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What changed in KB HOME's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of KB HOME's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+455 added−435 removedSource: 10-K (2026-01-23) vs 10-K (2025-01-24)

Top changes in KB HOME's 2025 10-K

455 paragraphs added · 435 removed · 328 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

75 edited+36 added−33 removed91 unchanged
Biggest changeEach certified home is estimated by the EPA to produce approximately 3,287 pounds (1.5 metric tons) per year less GHG emissions than a typical new home . Based on our energy use analysis, our homes currently save our homeowners an estimated average of $1,400 annually on utility bills compared to typical resale homes.
Biggest changeMilestones we have achieved under these programs include the following: • In 2008, we became the first national homebuilder to make a broad commitment to building ENERGY STAR certified homes, which, according to the EPA, achieve on average up to a 20% energy-efficiency improvement compared to new homes built to local code, and even more compared to resale homes without certification. ◦ The EPA estimated as of 2024 that each certified home produces approximately 3,287 pounds (1.5 metric tons) per year less GHG emissions than a typical new home. ◦ Based on our energy use analysis, our homes currently save our homeowners an estimated average of over $1,400 annually on utility bills compared to typical resale homes. • In 2025, the cumulative number of ENERGY STAR certified new homes we have built totaled over 217,000, more than any other builder in the nation. ◦ In 2005, we built our first solar home, and in 2011, we introduced our first all-solar community. ◦ In 2025, all our homes built in California were solar homes.
Our approach to corporate governance aligns with the principles of the Investor Stewardship Group, a coalition of some of the world’s largest investors and asset managers, as follows: Stewardship Principle What We Do • Boards are accountable to stockholders. • Our board is unclassified and directors stand for election annually under a majority voting standard in an uncontested election. • Stockholders should be entitled to voting rights in proportion to their economic interest. • We have one class of outstanding voting securities that allow each holder one vote for each share held. • Boards should be responsive to stockholders and be proactive in order to understand their perspectives. • Stockholders may communicate with us and our board. • We proactively engage with stockholders year-round.
Our approach to corporate governance aligns with the principles of the Investor Stewardship Group, a coalition of some of the world’s largest investors and asset managers, as follows: 15 Stewardship Principle What We Do • Boards are accountable to stockholders. • Our board is unclassified and directors stand for election annually under a majority voting standard in an uncontested election. • Stockholders should be entitled to voting rights in proportion to their economic interest. • We have one class of outstanding voting securities that allow each holder one vote for each share held. • Boards should be responsive to stockholders and be proactive in order to understand their perspectives. • Stockholders may communicate with us and our board. • We proactively engage with stockholders year-round.
We do this by calibrating home sales rates and selling prices at each of our communities to improve profitability; focusing on controlling direct construction costs; increasing inventory turns to the extent practical; balancing pace, price and construction starts at each community to optimize even-flow production and our return on each inventory asset within its market context; structuring land acquisitions to minimize upfront costs where possible, as discussed below under “ Community Development and Land Inventory Management ”; and deploying excess cash flow from operations to help fuel additional revenue growth or reduce debt, among other steps.
We do this by calibrating home sales rates and selling prices at each of our communities to improve profitability; focusing on controlling direct construction costs; increasing inventory turns to the extent practical; balancing pace, price and construction starts at each community to optimize even-flow production and our return on each inventory asset within its market context; structuring land acquisitions to minimize upfront costs where possible, as discussed below under “ Community Development and Land Inventory Management ”; and deploying excess cash flow from operations to help fuel revenue growth or reduce debt, among other steps.
Our homebuyers can visit our KB Home Design Studios , where they get both advice and the opportunity to select from a broad range of inc luded features, design choices and options that will help personalize their home.
Our homebuyers can visit our KB Home Design Studios , where they get both advice and the opportunity to select from a broad range of inc luded features and design options that will help personalize their home.
We also take steps prior to our acquisition of the land to gain reasonable assurance as to the precise scope of any remediation work required and the costs associated with removal, site restoration and/or monitoring.
We also take steps prior to our acquisition of the land to gain reasonable assurance as to the precise scope 16 of any remediation work required and the costs associated with removal, site restoration and/or monitoring.
We typically focus on metropolitan areas with favorable long-term economic and population growth prospects, and target land parcels that meet our investment return standards. We focus on investments that provide a one- to three-year supply of land or lots per product line, per community, and individual assets that are generally between 50 to 300 lots in size .
We typically focus on metropolitan areas with favorable long-term economic and population growth prospects, and target land parcels that meet our investment return standards. We focus on investments that provide a one- to three-year supply of land or lots per product line, per community, and individual assets that are generally between 50 to 250 lots in size .
Additionally, at our KB Home Design Studios , our homebuyers have the opportunity to select from a broad range of included features, design choices and options. • Innovative Design .
Additionally, at our KB Home Design Studios , our homebuyers have the opportunity to select from a broad range of included features and design options. • Innovative Design .
Our design studios, generally centrally located within our served markets, are a key component of our Built to Order process, with the mix of design choices and options we offer at each studio primarily based on the preferences identified by our market survey and purchase frequency data, as discussed further below under “ Customer Obsession .” We utilize a centralized internal architectural group that designs homes to meet or exceed customers’ price-to-value expectations while being as cost-effective as possible to construct.
Our design studios, generally centrally located within our served markets, are a key component of our Built to Order process, with the mix of included features and design options we offer at each studio primarily based on the preferences identified by our market survey and purchase frequency data, as discussed further below under “ Customer Obsession .” We utilize a centralized internal architectural group that designs homes to meet or exceed customers’ price-to-value expectations while being as cost-effective as possible to construct.
A liability for environmental remediation and other environmental costs is accrued when we consider it probable that a liability has been incurred and the amount of loss can be reasonably estimated. However, environmental costs and accruals were not material to our operations, cash flows or financial position in 2024 , 2023 or 2022 .
A liability for environmental remediation and other environmental costs is accrued when we consider it probable that a liability has been incurred and the amount of loss can be reasonably estimated. However, environmental costs and accruals were not material to our operations, cash flows or financial position in 2025 , 2024 or 2023 .
As noted above under “ Human Capital Resources ,” w e are also one of the founding partners of the Building Talent Foundation, whose mission is to advance the education, training and career progression of young people and people from underrepresented groups as skilled technical workers and business owners in residential construction.
In addition, as noted above under “ Human Capital ,” w e are also one of the founding partners of the Building Talent Foundation, whose mission is to advance the education, training and career progression of young people and people from underrepresented groups as skilled technical workers and business owners in residential construction.
Our homebuilding operations represent the majority of our business, accounting for 99.6% of our total revenues in 2024 . Our financial services operations, which accounted for the remaining .4% of our total revenues in 2024 , offer various insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets.
Our homebuilding operations represent the majority of our business, accounting for 99.6% of our total revenues in 2025 . Our financial services operations, which accounted for the remaining .4% of our total revenues in 2025 , offer various insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets.
Two directors are liaisons to management on sustainability-related matters. • Boards should have a strong, independent leadership structure. • Our board has a strong independent lead director with significant responsibilities and authority. • Only independent directors serve on board committees. • Boards should adopt structures and practices that enhance their effectiveness. • Directors have extensive and relevant experience and skills. • 90% of directors are independent; 50% are women or racial or ethnic minorities. • The average tenure of our board members is approximately seven years, with five of the directors on the Board having joined since 2021, promoting its refreshment. • Boards should develop management incentive structures that are aligned with the long-term strategy of the company. • We take stockholder feedback into account in our executive compensation program, as discussed in our 2025 Proxy Statement. • Management compensation is designed to encourage the achievement of our long-term strategic goals. • All unvested employee equity awards made since 2017 require double-trigger vesting in a change in control.
Two directors are liaisons to management on sustainability-related matters. • Boards should have a strong, independent leadership structure. • Our board has a strong independent lead director with significant responsibilities and authority. • Only independent directors serve on board committees. • Boards should adopt structures and practices that enhance their effectiveness. • Directors have extensive and relevant experience and skills. • 90% of directors are independent; 50% are women or racial or ethnic minorities. • The average tenure of our board members is approximately eight years, with five of the directors on the Board having joined since 2020, promoting its refreshment. • Boards should develop management incentive structures that are aligned with the long-term strategy of the company. • We take stockholder feedback into account in our executive compensation program, as discussed in our 2026 Proxy Statement. • Management compensation is designed to encourage the achievement of our long-term strategic goals. • All unvested employee equity awards made since 2017 require double-trigger vesting in a change in control.
We expect these upward cost trends may continue in 2025 , particularly if and as there is greater competition for these resources across a disrupted global supply chain. Seasonality. Our performance is affected by seasonal demand trends for housing.
We expect these upward cost trends may continue in 2026, particularly if and as there is greater competition for these resources across a disrupted global supply chain. Seasonality. Our performance is affected by seasonal demand trends for housing.
However, cancellations of home sales contracts prior to the delivery of the underlying homes, the construction of attached products with some unsold units, or specific marketing or other strategic considerations will result in our having some unsold completed or partially completed homes in our inventory.
In addition, cancellations of home sales contracts prior to the delivery of the underlying homes, the construction of attached products with some unsold units, or specific marketing or other strategic considerations will result in our having some unsold completed or partially completed homes in our inventory.
More information concerning our corporate governance can be found in our Proxy Statement for the 2025 Annual Meeting of Stockholders (“ 2025 Proxy Statement ”). 15 Government Regulations and Environmental Matters Our operations are subject to myriad legal and regulatory requirements concerning land development (including governmental permits, taxes, assessments and fees), the homebuilding process, employment conditions and worksite health and safety.
More information concerning our corporate governance can be found in our Proxy Statement for the 2026 Annual Meeting of Stockholders (“ 2026 Proxy Statement ”). Government Regulations and Environmental Matters Our operations are subject to myriad legal and regulatory requirements concerning land development (including governmental permits, taxes, assessments and fees), the homebuilding process, employment conditions and worksite health and safety.
To emphasize the distinct combination of innovative design, sustainability, personalization, affordability and partnership we offer to our homebuyers and the importance we place on customer satisfaction, we have centered our external brand identity and messaging around Built on Relationships®.
To emphasize the distinct combination of partnership, personalization, innovative design, sustainability and affordability we offer to our homebuyers, as well as the importance we place on customer satisfaction, we have centered our external brand identity and messaging around Built on Relationships®.
Generally, 60% to 70% of our homes delivered are Built to Order , with the remainder consisting of homes started without a corresponding buyer and partially constructed homes where the initial buyer cancelled their home sales contract with us.
Historically, 60% to 70% of our homes delivered are Built to Order , with the remainder consisting of homes started without a corresponding buyer and partially constructed homes where the initial buyer cancelled their home sales contract with us.
Therefore, our results in any given period will fluctuate compared to other periods based on the proportion of homes delivered from areas with higher or lower selling prices and on the corresponding land and overhead costs incurred to generate those deliveries, as well as from our overall community count.
Therefore, our results in any given period will fluctuate compared to other periods based on the proportion of homes delivered from areas with higher or lower selling prices and on the corresponding land and overhead costs incurred to generate those deliveries, as well as from our overall community count. Human Capital Our Culture.
We also incorporate energy-efficient and water-saving f eatures into our product designs to help lower our homebuyers’ total cost of homeownership and reduce our homes’ impact on the environment. • Production . In addition to differentiating us from other high-production homebuilders, our Built to Order process helps drive low-cost production.
We also incorporate energy-efficient and water-saving features into our product designs to help lower our homebuyers’ total cost of homeownership and reduce our homes’ impact on the environment. • Production . In addition to differentiating us from other high-production homebuilders, our Built to Order process helps drive low-cost production.
The following charts present homebuilding revenues, net income and diluted earnings per share for the years ended November 30, and book value per share as of November 30 : 2 Markets Reflecting the geographic scale of our homebuilding business, we have operations in the nine states and 49 major markets presented below.
The following charts present homebuilding revenues, net income and diluted earnings per share for the years ended November 30, 2021, 2023 and 2025, and book value per share as of November 30, 2021, 2023 and 2025: 2 Markets Reflecting the geographic scale of our homebuilding business, we have operations in the nine states and 49 major markets presented below.
In 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return standards.
In 2026, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return standards.
The following charts present our overall buyer profile and the percentage of homes delivered to first-time homebuyers within each homebuilding reporting segment for the year ended November 30, 2024 : 6 Operational Structure.
The following charts present our overall buyer profile and the percentage of homes delivered to first-time homebuyers within each homebuilding reporting segment for the year ended November 30, 2025 : Operational Structure.
To help learn and improve our customer experience, we schedule follow-up visits with our customers 1 0 days and 30 day s after they move in, as well as six, 10 and 18 months later , to hear about their experience in their new home and to address any concerns they may have, including warranty claims.
To help learn and improve our customer experience, we schedule follow-up visits with our customers 10 days and 30 days after they move in, as well as six, 10 and 18 months later , to hear about their experience in their new home and to address any concerns they may have, including warranty 5 claims.
These advisors, who have a broad and diverse set of personal and professional perspectives, experiences and expertise, help us shape our sustainability priorities and reporting, as well as our approach to stakeholder engagement. Energy Efficiency Commitment .
These advisors, who have a broad and diverse set of personal and professional perspectives, experiences and expertise, help us shape our sustainability priorities and reporting, as well as our approach to stakeholder engagement. Energy Efficiency and Water Conservation Leadership .
Item 1. BUSINESS General KB Home is one of the largest and most trusted homebuilders in the U.S. We have been building homes for more than 65 years, with nearly 700,000 homes built since our founding in 1957.
Item 1. BUSINESS General KB Home is one of the largest and most trusted homebuilders in the U.S. We have been building homes for nearly 70 years, with over 700,000 homes built since our founding in 1957.
There have been and may in future periods be circumstances where we deviate from certain of the above principles, such as starting construction on a certain number of homes in a community before corresponding sales contracts are signed with homebuyers to more quickly meet customer delivery expectations and generate revenues, particularly in markets with low resale home inventory.
There have been and may in future periods be circumstances where we deviate from certain of the above principles, such as starting construction on a certain number of homes in a community before corresponding sales contracts are signed with 4 homebuyers to more quickly meet customer delivery expectations and generate revenues.
Segment States Major Market(s) West Coast California Contra Costa County, Fresno, Hollister, Los Angeles, Madera, Modesto, Oakland, Orange County, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Rosa-Petaluma, Stockton, Vallejo, Ventura and Yuba City Idaho Boise Washington Bremerton, Olympia and Seattle Southwest Arizona Phoenix and Tucson Nevada Las Vegas Central Colorado Denver, Erie, Firestone and Loveland Texas Austin, Dallas, Fort Worth, Houston and San Antonio Southeast Florida Fort Myers, Jacksonville, Lakeland, Melbourne, Orlando, Palm Coast, Sarasota and Tampa North Carolina Charlotte, Durham-Chapel Hill, Fayetteville and Raleigh Business Strategy Overview .
Segment States Major Market(s) West Coast California Contra Costa County, Fresno, Hollister, Los Angeles, Madera, Modesto, Oakland, Orange County, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Rosa-Petaluma, Stockton, Vallejo, Ventura and Yuba City Idaho Boise Washington Bremerton, Olympia and Seattle Southwest Arizona Phoenix and Tucson Nevada Las Vegas Central Colorado Denver, Erie, Firestone and Loveland Texas Austin, Dallas, Fort Worth, Houston and San Antonio Southeast Florida Fort Myers, Jacksonville, Lakeland, Melbourne, Orlando, Palm Coast, Sarasota and Tampa North Carolina Charlotte, Durham-Chapel Hill, Fayetteville and Raleigh In 2025, we announced our reentry into the Atlanta, Georgia market.
First Quarter Second Quarter Third Quarter Fourth Quarter Net Orders 2024 25 % 30 % 24 % 21 % 2023 19 % 36 % 28 % 17 % 2022 39 % 36 % 19 % 6 % Homes Delivered 2024 21 % 25 % 26 % 28 % 2023 21 % 28 % 25 % 26 % 2022 21 % 25 % 26 % 28 % Housing Revenues 2024 21 % 25 % 25 % 29 % 2023 22 % 27 % 25 % 26 % 2022 20 % 25 % 27 % 28 % Delivery Mix and Other Factors.
First Quarter Second Quarter Third Quarter Fourth Quarter Net Orders 2025 24 % 30 % 25 % 21 % 2024 25 % 30 % 24 % 21 % 2023 19 % 36 % 28 % 17 % Homes Delivered 2025 22 % 24 % 26 % 28 % 2024 21 % 25 % 26 % 28 % 2023 21 % 28 % 25 % 26 % Housing Revenues 2025 22 % 25 % 26 % 27 % 2024 21 % 25 % 25 % 29 % 2023 22 % 27 % 25 % 26 % Delivery Mix and Other Factors.
