What changed in this filing

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Item 1. Business

2023-01-20 compared with 2022-01-21 · 130 added, 112 removed, 323 unchanged (43% of the section changed)

KB Home is one of the largest and most recognized homebuilding companies in the U.S.

We have been building homes for 65 years, with over 655,000 homes delivered since our founding in 1957.

We have been building homes for more than 65 years, with over 670,000 homes delivered since our founding in 1957.

We build a variety of new homes designed primarily for first-time and first move-up, as well as second move-up and active adult homebuyers, including attached and detached single-family residential homes, townhomes and condominiums.

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and “community count” is the number of communities we have open for sales with at least five homes/lots left to sell.

The following charts present homebuilding revenues, homes delivered, net income and diluted earnings per share for the years ended November 30, 2017, 2019 and 2021, and book value per share as of November 30, 2017, 2019 and 2021:

The following charts present homebuilding revenues, net income and diluted earnings per share for the years ended November 30, 2020, 2021 and 2022, and book value per share as of November 30, 2020, 2021 and 2022:

Reflecting the geographic reach of our homebuilding business, we have ongoing operations in the nine states and 47 major markets presented below.

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• 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 how they live and what they value, at an affordable price, gives us a meaningful and distinct competitive advantage over other homebuilders and resale and rental homes.

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 can have a strong emotional attachment to our products prior to and after closing when they create a personalized home with the features and finishes they select.

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.

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We focus on investments that provide a one- to two-year supply of land or lots per product line, per community, and individual assets that are generally between 50 to 200 lots in size.

At the same time, our land investment activity shifts relative to local or national housing market environments or broader economic conditions, increasing in conjunction with strong growth, as occurred in the 2020 second half through most of the 2022 first half, and decreasing in conjunction with slower growth, as occurred in the 2022 second half, as discussed below under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Though we evaluate new markets to enter, our primary focus is on our existing geographic footprint.

We leverage the relationships we have with land owners, developers and brokers to find and acquire land parcels, and use our experience in working with municipalities to efficiently obtain development approvals.

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.

We offer our customers a variety of homes with a standardized set of base functions and features generally priced to be affordable for those with household incomes within a range of the local area’s median level.

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, and to personalize their homes beyond our base offerings with numerous interior design options and upgrades in our KB Home Design Studios.

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 options and upgrades 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 options and upgrades 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 efficient 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.

Our standardized plans allow us to more effectively shift with local demand and particular site attributes, such as the size and location of developable lots, enabling 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.

Our library of standardized plans allows us to effectively 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 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 features into our product designs to help lower our homebuyers’ total cost of homeownership and reduce our homes’ impact on the environment, as discussed below under “Environmental, Social and Governance.”

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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.

In order to help moderate construction-related cost inflation, we typically enter into fixed-price contracts with our larger trade partners and building material suppliers for specified periods of time.

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 as we grow.

We have also been able to mitigate supply chain-related disruptions over the past few years, which are further discussed below, through implementing construction process workarounds, simplifying our design option and upgrade SKUs, adding new construction service providers and communicating in real-time with our supplier base to help us construct and deliver completed homes as quickly as possible.

There may be market-driven circumstances where we believe it is necessary or appropriate to temporarily deviate from certain of the above principles.

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or acquiring land parcels in peripheral neighborhoods of a core metropolitan area that otherwise fit our growth strategy and meet our investment return standards.

Throughout 2021, we experienced significant supply chain disruptions and construction services shortages that, in conjunction with high customer demand, impacted our operations in many markets by, among other things, impairing our even-flow home production process;

causing appreciable delays in opening new communities and delivering homes;

and prompting us to narrow the design options and upgrades offered in our design studios and provide substitutes for unexpectedly unavailable items, in some cases on an interim basis.

In 2020 and 2021, our average construction cycle time lengthened and our even-flow home production process was hindered primarily due to the effects the 2019 coronavirus disease (“COVID-19”) pandemic and related control efforts had on our supply chain, which, in conjunction with high customer demand, resulted in building materials and construction services shortages, unpredictable shipment schedules and other issues.

In 2022, although demand decelerated significantly in the second half, as described below under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report, we continued to experience significant supply chain disruptions as well as delays with respect to state and municipal permitting, inspection and utility processes, which have been affected by key equipment shortages, as we worked to deliver our backlog.

