KBH
$43.05
KB Home
$.57
1.34%
Earnings Details
1st Quarter February 2021
Wednesday, March 24, 2021 4:10:00 PM
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Summary

KB Home Beats

KB Home (KBH) reported 1st Quarter February 2021 earnings of $1.02 per share on revenue of $1.1 billion. The consensus earnings estimate was $0.87 per share on revenue of $1.2 billion. The Earnings Whisper number was $0.95 per share. Revenue grew 6.1% on a year-over-year basis.

KB Home is engaged in the construction and sell of homes. The Company' offers a variety of new homes designed primarily for first-time, move-up and active adult homebuyers, including attached and detached single-family residential homes.

Results
Reported Earnings
$1.02
Earnings Whisper
$0.95
Consensus Estimate
$0.87
Reported Revenue
$1.14 Bil
Revenue Estimate
$1.21 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

KB Home Reports 2021 First Quarter Results

Diluted Earnings Per Share Grew 62% to $1.02
Gross Margin Expanded to 20.8%, Up 340 Basis Points
Net Order Value Rose 35%; Backlog Value Increased 74% to $3.7 Billion

LOS ANGELES--(BUSINESS WIRE)--KB Home (NYSE: KBH) today reported results for its first quarter ended February 28, 2021.

“We begin 2021 with positive momentum continuing across our business. We achieved a 62% increase in our first quarter diluted earnings per share primarily driven by substantial growth in our gross margin to 21.1%, excluding inventory-related charges. Multiple factors contributed to our significantly higher profitability, in particular, our effective management of order pace, price and starts to optimize our assets and generate a strong return on each community,” said Jeffrey Mezger, Chairman, President and Chief Executive Officer. “The combination of healthy housing market conditions and our customer-centric approach produced a 23% year-over-year increase in our net orders to nearly 4,300 homes. The ongoing strength in our order activity reflects the favorable demographics underlying demand. Millennials, the largest adult population in the U.S., are now in their prime homebuying years and continue to represent our largest cohort of buyers, underscoring our competitive advantage in serving first-time buyers and success in building homes in desirable locations at affordable price points.”

“With our full year coming into better view, supported by a 74% year-over-year increase in our backlog value and our ability to match housing starts to net orders, we believe we are now even better positioned for meaningful growth in 2021,” continued Mezger. “We are executing on our plan to expand our scale while driving both margins and returns higher.”

Three Months Ended February 28, 2021 (comparisons on a year-over-year basis)

  • Revenues increased 6% to $1.14 billion.
  • Homes delivered rose 4% to 2,864, their highest first-quarter level since 2008.
  • Average selling price increased 2% to $397,100.
  • Homebuilding operating income grew 90% to $114.1 million from $60.2 million. The homebuilding operating income margin increased 440 basis points to 10.0%. Excluding inventory-related charges of $4.1 million in the current quarter and $5.7 million in the year-earlier quarter, this metric improved to 10.4% from 6.1%.
    • The housing gross profit margin expanded 340 basis points to 20.8%. Excluding inventory-related charges, the housing gross profit margin increased 320 basis points to 21.1%.
      • The housing gross profit margin improvement mainly reflected a favorable pricing environment due to the strength of housing market demand, increased operating leverage due to higher revenues, and lower amortization of previously capitalized interest.
      • Adjusted housing gross profit margin, a metric that excludes inventory-related charges and the amortization of previously capitalized interest, increased to 24.0% from 21.1%.
    • Selling, general and administrative expenses as a percentage of housing revenues decreased to 10.7% from 11.8%, mainly due to targeted actions the Company took last year to reduce overhead costs in the early stages of the COVID-19 pandemic; lower advertising costs, partly reflecting the strong housing demand; and increased operating leverage from higher revenues.
  • The Company’s financial services operations generated pretax income of $8.5 million, which increased 46% primarily due to higher income from its mortgage banking joint venture, KBHS Home Loans, LLC.
    • KBHS Home Loans, LLC originated 79% of the residential mortgage loans the Company’s homebuyers obtained to finance their home purchase, compared to 71%.
  • Total pretax income grew 79% to $123.6 million. As a percentage of revenues, pretax income increased 440 basis points to 10.8%.
  • The Company‘s income tax expense and effective tax rate were $26.5 million and approximately 21%, respectively, compared to income tax expense of $9.1 million and an effective tax rate of approximately 13%. The higher effective tax rate reflected the substantial increase in the Company’s pretax income, which reduced the proportionate favorable impact of federal energy tax credits and stock-based compensation tax benefits on the overall rate.
  • Net income of $97.1 million and diluted earnings per share of $1.02 each increased 62%, compared to net income of $59.7 million and diluted earnings per share of $.63.