Our KB Cares philanthropic program has four key focus areas: shelter, community, sustainability/environment and construction skills/employment. KB Cares helps to build strong 14 social ties by, among other things, providing our employees a means of giving back to the areas in which we operate through efforts ranging from assisting people in challenging circumstances to educating the next generation.
Our KB Cares philanthropic program helps to build strong social ties by, among other things, providing our employees with an opportunity to give back to the areas in which we operate through efforts ranging from assisting people in challenging circumstances to educating the next generation. KB Cares has four key focus areas: shelter, community, sustainability/environment and construction skills/employment.
In addition, in many of our communities, we can readily introduce smaller square footage floor plans to enable more customers to select and design a personalized home within their budget. Our ENERGY STAR ® certified homes can provide long- term significant savings on utility bills, compared to typical resale homes and new homes that are not ENERGY STAR certified.
In addition, in many of our communities, we can readily introduce smaller square footage floor plans to enable more customers to select and design a personalized home within their budget. Our energy- and water-efficient homes can provide long- term significant savings on utility bills, compared to typical resale homes and new homes without such features.
With our Built to Order approach, our customers have the opportunity to select their lot location within a community, floor plan, elevation and structural options, each of which may be at a premium added to a home’s selling price, and to personalize their homes beyond our base offerings by adding numerous design choices and options available in our KB Home Design Studios .
Moreover, unlike the constraints inherent with resale homes, and new homes offered by certain other builders, our Built to Order approach provides our customers with the opportunity to select their lot location within a community, floor plan, elevation and structural options, each of which may be at a premium added to a home’s selling price, and to personalize their homes beyond our base offerings by adding numerous design options available in our KB Home Design Studios .
Our library of standardized plans facilitates our ability to shift with local demand, which may include adding smaller square footage homes at communities to offer more affordable choices to buyers, and/or project site attributes, such as the size and location of developable lots.
Our library of standardized plans, which we have streamlined to focus on those most frequently selected by our customers, facilitates our ability to shift with local demand, which may include adding smaller square footage homes at communities to offer more affordable choices to buyers, and/or project site attributes, such as the size and location of developable lots.
Our product portfolio for customers ranges from smaller, higher density homes, with average selling prices typically suited for first-time homebuyers, to larger homes in premium locations with additional amenities and higher average selling prices that generally attract a first or second move-up homebuyer.
We also use print media and advertising, and billboards in our served markets. 6 Homebuyer Profile . Our product portfolio for customers ranges from smaller, higher density homes, with average selling prices typically suited for first-time homebuyers, to larger homes in premium locations with additional amenities and higher average selling prices that generally attract a first or second move-up homebuyer.
We also use electronic sales capabilities and technology to give our customers a variety of convenient ways to shop for and purchase a new KB home, including, among other things: • Offering virtual home tours and online photo galleries for prospective homebuyers; • Providing access to interactive floor plans and homesite maps for their desired community; • Conducting virtual appointments and tours of the model homes and design studios; • Utilizing online tools to serve homebuyers where possible; and • Presenting homebuyers with the ability to virtually see and walk through their home at various points during its construction and prior to closing.
We also use electronic sales capabilities and technology to give our customers a variety of convenient ways to shop for and purchase a new KB home, including, among other things: • Offering virtual 360 ° home tours and online photo galleries for prospective homebuyers; • Providing access to interactive floor plans and homesite maps for their desired community, as well as the ability to reserve a favorite homesite and floorplan; • Conducting virtual appointments and tours of the model homes and design studios; • Offering online tools, such as the MyKB digital portal and KB Home app, to guide buyers through the homebuying journey from shopping to construction and ownership; and • Presenting homebuyers with the ability to virtually see and walk through their home at various points during its construction and prior to closing.
We support each person or family, whether it is their first time or they have already been homeowners, with a dedicated community team of sales counselors, design consultants, customer service representatives, construction superintendents and other personnel.
We support each person or family, whether it is their first time or they have already been homeowners, with a dedicated community team of sales counselors, design consultants, construction superintendents, customer service representatives, KBHS loan officers (for buyers who elect to use KBHS to finance their home purchase) and other personnel.
To date, we have built over 26,000 WaterSense labeled and Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.2 million WaterSense labeled fixtures, collectively helping to save an estimated 2.1 billion gallons of water per year based on calculations derived from WaterSense program and supplier data.
In July 2022, we committed to building WaterSense labeled homes in all our future Arizona, California and Nevada communities. • To date, we have built approximately 30,000 WaterSense labeled and Southern Nevada Water Authority Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.3 million WaterSense labeled fixtures, collectively helping to save an estimated 2.2 billion gallons of water per year based on calculations derived from WaterSense program and supplier data.
This “selling season” demand results in our typically delivering more homes and generating higher revenues from late summer through the fall months (corresponding to part of our third quarter and all of our fourth quarter).
This “selling season” 10 demand results in our typically delivering more homes and generating higher revenues from late summer through the fall months (corresponding to part of our third quarter and all of our fourth quarter). The seasonal nature of our business may also cause significant variations in our working capital requirements and liquidity.
However, depending on market conditions and available opportunities, we may acquire undeveloped and/or unentitled land. We may also invest in land that requires us to repurpose and re-entitle the property for residential use, such as urban in-fill developments.
We may also invest in land that requires us to repurpose and re-entitle the property for residential use, such as urban in-fill developments.
Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less home sales contract cancellations) generated during the current period minus the number of homes delivered during the current period. Our backlog at any given time will be affected by cancellations, homes delivered and our community count.
Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less home sales contract cancellations) generated during the current period minus the number of homes delivered during 9 the current period.
Our typical cycle time from home sale to delivery has historically ranged from six to seven months. We, or outside general contractors we may engage, contract with a variety of independent contractors, who are typically locally based, to perform all land development and home construction work through these independent contractors’ own employees or subcontractors.
We, or outside general contractors we may engage, contract with a variety of independent contractors, who are typically locally based, to perform all land development and home construction work through these independent contractors’ own employees or subcontractors. We do not self-perform any land development or home construction work.
Our community development process varies based on, among other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors.
Our community development process varies based on, among other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors. 7 Although they vary significantly in size and complexity, our single-family residential home communities typically consist of 50 to 125 lots per product line, with lots ranging in size from 1,800 to 10,000 square feet.
In markets experiencing extensive construction activity, including areas recovering from earthquakes, wildfires (which is expected to be the case in the Los Angeles County area due to the unprecedented wildfires it experienced in January 2025) , hurricanes (such as the hurricanes that made landfall in the Southeast United States in September and October 2024), flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services, which in turn tends to drive up our costs and/or extend our production schedules.
In markets experiencing extensive construction activity, including areas recovering from earthquakes, wildfires, hurricanes, flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services, which in turn tends to drive up our costs and/or extend our production schedules.
We generally build one to three model homes at each community so that prospective homebuyers can preview the various products available. Depending on the community, we may offer premium lots containing more square footage, better views and/or location benefits. Some of our communities consist of multiple-story structures that encompass several attached condominium-style units. 7 Land Acquisition and Land Development.
In our communities, we typically offer four to 10 home design choices. We generally build one to three model homes at each community so that prospective homebuyers can preview the various products available. Depending on the community, we may offer premium lots containing more square footage, better views and/or location benefits.
The following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 2024 and 2023 : Homes Under Construction Land Under Development Land Under Option (a) Total Land Owned or Under Option 2024 2023 2024 2023 2024 2023 2024 2023 West Coast 2,286 2,343 10,794 9,784 10,876 6,093 23,956 18,220 Southwest 1,303 1,567 4,078 4,365 7,736 1,085 13,117 7,017 Central 1,575 2,156 9,866 10,981 9,615 4,191 21,056 17,328 Southeast 1,360 1,569 7,600 8,035 9,614 3,807 18,574 13,411 Total 6,524 7,635 32,338 33,165 37,841 15,176 76,703 55,976 (a) Land under option as of November 30, 2024 and 2023 includes 18,923 and 6,260 lots, respectively, under land option contracts or other similar contracts where the associated deposits were refundable at our discretion.
The following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 2025 and 2024 : Homes Under Construction Land Under Development Land Under Option (a) Total Land Owned or Under Option 2025 2024 2025 2024 2025 2024 2025 2024 West Coast 1,713 2,286 10,400 10,794 8,637 10,876 20,750 23,956 Southwest 630 1,303 6,255 4,078 4,257 7,736 11,142 13,117 Central 1,254 1,575 9,501 9,866 9,859 9,615 20,614 21,056 Southeast 1,158 1,360 6,226 7,600 4,722 9,614 12,106 18,574 Total 4,755 6,524 32,382 32,338 27,475 37,841 64,612 76,703 (a) Land under option as of November 30, 2025 and 2024 includes 7,715 and 18,923 lots, respectively, under land option contracts or other similar contracts where the associated deposits were refundable at our discretion.
We built our first solar home in 2005 and introduced our first all solar community in 2011. In 2024, essentially all of our homes built in California were solar homes. As of November 30, 2024 , most of our model homes and sales offices in California were powered by solar energy.
As of November 30, 2025, most of our model homes and sales offices in California were powered by solar energy.
All employees must complete a training course on our Ethics Policy where they confirm they will adhere to its guidelines. An internal ethics committee composed of senior corporate and regional leaders oversees the Ethics Policy and reviews related matters. We provide an independently managed hotline and reporting website that allow employees and third parties to anonymously report any ethics-related issues.
All employees must complete a training course on our Ethics Policy upon hire and annually thereafter, and confirm they will adhere to its guidelines. An internal ethics committee composed of senior corporate and operational leaders oversees the Ethics Policy and reviews related matters.
In recent years and in response to the growing number of millennial and Generation Z homebuyers, we have increased our emphasis on digital marketing, through search engine marketing, interactive internet-based applications, email, social media, our website and other evolving communication technologies. We also use print media and advertising, billboards and radio in our served markets. Homebuyer Profile .
In recent years and in response to the large number of millennial and Generation Z homebuyers, we have increased our emphasis on digital marketing, through search engine marketing, online real estate listing platforms, display ads, email, social media, our website and other evolving communication technologies.
The following charts present the percentage of inventory lots we owned or controlled under land option contracts or other similar contracts by homebuilding reporting segment and the percentage of total lots we owned and had under option as of November 30, 2024 : 8 Home Construction and Deliveries.
The number of lots we owned or controlled under land option contracts or other similar contracts as of November 30, 2025 decreased 16% from November 30, 2024 , largely reflecting homes delivered and our abandonment of 24,596 previously controlled lots that no longer met our underwriting criteria, partly offset by newly optioned lots during 2025. 8 The following charts present the percentage of inventory lots we owned or controlled under land option contracts or other similar contracts by homebuilding reporting segment and the percentage of total lots we owned and had under option as of November 30, 2025 : Home Construction and Deliveries.
Since 2014, we have partnered with IBACOS®, a nationally recognized expert in home construction quality and performance, to conduct annual jobsite safety reviews. Our commitment to the communities we serve is not solely about the homes we build, as we strive to also make wider community contributions that intersect with the nature of our business.
Our commitment to the communities we serve is not solely about the homes we build, as we strive to also make wider community contributions that intersect with the nature of our business.
Our cancellation rates and the factors affecting such rates are further discussed below under both Item 1A – Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. 9 The following charts present our ending backlog ( number of homes and value ) by homebuilding reporting segment as of November 30, 2023 and 2024 : Competition, Seasonality, Delivery Mix and Other Factors Competition.
Our cancellation rates and the factors affecting such rates are further discussed below under both Item 1A – Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.
We do not self-perform any land development or home construction work. These independent contractors also supply some of the building materials required for such production activities.
These independent contractors also supply some of the building materials required for such production activities.
We have also made a concerted effort to recruit military veterans, recognizing the unique qualities they bring to the workplace, and are a founding supporter of the Building Talent Foundation, established by the Leading Builders of America to help address the severe and persistent labor shortage in skilled trades affecting the homebuilding industry. Training and Career Development.
We have also prioritized recruiting veterans and we are a founding supporter of the Building Talent Foundation, established by the Leading Builders of America, to help address the significant and ongoing shortage of skilled workers in the homebuilding sector. 12 Training and Career Development.
We continuously evaluate land acquisition opportunities against our investment return standards, while balancing competing needs for financial strength, liquidity and land inventory for future growth. When we acquire land, we generally focus on parcels with lots that are entitled for residential construction and are either physically developed to start home construction (referred to as “finished lots”) or partially finished.
When we acquire land, we generally focus on parcels with lots that are entitled for residential construction and are either physically developed to start home construction (referred to as “finished lots”) or partially finished. However, depending on market conditions and available opportunities, we may acquire undeveloped and/or unentitled land.
This is the 14th consecutive year we have been recognized for our achievements in constructing water-efficient homes; • Newsweek’s 2025 list of America’s Most Responsible Companies – We were once again named by Newsweek as one of America’s most responsible companies, the only homebuilder to make this distinguished list five years in a row.
We have been recognized with major national awards for our consistent leadership and commitment, including: • Newsweek’s 2026 list of America’s Most Responsible Companies – We were once again named by Newsweek as one of America’s most responsible companies, the highest-ranked national builder and the only one to make this distinguished list six years in a row.
According to the EPA, WaterSense labeled products use at least 20% less water compared to products that are not WaterSense labeled. In 2021, we were also the first national homebuilder to implement the new WaterSense Labeled Homes Program, Version 2, under which homes are to be at least 30% more water efficient than a 13 typical new home.
We are also building all-electric homes in many areas across the country per local requirements and conditions. • In 2008, we were the first national homebuilder to join the WaterSense program, and in 2009, we made a commitment to using WaterSense labeled products in our homes. • In 2021, we were the first national homebuilder to implement the WaterSense Labeled Homes Program, Version 2, under which homes are to be at least 30% more water efficient than a typical new home.
We have partnered with local nonprofits and community organizations to contribute to the long-term social fabric of the areas in which we build. For instance, we work with Sackcloth & Ashes, an organization that donates a blanket to a local homeless shelter for every blanket we purchase as a housewarming gift for our new homeowners.
We have partnered with local nonprofits and community organizations to contribute to the long-term social fabric of the areas in which we build, including Jared Allen’s Homes for Wounded Warriors, which raises money to build or modify homes for injured military veterans; Sackcloth & Ashes, which donates a blanket to a local homeless shelter for every blanket we purchase as a housewarming gift for our new homeowners; and Sleep in Heavenly Peace, for which our employees and various trade partners help build and deliver handmade, fully furnished beds to children in need.
By continuously enhancing and expanding our offerings, we aim to create a positive and supportive work environment that benefits both our employees and the organization as a whole. 12 Sustainability Principles and Practices For more than 17 years, we have made a dedicated effort to be an industry leader in sustainability and seek to integrate sustainable features, products and design elements into our homes in ways that maintain their affordability to our core customer segments and, as noted above under “ Business Strategy ,” help to lower long-term homeownership costs.
We seek to integrate sustainable features, products and design elements into our homes in ways that maintain their affordability to our core customer segments and, as noted above under “ Business Strategy ,” help to lower long-term homeownership costs.
This initiative helps homeowners use less water, as well as lower their utility bills, in some of the most drought-affected areas of the country. Indoor Environments . Our sustainability program portfolio includes incorporating features that are aimed at enhancing our homes’ indoor environment with air-sealing designs and high-performance ventilation systems and low- or zero-VOC products.
Our sustainability program portfolio includes incorporating features that are aimed at enhancing our homes’ indoor environment with air-sealing designs and high-performance ventilation systems and low- or zero-VOC products. Our homes also feature door hardware with antimicrobial protection that helps reduce the spread of bacteria and germs. Awards and Recognition .
Human Capital Resources At November 30, 2024 and 2023 , we had approximately 2,384 and 2,205 full-time employees, respectively. None of our employees are represented by a collective bargaining agreement. Our Culture. We seek to a ttract, promote, and retain qualified personnel, particularly the leaders of our local divisions who manage our businesses in markets and partner with various stakeholders.
At November 30, 2025 and 2024 , we had approximately 2,118 and 2,384 full-time employees, respectively. None of our employees are represented by a collective bargaining agreement.
We strive to provide a safe and supportive working environment for our employees and trade partners, as discussed under the “ Safety and Community Investment Initiatives ” section of this report. Ensuring the well- being of our team members is a top priority, and we have implemented several initiatives to achieve this goal.
We strive to foster a secure and encouraging workplace for our employees and trade partners, as outlined in the “ Safety and Community Investment Initiatives ” section of this report.
In 2024, we continued to be one of the highest-ranked national homebuilders for customer satisfaction in 5 third-party surveys and, based on long-running buyer surveys conducted by an outside organization we have engaged, achieved the highest level of customer satisfaction in our histor y , which we believe reflects the effective dedication we have to our homebuyers. Promotional Marketing Strategy.
