kbh-20241130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from to .

Commission File No. 001-09195

KB HOME

(Exact name of registrant as specified in its charter)


Delaware	95-3666267
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10990 Wilshire Boulevard, Los Angeles, California 90024

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (310) 231-4000

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (par value $1.00 per share)	KBH	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to

submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller

reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the

registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by non-affiliates of the registrant on May 31, 2024 was $5,782,776,530,

including 6,705,247 shares held by the registrant’s grantor stock ownership trust and excluding 19,982,889 shares held in treasury.

There were 72,156,821 shares of the registrant’s common stock, par value $1.00 per share, outstanding on December 31, 2024.

Documents Incorporated by Reference

Portions of the registrant’s definitive Proxy Statement for the 2025 Annual Meeting of Stockholders (incorporated into Part III).

PART I

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. We build a variety of new homes, including attached and

detached single-family residential homes, townhomes and condominiums, designed primarily for first-time and first move-up,

as well as second move-up and active adult, homebuyers. We offer homes in development communities, at urban in-fill

locations and as part of mixed-use projects. 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 financial services operations also provide mortgage banking services, including

residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through KBHS Home Loans,

LLC (“KBHS”), an unconsolidated joint venture between us and a third party.

Unless the context indicates otherwise, the terms “we,” “our” and “us” used in this report refer to KB Home, a Delaware

corporation, and its predecessors and subsidiaries. We also use the following terms in our business with the corresponding

meanings: “home” is a single-family residence, whether it is a single-family home or other type of residential property; “homes

delivered” are homes for which the sale has closed and title has passed to a customer; “community” is a single development in

which new homes are constructed as part of an integrated plan; “community count” is the number of communities we have open

for sales with at least five homes/lots left to sell; and “product” encompasses a home’s floor plan design and interior/exterior

style, amenities, functions and features.

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:

Markets

Reflecting the geographic scale of our homebuilding business, we have operations in the nine states and 49 major markets

presented below. We also operate in various submarkets within these major markets. We may refer to these markets and

submarkets collectively as our “served markets.” For reporting purposes, we organize our homebuilding operations into four

segments — West Coast, Southwest, Central and Southeast.


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. Our core business strategy, which we refer to as KB Edge, is to expand our operations primarily within our

current geographic footprint to achieve a top-five position in each of our served markets (based on homes delivered). KB Edge

is a systematic, fact-based and process-driven approach to homebuilding that is grounded in gaining a detailed understanding of

consumers’ location and product preferences and product price-to-value perceptions.

KB Edge consists of the following key principles with respect to customers, land, products and production:

•Customers. With our Built to Order® homebuying process, we provide each of our homebuyers with a highly

personalized experience where they can make a wide range of structural and design choices for their future new home,

as discussed further below under “Customer Obsession.” We believe this highly interactive, “customer-first”

experience that puts our homebuyers firmly in control of designing the home they want based on what they value and

how they want to live, at a price they can afford, gives us a meaningful and distinct competitive advantage over other

homebuilders and resale and rental homes. In addition, we find our homebuyers build a strong emotional attachment

to our products when they create a personalized home with the features and finishes they select.

•Land. We seek to manage our working capital and reduce our operating risks by primarily acquiring entitled land

parcels within attractive submarkets identified by our market research. 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. Our land investment is sensitive to

and will shift with local or national housing market environments or broader economic conditions, generally increasing

when we are experiencing or expecting strong growth and decreasing when we are experiencing or expecting slower

growth. We leverage the relationships we have with landowners, developers and brokers to find and acquire land

parcels, and use our experience in working with municipalities to efficiently obtain development approvals.

•Products. We offer our customers a variety of homes with a standardized set of functions and features generally priced

to be affordable for those with household incomes within a range of the local area’s median level, with the goal of

being attainable for the largest demand segments. 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. 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. To enhance the simplicity and efficiency of our

products and processes, our architectural group has developed a core series of high-frequency, flexible floor plans and

elevations that we can offer across many of our served markets, which it periodically updates to incorporate value-

engineering enhancements, regulatory requirements and/or evolving consumer tastes. 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. This library also enables us to better understand in advance the cost to build our products and to

compare and implement best land development and home construction practices across divisions and communities.

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. We generally commence construction of a home only after we have a signed

purchase contract with a homebuyer and have obtained preliminary credit approval or other evidence of the

homebuyer’s financial ability to purchase the home, and seek to build a backlog of sold homes. To help moderate

construction-related cost inflation, we, to the extent practicable, enter into fixed-price contracts with our larger trade

partners and building material suppliers for specified periods of time. By maintaining a substantial backlog, along

with centralized scheduling and standardized reporting processes, we have established a disciplined and scalable

operational platform that helps us sustain an even-flow production of pre-sold homes. This reduces our inventory risk,

promotes construction efficiencies, enhances our relationships with independent contractors and other business

partners, and provides us with greater visibility and predictability on future deliveries.

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. 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. 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

into 2023 substantially lengthened our average build time and hindered our even-flow home production process. We achieved a

meaningful sequential improvement in our build times each quarter beginning with the 2023 second quarter. 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. In implementing our KB Edge business strategy, a key focus is on enhancing asset efficiency. 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.

Customer Obsession. We believe the best new homes start with the people who will live in them. Our customer-centric

approach comes from a deep-rooted operational philosophy and company culture motivated by a paramount objective: to be the

most customer-obsessed homebuilder in the world. Driven by this ambition, our team seeks to provide a compelling, simple

and personalized homebuying process distinguished by phenomenal customer service. We want our customers to know they

have a real partner when buying a home with us and feel that once their home is built, they can see themselves in their new

home. Our team members, supported through our training and development programs, are encouraged to make decisions

intended to produce the best results for our customers and our organization. Our customer obsession mindset is built around the

following key principles:

•Find out what customers actually want. We ascertain homebuyer product design and location preferences partly

through surveys we conduct of recent buyers of both new and resale homes across our served markets. We also obtain

data from our own homebuyers’ selections and post-sale feedback. We use this information on what matters most to

homebuyers when making purchase and trade-off decisions to develop and refine our product offerings, as well as our

land acquisition targets.

We also cultivate and leverage close supplier and business partner relationships to integrate into or offer with our

products architectural elements, building materials, construction techniques, structural and non-structural systems, and

components and devices that are aligned with the preferences identified in our surveys and other data sources.

•Offer customers choice and control. From our synthesis of the foregoing consumer research and related activities, we

give our homebuyers a wide array of choices to craft the new home that fits their particular lifestyle and priorities,

including their homesite, floor plan, elevation and structural options. Our homebuyers can visit our KB Home Design

Studios, where they get both advice and the opportunity to select from a broad range of included features, design

choices and options that will help personalize their home. When customers build a new home with us, they also enjoy

choosing exactly what they want and paying only for what matters most to them. This helps to meet homebuyers’

priorities at price points attainable to them.

•Create collaborative customer relationships. In our view, we are not just selling a house. We are in the business of

delivering an exceptional, personalized experience that enables our customers to achieve perhaps the most meaningful

purchase they will ever make and an important landmark in their life’s journey — their own home. From this

perspective, we strive to form close relationships with our homebuyers. We endeavor to learn key details about what

they want, their top priorities today and where they see themselves in the future, so we can co-create a home for their

day-to-day lives. 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. This team is available to guide each homebuyer

through each major step of the design, construction and closing of their KB home and aims to make the process as easy

and straightforward as possible.

•Continue to listen to customers after the sale is done. 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

claims. Information about our KB Home 10-year Limited Warranty program is provided in Note 17 – Commitments

and Contingencies in the Notes to Consolidated Financial Statements in this report.

We believe our approach differentiates us in the homebuilding industry and, along with our company culture that sustains

it, enhances customer satisfaction. We are proud of the high levels of satisfaction our homebuyers have reported to us and

outside survey firms. In 2024, we continued to be one of the highest-ranked national homebuilders for customer satisfaction in

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 history, which we believe reflects the effective dedication we have to our

homebuyers.

Promotional Marketing Strategy. 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®. Built on Relationships also

encapsulates the importance of customer, as discussed above, and other key relationships – with suppliers, trade contractors,

land sellers and municipalities – to the success of our business. The key components we highlight as part of our brand identity

include:

•Partnership. Our dedicated team of sales counselors, design consultants, construction superintendents and customer

service representatives, as well as KBHS loan officers, work closely with our customers throughout the homebuying

process.

•Personalization. We give our homebuyers the ability to personalize their new home from floor plans to exterior styles,

and from design choices to where they live in the community. 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. We believe we offer homebuyers product designs that distinctively blend contemporary consumer-

preferred elements, such as open floor plans, flexible living spaces, indoor/outdoor flow and extra storage; quality

construction standards; and advanced technological features and devices, as compared to some other new and resale

homes.

•Sustainability. Our homes are engineered to be highly energy and water efficient, as discussed further below.

•Affordability. We offer our customers a variety of homes with a standardized set of functions and features generally

priced to be affordable for those with household incomes within a range of the local area’s median level. 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.

We typically sell our homes through salaried and/or commissioned sales associate employees from sales offices located in

or adjacent to furnished model homes in each community, or through outside brokers. 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 market our homes to prospective homebuyers and real estate brokers through a variety of media, and use data analytics

to target our advertising and measure its effectiveness and efficiency in terms of generating leads and orders. 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. 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 offer a variety of single-story

floorplans that typically appeal to an active adult homebuyer age 55 and over. For more than a decade, first-time and first

move-up homebuyers have accounted for an average of over 75% of our annual deliveries. 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:

Operational Structure. We operate our homebuilding business through divisions with experienced management teams who

have in-depth local knowledge of their particular served markets, which helps us acquire land in preferred locations; develop

communities with products that meet local demand; and understand local regulatory environments. Our division management

teams exercise considerable autonomy in identifying land acquisition opportunities; developing land and communities;

implementing product, marketing and sales strategies; and controlling costs. To help maintain consistent execution within the

organization, our division management teams and other employees are continuously trained on KB Edge principles and are

evaluated, in part, based on their achievement of relevant operational objectives.

Our corporate management and support personnel develop and oversee the implementation of company-wide strategic

initiatives, our overall operational policies and internal control standards, and perform various centralized functions, including

architecture; purchasing and national contracts; treasury and cash management; land acquisition approval; risk and litigation

management; accounting and financial reporting; internal audit and compliance activities; information technology (“IT”)

systems; human resources strategy; marketing; and investor and media relations.

Community Development and Land Inventory Management

Developable land for the production of homes is a core resource for our business. Based on our current strategic plans, we

seek to own or control land sufficient to meet our forecasted production goals for the next three to five years. 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. We may periodically sell certain land interests or monetize land

previously held for future development to strategically balance our land portfolio in line with local or national market

environments or for other reasons. We may also decide not to exercise certain land option contracts and other similar contracts

due to market conditions and/or changes in our marketing strategy.

Our community development process generally consists of four phases: land acquisition, land development into finished

lots for a community (if necessary), home construction and delivery of completed homes to homebuyers. Historically, our

community development process has typically ranged from 10 to 24 months in our West Coast homebuilding reporting

segment, with a somewhat shorter duration in our other homebuilding reporting segments. The development process in our

West Coast homebuilding reporting segment is typically longer than in our other segments due to the municipal and regulatory

requirements that are generally more stringent in California. 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.

Although they vary significantly in size and complexity, our single-family residential home communities typically consist

of 50 to 150 lots per product line, with lots ranging in size from 2,000 to 11,000 square feet. In our communities, we typically

offer four to 15 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. Some of our communities consist of multiple-story structures that

encompass several attached condominium-style units.

Land Acquisition and Land 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. 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 expect that the

overall balance of undeveloped, unentitled, entitled, partially finished and finished lots in our inventory will vary over time, and

in implementing our strategic growth initiatives, we may acquire a greater proportion of undeveloped or unentitled land in the

future if and as the availability of reasonably priced land with finished or partially finished lots diminishes.

As part of the decision-making process for approving a land purchase, we review extensive information about a proposed

project, including past use; assessment of environmentally sensitive areas and areas that may be suitable for parks, trails, and

open space preservation; assessment of site development required, including any work needed to comply with storm water

regulations; proximity to major employment and retail centers; and site design and product (home designs and specifications)

plans that are, among other things, consistent with our focus on building highly energy- and water-efficient homes.

We generally seek to structure our land acquisition and land development activities to minimize, or defer the timing of,

expenditures in order to reduce both the market risks associated with holding land and our working capital and financial

commitments, including interest and other carrying costs. This may entail developing land in smaller phases wherever possible,

and balancing development with our starts pace to manage our inventory of finished lots. We typically use contracts that, in

exchange for a small initial option payment or earnest money deposit, give us an option or similar right to acquire land at a

future date, usually at a pre-determined price and pending our satisfaction with the feasibility of developing and selling homes

on the land and/or an underlying land seller’s completion of certain obligations, such as securing entitlements, developing

infrastructure or finishing lots. We refer to land subject to such option or similar contractual rights as being “controlled.” Our

decision to exercise a particular land option or similar right is based on the results of our due diligence and continued market

viability analysis after entering into such a contract.

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 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:

Home Construction and Deliveries. Following the acquisition of land and, if necessary, the development of the land into

finished lots, we typically begin constructing model homes and marketing homes for sale. As discussed above under “Business

Strategy,” we generally commence construction of a home after we have a signed sales contract with a homebuyer and have

obtained preliminary credit approval or other evidence of the homebuyer’s financial ability to purchase the home. Other than

model homes, our inventories typically do not consist of a significant number of completed unsold homes. 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. 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 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. Our contracts with these

independent contractors require that they comply with all laws applicable to their work, including wage and safety laws, meet

performance standards, follow local building codes and permits, and abide by our Ethics Policy referenced under Item 10 –

Directors, Executive Officers and Corporate Governance in this report.

Raw Materials. Outside of land, the principal raw materials used in our production process are concrete and forest

products. Other primary materials used in home construction include drywall, and plumbing and electrical items. We source

our building materials, many of which are domestically produced, from third parties and, to the extent feasible, select products

with sustainability certifications or attributes. In addition, our lumber suppliers generally certify that their wood was not

sourced from endangered forests or is certified by recognized programs. We attempt to enhance the efficiency of our operations

by using, where practical, standardized materials that are commercially available on competitive terms from a variety of outside

sources. In addition, we have national and regional purchasing programs for certain building materials, appliances, fixtures and

other items that allow us to benefit from large-quantity purchase discounts and, where available, participate in outside

manufacturer or supplier rebate programs. When possible, we arrange for bulk purchases of these products at favorable prices

from such manufacturers and suppliers.

Backlog

Our “backlog” consists of homes that are under a sales contract but have not yet been delivered to a homebuyer. 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.

Backlog value represents potential future housing revenues from homes in backlog. 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.

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. The homebuilding industry and housing market are highly competitive with respect to selling homes;

contracting for construction services, such as carpentry, roofing, electrical and plumbing; and acquiring attractive developable

land, though the intensity of competition can vary and fluctuate between and within individual markets and submarkets. We

compete for homebuyers, construction resources and desirable land against numerous homebuilders, ranging from regional and

national firms, some of which are larger and have greater financial resources than us, to small local enterprises. As to

homebuyers, we primarily compete with other homebuilders on the basis of selling price, community location and amenities,

availability of financing options, home designs, reputation, build time, and the design choices and options that can be included

in a home. In some cases, this competition occurs within larger residential development projects containing separate sections

other homebuilders design, plan and develop. We also compete for homebuyers against housing alternatives to new homes,

including resale homes, apartments, single-family rentals and other rental housing.

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. Elevated construction

activity, and reallocations of staff for public safety priorities after natural disasters or otherwise, can increase the time needed to

obtain governmental approvals or utility service activations and, combined with tariffs imposed or increased by the U.S. and

other governments, the cost of certain raw building materials, such as steel, lumber, drywall and concrete, or finished products.

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. Traditionally, there has been more

consumer demand for home purchases and we tend to generate more net orders in the spring and early summer months

(corresponding to most of our second quarter and part of our third quarter) than at other times of the year. 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). However, as illustrated in the table below, the

combination of rapidly rising mortgage interest rates, elevated inflation and other macroeconomic and geopolitical concerns

disrupted our usual seasonal patterns in 2022. Demand began to improve in the 2023 second quarter due to, among other

things, constrained resale home inventory, favorable demographic trends, buyer interest in homes at our price points and our

selective implementation of targeted sales strategies, including pricing adjustments and other homebuyer concessions

(particularly, mortgage-related concessions such as interest rate buydown or lock programs) to help drive order activity and

minimize cancellations. We can provide no assurance whether or to what extent typical seasonal performance trends will occur

in 2025, or at all.


	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. In addition to the overall volume of homes we sell and deliver, our results in a given

period are significantly affected by the geographic mix of markets and submarkets in which we operate; the number and

characteristics of the communities we have open for sales in those markets and submarkets; and the products we sell from those

communities during the period. While there are some similarities, there are differences within and between our served markets

in terms of the number, size and nature of the communities we operate and the products we offer to consumers. These

differences reflect, among other things, local homebuyer preferences; household demographics (e.g., large families or working

professionals; income levels); geographic context (e.g., urban or suburban; availability of reasonably priced finished lots;

development constraints; residential density); and the shifts that can occur in these factors over time. These factors in each of

our served markets will affect the costs we incur and the time it takes to locate, acquire rights to and develop land, open

communities for sales, and market and build homes; the size of our homes; our selling prices (including the contribution from

homebuyers’ purchases of design choices and options); the pace at which we sell and deliver homes; the rate at which

communities are sold out; and our housing gross profits and housing gross profit margins. 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 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 attract, promote, and retain qualified personnel, particularly the leaders of our local divisions who

manage our businesses in markets and partner with various stakeholders. We strive to create an engaging environment that

offers fulfilling work, meaningful career growth and development opportunities, and rewarding short- and long-term

compensation programs aligned with our business objectives. We also provide employee home purchase and product and

service referral programs, as well as awards for employment service milestones. 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. 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. The extensive service history of

our leadership team has provided consistency in managing our business and in reinforcing and sustaining our company culture

at all levels of the organization. For fiscal year 2024, our turnover rate was 18%, made up of 15% voluntary turnover and 3%

involuntary turnover. For fiscal year 2023, our turnover rate was 27%, made up of 16% voluntary turnover and 11%

involuntary turnover. We believe these rates are reasonable for our industry and market conditions at the time.

Promoting High Ethical Standards. We aim to reach our business objectives by operating with integrity and following

high ethical standards. 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.

Talent Acquisition and Development. We place a significant emphasis on growing our team members’ skills through talent

development programs, including investing in training as discussed below. We believe these initiatives have helped us achieve

a high level of internal promotions and retention. At the same time, we seek to attract the best possible candidates to join our

company to, among other things, bring in innovative and diverse perspectives to help advance our business goals.

In addition to targeting experienced professionals within the homebuilding industry, we have implemented several

programs designed to deepen our talent pool. These programs include partnerships with colleges and universities, which help

us to identify and recruit promising interns and early career professionals. 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. 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. We support a dedicated internet-based learning platform,

KBU, which includes a broad range of written, audio-visual, and interactive enterprise-wide and discipline-specific policy and

training materials. The platform features a library of approximately 1,811 self-directed courses and virtual, instructor-led

programs for employees at all levels, as well as 389 leadership and managerial training topics. During 2024, our team members

completed more than 30,230 courses in total, averaging approximately 11 courses per employee. Managers and supervisors

also receive training to support the professional development of their direct reports.

To recognize and promote talented employees, we carry out a workforce and succession planning review process every

year. 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. 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. 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. As outlined in our published Human Rights Statement, we are committed to fostering a work

culture that treats all employees fairly and with respect. This includes providing equal opportunities for professional growth

and advancement based solely on merit, ensuring that every individual has the chance to thrive and succeed based on their own

abilities and contributions. 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. 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. In addition to the

comprehensive benefits programs previously described, we offer an extensive wellness program designed to support the overall

health and well-being of our employees, including mental health and stress management. Our wellness program is accessible to

all employees through an online platform, ensuring that everyone, regardless of location or work schedule, can benefit from the

resources provided. The program features monthly interactive webinars that cover a range of topics related to holistic health.

These webinars are designed to educate employees on various aspects of wellness, including nutrition, mental health, physical

fitness, and preventive care. We believe that by offering these resources, we can help our employees lead healthier, more

balanced lives, which in turn can lead to increased productivity and job satisfaction. 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.

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 believe our

initiatives provide tangible benefits for our customers, our operations and the environment, and distinctly differentiate us from

other builders of new homes and from resale homes.

Sustainability Practices. We have established an Environmental Management System (“EMS”), through which we focus

on continually improving the energy efficiency of our homes so, among other things, there are less greenhouse gas (“GHG”)

emissions associated with their use over their multi-decade life cycle. Our EMS, and its related manuals and other

documentation, provides a framework for planning, implementing, measuring, evaluating and refining these efforts over time.

In addition to our internal executive team who implements and operates within the EMS, we monitor evolving trends and gather

input and guidance for our initiatives through our National Advisory Board, which is a panel of external advisors we established

in 2009 solely for these purposes. 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. With most of the energy consumption during a home’s life occurring after it is delivered

to the customer, our products’ energy efficiency is a key part of our efforts to help minimize a home’s impact on the

environment from its day-to-day use. Reflecting our long-standing focus on enhancing the energy efficiency of our homes, in

2008 we became the first national homebuilder to make a broad commitment to building ENERGY STAR certified homes. In

2024, we achieved the significant milestone of over 200,000 ENERGY STAR certified new homes built, more than any other

builder in the nation. By comparison, the U.S. Environmental Protection Agency (“EPA”) estimates that fewer than 12% of

new homes nationwide meet ENERGY STAR certification standards.

ENERGY STAR is a voluntary EPA and Department of Energy program that seeks to help consumers, businesses and

industry save money and protect the environment through the adoption of energy-efficient products and practices. According to

the EPA, ENERGY STAR certified new homes achieve on average up to 20% energy-efficiency improvement compared to

new homes built to local code, and even more compared to resale homes without certification. Each 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.