Backlog and Net Orders (comparisons on a year-over-year basis)

  • Net orders grew 23% to 4,292, the Company’s highest first-quarter level in 14 years, with net order value increasing by $486.4 million, or 35%, to $1.87 billion. Both net orders and net order value rose in all of the Company’s four regions, with net order value growth ranging from 30% in the West Coast and Southwest regions to 48% in the Central region.
    • The cancellation rate as a percentage of gross orders improved to 10% from 14%.
    • Company-wide, net orders per community averaged 6.4 per month, up 39% compared to 4.6.
  • Ending backlog grew 59% to 9,238 homes, driving a 74% increase in ending backlog value to $3.69 billion. Each of the Company’s four regions posted sizable increases in backlog value, ranging from 47% in the Southwest region to 99% in the West Coast region.
  • Average community count for the quarter decreased 11% to 223. Ending community count of 209 was down 16%.

Balance Sheet as of February 28, 2021 (comparisons to November 30, 2020)

  • Cash and cash equivalents totaled $569.8 million, compared to $681.2 million.
    • The Company had total liquidity of $1.36 billion, including cash and cash equivalents and $787.6 million of available capacity under its unsecured revolving credit facility. The Company did not borrow under the facility during the quarter.
  • Inventories increased 6% to $4.12 billion.
    • Investments in land acquisition and development in the current quarter grew 37% to $556.0 million, compared to $405.0 million in the year-earlier quarter.
    • The Company’s lots owned or under contract increased to 69,694, up 10% from the year-earlier quarter and 4% from November 30, 2020.
      • Of the Company’s total lots, approximately 60% were owned and 40% were under contract.
      • The Company’s 41,582 owned lots represented a supply of approximately 3.9 years, based on homes delivered in the trailing 12 months.
  • Notes payable of $1.75 billion were essentially unchanged.
    • The Company’s debt to capital ratio of 38.9% improved 70 basis points. The Company’s net debt to capital ratio was 30.0%. On a year-over-year basis, the debt to capital ratio and net debt to capital ratio improved 280 basis points and 510 basis points, respectively.
    • In February 2021, Moody’s Investors Service reaffirmed the Company’s corporate credit rating of Ba3 and upgraded the rating outlook to positive from stable.

Conference Call

The conference call to discuss the Company’s 2021 first quarter earnings will be broadcast live TODAY at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. To listen, please go to the Investor Relations section of the Company’s website at kbhome.com.

About KB Home

KB Home (NYSE: KBH) is one of the largest and most recognized homebuilders in the United States and has been building quality homes for over 60 years. Today, KB Home operates in 45 markets across eight states, serving a wide array of buyer groups. What sets us apart is how we give our customers the ability to personalize their homes from homesites and floor plans to cabinets and countertops, at a price that fits their budget. We are the first builder to make every home we build ENERGY STAR® certified. In fact, we go beyond the EPA requirements by ensuring every ENERGY STAR certified KB home has been tested and verified by a third-party inspector to meet the EPA’s strict certification standards, which helps lower the cost of ownership and to make our new homes healthier and more comfortable than new ones without certification. We also work with our customers every step of the way, building strong personal relationships so they have a real partner in the homebuying process, and the experience is as simple and easy as possible. Learn more about how we build homes built on relationships by visiting kbhome.com.