We are proud of the high levels of satisfaction our homebuyers have reported to us and outside survey firms. In 2025, we continued to be one of the top-ranked national homebuilders for customer satisfaction on a leading independent homebuilding review site, which we believe reflects the effective dedication we have to our homebuyers. Promotional Marketing Strategy.
This process is aimed at identifying top-performing, high-potential team members, with a diverse range of experiences and backgrounds, for advancement to crucial field and corporate leadership positions.
This evaluation focuses on identifying high-achieving and high-potential team members from a variety of backgrounds and experiences for progression into field and corporate leadership positions.
This recognition is based on our industry-leading environmental and social practices; • Newsweek’s 2024 list of America’s Most Trustworthy Companies – This is the third consecutive year we have received this recognition, which is based on three main public pillars: customer trust, investor trust and employee trust; • USA Today’s 2024 List of America’s Climate Leaders – We were the highest-ranked homebuilder and ranked in the top five percent of all companies, in consideration of, among other things, our annualized reductions in emission intensity and carbon disclosure rating; • Time Magazine’s 2024 America’s Best Midsize Companies – We were the only national homebuilder to receive this distinction on this inaugural list, which evaluates employee satisfaction, revenue growth and sustainability transparency; and • Forbes’ 2024 America’s Best Midsize Employers – We were recognized for a third time, the only national homebuilder to receive this distinction.
The recognition is based on a comprehensive analysis conducted to identify the top-performing companies around the globe and is based on evaluation criteria of employee satisfaction, revenue growth and sustainability; • Time Magazine’s 2025 list of America’s Best Midsize Companies – We have been the only national homebuilder to receive this distinction every year since its inception, which is based on more than 15 different criteria, including employee satisfaction, revenue growth and sustainability transparency; 14 • USA Today’s 2025 list of America’s Climate Leaders – We were the highest-ranked homebuilder in consideration of, among other things, our annualized reductions in emission intensity and carbon disclosure rating; and • In 2025, we were recognized by AvidCX TM , a trusted platform of homebuyer experience insights, with an unprecedented 18 division-level AvidCX awards, including the prestigious 2025 AvidCX Cup, based on customer surveys taken during the first year of homeownership.
We can provide no assurance whether or to what extent typical seasonal performance trends will occur in 2025, or at all.
Accordingly, our quarterly results of operations and financial position at the end of any given quarter are not necessarily indicative of results for the corresponding full year. We can provide no assurance whether or to what extent typical seasonal performance trends will occur in 2026, or at all.
We may also acquire land parcels in peripheral neighborhoods of a core metropolitan area that otherwise fit our growth strategy and meet our investment return standards. Additionally, significant supply chain disruptions from 2020 4 into 2023 substantially lengthened our average build time and hindered our even-flow home production process.
We may also acquire land parcels in peripheral neighborhoods of a core metropolitan area that otherwise fit our growth strategy and meet our investment return standards. Asset Efficiency. In implementing our KB Edge business strategy, a key focus is on enhancing asset efficiency.
To promote our employees ’ professional growth and help drive the consistent execution of our business strategy, including our customer obsession philosophy, we offer training opportunities tailored to team members ’ responsibilities throughout their careers with us.
In order to promote the professional growth of our employees and to help ensure the consistent execution of our business strategy — particularly our commitment to customer-centricity — we provide training opportunities specifically tailored to the roles and career stages of our employees.
To promote an inclusive workforce and the professional growth of the diverse individuals who join us, our employment policies prohibit discrimination based on race, color, religion, national origin, ancestry, familial status, age, veteran status, physical disability, mental disability, medical condition, gender, gender identity, sexual orientation, marital status, or any other legally protected status.
We strictly prohibit discrimination on grounds such as race, color, religion, national origin, ancestry, family status, age, veteran status, physical or mental disabilities, medical conditions, gender, gender identity, sexual orientation, marital status, or any other status protected by law.
Other than model homes, our inventories typically do not consist of a significant number of completed unsold homes.
Other than model homes, our inventories typically do not consist of a significant number of completed unsold homes. However, at the end of 2025, we carried a higher number of completed unsold homes largely reflecting strategies we had adopted in 2020-2024 to navigate supply chain disruptions and market dynamics.
Through our 2024 fiscal year end, our top division and regional leaders have an average tenure with us of nearly 13 years , and the local leaders responsible for land acquisition, entitlement, and development average over eight years. Our senior corporate officers, who set our overall strategy, have an average tenure of 22 years .
At the close of our 2025 fiscal year, our division and regional presidents had served an average of over 11 years , while local land leaders managing land acquisition, entitlement, and development had an average tenure of more than eight years .
We earned a place in the top 20% of all listed companies through our focus on cultivating a supportive and inclusive workplace culture that encourages the growth and development of our employees. Our annual sustainability reports, which we have published on our website since 2008, contain more information about our programs, goals, and achievements. Safety and Community Investment Initiatives .
We also received an impressive 108 AvidCX Service awards honoring our team members in sales, design, construction, mortgage and customer care as being in the top 5% nationally in customer satisfaction. Our annual sustainability reports, which we have published on our website since 2008, contain more information about our programs, goals, and achievements. Safety and Community Investment Initiatives .
The management development and compensation committee of our board of directors, composed of members with broad expertise and insight into human capital management, talent development and executive compensation across various organizational structures, as well as solid backgrounds in executive leadership, oversees this review process. Inclusion.
The management development and compensation committee, which is part of our board of directors and consists of members with expertise in human capital management, talent development and executive compensation across different business models, oversees this process. Inclusion. Our employment practices are designed to create a welcoming environment and encourage the advancement of all individuals who join our team.
Backlog value represents potential future housing revenues from homes in backlog.
Our backlog at any given time will be affected by cancellations, homes delivered, build times, and our community count. Backlog value represents potential future housing revenues from homes in backlog.
As of November 30, 2024 , females comprised 42% of our workforce and 33% of managerial employees. In addition, ethnic/racial minorities comprised 38% of our workforce and 23% of managerial employees. Employee Safety and Wellness.
As of November 30, 2025, females accounted for 44% of our workforce and 35% of managerial employees. Furthermore, individuals from ethnic or racial minority groups represented 36% of our workforce and 22% of our managerial population. Employee Safety and Wellness.
We achieved a meaningful sequential improvement in our build times each quarter beginning with the 2023 second quarter.
In 2026, with a more normalized supply chain and meaningful improvement in our average build times since the 2023 second quarter, we intend to bring our mix of homes delivered closer to our historical average.
Additionally, our benefit programs include medical, dental, and vision insurance, a savings/retirement plan, life and disability insurance, and tuition reimbursement, along with a range of voluntary benefits designed to meet individual needs. We engage nationally recognized external compensation and benefits consulting firms to objectively evaluate our programs and benchmark them against those of peers and similarly sized organizations.
Components of the packages include: • Medical, dental, vision care, life and disability insurance; • 401(k) Savings Plan with a company match; • Tuition reimbursement; • Employee home purchase discounts; and • A selection of voluntary benefits designed to meet individual preferences and needs.
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Our average build times in 2024 improved 28% from the prior year and as of the end of the 2024 fourth quarter , our build times had nearly returned to their historical average of between four to five months from start to home completion . Asset Efficiency.
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However, as of November 30, 2025 , we had not acquired land or commenced selling homes in that market. Business Strategy Overview .
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In implementing our KB Edge business strategy, a key focus is on enhancing asset efficiency.
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Additionally, since mid-February 2025, we have implemented a simplified sales strategy focused on providing a straightforward, transparent base price, with limited, if any, concessions or incentives, that is intended to offer to our customers a compelling value competitive with area resale home prices.
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We are proud of the high levels of satisfaction our homebuyers have reported to us and outside survey firms.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCompliance with those directed at or otherwise affecting our business or our suppliers’ (or their suppliers’) operations, products or services, could increase our costs, such as with California’s requirement that all new homes have solar power systems and agency requirements for all-electric readiness and plans to potentially eliminate natural gas appliances in new homes built in the state by 2026; delay or complicate home construction, for example, due to a need to reformulate or redesign building materials or components, or source updated or upgraded items or equipment, or specially trained or certified independent contractors, in limited or restricted supply, which has been a challenge for us in certain cases in the past few years, such as with paint, garage doors, insulation, electrical materials, cabinets, HVAC equipment and water heaters that have been out of stock and delayed home construction or required us to install or use temporary or permanent substitutes due to the supply chain disruptions we have experienced; or diminish consumer interest in homes mandated to include or omit certain features, amenities or appliances, particularly if home prices increase as a result. 21 Adapting to or transitioning from the use of certain items or methods in home construction, or adjusting the products we offer to our buyers, whether due to climate-related governmental rules affecting home construction or our supply chain, market dynamics or consumer preferences, can negatively affect our costs and profitability, production operations in affected markets and customer satisfaction during the transition period, which could be prolonged.
Biggest changeThese initiatives could increase our costs, such as with California’s requirement that all new homes have solar power systems, agency requirements for all-electric readiness and higher efficiency standards, including the use of zero-emission alternatives, beginning in 2026; delay or complicate home construction, for example, due to a need to reformulate or redesign building materials or components, or source updated or upgraded items or equipment, or specially trained or certified independent contractors, in limited or restricted supply, which has been a challenge for us in certain cases in the past few years; or diminish consumer interest in homes mandated to include or omit certain features, amenities or appliances, particularly if home prices increase as a result.
Further, if our insurance does not fully cover our costs and other losses from such events, our earnings, liquidity, or capital resources could be adversely impacted. Warranty Risks . Our homebuilding business is subject to warranty and construction defect claims.
Further, if our insurance does not fully cover our costs and other losses from such events, our earnings, liquidity, or capital resources could be adversely impacted. Warranty and Insurance Risks . Our homebuilding business is subject to warranty and construction defect claims.
Other Risks . The risk factors described above are not our only salient risks. Political events, war, terrorism, weather or other natural/environmental disasters, and other risks that are currently unknown or are currently or may initially be seen as immaterial, could also have a material adverse impact on our business, consolidated financial statements and/or common stock’s market price. Item 1B.
The risk factors described above are not our only salient risks. Political events, war, terrorism, weather or other natural/environmental disasters, and other risks that are currently unknown or are currently or may initially be seen as immaterial, could also have a material adverse impact on our business, consolidated financial statements and/or common stock’s market price. Item 1B.
Also, if a rating agency downgrades our credit rating or outlook, external financing may be difficult and costly for us to obtain. ◦ Noncompliance with our Credit Facility , Term Loan and senior notes covenants may restrict our ability to borrow; accelerate repayment of our debt, which may not be feasible for us; or cause our lenders to impose significant fees or cease lending to us. ◦ As described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report, if a change of control or fundamental change occurs before our senior notes mature, we may need to offer to purchase certain of them.
Also, if a rating agency downgrades our credit rating or outlook, external financing may be difficult and costly for us to obtain. ◦ Noncompliance with our Credit Facility , Term Loan and senior notes covenants may restrict our ability to borrow; accelerate repayment of our debt, which may not be feasible for us; or cause our lenders to impose significant fees or cease lending to us. 20 ◦ As described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report, if a change of control or fundamental change occurs before our senior notes mature, we may need to offer to purchase certain of them.
California and certain of its local governments have implemented restrictions on or disincentives for new suburban and exurban residential communities, generally in favor of higher-density, urban developments that can be attractive to some buyers, but in many cases are on smaller parcels with higher building costs and more complicated entitlement requirements and may be subject to affordable housing mandates, prevailing wage requirements, greater local opposition and/or additional site remediation work.
In addition, California and certain of its local governments have implemented restrictions on or disincentives for new suburban and exurban residential communities, generally in favor of higher-density, urban developments that can be attractive to some buyers, but in many cases are on smaller parcels with higher building costs and more complicated entitlement requirements and may be subject to affordable housing mandates, prevailing wage requirements, greater local opposition and/or additional site remediation work.
However, we may be constrained or delayed in entitling land and selling and delivering homes in California, and incur higher development or construction costs, from water conservation or wildfire protection measures (including precautionary and event-induced electricity blackouts, temporary or extended local or regional evacuations, development moratoriums in high-risk areas, and community resiliency design requirements) that are intended to address severe drought and climate conditions that have arisen in recent years.
However, we may be constrained or delayed in entitling land and selling and delivering homes in California, and incur higher development or construction costs, from water conservation or wildfire protection measures (including precautionary and event-induced electricity blackouts, temporary or extended local or regional evacuations, development moratoriums in high-risk areas, and community resiliency 21 design requirements) that are intended to address severe drought and climate conditions that have arisen in recent years.
We also depend on our service providers, GR Alliance and other mortgage lenders with whom we share some personal identifying and confidential information to secure our information and the homebuyer information they collect from us. Our IT security costs, including cybersecurity insurance, are significant and will likely rise in tandem with the sophistication and frequency of system attacks.
Our IT security costs, including cybersecurity insurance, are significant and will likely rise in tandem with the sophistication and frequency of system attacks. We also depend on our service providers, GR Alliance and other mortgage lenders, with whom we share some personal identifying and confidential information, to secure our data and the homebuyer information they collect from us.
These lenders may be unable or unwilling to 17 complete, timely or at all, the loan originations they start for our homebuyers, including if adequate homeowner insurance is not available. Poorly or non-performing lenders can significantly delay home closings, disrupting our production schedules and delivery forecasts, or cause home sales contract cancellations.
These lenders may be unable or unwilling to complete, timely or at all, the loan originations they start for our homebuyers, including if adequate homeowner insurance is not available. Poorly or non-performing lenders can significantly delay home closings, disrupting our production schedules and delivery forecasts, or cause home sales contract cancellations.
A substantial disruption, or security breach suffered by GR Alliance / KBHS or a service provider, particularly our cloud service provider which hosts many of our IT resources, could damage our reputation and result in the loss of customers or revenues, in sensitive personal information being publicly disclosed or misused and/or legal proceedings against us.
A substantial disruption, or security breach suffered by us, GR Alliance / KBHS or a service provider, particularly our cloud service provider which hosts many of our IT resources, could damage our reputation and result in the loss of customers or revenues, in sensitive personal information being publicly disclosed or misused and/or regulatory or legal proceedings against us.
We may also record charges to reflect our then-current claims experience, including the actual costs incurred. Home warranty and other construction defect issues may also generate negative publicity, including on social media and the internet, that detracts from our reputation and efforts to sell homes. 22 Tax-Related Risks .
We may also record charges to reflect our then-current claims experience, including the actual costs incurred. Home warranty and other construction defect issues may also generate negative publicity, including on social media and the internet, that detracts from our reputation and efforts to sell homes. Tax-Related Risks .
These risks, and other factors outside of our control, could also create or increase volatility in our common stock’s market price. The order in which we discuss the risks below should not be taken as any indication of their relative importance, likelihood or impact. 16 Consumer Demand Risks.
These risks, and other factors outside of our control, could also create or increase volatility in our common stock’s market price. The order in which we discuss the risks below should not be taken as any indication of their relative importance, likelihood or impact. Consumer Demand Risks.
In evaluating whether to implement voluntary improvements, we also consider that choosing not to enhance our homes’ resource efficiency can make them less attractive to municipalities, and increase the vulnerability of residents in our communities to rising energy and water expenses and use restrictions.
In evaluating whether to implement voluntary improvements, we consider that choosing not to enhance our homes’ resource efficiency can make them less attractive to municipalities, and increase the vulnerability of residents in our communities to rising energy and water expenses and use restrictions.
While there is considerable debate over its drivers and magnitude, and about the physical, regulatory and/or technical/scientific mitigation or adaptation measures, if any, that should be implemented, global climate change and responses to it present potential risks to our operations, ranging from more frequent extreme weather events to extensive governmental policy developments and shifts in consumer preferences, which could individually or collectively significantly disrupt our business as well as negatively affect our suppliers, independent contractors and customers.
While there is considerable debate over its drivers and magnitude, and about the physical, regulatory and/or technical/scientific mitigation or adaptation measures, if any, that should be implemented, global climate change and responses to it present potential risks to our operations, ranging from extreme weather events to extensive governmental policy developments and shifts in consumer preferences, which could individually or collectively significantly disrupt our business as well as negatively affect our suppliers, independent contractors and customers.
In addition, as large-scale wildfires and flooding, as well as hurricanes, heavy rains and other climate change-driven natural disasters in our served markets become more frequent and intense, as discussed below under “ Climate Risk ,” we may experience greater disruption to our land development and homebuilding activities, delaying orders and homes delivered, among other impacts.
In addition, to the extent large-scale wildfires and flooding, as well as hurricanes, heavy rains and other climate change-driven natural disasters in our served markets become more frequent and intense, as discussed below under “ Climate Risk ,” we may experience greater disruption to our land development and homebuilding activities, delaying orders and homes delivered, among other impacts.