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. We are also building all-electric homes in many areas across the country per local

requirements and conditions. Each all-electric home produces approximately 3,800 pounds less CO2 per year compared to dual-

fuel homes, minimizing the GHG emissions generated over the life cycle of our homes.

GHG Emission Goal. In 2020, we set a goal to lower the estimated GHG emissions (metric tons per year) produced

through the use of our average home built in 2025 by 0.5 metric tons per year, or 8%, from the estimated 6 metric tons per year

average for a KB home built in 2020. We use the Home Energy Rating System (HERS®) Index to measure our progress, as

each point reduction in the HERS Index equates to a 1% improvement in energy efficiency relative to a standard new home and

potentially produces an average of 0.1 metric tons less GHG emissions (as calculated based on the states in which we operate).

Accordingly, our goal was to lower our national average HERS Index score by five points, from 50 for 2020 to 45 for 2025.

We achieved a HERS Index score of 45 in 2024, a year earlier than we targeted. For comparison, a typical resale home today

has a HERS Index score of 130.

Water Conservation. As a homebuilder operating in some of the most water-challenged regions of the country, we also

prioritize water conservation. We provide water-saving features in our homes that reduce our homeowners’ bills and may help

to mitigate strain on local communities’ water resources. As water availability is an important consideration for local

governments in approving new-home developments, we believe our leadership in this area has positioned us to effectively

address water-related development concerns and help preserve this critical resource.

We were the first national homebuilder to join the EPA’s WaterSense® program, which is a voluntary partnership program

that is both a label for water-efficient products and a resource for helping conserve water, and have made a commitment to

using WaterSense labeled products in our homes. 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

typical new home. In July 2022, we committed to building WaterSense labeled homes in all our future Arizona, California and

Nevada communities.

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. 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 homes also feature interior door hardware with antimicrobial protection that helps reduce the spread of bacteria and germs.

Awards and Recognition. We have been recognized with major national awards for our consistent leadership and

commitment, including:

•2024 ENERGY STAR Partner of the Year – Sustained Excellence Award – This was our 14th consecutive award for

demonstrating leadership in building highly energy-efficient homes;

•2024 ENERGY STAR Market Leader Awards – We set a new industry record by earning an unprecedented 30 awards,

more than any other homebuilder;

•2024 WaterSense Sustained Excellence Award – We were once again the only national homebuilder to receive this

honor in 2024, which is the highest level of recognition given by the EPA WaterSense program. 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.

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. 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. Safety is a priority for our employees, our homebuyers and our independent

contractors. To monitor our independent contractors’ compliance with their safety obligations, we track nearly 50 checkpoints

across key aspects of jobsite safety, including safety documentation, personal protective equipment, scaffolding and ladders, fall

protection, trenching and excavation, hazard assessment protocol, first aid and emergency plan, electrical safety and material

safety. In addition to our on-site construction managers conducting safety inspections weekly, each operating division has a

designated representative who has successfully completed the Occupational Safety and Health Administration’s 30-hour

training course which provides supervisors with a greater depth and variety of training on an expanded list of topics associated

with the recognition, avoidance, abatement, and prevention of workplace hazards. 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 KB Cares philanthropic program has four key focus

areas: shelter, community, sustainability/environment and construction skills/employment. KB Cares helps to build strong

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. 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. In 2023, we partnered with the National Forest Foundation and

their mission to plant 50 million trees to help restore public lands, and conserve America’s mature and old growth forests. As

noted above under “Human Capital Resources,” we 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.

We have a Supplier Code of Conduct that builds upon the principles, guidelines and standards within our Ethics Policy,

including operating in accordance with applicable laws; treating all workers fairly and with dignity and respect; and providing a

clean, safe and healthy work environment without the use of any involuntary or forced labor. Our Supplier Code of Conduct

also encourages our suppliers to operate in an efficient and environmentally responsible manner, conserve natural resources and

minimize waste and the use of environmentally harmful materials.

Corporate Governance. Our board of directors maintains a robust governance framework and leading practices to oversee

the management of our business and, among other things, oversees our sustainability initiatives as part of our overall business

strategy. 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. Since 2021, many stockholder dialogues included discussions on our sustainability-focused programs. 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.

More information concerning our corporate governance can be found in our Proxy Statement for the 2025 Annual Meeting

of Stockholders (“2025 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. These requirements often provide broad discretion to government authorities, and they could be interpreted or revised in

ways that delay or prohibit project development or home sales, and/or make these activities more costly. The costs to comply,

or associated with any noncompliance, are, or can be, significant and variable from period to period. 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.

Under applicable environmental laws (including those aimed at protecting against climate change impacts), we may be

responsible for, among other things, removing or remediating hazardous or toxic substances even where we were not aware of

their presence or on land we previously owned. In addition to incurring clean-up costs, the presence of harmful substances on

or near our properties may prevent us from performing land development or selling homes. Also, we are subject to federal,

state and local rules that can require us to undertake extensive measures to prevent or minimize discharges of stormwater and

other materials from our communities, and to protect wetlands and other designated areas.

As part of our due diligence process for land acquisitions, we often use third-party environmental consultants to investigate

potential environmental risks, and we require disclosures, representations and warranties from land sellers regarding

environmental risks. 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. To the extent

contamination or other environmental issues have occurred in the past, we will attempt to recover restoration costs from third

parties, such as the generators of hazardous waste, land sellers or others in the prior chain of title and/or their insurers.

However, despite these efforts, there can be no assurance that we will avoid material liabilities relating to the existence or

removal of toxic wastes, site restoration, monitoring or other environmental matters affecting properties currently or previously

owned or controlled by us, and no estimate of any potential liabilities can be made.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership

reports on Forms 3, 4 and 5 and proxy statements, as well as all amendments to those reports are available free of charge

through our investor relations website at investor.kbhome.com, as soon as reasonably practicable after such reports are

electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). They can also be found at the SEC

website at www.sec.gov. We will also provide these reports in electronic or paper format free of charge upon request made to

our investor relations department at [email protected] or at our principal executive offices. We intend for our

investor relations website to be the primary location where investors and the general public can obtain announcements

regarding, and can learn more about, our financial and operational performance, business plans and prospects, our board of

directors, our senior executive management team, and our corporate governance policies, including our articles of

incorporation, By-Laws, corporate governance principles, board committee charters, and ethics policy. We may from time to

time choose to disclose or post important information about our business on or through our investor relations website, and/or

through other electronic channels, including social media outlets, such as Facebook® (Facebook.com/KBHome) and X®

(Twitter.com/KBHome), and other evolving communication technologies. The content available on or through our primary

website at www.kbhome.com, our investor relations website, including our sustainability reports, Human Rights Statement,

Supplier Code of Conduct and other governance policies, or social media outlets and other evolving communication

technologies is not incorporated by reference in this report or in any other filing we make with the SEC, and our references to

such content are intended to be inactive textual or oral references only.

Item 1A.RISK FACTORS

Although we have operated through a number of varying economic cycles, there are several risks that could affect our

ability to conduct our business, which we discuss below. If any of these risks materialize, they could, among other things, (a)

materially and adversely impact our results of operations and consolidated financial statements; and (b) cause our results to

differ materially from the forward-looking and other statements we make in our SEC filings; in our news releases and other

public reports and communications, including those we post on or make available through our websites or other electronic

channels; or orally through our personnel and representatives. 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. The following could negatively affect consumer demand for our products, thereby unfavorably

impacting our net orders, homes delivered, average selling prices, revenues and/or profitability:

•Soft or negative economic or housing market conditions. 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. 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. 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. 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 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. 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. Consumers may be reluctant to

purchase a home compared to housing alternatives (such as renting apartments or homes, or remaining in their existing

home) due to location or lifestyle preferences, affordability and home selling price perceptions (particularly in markets

that experienced rapid home price appreciation), employment instability or otherwise. Consumers may also decide not

to search for a new home, or cancel their home sales contracts with us, due to economic or personal financial

uncertainty. 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. 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. 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. Their ability to obtain a mortgage loan is largely subject to prevailing interest

rates, lenders’ credit standards and appraisals, and the availability of government-supported programs, such as those

from the Federal Housing Administration, the Veterans Administration, Federal National Mortgage Association (also

known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (also known as Freddie Mac). 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.

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. 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. We depend on third-party lenders, including GR Alliance Ventures, LLC (“GR Alliance”), a

subsidiary of Guaranteed Rate, Inc. and our third-party partner in KBHS, to provide mortgage loans to our

homebuyers, unlike homebuilders with a wholly-owned mortgage lender. 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. In addition, if GR Alliance or

KBHS perform poorly and our customers use another lender, the income from and value of our KBHS equity interest

would decline.

•Adverse tax law changes. If federal or state laws are changed to eliminate or reduce the income tax benefits associated

with homeownership, such as personal tax deductions for mortgage interest costs and real estate taxes, the after-tax

cost of homeownership could measurably increase and diminish consumer interest in buying a home, as could

increases in personal income tax rates. At the same time, favorable tax law changes will not necessarily increase

demand or allow for higher selling prices for homes generally or for the homes we sell.

•Competition. We face significant competition for customers from other homebuilders, sellers of resale homes and

other housing industry participants, including single-family and other rental-housing operators. This competitive

environment may, among other things, cause us to reduce our home selling prices or offer other concessions to attract

or retain buyers. 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. 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. As discussed above under Item 1 – Business in this report, we historically have experienced fluctuations

in our quarterly operating results with measurably more homes delivered and revenues generated in our third and

fourth fiscal quarters. However, as was the case in recent years, this pattern may not continue in the future at all or to

the same degree as in the past.

•Inflation. Since 2021, product and labor costs and general inflation in the economy have increased and remained

elevated compared to the prior decade. 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. 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”).

While we attempt to pass on increases in our costs through increased selling prices, including for design choices and

options, market forces and buyer affordability constraints can limit our ability to do so. If we are unable to raise

selling prices enough to compensate for higher costs, or our borrowing costs increase significantly, our revenues,

housing gross profit margin and net income could be adversely affected.

Supply Risks. 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. 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.

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.

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. 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. 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. In an effort to manage our build times and deliver homes to our

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. 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. Our business needs considerable cash to, among other things, acquire and develop

land, build homes and provide customer service. We expect to meet our needs with existing cash, future operational

cash flow, our Credit Facility and unsecured letter of credit facility with certain financial institutions (“LOC Facility”),

or outside sources, including loans that are specifically obtained for, or secured by, particular communities or other

inventory assets, which we refer to as “project financing.” However, outside financing may be unavailable, costly and/

or considerably dilute stockholders. For instance:

◦Tight or volatile capital or financial market conditions may hinder our ability to obtain external financing or

performance bonds, or use or expand our Credit Facility and LOC Facility, on favorable terms or at all. 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. This may require us to refinance or restructure our debt, which we may be unable to do on

favorable terms or at all.

◦Our debt and ratio of debt to capital levels could require us to dedicate substantial cash flow to debt service;

inhibit our ability to respond to business changes or adjust our debt maturity schedule; curb execution on our

current strategies; and/or make us more vulnerable in a downturn than our less-leveraged competitors. 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 land inventory’s value depends on market conditions, including our estimates of

applicable future demand and revenue generation. If conditions deteriorate during the typically significant amount of

time between our acquiring ownership/control of land and delivering homes on that land; if we cannot sell land held

for sale at its estimated fair value; or if we make strategic changes, we may need to record inventory-related charges.

We may also record charges if we decide to sell land at a loss or activate or sell land held for future development.

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). 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. 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. For example, the U.S., European Union and other countries

have imposed wide-ranging sanctions on Russian business sectors, financial organizations, individuals and raw

materials due to the military conflict in Ukraine that, in combination with restrictions caused by the hostilities,

contributed to higher costs and shortages of building materials. Military conflicts and other attacks in the Middle East

region, including in or near shipping channels, may have a similar impact on the cost and availability of raw or

finished building materials and components. Further, the new U.S. presidential administration has promoted plans to

raise tariffs and pursue other trade policies intended to restrict imports. In addition, shortages or rising prices of

building materials may ensue from manufacturing defects, resulting in recalls of materials. If such disputes continue

or recalls occur, our costs and supply chain disruptions, as described above, could increase further.

•Poor contractor availability and performance. 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. If qualified contractors are not available (due

to general shortages in a tight labor market, competition from other builders or otherwise), or do not timely perform,

we may incur production delays and other inefficiencies, or higher costs for substitute services. Also, if our trade

partners’ work or materials quality does not meet our standards, we could face more home warranty and construction

defect claims, and they or their insurers may not be able to cover the associated repair costs.

•Potential expansion of employment-related obligations. Governmental agencies or others might assert that we should

be subjected to California law and associated regulations that, in certain circumstances, impose responsibility upon

direct contractors for certain wages and benefits that subcontractors of the direct contractor have failed to pay to their

employees. It might also be alleged that California law and regulations impose other liabilities upon us with respect to

the employees of our trade partners. Further efforts in California or elsewhere to impose such external labor-related

obligations on us could create substantial exposure for us in situations beyond our control.

Strategy Risks. 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. 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. We may also incur higher costs, or experience sourcing or supply chain

disruptions that result in extended times to build our homes, as compared to other homebuilders due to our commitment to

sustainability. However, we expect there could be an unfavorable reputational impact if we do not maintain our sustainability

programs, including if we decide not to construct homes that are designed to be ENERGY STAR certified or are otherwise as

energy efficient as those we currently build; fail to achieve ENERGY STAR certification or any other voluntarily elected or

mandatory energy-efficiency standard for our homes, which has occurred in a few instances in recent years; or if we fail to meet

our sustainability objectives. 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. We generate the highest proportion of

our revenues from and make significant inventory investments in our California operations. 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. 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. Though the extent is uncertain and none of our communities or operations have been directly affected as

of the date of this report, given the scope of the unprecedented wildfires in the Los Angeles County area in January 2025, we

may experience some disruption in our homebuilding activities, and potentially with our orders and homes delivered, in the

Southern California region during the year and beyond.

Also, California’s highly regulated and litigious business environment has made the state an increasingly difficult place for

us to operate. This includes implementing regulations under the state’s Global Warming Solutions Act of 2006 intended to

lower GHG emissions. For instance, we have and will continue to incur higher construction costs because of a state law

requirement that effectively requires that all newly-built homes have solar power systems, and we may be unable to offset

(through customer leases) or cover such costs through selling price increases due to competition and consumer affordability

concerns. 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. 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. In addition, the state’s energy commission issued new energy efficiency standards requiring all new

residences to be electric-ready for heating, cooling, cooking, clothes drying and water heating systems. 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.

These efforts have and could further significantly increase our land acquisition and development costs and, along with

competition from other homebuilders and investors for available developable land, limit our California operations’ growth,

while making new homes less affordable to potential buyers in the state, including as a result of its public utilities commission’s

decision to significantly reduce net metering payments to homeowners for the rooftop solar power they export to the grid from

systems installed.

Climate Risk. 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. Experiencing or addressing the

various risks from climate change may significantly reduce our revenues and profitability, or cause us to generate losses. For

instance, incorporating greater resource efficiency into our home designs, whether to comply with upgraded building codes or

recommended practices given a region’s particular exposure to climate conditions, or undertaken to satisfy demand from

increasingly environmentally conscious customers or to meet our own sustainability goals, often raises our costs to construct

homes. 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. We weigh the impact of the costs associated with

offering more resource-efficient products against our priorities of generating higher returns and delivering homes that are

affordable to our core first-time and first move-up buyers. We also consider whether our buyers may face higher costs for, or

may be unable to obtain, fire, flood or other hazard insurance coverage in certain areas due to local environmental conditions or

historical events. 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. 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.

Beyond the commercial pressures implicated by climate change concerns, our operations in any of our served markets may

face potential adverse physical effects. 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. In addition, based on an Arizona state order in June 2023, new

housing subdivisions will not be permitted in some parts of Phoenix unless developers, like us, secure water supplies other than

local groundwater. 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.

As discussed above under “Strategy Risks,” and below under “Legal and Compliance Risks,” international, federal, state

and local authorities and legislative bodies have issued, implemented or proposed regulations, penalties, standards or guidance

intended to restrict, moderate or promote activities consistent with resource conservation, GHG emission reduction,

environmental protection or other climate-related objectives. Compliance 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.

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. 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. To the extent other jurisdictions or the state

adopt such bans and as we implement the state’s all-electric readiness requirements, as discussed above, we will face similar

issues.

Though practically available technology and resources allow us only to make certain estimates, and not definitive

measurements, of the effectiveness and overall impact of our longstanding and broad-based environmental sustainability

initiatives described above under “Sustainability Principles and Practices,” we feel these initiatives and their evolution over

time represent how we can best address climate change risks in the context of our business, industry and the wider, and rapidly

changing, economic, social and political environment. However, climate change is an intrinsically complex global phenomenon

with inherent residual risks across its physical, regulatory and adaptation/transition dimensions that cannot be mitigated given

their wide-ranging, (sometimes unexpectedly) interdependent and largely unpredictable potential scope, nature, timing or

duration. Therefore, though we have not as of the date of this report identified or experienced any particular material impact,

whether singular or in combination, to our consolidated financial statements from climate change or the associated regulatory,

physical, transition and other risks discussed above, we cannot provide any assurance that we have or can successfully prepare

for, or are or will be able to reduce or manage any of them to the extent they may arise.

Further, we expect that as concerns about climate change and other environmental issues continue to increase,

homebuilders will be required to comply with new and extensive laws and regulations, including recently enacted climate

disclosure laws in California as well as any climate-related disclosure rules that may be adopted by the SEC, each of which we

anticipate will result in additional significant compliance costs. In October 2023, California enacted the Climate Corporate

Data Accountability Act (“SB-253”), which mandates the disclosure of GHG emissions, including Scope 1, Scope 2 and Scope

3 emissions; and the Climate-Related Financial Risk Act (“SB-261”), which mandates the disclosure of climate-related

financial risks, and measures adopted to reduce and adapt to such risks. While the state enacted SB-219 in September 2024 that

amends certain aspects of SB-253 and SB-261, California law currently requires initial disclosures in 2026. California also

enacted a third climate-disclosure law that requires entities that operate in the state and make net zero emissions claims, carbon-

neutral claims or significant GHG reduction claims to disclose, starting in 2024, information about those claims and the

purchase or use of voluntary carbon offsets used to achieve those claims.

We may also experience substantial negative impacts to our business if an unexpectedly severe weather event or natural

disaster damages our operations or those of our suppliers or independent contractors in our primary markets, such as in

California, Florida, Nevada and Texas, or from the unintended consequences of regulatory changes that directly or indirectly

impose substantial restrictions on our activities or adaptation requirements. 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. 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. Though we have

insurance coverage to partially reduce our exposure, it is limited and costly, in part due to a shrinking provider market, and we

have high self-insured retentions that are expected to increase. We self-insure some of our risk through a wholly-owned

insurance subsidiary.

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.

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. 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.

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. At the same time, the

legislation newly tied qualifying for the Section 45L tax credit on and after January 1, 2023 to new homes achieving ENERGY

STAR certification. Internal Revenue Service (“IRS”) guidance set a qualifying ENERGY STAR version that makes it more

costly to satisfy the Section 45L requirements. Subject to future guidance, regulation or legislation, we have opted to build

homes in many of our markets beginning in 2025 to an alternate version of ENERGY STAR under which our homes delivered

will continue to be highly energy efficient and qualify for ENERGY STAR certification but not qualify for Section 45L tax

credits, as we believe the additional costs necessary for some of our homes to satisfy the higher Section 45L standards outweigh

the possible benefits from meeting them for both our business and our buyers. Therefore, we expect to realize fewer such tax

credits compared to prior periods. Further, should the Section 45L tax credit be reduced or repealed, or if the qualification

standards are revised, or we adjust how we build our homes, such that even fewer of our homes qualify for the Section 45L or

other energy efficiency-related tax credits, our income tax rate and expense would likely increase, which would reduce our net

income and cash flow and may have a material adverse impact on our consolidated financial statements.

Our realization of our deferred tax assets depends on our generating sufficient future taxable income, which may not occur.

Also, our deferred tax assets’ value can increase or decrease with: (a) changes in the federal corporate income tax rate; (b) our

undergoing a “change of ownership” under federal tax rules, which would significantly reduce and possibly eliminate their

value; and (c) adjustments in statutory or taxing authority treatment of such assets.

We have filed our tax returns based on certain positions we believe are appropriate, and we may owe additional taxes if

taxing authorities disagree with those positions.

Human Capital Risks. Our directors, officers and employees are important resources. If we cannot attract, retain and

develop talent at reasonable pay and benefits levels, or, alternatively, if we need to implement personnel or compensation

reductions, our performance, profitability and ability to achieve our strategic goals could be significantly impaired. In addition,

in many of our served markets, we need to have personnel with certain professional licenses, including building contractor and

real estate brokerage licenses. Our home selling and construction activities may be severely disrupted or delayed if we do not

have sufficient licensed individuals in our workforce.

Information Technology and Information Security Risks. We use IT resources to carry out important operational activities

and maintain our business records. Third parties provide and maintain many of our IT resources, including disaster recovery

and business continuity services intended to safeguard access to and use of our IT resources during a general or local network

outage, under agreements with evolving security and service level standards. 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

2025. 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. 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. 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. 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. For these defenses, we rely on a combination of artificial intelligence, machine

learning computer network monitoring, malware and antivirus resources, firewall systems, vendor cloud service defenses,

internet address and content filtering monitoring software that secures against known malicious websites and potential data

exfiltration, and a variety of cyber intelligence threat monitoring sources that provide ongoing updates, all provided from 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 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. 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.

However, our, GR Alliance’s and our service providers’ measures may be inadequate and possibly have operational or

security vulnerabilities that could go undetected for some period of time. 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. 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. We may

incur significant expenses to resolve such issues. While, to date, we have not had a significant cybersecurity breach or attack

that had a material impact on our business or consolidated financial statements, there can be no assurance our efforts to

maintain the security and integrity of these systems will be effective or that attempted security breaches, cyber-attack, data theft

or disruptions would not occur in the future, be successful or damaging.