Forward-Looking and Cautionary Statements

Certain matters discussed in this press release, including any statements that are predictive in nature or concern future market and economic conditions, business and prospects, our future financial and operational performance, or our future actions and their expected results are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and projections about future events and are not guarantees of future performance. We do not have a specific policy or intent of updating or revising forward-looking statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to the following: general economic, employment and business conditions; population growth, household formations and demographic trends; conditions in the capital, credit and financial markets; our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; the execution of any share repurchases pursuant to our board of directors’ authorization; material and trade costs and availability, particularly lumber; changes in interest rates; our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; our compliance with the terms of our revolving credit facility; volatility in the market price of our common stock; weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; home selling prices, including our homes’ selling prices, increasing at a faster rate than consumer incomes; competition from other sellers of new and resale homes; weather events, significant natural disasters and other climate and environmental factors; any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations, and financial markets’ and businesses’ reactions to any such failure; government actions, policies, programs and regulations directed at or affecting the housing market (including the Coronavirus Aid, Relief, and Economic Security Act relief provisions for outstanding mortgage loans and any extensions or broadening thereof, tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto; changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto; the availability and cost of land in desirable areas and our ability to timely develop acquired land parcels and open new home communities; our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred; costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals; our ability to use/realize the net deferred tax assets we have generated; our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets and in entering into new markets; our operational and investment concentration in markets in California; consumer interest in our new home communities and products, particularly from first-time homebuyers and higher-income consumers; our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California; our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this release or in other public filings, presentations or disclosures; income tax expense volatility associated with stock-based compensation; the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services; the performance of mortgage lenders to our homebuyers; the performance of KBHS, our mortgage banking joint venture with Stearns Ventures, LLC; information technology failures and data security breaches; an epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; a continuation of widespread protests and civil unrest related to efforts to institute law enforcement and other social and political reforms, and the impacts of implementing or failing to implement any such reforms; and other events outside of our control. Please see our periodic reports and other filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to our business.

KB HOME
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended February 28, 2021 and February 29, 2020
(In Thousands, Except Per Share Amounts - Unaudited)

 

 

Three Months Ended

 

 

February 28,
2021

 

February 29,
2020

Total revenues

 

$

1,141,738

 

 

$

1,075,935

 

Homebuilding:

 

 

 

 

Revenues

 

$

1,138,008

 

 

$

1,072,382

 

Costs and expenses

 

(1,023,914

 

(1,012,187

Operating income

 

114,094

 

 

60,195

 

Interest income

 

653

 

 

935

 

Equity in income of unconsolidated joint ventures

 

304

 

 

1,905

 

Homebuilding pretax income

 

115,051

 

 

63,035

 

Financial services:

 

 

 

 

Revenues

 

3,730

 

 

3,553

 

Expenses

 

(1,200

 

(962

Equity in income of unconsolidated joint ventures

 

5,970

 

 

3,222

 

Financial services pretax income

 

8,500

 

 

5,813

 

Total pretax income

 

123,551

 

 

68,848

 

Income tax expense

 

(26,500

 

(9,100

Net income

 

$

97,051

 

 

$

59,748

 

Earnings per share:

 

 

 

 

Basic

 

$

1.05

 

 

$

.66

 

Diluted

 

$

1.02

 

 

$

.63

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

91,716

 

 

89,842

 

Diluted

 

94,903

 

 

94,205

 

KB HOME
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)

 

 

February 28,
2021

 

November 30,
2020

Assets

 

 

 

 

Homebuilding:

 

 

 

 

Cash and cash equivalents

 

$

569,793

 

 

$

681,190

 

Receivables

 

249,234

 

 

272,659

 

Inventories

 

4,123,953

 

 

3,897,482

 

Investments in unconsolidated joint ventures

 

46,453

 

 

46,785

 

Property and equipment, net

 

67,558

 

 

65,547

 

Deferred tax assets, net

 

215,145

 

 

231,067

 

Other assets

 

118,306

 

 

125,510

 

 

 

5,390,442

 

 

5,320,240

 

Financial services

 

36,342

 

 

36,202

 

Total assets

 

$

5,426,784

 

 

$

5,356,442

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Homebuilding:

 

 

 

 

Accounts payable

 

$

280,541

 

 

$

273,368

 

Accrued expenses and other liabilities

 

649,110

 

 

667,501

 

Notes payable

 

1,747,007

 

 

1,747,175

 

 

 

2,676,658

 

 

