KB Home

Good afternoon. My name is John, and I'll be your conference operator today. I would like to welcome everyone to the KB Home 2024 Second Quarter Earnings Conference Call. Currently, all participants are in a listen-only mode. Following the company's opening remarks, we will open the lines for questions. Today's conference call is being recorded and will be available for replay at the company's website, kbhome.com, through July 18, 2024. And now I would like to turn the call over to Jill Peters, Senior Vice President, Investor Relations. Thank you, Jill. You may begin.

Thank you, John. Good afternoon, everyone, and thank you for joining us today to review our results for the second quarter of fiscal 2024. On the call are Jeff Mezger, Chairman and Chief Executive Officer, Rob McGibney, President and Chief Operating Officer, Jeff Kaminski, Executive Vice President and Chief Financial Officer, Bill Hollinger, Senior Vice President and Chief Accounting Officer, and Thad Johnson, Senior Vice President and Treasurer. During this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results and the company does not undertake any obligation to update them. Due to various factors, including those detailed in today's press release, and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, a reconciliation of the non-GAAP measure of adjusted housing gross profit margin, which excludes inventory-related charges, and any other non-GAAP measure referenced during today's discussion to its most directly comparable GAAP measure can be found in today's press release and or on the investor relations page of our website at kbhome.com. And with that, here is Jeff Mezger.

Thank you, Jill, and good afternoon, everyone. Our performance in the second quarter was solid, with key metrics that were above the high end of our guidance ranges. In addition, we achieved positive year-over-year comparisons for both net orders and net order value. We believe we are well positioned to achieve our goals over the remainder of 2024 with a backlog of committed buyers valued at over $3 billion and meaningful improvement in our build times. As for the details of our results, we generated total revenues of over $1.7 billion and detailed earnings per share of $2.15. Our margins were healthy with over 21% in gross and above 11% in operating income margin. This performance, along with the cumulative benefit of ongoing quarterly share repurchases, including an additional $50 million during the second quarter, drove our book value per share up 14% year over year. Longer-term housing market conditions remain favorable, supported by an undersupply of new and resale homes solid employment, wage growth, favorable demographics, and rising household formations. However, during the second quarter, we did see volatility return to the market correlated to the rise in mortgage rates. Periods of rate increases create uncertainty for consumers, which can delay their purchase decisions. Despite this, the desire for homeownership is strong, And the appeal of a personalized home is clear, as we generated a higher mix of sales of built-to-order homes in our second quarter than we have in several quarters. Personalization is a key differentiator for our company, and its appeal is even stronger as our build times are normalizing and as most large production builders have migrated to an all-spec model, particularly for first-time buyers. We are affordably positioned in our served markets with products that include features that we know buyers value based on our survey data. Our buyers can then significantly influence their final sales price as they personalize their choice of lot, elevation, and selections in our design studio, aligning their monthly payment with their budget. While the majority of our business is built to order, We've always offered quick move-in homes in each of our communities. As a result, we are in a unique position to satisfy the majority of customers who value choice while also accommodating those buyers who prioritize a quicker move-in date. Operationally and financially, we gain several key benefits from our bill-to-order model. The even flow production inherent in our approach provides visibility and consistency in deliveries, which is particularly important in periods of housing market volatility as we work from a large backlog and do not need to sell homes at any price to achieve our delivery targets in a given quarter. In addition, the revenue that we generate from lot premiums and studio revenues help to enhance our gross margin. Despite the movement in rates during the quarter, we saw indicators that reinforced strength in demand. As the quarter progressed, we experienced a sequentially higher level of traffic in our communities. In addition, our cancellation rate was well below our average levels and one of the lowest that we have seen during a quarter of volatile rates. Both of these factors contributed to nearly 4,000 net orders during the quarter, a positive comparison relative to the year-ago period. On a per community basis, our absorption pace grew to 5.5 monthly net orders in line with the expectation that we shared on our last earnings call. Our focus remains consistent in optimizing each asset on a community by community basis and generating high inventory terms. With that, I'll pause for a moment and ask Rob to provide an operational update. Rob.