Beyond our service providers, we depend on independent third parties to handle certain processes required to complete land

purchases and home closings, including title insurers and escrow/settlement companies. Should these third parties, as well as

independent mortgage lenders and other firms involved in real property transactions, experience their own cybersecurity

incidents or IT resource failures that disrupt or prevent their performance of necessary real estate transaction services, our

ability to close on land transactions or our customers’ ability to close on their homes, as well as our production schedules and

delivery forecasts, may be significantly disrupted and have a material impact on our operations or consolidated financial

statements, including by causing home sales contract cancellations.

Legal and Compliance Risks. As discussed above under Item 1 – Business in this report, our operations are subject to

myriad legal and regulatory requirements, which can delay our operational activities, raise our costs and/or prohibit or restrict

homebuilding in some areas. These requirements often provide broad discretion to government authorities, and they could be

interpreted or revised in ways unfavorable to us. The costs to comply, or associated with any noncompliance, are, or can be,

significant and variable from period to period. 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. We could incur penalties and/or be restricted from developing or building at certain community locations during or

as a result of such agencies’ investigations or findings.

Additionally, we are involved in legal, arbitral or regulatory proceedings or investigations incidental to our business, the

outcome or settlement of which could result in material claims, losses, monetary damage awards, penalties, or other direct or

indirect payments recorded against our earnings, or injunctions, consent decrees or other voluntary or involuntary restrictions or

adjustments to our business operations or practices. Any adverse results could be beyond our expectations, insurance coverages

and/or accruals at particular points in time. Unfavorable outcomes, as well as unfavorable investor, analyst or news reports

related to our industry, company, personnel, governance or operations, may also generate negative publicity, including on social

media and the internet, damaging our reputation and resulting in the loss of customers or revenues. We may also face similar

reputational impacts if our sustainability initiatives or objectives and/or our social or governance practices do not meet the

standards set by investors or third-party rating services. Additionally, low third-party ratings could result in our common stock

being excluded from certain indexes or not being recommended for or selected by investors with certain mandates or priorities.

To reduce the risks and expected significant costs of defending intra-corporate proceedings in multiple venues and to help

ensure that such matters are considered within a well-established body of law, our By-Laws provide that, subject to certain

exceptions, Delaware state courts are the exclusive forum for specified internal corporate affairs actions and federal courts are

the exclusive forum for any action asserting a claim arising under the Securities Act of 1933, as amended. 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).

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 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. We have incurred costs in an effort to address these data privacy

risks and requirements, and our costs may increase significantly as risks become increasingly complex or if new or changing

requirements are enacted, and based on how individuals exercise their rights. Despite our efforts, any noncompliance could

result in our incurring substantial penalties and reputational damage.

KBHS’ operations are heavily regulated. If GR Alliance, which oversees KBHS’ operations, or KBHS is found to have

violated regulations, or mortgage investors demand KBHS repurchase mortgage loans it has sold to them, or cover their losses,

for claimed contract breaches, KBHS could face significant liabilities, which, if they exceed its reserves, could result in our

recognizing losses on our KBHS equity interest.

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. 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 reputation, business, financial performance and growth.

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.UNRESOLVED STAFF COMMENTS

None.

Item 1C.CYBERSECURITY

Risk Management and Strategy. We have policies and procedures for identifying, assessing and managing material risks

associated with cybersecurity threats. To help protect our IT resources, we have instituted administrative, physical and

technical controls and processes and commissioned third-party assessments. 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; 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. 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.

We evaluate, and adjust as determined appropriate, our cybersecurity strategies and measures based on the above-noted

threat monitoring sources, learnings from periodic incident response tabletop exercises in which members of senior

management participate; penetration tests and scanning exercises; and an annual cybersecurity and/or cloud security risk

assessment conducted with help from outside experts informed by the National Institute of Standards and Technology

Cybersecurity framework. Our IT function also undertakes a specific risk review, assisted in part by independent consultants

and other third parties, that is integrated into the overall annual enterprise risk management assessment the board of directors’

audit and compliance committee oversees. Our internal audit department incorporates the results from this risk review, and

cybersecurity-related enhancements identified through the review, in designing and conducting its IT function audits, in some

cases with a third-party firm’s assistance.

To support the ongoing identification and management of cybersecurity issues, all employees are required to complete

cybersecurity awareness training, including social engineering, password best practices, data classification and phishing

awareness, with additional training for handling of customer personal information. We also publish a monthly security

awareness newsletter along with performing ongoing internal phishing assessments.

We also consider and evaluate cybersecurity risks associated with KBHS and third-party service providers that we have

identified as having the greatest potential to expose us to cybersecurity threats. We have established due diligence procedures

with KBHS and such third-party service providers, as well as communication channels as part of their breach and incident

response processes. 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,

data privacy and notification processes, onboarding processes, incident response procedures and periodic independent testing of

the vendor capabilities. We depend on our third-party service providers, KBHS and outside service providers to our customers

with whom we share some personal identifying and confidential information to secure the information they receive from us.

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. 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. 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. Our chief

information officer (“CIO”) periodically provides this review to the audit and compliance committee, with the most recent

review conducted in January 2025. 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.

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. This team also

maintains other policies and procedures concerning cybersecurity matters, such as encryption standards, antivirus protection,

remote access, multifactor authentication, data classification, confidential information and the use of the internet, social media,

email and wireless devices. We also maintain insurance coverage for cybersecurity insurance as part of our overall insurance

portfolio.

Our IT systems have faced a variety of phishing, denial-of-service and other attacks. Although we have not identified any

cybersecurity incidents during the fiscal years covered by this report that have materially affected or are reasonably likely to

materially affect our business strategy, consolidated results of operations or consolidated financial condition, we can provide no

assurance that our security measures will be successful and therefore we may experience a cybersecurity incident that materially

affects our business strategy, consolidated results of operations, consolidated financial condition or reputation, including, but

not limited to those described above. For more information about the cybersecurity risks we face, see Item 1A – Risk Factors.

Item 2.PROPERTIES

None.

Item 3.LEGAL PROCEEDINGS

Our legal proceedings are discussed in Note 18 – Legal Matters in the Notes to Consolidated Financial Statements in this

report.

Item 4.MINE SAFETY DISCLOSURES

Not applicable.

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. Mezger	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. 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. Mezger has served as a director since 2006.

There is no family relationship between any of our executive officers or between any of our executive officers and any of

our directors.

PART II

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.

Information regarding the shares of our common stock that may be issued under our equity compensation plans is provided

below under Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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. 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. 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. 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. These transactions are not considered

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. All dollar amounts presented in the table above and in this report related to our share repurchases and our share

repurchase authorizations exclude such excise taxes, to the extent applicable, unless otherwise indicated.

Stock 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. 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. 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]

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. 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

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.

RESULTS OF OPERATIONS

Overview. Revenues are generated from our homebuilding and financial services operations. The following table presents

a summary of our consolidated results of operations (dollars in thousands, except per share amounts):


	Years Ended November 30,			Variance
	2024	2023	2022	2024 vs 2023	2023 vs 2022
Revenues:
Homebuilding	$6,902,239	$6,381,106	$6,880,362	8%	(7)%
Financial services	27,847	29,523	23,414	(6)	26
Total	$6,930,086	$6,410,629	$6,903,776	8%	(7)%
Pretax income:
Homebuilding	$802,028	$731,783	$1,033,615	10%	(29)%
Financial services	48,890	39,494	38,451	24	3
Total	850,918	771,277	1,072,066	10	(28)
Income tax expense	(195,900)	(181,100)	(255,400)	(8)	29
Net income	$655,018	$590,177	$816,666	11%	(28)%
Earnings per share:
Basic	$8.70	$7.25	$9.35	20%	(22)%
Diluted	$8.45	$7.03	$9.09	20%	(23)%

In 2024, our operational execution contributed to year-over-year increases in total revenues, net income and diluted

earnings per share. Our performance for the year reflected, among other things, key longer-term housing market drivers

remaining largely positive, including favorable demographic trends, rising household formations, solid employment, wage

growth and the ongoing undersupply of new and resale homes. At the same time, affordability constraints stemming largely

from rising mortgage interest rates tempered buyer demand in 2024.

Our net orders in 2024 increased 18% year over year to 13,093, and the pace of monthly net orders per community rose to

4.4 from 3.8 in 2023, despite uneven market conditions during the current year that were driven primarily by buyer discomfort

with volatile mortgage interest rates, persistent inflationary pressures and general economic concerns. To navigate this business

environment, we focused on balancing pace, price and construction starts at each community to optimize our return on each

inventory asset within its market context. With this approach, we implemented price increases in most of our communities in

the 2024 first half, selectively adjusted prices at certain communities in the third quarter to help stimulate demand, and, given

our backlog entering the period, held prices relatively stable in the seasonally slower fourth quarter. Additionally, we continued

to employ targeted sales strategies throughout the year, as we have to varying degrees since the 2022 second half, including

homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydowns), to help drive order activity

and minimize cancellations, especially during periods of rising mortgage interest rates. Reflecting these actions, and relatively

soft net order levels in the year-earlier quarter, our 2024 fourth quarter net orders and net order value each grew 41% year over

year, with all of our homebuilding reporting segments generating increases. 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.

Homebuilding revenues for 2024 and 2023 were comprised of housing revenues and land sale revenues. Housing revenues

of $6.90 billion grew 8% from the previous year, due to a 7% increase in the number of homes delivered to 14,169 and a slight

increase in the overall average selling price of those homes to $486,900. Approximately 50% of our homes delivered in 2024

were to first-time homebuyers. Homebuilding operating income for 2024 increased 6% to $763.9 million, compared to $718.7

million for 2023 and, as a percentage of homebuilding revenues was 11.1%, compared to 11.3%. Our homebuilding operating

income margin for 2024 primarily reflected a 20 basis point decrease in our housing gross profit margin to 21.0%, as selling,

general and administrative expenses as a percentage of housing revenues were nearly even with the prior year at 10.0%. Net

income and diluted earnings per share for 2024 grew 11% and 20%, respectively, each as compared to 2023. The increase in

diluted earnings per share for 2024 was driven by higher net income and the favorable impact of our common stock repurchases

over the past several quarters.

Our return on equity (“ROE”) for 2024 was 16.6%, compared to 15.7% for 2023. ROE is calculated as net income for the

year divided by average stockholders’ equity, where average stockholders’ equity is based on the ending stockholders’ equity

balances of the trailing five quarters.

We believe our strong balance sheet and liquidity position helped provide us with the flexibility to operate effectively

through the evolving market conditions during the year and pursue our priorities of investing in land and land development to

support future growth and returning capital to our stockholders. In 2024, we continued to take a balanced approach in

allocating our capital aligned with these priorities. Our investments in land and land development for 2024 increased 58% year

over year to $2.84 billion. In addition, we repurchased approximately 4.7 million shares of our common stock at a total cost of

$350.0 million, which represented about 6% of our shares that were outstanding at the start of the year, and in the 2024 second

quarter, our board of directors increased the quarterly cash dividend on our common stock by 25% to $.25 per share, from $.20

per share. We paid a cash dividend at this higher rate in the 2024 second, third and fourth quarters. We ended 2024 with total

liquidity of $1.68 billion, comprised of $598.0 million of cash and cash equivalents and $1.08 billion of available capacity

under our Credit Facility. We had no cash borrowings outstanding under the Credit Facility at November 30, 2024.

Reflecting our increased investments in land and land development, we ended 2024 with 258 active communities, up 7%

year over year. Although the number of homes in our ending backlog at November 30, 2024 was down 20% year over year to

4,434, mainly reflecting a 28% improvement in our 2024 average build time, we believe we are well-positioned for 2025, as

described below under “Outlook.”

HOMEBUILDING

Financial Results. 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


	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. Homebuilding revenues of $6.90 billion for 2024 grew 8% from the prior year due to an increase in housing

revenues, partly offset by a decrease in land sale revenues.

In 2024, housing revenues grew 8% from the previous year, reflecting a 7% increase in the number of homes delivered and

a slight increase in their overall average selling price. The year-over-year growth in the number of homes delivered reflected

increases of 28%, 9% and 7% in our West Coast, Southeast and Southwest homebuilding reporting segments, respectively,

partially offset by a 10% decrease in our Central segment. The slightly higher average selling price primarily resulted from the

combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-

priced West Coast homebuilding reporting segment, and a decrease in homebuyer concessions.

We generated $3.6 million of land sale revenues in 2024, compared to $10.7 million of such revenues in 2023. Generally,

land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based

upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in

particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market

conditions.

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. 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. As a percentage of homebuilding revenues, our homebuilding operating income for 2024 decreased

20 basis points year over year to 11.1%, mainly due to a lower housing gross profit margin. Excluding inventory-related

charges for both periods, our homebuilding operating income margin declined 30 basis points to 11.1% in 2024 from 11.4% in

2023.

•Housing Gross Profits – In 2024, housing gross profits of $1.45 billion grew 7% from the previous year, reflecting an

increase in housing revenues, partly offset by a decrease in our housing gross profit margin. Housing gross profits for

2024 and 2023 included inventory-related charges associated with housing operations of $4.6 million and $11.4

million, respectively.

Our housing gross profit margin for 2024 was 21.0%, down 20 basis points from the previous year, primarily due to

product and geographic mix shifts of homes delivered and higher relative construction and land costs, largely offset by

decreases in both inventory-related charges and homebuyer concessions. As a percentage of housing revenues, the

amortization of previously capitalized interest associated with housing operations was 1.7% for 2024 and 1.9% for

2023. Excluding the inventory-related charges associated with housing operations described above, our adjusted

housing gross profit margin decreased 30 basis points year over year to 21.1% in 2024. The calculation of adjusted

housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is

described below under “Non-GAAP Financial Measures.”

•Land Sale Profits – Land sale profits totaled $1.5 million for 2024, compared to $1.2 million for 2023.

•Selling, General and Administrative Expenses – The following table presents the components of our selling, general

and administrative expenses (dollars in thousands):


	Years Ended November 30,
	2024	% of Housing Revenues	2023	% of Housing Revenues	2022	% of Housing Revenues
Marketing expenses	$158,108	2.3%	$143,577	2.2%	$136,262	2.0%
Commission expenses (a)	238,327	3.5	222,743	3.5	220,466	3.2
General and administrative expenses	290,413	4.2	265,774	4.2	272,917	4.0
Total	$686,848	10.0%	$632,094	9.9%	$629,645	9.2%

(a)Commission expenses include sales commissions on homes delivered paid to internal sales counselors and

external real estate brokers.

Selling, general and administrative expenses for 2024 increased 9% from the prior year. As a percentage of housing

revenues, selling, general and administrative expenses for 2024 were nearly even with 2023, primarily reflecting

higher costs, including marketing and other expenses associated with the increase in our community count during the

year to position our operations for growth, mostly offset by increased operating leverage from higher housing

revenues.

Interest Income/Expense and Other. In 2024, interest income and other was comprised of interest income and a $12.5

million gain associated with the sale of a privately held technology company in which we held an ownership interest. Further

information regarding this gain is provided in Note 11 – Other Assets in the Notes to Consolidated Financial Statements in this

report. In 2023, interest income and other was comprised solely of interest income. Interest income, which is generated from

short-term investments, increased to $19.6 million in 2024, compared to $13.8 million in 2023 due to our higher average

balance of cash equivalents and a higher average interest rate in 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. The amount of interest incurred generally fluctuates based on the average amount of debt

outstanding for the period and the interest rate on that debt. In 2024, total interest incurred of $105.6 million decreased from

$107.1 million in 2023 primarily due to there being no borrowings under the Credit Facility in 2024. All interest incurred

during 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher

than our average debt level for each period. As a result, we had no interest expense for 2024 or 2023. 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. Our equity in income of unconsolidated joint ventures was

$6.0 million for 2024, compared to a nominal equity in loss of unconsolidated joint ventures for 2023. The year-over-year

improvement in 2024 mainly reflected homes delivered by an unconsolidated joint venture in California. In 2023, our

unconsolidated joint ventures did not deliver any homes. 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.

Net Orders, Backlog and Community Count. 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

(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.

(b)Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total

(gross) orders for new homes generated during the same period.

Net Orders. Net orders from our homebuilding operations for the year ended November 30, 2024 grew 18% from the

previous year, reflecting an increase in the pace of monthly net orders per community to 4.4 in 2024, compared to 3.8 in 2023.

The value of our 2024 net orders rose 21% year over year as a result of the net order growth and a 3% increase in the overall

average selling price of net orders to $494,500. In 2024, the year-over-year growth in our overall net order value reflected

increases in each of our homebuilding reporting segments, ranging from 13% in our Southeast segment to 48% in our Central

segment.

Our cancellation rate as a percentage of gross orders for the year ended November 30, 2024 improved year over year,

reflecting buyers’ ability and willingness to close on their homes when available for delivery.

Backlog. The number of homes in our backlog at November 30, 2024 decreased 20% from the previous year mainly due to

a 28% improvement in our 2024 average build time. The potential future housing revenues in our backlog at November 30,

2024 were down 16% year over year, reflecting fewer homes in our backlog, partially offset by a 4% increase in the average

selling price of those homes. Backlog value decreased in each of our four homebuilding reporting segments, with decreases in

value ranging from 5% in our Central segment to 29% in our Southeast segment. Based on our historical experience, a portion

of the homes in backlog will not result in homes delivered due to cancellations.

Community Count. Our average community count for 2024 expanded slightly from the previous year, and our ending

community count grew 7%. 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. Our ending community count for 2024 also reflected a 58% year-

over-year increase in our investments in land and land development for the year, as discussed below under “Liquidity and

Capital Resources.”

HOMEBUILDING REPORTING SEGMENTS

Operational Data. The following tables present information about our homes delivered, net orders, cancellation rates as a

percentage of gross orders, net order value, average community count, and ending backlog (number of homes and value) by

homebuilding reporting segment (dollars in thousands):


	Years Ended November 30,
	Homes Delivered		Net Orders		Cancellation Rates
Segment	2024	2023	2024	2023	2024	2023
West Coast	4,316	3,365	3,982	3,623	14%	17%
Southwest	2,890	2,699	2,645	2,386	10	17
Central	4,051	4,506	3,917	2,784	14	40
Southeast	2,912	2,666	2,549	2,291	19	27
Total	14,169	13,236	13,093	11,084	14%	26%


	Net Order Value			Average Community Count
Segment	2024	2023	Variance	2024	2023	Variance
West Coast	$2,780,631	$2,423,459	15%	80	76	5%
Southwest	1,225,604	1,032,334	19	43	44	(2)
Central	1,427,132	965,994	48	76	79	(4)
Southeast	1,040,528	924,754	13	49	46	7
Total	$6,473,895	$5,346,541	21%	248	245	1%


	November 30,
	Backlog – Homes			Backlog – Value
Segment	2024	2023	Variance	2024	2023	Variance
West Coast	1,211	1,545	(22)%	$874,364	$1,025,381	(15)%
Southwest	1,134	1,379	(18)	532,371	616,717	(14)
Central	1,133	1,267	(11)	436,093	458,593	(5)
Southeast	956	1,319	(28)	400,079	566,988	(29)
Total	4,434	5,510	(20)%	$2,242,907	$2,667,679	(16)%

As discussed above under Item 1 – Business in this report, the composition of our homes delivered, net orders and backlog

shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the

homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing

communities wind down or sell out in the ordinary course. In addition, with our Built to Order model, the selling prices of

individual homes within a community may vary due to differing lot sizes and locations, home square footage, product

premiums and the design choices and options buyers select. These intrinsic variations in our business limit the comparability of

our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year

periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods.

Financial Results. Below is a discussion of the financial results of each of our homebuilding reporting segments. Further

information regarding these segments, including their pretax income (loss), is included in Note 2 – Segment Information in the

Notes to Consolidated Financial Statements in this report. The difference between each homebuilding reporting segment’s

operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint

ventures, which is also presented in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this

report, and/or interest income and expense.

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding

operating income includes the results of Corporate and other, a non-operating segment described in Note 2 – Segment

Information in the Notes to Consolidated Financial Statements in this report. Corporate and other had operating losses of

$149.0 million in 2024, $142.6 million in 2023 and $145.3 million in 2022.

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 following table presents financial information related to our West Coast 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	$2,932,058	$2,321,093	$3,050,506	26 %	(24) %
Construction and land costs	(2,367,008)	(1,888,422)	(2,345,754)	(25)	19
Selling, general and administrative expenses	(195,436)	(165,712)	(184,619)	(18)	10
Operating income	$369,614	$266,959	$520,133	38 %	(49) %
Homes delivered	4,316	3,365	4,186	28 %	(20) %
Average selling price	$679,300	$689,800	$728,700	(2) %	(5) %
Operating income as a percentage of revenues	12.6%	11.5%	17.1%	110bps	(560) bps

In 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. In 2023, revenues

were generated solely from housing revenues. Housing revenues for 2024 grew 26% from 2023 due to an increase in the

number of homes delivered, partly offset by a decrease in their average selling price. Operating income for 2024 was also up

year over year, reflecting higher housing gross profits, partially offset by higher selling, general and administrative expenses.

As a percentage of revenues, this segment’s 2024 operating income increased from the previous year, reflecting a 70 basis-point

expansion in the housing gross profit margin to 19.3% and a 40 basis-point improvement in selling, general and administrative

expenses as a percentage of housing revenues to 6.7%. The housing gross profit margin expansion primarily reflected lower

relative construction and land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer

concessions and product and geographic mix shifts of homes delivered. Inventory-related charges associated with housing

operations decreased to $2.9 million in 2024, compared to $4.9 million in 2023. The year-over-year improvement in selling,

general and administrative expenses as a percentage of housing revenues was mainly due to improved operating leverage from

increased housing revenues, partly offset by higher costs including marketing and other expenses associated with our expanded

community count in this segment.