2,688,044

 

Financial services

 

1,942

 

 

2,629

 

Stockholders’ equity

 

2,748,184

 

 

2,665,769

 

Total liabilities and stockholders’ equity

 

$

5,426,784

 

 

$

5,356,442

 

KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months Ended February 28, 2021 and February 29, 2020
(In Thousands, Except Average Selling Price - Unaudited)

 

 

 

Three Months Ended

 

 

February 28,
2021

 

February 29,
2020

Homebuilding revenues:

 

 

 

 

Housing

 

$

1,137,353

 

 

$

1,071,810

 

Land

 

655

 

 

572

 

Total

 

$

1,138,008

 

 

$

1,072,382

 

 

 

 

 

 

 

 

 

 

 

Homebuilding costs and expenses:

 

 

 

 

Construction and land costs

 

 

 

 

Housing

 

$

901,178

 

 

$

885,481

 

Land

 

731

 

 

572

 

Subtotal

 

901,909

 

 

886,053

 

Selling, general and administrative expenses

 

122,005

 

 

126,134

 

Total

 

$

1,023,914

 

 

$

1,012,187

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

Interest incurred

 

$

31,092

 

 

$

30,962

 

Interest capitalized

 

(31,092

 

(30,962

Total

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Other information:

 

 

 

 

Amortization of previously capitalized interest

 

$

32,650

 

 

$

34,575

 

Depreciation and amortization

 

7,724

 

 

7,929

 

 

 

 

 

 

 

 

 

 

 

Average selling price:

 

 

 

 

West Coast

 

$

582,000

 

 

$

610,200

 

Southwest

 

351,500

 

 

316,400

 

Central

 

306,300

 

 

292,900

 

Southeast

 

288,400

 

 

292,000

 

Total

 

$

397,100

 

 

$

389,500

 

KB HOME
SUPPLEMENTAL INFORMATION
For the Three Months Ended February 28, 2021 and February 29, 2020
(Dollars in Thousands - Unaudited)

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

February 28,
2021

 

February 29,
2020

Homes delivered:

 

 

 

 

 

 

 

West Coast

 

 

 

 

884

 

 

794

 

Southwest

 

 

 

 

534

 

 

603

 

Central

 

 

 

 

1,011

 

 

968

 

Southeast

 

 

 

 

435

 

 

387

 

Total

 

 

 

 

2,864

 

 

2,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net orders:

 

 

 

 

 

 

 

West Coast

 

 

 

 

1,160

 

 

979

 

Southwest

 

 

 

 

867

 

 

765

 

Central

 

 

 

 

1,598

 

 

1,217

 

Southeast

 

 

 

 

667

 

 

534

 

Total

 

 

 

 

4,292

 

 

3,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net order value:

 

 

 

 

 

 

 

West Coast

 

 

 

 

$

779,551

 

 

$

598,416

 

Southwest

 

 

 

 

333,919

 

 

257,220

 

Central

 

 

 

 

552,941

 

 

373,481

 

Southeast

 

 

 

 

202,657

 

 

153,537

 

Total

 

 

 

 

$

1,869,068

 

 

$

1,382,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 28, 2021

 

February 29, 2020

 

Homes

 

Value

 

Homes

 

Value

Backlog data:

 

 

 

 

 

 

 

West Coast

2,300

 

 

$

1,417,644

 

 

1,228

 

 

$

712,218

 

Southwest

1,854

 

 

669,939

 

 

1,400

 

 

456,024

 

Central

3,624

 

 

1,176,047

 

 

2,237

 

 

680,904

 

Southeast

1,460

 

 

430,488

 

 

956

 

 

275,405

 

Total

9,238

 

 

$

3,694,118

 

 

5,821

 

 

$

2,124,551

 

KB HOME
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Percentages - Unaudited)

This press release contains, and Company management’s discussion of the results presented in this press release may include, information about the Company’s adjusted housing gross profit margin and ratio of net debt to capital, neither of which is calculated in accordance with generally accepted accounting principles (“GAAP”). The Company believes these non-GAAP financial measures are relevant and useful to investors in understanding its operations and the leverage employed in its operations, and may be helpful in comparing the Company with other companies in the homebuilding industry to the extent they provide similar information. However, because they are not calculated in accordance with GAAP, these non-GAAP financial measures may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP. Rather, these non-GAAP financial measures should be used to supplement their respective most directly comparable GAAP financial measures in order to provide a greater understanding of the factors and trends affecting the Company’s operations.

