KB Home (NYSE:KBH) executives told investors the company delivered fiscal 2025 results that reflected “relatively consistent” performance in a constrained housing market, while outlining a 2026 strategy centered on expanding community count, continuing to reduce build times and costs, and shifting sales and deliveries back toward its higher-margin Built-to-Order (BTO) model.
Fiscal 2025 results and fourth-quarter performance
Chairman and CEO Jeff Mezger said KB Home generated more than $6.2 billion of total revenue and nearly $430 million of net income in fiscal 2025, producing a 10% increase in book value per share. He said the company helped nearly 13,000 individuals and families become homeowners while maintaining “industry-leading customer satisfaction ratings.”
Housing gross profit margin was 17%. Adjusted Housing Gross Profit Margin, excluding $13.7 million of inventory-related charges, was 17.8%. Dillard said the adjusted margin was 310 basis points lower, driven by pricing pressure, negative operating leverage, higher relative land costs, and regional and product mix, partially offset by lower direct construction costs per unit. He also noted that average costs per unit declined as direct construction and material costs decreased more than lot costs increased.
SG&A expense was 10% of housing revenue, or 9.1% when adjusted for $16 million of accelerated equity-based compensation expense tied to a policy change affecting the timing of expense recognition for certain long-term incentive awards.
Net income in the fourth quarter was $102 million, or $1.55 per diluted share. Adjusted net income, excluding inventory-related charges, accelerated equity compensation, and roughly $1 million for early extinguishment of debt, was $126 million, or $1.92 per diluted share.
Demand conditions and pricing approach
Mezger said the company remained optimistic on long-term housing demand due to favorable demographics and a structural undersupply of homes, while acknowledging near-term headwinds including low consumer confidence, affordability concerns, and elevated mortgage rates. He said consumers are still showing interest—via website activity, leads, and traffic—but are taking longer to decide.
KB Home reported 2,414 net orders in the fourth quarter. Mezger said the company maintained a “consistent approach to pricing,” emphasizing transparent, affordable pricing rather than “inflated prices masked by heavy incentives.” He added the company was disciplined in not taking “overly aggressive steps” to capture sales in the seasonally slower fourth quarter, which management believes should support better margins on those sales in the fiscal 2026 first quarter than if it had pushed harder for volume.
When asked about competitive incentives in the market, management said incentive usage was not unusual for KB Home. Executives cited mortgage concessions of around 1% and described typical incentives such as closing cost assistance, generally equating to about 1% to 2%.
Operational execution: build times, community growth, and the BTO mix
President and COO Rob McGibney emphasized operational improvements, including faster cycle times and lower direct costs. He said the cancellation rate was stable at 18%, and net orders supported an average absorption pace of three per month per community, in line with the average fourth-quarter pace of the past two years.
McGibney said build times improved roughly 20% year over year in the fourth quarter, and the company achieved its target of 120 days or better from start to completion for Built-to-Order homes, with several divisions averaging fewer than 100 days in November. He said faster build times allow the company to sell “much deeper into the year” and still deliver within the fiscal year.
At quarter end, the company had 271 active communities, up 5% from the prior year period. McGibney said the company plans to open 35 to 40 new communities in the fiscal 2026 first quarter and expects to hit a “high watermark” for community count in the second quarter during the spring selling season. He said the company expects to be up roughly nine to 13 communities from the 271 level by mid-Q2.
Executives repeatedly pointed to a renewed emphasis on BTO, with the goal of returning BTO deliveries to 70% or higher of total deliveries (from 57% in the fourth quarter). McGibney said gross margins on BTO homes are trending 3 to 5 percentage points higher than on inventory sales. He also said the company began to see a shift toward more BTO sales during November, which continued into December. In the Q&A, management said it expects the BTO mix in the fiscal 2026 first quarter to be similar to the fourth quarter—roughly in the 57% to 60% range—as it works through remaining inventory, with the exit rate toward 70% expected to improve gradually over the first couple of quarters.
On starts, the company started 1,827 homes in the fourth quarter. McGibney said direct costs were about 4% lower sequentially and 6% lower year over year on homes started during the quarter, which helped offset higher land costs.
McGibney also highlighted the credit profile of buyers using the KBHS Home Loans joint venture. He said the capture rate was 80% for financed buyers in the quarter. The average cash down payment was 17% (nearly $80,000), average household income was about $130,000, and the average FICO score was 743. He added that 10% of fourth-quarter deliveries were to all-cash buyers.
Land strategy, inventory, and capital returns
Mezger said the company ended the year owning or controlling about 65,000 lots, with 43% controlled. He said KB Home canceled contracts to purchase approximately 3,500 lots (about 20 communities) in the fourth quarter that no longer met underwriting criteria, describing the lot pipeline as “healthy” and giving the company flexibility to wait for better terms.
On inventory, management said the company had about 1,700 homes in inventory across the company, with “a little over 1,000” at or near the finished stage, as it works through older specs during the transition back to BTO.
Capital allocation was another key theme. Mezger said KB Home returned more than $600 million to shareholders in fiscal 2025, including dividends, and repurchased 13% of outstanding shares at an average price below current book value. Dillard said the company repurchased about 9.4 million shares in 2025 and has repurchased nearly 36% of its outstanding common stock since initiating the program in late 2021. The board approved a new $1 billion repurchase authorization in the fourth quarter, leaving $900 million available at year-end. Management said it expects to repurchase between $50 million and $100 million of stock in the fiscal 2026 first quarter.
2026 outlook and balance sheet updates
For fiscal 2026, KB Home said it is providing guidance for deliveries and housing revenue while deferring margin projections until after it gains visibility in the spring selling season; Mezger said the company plans to provide projections for operating and gross margins when it reports fiscal 2026 first-quarter results in March.
- Fiscal Q1 2026 guidance: housing revenue of $1.05 billion to $1.15 billion on deliveries of 2,300 to 2,500 homes; housing gross margin (assuming no inventory-related charges) of 15.4% to 16%; SG&A ratio of 12.2% to 12.8%; effective tax rate of about 19% in Q1 only.
- Full-year fiscal 2026 guidance: housing revenue of $5.1 billion to $6.1 billion on deliveries of 11,000 to 12,500 homes.
Dillard said the company expects the tax rate to rise later in the year, averaging 24% to 26%, due to reduced energy credits with the end of 45L credits in 2026.
On financing and liquidity, Dillard said the company entered a new credit facility to increase liquidity and improve covenants, and amended its $360 million term loan to extend maturity to 2029, leaving no debt maturities until June 2027. At year-end, KB Home had total liquidity of $1.43 billion, including $229 million in cash and no cash borrowings on its $1.2 billion revolving credit facility. The company’s total debt-to-capital ratio was 30.3%, in line with its targeted range “in the neighborhood of 30%,” which management said supports its BB+ credit rating.
About KB Home (NYSE:KBH)
KB Home is an American homebuilding company headquartered in Los Angeles, California. Founded in 1957, it was among the first homebuilders to go public, offering investors access to one of the nation’s largest residential construction platforms. The company is structured to serve a broad spectrum of homebuyers, with a particular focus on first-time, first move-up and active adult segments. As a public company trading on the New York Stock Exchange under the symbol KBH, KB Home draws on decades of experience in land acquisition, construction and community planning.
At its core, KB Home designs and constructs single-family detached and attached homes, townhomes and condominium units.