Southwest. 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%	140bps	(540)bps

This segment’s revenues in 2024 were generated solely from housing revenues. In 2023, revenues were comprised of both

housing revenues and land sale revenues. Housing revenues for 2024 grew 13% year over year, reflecting increases in both the

number of homes delivered and their average selling price. Land sale revenues totaled $6.0 million in 2023. Operating income

rose from the previous year, primarily due to higher housing gross profits, partly offset by higher selling, general and

administrative expenses and the absence of land sale profits in 2024. Land sale profits totaled $1.1 million in 2023. As a

percentage of revenues, operating income increased year over year, primarily due to a 140 basis-point expansion in the housing

gross profit margin to 24.8%, with selling, general and administrative expenses as a percentage of housing revenues nearly even

at 7.4%. The year-over-year improvement in the housing gross profit margin mainly reflected lower relative construction and

land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer concessions, and product and

geographic mix shifts of homes delivered.

Central. The following table presents financial information related to our Central 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	$1,452,794	$1,831,914	$1,749,231	(21) %	5 %
Construction and land costs	(1,136,420)	(1,420,063)	(1,336,986)	20	(6)
Selling, general and administrative expenses	(144,942)	(153,248)	(140,248)	5	(9)
Operating income	$171,432	$258,603	$271,997	(34) %	(5) %

Homes delivered	4,051	4,506	4,339	(10) %	4 %
Average selling price	$357,800	$405,500	$403,100	(12) %	1 %
Operating income as a percentage of revenues	11.8%	14.1%	15.6%	(230)bps	(150)bps

This segment’s revenues in 2024 and 2023 were comprised of both housing revenues and land sale revenues. 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.

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. As a

percentage of revenues, operating income declined from the previous year, reflecting an 80 basis-point decrease in the housing

gross profit margin to 21.7% and a 150 basis-point increase in selling, general and administrative expenses as a percentage of

housing revenues to 10.0%. The year-over-year decline in the housing gross profit margin was mainly driven by higher relative

construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower

housing revenues, partly offset by a decrease in amortization of previously capitalized interest. The housing gross profit margin

for 2024 included inventory-related charges of $.8 million, compared to $2.5 million in 2023. The year-over-year increase in

selling, general and administrative expenses as a percentage of housing revenues was primarily due to reduced operating

leverage from lower housing revenues.

Southeast. The following table presents financial information related to our Southeast 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	$1,207,437	$1,058,151	$970,580	14 %	9 %
Construction and land costs	(956,682)	(815,760)	(731,813)	(17)	(11)
Selling, general and administrative expenses	(107,642)	(95,262)	(86,585)	(13)	(10)
Operating income	$143,113	$147,129	$152,182	(3)%	(3)%

Homes delivered	2,912	2,666	2,621	9 %	2 %
Average selling price	$414,600	$396,900	$370,300	4 %	7 %
Operating income as a percentage of revenues	11.9%	13.9%	15.7%	(200)bps	(180)bps

This segment’s revenues for 2024 and 2023 were generated solely from housing operations. In 2024, housing revenues

grew year over year due to increases in both the number of homes delivered and the average selling price of those homes.

Operating income was down from 2023, reflecting higher selling, general and administrative expenses, partly offset by higher

housing gross profits. As a percentage of revenues, operating income decreased from 2023 primarily due to a 210 basis-point

decline in the housing gross profit margin to 20.8% that mainly reflected higher relative construction and land costs, and

product and geographic mix shifts of homes delivered, partly offset by a decrease in inventory-related charges and improved

operating leverage from higher housing revenues. In 2024, inventory-related charges associated with housing operations were

$.5 million, compared to $4.0 million in 2023. Selling, general and administrative expenses as a percentage of housing

revenues improved 10 basis points year over year to 8.9%.

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


	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.

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. Our financial services pretax income for 2024 grew 24% from the previous year, reflecting an increase in

the equity in income of our unconsolidated joint venture, KBHS, partly offset by a decrease in operating income from our

insurance and title services businesses. In 2024, the equity in income of our unconsolidated joint ventures rose 73% year over

year as a result of an increase in KBHS’ income. 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.

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. 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. Our income tax expense and effective income tax rate were as follows (dollars in thousands):


	Years Ended November 30,
	2024	2023	2022
Income tax expense	$195,900	$181,100	$255,400
Effective income tax rate	23.0%	23.5%	23.8%

Our effective tax rate for 2024 was slightly lower than the previous year, mainly due to a $4.0 million decrease in state

taxes, a $2.4 million increase in excess tax benefits related to stock-based compensation and a $1.5 million decrease in non-

deductible compensation expense, partly offset by a $5.9 million decline in Section 45L tax credits we recognized primarily

from building energy-efficient homes.

The IRA tied Section 45L tax credit qualification for energy-efficient homes built on and after January 1, 2023 to new

homes achieving ENERGY STAR certification. Based on guidance the IRS issued in September 2023, fewer of the ENERGY

STAR homes we build in California meet the heightened qualification standard the IRS selected for homes built in that state

relative to other states. The heightened tax credit qualifications contributed to our recognizing less Section 45L tax credits in

2024 than in 2023. Subject to future guidance, regulation or legislation, we have opted to build homes in many of our markets

beginning in 2025 to an alternate version of ENERGY STAR under which our homes delivered will continue to be highly

energy efficient and qualify for ENERGY STAR certification but not qualify for Section 45L tax credits, as we believe the

additional costs necessary for some of our homes to satisfy the higher Section 45L standards outweigh the possible benefits

from meeting them for both our business and our buyers. Therefore, we expect to realize fewer such tax credits compared to

prior periods, including in 2025 and future years as compared to 2024.

On June 27, 2024, California enacted Senate Bill 167 (“SB-167”), which, among other things, suspended California net

operating loss (“NOL”) utilization and imposed a cap of $5.0 million on the amount of California business incentive tax credits

companies can utilize, effective for tax years beginning on or after January 1, 2024 and before January 1, 2027. This act

suspends our ability to use our California NOLs for the years ended November 30, 2025 through 2027. SB-167 includes an

extended carryover period for the suspended California NOLs with an additional year carryforward for each year of suspension.

This 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. However, it is expected to impact the timing of tax payments, resulting in a higher

amount of taxes paid for the years ended November 30, 2025 through 2027 and a lower amount of taxes paid when the

California NOLs can be utilized.

Under current accounting standards, we expect volatility in our income tax expense in future periods, the magnitude of

which will depend on, among other factors, the price of our common stock and the timing and volume of stock-based

compensation award activity, such as employee exercises of stock options and the vesting of restricted stock awards and

performance-based restricted stock units (each, a “PSU”).

Further information regarding our income taxes is provided in Note 14 – Income Taxes in the Notes to Consolidated

Financial Statements in this report.

NON-GAAP FINANCIAL MEASURES

This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with

generally accepted accounting principles (“GAAP”). We believe this non-GAAP financial measure is relevant and useful to

investors in understanding our operations, and may be helpful in comparing us with other companies in the homebuilding

industry to the extent they provide similar information. However, because it is not calculated in accordance with GAAP, this

non-GAAP financial measure may not be completely comparable to other companies in the homebuilding industry and, thus,

should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by

GAAP. Rather, 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. 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.

Adjusted housing gross profit margin is a non-GAAP financial measure, which we calculate by dividing housing revenues

less housing construction and land costs excluding housing inventory impairment and land option contract abandonment

charges (as applicable) recorded during a given period, by housing revenues. The most directly comparable GAAP financial

measure is housing gross profit margin. We believe adjusted housing gross profit margin is a relevant and useful financial

measure to investors in evaluating our performance as it measures the gross profits we generated specifically on the homes

delivered during a given period. This non-GAAP financial measure isolates the impact that the housing inventory impairment

and land option contract abandonment charges have on housing gross profit margins, and allows investors to make comparisons

with our competitors that adjust housing gross profit margins in a similar manner. 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. This

financial measure assists us in making strategic decisions regarding community location and product mix, product pricing and

construction pace.

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. Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility

and the Term Loan are guaranteed on a joint and several basis by certain of our subsidiaries (“Guarantor Subsidiaries”), which

are listed on Exhibit 22. Our other subsidiaries, including all of our subsidiaries associated with our financial services

operations, do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”), although we may cause a

Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best

interest. See Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report for additional

information regarding the terms of our senior notes, the Credit Facility and the Term Loan.

The guarantees are full and unconditional and the Guarantor Subsidiaries are 100% owned by us. The guarantees are

senior unsecured obligations of each of the Guarantor Subsidiaries and rank equally in right of payment with all unsecured and

unsubordinated indebtedness and guarantees of such Guarantor Subsidiaries. The guarantees are effectively subordinated to

any secured indebtedness of such Guarantor Subsidiaries to the extent of the value of the assets securing such indebtedness, and

structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries.

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.

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. See Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in

this report for additional information regarding our unconsolidated joint ventures.


		November 30, 2024
Summarized Balance Sheet Data (in thousands)		November 30, 2024
Assets
Cash		$543,233
Inventories		4,981,097
Amounts due from Non-Guarantor Subsidiaries		500,321
Total assets		6,657,479

Liabilities and Stockholders’ Equity
Notes payable		1,691,679
Amounts due to Non-Guarantor Subsidiaries		382,356
Total liabilities		2,928,169
Stockholders’ equity		3,729,310


		Year Ended November 30, 2024
Summarized Statement of Operations Data (in thousands)		Year Ended November 30, 2024
Revenues		$6,306,940
Construction and land costs		(4,962,430)
Selling, general and administrative expenses		(653,832)
Interest income from Non-Guarantor Subsidiaries		31,164
Pretax income		753,018
Net income		570,818

LIQUIDITY AND CAPITAL RESOURCES

Overview. We have funded our homebuilding and financial services activities over the last several years with:

• internally generated cash flows;

• public issuances of debt securities;

• borrowings under the Credit Facility;

• the Term Loan;

• land option contracts and other similar contracts and seller notes;

• public issuances of our common stock; and

• letters of credit and performance bonds.

We manage our use of cash in the operation of our business to support the execution of our primary strategic goals. Over

the past several years, we have primarily used cash for:

•land acquisitions and land development;

•home construction;

•operating expenses;

•principal and interest payments on notes payable;

•repayments of borrowings under the Credit Facility;

•dividends paid to stockholders; and

•repurchases of our common stock.

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. Because these costs are

capitalized as a component of our inventories and are not recognized in our statement of operations until a home is delivered,

we incur significant cash outflows prior to recognizing earnings from a delivered home. As homes are delivered, which in

some cases may be a year or more after the related land development or entitlement work commences, cash inflows may

significantly exceed earnings reported for financial statement purposes, as the cash outflows associated with the land and home

construction were previously incurred.

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. 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. 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. We believe that our existing cash and cash equivalents, our anticipated cash flows from

operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related

investment needs for at least the next 12 months.

Cash Requirements. Our material cash requirements include the following contractual and other obligations:

Notes Payable. 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. Future

interest payments associated with the Term Loan and our senior notes, together with the unused commitment fee associated

with our Credit Facility, totaled $421.7 million as of November 30, 2024, with $102.1 million payable within 12 months. The

Term Loan will mature on August 25, 2026. Our next senior note maturity is our $300.0 million in aggregate principal amount

of 6.875% Senior Notes due 2027. Further information regarding our notes payable is provided in Note 15 – Notes Payable in

the Notes to Consolidated Financial Statements in this report.

Leases. 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. Further information regarding our leases is provided in Note 13 – Leases

in the Notes to Consolidated Financial Statements in this report.

Inventory-Related Obligations. 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. 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. Our investments in land and land development increased 58% to

$2.84 billion in 2024, compared to $1.80 billion in 2023. Land acquisition expenditures, which are included in our investments

in land and land development, increased 166% to $1.24 billion from $465.8 million in the year-earlier period. Approximately

44% of our total investments in land and land development in 2024 were related to land acquisitions, compared to

approximately 26% in 2023. 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.

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 standards. While we expect our land acquisition activity to increase in

2025 as compared to 2024, our investments in land and land development in the future will depend significantly on market

conditions and available opportunities that meet our investment return standards.

The following table presents the number of lots we owned or controlled under land option contracts and other similar

contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands):


	November 30, 2024		November 30, 2023		Variance
Segment	Lots	Carrying Value	Lots	Carrying Value	Lots	Carrying Value
West Coast	23,956	$2,915,543	18,220	$2,455,336	5,736	$460,207
Southwest	13,117	845,910	7,017	830,514	6,100	15,396
Central	21,056	839,920	17,328	942,168	3,728	(102,248)
Southeast	18,574	926,647	13,411	905,628	5,163	21,019
Total	76,703	$5,528,020	55,976	$5,133,646	20,727	$394,374

The number and carrying value of lots we owned or controlled under land option contracts and other similar contracts at

November 30, 2024 increased year over year, reflecting land investments in 2024, partly offset by homes delivered and our

abandonment of 8,389 previously controlled lots. The number of lots we owned and controlled as of November 30, 2024

increased 37% from November 30, 2023. The number of lots in inventory as of November 30, 2024 included 18,923 lots under

contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023.

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. Generally, this percentage fluctuates with our decisions to

control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on

available opportunities and our investment return standards.

Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to

Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain

provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar

contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct

after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may

be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development

approvals, and/or physically developing the underlying land by a pre-determined date. 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. 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.

Liquidity. The table below summarizes our total cash and cash equivalents, and total liquidity (in thousands):


	November 30,
	2024	2023
Cash and cash equivalents	$597,973	$727,076
Credit Facility commitment	1,090,000	1,090,000
Letters of credit outstanding under the Credit Facility	(8,260)	(6,650)
Credit Facility availability	1,081,740	1,083,350
Total liquidity	$1,679,713	$1,810,426

Capital Resources. Our notes payable consisted of the following (in thousands):


	November 30,
	2024	2023	Variance
Term Loan	$358,826	$358,156	$670
Senior notes	1,329,704	1,327,934	1,770
Mortgages and land contracts due to land sellers and other loans	3,149	3,808	(659)
Total	$1,691,679	$1,689,898	$1,781

Our financial leverage, as measured by the ratio of debt to capital, improved 130 basis points to 29.4% at November 30,

2024, compared to 30.7% at November 30, 2023. 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. On September 12, 2024, we entered into an amendment to the LOC Facility that increased the limit of letters of

credit we may issue under it from $75.0 million to $100.0 million, and extended the expiration date from February 18, 2027 to

February 13, 2028. As of November 30, 2024 and 2023, we had letters of credit outstanding under the LOC Facility of $73.3

million and $12.5 million, respectively.

Performance Bonds. As discussed in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial

Statements in this report, we had $1.33 billion and $1.32 billion of performance bonds outstanding at November 30, 2024 and

2023, respectively.

Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. 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

amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash

borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the

Credit Facility. 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.

Under the terms of the Credit Facility and the Term Loan, we are required, among other things, to maintain compliance

with various covenants, including financial covenants regarding our consolidated tangible net worth, consolidated leverage ratio

(“Leverage Ratio”), and either a consolidated interest coverage ratio (“Interest Coverage Ratio”) or minimum liquidity level,

each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are

specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from

comparable GAAP or other commonly used terms. 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) $2.09 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

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 Leverage Ratio is calculated as the ratio of our consolidated total indebtedness to the sum of consolidated total

indebtedness and consolidated tangible net worth, all as defined under the Credit Facility and the Term Loan.

•Interest Coverage Ratio or liquidity – We are also required to maintain either (a) an Interest Coverage Ratio of greater

than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both. The Interest

Coverage Ratio is the ratio of our consolidated adjusted EBITDA to consolidated interest incurred, each as defined

under the Credit Facility and the Term Loan, in each case for the previous 12 months. Our minimum liquidity is

required to be greater than or equal to consolidated interest incurred, as defined under the Credit Facility and the Term

Loan, for the four most recently ended fiscal quarters in the aggregate.

In addition, under the Credit Facility and the Term Loan, our equity investments in joint ventures and Non-Guarantor

Subsidiaries and other unconsolidated entities as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million

and (b) 20% of consolidated tangible net worth. 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).

The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants

that we are subject to with respect to our notes payable. 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	>	$3.13billion	$4.02billion
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	$2.87billion

(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 indenture governing our senior notes does not contain any financial covenants. Subject to specified exceptions, the

indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or

engage in sale-leaseback transactions involving property above a certain specified value. In addition, the indenture contains

certain limitations related to mergers, consolidations, and sales of assets.

As of the date of this report, we were in compliance with the applicable terms of all our covenants and other requirements

under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility, and the mortgages and land

contracts due to land sellers and other loans. Our ability to access the Credit Facility for cash borrowings and letters of credit

and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. Our ability to

access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the

ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and

financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under

those instruments.

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).

Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or

with other forms of financing from third parties. 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. We have a $360.0 million Term Loan with the lenders party thereto that will mature on

August 25, 2026, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject

to certain exceptions). The Term Loan is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial

Statements in this report.

Unconsolidated Joint Ventures. As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to

Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets

where our homebuilding operations are located. 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. In March 2024, S&P Global Ratings

upgraded our corporate credit rating to BB+ from BB and maintained its rating outlook at stable. In May 2024, Moody’s

Ratings upgraded our corporate credit rating to Ba1 from Ba2 and changed its rating outlook to stable from positive.

Consolidated Cash Flows. 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. Generally, our net operating cash flows fluctuate primarily based on changes in our inventories and

our profitability. 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 2023

primarily reflected net income of $590.2 million and a net decrease in inventories of $426.8 million, partly offset by a net

decrease in accounts payable, accrued expenses and other liabilities of $62.2 million and a net increase in receivables of $12.9

million.

Investing Activities. 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 2023, our uses of cash included $35.5 million for net purchases of property and equipment and $27.7 million for

contributions to unconsolidated joint ventures. These uses of cash were partly offset by a $5.1 million return of investments in

unconsolidated joint ventures.

Financing Activities. 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. The

cash used was partially offset by $10.4 million of issuances of common stock under employee stock plans. In 2023, net cash

was used for stock repurchases totaling $411.4 million, net repayments under the Credit Facility of $150.0 million, dividend

payments on our common stock of $56.8 million, tax payments associated with stock-based compensation awards of $14.2

million, and payments on mortgages and land contracts due to land sellers and other loans of $3.8 million. The cash used was

partially offset by $8.9 million of issuances of common stock under employee stock plans.

Dividends. In the 2024 first quarter, our board of directors declared a quarterly cash dividend of $.20 per share of common

stock. 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. In the 2023 first and second quarters, our board of directors declared quarterly cash dividends of $.15 per share

of common stock. 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. 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. The declaration and payment of future cash dividends on our common stock, whether at current levels or at

all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash

flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial

investment strategy and general financial condition, as well as general business conditions.

Shelf Registration Statement. We have an automatically effective universal shelf registration statement that was filed with

the SEC on July 10, 2023 (“2023 Shelf Registration”). The 2023 Shelf Registration registers the offering of securities that we

may issue from time to time in amounts to be determined. Our ability to issue securities is subject to market conditions and,

with respect to debt securities, other factors impacting our borrowing capacity. We have not made any offerings of securities

under the 2023 Shelf Registration.

Share Repurchase Program. As of November 30, 2022, we had $150.0 million of availability to repurchase up to $300.0

million of our outstanding common stock under an April 7, 2022 board authorization. In the 2023 first quarter, we repurchased

1,965,442 shares of our common stock on the open market pursuant to this authorization at a total cost of $75.0 million. On

March 21, 2023, our board of directors authorized us to repurchase up to $500.0 million of our outstanding common stock.

This authorization replaced the 2022 board of directors authorization, which had $75.0 million of remaining availability. In the

2023 second, third and fourth quarters, we repurchased 7,278,995 shares of our common stock on the open market pursuant to

this authorization at a total cost of $336.4 million, bringing our total repurchases for the year ended November 30, 2023 to

9,244,437 shares of common stock at a total cost of $411.4 million. As of November 30, 2023, there was $163.6 million of

remaining availability under this share repurchase authorization.

In the 2024 first quarter, we repurchased 826,663 shares of our common stock in the open market pursuant to the 2023

board of directors authorization at a total cost of $50.0 million. On April 18, 2024, our board of directors authorized us to

repurchase up to $1.00 billion of our outstanding common stock. This authorization replaced the 2023 board of directors

authorization, which had $113.6 million of remaining availability. In the 2024 second, third and fourth quarters, we

repurchased 3,898,518 shares of our common stock at a total cost of $300.0 million, bringing our total repurchases for the year

ended November 30, 2024 to 4,725,181 shares of common stock at a total cost of $350.0 million. Repurchases under the

current authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise,

with the timing and amount at management’s discretion and dependent on market, business and other conditions. This share

repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and

does not obligate us to purchase any shares. As of November 30, 2024, there was $700.0 million of remaining availability

under this share repurchase authorization.

As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing

sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs

in the ordinary course of our business. 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. During this time, we may also

engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity

securities or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these

transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand

the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility

arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire.

Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial

market conditions or other factors, including those described below under “Outlook” and/or our liquidity, leverage and net

worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from

any one or series of such transactions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accompanying consolidated financial statements were prepared in conformity with GAAP. The preparation of these

financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and

liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented.

Actual results could differ from those estimates and assumptions. See Note 1 – Summary of Significant Accounting Policies in

the Notes to Consolidated Financial Statements in this report for a discussion of our significant accounting policies. The

following are accounting policies that we believe are critical because of the significance of the activity to which they relate or

because they require the use of significant estimates, judgments and/or other assumptions in their application.

Homebuilding Revenue Recognition. We recognize homebuilding revenue by applying the following steps in determining

the timing and amount of revenue to recognize: (1) identify the contract(s) with a customer; (2) identify the performance

obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations

in the contract, if applicable; and (5) recognize revenue when (or as) we satisfy a performance obligation.

Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation

to deliver a completed home to the homebuyer when closing conditions are met. Revenues from home sales are recognized

when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of

the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date. Little to no estimation is

involved in recognizing such revenues.

