KB Home

Good afternoon. My name is John, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2025 First 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 April 24, 2025. 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 first quarter of fiscal 2025. On the call are Jeff Mezger, Chairman and Chief Executive Officer, Rob McGibney, President and Chief Operating 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's Jeff Mesger.

Thank you, Jill. Good afternoon, everyone. In addition to reporting our first quarter results today, we also announced that Rob Dillard will be joining the company as our Executive Vice President and Chief Financial Officer. Rob is a well-rounded leader with a solid financial and operational background. He's an excellent addition to our deeply talented and long-tenured finance and accounting team. We're excited for him to join us next week. Moving on to market conditions. Consumers are continuing to cope with affordability concerns and uncertainties around macroeconomic and geopolitical events. As a result, consumer confidence has declined sequentially each month for the past several months and home buyers are moving more slowly in making their purchase decisions. While longer-term housing market conditions remain favorable, driven by demographics and an undersupply of homes, demand at the start of the spring selling season has been more muted than we have seen over the past few years. As a result of this softer selling environment, we are lowering our revenue guidance for fiscal 2025. As for the details of our results, We produced total revenues of $1.4 billion and diluted earnings per share of $1.49 in our first quarter. We delivered fewer homes than we anticipated due to about 150 less inventory home sales than we projected and a timing issue that impacted roughly 75 of our deliveries in Southern California following the wildfires early this year. Even with this lower level of deliveries, our gross margin held up well at 20.3% excluding inventory-related charges above the midpoint of our guided range. With our SG&A of 11%, we produced an operating income margin of 9.3%. We increased our book value per share to over $57, a 12% year-over-year increase. We generated 2,772 net orders in the first quarter. While our average community count was in line with our projection and our cancellation rate was fairly steady, our monthly absorption pays per community was 3.6 homes compared to 4.6 in last year's first quarter. At the time of our last earnings call in January, traffic in our communities was higher year over year, along with higher website leads And mortgage interest rates were similar to where they were in the year ago period. These metrics indicated to us that we were set up to experience a typical start to the spring selling season, similar to how the 2024 spring season unfolded, with the strongest weeks of the first quarter still ahead of us. And with a meaningful number of planned new community openings, we expected to achieve a flat year-over-year net order comparison for the full quarter. As the quarter progressed following our last call, it became apparent that demand was softer than we expected. We took action in mid-February, evaluating our base pricing in every community relative to local market conditions, then repositioning our communities with a focus on offering the most compelling value. We were encouraged by buyers' responses to these actions and saw a meaningful improvement in our net orders in the last two weeks of the quarter, which has continued into the first three weeks of our second quarter. For the trailing five weeks, our weekly net sales have averaged about 300, which equates to an absorption pace of 5.1 net orders per month per community. This is approaching a more normalized order pace for the spring. While we're pleased with this progress, we recognize that the environment is dynamic and we are committed to taking further action if necessary, depending on how market conditions evolve. Let me pause here for a moment and ask Rob to provide more details on our deliveries and sales, as well as an operational update. Rob. Thank you, Jeff.