In turn, we experienced rising land and construction costs, particularly for building materials and construction service providers’ rates, warranty repair costs, and compensation and benefit expenses to attract and retain talent. These trends are expected to continue to an extent in 2025, though they may worsen compared to prior years.
In turn, we experienced rising land and construction costs, particularly for building materials and construction service providers’ rates, warranty repair costs, and compensation and benefit expenses to attract and retain talent. These trends are expected to continue to an extent in 2026, though they may worsen compared to prior years.
In addition, our business could be negatively affected if our net orders, homes delivered or backlog-to-homes delivered conversion rate fall; if often-volatile building materials prices or construction services costs increase, which has been the trend over the past few years; or if our community openings are delayed due to, among other things, prolonged development from supply chain disruptions, construction services shortages or otherwise, our strategic adjustments, or protracted government approvals or utility service activations from staff or resource cuts or reallocations for public safety priorities ( e.g ., earthquakes, wildfires, flooding, hurricanes or other natural disasters).
In addition, our business could be negatively affected if our net orders, homes delivered or backlog-to-homes delivered conversion rate fall; if often-volatile building materials prices or construction services costs increase, which has been the trend over the past few years; or if our community openings are delayed due to, among other things, prolonged development from supply chain disruptions, construction services shortages or otherwise, our strategic adjustments, or protracted government approvals or utility service activations from staff or resource cuts or reallocations for public safety priorities ( e.g ., earthquakes, wildfires, flooding, hurricanes or other natural disasters). • Poor contractor availability and performance .
Our future income tax rates and expense can fluctuate or be adversely affected due to legislative and regulatory changes; government or court interpretations of new or existing tax laws and regulations; changes in available tax credits; adjustments to estimated taxes in finalizing our tax returns and/or due to new regulatory guidance, as occurred in our 2023 fourth quarter; changes in non-deductible expenses, particularly those associated with compensation; tax benefits related to stock-based compensation; the realization of our deferred tax assets; and the resolution of tax audits with federal or state tax authorities based on, among other things, tax positions we have taken.
Our future income tax rates and expense can fluctuate or be adversely affected due to legislative and regulatory changes; government or court interpretations of new or existing tax laws and regulations; changes in available tax credits; adjustments to estimated taxes in finalizing our tax returns and/or due to new regulatory guidance; changes in non- deductible expenses, particularly those associated with compensation; tax benefits related to stock-based compensation; the realization of our deferred tax assets; and the resolution of tax audits with federal or state tax authorities based on, among other things, tax positions we have taken.
Inflation has also tempered consumer demand for homes, disrupted credit and lending markets and may increase our financing costs, as borrowings, if any, under our unsecured revolving credit facility with various banks (“ Credit Facility ”) and our senior unsecured term loan with the lenders party thereto (“ Term Loan ”) typically accrue interest at a variable rate based on short-term Secured Overnight Financing Rate (“ SOFR ”).
Inflation has also tempered consumer demand for homes, disrupted credit and lending markets and may increase our financing costs, as borrowings, if any, under our new, larger unsecured revolving credit facility with various banks (“ Credit Facility ”) and our recently amended senior unsecured term loan with the lenders party thereto (“ Term Loan ”) typically accrue interest at a variable rate based on short-term Secured Overnight Financing Rate (“ SOFR ”).
Since 2022, insurance companies have discontinued, or significantly reduced, underwriting new homeowner insurance policies in areas that have experienced, or are thought to be at risk of experiencing, significant wildfires, hurricanes, flooding or other natural disasters, such as in California and Florida.
Since 2022, insurance companies have discontinued, or significantly reduced, underwriting new homeowner insurance policies in areas that have experienced, or are thought to be at risk of experiencing, significant wildfires, hurricanes, flooding or other natural disasters, such as in California, Florida and certain Texas markets.
In balancing these objectives, we may determine we need to absorb most or all the additional operating costs that come with making our homes more efficient and/or from operating in areas with more extensive regulatory requirements, such as California, or certain climates.
We may determine we need to absorb most or all the additional operating costs that come with making our homes more efficient and/or from operating in areas with more extensive regulatory requirements, such as California, or certain climates.
While our years of experience in sustainable homebuilding, as discussed above under “ Sustainability Principles and Practices ,” and ability to leverage economies of scale may give us an advantage over other homebuilders in managing these absorbed costs, they may be substantial for us.
While our years of experience in sustainable homebuilding, as discussed above under “ Sustainability Principles and Practices ,” may give us an advantage over other homebuilders in managing these absorbed costs, they may be substantial for us.
For instance, in certain local markets in California where natural gas use is banned in new homes, we have faced some disruptions in reorienting our purchase order, independent contractor engagement, design studio and home construction processes to accommodate the restriction and, longer term, have implemented certain architectural design changes for all-electric homes.
For instance, in certain local markets in California where natural gas use is banned in new homes, we have faced some disruptions in reorienting our purchase order, independent contractor engagement, design studio and home construction processes and have implemented certain architectural design changes for all-electric homes.
Such severe weather events, including impacts from the unprecedented wildfires in the Los Angeles County area in January 2025, could delay home construction, increase construction costs, reduce the availability of building materials, and damage roads and/or cause transportation delays that stress our supply chain and negatively impact the demand for new homes in affected areas, as well as slow down or otherwise impair the ability of utilities and local government agencies to provide approvals and service to new communities.
Such severe weather events could delay home construction, increase construction costs, reduce the availability of building materials, and damage roads and/or cause transportation delays that stress our supply chain and negatively impact the demand for new homes in affected areas, as well as slow down or otherwise impair the ability of utilities and local government agencies to provide approvals and service to new communities.
In addition, to the extent we expand our disclosures on our sustainability initiatives in line with certain private reporting frameworks and investor requests, or the proposed SEC rules mentioned above, if adopted, our failure to report accurately or achieve progress on our metrics on a timely basis, or at all, could adversely affect our r eputation, business, financial performance and growth.
In addition, to the extent we expand our disclosures on our sustainability initiatives in line with certain private reporting frameworks and investor requests, our failure to report accurately or achieve progress on our metrics on a timely basis, or at all, could adversely affect our r eputation, business, financial performance and growth. Other Risks .
Our financial results may be materially affected by the adoption of new or amended financial accounting standards, and regulatory or outside auditor guidance or interpretations.
Our financial results may be materially affected by our use of critical accounting estimates and the adoption of new or amended financial accounting standards, as well as regulatory or outside auditor guidance or interpretations.
Our technical defense layers are designed to provide multiple, overlapping measures to protect against exploitation of a vulnerability that may arise or if a security control fails.
Our technical defense layers are designed to provide multiple, overlapping measures to establish appropriate system security configurations and protect against exploitation of a vulnerability that may arise or if a security 24 control fails.
Our strategies, and any related initiatives or actions, and any changes thereto, may not be successful in achieving our goals or generate any growth, earnings or returns, particularly in the highly volatile business environment of the past few years and as may occur in 2025, due to significant inflation, interest rate and financial market volatility, or political or social distress.
Our strategies, and any related initiatives or actions, and any changes thereto, including as to the land we acquire and develop and the markets we decide to serve, may not be successful in achieving our goals or generate any growth, earnings or returns, particularly in the highly volatile business environment of the past few years and as may occur in 2026, due to inflation, interest rate and financial market volatility, or political or social distress.
With respect to environmental laws, in addition to the risks and potential operational costs discussed above, we have been, and we may in the future be, involved in federal, state and local air and water quality agency investigations or proceedings for potential noncompliance with their rules, including rules governing discharges of materials into the air and waterways; stormwater discharges from community sites; and wetlands and listed species habitat protection.
With respect to environmental laws, in addition to the risks and potential operational costs discussed above, we have been, and we may in the future be, involved in federal, state and local air and water quality agency investigations or proceedings for potential noncompliance with their rules, including rules governing discharges of materials into the air and waterways; stormwater discharges from community sites; wetlands and listed species habitat protection; and governmental health and safety rules and requirements, such as those enforced by the federal Occupational Safety and Health Administration and similar state agencies.
The following could negatively affect our ability to increase our owned and controlled lot inventory, community count, operational scale and market share, and to grow our business, if at all: • Lack of available land .
The following could negatively affect our ability to increase our owned and controlled lot inventory, community count, operational scale and market share, optimize returns on each of our assets, and grow our business, if at all: • Lack of available land; delayed community openings and home starts .
While we have health and safety protocols in place for our construction sites and take steps to safeguard our administrative functions, including our IT resources, as described below under “ Information Technology and Information Security Risks ,” we can provide no assurance that we or our suppliers or trade partners can successfully operate in areas experiencing frequent or persistent adverse climate-related conditions, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other homebuilders or businesses, depending on the nature of the conditions or other circumstances.
While we have health and safety protocols in place for our construction sites and take steps to safeguard our administrative functions, including our IT resources, as described below under “ Information Technology and Information Security Risks ,” we can provide no assurance that we or our suppliers or trade partners can successfully operate in areas experiencing frequent or persistent adverse climate-related conditions, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other homebuilders or businesses, depending on the nature of the conditions or other circumstances. 22 As discussed above under “ Strategy Risks ,” and below under “ Legal and Compliance Risks ,” various government and legislative bodies have aimed to restrict, moderate or promote activities consistent with resource conservation, GHG emission reduction, environmental protection or other climate-related objectives.
If mortgage interest rates increase, credit standards are tightened, appraisals for our homes are lowered or mortgage loan programs are curtailed, potential buyers of our homes may not be able to obtain necessary mortgage financing to be able to purchase a home from us.
While mortgage interest rates began to moderate in the 2025 second half, if mortgage interest rates increase and/or become more volatile, credit standards are tightened, appraisals for our homes are lowered or mortgage loan programs are curtailed, potential buyers of our homes may not be able to obtain necessary mortgage financing to be able to purchase a home from us.
While employment has mostly grown since mid-2020, it may rise more slowly or decline in 2025. If it does, our core first-time and first move-up homebuyer segments could be particularly affected, impacting us more severely than homebuilders targeting a different buyer demographic. • Lower population growth, household formations or other unfavorable demographic changes .
If it does, our core first-time and first move-up homebuyer segments could be particularly affected, impacting us more severely than homebuilders targeting a different buyer demographic. • Lower population growth, household formations or other unfavorable demographic changes .
If a cybersecurity incident is determined to be material, we are subject to additional SEC reporting requirements. Our cybersecurity policies and procedures are further described below under Item 1C – Cybersecurity in this report. Our systems have faced a variety of phishing, denial-of-service and other attacks and occasional theft of encrypted employee laptops.
Our cybersecurity policies and procedures are further described below under Item 1C – Cybersecurity in this report. Our systems have faced a variety of phishing, denial-of-service and other attacks and occasional theft of encrypted employee laptops.
If potential homebuyers are unable to obtain affordable homeowner insurance coverage, which became more widespread during 2024 and is expected to be exacerbated by the unprecedented wildfires in the Los Angeles County area in January 2025, they may not be able to or decide not to pursue purchasing a home or may cancel a home sales contract with us. • Poor lender performance .
If potential homebuyers are unable to obtain affordable homeowner insurance coverage, a challenge which became more widespread in California and Florida during 2024 and was exacerbated by wildfires and various significant weather events in 2025, they may not be able to or decide not to pursue purchasing a home or may cancel a home sales contract with us. 18 • Poor lender performance .
Though we schedule and oversee such activities at our community sites, we have no control over our independent contractors’ availability or work methods.
Independent contractors perform essentially all of our land development and home construction work. Though we schedule and oversee such activities at our community sites, we have no control over our independent contractors’ availability or work methods.
In an effort to manage our build times and deliver homes to our 18 homebuyers, we, among other things, expanded our supplier base and added new construction service providers; worked with our national suppliers to get products and materials; ordered items in advance of starting homes; implemented construction process workarounds; simplified our design choices and options; paced lot releases to align with our production capacity; and balanced pace, price and construction starts to enhance margins.
In an effort to accelerate our build times and the delivery of homes to our homebuyers, which improves customer satisfaction, inventory turns and revenue generation, and the competitiveness of our value proposition to customers relative to other new homebuilders, since 2020 we, among other things, have expanded our supplier base and added new construction service providers; worked with our national suppliers to get products and materials; ordered items in advance of starting homes; implemented construction process workarounds; simplified our design options; paced lot releases to align with our production capacity; and balanced pace, price and construction starts to enhance margins.
We also face an uncertain solar power system provider environment largely due to changes in California net metering regulations that created significant instability in the solar power industry, with several providers going out of business or entering bankruptcy.
We also faced an uncertain solar power system provider environment in 2025 and 2024 largely due to the federal government’s repealing and/or accelerating the expiration of related tax credits, as described below, and changes in California net metering regulations that created significant instability in the solar power industry, with several providers going out of business or entering bankruptcy.
Among other strategic risks, our business is presently concentrated in California, Florida, Nevada and Texas. Poor conditions in any of those markets could have a measurable negative impact on our results, and the impact could be larger for us than for other less-concentrated homebuilders. Adverse conditions in California would have particular significance to our business.
Poor conditions in any of those markets could have a measurable negative impact on our results, and the impact could be larger for us than for other less-concentrated homebuilders. Adverse conditions in California would have particular significance to our business. We generate the highest proportion of our revenues from and make significant inventory investments in our California operations.
Due to our dependence on the performance of independent suppliers and contractors to provide products and materials and carry out our homebuilding activities, and the associated risks described above under “ Inflation ,” “ Supply chain and construction services shortages ” and “ Poor contractor availability and performance ,” as well as inherent uncertainties, including obtaining recoveries from responsible parties and/or their or our insurers, our recorded warranty and other liabilities may be inadequate to address future claims, which, among other things, could require us to record charges to increase such liabilities.
Because we do not maintain insurance coverage to cover all claims or liabilities that may arise in our business, and have high self-insured retentions with the insurance coverages we do maintain, we may need to use a significant amount of our then-existing liquidity, or obtain external financing, to satisfy any such claims and liabilities. 23 Due to our dependence on the performance of independent suppliers and contractors to provide products and materials and carry out our homebuilding activities, and the associated risks described above under “ Inflation ,” “ Supply chain challenges ” and “ Poor contractor availability and performance ,” as well as inherent uncertainties, including obtaining recoveries from responsible parties and/or their or our insurers, our recorded warranty and other liabilities may be inadequate to address future claims, which, among other things, could require us to record charges to increase such liabilities.
In addition, the state’s energy commission issued new energy efficiency standards requiring all new 20 residences to be electric-ready for heating, cooling, cooking, clothes drying and water heating systems.
Effective in 2026, California’s new energy efficiency standards will require all new residences to be electric-ready for heating, cooling, cooking, clothes drying and water heating systems.
Such constraints, cost pressures and delays have increased our costs, reduced our revenues in certain reporting periods, particularly in 2022 and 2023, and in some instances, led to home sales contract cancellations or lower customer satisfaction. These trends could continue into 2025.
Such cost pressures, supply constraints, processing delays and, to a lesser degree, manufacturing defects have increased our input costs and reduced our revenues in certain reporting periods, and in some instances, led to home sales contract cancellations or lower customer satisfaction.
In addition, these conditions, along with heightened competition from other homebuilders and sellers and landlords of existing homes, as discussed below, may lead us to reduce our home selling prices or offer other concessions to attract or retain buyers, which we did selectively in 2024 and 2023 (particularly, mortgage-related concessions such as interest rate buydowns), and expect to continue doing in 2025 to varying degrees, negatively affecting our revenues and margins and, to the extent the concessions we offer are not sufficient to attract and retain buyers, our net orders.
In addition, these conditions, along with heightened competition from other homebuilders and sellers and landlords of existing homes, as discussed below, may lead us to reduce our home selling prices or offer other concessions (such as mortgage interest rate buydowns) to attract or retain buyers.
The combination of elevated mortgage interest rates since early 2022, several years of rising housing prices, volatility across financial markets, persistent inflation and various other macroeconomic and geopolitical concerns have weighed on consumer budgets and confidence throughout 2024 and may continue to do so in 2025, including due to the change in U.S. presidential administrations in January and potential attendant regulatory instability.
The combination of elevated mortgage interest rates, several years of rising housing prices, volatility across financial markets, persistent inflation, including for essential consumer expenses ( e.g ., food, gasoline, electricity, trash, water), and various other macroeconomic and geopolitical concerns have weighed on consumer budgets and confidence throughout 2024 and 2025 and may continue to do so in 2026.
If our IT resources are compromised by an intentional attack, natural or man-made disaster, electricity blackout, IT failure or systems misconfiguration, service provider error, mismanaged user access protocols, personnel action, or otherwise, we may be severely limited in conducting our business and achieving our strategic goals for an extended period, experience internal control failures or lose access to operational assets or funds.
If our IT resources are compromised, we may be severely limited in conducting our business and achieving our strategic goals for an extended period, experience internal control failures or lose access to operational assets or funds.