We may periodically elect to sell parcels of land to third parties if such assets no longer fit into our strategic operating plans

or are zoned for non-residential development. Revenues from land sales are recognized when we have satisfied the

performance obligation(s) within the sales contract, which is generally when title to and possession of the land and the risks and

rewards of ownership are transferred to the land buyer on the closing date. Certain land sales contracts may require

management judgment in determining the appropriate revenue recognition, but the impact of such transactions is generally

immaterial.

Inventories and Cost of Sales. Housing and land inventories are stated at cost, unless the carrying value is determined not

to be recoverable, in which case the affected inventories are written down to fair value or fair value less associated costs to sell.

Fair value is determined based on estimated future net cash flows discounted for inherent risks associated with the real estate

assets, or other valuation techniques. Due to uncertainties in the estimation process and other factors beyond our control, it is

possible that actual results could differ from those estimated. Other than model homes, our inventories typically do not consist

of completed unsold homes. However, as discussed above under Item 1 – Business in this report, we may have unsold

completed or partially completed homes in our inventory.

We rely on certain estimates to determine our construction and land costs and resulting housing gross profit margins

associated with revenues recognized. Construction and land costs are comprised of direct and allocated costs, including

estimated future costs for the limited warranty we provide on our homes, and certain amenities within a community. Land

acquisition, land development and other common costs are generally allocated on a relative fair value basis to the homes or lots

within the applicable community or land parcel. 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. It is possible that actual

results could differ from budgeted amounts for various reasons, including construction delays, construction resource shortages,

increases in costs that have not yet been committed, changes in governmental requirements, unforeseen environmental hazards

or other unanticipated issues encountered during construction and other factors beyond our control. While the actual results for

a particular construction project are accurately reported over time, variances between the budgeted and actual costs of a project

could result in the understatement or overstatement of construction and land costs and homebuilding gross profits in a particular

reporting period. To reduce the potential for such distortion, we have set forth procedures that collectively comprise a critical

accounting policy. These procedures, which we have applied on a consistent basis, include assessing, updating and revising

project budgets on a monthly basis, obtaining commitments to the extent possible from independent contractors and vendors for

future costs to be incurred, reviewing the adequacy of warranty accruals and historical warranty claims experience, and utilizing

the most current information available to estimate construction and land costs to be charged to expense. Variances to the

budgeted costs after an estimate has been charged to expense that are related to project costs are generally allocated on a

relative fair value basis to the remaining homes to be delivered within the community or land parcel, while such variances

related to direct construction costs are generally expensed as incurred. The variances between budgeted and actual costs have

historically not been material to our consolidated financial statements. We believe that our policies provide for reasonably

dependable estimates to be used in the calculation and reporting of construction and land costs.

Inventory Impairments and Land Option Contract Abandonments. Each community or land parcel in our owned inventory

is assessed to determine if indicators of potential impairment exist. 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. If indicators of potential impairment exist for a

community or land parcel, the identified asset is evaluated for recoverability.

When an indicator of potential impairment is identified for a community or land parcel, we test the asset for recoverability

by comparing the carrying value of the asset to the undiscounted future net cash flows expected to be generated by the asset.

The undiscounted future net cash flows are impacted by then-current conditions and trends in the market in which the asset is

located as well as factors known to us at the time the cash flows are calculated. These factors may include recent trends in our

orders, backlog, cancellation rates and volume of homes delivered, as well as our expectations related to the following: product

offerings; market supply and demand, including estimated average selling prices and related price appreciation; and land

development, home construction and overhead costs to be incurred and related cost inflation.

Generally, a community must have a projected gross profit margin percentage below approximately 5% to proceed to a

recoverability test and a potential fair value evaluation. Our overall housing gross profit margin in the 2024 fourth quarter was

20.9%, and as of November 30, 2024, fewer than 10 communities were evaluated for recoverability based on their gross

margins. 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. 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.

The following table presents information regarding inventory impairment and land option contract abandonment charges

included in construction and land costs in our consolidated statements of operations (dollars in thousands):


	Years Ended November 30,
	2024	2023	2022
Inventory impairments:
Number of communities or land parcels written down to fair value	—	—	4
Pre-impairment carrying value of communities or land parcels written down to fair value	$—	$—	$65,372
Inventory impairment charges	—	—	(24,077)
Post-impairment fair value	$—	$—	$41,295
Land option contract abandonments charges	$4,597	$11,424	$13,224

There were no inventory impairment charges in 2024 or 2023. The inventory impairment charges in 2022 reflected our

decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain

communities, mainly by accelerating the overall pace for selling, building and delivering homes therein, including communities

on land previously held for future development.

As further described in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to

Consolidated Financial Statements in this report, given the inherent challenges and uncertainties in forecasting future results,

our inventory assessments at the time they are made take into consideration whether a community or land parcel is active,

meaning whether it is open for sales and/or undergoing development, or whether it is being held for future development or held

for sale.

We record an inventory impairment charge on a community or land parcel that is active or held for future development

when indicators of potential impairment exist and the carrying value of the real estate asset is greater than the undiscounted

future net cash flows the asset is expected to generate. These real estate assets are written down to fair value, which is primarily

determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other

valuation techniques.

We record an inventory impairment charge on land held for sale when the carrying value of the real estate asset is greater

than its fair value. These real estate assets are written down to fair value, less associated costs to sell. 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. Assessments are made separately for each optioned land parcel on a

quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others:

current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and

home construction costs; and projected profitability on expected future housing or land sales. When a decision is made not to

exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our marketing

strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs.

The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the

total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated

future net order and cancellation rates; and the expected timeline to build and deliver homes sold. 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. 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 inventory balances in the 6-10 years category were primarily located in our Central and Southeast segments and were

mostly comprised of active, multi-phase communities with large remaining land positions.

Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment

assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our

inventory balances, particularly as to land held for future development, it is possible that actual results could differ substantially

from those estimated, especially in periods of volatile housing market or economic conditions.

Deterioration in the supply and demand factors in the overall housing market or in an individual market or submarket, or

changes to our operational or selling strategy at certain communities may lead to additional inventory impairment charges,

future charges associated with land sales or the abandonment of land option contracts or other similar contracts related to

certain assets. 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.

We believe the carrying value of our inventory balance as of November 30, 2024 is recoverable. Our considerations in

making this determination include the factors and trends incorporated into our impairment analyses, and as applicable, the

prevailing regulatory environment, competition from other homebuilders, inventory levels and sales activity of resale homes,

and the local economic conditions where an asset is located. In addition, we consider the financial and operational status and

expectations of our inventories as well as unique attributes of each community or land parcel that could be viewed as indicators

for potential future impairments. However, if conditions in the overall housing market or in a specific market or submarket

worsen in the future beyond our current expectations, including, among other things, from increases in mortgage interest rates,

higher inflation, worsening supply chain and/or other production-related challenges, or if future changes in our business

strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in

any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory

impairments or land option contract abandonments, or both, related to our current inventory assets. Any such charges could be

material to our consolidated financial statements.

Warranty Costs. We provide a limited warranty on all of our homes. The specific terms and conditions of our limited

warranty program vary depending upon the markets in which we do business. We estimate the costs that may be incurred under

each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each

home is recognized. 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. Factors that affect our warranty liability include the number of homes delivered,

historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our accrued

warranty liability, which is included in accrued expenses and other liabilities in our consolidated balance sheets, and adjust the

amount as necessary based on our assessment. Our assessment includes the review of our actual warranty costs incurred to

identify trends and changes in our warranty claims experience, and considers our home construction quality and customer

service initiatives and outside events. Based on this assessment, we may from time to time adjust our warranty accrual rates,

which would be applied on a prospective basis to homes delivered. Although adjustments to the accrual rates are generally

infrequent, they may be necessary when actual warranty expenditures have increased or decreased on a sustained basis, as was

the case in recent years when we revised our warranty accrual rates to reflect trends in our warranty expenditures. 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. 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. Estimates of recoveries and amounts we have paid on behalf of and expect to

recover from other parties, if any, are recorded as receivables when such recoveries are considered probable.

While we believe the warranty liability currently reflected in our consolidated balance sheets to be adequate, unanticipated

changes or developments in the legal environment, local weather, land or environmental conditions, quality of materials or

methods used in the construction of homes or customer service practices and/or our warranty claims experience could have a

significant impact on our actual warranty costs in future periods and such amounts could differ significantly from our current

estimates. A 10% change in the historical warranty rates used to estimate our accrued warranty liability would not result in a

material change in our accrual.

Self-Insurance. We maintain, and require the majority of our independent contractors to maintain, general liability

insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance. These insurance

policies protect us against a portion of our risk of loss from claims related to our homebuilding activities, subject to certain self-

insured retentions, deductibles and other coverage limits. We self-insure a portion of our overall risk through the use of a

captive insurance subsidiary. In Arizona, California, Colorado and Nevada, our contractors’ general liability insurance

primarily takes the form of a wrap-up policy under a program where eligible independent contractors are enrolled as insureds

on each community. Enrolled contractors generally contribute toward the cost of the insurance and agree to pay a contractual

amount in the future if there is a claim related to their work.

We record liabilities based on the estimated costs required to cover reported claims, claims incurred but not yet reported,

and claim adjustment expenses. These estimated costs are based on an actuarial analysis of our historical claims and expense

data, as well as industry data. Our self-insurance liabilities are presented on a gross basis without consideration of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.

The amount of our self-insurance liability is based on an analysis performed by a third-party actuary that uses our historical

claim and expense data, as well as industry data to estimate these overall costs. These estimates are subject to uncertainty due

to a variety of factors, the most significant being the long period of time between the delivery of a home to a homebuyer and

when a structural warranty or construction defect claim may be made, and the ultimate resolution of any such construction

defect claim. Though state regulations vary, construction defect claims are reported and resolved over a long period of time,

which can extend for 10 years or more. As a result, the majority of the estimated self-insurance liability based on the actuarial

analysis relates to claims incurred but not yet reported. Therefore, adjustments related to individual existing claims generally

do not significantly impact the overall estimated liability. Adjustments to our liabilities related to homes delivered in prior

years are recorded in the period in which a change in our estimate occurs. During 2024, 2023 and 2022, we recorded

adjustments to increase our previously recorded liabilities by $5.5 million, $6.5 million and $7.0 million, respectively. 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 projection of losses related to these liabilities requires the use of actuarial assumptions. Key assumptions used in

developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended

period of time. These estimates are subject to variability due to the length of time between the delivery of a home to a

homebuyer and when a construction defect claim is made, and the ultimate resolution of such claim; uncertainties regarding

such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or interpretations,

among other factors. Due to the degree of judgment involved and the potential for variability in these underlying assumptions,

our actual future costs could differ from those estimated. 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. 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% 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.

Estimates of insurance recoveries and amounts we have paid on behalf of other parties, if any, are recorded as receivables

when such recoveries are considered probable. These estimated recoveries are principally based on actuarially determined

amounts and depend on various factors, including, among other things, the above-described claim cost estimates, our insurance

policy coverage limits for the applicable policy year(s), historical third-party recovery rates, insurance industry practices, the

regulatory environment, and legal precedent, and are subject to a high degree of variability from year to year. Because of the

inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from

amounts currently estimated.

Legal Matters Accruals. We record contingent liabilities resulting from claims against us when a loss is assessed to be

probable and the amount of the loss is reasonably estimable. Assessing the probability of losses and estimating probable losses

requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants,

regulatory agencies, mediators, arbitrators, responsible third parties and/or courts, as the case may be. Recorded contingent

liabilities are based on the most recent information available and actual losses in any future period are inherently uncertain. If

future adjustments to estimated probable future losses or actual losses exceed our recorded liability for such claims, we would

record additional charges during the period in which the actual loss or change in estimate occurred. In addition to contingent

liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility the ultimate loss

will materially exceed the recorded liability. While we cannot predict the outcome of pending legal matters with certainty, we

do not believe any currently identified claim or proceeding, either individually or in aggregate, will have a material impact on

our results of operations, financial position or cash flows.

Income Taxes. As discussed in Note 14 – Income Taxes in the Notes to the Consolidated Financial Statements in this

report, we evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based

on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect to

whether deferred tax assets will be realized. This evaluation considers, among other factors, our historical operating results, our

expectation of future profitability, the duration of the applicable statutory carryforward periods, and conditions in the housing

market and the broader economy. The ultimate realization of our deferred tax assets depends primarily on our ability to

generate future taxable income during the periods in which the related deferred tax assets become deductible. The value of our

deferred tax assets in our consolidated balance sheets depends on applicable income tax rates. We base our estimate of deferred

tax assets and liabilities on current tax laws and rates. In certain cases, we also base this estimate on business plan forecasts and

other expectations about future outcomes. 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. Judgment is required in determining the future

tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns. Differences

between the anticipated and actual outcomes of these future results could have a material impact on our consolidated financial

statements. Also, changes in existing federal and state tax laws and corporate income tax rates could affect future tax results

and the realization of deferred tax assets over time.

We recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as

a component of the provision for income taxes. Our liability for unrecognized tax benefits, combined with accrued interest and

penalties, is reflected as a component of accrued expenses and other liabilities in our consolidated balance sheets. Judgment is

required in evaluating uncertain tax positions. We evaluate our uncertain tax positions quarterly based on various factors,

including changes in facts or circumstances, tax laws or the status of audits by tax authorities. Changes in the recognition or

measurement of uncertain tax positions could have a material impact on our consolidated financial statements in the period in

which we make the change.

INFLATION

Since 2021, product and labor costs and general inflation in the economy have increased and remained elevated compared

to the prior decade. 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. 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. Accordingly, to the extent land acquisition costs are fixed,

subsequent increases or decreases in our home selling prices will affect our profits. As the selling price of each of our homes is

fixed at the time a buyer enters into a home sales contract, and because we generally commence construction of a home only

after we have a signed sales contract with a homebuyer, any interim construction-related cost inflation can result in lower

housing gross profit margins. In order to help, but not entirely moderate that effect, we typically enter into fixed-price contracts

with our larger trade partners and building material suppliers for specified periods of time.

Inflation is often accompanied by higher and more volatile interest rates, which may negatively impact housing

affordability and the confidence of potential homebuyers, and adversely impact demand for our homes. 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. While we attempt to pass on increases in our

costs through increased home selling prices, including for design choices and options, market forces and buyer affordability

constraints can limit our ability to do so. If we are unable to raise selling prices enough to compensate for higher costs, or our

borrowing costs increase significantly, our revenues, housing gross profit margin and net income could be adversely affected.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements are discussed in Note 1 – Summary of Significant Accounting Policies in the Notes to

Consolidated Financial Statements in this report.

OUTLOOK

Key longer-term housing market drivers have remained largely positive during 2023 and 2024, including favorable

demographic trends, rising household formations, solid employment, wage growth and the ongoing undersupply of new and

resale homes. While market conditions were uneven during 2024, we generated favorable operational and financial results. We

believe we are well-positioned to achieve our goals for 2025 based on our differentiated, highly customer-centric Built to Order

business model, operational capabilities, affordable product offerings, lot supply, strong balance sheet and liquidity, substantial

backlog value of $2.24 billion at November 30, 2024, improved build times, normalizing cancellation rates and planned

community count growth, subject to the factors and risks described in this report. We expect to be able to drive our build times

lower in 2025 as we progress toward our goal of four months from start to home completion, which is at the lower end of our

historical range, subject to the availability of skilled trades and building materials.

Our key longer-term objectives remain to increase our scale, profitability and returns, as well as generate cash flows, by

expanding our lot count through land acquisitions that meet our underwriting standards, opening new communities on time,

driving net orders and balancing pace, price and construction starts at each community to optimize our return on each inventory

asset within its market context. To do so, we expect to continue to calibrate at each community our home pricing and

homebuyer concessions, if any, and inventory levels, based on homebuyer demand. Our use of homebuyer concessions in 2025

will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as

well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots

remaining available for sale.

While we expect our land acquisition and development investment activity to increase in 2025 as compared to 2024 to

support future growth, depending significantly on market conditions and available opportunities that meet our investment return

standards, we will prioritize capital efficiency, developing lots where possible in smaller phases and balancing development

with our starts pace to manage our inventory of finished lots.

At the same time, we will plan to continue returning capital to our stockholders. As of November 30, 2024, we had $700.0

million remaining under our current board of directors share repurchase authorization. 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.

Since our 2024 fiscal year ended, buyer hesitancy due to discomfort with volatile mortgage interest rates has continued to

some degree. Through the first seven weeks of our 2025 first quarter, we generated 1,252 net orders, compared to 1,456 in the

year-earlier period. As we are entering the stronger selling months of the quarter and with a meaningful number of community

openings projected, we expect to close the gap on net orders relative to last year’s quarter. We estimate that our net order

comparison for the full 2025 first quarter will be roughly flat versus a strong comparable in our 2024 first quarter.

In considering the foregoing, our present outlook for the 2025 first quarter and the 2025 full year as to certain metrics is as

follows:

2025 First Quarter –

•We expect to generate housing revenues in the range of $1.45 billion to $1.55 billion, compared to $1.46 billion for the

corresponding 2024 period, and anticipate our average selling price to be approximately $501,000, compared to

$480,100 in the year-earlier period.

•We expect our homebuilding operating income margin as a percentage of revenues to be approximately 9.5%,

assuming no inventory-related charges, compared to 10.9% for the year-earlier quarter.

◦We expect our housing gross profit margin to be in the range of 20.0% to 20.4%, assuming no inventory-related

charges, compared to 21.6% for the corresponding 2024 quarter.

◦We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range

of 10.5% to 10.9%, compared to 10.8% for the 2024 first quarter.

•We expect our effective tax rate will be approximately 23.0%. The effective tax rate for the year-earlier quarter was

20.6%.

•We expect our ending community count to be approximately 260, which would result in an 8% year-over-year increase

in our average community count.

2025 Full Year –

•We expect our housing revenues to be in the range of $7.00 billion to $7.50 billion, an increase from $6.90 billion for

2024.

•We expect our average selling price to be in the range of $488,000 to $498,000, compared to $486,900 for 2024.

•We expect our homebuilding operating income margin as a percentage of revenues to be approximately 10.7%,

assuming no inventory-related charges, compared to 11.1% for 2024.

◦We expect our housing gross profit margin to be in the range of 20.0% to 21.0%, assuming no inventory-related

charges, compared to 21.1% for 2024.

◦We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range

of 9.6% to 10.0%, compared to 10.0% for 2024.

•We expect our effective tax rate to be approximately 24.0%, compared to 23.0% for 2024.

•We expect our ending community count to be approximately 250, compared to 258 for 2024.

In addition to factors discussed elsewhere in this report, our future performance and the strategies we implement (and

adjust or refine as necessary or appropriate) will depend significantly on prevailing economic, employment, homebuilding

industry and capital, credit and financial market conditions and on a fairly stable and constructive political and regulatory

environment (particularly in regard to housing and mortgage loan financing policies). For instance, the Federal Reserve’s

aggressive raising of the federal funds interest rate and other measures during 2022 and 2023 to moderate persistent U.S.

inflation created significant and ongoing headwinds for the housing market, tempering consumer demand for homes and

disrupting credit and lending markets. 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. In addition, while we experienced improvement with respect to supply chain-related disruptions as described in this

Management’s Discussion and Analysis of Financial Condition and Results of Operations, we believe they could persist or

possibly worsen to various degrees in 2025. Further, and though the extent is uncertain and none of our communities or

operations have been directly affected as of the date of this report, given the scope of the unprecedented wildfires in the Los

Angeles County area in January 2025, we may experience some disruption in our homebuilding activities, and potentially with

our orders and homes delivered, in the Southern California region during the year and beyond. The potential extent and effect

of these factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including

in 2024, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to,

our net orders, backlog, revenues and returns.

FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press

releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during

presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the

“Act”). Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words

such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “hope,” and similar expressions constitute forward-

looking statements. In addition, any statements that we may make or provide concerning future financial or operating

performance (including without limitation future revenues, community count, homes delivered, net orders, selling prices, sales

pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings

per share, or growth or growth rates), future market conditions, future interest rates, and other economic conditions, ongoing

business strategies or prospects, future dividends and changes in dividend levels, the value of our backlog (including amounts

that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries), the value of our

net orders, potential future asset acquisitions and the impact of completed acquisitions, future share issuances or repurchases,

future debt issuances, repurchases or redemptions and other possible future actions are also forward-looking statements as

defined by the Act. Forward-looking statements are based on our current expectations and projections about future events and

are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding

industry, among other things. These statements are not guarantees of future performance, and we have no specific policy or

intention to update these statements. If we update or revise any such statement(s), no assumption should be made that we will

further update or review that statement(s) or update or revise any other such statement(s). In addition, forward-looking and

other statements in this report and in other public or oral disclosures that express or contain opinions, views or assumptions

about market or economic conditions; the success, performance, effectiveness and/or relative positioning of our strategies,

initiatives or operational activities; and other matters, may be based in whole or in part on general observations of our

management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical

investigation, inquiry or analysis.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a

number of factors. The most important risk factors that could cause our actual performance and future events and actions to

differ materially from such forward-looking statements include, but are not limited to, the following:

•general economic, employment and business conditions;

•population growth, household formations and demographic trends;

•conditions in the capital, credit and financial markets;

•our ability to access external financing sources and raise capital through the issuance of common stock, debt or other

securities, and/or project financing, on favorable terms;

•the execution of any 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;

•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;

•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.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We enter into debt obligations primarily to support general corporate purposes, including the operations of our subsidiaries.

We are subject to interest rate risk on our debt. For fixed rate debt, changes in interest rates generally affect the fair value of the

debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do

not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. We generally have no

obligation to prepay our debt before maturity, and, as a result, interest rate risk and changes in fair market value should not have

a significant impact on our fixed rate debt until we are required or elect to refinance or repurchase such debt. Under our current

policies, we do not use interest rate derivative instruments to manage our exposure to changes in interest rates.

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	Fair Value at November 30, 2024
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. Based 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.


