KB Home

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 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 finally, please note all figures are based on our fiscal November 30th year end and all comparisons are on a year-over-year basis unless otherwise stated. And with that, here is Jeff Mezger.

Thank you, Jill. And good afternoon, everyone. We are pleased to share our results for our 2025 fourth quarter and fiscal year. It was a year that tested consumers resilience as they faced various economic and geopolitical issues. Yet through it all, they continued to demonstrate a desire to own a home. We helped nearly 13,000 individuals and families achieve the dream of home ownership. while maintaining our industry-leading customer satisfaction ratings. With total revenues of over $6.2 billion and nearly $430 million in net income, we produced a 10% increase in our book value per share. We further strengthened our financial flexibility with the recent expansion of our new $1.2 billion revolving credit facility and the extension of our term loan. And through our balanced approach to capital allocation, We rewarded our shareholders with a healthy return of capital, totaling more than $600 million in fiscal 2025, including dividends. We continue to lead our peer group in the cumulative amount of capital returned to our shareholders over the past four and a half years as a percentage of market capitalization. In 2025, we repurchased 13% of our outstanding shares at an average price below our current book value, which we believe is an excellent use of our cash and accretive to both our earnings and book value per share. As for the details of our fourth quarter results, we produced total revenues of just under $1.7 billion and adjusted diluted earnings per share of $1.92. We returned about $115 million in cash to our shareholders, including the repurchase of 1.6 million shares. We remain optimistic about the housing market, as we believe favorable demographics will be a key driver supporting higher demand over time, together with the structural undersupply of homes. Near-term conditions continue to reflect underlying demand for homes supported by population, household formation, job and wage growth. However, low consumer confidence, affordability concerns, and elevated mortgage rates continue to constrain the pool of actionable buyers. Consumers are demonstrating their interest in buying a home reflected in our website visits, leads, and traffic to our communities. They're just taking much longer to make their home buying decisions. We produced 2,414 net orders in the fourth quarter with a consistent approach to pricing, offering transparent and affordable prices rather than inflated prices masked by heavy incentives. This remains the foundation of our competitive position as it allows us to advertise our compelling pricing directly on our website and is also how we build trust with our customers. We were disciplined in not taking overly aggressive steps to capture sales during the seasonally slower fourth quarter. By doing so, we believe we are positioned to achieve better margins on these sales in our 2026 first quarter than we would otherwise have produced. Before I turn the call over to Rob McGibney, I will make a comment on the approach we are taking with respect to our guidance for fiscal 2026. As detailed in today's press release, we are providing our outlook for fiscal 2026 deliveries and housing revenues. We expect to have greater visibility on both operating and gross margins as we get into the spring selling season and plan to provide our projections for these metrics when we report our 2026 first quarter results in March. Let me pause here for a moment and ask Rob to provide more details on our sales as well as an operational update.

Rob. Thank you, Jeff. Consistent with our operational success throughout fiscal 2025, our divisions continued to execute well in the fourth quarter in maintaining high customer satisfaction levels, further improving build times, lowering direct cost, and balancing pace and price to optimize each asset. Traffic in our communities was steady during the fourth quarter, and at 18%, our cancellation rate was stable, supporting net orders at an average absorption pace of three per month per community. This pace was in line with our average fourth quarter pace of the past two years. As we look ahead to the full year 2026, although we begin the year with a lower backlog than we have carried in some time, the fundamentals of our operating model and the improvements we have made over the last few years provide a clear and we believe achievable path to meeting our delivery objectives. Our beginning backlog represents 27% of the midpoint of our full year delivery target compared to 34% at the start of 2025. While this is a smaller starting position, it must be viewed in the context of our significantly faster build times and our expectation of expanding our community count with new community openings. We have become more efficient in building homes with build times improving roughly 20% year over year in the fourth quarter. We achieved our company-wide target of 120 days or better from home start to completion on built-to-order homes during the quarter with several divisions averaging fewer than 100 days in November. Our faster build times allow us to extend sales much deeper into the year and still achieve delivery of the home. At quarter end, we had 271 active communities, up 5% as compared to the prior year period. In our 2026 first quarter, We are planning to open between 35 and 40 new communities and expect to hit a high watermark for community count during our second quarter at the height of the spring selling season. With this broader base of communities, we are very well positioned to capture the typical seasonal lift in demand during this period. Our new communities typically generate strong early demand benefiting from the newness and excitement of grand openings and supported by our disciplined community opening process. Importantly, these new communities are expected to generate favorable gross margins supported by a sales mix that is predominantly built order. As we have discussed, we are focused on returning our built-order homes to a higher percentage of our total deliveries, from 57% in Q4 2025 to our historical 70% or higher. While we always have some inventory homes available for those buyers that need a quicker move-in date, the superior margins we generate on BTO homes will allow us to realize greater value from our communities. Our gross margins on BTO homes are trending three to five percentage points higher than on inventory sales, and we began to see a shift toward more BTO sales during November, an encouraging trend that has continued into December. As we remain focused on selling our BTO homes and these sales become deliveries over the course of fiscal 2026, we expect to achieve a favorable trajectory in our gross margins. We are aligning our starts with our BTO sales and started 1,827 homes in our fourth quarter. Our divisions together with our national purchasing team are doing an outstanding job in driving costs lower. These efforts combined with our value engineering and studio simplification initiatives contributed to direct costs that were about 4% lower sequentially and 6% lower year over year on our homes started during the fourth quarter helping to offset the impact of higher land costs. Before I wrap up, I will review the credit profile of our buyers who financed their mortgages through our joint venture, KBHS Home Loans. Our capture rate was high, with 80% of our buyers who financed their homes in the fourth quarter using KBHS. Higher capture rates help us manage our backlog more effectively and provide more certainty in closing dates, which benefits our company as well as our buyers. In addition, we see higher customer satisfaction levels from buyers who use our joint venture versus other lenders. The average cash down payment moved up slightly, both sequentially and year over year, to 17%, equating to nearly $80,000. On average, the household income of customers who use KBHS was about $130,000, and they had a FICO score of 743. Even with over one half of our customers purchasing their first home, we are still attracting buyers with strong credit profiles who can qualify for their mortgage while making a significant down payment or pay in cash. 10% of our deliveries in the fourth quarter were to all cash buyers. In conclusion, we remain firmly committed to delivering high customer satisfaction and strong operational execution to drive our results. We believe our portfolio of communities, products, and pricing are well aligned with the needs of today's buyers, and with improved build times, an expanded community footprint, and stronger operational consistency, we are confident in our ability to achieve our fiscal 2026 delivery objectives. And with that, I will turn the call back over to Jeff.