These factors impacted our operations during these years in many markets by, among other things discussed in this report, causing appreciable delays in opening new communities and delivering homes;

and prompting us to revise the sequencing of construction steps from time to time, and in some cases, order items in advance of starting homes to mitigate delays.

Other circumstances could arise in the future that may lead us to make specific short-term shifts from our KB Edge principles.

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and deploying excess cash flow from operations to help fuel additional revenue growth or reduce debt, among other steps.

Raising our asset efficiency also supports utilization of our valuable deferred tax assets, allowing us to realize substantial tax cash savings that can be productively deployed in our business or to enhance our capital structure.

Customer Obsession.

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Our customer obsession mindset is built around the following key principles:

• Find out what customers want and offer them choice to attain it .

Design plays an important role in the homes we build for our customers.

• Find out what customers actually want .

We ascertain homebuyer product design and location preferences through surveys we conduct of recent buyers of both new and resale homes across our served markets.

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We use this information on what matters most to homebuyers when making purchase and trade-off decisions to develop and refine our products, 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 (such as flex spaces that can serve multiple purposes, quiet zones or home offices), building materials, construction techniques, and structural and non-structural systems, components and devices that are aligned with the preferences identified in our surveys and other data sources, including with the design options and upgrades we offer.

With our focus on affordability, we seek out innovative techniques, materials and items to help meet homebuyers’ priorities at attainable price points.

From our synthesis of the foregoing consumer research and related activities, we give our homebuyers a wide array of choice 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 upgrades and options that will help personalize their home.

We also cultivate and leverage close supplier and business partner relationships to integrate into or offer with our products architectural elements (such as flex spaces that can serve multiple purposes, quiet zones or home offices), 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 options and upgrades 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 .

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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 construction supervisors, sales representatives, design consultants and other personnel.

We support each person or family, whether it is their first time or they have already been homeowners, with a dedicated community team of sales counselors, design consultants, construction supervisors 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.

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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 on outside surveys.

In 2021, we achieved the top rank for customer satisfaction among homebuilders in third-party surveys, which we believe reflects the effective dedication we have to our homebuyers.

We are proud of the high levels of satisfaction our homebuyers have reported to us and outside survey firms.

In 2022, we continued to be the highest-ranked national homebuilder for customer satisfaction in third-party surveys, which we believe reflects the effective dedication we have to our homebuyers.

Promotional Marketing Strategy.

To emphasize the distinct combination of innovative designs, personalization, affordability and partnership we offer to our homebuyers and the importance we place on customer satisfaction, we have

centered our external brand identity and messaging around Built on Relationships®.

To emphasize the distinct combination of innovative designs, 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:

• Offering Innovative Designs .

We believe we offer homebuyers product designs that distinctively blend consumer-preferred elements, such as open floor plans, flexible living spaces and extra storage, as discussed above under “Customer Obsession;” quality construction standards;

and superior energy efficiency, compared to other new homes and resale homes with which we compete.

• A Personalized Home .

We give our homebuyers considerable ability to personalize their new home from floor plans to design features to where they live in the community.

At our KB Home Design Studios, our homebuyers are able to get both advice and the opportunity to select from a broad range of included features, design upgrades and options that will help personalize their home.

• Affordable Today and a Lower Cost of Homeownership Tomorrow .

• 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, as discussed above under “Customer Obsession”;

quality construction standards;

superior energy and water efficiency;

and a healthier indoor air environment, guided by the U.S.

Environmental Protection Agency (“EPA”) Indoor airPLUS standards, along with advanced technological features and devices, as compared to some other new homes and resale homes with which we compete.

• 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.

At our KB Home Design Studios, our homebuyers can get advice and have the opportunity to select from a broad range of included features, design options and upgrades that will help personalize their home.

• Affordability .

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 to competitive new homes that are not ENERGY STAR certified.

• A Partner Every Step of the Way .

Our dedicated team of sales counselors, design studio consultants, construction superintendents and customer service representatives, as well as KBHS loan officers, work closely with our homebuyers throughout the homebuying process.

• 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 homebuyers throughout the homebuying process.

We typically sell our homes through commissioned sales associate employees from sales offices located in or adjacent to furnished model homes in each community.