	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	Fair Value at November 30, 2023
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.

Unconsolidated Joint Ventures. The tables above do not include debt of our unconsolidated joint ventures. For a

discussion pertaining to the debt of our homebuilding and financial services unconsolidated joint ventures, see Note 9 –

Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Our financial services unconsolidated joint venture, KBHS, is exposed to interest rate risk as it relates to its lending

activities, including originating mortgage loans and providing IRLCs to customers. KBHS enters into best efforts forward sale

commitments with secondary market investors to manage the risk of adverse interest rate movements that could impact the fair

value of IRLCs. Best efforts forward sale commitments allow KBHS to agree on the sales price of the underlying loans that

will be realized upon their sale into the secondary market. KBHS does not engage in speculative or trading derivative activities.

KBHS’ entire loan portfolio is held for sale and subject to best efforts forward sale commitments. Further information is

provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this

report.

KB HOME

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Shares)


	November 30,
	2024	2023
Assets
Homebuilding:
Cash and cash equivalents	$597,973	$727,076
Receivables	377,533	366,862
Inventories	5,528,020	5,133,646
Investments in unconsolidated joint ventures	67,020	59,128
Property and equipment, net	90,359	88,309
Deferred tax assets, net	102,421	119,475
Other assets	105,920	96,987
	6,869,246	6,591,483
Financial services	66,923	56,879
Total assets	$6,936,169	$6,648,362

Liabilities and stockholders’ equity
Homebuilding:
Accounts payable	$384,894	$388,452
Accrued expenses and other liabilities	796,261	758,227
Notes payable	1,691,679	1,689,898
	2,872,834	2,836,577
Financial services	2,719	1,645
Stockholders’ equity:
Preferred stock — $1.00 par value; 10,000,000 shares authorized; none issued	—	—
Common stock —$1.00 par value; 290,000,000 shares authorized at November 30, 2024 and 2023; 74,409,977 and 101,275,979 shares issued at November 30, 2024 and 2023, respectively	74,410	101,276
Paid-in capital	862,049	845,693
Retained earnings	3,269,423	3,676,924
Accumulated other comprehensive loss	(3,704)	(3,671)
Grantor stock ownership trust, at cost: 6,705,247 shares at November 30, 2023	—	(72,718)
Treasury stock, at cost: 2,253,156 and 18,703,704 shares at November 30, 2024 and 2023, respectively	(141,562)	(737,364)
Total stockholders’ equity	4,060,616	3,810,140
Total liabilities and stockholders’ equity	$6,936,169	$6,648,362

See accompanying notes.

KB HOME

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


	Years Ended November 30, 2024, 2023 and 2022
	Number of Shares			Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Grantor Stock Ownership Trust	Treasury Stock	Total Stockholders’ Equity
	Common Stock	Grantor Stock Ownership Trust	Treasury Stock	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Grantor Stock Ownership Trust	Treasury Stock	Total Stockholders’ Equity
Balance at November 30, 2021	100,711	(6,705)	(5,785)	$100,711	$848,620	$2,379,364	$(19,119)	$(72,718)	$(217,383)	$3,019,475
Net income	—	—	—	—	—	816,666	—	—	—	816,666
Other comprehensive income, net of tax	—	—	—	—	—	—	13,544	—	—	13,544
Dividends on common stock	—	—	—	—	—	(52,452)	—	—	—	(52,452)
Stock awards	—	—	1,088	—	(41,824)	—	—	—	41,824	—
Stock-based compensation	—	—	—	—	29,464	—	—	—	—	29,464
Stock repurchases	—	—	(4,928)	—	—	—	—	—	(150,000)	(150,000)
Tax payments associated with stock-based compensation awards	—	—	(391)	—	—	—	—	—	(15,902)	(15,902)
Balance at November 30, 2022	100,711	(6,705)	(10,016)	100,711	836,260	3,143,578	(5,575)	(72,718)	(341,461)	3,660,795
Net income	—	—	—	—	—	590,177	—	—	—	590,177
Other comprehensive income, net of tax	—	—	—	—	—	—	1,904	—	—	1,904
Dividends on common stock	—	—	—	—	—	(56,831)	—	—	—	(56,831)
Employee stock options/other	565	—	—	565	8,292	—	—	—	—	8,857
Stock awards	—	—	927	—	(33,471)	—	—	—	33,471	—
Stock-based compensation	—	—	—	—	34,612	—	—	—	—	34,612
Stock repurchases, including excise tax	—	—	(9,244)	—	—	—	—	—	(415,136)	(415,136)
Tax payments associated with stock-based compensation awards	—	—	(371)	—	—	—	—	—	(14,238)	(14,238)
Balance at November 30, 2023	101,276	(6,705)	(18,704)	101,276	845,693	3,676,924	(3,671)	(72,718)	(737,364)	3,810,140
Net income	—	—	—	—	—	655,018	—	—	—	655,018
Other comprehensive loss, net of tax	—	—	—	—	—	—	(33)	—	—	(33)
Dividends on common stock	—	—	—	—	—	(71,554)	—	—	—	(71,554)
Employee stock options/other	691	—	—	691	9,742	—	—	—	—	10,433
Stock awards	—	—	682	—	(27,856)	—	—	—	27,856	—
Stock-based compensation	—	—	—	—	34,470	—	—	—	—	34,470
Stock repurchases, including excise tax	—	—	(4,725)	—	—	—	—	—	(352,842)	(352,842)
Tax payments associated with stock-based compensation awards	—	—	(358)	—	—	—	—	—	(25,016)	(25,016)
Termination of grantor stock ownership trust	—	6,705	(6,705)	—	—	—	—	72,718	(72,718)	—
Retirement of treasury stock	(27,557)	—	27,557	(27,557)	—	(990,965)	—	—	1,018,522	—
Balance at November 30, 2024	74,410	—	(2,253)	$74,410	$862,049	$3,269,423	$(3,704)	$—	$(141,562)	$4,060,616

See accompanying notes.

KB HOME

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Years Ended November 30,
	2024	2023	2022
Cash flows from operating activities:
Net income	$655,018	$590,177	$816,666
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of unconsolidated joint ventures	(33,195)	(14,984)	(19,934)
Distributions of earnings from unconsolidated joint ventures	26,775	23,171	11,038
Amortization of debt issuance costs and premiums	3,483	3,381	2,322
Depreciation and amortization	37,272	36,413	32,319
Deferred income taxes	17,054	41,393	16,510
Gain on sale of investment	(12,516)	—	—
Loss on early extinguishment of debt	—	—	3,598
Stock-based compensation	34,470	34,612	29,464
Inventory impairments and land option contract abandonments	4,597	11,424	37,301
Changes in assets and liabilities:
Receivables	16,586	(12,919)	(19,885)
Inventories	(385,795)	426,812	(785,557)
Accounts payable, accrued expenses and other liabilities	(7,241)	(62,200)	53,097
Other, net	6,214	5,419	6,479
Net cash provided by operating activities	362,722	1,082,699	183,418
Cash flows from investing activities:
Contributions to unconsolidated joint ventures	(14,509)	(27,694)	(28,439)
Return of investments in unconsolidated joint ventures	1,992	5,100	1,900
Proceeds from sale of investment	1,709	—	—
Purchases of property and equipment, net	(39,311)	(35,468)	(45,234)
Net cash used in investing activities	(50,119)	(58,062)	(71,773)
Cash flows from financing activities:
Proceeds from issuance of debt	—	—	350,000
Repayment of senior notes	—	—	(703,598)
Payment of issuance costs	—	—	(11,064)
Borrowings under revolving credit facility	—	170,000	1,685,000
Repayments under revolving credit facility	—	(320,000)	(1,535,000)
Borrowings under senior unsecured term loan	—	—	360,000
Payments on mortgages and land contracts due to land sellers and other loans	(917)	(3,843)	(567)
Issuance of common stock under employee stock plans	10,433	8,857	—
Stock repurchases and excise taxes paid	(353,698)	(411,438)	(150,000)
Tax payments associated with stock-based compensation awards	(25,016)	(14,238)	(15,902)
Payments of cash dividends	(71,554)	(56,831)	(52,452)
Net cash used in financing activities	(440,752)	(627,493)	(73,583)
Net increase (decrease) in cash and cash equivalents	(128,149)	397,144	38,062
Cash and cash equivalents at beginning of year	727,342	330,198	292,136
Cash and cash equivalents at end of year	$599,193	$727,342	$330,198

See accompanying notes.

KB HOME

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.Summary of Significant Accounting Policies

Operations. KB Home is a builder of attached and detached single-family residential homes, townhomes and

condominiums. As of November 30, 2024, we conducted ongoing operations in Arizona, California, Colorado, Florida, Idaho,

Nevada, North Carolina, Texas and Washington. We also offer property and casualty insurance and, in certain instances,

earthquake, flood and personal property insurance to our homebuyers in the same markets as our homebuilding reporting

segments, and provide title services in the majority of our markets located within our Southwest, Central and Southeast

homebuilding reporting segments. We offer mortgage banking services, including mortgage loan originations, to our

homebuyers indirectly through KBHS, which is an unconsolidated joint venture between us and a third party.

Basis of Presentation. Our consolidated financial statements have been prepared in accordance with GAAP and include

our accounts and those of the consolidated subsidiaries in which we have a controlling financial interest. All intercompany

balances and transactions have been eliminated in consolidation. Investments in unconsolidated joint ventures in which we

have less than a controlling financial interest are accounted for using the equity method.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make

estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

Cash and Cash Equivalents. We consider all highly liquid short-term investments purchased with an original maturity of

three months or less to be cash equivalents. Our cash equivalents totaled $385.1 million at November 30, 2024 and $508.2

million at November 30, 2023. At November 30, 2024 and 2023, our cash equivalents were mainly invested in interest-bearing

bank deposit accounts and money market funds.

Receivables. We record receivables net of an allowance for doubtful accounts. This allowance for potential losses is

established or maintained for expected uncollectible receivables. The allowance is estimated based on our evaluation of the

receivables, taking into account historical collection experience, general economic conditions, specific credit risk of the

counterparties and other relevant information.

Property and Equipment and Depreciation. Property and equipment are recorded at cost and are depreciated using the

straight-line method over their estimated useful lives as follows: computer software and equipment – two to 15 years; model

furnishings and sales office improvements – two to three years; office furniture and equipment – three to 10 years; and

leasehold improvements – life of the lease. Repair and maintenance costs are expensed as incurred. Depreciation expense

totaled $37.3 million in 2024, $36.4 million in 2023 and $32.3 million in 2022.

Investments in Equity Securities. We have elected to measure our investments in equity securities without readily

determinable fair values at cost less impairment, if any, including adjustments for observable price changes in orderly

transactions for an identical or similar investment of the same issuer. These investments, which totaled $15.2 million at

November 30, 2024 and zero as of November 30, 2023, are included in other assets in our consolidated balance sheets.

Homebuilding Operations. We recognize homebuilding revenue by applying the following steps in determining the timing

and amount of revenue to recognize: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the

contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if

applicable; and (5) recognize revenue when (or as) we satisfy a performance obligation.

Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation

to deliver a completed home to the homebuyer when closing conditions are met. Revenues from home sales are recognized

when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of

the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date. Under our home sales

contracts, we typically receive an initial cash deposit from the homebuyer at the time the sales contract is executed and receive

the remaining consideration to which we are entitled, through a third-party escrow agent, at closing. Customer deposits related

to sold but undelivered homes are included in accrued expenses and other liabilities.

Concurrent with the recognition of revenues in our consolidated statements of operations, sales incentives in the form of

price concessions on the selling price of a home or mortgage-related concessions are recorded as a reduction of revenues.

When we provide sales incentives in the form of free products or services to homebuyers, the costs of the free products or

services are reflected as construction and land costs because such incentives are identified in our home sales contracts with

homebuyers as an intrinsic part of our single performance obligation to deliver and transfer title to their home for the

transaction price stated in the contracts. Sales incentives that we may provide in the form of closing cost allowances are

immaterial to the related revenues. Cash proceeds from home sale closings held by third-party escrow agents for our benefit,

typically for less than five days, are considered deposits in-transit and classified as cash.

We may periodically elect to sell parcels of land to third parties if such assets no longer fit into our strategic operating plans

or are zoned for non-residential development. Land sale transactions are made pursuant to contracts under which we typically

have a performance obligation(s) to deliver specified land parcels to the buyer when closing conditions are met. We evaluate

each land sales contract to determine our performance obligation(s) under the contract, including whether we have a distinct

promise to perform post-closing land development work that is material within the context of the contract, and use objective

criteria to determine our completion of the applicable performance obligation(s), whether at a point in time or over time.

Revenues from land sales are recognized when we have satisfied the performance obligation(s) within the sales contract, which

is generally when title to and possession of the land and the risks and rewards of ownership are transferred to the land buyer on

the closing date. Under our land sales contracts, we typically receive an initial cash deposit from the buyer at the time the

contract is executed and receive the remaining consideration to which we are entitled, through a third-party escrow agent, at

closing. In the limited circumstances where we provide financing to the land buyer, we determine that collectability of the

receivable is reasonably assured before we recognize revenue.

In instances where we have a distinct and material performance obligation(s) within the context of a land sales contract to

perform land development work after the closing date, a portion of the transaction price under the contract is allocated to such

performance obligation(s) and is recognized as revenue over time based upon our estimated progress toward the satisfaction of

the performance obligation(s). We generally measure our progress based on our costs incurred relative to the total costs

expected to satisfy the performance obligation(s). While the payment terms for such a performance obligation(s) vary, we

generally receive the final payment when we have completed our land development work to the specifications detailed in the

applicable land sales contract and it has been accepted by the land buyer.

Homebuilding revenues include forfeited deposits, which occur when home sales or land sales contracts, if any, that

involve a nonrefundable deposit are cancelled. Revenues from forfeited deposits are immaterial.

Within our homebuilding operations, substantially all of our contracts with customers and the related performance

obligations have an original expected duration of one year or less.

Construction and land costs are comprised of direct and allocated costs, including estimated future costs for the limited

warranty we provide on our homes, and certain amenities within a community. Land acquisition, land development and other

common costs are generally allocated on a relative fair value basis to the homes or lots within the applicable community or land

parcel. Land acquisition and land development costs include related interest and real estate taxes.

Disaggregation of Revenues. Our homebuilding operations accounted for 99.6%, 99.5% and 99.7% of our total revenues

for the years ended November 30, 2024, 2023 and 2022, respectively, with most of those revenues generated from home sales

contracts with customers. Due to the nature of our revenue-generating activities, we believe the disaggregation of revenues as

reported in our consolidated statements of operations, and as disclosed by homebuilding reporting segment in Note 2 – Segment

Information and for our financial services reporting segment in Note 3 – Financial Services, fairly depicts how the nature,

amount, timing and uncertainty of cash flows are affected by economic factors.

Inventories. Housing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable,

in which case the affected inventories are written down to fair value or fair value less associated costs to sell. Real estate assets,

such as our housing and land inventories, are tested for recoverability whenever events or changes in circumstances indicate

that their carrying value may not be recoverable. Recoverability is measured by comparing the carrying value of an asset to the

undiscounted future net cash flows expected to be generated by the asset. These impairment evaluations are significantly

impacted by estimates for the amounts and timing of future revenues, costs and expenses, and other factors. If the carrying

value of a real estate asset is determined not to be recoverable, the impairment charge to be recognized is measured by the

amount by which the carrying value of the affected asset exceeds its estimated fair value. For land held for sale, if the fair value

less associated costs to sell exceeds the asset’s carrying value, no impairment charge is recognized.

Capitalized Interest. Interest is capitalized to inventories while the related communities or land parcels are being actively

developed and until homes are completed or the land is available for immediate sale. Capitalized interest is amortized to

construction and land costs as the related inventories are delivered to homebuyers or land buyers (as applicable). In the case of

land held for future development and land held for sale, applicable interest is expensed as incurred.

Fair Value Measurements. Fair value measurements are used for inventories on a nonrecurring basis when events and

circumstances indicate that their carrying value is not recoverable. For these real estate assets, fair value is determined based on

the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques.

Our financial instruments consist of cash and cash equivalents, corporate-owned life insurance, outstanding borrowings

under the Credit Facility, if any, and the Term Loan, senior notes, and mortgages and land contracts due to land sellers and

other loans. Fair value measurements of financial instruments are determined by various market data and other valuation

techniques as appropriate. When available, we use quoted market prices in active markets to determine fair value.

Financial Services Operations. Our financial services reporting segment, which includes the operations of KB HOME

Mortgage Company, generates revenues primarily from insurance commissions and title services. Revenues from title services

are recognized when policies are issued, which generally occurs at the time each applicable home sale is closed. We receive

commissions from various third-party insurance carriers for arranging for the carriers to provide homeowner and other

insurance policies for our homebuyers that elect to obtain such coverage. In addition, each time a homebuyer renews their

insurance policy with the insurance carrier, we receive a renewal commission. Revenues from insurance commissions are

recognized when the insurance carrier issues an initial insurance policy to our homebuyer, which generally occurs at the time

each applicable home sale is closed. As our performance obligations for policy renewal commissions are satisfied upon

issuance of the initial insurance policy, insurance commissions for renewals are considered variable consideration.

Accordingly, we estimate the probable future renewal commissions when an initial policy is issued and record a corresponding

contract asset and insurance commission revenues. We estimate the amount of variable consideration based on historical

renewal trends and constrain the estimate such that it is probable that a significant reversal of cumulative recognized revenue

will not occur. We also consider the likelihood and magnitude of a potential future reversal of revenue and update our

assessment at the end of each reporting period. The contract assets for estimated future renewal commissions are included in

other assets within our financial services reporting segment.

Warranty Costs. We provide a limited warranty on all of our homes. We estimate the costs that may be incurred under

each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each

home is recognized. 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. Factors that affect our warranty liability include the number of

homes delivered, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of

our accrued warranty liability and adjust the amount as necessary based on our assessment. Our 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. Estimates of recoveries and amounts we have paid on behalf of and expect to recover from other

parties, if any, are recorded as receivables when such recoveries are considered probable.

Self-Insurance. We self-insure a portion of our overall risk through the use of a captive insurance subsidiary. We record

liabilities based on the estimated costs required to cover reported claims, claims incurred but not yet reported, and claim

adjustment expenses. These estimated costs are based on an actuarial analysis of our historical claims and expense data, as well

as industry data. Our self-insurance liability is presented on a gross basis for all years without consideration of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as

receivables when such recoveries are considered probable.

Community Sales Office and Other Marketing- and Model Home-Related Costs. Community sales office and other

marketing- and model home-related costs are either recorded as inventories, capitalized as property and equipment, or expensed

to selling, general and administrative expenses as incurred. Costs related to the construction of a model home, inclusive of

design choices and options that will be sold as part of the home, are recorded as inventories and recognized as construction and

land costs when the model home is delivered to a homebuyer. Costs to furnish and ready a model home or on-site community

sales facility that will not be sold as part of the model home, such as costs for model furnishings, community sales office and

model complex grounds, sales office construction and sales office furniture and equipment, are capitalized as property and

equipment under “model furnishings and sales office improvements.” Model furnishings and sales office improvements are

depreciated to selling, general and administrative expenses over their estimated useful lives. Other costs related to the

marketing of a community, removing the on-site community sales facility and readying a completed (model) home for sale are

expensed to selling, general and administrative expenses as incurred.

Advertising Costs. We expense advertising costs as incurred. We incurred advertising costs of $39.9 million in 2024,

$34.2 million in 2023 and $37.1 million in 2022.

Legal Fees. Legal fees associated with litigation and similar proceedings that are not expected to provide a benefit in

future periods are generally expensed as incurred. Legal fees associated with land acquisition and development and other

activities that are expected to provide a benefit in future periods are capitalized to inventories in our consolidated balance sheets

as incurred. We expensed legal fees of $8.7 million in 2024, $10.4 million in 2023 and $10.6 million in 2022.

Stock-Based Compensation. We measure and recognize compensation expense associated with our grant of equity-based

awards at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting

period. We estimate the fair value of stock options granted using the Black-Scholes option-pricing model with assumptions

based primarily on historical data. We estimate the fair value of other equity-based awards using the closing price of our

common stock on the grant date. For PSUs, we recognize compensation expense ratably over the vesting period when it is

probable that stated performance targets will be achieved and record cumulative adjustments in the period in which estimates

change. We account for forfeitures of equity-based awards as they occur.

Income Taxes. The provision for, or benefit from, income taxes is calculated using the asset and liability method, under

which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of

assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax

assets are evaluated on a quarterly basis to determine if adjustments to the valuation allowance are required. This evaluation is

based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect

to whether deferred tax assets will be realized. The ultimate realization of our deferred tax assets depends primarily on our

ability to generate future taxable income during the periods in which the related deferred tax assets become deductible. The

value of deferred tax assets in our consolidated balance sheets depends on applicable income tax rates.

Accumulated Other Comprehensive Loss. The accumulated balances of other comprehensive loss in the consolidated

balance sheets as of November 30, 2024 and 2023 were comprised solely of adjustments recorded directly to accumulated other

comprehensive loss related to our benefit plan obligations. Such adjustments are made annually as of November 30, when our

benefit plan obligations are remeasured.

Earnings Per Share. We compute earnings per share using the two-class method, which is an allocation of earnings

between the holders of common stock and a company’s participating security holders. Our outstanding nonvested shares of

restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of

computing earnings per share pursuant to the two-class method. We had no other participating securities at November 30,

2024, 2023 or 2022.

Recent Accounting Pronouncements Not Yet Adopted. In November 2023, the FASB issued Accounting Standards Update

No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is

intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant

segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within

fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to

all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed

in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of

adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial

statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require

entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before

income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing

operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments

to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods

beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or

made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and

related disclosures.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement — Reporting

Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement

Expenses” (“ASU 2024-03”), which requires disclosure of certain costs and expenses on an interim and annual basis in the

notes to the consolidated financial statements. The guidance is effective for annual reporting periods beginning after December

15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

The guidance is to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date

or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the potential

impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Reclassifications. Certain amounts in our consolidated financial statements of prior years have been reclassified to

conform to the current period presentation.