For example, California, our largest market, has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, water scarcity, heat waves, wildfires (such as the unprecedented wildfires in the Los Angeles County area in January 2025), and resultant air quality impacts and power shutoffs associated with wildfire prevention.
Our operations in any of our served markets may face potential adverse physical effects, especially in California, our largest market, that has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, water scarcity, heat waves, wildfires, and resultant air quality impacts and power shutoffs associated with wildfire prevention.
An extended downturn in the U.S. housing market could result in an oversupply of new home and resale inventory and greater foreclosure activity, which would further impair our ability to sell homes at the same volume, prices and margins as in prior periods. • Reduced employment levels and job and wage growth .
While we believe this approach drove higher traffic to our communities and stabilized demand after its implementation relative to the start of our 2025 fiscal year, an extended downturn in the U.S. housing market could result in an oversupply of new home and resale 17 inventory and greater foreclosure activity, which would further impair our ability to sell homes at the same volume, prices and margins as in prior periods.
Whether we increase, decrease or maintain our current pace of land spend, we expect to continue to face competition for desirable land in our served markets in 2025 and beyond, limiting our ability to profitably develop communities and sell homes on such land. • Supply chain and construction services shortages .
While we began to see a more constructive land market as to terms and pricing at the beginning of the 2025 fourth quarter, we expect to continue to face competition for desirable land in our served markets in 2026 and beyond irrespective of whether we increase, decrease or maintain our current pace of land spend, which may limit our ability to profitably develop communities and sell homes on such land.
In addition, homeowners who purchased their home with a relatively low mortgage interest rate, as was generally the case from mid-2020 to mid-2022, may be reluctant to move given the current higher interest rate levels. With housing affordability at historically low levels, these conditions are expected to remain, and may worsen, in 2025.
In addition, homeowners who purchased their home with a relatively low mortgage interest rate may be reluctant to move given the current higher interest rate levels.
This competitive environment may, among other things, cause us to reduce our home selling prices or offer other concessions to attract or retain buyers.
This competitive environment may, among other things, cause us to reduce our home selling prices or offer other concessions to attract or retain buyers. Additionally, unpredictable buyer demand since 2022 has amplified competitive pressures and is likely to remain a factor in 2026. • Seasonality .
A reporting process has been established, and periodically tested and refined with the assistance of outside experts, to escalate notice within our organization of and coordinate our response to IT security events. Depending on the severity of an event, our incident reporting process includes informing as early as practicable our senior corporate management and members of our board of directors.
Our senior IT executives also periodically update the audit and compliance committee of our board of directors on our cybersecurity practices and risks, most recently in January 2026. A reporting process has been established, and periodically tested and refined with the assistance of outside experts, to escalate notice within our organization of and coordinate our response to IT security events.
These regulations impose certain obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
The European Union and state governments, notably California, Colorado, Delaware and Nevada, have enacted or enhanced data privacy regulations, and other governments are considering establishing similar or stronger protections. These 25 regulations impose certain obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
At the same time, if a court were to allow for an alternative forum, or we waive the provision’s application, for a particular matter, we may incur additional costs associated with resolving an otherwise relevant action in another jurisdiction(s). 24 The European Union and state governments, notably California and Nevada, have enacted or enhanced data privacy regulations, and other governments are considering establishing similar or stronger protections.
These provisions may limit a stockholder’s ability to bring a claim in their favored forum. At the same time, if a court were to allow for an alternative forum, or we waive the provision’s application, for a particular matter, we may incur additional costs associated with resolving an otherwise relevant action in another jurisdiction(s).
We may not achieve positive operational or financial results, or results equal to or better than we did in any prior period or in comparison to other homebuilders.
Our intent for 2026 is to bring our mix of homes delivered closer to our historical average. However, we may not achieve positive operational or financial results from implementing this or other business strategies, or results equal to or better than we did in any prior period or in comparison to other homebuilders.
To help counter the growing volume and sophistication of cyberattacks, including the potential of fraudulently inducing our employees, customers, trade partners and other third parties to disclose information or unknowingly provide access to systems or data, as well as state and other actors using artificial intelligence technology, we have implemented administrative, physical and multi-layered technical controls and processes to help address and mitigate cybersecurity risks and protect our IT resources, including employee education and awareness training, as well as third-party assessments.
To help counter the growing volume and sophistication of cyberattacks and other attempts to gain unauthorized access to sensitive business or individuals’ personal information, including the potential of fraudulent schemes inducing our employees, customers, trade partners, or other third parties to disclose information or unknowingly provide access to systems or data, whether in our sales offices or elsewhere, and considering the use of artificial intelligence and other technology to compromise our user access protocols, we have implemented administrative, physical and multi-layered technical controls and processes.
Among other impacts, a severe or sustained economic contraction may trigger a rise in home sales contract cancellations, which we and the homebuilding industry experienced in our 2022 second half and 2023 first quarter, resulting in significantly lower net orders as compared to corresponding year-earlier periods.
Among other impacts, a severe or sustained economic contraction may negatively impact housing demand, exacerbate ongoing housing affordability challenges, decrease traffic at our communities and/or trigger a rise in home sales contract cancellations, resulting in fewer net orders as compared to corresponding year-earlier periods.
Securing sufficient developable land that meets our investment return standards is critical for us to meet our strategic goals and profitably expand our business’ scale. Land availability depends on several factors, including geographical/topographical/governmental constraints, sellers’ business relationships and reputation within the residential real estate community, and competition from other parties, some of which can bid more for land.
Land availability depends on several factors, including geographical/ topographical/governmental constraints, sellers’ business relationships and reputation within the residential real estate community, and competition from other parties, some of which can bid more for land. Reflecting housing market conditions, we and other homebuilders appreciably increased land investments in 2024 compared to 2023, which pressured both the availability and pricing of land.
Although we have achieved meaningful sequential improvement in our build times since the 2023 second quarter, we believe these challenging conditions may persist to a certain degree into and potentially throughout 2025, as discussed below under “Outlook.” We may also face increased home warranty and construction defect claims associated with replacing or servicing substitute products or materials used in some instances to address supply shortages in certain served markets or communities. • Insufficient financial resources .
We may also face increased home warranty and construction defect claims associated with replacing or servicing substitute products or materials used in some instances to address supply shortages due to trade restrictions or other factors in certain served markets or communities. • Insufficient financial resources .
The Term Loan will mature on August 25, 2026 or earlier under certain circumstances. The Credit Facility will mature on February 18, 2027 . Our next senior note maturity is our $300.0 million in aggregate principal amount of 6.875% senior notes due June 15, 2027 (“ 6.875% Senior Notes due 2027 ”). • Decreased land inventory value .
Our next senior note maturity is our $300.0 million in aggregate principal amount of 6.875% senior notes due June 15, 2027 (“ 6.875% Senior Notes due 2027 ”). • Decreased land inventory value . Our land inventory’s value depends on market conditions, including our estimates of applicable future demand and revenue generation.
Beyond negatively impacting demand, these conditions may require us to continue providing, or to increase, concessions like those described above to stimulate net orders, adversely affecting our revenues and margins. • Tightened availability or affordability of mortgage loans and homeowner insurance coverage . Most of our buyers need a mortgage loan to purchase their home.
With strained housing affordability, these conditions are expected to remain, and may worsen, in 2026, negatively impacting demand and potentially requiring us to lower selling prices or offer other concessions to stimulate net orders, adversely affecting our revenues and margins. • Tightened availability or affordability of mortgage loans and homeowner insurance coverage .
In prior years, we have recognized federal tax credits from our building energy-efficient new homes. In some periods, these tax credits were not available because Congress had not renewed the program. The 2022 Inflation Reduction Act (“ IRA ”) extended this federal tax credit under Internal Revenue Code Section 45L (“ Section 45L ”) to 2032.
In 2025 and prior years, we have recognized federal tax credits under Internal Revenue Code Section 45L (“ Section 45L ”) from our building energy-efficient new homes, when such credits were available to us. In July 2025, H.R.1, the One Big Beautiful Bill Act (“ OBBBA ”) repealed the Section 45L credit for homes delivered after June 30, 2026.
We conduct periodic incident response tabletop exercises, with third-party support and reviews, and have established communication channels with KBHS security personnel and key partners regarding their breach and incident response processes. In addition, we perform an annual cybersecurity risk assessment to identify potential areas of focus.
For these defenses, we rely on third parties that we believe, but cannot guarantee, are capable of performing the protective service for which we have engaged them. We conduct periodic incident response tabletop exercises, with third-party support and reviews, and we perform an annual cybersecurity risk assessment to identify potential areas of focus.
Experiencing or addressing the various risks from climate change may significantly reduce our revenues and profitability, or cause us to generate losses.
Experiencing or addressing these various risks may significantly reduce our revenues and profitability, or cause us to generate losses. For instance, incorporating greater resource efficiency into our home designs to comply with upgraded building codes often raises our costs to construct homes.
Adverse conditions in our served markets or nationally could be caused or worsened by factors outside of our control, including slow or negative economic growth, sustained elevated mortgage interest rates and inflation, and various other macroeconomic as well as geopolitical concerns, such as military conflicts in Ukraine and the Middle East, and the U.S. federal government’s financial and regulatory stability with the recent presidential election and change of administration.
Adverse conditions in our served markets or nationally could be caused or worsened by factors outside of our control, including slow or negative economic growth, or growth concentrated in a few business sectors outside of housing; sustained elevated mortgage interest rates and inflation; high consumer debt levels; and other macroeconomic and geopolitical concerns, such as the military conflict in Ukraine, lingering economic and financial market impacts from the prolonged shutdown of the federal government’s operations in October and November 2025, which may be compounded if Congress cannot agree on, or the President does not approve, a budget to fully fund the government beyond January 30, 2026, as well as the delay or cancellation of federal funding to certain states, particularly California.
Our realization of our deferred tax assets depends on our generating sufficient future taxable income, which may not occur.
As a result, beginning in our 2026 third quarter, our income tax expense and effective tax rate will no longer reflect a benefit from such tax credits as to homes delivered after that date. Our realization of our deferred tax assets depends on our generating sufficient future taxable income, which may not occur.
This has disrupted the supply and installation of solar power systems, causing delays in system completions and permissions to operate and, in turn, home deliveries. In 2022, the California Air Resources Board adopted a plan to eliminate installing natural gas appliances in new homes built in 2026 and beyond.
This has disrupted the supply and installation of solar power systems, causing delays in system completions and permissions to operate and, in turn, home deliveries. The federal government’s repeal and/or accelerated expiration of tax credits for solar power systems has also caused lease financing providers to exit the market, pressuring the availability of leases for customers in California.
Removed
These may be driven by, among other things, birth rate changes, economic factors or U.S. immigration policies. • Diminished consumer confidence, whether generally or as to purchasing a home .
Added
Since mid-February 2025, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach to help stimulate demand. We both reduced selling prices relative to applicable market conditions and lowered or eliminated other homebuyer concessions.
Removed
While the historically low level of resale home inventory reduced the competition from sellers of resale homes in 2023 and 2024, resale inventory levels rose in our served markets in the 2024 second half and we can provide no assurance that this favorable factor will continue to the same degree, or at all, in 2025.
Added
Additionally, we can offer no assurance that our current pricing strategy, and any changes we may implement thereto, including whether we offer or increase any concessions to homebuyers, will improve or sustain demand relative to 2025 levels or our expectations for 2026 and beyond. • Reduced employment levels and job and wage growth .
Removed
In addition, volatility in buyer demand since 2022 increased competitive pressures for our business and is expected to continue into the next fiscal year. • Seasonality .
Added
While unemployment rates remained steady in 2024 and through the 2025 first half, the 2025 second half was marked by slower job and wage growth, as well as a gradual rise in the unemployment rate, which may be indicative of a cooling labor market.
Removed
Reflecting the housing market slowdown in the 2022 second half and 2023 first quarter, we and other homebuilders reduced land acquisition spending during the period. With market conditions having improved since the 2023 first quarter, we and other homebuilders have measurably increased land investments, pressuring availability and pricing.
Added
An increase in unemployment levels, as well as buyers hesitating on making purchase decisions due to, among other things, tepid consumer confidence, may lead to an increase in loan delinquencies and foreclosures, more resale homes on the market and diminished demand for new homes, including our homes.
Removed
Our business relies on a network of suppliers and trade partners to source materials and services to build homes. However, our industry and the U.S. economy have experienced since mid-2020 labor shortages, supply chain constraints and rising and volatile raw material prices and availability, as well as delays with respect to state and municipal construction permitting, inspections and utility processes.
Added
We continue to view the long-term outlook for the housing market favorably, based largely on demographic trends and the continued undersupply of homes.
Removed
Our land inventory’s value depends on market conditions, including our estimates of applicable future demand and revenue generation.
Added
However, if there is less population growth or demographic trends are not as positive as we expect, potentially driven by, among other things, birth rate changes, economic factors or U.S. immigration policies, demand for new homes, including our homes, could be below the long-term forecasts in our business plans and/or result in our not achieving the same or better growth and financial performance in 2026 and beyond as we did in prior periods. • Lack of available affordable housing .
Removed
Though the extent is uncertain as of the date of this report, given the scope of the unprecedented wildfires in the Los Angeles County area in January 2025, we expect the recovery efforts to create some of these types of disruptions in the Southern California region during the year and beyond. • Trade disputes and defective materials .
Added
Elevated mortgage loan interest rates in 2024 and 2025, and the extended undersupply of homes, among other factors, have strained housing affordability and raised demand for lower-priced homes. In response, we introduced smaller floor plans and offer attached homes, townhomes, and condominiums, especially in our in-fill communities, to provide more affordable options.
Removed
The federal government has imposed, and may in the future impose, new or increased import tariffs or sanctions, and other countries have implemented retaliatory measures, raising the cost and reducing the supply of several home construction items.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese measures currently involve a combination of artificial intelligence; machine learning computer network monitoring; malware and antivirus resources; firewall systems; endpoint detection and response; cloud service defenses; Internet address and content filtering monitoring software intended to secure against known malicious websites and potential data exfiltration; and a variety of cyber intelligence and threat monitoring sources, which provide ongoing updates, all provided by third parties that we believe are capable of performing the service for which they have been engaged or governmental agencies.
Biggest changeWe also utilize cloud service defenses; Internet address and content filtering monitoring software intended to secure against known malicious websites and potential data exfiltration; and enterprise gateway security for workforce mobile devices and applications. Additionally, a variety of cyber intelligence and threat monitoring sources provide us with ongoing updates on potential or emerging risks.
We also review annually the System and Organization Controls reports of third-party vendors hosting our 25 data to ensure they maintain adequate access management controls including physical safeguards, disaster recovery capabilities, data privacy and notification processes, onboarding processes, incident response procedures and periodic independent testing of the vendor capabilities.
We also review annually the System and Organization Controls reports of third-party vendors hosting our data to ensure they maintain adequate access management controls including physical safeguards, disaster recovery capabilities, 26 data privacy and notification processes, onboarding processes, incident response procedures and periodic independent testing of the vendor capabilities.
Similar impacts may result from a substantial disruption, or security incident or breach KBHS or an outside service provider to our customers suffers, which could also result in sensitive personal information being publicly disclosed or misused. Governance .
Similar impacts may result from a substantial disruption, or security incident or breach, suffered by KBHS or an outside service provider to our customers, which could also result in sensitive personal information being publicly disclosed or misused. Governance .
When engaging a third party for these types of services and resources, we typically conduct a security review involving, as relevant to the service or resource, discussions with the firm’s security personnel, evaluation of auditor reports, and other requested information and documentation.
Before we engage a third-party provider for these types of services and resources, we typically conduct a security review involving, as relevant to the service or resource, discussions with the provider’s security personnel, evaluation of auditor reports, and other requested information and documentation.
Our IT function, which is led by the CIO, maintains and is initially responsible for executing on a cybersecurity incident response plan and specific runbooks, which describe processes for evaluating and escalating, depending on severity, within the enterprise and up to our senior executive management and board of directors the cybersecurity threats and incidents, or potential threats or incidents, identified through our cybersecurity measures, as well as making public disclosures thereof.
Our IT function, which is led by the CIO, maintains and is initially responsible for executing on our CIRP and specific runbooks, which describe processes for evaluating and escalating, depending on severity, within the enterprise and up to our senior executive management and board of directors the cybersecurity threats and incidents, or potential threats or incidents, identified through our cybersecurity measures.
The CIO, who has more than 34 years of experience in IT and cybersecurity, is supported by a chief information security officer and various employees and dedicated contract personnel experienced with IT and cybersecurity matters who are responsible for procuring, using, maintaining, updating and evaluating the cybersecurity measures detailed above. These individuals also hold numerous cloud, security and privacy certifications.
