consistently. it's repurchases EPS we back an and way. nothing of a on to both the sitting along give invest value time cash We've helps with growth a to our And it's still years intent. And So pretty ability and big balance now signaled X your to first we've share been we're

Jeff, both through want do So to... we else can 'XX. think you if we you have anything

Jeff Kaminski

sheet balance paying leverage ahead certainly improving it. speed us behind strategy. scale, No, allocation that view focus with cash at of components ratio. point. returns, to That's ago, increasing Years and us summarizes the in we as shareholders had of I capital the full key and think it's from growth, on debt of returning realigning a And point the this the

Operator

the from comes line of Bank Rafe of question next from the Jadrosich And America.

Rafe Jadrosich

and Can development of costs cash maybe land basis, in today, you talk materials? about the level a you're well on inflation terms seeing of as as

Jeffrey Mezger

Rob, you that? want take to

Rob McGibney

in moving up. cities of our others we've Sure. in. operate It's where and it in that regards stuck, Concrete to on continued of go of going that able comes it's is to lower one on infrastructure we that mind. projects last spotty cost down I to the most and lot kind what's Yes. mean, a been and to up really materials. been there's year some There's

concrete So seeing. of the programmatic numbers we're that's quickly with pretty and almost that is some seems inflated one

it. develop development, a far given growth are and think too. infrastructure to because some bit as XXXX. those have from we're solid XXXX. double-digit labor little we're really going assets, part with be into significant seeing. land we're it's seeing working the higher favorability. are in goes, then we cost. developing, But to we're going driving basis at that bit and communities to single-digits a cost and today. These work measure to cost little get kind building, to division, to that's low these many as those as in our just developing They're the I delivered And cost into to, lots double in most development overall sorry, anywhere looking of closings that what positioned basis construction low-to-mid our going the low-to-mid in margins on up.And land contractor really lots, the gross not that respect lots as that, has easier we're cases, As inflation experience to Depending from than digits and the I pieces the sustain favorable range don't we're that we we're that. of is mentioned for I'm gone a we're parts the out But we've in got well home

Rafe Jadrosich

helpful. really That's

remind much typically? cost of us total Just land as percentage how is of the a cost the development that

Jeffrey Mezger

land Yes. It division varies parcel. by and by tremendously

have that don't reference because business. So it, of the average, but across the I'd that I just meaningful know we see that it's to variances the

Operator

And of line our final McCanless from Wedbush question Securities. with Jay comes the

James McCanless

topic on I had, land the a question second. first the So sticking for maybe

in more from As the are spring for land normally. from inflation you lots market, than those of some for competitive And heard and competitors a lots? terms cost standpoint, further seeing it XXXX land is you're we've out of looking especially beyond, fierce is what that your the at

like? if So could and the what backdrop you looks maybe the inflation talk about competitive

Jeffrey Mezger

would what's development. easy is, for describe the of competitive. no It's just the deal There's best and price land there. not market the competing you for I parcel with out complexity Well, who as are the the improvements the

parcel. You a And really need it's land have good if to team, understand you strength. a the

XX% than did a You competitive, be ago. it's we We overall, more weakness. while don't can land have a it and year spent a And good we development team, finding in on deals. QX land are

location, in and you finding underwriting, investing that we're said to product So also the we're and my the the it I type, prepared returns tells need we're the disciplines get. it. in our remarks sticking that deals we to that on

on land any have seeing on you what color out market. if I other you Rob, you're to don't know So, give want there the

Rob McGibney

the far land mean, as I depends factor echo specific I based and are number can competitive. to, as that, give based on pay for it a on a to you land in to the definitely city. up what too. submarket, developed it I hard we inflated is the that mean, lot lot, is the and and costs Well, move just or is your goes residual just competitive, all it comments. the but prices seeing development It's

James McCanless

should where in think in roughly you that how second terms a we the quarter And XX%. guide production talked then of last the K, are of about and the quarter specs more mix you Could now for the and Jeff the rest XX% homes, about, of spec quarter with being think margin I year? of gross like talk about with for goal

Jeff Kaminski

resell many that a Yes, just on a that with to now the The back. can after we years down, spec point thing having we're stable. seeing we're is side, the it remained start homes as coming in had at not rate time nice relatively few

having going production, homes. spec And move think of will is stable just delivering, it. planned as with part it's roughly remain that where is ones. surprise out, close in the I I remain we can levels. we easier XX% a tricky is not the gross to homes you yes, when many So have mix, we you're think, it's to of stable we've at what through point production When spec where fairly margin, That number the fairly lower versus those as pretty particularly forecasting it's but about that rate and spec right now the as around look been right total

in goes move [Technical steady that we it as as with metric we're the margin So forward guide. Difficulty]

Rob McGibney

Jeff just pointed blend our out that in We is the it. margin always guide. blend

we out and We as there. the estimate on. coming of estimates always all the the out move what we But embedded close quarter put estimate it's costs we'll out margin quarter, next look we in of make So we'll and what know some price forward. at build and are, deliveries put to that's we'll not backlog in sell the that guide have then

Operator

for conclude you And your today's participation. Thank ladies this teleconference. gentlemen, and does

lines. disconnect You may your now

KB Home (KBH) 20 Mar 242024 Q1 Earnings call transcript