Note 2.Segment Information

An operating segment is defined as a component of an enterprise for which separate financial information is available and

for which segment results are evaluated regularly by the chief operating decision maker in deciding how to allocate resources

and in assessing performance. We have identified each of our homebuilding divisions as an operating segment. Our

homebuilding operating segments have been aggregated into four homebuilding reporting segments based primarily on

similarities in economic and geographic characteristics, product types, regulatory environments, methods used to sell and

construct homes and land acquisition characteristics. We also have one financial services reporting segment. Management

evaluates segment performance primarily based on segment pretax results.

As of November 30, 2024, our homebuilding reporting segments conducted ongoing operations in the following states:


West Coast:	California, Idaho and Washington
Southwest:	Arizona and Nevada
Central:	Colorado and Texas
Southeast:	Florida and North Carolina

Our homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential

purposes and offer a wide variety of homes that are designed to appeal to first-time, first move-up and active adult homebuyers.

Our homebuilding operations generate most of their revenues from the delivery of completed homes to homebuyers. They also

earn revenues from the sale of land.

Our financial services reporting segment earns revenues primarily from insurance commissions and from the provision of

title services. We offer mortgage banking services, including mortgage loan originations, to our homebuyers indirectly through

KBHS, our unconsolidated joint venture with GR Alliance, a subsidiary of Guaranteed Rate, Inc. We and GR Alliance each

have a 50.0% ownership interest, with GR Alliance providing management oversight of KBHS’ operations. The financial

services reporting segment is separately reported in our consolidated financial statements.

Corporate and other is a non-operating segment that develops and oversees the implementation of company-wide strategic

initiatives and provides support to our reporting segments by centralizing certain administrative functions. Corporate

management is responsible for, among other things, evaluating and selecting the geographic markets in which we operate,

consistent with our overall business strategy; allocating capital resources to markets for land acquisition and development

activities; making major personnel decisions related to employee compensation and benefits; and monitoring the financial and

operational performance of our divisions. Corporate and other includes general and administrative expenses related to

operating our corporate headquarters. A portion of the expenses incurred by Corporate and other is allocated to our

homebuilding reporting segments.

Our reporting segments follow the same accounting policies used for our consolidated financial statements as described in

Note 1 – Summary of Significant Accounting Policies. The results of each reporting segment are not necessarily indicative of

the results that would have occurred had the segment been an independent, stand-alone entity during the periods presented, nor

are they indicative of the results to be expected in future periods.

The following tables present financial information relating to our homebuilding reporting segments (in thousands):


	Years Ended November 30,
	2024	2023	2022
Revenues:
West Coast	$2,932,058	$2,321,093	$3,050,506
Southwest	1,309,950	1,169,948	1,110,045
Central	1,452,794	1,831,914	1,749,231
Southeast	1,207,437	1,058,151	970,580
Total	$6,902,239	$6,381,106	$6,880,362

Note 3.Financial Services

The following tables present financial information relating to our financial services reporting segment (in thousands):


	Years Ended November 30,
	2024	2023	2022
Revenues
Insurance commissions	$16,403	$17,804	$12,823
Title services	11,444	11,719	10,572
Other	—	—	19
Total	27,847	29,523	23,414
Expenses
General and administrative	(6,133)	(5,726)	(5,762)
Operating income	21,714	23,797	17,652
Equity in income of unconsolidated joint ventures	27,176	15,697	20,799
Pretax income	$48,890	$39,494	$38,451


	November 30,
	2024	2023
Assets
Cash and cash equivalents	$1,220	$266
Receivables	5,407	2,783
Investments in unconsolidated joint ventures	21,997	19,354
Other assets (a)	38,299	34,476
Total assets	$66,923	$56,879
Liabilities
Accounts payable and accrued expenses	$2,719	$1,645
Total liabilities	$2,719	$1,645

(a)Other assets at November 30, 2024 and 2023 included $38.2 million and $34.4 million, respectively, of contract assets for

estimated future renewal commissions.

Note 4.Earnings Per Share

Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):


	Years Ended November 30,
	2024	2023	2022
Numerator:
Net income	$655,018	$590,177	$816,666
Less: Distributed earnings allocated to participating securities	(527)	(413)	(268)
Less: Undistributed earnings allocated to participating securities	(4,301)	(3,861)	(3,904)
Numerator for basic earnings per share	650,190	585,903	812,494
Effect of dilutive securities:
Add: Undistributed earnings allocated to participating securities	4,301	3,861	3,904
Less: Undistributed earnings reallocated to participating securities	(4,179)	(3,744)	(3,796)
Numerator for diluted earnings per share	$650,312	$586,020	$812,602


	Years Ended November 30,
	2024	2023	2022
Denominator:
Weighted average shares outstanding — basic	74,753	80,842	86,861
Effect of dilutive securities:
Share-based payments	2,202	2,538	2,487
Weighted average shares outstanding — diluted	76,955	83,380	89,348
Basic earnings per share	$8.70	$7.25	$9.35
Diluted earnings per share	$8.45	$7.03	$9.09

In 2024, 2023 and 2022, no outstanding stock options were excluded from the diluted earnings per share calculation.

Contingently issuable shares associated with outstanding PSUs were not included in the basic earnings per share calculations

for the periods presented, as the applicable vesting conditions had not been satisfied.

Note 5.Receivables

Receivables consisted of the following (in thousands):


	November 30,
	2024	2023
Due from utility companies, improvement districts and municipalities (a)	$173,733	$197,102
Recoveries related to self-insurance and other legal claims	136,949	107,065
Refundable deposits and bonds	10,667	13,292
Income taxes receivable	10,543	—
Other	49,887	53,615
Subtotal	381,779	371,074
Allowance for doubtful accounts	(4,246)	(4,212)
Total	$377,533	$366,862

(a)These receivables typically relate to infrastructure improvements we make with respect to our communities. We are

generally reimbursed for the cost of such improvements when they are accepted by the utility company, improvement

district or municipality, or after certain events occur, depending on the terms of the applicable agreements. These events

may include, but are not limited to, the connection of utilities or the issuance of bonds by the respective improvement

districts or municipalities.

Note 6.Inventories

Inventories consisted of the following (in thousands):


	November 30,
	2024	2023
Homes completed or under construction	$1,990,113	$2,106,149
Land under development	3,537,907	3,027,497
Total	$5,528,020	$5,133,646

Homes completed or under construction is comprised of costs associated with homes completed or in various stages of

construction and includes direct construction and related land acquisition and land development costs. Land under development

primarily consists of land acquisition and land development costs. Land development costs include capitalized interest and real

estate taxes. When home construction begins, the associated land acquisition and land development costs are included in homes

under construction.

Land under development at November 30, 2024 and 2023 included land held for future development of $21.2 million and

$17.0 million, respectively. Land held for future development principally relates to land where development activity has been

suspended or has not yet begun but is expected to occur in the future. These assets are generally located in submarkets where

conditions do not presently support further investment or development, or are subject to a building permit moratorium or

regulatory restrictions, or are portions of larger land parcels that we plan to build out over several years and/or that have not yet

been entitled.

Our interest costs were as follows (in thousands):


	Years Ended November 30,
	2024	2023	2022
Capitalized interest at beginning of year	$134,375	$145,494	$161,119
Interest incurred	105,642	107,086	120,859
Interest amortized to construction and land costs (a)	(117,630)	(118,205)	(136,484)
Capitalized interest at end of year	$122,387	$134,375	$145,494

(a)Interest amortized to construction and land costs for the years ended November 30, 2024 and 2023 included nominal

amounts related to land sales during the periods.

Note 7.Inventory Impairments and Land Option Contract Abandonments

Each community or land parcel in our owned inventory is assessed to determine if indicators of potential impairment exist.

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.

If indicators of potential impairment exist for a community or land parcel, the identified asset is evaluated for recoverability.

We evaluated eight, five and five communities or land parcels for recoverability as of November 30, 2024, 2023 and 2022,

respectively. The carrying values of those communities or land parcels evaluated as of November 30, 2024, 2023 and 2022

were $139.5 million, $89.3 million and $118.7 million, respectively. In addition, we evaluated land held for future

development for recoverability as of November 30, 2024, 2023 and 2022. Inventory impairment charges are included in

construction and land costs in our consolidated statements of operations.

When an indicator of potential impairment is identified for a community or land parcel, we test the asset for recoverability

by comparing the carrying value of the asset to the undiscounted future net cash flows expected to be generated by the asset.

The undiscounted future net cash flows are impacted by then-current conditions and trends in the market in which the asset is

located as well as factors known to us at the time the cash flows are calculated. These factors may include recent trends in our

orders, backlog, cancellation rates and volume of homes delivered, as well as our expectations related to the following: product

offerings; market supply and demand, including estimated average selling prices and related price appreciation; and land

development, home construction and overhead costs to be incurred and related cost inflation. Our inventory is assessed for

potential impairment on a quarterly basis, and the assumptions used are reviewed and adjusted, as necessary, to reflect the

market conditions and trends and our expectations at the time each assessment is performed.

Given the inherent challenges and uncertainties in forecasting future results, our inventory assessments at the time they are

made take into consideration whether a community or land parcel is active, meaning whether it is open for sales and/or

undergoing development, or whether it is being held for future development or held for sale. Due to the short-term nature of

active communities and land held for sale, as compared to land held for future development, our inventory assessments

generally assume the continuation of then-current market conditions, subject to identifying information suggesting significant

sustained changes in such conditions. Our assessments of active communities, at the time made, generally anticipate net orders,

average selling prices, volume of homes delivered and costs for land development and home construction to continue at or near

then-current levels through the particular asset’s estimated remaining life. Inventory assessments for our land held for future

development consider then-current market conditions as well as subjective forecasts regarding the timing and costs of land

development and home construction and related cost inflation; the product(s) to be offered; and the net orders, volume of homes

delivered, and selling prices and related price appreciation of the offered product(s) when an associated community is

anticipated to open for sales. We evaluate various factors to develop these forecasts, including the availability of and demand

for homes and finished lots within the relevant marketplace; historical, current and expected future sales trends for the

marketplace; and third-party data, if available. The estimates, expectations and assumptions used in each of our inventory

assessments are specific to each community or land parcel based on what we believe are reasonable forecasts for their particular

performance, and may vary among communities or land parcels and may vary over time.

We record an inventory impairment charge on a community or land parcel that is active or held for future development

when indicators of potential impairment exist and the carrying value of the real estate asset is greater than the undiscounted

future net cash flows the asset is expected to generate. These real estate assets are written down to fair value, which is primarily

determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other

valuation techniques. Inputs used in our calculation of estimated discounted future net cash flows are specific to each affected

real estate asset and are based on our expectations for each such asset as of the applicable measurement date, including, among

others, expectations related to average selling prices and volume of homes delivered. The discount rates we used were

impacted by one or more of the following at the time the calculation was made: the risk-free rate of return; expected risk

premium based on estimated land development, home construction and delivery timelines; market risk from potential future

price erosion; cost uncertainty due to land development or home construction cost increases; and other risks specific to the asset

or conditions in the market in which the asset is located.

We record an inventory impairment charge on land held for sale when the carrying value of a land parcel is greater than its

fair value. These real estate assets are written down to fair value, less associated costs to sell. The estimated fair values of such

assets are generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar

information.

The following table summarizes ranges for significant quantitative unobservable inputs we utilized in our fair value

measurements with respect to impaired communities, other than land held for sale, written down to fair value during the years

presented:


	Years Ended November 30,
Unobservable Input (a)	2024	2023	2022
Average selling price	n/a	n/a	$475,500 - $1,076,200
Deliveries per month	n/a	n/a	2 - 4
Discount rate	n/a	n/a	17% - 21%

(a)Ranges of inputs presented primarily reflect differences between the housing markets where each impacted community is

located, rather than fluctuations in prevailing market conditions.

Based on the results of our evaluations, we recognized no inventory impairment charges in 2024 or 2023. In 2022, we

recognized inventory impairment charges of $24.1 million related to four communities with a post-impairment fair value of

$41.3 million. The impairment charges in 2022 reflected our decisions to make changes in our operational strategies aimed at

more quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building

and delivering homes therein, including communities on land previously held for future development. If we change our

strategy or if there are changes in market conditions for any given asset, it is possible that we may recognize additional

inventory impairment charges.

As of November 30, 2024, the aggregate carrying value of our inventory that had been impacted by previous inventory

impairment charges was $32.1 million, representing four communities and various other land parcels. As of November 30,

2023, the aggregate carrying value of our inventory that had been impacted by previous inventory impairment charges was

$73.9 million, representing five communities and various other land parcels.

Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it

continues to meet our investment return standards. Assessments are made separately for each optioned land parcel on a

quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others:

current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and

home construction costs; and projected profitability on expected future housing or land sales. When a decision is made not to

exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our marketing

strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs.

Based on the results of our assessments, we recognized land option contract abandonment charges of $4.6 million in 2024,

$11.4 million in 2023 and $13.2 million in 2022. Land option contract abandonment charges are included in construction and

land costs in our consolidated statements of operations.

The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the

total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated

future net order and cancellation rates; and the expected timeline to build and deliver homes sold. 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.

Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment

assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our

inventory balances, particularly as to land held for future development, it is possible that actual results could differ substantially

from those estimated, especially in periods of volatile housing market or economic conditions.

Note 8.Variable Interest Entities

Unconsolidated Joint Ventures. We participate in joint ventures from time to time that conduct land acquisition, land

development and/or other homebuilding activities in various markets where our homebuilding operations are located. Our

investments in these joint ventures may create a variable interest in a variable interest entity (“VIE”), depending on the

contractual terms of the arrangement. We analyze our joint ventures under the variable interest model to determine whether

they are VIEs and, if so, whether we are the primary beneficiary. Based on our analyses, we determined that one of our joint

ventures at November 30, 2024 and 2023 was a VIE, but we were not the primary beneficiary of the VIE. Therefore, all of our

joint ventures at November 30, 2024 and 2023 were unconsolidated and accounted for under the equity method because we did

not have a controlling financial interest.

Land Option Contracts and Other Similar Contracts. In the ordinary course of our business, we enter into land option

contracts and other similar contracts with third parties and unconsolidated entities to acquire rights to land for the construction

of homes. The use of these contracts generally allows us to reduce the market risks associated with direct land ownership and

development, and reduce our capital and financial commitments, including interest and other carrying costs. Under these

contracts, which generally do not contain provisions requiring our specific performance, we typically make a specified option

payment or earnest money deposit in consideration for the right to purchase land in the future, usually at a predetermined price.

We analyze each of our land option contracts and other similar contracts under the variable interest model to determine

whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the

underlying land, we are required to consolidate a VIE if we are the primary beneficiary. In determining whether we are the

primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most

significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or

limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing

for the VIE. As a result of our analyses, we determined that as of November 30, 2024 and 2023, we were not the primary

beneficiary of any VIEs from which we have acquired rights to land under land option contracts and other similar contracts.

The following table presents a summary of our interests in land option contracts and other similar contracts (in thousands):


	November 30, 2024		November 30, 2023
	Cash Deposits	Aggregate Purchase Price	Cash Deposits	Aggregate Purchase Price
Unconsolidated VIEs	$50,469	$1,705,542	$21,554	$727,620
Other land option contracts and other similar contracts	31,470	885,588	23,464	540,912
Total	$81,939	$2,591,130	$45,018	$1,268,532

In addition to the cash deposits presented in the table above, our exposure to loss related to our land option contracts and

other similar contracts with third parties and unconsolidated entities consisted of pre-acquisition costs of $34.3 million at

November 30, 2024 and $18.5 million at November 30, 2023. These pre-acquisition costs and cash deposits were included in

inventories in our consolidated balance sheets.

For land option contracts and other similar contracts where the land seller entity is not required to be consolidated under the

variable interest model, we consider whether such contracts should be accounted for as financing arrangements. Land option

contracts and other similar contracts that may be considered financing arrangements include those we enter into with third-party

land financiers or developers in conjunction with such third parties acquiring a specific land parcel(s) on our behalf, at our

direction, and those with other landowners where we or our designee make improvements to the optioned land parcel(s) during

the applicable option period. For these land option contracts and other similar contracts, we record the remaining purchase

price of the associated land parcel(s) in inventories in our consolidated balance sheets with a corresponding financing obligation

if we determine that we are effectively compelled to exercise the option to purchase the land parcel(s). In making this

determination with respect to a land option contract, we consider the non-refundable deposit(s) we have made and any non-

reimbursable expenditures we have incurred for land improvement activities or other items up to the assessment date; additional

costs associated with abandoning the contract; and our commitments, if any, to incur non-reimbursable costs associated with the

contract. As a result of our evaluations of land option contracts and other similar contracts for financing arrangements, we

recorded inventories in our consolidated balance sheets, with a corresponding increase to accrued expenses and other liabilities,

of $26.0 million at November 30, 2024 and $21.5 million at November 30, 2023.

Note 9.Investments in Unconsolidated Joint Ventures

Homebuilding. We have investments in unconsolidated joint ventures that conduct land acquisition, land development and/

or other homebuilding activities in various markets where our homebuilding operations are located. We and our unconsolidated

joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro

rata basis, according to our respective equity interests. The obligations to make capital contributions are governed by each such

unconsolidated joint venture’s respective operating agreement and related governing documents. Our partners in these

unconsolidated joint ventures are unrelated homebuilders, and/or land developers and other real estate entities, or commercial

enterprises. These investments are designed primarily to reduce market and development risks and to increase the number of

lots we own or control. In some instances, participating in unconsolidated joint ventures has enabled us to acquire and develop

land that we might not otherwise have had access to due to a project’s size, financing needs, duration of development or other

circumstances. While we consider our participation in unconsolidated joint ventures as potentially beneficial to our

homebuilding activities, we do not view such participation as essential.

For distributions we receive from these unconsolidated joint ventures, we have elected to use the cumulative earnings

approach for our consolidated statements of cash flows. Under the cumulative earnings approach, distributions up to the

amount of cumulative equity in earnings recognized are treated as returns on investment within operating cash flows and those

in excess of that amount are treated as returns of investment within investing cash flows.

We typically have obtained rights to acquire portions of the land held by the unconsolidated joint ventures in which we

currently participate. When an unconsolidated joint venture sells land to our homebuilding operations, we defer recognition of

our share of such unconsolidated joint venture’s earnings (losses) until we recognize revenues on the corresponding home sale,

which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the

homebuyer on the closing date. At that time, we account for the earnings (losses) as a reduction (increase) to the cost of

purchasing the land from the unconsolidated joint venture. We defer recognition of our share of such unconsolidated joint

venture losses only to the extent profits are to be generated from the sale of the home to a homebuyer.

We share in the earnings (losses) of these unconsolidated joint ventures generally in accordance with our respective equity

interests. In some instances, we recognize earnings (losses) related to our investment in an unconsolidated joint venture that

differ from our equity interest in the unconsolidated joint venture. This typically arises from our deferral of the unconsolidated

joint venture’s earnings (losses) from land sales to us, or other items.

We had investments in six unconsolidated joint ventures as of November 30, 2024, 2023 and 2022. The following table

presents combined condensed information from the statements of operations for our homebuilding unconsolidated joint

ventures (in thousands):


	Years Ended November 30,
	2024	2023	2022
Revenues	$65,866	$2,871	$5,251
Construction and land costs	(48,627)	(1,111)	(3,875)
Other expenses, net	(5,033)	(2,907)	(2,935)
Income (loss)	$12,206	$(1,147)	$(1,559)

The combined revenues and construction and land costs for 2024 primarily related to homes delivered by an

unconsolidated joint venture in California. In 2023 and 2022, our unconsolidated joint ventures did not deliver any homes. The

following table presents combined condensed balance sheet information for our homebuilding unconsolidated joint ventures (in

thousands):


	November 30,
	2024	2023
Assets
Cash	$18,869	$16,260
Receivables	2,918	3,437
Inventories	158,322	152,456
Other assets	1,052	679
Total assets	$181,161	$172,832

Liabilities and equity
Accounts payable and other liabilities	$8,091	$9,632
Notes payable (a)	47,300	53,386
Equity	125,770	109,814
Total liabilities and equity	$181,161	$172,832

(a)As of both November 30, 2024 and 2023, the unconsolidated joint venture in California that delivered homes in 2024 had

borrowings outstanding under a revolving line of credit it entered into with a third-party lender in April 2022 to finance its

land acquisition, development and construction activities. In April 2024, the revolving line of credit was amended,

increasing the aggregate commitment to $70.0 million from $62.0 million, with the amount of all advances through

October 2024 not to exceed $80.0 million. Principal repayments are made as homes are delivered, which began in May

2024. Pursuant to the amendment, the revolving line of credit converted to a term loan and the aggregate commitment was

reduced to $55.0 million effective October 31, 2024, and will be reduced to $25.0 million by April 30, 2025. Borrowings

under this term loan are secured by the underlying property and related project assets. This term loan is scheduled to

mature on April 19, 2026, unless extended or terminated pursuant to its applicable terms. None of our other

unconsolidated joint ventures had outstanding debt at November 30, 2024 or 2023.

We provide certain guarantees and indemnities to the lender in connection with the above-described revolving line of

credit, including a guaranty of interest and carry costs; a guaranty to complete the construction of phases of the improvements

for the project as such phases are commenced; a guaranty against losses suffered due to certain bad acts or failures to act by the

unconsolidated joint venture or its partners; and an indemnity from environmental issues. Except to the extent related to the

foregoing guarantees and indemnities, we do not have a guaranty or any other obligation to repay borrowings under the line of

credit or to support the value of the underlying collateral. However, various financial and non-financial covenants apply under

the line of credit and with respect to the related guaranty and indemnity obligations, and a failure to comply with such

covenants could result in a default and cause the lender to seek to enforce such guaranty and indemnity obligations. As of the

date of this report, we were in compliance with the relevant covenants. We do not believe that our existing exposure under our

guaranty and indemnity obligations related to outstanding borrowings under the line of credit is material to our consolidated

financial statements.