The CIO, who has more than 35 years of experience in IT and cybersecurity, is supported by a chief information security officer, who has more than 30 years of experience in IT and cybersecurity, and various employees and dedicated contract personnel experienced with IT and cybersecurity matters who are responsible for procuring, using, maintaining, updating and evaluating the cybersecurity measures detailed above.
Our management is responsible for the ongoing assessment of, and for developing and implementing our strategies and measures to address, material cybersecurity risks. Our board of directors through its audit and compliance committee oversees management’s cybersecurity assessment activities and protective strategies and measures.
Our management is responsible for the ongoing assessment of, and for developing and implementing our strategies and measures to address, material cybersecurity risks. Our board of directors through its audit and compliance committee oversees management’s cybersecurity assessment activities and protective strategies and measures. This includes engaging in periodic reviews with management covering, among other things, our cybersecurity practices and risks.
This includes engaging in periodic reviews with management covering, among other things, our cybersecurity practices and risks . Our chief information officer (“CIO”) periodically provides this review to the audit and compliance committee, with the most recent review conducted in January 2025.
Several of our directors have experience with overseeing cybersecurity practices and incident management. Our chief information officer (“CIO”) periodically provides this review to the audit and compliance committee, with the most recent review conducted in January 2026.
Our business strategy, results of operations, or financial condition may be materially affected if our IT resources are compromised, whether by an intentional attack, natural or man-made disaster, electricity blackout, IT/cybersecurity failure, systems misconfiguration, denial-of-service attacks, service provider error, mismanaged user access protocols, personnel action, or otherwise, as we may be severely limited in conducting operations for an extended period, experience internal control failures, be cut off from assets or funds, face reputational damage, lose customers and related revenues and/or have private party or governmental legal proceedings instituted against us, and incur significant expenses to resolve any such issues.
Our business strategy, results of operations, or financial condition may be materially affected if our IT resources are compromised, whether by an intentional attack, natural or man-made disaster, electricity blackout, IT/cybersecurity failure, systems misconfiguration, denial-of-service attacks, service provider error, mismanaged user access protocols, personnel action, or otherwise.
The technical defense measures we have implemented are designed to address vulnerabilities that may arise, including from a security control failure.
The technical defense measures we have implemented are designed to address vulnerabilities that may arise, including from a security control failure. These measures currently involve a combination of artificial intelligence; machine learning computer network monitoring; malware and antivirus resources; firewall systems; and endpoint detection and response.
Added
For all these measures we rely on third-party providers that we believe are capable of performing the service for which they have been engaged or on certain governmental agencies.
Added
Depending on source or severity, among other factors, should any such compromise(s) occur, we may be severely limited in conducting operations for an extended period, experience internal control failures, be cut off from assets or funds, face reputational damage, lose customers and related revenues and/or have private party or governmental legal proceedings instituted against us, and incur significant expenses to resolve any such issues.
Added
These individuals also hold numerous cloud, security and privacy certifications.
Added
We have a cybersecurity incident response plan (“CIRP”) that, among other things. defines roles and responsibilities, outlines steps for managing a cybersecurity event that is assessed to be a cybersecurity incident, including determining whether such an incident is material and required to be publicly disclosed per SEC rules, and specifies internal and external communication channels with respect to a cybersecurity incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties 25 Item 3. Legal Proceedings 25 Item 4. Mine Safety Disclosures 25 Information about our Executive Officers 26 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26
Biggest changeItem 2. Properties 26 Item 3. Legal Proceedings 26 Item 4. Mine Safety Disclosures 26 Information about our Executive Officers 27 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

3 edited+1 added−0 removed1 unchanged
Biggest changeMezger 69 Chairman and Chief Executive Officer (a) 2024 31 Chairman, President and Chief Executive Officer 2016- 2024 Jeff J. Kaminski 63 Executive Vice President and Chief Financial Officer 2010 14 Robert V.
Biggest changeMezger 70 Chairman and Chief Executive Officer (a) 2024 32 Chairman, President and Chief Executive Officer 2016- 2024 Robert R.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 26 Information about our Executive Officers The following table presents certain information regarding our executive officers as of December 31, 2024 : Name Age Present Position Year Assumed Present Position Years at KB Home Other Positions and Other Business Experience within the Last Five Years From – To Jeffrey T.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 27 Information about our Executive Officers The following table presents certain information regarding our executive officers as of December 31, 2025: Name Age Present Position Year Assumed Present Position Years at KB Home Other Positions and Other Business Experience within the Last Five Years From – To Jeffrey T.
McGibney 50 President and Chief Operating Officer 2024 24 Executive Vice President and Chief Operating Officer 2022- 2024 Executive Vice President and Co-Chief Operating Officer 2021- 2022 Regional President 2018- 2021 Albert Z. Praw 76 Executive Vice President, Real Estate and Business Development 2011 28 Brian J. Woram 64 Executive Vice President and General Counsel 2010 14 (a) Mr.
McGibney 51 President and Chief Operating Officer 2024 25 Executive Vice President and Chief Operating Officer 2022- 2024 Executive Vice President and Co-Chief Operating Officer 2021- 2022 Regional President 2018- 2021 Albert Z. Praw 77 Executive Vice President, Real Estate and Business Development 2011 29 Brian J. Woram 65 Executive Vice President and General Counsel 2010 15 (a) Mr.
Added
Dillard 51 Executive Vice President and Chief Financial Officer 2025 1 Chief Financial Officer, Sonoco Products Company (a global provider of packaging solutions) 2022- 2025 Chief Strategy Officer, Sonoco Products Company 2022- 2022 Vice President, Corporate Development, Sonoco Products Company 2018- 2022 Robert V.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−0 removed2 unchanged
Biggest changeStock Performance Graph The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30: Comparison of Five-Year Cumulative Total Return Among KB Home, S&P 500 Index and Dow Jones US Home Construction Index 2019 2020 2021 2022 2023 2024 KB Home $ 100 $ 103 $ 119 $ 95 $ 160 $ 257 S&P 500 Index 100 117 150 136 155 208 Dow Jones US Home Construction Index 100 122 163 138 217 306 The above graph is based on the KB Home common stock and index prices calculated as of the last trading day before December 1 of the year-end periods presented.
Biggest changeStock Performance Graph The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30: Comparison of Five-Year Cumulative Total Return Among KB Home, S&P 500 Index and Dow Jones US Home Construction Index 2020 2021 2022 2023 2024 2025 KB Home $ 100 $ 115 $ 92 $ 155 $ 249 $ 197 S&P 500 Index 100 128 116 132 177 204 Dow Jones US Home Construction Index 100 133 113 177 255 232 The above graph is based on the KB Home common stock and index prices calculated as of the last trading day before December 1 of the year-end periods presented.
Total return assumes $100 invested at market close on November 30, 2019 in KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index, including reinvestment of dividends. Item 6. [RESERVED]
Total return assumes $100 invested at market close on November 30, 2020 in KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index, including reinvestment of dividends. Item 6. [RESERVED] 29
As of November 30, 2024 , we were authorized to repurchase up to $700.0 million of our outstanding common stock. During the three months ended November 30, 2024 , we also purchased certain previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards.
As of November 30, 2025 , we were authorized to repurchase up to $900.0 million of our outstanding common stock. During the three months ended November 30, 2025 , we also purchased certain previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards.
Item 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” As of December 31, 2024, there were 506 holders of record of our common stock.
Item 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” As of December 31, 2025, there were 473 holders of record of our common stock.
The closing price of KB Home common stock on the New York Stock Exchange was $82.74 per share on November 30, 2024 and $52.10 per share on November 30, 2023 . The performance of our common stock as presented above reflects past performance only and is not indicative of future performance.
The closing price of KB Home common stock on the New York Stock Exchange was $64.33 per share on November 30, 2025 and $82.74 per share on November 30, 2024 . The performance of our common stock as presented above reflects past performance only and is not indicative of future performance.
These transactions are not considered 27 repurchases under the board of directors authorization. The IRA imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.
These transactions are not considered repurchases under the board of directors authorization. The 2022 Inflation Reduction Act (“IRA”) imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.
On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock, replacing the prior board of directors authorization, which had $113.6 million remaining, as further discussed in Note 19 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report.
On October 9, 2025, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock. This authorization replaced the 2024 authorization, which had $261.5 million remaining, as further discussed in Note 19 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report.
The following table summarizes our purchases of our own equity securities during the three months ended November 30, 2024 (dollars in thousands, except per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Dollar Value of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs September 1-30 — $ — $ — $ 800,000 October 1-31 834,996 69.46 58,000 742,000 November 1-30 529,307 79.35 42,000 700,000 Total 1,364,303 $ 73.30 $ 100,000 As of November 30, 2023 , we were authorized to repurchase up to $ 163.6 million of our outstanding common stock under a share repurchase program approved by our board of directors in March 2023.
The following table summarizes our purchases of our own equity securities during the three months ended November 30, 2025 (dollars in thousands, except per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Dollar Value of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs September 1-30 — $ — $ — $ 261,540 October 1-31 1,647,423 59.01 97,212 902,788 November 1-30 45,646 61.08 2,788 900,000 Total 1,693,069 $ 59.06 $ 100,000 As of November 30, 2024 , we were authorized to repurchase up to $700.0 million of our outstanding common stock under a share repurchase program approved by our board of directors in April 2024.
In the 2024 fourth quarter, we purchased 1,264,484 shares of our common stock pursuant to this authorization at a total cost of $100.0 million , bringing our total repurchases in 2024 to 4,725,181 shares at a total cost of $350.0 million .
In the 2025 fourth quarter, we purchased 1,597,196 shares of our common stock pursuant to this authorization at a total cost of $100.0 million , bringing our total repurchases in 2025 to 9,385,309 shares 28 at a total cost of $538.5 million .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

162 edited+51 added−44 removed138 unchanged
Biggest changeThe 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 securities repurchases pursuant to our board of directors’ authorization; • material and trade costs and availability, including the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; • consumer and producer price inflation; • changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve may increase to moderate inflation, as it did in 2022 and 2023 , and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; • 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 the Credit Facility and the Term Loan ; • the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility ; • volatility in the market price of our common stock; • home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; 53 • weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; • competition from other sellers of new and resale homes; • weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas, and the unprecedented wildfires in the Los Angeles County area in January 2025; • any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; • potential regulatory instability associated with the upcoming change in the U.S. presidential administrations; • government actions, policies, programs and regulations directed at or affecting the housing market (including the 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, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes; • 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; • disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict and other attacks in the Middle East region and military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; • 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 and efficiently develop acquired land parcels and open new home communities; • impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; • 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, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, 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; 54 • our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures; • income tax expense volatility associated with stock-based compensation; • the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; • the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; • the performance of mortgage lenders to our homebuyers; • the performance of KBHS ; • the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; • information technology failures and data security breaches; • an epidemic, pandemic or significant seasonal or other disease outbreak, 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 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; • widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and • other events outside of our control.
Biggest changeThe 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 securities repurchases pursuant to our board of directors’ authorization; 54 • material and trade costs and availability, including the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; • consumer and producer price inflation; • changes in interest rates, including those set by the Federal Reserve and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; • 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 the Credit Facility and the Term Loan ; • the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility ; • volatility in the market price of our common stock; • home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; • weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; • competition from other sellers of new and resale homes, particularly homebuilders with significant unsold inventory; • weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas, and the unprecedented wildfires in the Los Angeles County area in January 2025; • lingering economic and financial market impacts from the prolonged shutdown of the federal government’s operations in October and November 2025, and any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; • potential instability associated with the regulatory and executive policies, proposals and orders of the U.S. presidential administration, including any directed at our operations, business practices or capital allocation strategies; • government actions, policies, programs and regulations directed at or affecting the housing market (including the 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, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes and the pending expiration of such tax credits in 2026; • 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; • disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; • 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 and efficiently develop acquired land parcels and open new home communities; • impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; 55 • 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, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, and in entering into new markets; • our operational and investment concentration in markets in California; • consumer interest in and responsiveness to our new home communities, products and simplified selling process and transparent pricing initiatives, 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 report or in any of our other public filings, presentations or disclosures; • income tax expense volatility associated with stock-based compensation; • the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; • the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; • the performance of mortgage lenders to our homebuyers; • the performance of KBHS ; • the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; • information technology failures and data security breaches; • an epidemic, pandemic or significant seasonal or other disease outbreak, 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 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; • widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and • other events outside of our control.
Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit 46 margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.
Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.
However, if there is a sustained economic slowdown or other factor(s) that lead to moderate or significant decreases in new home prices in certain submarkets, more communities could begin to approach gross margin levels where we would conduct a fair value analysis. Any resulting impairment(s) from such an analysis(es) could be material.
However, if there is a sustained economic slowdown or other factor(s) that lead to moderate or significant decreases in new home prices in certain submarkets, more communities could begin to approach gross profit margin levels where we would conduct a fair value analysis. Any resulting impairment(s) from such an analysis(es) could be material.
Due to the nature or location of the projects, land held for future development that we activate as part of our strategic growth initiatives or to accelerate sales and/or our return on investment, or that we otherwise monetize to help improve our asset efficiency, may have a somewhat greater likelihood of being impaired than other of our active inventory.
Due to the nature or location of the projects, land held for future development that we activate as part of our 49 strategic growth initiatives or to accelerate sales and/or our return on investment, or that we otherwise monetize to help improve our asset efficiency, may have a somewhat greater likelihood of being impaired than other of our active inventory.
There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan , which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit 43 Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).
There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan , which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).
The fair value of such real estate assets is generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information. 47 Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it continues to meet our investment return standards.
The fair value of such real estate assets is generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information. Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it continues to meet our investment return standards.
In assessing our overall warranty liability at a reporting date, we evaluate the costs for warranty-related items on a combined basis for all of our previously delivered homes that are under our limited warranty program. 48 Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience.
In assessing our overall warranty liability at a reporting date, we evaluate the costs for warranty-related items on a combined basis for all of our previously delivered homes that are under our limited warranty program. Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience.
We also believe investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior 38 period without regard to variability of housing inventory impairment and land option contract abandonment charges.
We also believe 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.
Land acquisition and land development costs include related interest and real estate taxes. In determining a portion of the construction and land costs recognized for each period, we rely on project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred.
Land acquisition and land development costs include related interest and real estate taxes. 47 In determining a portion of the construction and land costs recognized for each period, we rely on project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred.
Cash flows for each of our communities depend on their stage of development and can differ significantly from reported earnings. Early stages of development or expansion can require significant cash outflows for land acquisition, entitlements, land development, and construction of roads, utilities, landscaping, model homes and other items.
Cash flows for each of our communities depend on their stage of development and can differ significantly from reported earnings. Early stages of development or expansion can require significant cash outflows for land acquisition, entitlements, 41 land development, and construction of roads, utilities, landscaping, model homes and other items.
Rather, this non- GAAP financial measure should be used to supplement the most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting our operations. Adjusted Housing Gross Profit Margin.
Rather, this non- GAAP financial measure should be used to supplement the most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting our operations. 39 Adjusted Housing Gross Profit Margin.
Changes in positive and negative evidence, including differences between our future operating results and estimates, could result in the establishment of an additional valuation allowance against our deferred tax assets. Accounting for deferred taxes is based upon estimates of future results.
Changes in positive and negative evidence, including differences between our future operating results and estimates, could result in the establishment of an additional valuation allowance against our deferred tax 51 assets. Accounting for deferred taxes is based upon estimates of future results.
The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity). LOC Facility . We maintain a LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business.
The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity). 43 LOC Facility . We maintain a LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business.
In addition, changes in the frequency and severity of reported claims 49 and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements.
In addition, changes in the frequency and severity of reported claims and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements.
Further, for so long as we do not hold an investment grade credit rating, as defined under the Credit Facility and the Term Loan , the Credit Facility and the Term Loan do not permit our borrowing base indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries’ outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our inventory and unrestricted cash assets).
Further, for so long as we do not hold an investment grade credit rating, as defined under the Credit Facility and the Term Loan , the Credit Facility and the Term Loan do not permit our borrowing base indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries’ outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our inventory and in certain cases unrestricted cash assets).
We typically have the ability not to 41 exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers.
We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers.
While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to 10 years and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2024 within five years.
While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to 10 years and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2025 within five years.
Further information regarding our investments in unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. INCOME TAXES Income Tax Expense .
Further information regarding our investments in unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. 38 INCOME TAXES Income Tax Expense .
We have not made any material changes in the methodology used to establish our accrued warranty liability during 2024 , 2023 and 2022. Our accrued warranty liability is presented on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.
We have not made any material changes in the methodology used to establish our accrued warranty liability during 2025 , 2024 and 2023. Our accrued warranty liability is presented on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.
The adjustments in 2024 , 2023 and 2022 resulted from changes in estimates due to actual claims experience differing from previous actuarial projections and, in turn, impacting actuarial estimates for existing and potential future claims. We have not made any material changes in our methodology used to establish our self-insurance liabilities during 2024 , 2023 or 2022.
