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 Third 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 October 24, 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 third 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, and Bill Hollinger, Senior Vice President and Chief Accounting Officer. 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. Good afternoon, everyone. We achieved double-digit year-over-year growth in revenues and diluted earnings per share in the third quarter. With these results and our expectations for the remainder of this year, we believe we are well-positioned to produce about $6.9 billion in revenues in 2024 at a gross margin exceeding 21%. As we work to finish the year strong, we remain focused on growing our community count, maintaining our high levels of customer satisfaction, and executing our personalized, built-to-order model, offering customers choice and flexibility based on what they value and can afford. As to the details of our results, we generated total revenues of over $1.75 billion and diluted earnings per share of $2.04. We delivered more homes during the quarter than we had anticipated as cancellation rates remained low and our build times have compressed. Our gross margin was slightly lower than we have seen in the past two quarters at 20.6%, which we will provide some detail on in a moment. Although our operating income margin was within our guided range at 10.8%. Our performance drove our book value per share up 13% year over year. Long-term housing market conditions remain positive, supported by an undersupply of new and resale homes, solid employment, wage growth, and favorable demographics and household formations. Although resale inventory is rising in certain of our markets, it remains well below historically normalized levels is very limited at our price points, and days on the market are still low. We generated 3,085 net orders in the third quarter, flat with the year-ago period. Our monthly absorption pace per community of 4.1 homes was in line with our third quarter average over the past decade, although slightly below the 4.3 pace in last year's third quarter. Our cancellation rate remained stable sequentially at a historically low level, indicating a solid pool of buyers ready and able to close on their homes when completed. The desire for homeownership is strong, and we saw evidence of this during the third quarter with higher year-over-year traffic within our communities and increased leads from our digital marketing efforts. That said, buyers were hesitant as interest rates remained elevated and concerns about a slowing economy increased, and demand began to soften in late June through July. In this environment, we took steps to adjust pricing as necessary to hold our pace. Rates moderated in August, and demand strengthened, with our weekly net orders improving sequentially in each of the last three weeks of August. We are encouraged by this positive trend, and we continue to see solid sales quarter to date in September. With the Federal Reserve lowering interest rates by 50 basis points last week, we believe this will further benefit consumer confidence and affordability. Given the soft comparison in the year-ago fourth quarter, even normal seasonality will produce a strong year-over-year comparison in our 2024 fourth quarter net orders, setting us up with momentum as we enter the new year. And with that, I'll pause for a moment and ask Rob to provide an operational update. Rob.