Financial Services. The following table presents combined condensed information from the statements of operations for

our financial services unconsolidated joint ventures, mostly comprised of KBHS’s activities (in thousands):


	Years Ended November 30,
	2024	2023	2022
Revenues	$129,516	$100,785	$115,173
Expenses	(75,165)	(69,390)	(73,573)
Income	$54,351	$31,395	$41,600

Revenues are primarily generated from fees earned on mortgage loan originations, interest earned for the period loans are

held by KBHS, and gains on the sales of mortgage loans held for sale. Gains on the sales of mortgage loans held for sale

include the realized and unrealized gains and losses associated with changes in the fair value of such loans and any related

derivative financial instruments.

The following table presents combined condensed balance sheet information for our financial services unconsolidated joint

venture (in thousands):


	November 30,
	2024	2023
Assets
Cash and cash equivalents (a)	$31,702	$29,163
Mortgage loans held for sale	122,828	164,252
Other assets	22,815	18,380
Total assets	$177,345	$211,795

Liabilities and equity
Accounts payable and other liabilities	$15,398	$13,763
Funding facilities	117,953	159,324
Equity	43,994	38,708
Total liabilities and equity	$177,345	$211,795

(a)Cash and cash equivalents includes restricted cash of $1.3 million at November 30, 2024 and 2023.

Mortgage loans held for sale. Originated mortgage loans expected to be sold into the secondary market in the foreseeable

future are reported as mortgage loans held for sale and carried in KBHS’ balance sheets at fair value, with changes in fair value

recognized within revenues in KBHS’ statements of operations.

Interest rate lock commitments. KBHS enters into IRLCs in connection with originating certain mortgage loans held for

sale, at specified interest rates and within a specified period of time, with customers who have applied for a mortgage loan and

meet certain credit and underwriting criteria. KBHS accounts for IRLCs as free-standing derivatives and does not designate

any for hedge accounting. As a result, IRLCs are recognized in KBHS’ balance sheets at fair value, and gains or losses

resulting from changes in fair value are recognized within revenues in KBHS’ statements of operations. The fair value of

IRLCs is based on market prices, which includes an estimate of the fair value of the associated mortgage servicing rights,

adjusted for estimated costs to originate the underlying mortgage loans, as well as the probability that the mortgage loans will

fund within the terms of the IRLCs. The fair value of IRLCs included in other assets in KBHS’ balance sheets was

$16.0 million at November 30, 2024 and $13.9 million at November 30, 2023. The changes in the fair value of IRLCs, which

were reported in revenues for the applicable periods, were gains of $2.1 million for 2024 and $20.3 million for 2022 and a loss

of $16.0 million for 2023.

KBHS manages the interest rate and price risk associated with its outstanding IRLCs by entering into best efforts forward

sale commitments under which mortgage loans locked with a borrower are simultaneously committed to a secondary market

investor at a fixed price, subject to the underlying mortgage loans being funded. These best efforts forward sale commitments

do not meet the definition of derivative financial instruments and are therefore not recorded in KBHS’ balance sheets. If the

mortgage loans underlying the IRLCs do not fund, KBHS has no obligation to fulfill the secondary market investor

commitments.

Funding facilities. KBHS maintains warehouse lines of credit and master repurchase agreements with various financial

institutions to fund its originated mortgage loans, with its mortgage loans held for sale pledged as collateral under these

agreements. The agreements contain covenants which include certain financial requirements, including maintenance of

minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio and positive net income, as defined in

the agreements. KBHS was in compliance with these covenants as of November 30, 2024. In addition to its compliance with

these covenants, KBHS also depends on the ability and willingness of the applicable lenders and financial institutions,

including any substitute or additional lenders and financial institutions, to extend such credit facilities to KBHS to fund its

originated mortgage loans. KBHS intends to renew these facilities when they expire at various dates in 2025. The warehouse

lines of credit and master repurchase agreements are not guaranteed by us or any of our Guarantor Subsidiaries.

Note 10.Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	November 30,
	2024	2023
Computer software and equipment	$54,875	$52,323
Model furnishings and sales office improvements	102,907	99,857
Leasehold improvements, office furniture and equipment	22,280	19,824
Subtotal	180,062	172,004
Accumulated depreciation	(89,703)	(83,695)
Total	$90,359	$88,309

Note 11.Other Assets

Other assets consisted of the following (in thousands):


	November 30,
	2024	2023
Cash surrender value of corporate-owned life insurance contracts	$51,912	$53,079
Lease right-of-use assets	18,704	24,725
Prepaid expenses	17,799	15,879
Other	17,505	3,304
Total	$105,920	$96,987

On March 1, 2024, substantially all the assets of an investee company, in which we had an aggregate ownership interest of

approximately 13.5%, held largely through a limited liability company we established to hold the investment, were sold to a

privately held buyer through a merger. Prior to the sale, certain assets of the investee company that were not included in the

sale were distributed to a separate privately held entity in which we received the same proportionate equity interest. From the

sale, we received cash plus certain preferred and common equity interests in the buyer. The estimated fair value of the private

equity interests is included in other assets as of November 30, 2024. In connection with the sale, we recognized a gain of

$12.5 million, which is included in interest income and other in our consolidated statements of operations for the year ended

November 30, 2024. Certain of our executives are entitled to receive a portion of the proceeds from the sale transaction,

including any later distributions, pursuant to ownership interests they initially acquired, including our chairman and chief

executive officer who acquired a 3.3% interest, in the relevant limited liability company in 2000 through an incentive program

described in the Proxy Statement for our 2001 Annual Meeting of Stockholders. These executives vested in their respective

interests three years after their initial acquisition.

Note 12.Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):


	November 30,
	2024	2023
Self-insurance and other legal liabilities	$315,851	$269,735
Employee compensation and related benefits	182,460	171,408
Warranty liability	96,026	98,000
Inventory-related obligations (a)	44,408	41,525
Customer deposits	44,029	58,910
Accrued interest payable	28,806	29,391
Lease liabilities	20,859	26,531
Real estate and business taxes	17,056	15,169
Federal and state taxes payable	—	1,851
Other	46,766	45,707
Total	$796,261	$758,227

(a)Represents liabilities for financing arrangements discussed in Note 8 – Variable Interest Entities, as well as liabilities for

fixed or determinable amounts associated with TIFE assessments. As homes are delivered, our obligation to pay the

remaining TIFE assessments associated with each underlying lot is transferred to the homebuyer. As such, these

assessment obligations will be paid by us only to the extent we do not deliver homes on applicable lots before the related

TIFE obligations mature.

Note 13.Leases

We lease certain property and equipment for use in our operations. We recognize lease expense for these leases generally

on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Lease right-of-use assets

and lease liabilities are recorded in our consolidated balance sheets for leases with an expected term at the commencement date

of more than 12 months. Some of our leases include one or more renewal options, the exercise of which is generally at our

discretion. Such options are excluded from the expected term of the lease unless we determine it is reasonably certain the

option will be exercised. Lease liabilities are equal to the present value of the remaining lease payments while the amount of

lease right-of-use assets is based on the lease liabilities, subject to adjustment, such as for lease incentives. Our leases do not

provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the

present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term,

market interest rates, current interest rates on our senior notes and the effects of collateralization. Our lease population at

November 30, 2024 was comprised of operating leases where we are the lessee, primarily real estate leases for our corporate

offices, division offices and design studios, as well as certain equipment leases. Our lease agreements do not contain any

residual value guarantees or material restrictive covenants.

Lease expense is included in selling, general and administrative expenses in our consolidated statements of operations and

includes costs for leases with terms of more than 12 months as well as short-term leases with terms of 12 months or less. For

the years ended November 30, 2024, 2023 and 2022, our total lease expense was $20.2 million, $22.1 million and

$20.7 million, respectively, and included short-term lease costs of $7.0 million, $8.6 million and $7.7 million, respectively.

Variable lease costs and external sublease income for the years ended November 30, 2024, 2023 and 2022 were immaterial.

The following table presents our lease right-of-use assets, lease liabilities and the weighted-average remaining lease term

and weighted-average discount rate (incremental borrowing rate) used in calculating the lease liabilities (dollars in thousands):


	November 30,
	2024	2023
Lease right-of-use assets (a)	$18,734	$24,773
Lease liabilities (a)	20,887	26,581
Weighted-average remaining lease term	2.8 years	3.0 years
Weighted-average discount rate (incremental borrowing rate)	4.6%	4.8%

(a)Lease right-of-use assets and lease liabilities are predominantly within our homebuilding operations, with only nominal

amounts in our financial services operations.

The following table presents additional information about our leases (in thousands):


	Years Ended November 30,
	2024	2023
Lease right-of-use assets obtained in exchange for new lease liabilities	$4,780	$9,195
Cash payments on lease liabilities	12,594	12,592

As of November 30, 2024, the future minimum lease payments required under our leases are as follows (in thousands):


Years Ending November 30,
2025		$10,635
2026		4,989
2027		3,812
2028		2,379
2029		514
Thereafter		—
Total lease payments		22,329
Less: Interest		(1,442)
Present value of lease liabilities		$20,887

Note 14.Income Taxes

Income Tax Expense. The components of the income tax expense in our consolidated statements of operations are as

follows (in thousands):


	Federal	State	Total
2024
Current	$(147,300)	$(31,500)	$(178,800)
Deferred	(3,100)	(14,000)	(17,100)
Income tax expense	$(150,400)	$(45,500)	$(195,900)

2023
Current	$(123,200)	$(17,200)	$(140,400)
Deferred	(8,400)	(32,300)	(40,700)
Income tax expense	$(131,600)	$(49,500)	$(181,100)

2022
Current	$(194,400)	$(49,500)	$(243,900)
Deferred	(2,900)	(8,600)	(11,500)
Income tax expense	$(197,300)	$(58,100)	$(255,400)

Our effective tax rates were 23.0% for 2024, 23.5% for 2023 and 23.8% for 2022.

In 2024, our income tax expense and effective tax rate included the favorable impacts of $19.3 million of Section 45L tax

credits we recognized primarily from building energy-efficient homes and $7.9 million of excess tax benefits related to stock-

based compensation, partly offset by $10.7 million of non-deductible executive compensation expense. In 2023, our income

tax expense and effective tax rate reflected the favorable impacts of $25.2 million of Section 45L tax credits and $5.5 million of

excess tax benefits related to stock-based compensation, partly offset by $12.2 million of non-deductible executive

compensation expense. In 2022, our income tax expense and effective tax rate reflected the favorable impacts of $22.6 million

of Section 45L tax credits and $1.8 million of excess tax benefits related to stock-based compensation, partly offset by

$9.7 million of non-deductible executive compensation expense.

The IRA tied Section 45L tax credit qualification for energy-efficient homes built on and after January 1, 2023 to new

homes achieving ENERGY STAR certification. Based on guidance the IRS issued in September 2023, fewer of the ENERGY

STAR homes we build in California meet the heightened qualification standard the IRS selected for homes built in that state

relative to other states.

Deferred Tax Assets, Net. Deferred income taxes result from temporary differences in the financial and tax basis of assets

and liabilities. Significant components of our deferred tax liabilities and assets are as follows (in thousands):


	November 30,
	2024	2023
Deferred tax liabilities:
Capitalized expenses	$26,792	$29,395
State taxes	9,680	12,152
Depreciation and amortization	8,055	8,179
Other	308	374
Total	44,835	50,100

Deferred tax assets:
Warranty, legal and other accruals	50,360	53,805
Employee benefits	53,282	51,325
Capitalized expenses	21,861	22,538
NOLs from 2006 through 2023	21,811	33,827
Inventory impairment and land option contract abandonment charges	7,653	15,878
Partnerships and joint ventures	5,879	6,193
Tax credits	2,019	1,857
Other	1,191	1,052
Total	164,056	186,475
Valuation allowance	(16,800)	(16,900)
Total	147,256	169,575
Deferred tax assets, net	$102,421	$119,475

Reconciliation of Expected Income Tax Expense. The income tax expense computed at the statutory U.S. federal income

tax rate and the income tax expense provided in our consolidated statements of operations differ as follows (dollars in

thousands):


	Years Ended November 30,
	2024		2023		2022
	$	%	$	%	$	%
Income tax expense computed at statutory rate	$(178,692)	(21.0)%	$(161,982)	(21.0)%	$(225,121)	(21.0)%
Tax credits	19,321	2.3	25,218	3.3	22,565	2.1
Stock compensation	6,405	.7	4,471	.6	1,442	.2
Dividend received deduction	986	.1	—	—	—	—
Valuation allowance for deferred tax assets	100	—	200	—	300	—
Non-deductible compensation	(8,703)	(1.0)	(9,975)	(1.3)	(7,905)	(.7)
State taxes, net of federal income tax benefit	(36,028)	(4.2)	(39,307)	(5.1)	(46,139)	(4.3)
Other, net	711	.1	275	—	(542)	(.1)
Income tax expense	$(195,900)	(23.0)%	$(181,100)	(23.5)%	$(255,400)	(23.8)%

Deferred Tax Asset Valuation Allowance. We evaluate our deferred tax assets quarterly to determine if adjustments to our

valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely

than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors,

our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward

periods, and conditions in the housing market and the broader economy. In our evaluation, we give more significant weight to

evidence that is objective in nature as compared to subjective evidence. Also, more significant weight is given to evidence that

directly relates to our then-current financial performance as compared to indirect or less current evidence. The ultimate

realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in

which the related deferred tax assets become deductible. The value of our deferred tax assets depends on applicable income tax

rates.

Our deferred tax assets of $119.2 million at November 30, 2024 and $136.4 million at November 30, 2023 were partially

offset in each year by valuation allowances of $16.8 million and $16.9 million, respectively. The deferred tax asset valuation

allowances at November 30, 2024 and 2023 were primarily related to certain state NOLs that had not met the “more likely than

not” realization standard at those dates. As a result of our utilization of certain state NOLs, we reduced the valuation allowance

by $.1 million in 2024. As of November 30, 2024, we would need to generate approximately $408.0 million of pretax income

in future periods before 2043 to realize our deferred tax assets. Based on the evaluation of our deferred tax assets as of

November 30, 2024 and 2023, we determined that most of our deferred tax assets would be realized.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a

valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of

future results. Changes in positive and negative evidence, including differences between estimated and actual results, could

result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial

statements. Changes in existing federal and state tax laws and corporate income tax rates could also affect actual tax results and

the realization of deferred tax assets over time.

The majority of the tax benefits associated with our NOLs can be carried forward for 20 years and applied to offset future

taxable income. Depending on their applicable statutory period, the state NOLs of $21.8 million, if not utilized, will begin to

expire between 2025 and 2043. No state NOLs expired in 2024 or 2023. State NOLs of $.1 million expired in 2022.

Unrecognized Tax Benefits. Gross unrecognized tax benefits are the differences between a tax position taken or expected

to be taken in a tax return, and the benefit recognized for accounting purposes. A reconciliation of the beginning and ending

balances of gross unrecognized tax benefits, including interest and penalties, is as follows (in thousands):


	Years Ended November 30,
	2024	2023	2022
Balance at beginning of year	$2,376	$975	$930
Increase related to prior years’ tax positions	546	1,401	45
Balance at end of year	$2,922	$2,376	$975

Our unrecognized tax benefits are included in accrued expenses and other liabilities in our consolidated balance sheets. We

recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a

component of the provision for income taxes.

If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that

time. During the next 12 months, it is possible that the amount of unrecognized tax benefits will change, but we are not able to

provide a range of such change. The potential change, if any, will be related to increases due to new tax positions taken and the

accrual of interest and penalties. Our total accrued interest and penalties related to unrecognized income tax benefits was

approximately $.2 million at November 30, 2024 and approximately $.1 million at November 30, 2023. Because of the impact

of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not

affect our annual effective tax rate but would accelerate the payment of cash to a tax authority to an earlier period. As of

November 30, 2024, the fiscal years ending 2021 and later remain open to federal examinations, while 2020 and later remain

open to state examinations.

The benefits of our deferred tax assets, including our NOLs, built-in losses and tax credits would be reduced or potentially

eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on our

analysis performed as of November 30, 2024, we do not believe that we have experienced an ownership change as defined by

Section 382, and, therefore, the NOLs, built-in losses and tax credits we have generated should not be subject to a Section 382

limitation as of this reporting date.

Note 15.Notes Payable

Notes payable consisted of the following (in thousands):


	November 30,
	2024	2023
Senior unsecured term loan due August 25, 2026	$358,826	$358,156
6.875% Senior notes due June 15, 2027	298,560	298,062
4.80% Senior notes due November 15, 2029	297,932	297,572
7.25% Senior notes due July 15, 2030	346,574	346,101
4.00% Senior notes due June 15, 2031	386,638	386,199
Mortgages and land contracts due to land sellers and other loans (at an interest rate of 4.3% at November 30, 2024 and 3.0% to 4.5% at November 30, 2023)	3,149	3,808
Total	$1,691,679	$1,689,898

The carrying amounts of the Term Loan and senior notes listed above are net of debt issuance costs, which totaled $11.5

million at November 30, 2024 and $13.9 million at November 30, 2023.

Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. 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 also contains a sublimit of $250.0 million for the issuance of letters of credit. Interest on amounts borrowed

under the Credit Facility accrues at an adjusted term SOFR or a base rate, plus a spread that depends on our Leverage Ratio, as

defined under the Credit Facility. Interest is payable quarterly (base rate) or each month or three months (adjusted term SOFR).

The Credit Facility also requires the payment of a commitment fee at a per annum rate ranging from .15% to .35% of the

unused commitment, based on our Leverage Ratio. Under the terms of the Credit Facility, we are required, among other things,

to maintain compliance with various covenants, including financial covenants relating to our consolidated tangible net worth,

Leverage Ratio, and either an Interest Coverage Ratio or a minimum level of liquidity, each as defined therein. Our obligations

to pay borrowings under the Credit Facility are guaranteed on a joint and several basis by our Guarantor Subsidiaries. The

amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash

borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the

Credit Facility. As of November 30, 2024, we had no cash borrowings and $8.3 million of letters of credit outstanding under

the Credit Facility. Therefore, as of November 30, 2024, we had $1.08 billion available for cash borrowings under the Credit

Facility, with up to $241.7 million of that amount available for the issuance of letters of credit.

Senior Unsecured Term Loan. We have a Term Loan with the lenders party thereto that will mature on August 25, 2026,

or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain

exceptions). Interest under the Term Loan accrues at an adjusted term SOFR or a base rate, plus a spread that depends on our

Leverage Ratio. Interest is payable quarterly (base rate) or each month or three months (adjusted term SOFR). The Term Loan

contains various covenants that are substantially the same as those under the Credit Facility. The proceeds drawn under the

Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. As of November 30, 2024 and 2023, the

weighted average annual interest rates on our outstanding borrowings under the Term Loan were 6.0% and 6.8%, respectively.

LOC Facility. We maintain a LOC Facility to obtain letters of credit from time to time in the ordinary course of operating

our business. On September 12, 2024, we entered into an amendment to the LOC Facility that increased the limit of letters of

credit we may issue under it from $75.0 million to $100.0 million, and extended the expiration date from February 18, 2027 to

February 13, 2028. As of November 30, 2024 and 2023, we had letters of credit outstanding under the LOC Facility of $73.3

million and $12.5 million, respectively.

Senior Notes. All the senior notes outstanding at November 30, 2024 and 2023 represent senior unsecured obligations that

are guaranteed by certain of our subsidiaries and rank equally in right of payment with all of our and our Guarantor

Subsidiaries’ existing unsecured and unsubordinated indebtedness. All of our senior notes were issued in underwritten public

offerings. Interest on each of these senior notes is payable semi-annually.

The key terms of each of our senior notes outstanding as of November 30, 2024 were as follows (dollars in thousands):


				Redeemable Prior to Maturity	Effective Interest Rate

Notes Payable	Principal	Issuance Date	Maturity Date
6.875% Senior notes	$300,000	February 20, 2019	June 15, 2027	Yes (a)	7.1%
4.80% Senior notes	300,000	November 4, 2019	November 15, 2029	Yes (a)	5.0
7.25% Senior notes	350,000	June 22, 2022	July 15, 2030	Yes (b)	7.5
4.00% Senior notes	390,000	June 9, 2021	June 15, 2031	Yes (a)	4.2

(a)At our option, these notes may be redeemed, in whole at any time or from time to time in part, at a redemption price equal

to the greater of (i) 100% of the principal amount of the notes being redeemed and (ii) the sum of the present values of the

remaining scheduled payments of principal and interest on the notes being redeemed (exclusive of interest accrued to the

applicable redemption date), discounted to the redemption date at a defined rate, plus, in each case, accrued and unpaid

interest on the notes being redeemed to, but excluding, the applicable redemption date, except that six months prior to the

stated maturity date for these notes, the redemption price will be equal to 100% of the principal amount of the notes being

redeemed, plus accrued and unpaid interest on the notes being redeemed to, but excluding, the applicable redemption date.

(b)At our option, these notes may be redeemed, in whole at any time or in part from time to time prior to July 15, 2025, at a

redemption price equal to 100% of the principal amount of the notes being redeemed plus a “make whole” premium, plus

accrued and unpaid interest, if any, to the redemption date. In addition, at any time or from time to time prior to July 15,

2025, an amount not to exceed the net proceeds of qualified equity offerings may be used at our option to redeem up to

40% of the aggregate principal amount of these notes, at a redemption price equal to 107.250% of the principal amount of

the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date. We may also

elect to redeem the notes in whole at any time or in part from time to time, on or after July 15, 2025, at the applicable

specified redemption price, including accrued and unpaid interest, if any, to the redemption date.

If a change in control occurs as defined in the instruments governing our senior notes, we would be required to offer to

purchase all of our outstanding senior notes at 101% of their principal amount, together with all accrued and unpaid interest, if

any.