The adjustments in 2024 and 2023 resulted from changes in estimates due to actual claims experience differing from previous actuarial projections and, in turn, impacting actuarial estimates for existing and potential future claims. We have not made any material changes in our methodology used to establish our self-insurance liabilities during 2025 , 2024 or 2023.
Based on our assessment, we may also make adjustments to our previously recorded accrued warranty liability. Such adjustments are recorded in the period in which the change in estimate occurs. In 2023, we made an adjustment to increase our accrued warranty liability by $4.0 million . There were no such adjustments during 2024 and 2022 .
Based on our assessment, we may also make adjustments to our previously recorded accrued warranty liability. Such adjustments are recorded in the period in which the change in estimate occurs. In 2023, we made an adjustment to increase our accrued warranty liability by $4.0 million . There were no such adjustments during 2025 and 2024 .
Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates. We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs.
Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates. We incur interest principally from borrowings used to finance land acquisitions, land development, home construction and other operating and capital needs.
Inflation may also increase our financing costs, as borrowings under our Credit Facility , if any, and Term Loan typically accrue interest at a variable rate based on SOFR . We expect the inflationary pressures on our business to continue in 2025.
Inflation may also increase our financing costs, as borrowings under our Credit Facility , if any, and Term Loan typically accrue interest at a variable rate based on SOFR . We expect the inflationary pressures on our business to continue in 2026.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION As of November 30, 2024 , we had $1.34 billion in aggregate principal amount of outstanding senior notes, no borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan .
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION As of November 30, 2025 , we had $1.34 billion in aggregate principal amount of outstanding senior notes, no borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan .
These trends are expected to continue to an extent in 2025, though they may worsen compared to prior years. We generally enter into land option contracts and other similar contracts to acquire rights to land for the construction of homes a significant 50 period of time before development and/or sales efforts commence.
These trends are expected to continue to an extent in 2026, though they may worsen compared to prior years. We generally enter into land option contracts and other similar contracts to acquire rights to land for the construction of homes a significant period of time before development and/or sales efforts commence.
Based on our financial position as of November 30, 2024 , and our business forecast for 2025 as discussed below under “Outlook,” we have no material concerns related to our liquidity.
Based on our financial position as of November 30, 2025 , and our business forecast for 2026 as discussed below under “Outlook,” we have no material concerns related to our liquidity.
This provides us the opportunity to continue to repurchase our common stock in 2025, with the volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions.
This provides us the opportunity to continue to repurchase our common stock in 2026, with the pace, volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions.
In 2025, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.
In 2026, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.
Discussion and analysis of our 2022 fiscal year specifically, as well as the year- over-year comparison of our 2023 financial performance to 2022 , are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended 28 November 30, 2023 , filed with the SEC on January 19, 2024, which is available on our investor relations website at investor.kbhome.com and the SEC website at www.sec.gov.
Discussion and analysis of our 2023 fiscal year specifically, as well as the year-over-year comparison of our 2024 financial performance to 2023 , are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2024 , filed with the SEC on January 24, 2025, which is available on our investor relations website at investor.kbhome.com and the SEC website at www.sec.gov.
We have outstanding variable-rate borrowings under the Term Loan , and outstanding fixed-rate senior notes and mortgages and land contracts due to land sellers and other loans with varying maturities. As of November 30, 2024 , our notes payable had an aggregate principal amount of $1.70 billion , with $.5 million payable within 12 months.
We have outstanding variable-rate borrowings under the Term Loan , and outstanding fixed-rate senior notes and mortgages and land contracts due to land sellers and other loans with varying maturities. As of November 30, 2025 , our notes payable had an aggregate principal amount of $1.70 billion , with $.8 million payable within 12 months.
Operating income for 2024 was down year over year mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Land sale profits were $1.1 million in 2024 , compared to $.1 million in 2023 .
Operating income for 2025 was down year over year mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Land sale profits were $1.1 million in 2024 .
Approximately $11.6 million of these inventory- related obligations are payable within 12 months. However, TIFE assessment obligations are paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature. Investments in Land and Land Development.
Approximately $9.7 million of these inventory- related obligations are payable within 12 months. However, TIFE assessment obligations are paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature. Investments in Land and Land Development.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis below is focused on our 2024 and 2023 financial results, including comparisons of our year- over-year performance between these years.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis below is primarily focused on our 2025 and 2024 financial results, including comparisons of our year-over-year performance between these years.
Our net cash provided by operating activities in 2024 mainly reflected net income of $655.0 million and a net decrease in receivables of $16.6 million , partly offset by a net increase in inventories of $385.8 million and a net decrease in accounts payable, accrued expenses and other liabilities of $7.2 million .
Net cash provided by operating activities in 2024 primarily reflected net income of $655.0 million and a net decrease in receivables of $16.6 million , partly offset by a net increase in inventories of $385.8 million and a net decrease in accounts payable, accrued expenses and other liabilities of $7.2 million . Investing Activities .
The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: 42 • Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021. • Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.
The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: • Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.70 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after August 31, 2025 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after August 31, 2025. • Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.
In 2024 , our net cash used in investing activities included $39.3 million for net purchases of property and equipment and $14.5 million for contributions to unconsolidated joint ventures. These uses of cash were partially offset by a $2.0 million return of investments in unconsolidated joint ventures and $1.7 million of proceeds from the sale of an investment.
In 2024 , our uses of cash included $39.3 million for net purchases of property and equipment and $14.5 million for contributions to unconsolidated joint ventures. These uses of cash were partly offset by a $2.0 million return of investments in unconsolidated joint ventures and $1.7 million of proceeds from the sale of an investment. Financing Activities .
Revenues. Our financial services reporting segment, which includes the operations of KB HOME Mortgage Company, generates revenues primarily from insurance commissions and title services. In 2024 , financial services revenues declined 6% year over year due to decreases in both insurance commissions and title services revenues. Pretax income.
Revenues. Our financial services reporting segment, which includes the operations of KB HOME Mortgage Company, generates revenues primarily from insurance commissions and title services. In 2025 , financial services revenues declined 13 % year over year due to decreases in both insurance commissions and title services revenues. Pretax income.
At November 30, 2024 , we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million , secured primarily by the underlying property, which had an aggregate carrying value of $14.1 million . Senior Unsecured Term Loan.
At November 30, 2025 , we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million , secured primarily by the underlying property, which had an aggregate carrying value of $16.8 million . Senior Unsecured Term Loan.
Our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.20 per share in the 2023 third quarter, and declared quarterly dividends at the new higher rate for the 2023 third and fourth quarters. All dividends declared during 2024 and 2023 were also paid during those years.
Our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.25 per share in the 2024 second quarter, and declared quarterly dividends at the new higher rate for the 2024 second, third and fourth quarters. All dividends declared during 2025 and 2024 were also paid during those years.
As of November 30, 2024 , we had inventory-related obligations totaling $44.4 million , comprised of liabilities for inventory not owned associated with financing arrangements as discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“ TIFE ”) assessments.
As of November 30, 2025 , we had inventory-related obligations totaling $48.2 million , comprised of liabilities for inventory not owned associated with financing arrangements as discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“ TIFE ”) assessments.
Additionally, we have $116.2 million of deposits and pre-acquisition costs at November 30, 2024 related to land option contracts and other similar contracts. If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs.
Additionally, we have $143.7 million of deposits and pre-acquisition costs at November 30, 2025 related to land option contracts and other similar contracts. If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs.
We believe the carrying value of our inventory balance as of November 30, 2024 is recoverable.
We believe the carrying value of our inventory balance as of November 30, 2025 is recoverable.
While we made strategic investments in land and land development in each of our homebuilding reporting segments during 2024 and 2023 , approximately 58% and 56% , respectively, of these investments for each year were made in our West Coast homebuilding reporting segment.
While we made strategic investments in land and land development in each of our homebuilding reporting segments during 2025 and 2024 , approximately 51% and 58% , respectively, of these investments for each year were made in our West Coast homebuilding reporting segment.
In 2024 and 2023 , homebuilding operating income included total inventory-related charges of $4.6 million and $11.4 million , respectively, as discussed in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report.
In 2025 and 2024 , homebuilding operating income included total inventory-related charges of $32.1 million and $4.6 million , respectively, as discussed in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to 32 Consolidated Financial Statements in this report.
The year-over-year increase in our ending community count primarily reflected our investments in land and land development in 2023 and 2024 generating new community openings over the past 12 months that exceeded the number of communities selling out during the same period.
The year-over-year increase in our average and ending community counts primarily reflected our investments in land and land development in 2024 and 2025 generating new community openings over the past 12 months that exceeded the number of communities selling out during the same period.
The financial results of our homebuilding reporting segments for 2024 and 2023 were impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered. West Coast .
The financial results of our homebuilding reporting segments for 2025 and 2024 were impacted to varying degrees by price reductions and homebuyer concessions selectively extended to buyers in conjunction with our sales strategies, as well as product and geographic mix shifts of homes delivered. West Coast .
Cash equivalents included in the total were $385.1 million at November 30, 2024 and $508.2 million at November 30, 2023 , and were mainly invested in interest-bearing bank deposit accounts and money market funds . We had no cash borrowings outstanding under the Credit Facility as of November 30, 2024 .
Cash equivalents included in the total were $152.6 million at November 30, 2025 and $385.1 million at November 30, 2024 , and were mainly invested in interest-bearing bank deposit accounts and money market funds . We had no cash borrowings outstanding under the Credit Facility as of November 30, 2025 .
Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 49% at November 30, 2024 , compared to 27% at November 30, 2023 .
Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 43% at November 30, 2025 , compared to 49% at November 30, 2024 .
As of November 30, 2024 , we had no cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility . The Credit Facility is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report.
As of November 30, 2025 , we had no cash borrowings and $1.6 million of letters of credit outstanding under the Credit Facility . The Credit Facility is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report.
In 2024 , our uses of cash included stock repurchases and excise tax payments totaling $353.7 million , dividend payments on our common stock of $71.6 million , tax payments associated with stock-based compensation awards of $25.0 million and payments on mortgages and land contracts due to land sellers and other loans of $.9 million .
In 2024 , net cash was used for stock repurchases totaling $353.7 million , dividend payments on our common stock of $71.6 million , tax payments associated with stock-based compensation awards of $25.0 million , and payments on mortgages and land contracts due to land sellers and other loans of $.9 million .
The cash used was partially offset by $10.4 million of issuances of common stock under employee stock plans.
The cash used was partially offset by $1.1 million of issuances of common stock under employee stock plans.
A 10% decrease in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in decreases of approximately $25.8 million in our liability and approximately $6.8 million in our receivable as of November 30, 2024 , and a reduction to expense of approximately $19.0 million for 2024 .
A 10% decrease in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in decreases of approximately $25.7 million in our liability and approximately $6.3 million in our receivable as of November 30, 2025 , and a reduction to expense of approximately $19.4 million for 2025 .
T his act had no impact on our income tax expense for the year ended November 30, 2024 and will have no impact on our income tax expense in future periods .
This act had no impact on our income tax expense for the year ended November 30, 2025 and will have no impact on our income tax expense in future periods.
Quarterly cash dividends declared and paid during the years ended November 30, 2024 and 2023 totaled $.95 per share and $.70 per share of common stock, respectively.
Quarterly cash dividends declared and paid during the years ended November 30, 2025 and 2024 totaled $1.00 per share and $.95 per share of common stock, respectively.
While the Federal Reserve reduced interest rates three times in 2024, and may lower rates further in 2025 or later periods, we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes will positively affect demand or our business, results of operations or consolidated financial statements.
Additionally, while the Federal Reserve reduced interest rates in September, October and December 2025, and may lower rates further in 2026 or later periods, we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes, will meaningfully lower mortgage interest rates or positively affect demand or our business, results of operations or consolidated financial statements.
Our cancellation rate as a percentage of gross orders for the 2024 fourth quarter improved to 17% , from 28% for the 2023 fourth quarter and, together with our improved build times compared to a year ago, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 69% for the 2024 fourth quarter from 49% for the year-earlier quarter. 29 Homebuilding revenues for 2024 and 2023 were comprised of housing revenues and land sale revenues.
Our cancellation rate as a percentage of gross orders for the 2025 fourth quarter was 18% , compared to 17% for the 2024 fourth quarter and, together with our improved build times compared to a year ago, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 84% for the 2025 fourth quarter from 69% for the year-earlier quarter. 30 Homebuilding revenues for 2025 and 2024 were comprised of housing revenues and nominal land sale revenues.
Approximately 44% of our total investments in land and land development in 2024 were related to land acquisitions, compared to approximately 26% in 2023 .
Approximately 38% of our total investments in land and land development in 2025 were related to land acquisitions, compared to approximately 44% in 2024 .
The following table presents as of November 30, 2024 and 2023 , respectively, the estimated timeframe of delivery for the last home in an applicable community or land parcel and the corresponding percentage of total inventories such categories represent within our inventory balance (dollars in millions): 0-2 years 3-5 years 6-10 years $ % $ % $ % Total 2024 $ 2,849.2 52 % $ 2,554.7 46 % $ 124.1 2 % $ 5,528.0 2023 2,367.2 46 2,565.4 50 201.0 4 5,133.6 The inventory balances in the 0-2 years and 3-5 years categories were located throughout all of our homebuilding reporting segments and collectively represented 98% and 96% of our total inventories as of November 30, 2024 and 2023 , respectively.
The following table presents as of November 30, 2025 and 2024 , respectively, the estimated timeframe of delivery for the last home in an applicable community or land parcel and the corresponding percentage of total inventories such categories represent within our inventory balance (dollars in millions): 0-2 years 3-5 years 6-10 years $ % $ % $ % Total November 30, 2025 $ 2,518.6 44 % $ 2,848.3 50 % $ 303.9 6 % $ 5,670.8 November 30, 2024 2,849.2 52 2,554.7 46 124.1 2 5,528.0 The inventory balances in the 0-2 years and 3-5 years categories were located throughout all of our homebuilding reporting segments and collectively represented 94% and 98% of our total inventories as of November 30, 2025 and 2024 , respectively.
Also contributing to the year-over-year increase in KBHS ’ income was a higher principal amount of loans originated, which mainly reflected increases in both the number of homes we delivered and the percentage of homebuyers using KBHS . In 2024, 87% of the buyers financing their home purchases used KBHS , compared to 83% in the prior year.
Also contributing to the year-over-year decrease in KBHS ’ income was a lower principal amount of loans originated, which mainly reflected decreases in both the number of homes we delivered and the percentage of homebuyers using KBHS . In 2025 , 85% of the buyers financing their home purchases used KBHS , compared to 87% in the prior year.
The cash used was partially offset by $8.9 million of issuances of common stock under employee stock plans. 44 Dividends . In the 2024 first quarter, our board of directors declared a quarterly cash dividend of $.20 per share of common stock.
The cash used was partially offset by $10.4 million of issuances of common stock under employee stock plans. Dividends . In 2025 , our board of directors declared four quarterly cash dividends of $.25 per share of common stock. In the 2024 first quarter, our board of directors declared a quarterly cash dividend of $.20 per share of common stock.
The following table presents financial information related to our Southwest homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): Years Ended November 30, Variance 2024 2023 2022 2024 vs 2023 2023 vs 2022 Revenues $ 1,309,950 $ 1,169,948 $ 1,110,045 12 % 5 % Construction and land costs (984,730) (896,089) (789,651) (10) (13) Selling, general and administrative expenses (96,438) (85,235) (82,002) (13) (4) Operating income $ 228,782 $ 188,624 $ 238,392 21 % (21) % Homes delivered 2,890 2,699 2,592 7 % 4 % Average selling price $ 453,300 $ 431,200 $ 428,300 5 % 1 % Operating income as a percentage of revenues 17.5 % 16.1 % 21.5 % 140 bps (540) bps This segment’s revenues in 2024 were generated solely from housing revenues.
The following table presents financial information related to our Southwest homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): Years Ended November 30, Variance 2025 2024 2023 2025 vs 2024 2024 vs 2023 Revenues $ 1,245,446 $ 1,309,950 $ 1,169,948 (5) % 12 % Construction and land costs (942,438) (984,730) (896,089) 4 (10) Selling, general and administrative expenses (89,198) (96,438) (85,235) 8 (13) Operating income $ 213,810 $ 228,782 $ 188,624 (7) % 21 % Homes delivered 2,621 2,890 2,699 (9) % 7 % Average selling price $ 475,200 $ 453,300 $ 431,200 5 % 5 % Operating income as a percentage of revenues 17.2 % 17.5 % 16.1 % (30) bps 140 bps This segment’s revenues in 2025 and 2024 were generated solely from housing revenues.
