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 third quarter earnings conference call. All participant lines are in a listen-only mode. Following the company's opening remarks, we will open the lines for questions. This conference call is being recorded, and a replay will be accessible on the KB Home website until October 24, 2025. And I will now turn the call over to Jill Peters, Senior Vice President, Investor Relations. Thank you, Jill. You may now begin.

Thank you, John. Good afternoon, everyone, and thank you for joining us today to review our results for the third quarter of fiscal 2025. On the call are Jeff Mezger, Chairman and Chief Executive Officer, Rob McGibney, President and Chief Operating Officer, Rob Dillard, 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, an explanation and or 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 gap 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 Mezger.

Thank you, Jill. Good afternoon, everyone. We are pleased with the solid financial results that we achieved in our third quarter, meeting or exceeding our guidance ranges across our key metrics as we continue to navigate the current environment. And with a healthy balance sheet and significant cash flow, our flexibility remains strong. While we continue to invest in new communities to position ourselves for future growth, we are also returning a significant amount of cash to our shareholders. We repurchased more than $188 million of our shares in the third quarter, near the high end of our guided range, contributing to total repurchases of roughly $440 million year to date. This total represents approximately 11% of our outstanding share count at the beginning of the fiscal year, which was repurchased at an average price that is below our current book value. We believe this is an excellent use of our cash and highly accretive to both our earnings and book value per share, including dividends We have now returned more than $490 million in capital to our shareholders this year. From an operational standpoint, we had some critical achievements in terms of materially reducing our build times, which helped to generate closings that were slightly above our expectations, and also continuing to lower our direct costs. These accomplishments were realized while maintaining outstanding customer satisfaction levels. As for the details of our results, we produced total revenues of over $1.6 billion and diluted earnings per share of $1.61. We delivered higher profitability on our revenues than we had projected with a gross margin of 18.9%, excluding inventory-related charges, above the high end of our guided range. With a continued focus on prudently managing our costs, and aligning our overhead structure with our delivery volume, we held SG&A expenses to 10% of our housing revenues. The outperformance of these two metrics relative to guidance drove an adjusted operating income margin of 8.8%. We grew our book value per share to over $60, an 11% year-over-year increase. Moving on to market conditions, the longer-term outlook for the housing market remains favorable. driven by demographics and the ongoing undersupply of homes. With respect to current conditions, we are pleased to see stability in demand in June, which continued as our third quarter progressed. We are encouraged by the decline in mortgage interest rates, which should support greater demand for homeownership. We produced 2,950 net orders in the third quarter, maintaining the pricing approach we implemented earlier this year. Our focus is on offering the most compelling value at a transparent price while limiting the use of incentives. When we discuss with buyers the alternative of the lower sales price we offer versus a much higher price that can be offset by incentives, buyers recognize that they have a better opportunity for building wealth through equity over time with our home that has the lower starting price point. We continue to focus on optimizing our assets to generate the highest returns, balancing pace and price on a community by community basis relative to local market conditions. We exceeded our community count guidance, which together with a stable cancellation rate contributed to a monthly absorption pace per community of 3.8 net orders. This pace was lower than our third quarter pace of the past couple of years, And as a result, our net orders were below our internal sales goal. Our fourth quarter sales approach will emphasize our built to order homes while continuing to sell through our inventory. As we discussed on our last earnings call, our goal is to steer our business back to our historical range of built to order homes, which has averaged close to 70% over more than a decade from around 50% currently. It is our core competency and a key competitive differentiator. And with the significant reduction in our build times, Ed has become a more compelling selling proposition. We offer buyers an attractive home at an affordable price with features we know they value based on our survey data. Our buyers can then meaningfully influence their final sales price in selecting their lot, floor plan, and exterior elevation as well as personalized design studio selections, aligning their monthly payment with their budget. This choice model contributes to our high customer satisfaction scores as buyers draw value from our process and is a key driver of our monthly absorption pace, which is among the highest in our industry. As our built-to-order mix grows, we believe it will support a higher gross margin as these homes currently generate a gross margin that is 250 to 500 basis points higher than our inventory homes. In addition, increasing our built-to-order mix will help us establish a larger backlog, which provides greater visibility into future closing projections. As we have shared in past years, our fourth quarter is typically one in which we elect not to take aggressive steps to capture inventory sales as it is a seasonally slower period and discounting by the speculative home builders pursuing year-end deliveries tends to be elevated in the final months of their fiscal years. Our land positions are valuable and there is merit to exhibiting discipline when incremental volume gains are low. We do not intend to sell at any price to make up for the shortfall in net orders in our third quarter. Taking this into consideration, We are projecting $1.65 billion in housing revenues in our 2025 fourth quarter and $6.15 billion in housing revenues for our 2025 fiscal year, both at the midpoints of our guidance ranges. Let me pause here for a moment and ask Rob McGibney to provide more details on market conditions as well as an operational update. Rob.