KB Home Backlog Rises After Four-Year Stagnation
The homebuilder posted $1.30 billion of third-quarter revenue and $1.05 a share as deliveries, price and margins recovered sequentially.
KB Home (KBH) ended a four-year run of year-over-year backlog declines in the quarter closed August 31, 2026, as homes in backlog rose 2% to 4,398 and backlog value rose 3% to $2.05 billion. The prior quarter had shown a 5% drop in home count and a 7% drop in value.
The Los Angeles-based builder operated in a housing market that continued to weaken after its June earnings report, with higher mortgage rates, geopolitical uncertainty and broader economic headwinds making prospective buyers more cautious. Against that backdrop, it produced solid sequential improvement.
Revenue was $1.30 billion, down 20% from a year earlier. That year-over-year decline narrowed from 27% in the May quarter and 23% in the February quarter. Homes delivered were 2,732. Average selling price was $473,000.
The housing gross profit margin was 16.5%. Excluding $3.0 million of inventory-related charges, the margin was 16.8%. The adjusted margin primarily reflected continued pricing pressure, higher relative land costs and reduced operating leverage. President and Chief Executive Officer Robert McGibney said built-to-order homes represented nearly three-quarters of third-quarter deliveries and contributed to the sequentially higher housing gross profit margin. Second-quarter built-to-order homes had been 73% of net orders.
Homebuilding operating income was $67.1 million, or a 5.2% margin. Selling, general and administrative expenses were 11.3% of housing revenues. Financial services pretax income was $7.4 million. Pretax income totaled $81.2 million, including a $3.5 million gain on the sale of an equity investment in a privately held technology company. Net income was $65.3 million, or $1.05 a share, with an effective tax rate of 19.6%.
Net orders were 2,604, down 12% from a year earlier. Monthly net orders per community were 3.1. The cancellation rate as a percentage of gross orders was 18%. The average community count grew 8% to 279, and the ending community count was 277. McGibney said year-over-year community count growth reflected a significant number of new community openings over the past year that will help support sales efforts going forward.
Total liquidity was $942.4 million, including $159.0 million of cash and cash equivalents and $783.4 million of available capacity under its unsecured revolving credit facility, with $415.0 million of cash borrowings outstanding. Inventories were $5.98 billion. Notes payable were $2.11 billion, and the debt-to-capital ratio was 35.7%. Stockholders’ equity was $3.80 billion. Book value per share was $62.56.
The company repurchased 0.9 million shares at a cost of $50.0 million in the quarter. Total repurchases for the nine months ended August 31 were 3.1 million shares at $175.0 million. Remaining authorization was $725.0 million.
The company continues to expect full-year 2026 deliveries, housing revenues and margins to be within the ranges it last provided. Fourth-quarter guidance called for deliveries of 3,000 to 3,500 homes, housing revenues of $1.45 billion to $1.65 billion, a housing gross profit margin of 16.0% to 16.6% assuming no inventory-related charges, selling, general and administrative expenses of 10.3% to 10.9% of revenues, an effective tax rate of approximately 26%, and an ending community count of 270 to 275. Full-year 2026 guidance remained 10,500 to 11,000 deliveries, housing revenues of $4.90 billion to $5.10 billion, a housing gross profit margin of 16.0% to 16.2% assuming no inventory-related charges, selling, general and administrative expenses of 11.5% to 11.7% of revenues, and an effective tax rate of approximately 23%.