Housing gross profits for 2024 and 2023 included inventory-related charges associated with housing operations of $4.6 million and $11.4 million , respectively.
Housing gross profits for 2025 and 2024 included inventory-related charges associated with housing operations of $32.1 million and $4.6 million , respectively.
The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments.
The Credit Facility will mature on November 12, 2030 and contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.70 billion under certain conditions, including obtaining additional bank commitments.
We have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of November 30, 2024 , the future minimum payments required under these leases totaled $22.3 million , with $10.6 million payable within 12 months.
We have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of November 30, 2025 , the future minimum payments required under these leases totaled $21.2 million , with $7.9 million payable within 12 months.
Housing revenues for 2024 declined 21% from the prior year to $1.45 billion , reflecting decreases in both the number of homes delivered and the average selling price of those homes. Land sale revenues were $3.2 million in 2024 , compared to $4.7 million in 2023 .
In 2024 , revenues were comprised of both housing revenues and land sale revenues. Housing revenues for 2025 declined 19% from $1.45 billion in the prior year, reflecting decreases in both the number of homes delivered and the average selling price of those homes. Land sale revenues were $3.2 million in 2024 .
The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non- GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): Years Ended November 30, 2024 2023 2022 Housing revenues $ 6,898,667 $ 6,370,421 $ 6,880,362 Housing construction and land costs (5,449,382) (5,020,783) (5,210,802) Housing gross profits 1,449,285 1,349,638 1,669,560 Add: Inventory-related charges (a) 4,597 11,424 34,760 Adjusted housing gross profits $ 1,453,882 $ 1,361,062 $ 1,704,320 Housing gross profit margin as a percentage of housing revenues 21.0 % 21.2 % 24.3 % Adjusted housing gross profit margin as a percentage of housing revenues 21.1 % 21.4 % 24.8 % (a) Represents inventory impairment and land option contract abandonment charges associated with housing operations.
The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non- GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): Years Ended November 30, 2025 2024 2023 Housing revenues $ 6,210,560 $ 6,898,667 $ 6,370,421 Housing construction and land costs (5,057,312) (5,449,382) (5,020,783) Housing gross profits 1,153,248 1,449,285 1,349,638 Add: Inventory-related charges (a) 32,051 4,597 11,424 Adjusted housing gross profits $ 1,185,299 $ 1,453,882 $ 1,361,062 Housing gross profit margin as a percentage of housing revenues 18.6 % 21.0 % 21.2 % Adjusted housing gross profit margin as a percentage of housing revenues 19.1 % 21.1 % 21.4 % (a) Represents inventory impairment and land option contract abandonment charges associated with housing operations.
FINANCIAL SERVICES REPORTING SEGMENT The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): Years Ended November 30, 2024 2023 2022 Revenues $ 27,847 $ 29,523 $ 23,414 Expenses (6,133) (5,726) (5,762) Equity in income of unconsolidated joint ventures 27,176 15,697 20,799 Pretax income $ 48,890 $ 39,494 $ 38,451 Total originations (a): Loans 10,241 9,167 8,402 Principal $ 4,109,025 $ 3,630,734 $ 3,335,837 Percentage of homebuyers using KBHS 87 % 83 % 71 % Average FICO score 743 736 734 36 Years Ended November 30, 2024 2023 2022 Loans sold (a): Loans sold to GR Alliance 9,240 9,017 7,563 Principal $ 3,682,769 $ 3,588,618 $ 3,026,290 Loans sold to other third parties 1,121 347 861 Principal $ 469,207 $ 123,258 $ 287,436 Mortgage loan origination mix (a): Conventional/non-conventional loans 53 % 59 % 67 % FHA loans 35 % 27 % 20 % Other government loans 12 % 14 % 13 % Loan type (a): Fixed 84 % 92 % 98 % ARM 16 % 8 % 2 % (a) Loan originations and sales occurred within KBHS .
FINANCIAL SERVICES REPORTING SEGMENT The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): Years Ended November 30, 2025 2024 2023 Revenues $ 24,309 $ 27,847 $ 29,523 Expenses (6,120) (6,133) (5,726) Equity in income of unconsolidated joint ventures 16,790 27,176 15,697 Pretax income $ 34,979 $ 48,890 $ 39,494 Total originations (a): Loans 9,036 10,241 9,167 Principal $ 3,639,936 $ 4,109,025 $ 3,630,734 Percentage of homebuyers using KBHS 85 % 87 % 83 % Average FICO score 743 743 736 Loans sold (a): Loans sold to GR Alliance 6,911 9,240 9,017 Principal $ 2,787,260 $ 3,682,769 $ 3,588,618 Loans sold to other third parties 1,933 1,121 347 Principal $ 799,909 $ 469,207 $ 123,258 Mortgage loan origination mix (a): Conventional/non-conventional loans 48 % 53 % 59 % FHA loans 39 % 35 % 27 % Other government loans 13 % 12 % 14 % Loan type (a): Fixed 85 % 84 % 92 % ARM 15 % 16 % 8 % (a) Loan originations and sales occurred within KBHS .
The following table presents information about our net orders, cancellation rate, ending backlog, and community count for the years ended November 30, 2024 and 2023 (dollars in thousands): Years Ended November 30, 2024 2023 Net orders 13,093 11,084 Net order value (a) $ 6,473,895 $ 5,346,541 Cancellation rate (b) 14 % 26 % Ending backlog — homes 4,434 5,510 Ending backlog — value $ 2,242,907 $ 2,667,679 Ending community count 258 242 Average community count 248 245 32 (a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period.
The following table presents information about our net orders, cancellation rate, ending backlog, and community count for the years ended November 30, 2025 and 2024 (dollars in thousands): Years Ended November 30, 2025 2024 Net orders 11,596 13,093 Net order value (a) $ 5,371,005 $ 6,473,895 Cancellation rate (b) 17 % 14 % Ending backlog — homes 3,128 4,434 Ending backlog — value $ 1,403,352 $ 2,242,907 Ending community count 271 258 Average community count 260 248 (a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period.
Operating Income . Our homebuilding operating income increased 6% in 2024 , as compared to the previous year, primarily reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses.
Operating Income . Our homebuilding operating income decreased 34% in 2025 , as compared to the previous year, primarily reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses.
The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan , and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of November 30, 2024 : Financial Covenants and Other Requirements Covenant Requirement Actual Consolidated tangible net worth > $ 3.13 billion $ 4.02 billion Leverage Ratio .600 .298 Interest Coverage Ratio (a) > 1.500 11.501 Minimum liquidity (a) > $ 86.1 million $ 598.0 million Investments in joint ventures and Non-Guarantor Subsidiaries $ 908.7 million $ 413.6 million Borrowing base in excess of borrowing base indebtedness (as defined) n/a $ 2.87 billion (a) Under the terms of the Credit Facility and the Term Loan , we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.
The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan , and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of November 30, 2025 : 44 Financial Covenants and Other Requirements Covenant Requirement Actual Consolidated tangible net worth > $ 2.75 billion $ 3.86 billion Leverage Ratio .600 .280 Interest Coverage Ratio (a) > 1.500 6.702 Minimum liquidity (a) > $ 106.5 million $ 1.43 billion Investments in joint ventures and Non-Guarantor Subsidiaries $ 876.3 million $ 459.6 million Borrowing base in excess of borrowing base indebtedness (as defined) n/a $ 2.25 billion (a) Under the terms of the Credit Facility and the Term Loan , we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.
Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and Term Loan , if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes, the Credit Facility and the Term Loan so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release.
Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and Term Loan , if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes, the Credit Facility and the Term Loan so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release. 40 The following tables present summarized financial information for KB Home and the Guarantor Subsidiaries on a combined basis, excluding unconsolidated joint ventures and after the elimination of (a) intercompany transactions and balances between KB Home and the Guarantor Subsidiaries and (b) equity in earnings from and investments in the Non-Guarantor Subsidiaries .
The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price): Years Ended November 30, 2024 2023 2022 Revenues: Housing $ 6,898,667 $ 6,370,421 $ 6,880,362 Land 3,572 10,685 — Total 6,902,239 6,381,106 6,880,362 Costs and expenses: Construction and land costs Housing (5,449,382) (5,020,783) (5,210,802) Land (2,101) (9,492) (2,541) Total (5,451,483) (5,030,275) (5,213,343) Selling, general and administrative expenses (686,848) (632,094) (629,645) Total (6,138,331) (5,662,369) (5,842,988) Operating income 763,908 718,737 1,037,374 Interest income and other 32,101 13,759 704 Equity in income (loss) of unconsolidated joint ventures 6,019 (713) (865) Loss on early extinguishment of debt — — (3,598) Homebuilding pretax income $ 802,028 $ 731,783 $ 1,033,615 30 Years Ended November 30, 2024 2023 2022 Homes delivered 14,169 13,236 13,738 Average selling price $ 486,900 $ 481,300 $ 500,800 Housing gross profit margin as a percentage of housing revenues 21.0 % 21.2 % 24.3 % Adjusted housing gross profit margin as a percentage of housing revenues 21.1 % 21.4 % 24.8 % Selling, general and administrative expenses as a percentage of housing revenues 10.0 % 9.9 % 9.2 % Operating income as a percentage of homebuilding revenues 11.1 % 11.3 % 15.1 % Revenues .
The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price): Years Ended November 30, 2025 2024 2023 Revenues: Housing $ 6,210,560 $ 6,898,667 $ 6,370,421 Land 1,345 3,572 10,685 Total 6,211,905 6,902,239 6,381,106 Costs and expenses: Construction and land costs Housing (5,057,312) (5,449,382) (5,020,783) Land (1,348) (2,101) (9,492) Total (5,058,660) (5,451,483) (5,030,275) Selling, general and administrative expenses (646,182) (686,848) (632,094) Total (5,704,842) (6,138,331) (5,662,369) Operating income 507,063 763,908 718,737 Interest income and other 7,386 32,101 13,759 Equity in income (loss) of unconsolidated joint ventures 5,715 6,019 (713) Loss on early extinguishment of debt (954) — — Homebuilding pretax income $ 519,210 $ 802,028 $ 731,783 Homes delivered 12,902 14,169 13,236 Average selling price $ 481,400 $ 486,900 $ 481,300 Housing gross profit margin as a percentage of housing revenues 18.6 % 21.0 % 21.2 % Adjusted housing gross profit margin as a percentage of housing revenues 19.1 % 21.1 % 21.4 % Selling, general and administrative expenses as a percentage of housing revenues 10.4 % 10.0 % 9.9 % Operating income as a percentage of homebuilding revenues 8.2 % 11.1 % 11.3 % Revenues .
Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. Equity in Income (Loss) of Unconsolidated Joint Ventures .
Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. Equity in Income of Unconsolidated Joint Ventures . Our equity in income of unconsolidated joint ventures was $5.7 million for 2025 , compared to $6.0 million for 2024 .
We ended 2024 with total liquidity of $1.68 billion , including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility . Cash and cash equivalents totaled $598.0 million at November 30, 2024 , compared to $727.1 million at November 30, 2023.
We ended 2025 with total liquidity of $1.43 billion , including cash and cash equivalents and nearly $1.20 billion of available capacity under the Credit Facility . Cash and cash equivalents totaled $228.6 million at November 30, 2025 , compared to $598.0 million at November 30, 2024 .
As of November 30, 2024 , one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at November 30, 2024 . Credit Ratings. Our credit ratings are periodically reviewed by rating agencies.
As of November 30, 2025 , one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender, secured by the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at November 30, 2025 . Consolidated Cash Flows.
If we were to acquire all the land we had under land option contracts and other similar contracts at November 30, 2024 , we estimate the remaining purchase price to be paid would be as follows: 2025 – $1.42 billion ; 2026 – $670.2 million ; 2027 – $243.9 million ; 2028 – $116.5 million ; 2029 – $58.1 million ; and thereafter – $0 .
If we were to acquire all the land we had under land option contracts and other similar contracts at November 30, 2025 , we estimate the remaining purchase price to be paid would be as follows: 2026 – $1.16 billion ; 2027 – $524.8 million ; 2028 – $194.1 million ; 2029 – $100.5 million ; and 2030 and thereafter – $0 .
A 10% increase in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in increases of approximately $28.7 million in our liability and approximately $9.3 million in our receivable as of November 30, 2024 , and additional expense of approximately $19.4 million for 2024 .
A 10% increase in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in increases of approximately $27.9 million in our liability and approximately $6.8 million in our receivable as of November 30, 2025 , and additional expense of approximately $21.1 million for 2025 .
The year-over-year growth in KBHS ’ income was primarily due to a gain of $2.1 million in the fair value of interest rate lock commitments (“ IRLCs ”) in 2024 , compared to losses of $16.0 million in 2023.
The year-over-year decrease in KBHS ’ income was primarily due to a loss of $11.4 million in the fair value of interest rate lock commitments (“ IRLCs ”) in 2025 , compared to a gain of $2.1 million in 2024.
The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): Years Ended November 30, 2024 2023 2022 Net cash provided by (used in): Operating activities $ 362,722 $ 1,082,699 $ 183,418 Investing activities (50,119) (58,062) (71,773) Financing activities (440,752) (627,493) (73,583) Net increase (decrease) in cash and cash equivalents $ (128,149) $ 397,144 $ 38,062 Operating Activities .
The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): Years Ended November 30, 2025 2024 2023 Net cash provided by (used in): Operating activities $ 335,682 $ 362,722 $ 1,082,699 Investing activities (61,797) (50,119) (58,062) Financing activities (642,635) (440,752) (627,493) Net increase (decrease) in cash and cash equivalents $ (368,750) $ (128,149) $ 397,144 45 Operating Activities .
Corporate and other had operating losses of $149.0 million in 2024 , $142.6 million in 2023 and $145.3 million in 2022 .
Corporate and other had operating losses of $157.8 million in 2025 , $149.0 million in 2024 and $142.6 million in 2023 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+1 added−1 removed6 unchanged
Biggest changeBased upon the amount of variable rate debt outstanding at November 30, 2024 , and holding the variable rate debt balance constant, each 100 basis-point increase in the interest rate would increase the interest we incur by approximately $3.6 million per year. 55 As of November 30, 2023 and for the Years Ending November 30, Fair Value at November 30, 2023 2024 2025 2026 2027 2028 Thereafter Total Fixed Rate $ — $ — $ — $ 300,000 $ — $ 1,040,000 $ 1,340,000 $ 1,260,725 Weighted Average Effective Interest Rate — % — % — % 7.1 % — % 5.5 % 5.9 % Variable Rate (b) $ — $ — $ 360,000 $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % — % 6.8 % — % — % — % 6.8 % (b) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2023 .
Biggest changeBased upon the amount of variable rate debt outstanding at November 30, 2025 , and holding the variable rate debt balance constant, each 100 basis-point increase in the interest rate would increase the interest we incur by approximately $3.6 million per year.
Further information is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. 56
Further information is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. 57
The following tables present principal cash flows by scheduled maturity, weighted average effective interest rates and the estimated fair value of our debt obligations as of November 30, 2024 and 2023 (dollars in thousands): As of November 30, 2024 and for the Years Ending November 30, Fair Value at November 30, 2024 2025 2026 2027 2028 2029 Thereafter Total Fixed Rate $ — $ — $ 300,000 $ — $ 300,000 $ 740,000 $ 1,340,000 $ 1,309,700 Weighted Average Effective Interest Rate — % — % 7.1 % — % 5.0 % 5.7 % 5.9 % Variable Rate (a) $ — $ 360,000 $ — $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % 6.0 % — % — % — % — % 6.0 % (a) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2024 .
As of November 30, 2024 and for the Years Ending November 30, Fair Value at November 30, 2024 2025 2026 2027 2028 2029 Thereafter Total Fixed Rate $ — $ — $ 300,000 $ — $ 300,000 $ 740,000 $ 1,340,000 $ 1,309,700 Weighted Average Effective Interest Rate — % — % 7.1 % — % 5.0 % 5.7 % 5.9 % Variable Rate (b) $ — $ 360,000 $ — $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % 6.0 % — % — % — % — % 6.0 % (b) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2024 .
Removed
Under our current policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates.
Added
Under our current policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates. 56 The following tables present principal cash flows by scheduled maturity, weighted average effective interest rates and the estimated fair value of our debt obligations as of November 30, 2025 and 2024 (dollars in thousands): As of November 30, 2025 and for the Years Ending November 30, Fair Value at November 30, 2025 2026 2027 2028 2029 2030 Thereafter Total Fixed Rate $ — $ 300,000 $ — $ 300,000 $ 350,000 $ 390,000 $ 1,340,000 $ 1,333,188 Weighted Average Effective Interest Rate — % 7.1 % — % 5.0 % 7.5 % 4.2 % 5.9 % Variable Rate (a) $ — $ — $ — $ 360,000 $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % — % — % 5.4 % — % — % 5.4 % (a) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2025 .

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