Adjusted Housing Gross Profit Margin

The following table reconciles the Company’s housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of the Company’s adjusted housing gross profit margin:

 

 

Three Months Ended

 

 

February 28,
2021

 

February 29,
2020

Housing revenues

 

$

1,137,353

 

 

$

1,071,810

 

Housing construction and land costs

 

(901,178

 

(885,481

Housing gross profits

 

236,175

 

 

186,329

 

Add: Inventory-related charges (a)

 

4,064

 

 

5,672

 

Housing gross profits excluding inventory-related charges

 

240,239

 

 

192,001

 

Add: Amortization of previously capitalized interest (b)

 

32,496

 

 

34,575

 

Adjusted housing gross profits

 

$

272,735

 

 

$

226,576

 

Housing gross profit margin

 

20.8

%

 

17.4

%

Housing gross profit margin excluding inventory-related charges

 

21.1

%

 

17.9

%

Adjusted housing gross profit margin

 

24.0

%

 

21.1

%

(a) Represents inventory impairment and land option contract abandonment charges associated with housing operations.

(b) Represents the amortization of previously capitalized interest associated with housing operations.

Adjusted housing gross profit margin is a non-GAAP financial measure, which the Company calculates by dividing housing revenues less housing construction and land costs excluding (1) housing inventory impairment and land option contract abandonment charges (as applicable) recorded during a given period and (2) amortization of previously capitalized interest associated with housing operations, by housing revenues. The most directly comparable GAAP financial measure is housing gross profit margin. The Company believes adjusted housing gross profit margin is a relevant and useful financial measure to investors in evaluating the Company’s performance as it measures the gross profits the Company generated specifically on the homes delivered during a given period. This non-GAAP financial measure isolates the impact that housing inventory impairment and land option contract abandonment charges, and the amortization of previously capitalized interest associated with housing operations, have on housing gross profit margins, and allows investors to make comparisons with the Company’s competitors that adjust housing gross profit margins in a similar manner. The Company also believes investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of housing inventory impairment and land option contract abandonment charges, and amortization of previously capitalized interest associated with housing operations. This financial measure assists management in making strategic decisions regarding community location and product mix, product pricing and construction pace.

Ratio of Net Debt to Capital

The following table reconciles the Company’s ratio of debt to capital calculated in accordance with GAAP to the non-GAAP financial measure of the Company’s ratio of net debt to capital:

 

 

February 28,
2021

 

November 30,
2020

Notes payable

 

$

1,747,007

 

 

$

1,747,175

 

Stockholders’ equity

 

2,748,184

 

 

2,665,769

 

Total capital

 

$

4,495,191

 

 

$

4,412,944

 

Ratio of debt to capital

 

38.9

%

 

39.6

%

 

 

 

 

 

 

 

 

 

 

Notes payable

 

$

1,747,007

 

 

$

1,747,175

 

Less: Cash and cash equivalents

 

(569,793

 

(681,190

Net debt

 

1,177,214

 

 

1,065,985

 

Stockholders’ equity

 

2,748,184

 

 

2,665,769

 

Total capital

 

$

3,925,398

 

 

$

3,731,754

 

Ratio of net debt to capital

 

30.0

%

 

28.6

%

The ratio of net debt to capital is a non-GAAP financial measure, which the Company calculates by dividing notes payable, net of homebuilding cash and cash equivalents, by capital (notes payable, net of homebuilding cash and cash equivalents, plus stockholders’ equity). The most directly comparable GAAP financial measure is the ratio of debt to capital. The Company believes the ratio of net debt to capital is a relevant and useful financial measure to investors in understanding the leverage employed in the Company’s operations.

Jill Peters, Investor Relations Contact
(310) 893-7456 or jpeters@kbhome.com

Cara Kane, Media Contact
(321) 299-6844 or ckane@kbhome.com

Source: KB Home