We also use electronic sales capabilities, which we have progressively enhanced since 2020, as the outbreak of the 2019 coronavirus disease (“COVID-19”) pandemic and the related responses by public health and governmental authorities to contain and combat its outbreak and spread (“COVID-19 control responses”) accelerated our use of 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 for prospective homebuyers;

• Providing access to interactive floor plans available at their desired community;

• Enabling live chats with sales counselors;

• Conducting virtual appointments and tours of the design studios with our studio professionals;

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;

• Having KBHS pre-qualify our homebuyers for mortgages, and utilizing online tools and/or contactless methods to serve homebuyers where possible;

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We plan to make additional investments in our digital sales and marketing tools in 2023.

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 net 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 outlets, our website and other evolving communication technologies.

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, billboards, radio, magazine and newspaper advertising in our served markets, as necessary.

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Based on our current strategic plans, we seek to own or control land sufficient to meet our forecasted production goals for the next four to six years.

In 2022, 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.

However, we may periodically sell certain land interests or monetize land previously held for future development.

In 2023, 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, though at a lower level than in the prior two years, as discussed below under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

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:

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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.

In 2021, as noted above under “Business Strategy,” we experienced extended community development timelines due to nationwide supply chain disruptions that created shortages of

certain construction materials and other products;

construction services availability constraints;

and delays with respect to state and municipal construction permitting, inspections and utilities, and we believe these challenging conditions will generally persist into 2022 and potentially throughout the year, as discussed below under “Outlook.”

In 2022, as noted above under “Business Strategy,” our community development timelines extended due to supply chain disruptions that, among other things, created building materials and construction services shortages and delays with respect to state and municipal permitting, inspections and utility processes.

In addition, while we made substantial investments in land acquisition and land development in the 2022 first half, extending our efforts in 2020 and 2021 to expand our scale and support future community count growth, we pivoted in the 2022 third quarter in response to softening housing market conditions to emphasize developing land positions we already own or control under land option contracts and other similar contracts.

As the housing market continued to slow in the 2022 fourth quarter, we decided to further reduce our land investment activity to align with our growth expectations for that period and 2023.

We also modified our land development strategy, electing to build smaller phases and, in some cases, deferring the start of communities or phases to align with expected demand in certain local areas.

We believe the challenging conditions we experienced in the 2022 second half will generally persist next year, as discussed below under “Outlook.”

Although they vary significantly in size and complexity, our single-family residential home communities typically consist of 50 to 200 lots per product line, with lots ranging in size from 1,700 to 11,000 square feet.

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We generally 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.

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.

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.

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However, cancellations of home purchase 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 cycle time from home sale to delivery is typically six to seven months.

Although our typical cycle time from home sale to delivery has historically ranged from six to seven months, as described above, supply chain disruptions and other production-related issues extended our build times in 2022 and 2021.

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.

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Our “backlog” consists of homes that are under a purchase 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 cancellations) generated during the current period minus the number of homes delivered during the current period.

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 purchase 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.

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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.

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, hurricanes, flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services to us, 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, has also contributed to measurable increases in the amount of 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, Canadian lumber, drywall and concrete, or finished products.

Since 2020, we have experienced intensifying building material cost pressures, particularly for lumber, and production capacity issues with some of our main product suppliers, reflecting sustained high levels of homebuilding and renovation activity combined with supply chain disruptions stemming from international and domestic COVID-19 control responses and economy-wide labor shortages in the U.S.

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

In addition, since 2013, we have seen higher prices for desirable land amid heightened competition with homebuilders and other developers and investors (both domestic and international), particularly in the land-constrained areas where we operate.

We expect these upward cost trends to continue in 2022, if and as housing market activity grows and there is greater competition for these resources across a disrupted global supply chain.

We expect these upward cost trends to continue in 2023, if and as there is greater competition for these resources across a disrupted global supply chain.

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.

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 outbreak of COVID-19 and the related COVID-19 control responses beginning in mid-March 2020 disrupted our usual seasonal patterns in 2020, with our 2020 second quarter net order activity measurably constrained followed by a significant rebound in our 2020 third and fourth quarters, resulting in a higher percentage of net orders in those quarters, compared to corresponding quarters in previous years.

The seasonal pattern of our homes delivered and housing revenues in 2021 was slightly more in line with typical historical trends.

However, we can provide no assurance whether or to what extent typical seasonal performance trends will return in 2022, or at all.

The seasonal pattern of our homes delivered and housing revenues in 2021 and 2022 was slightly more in line with typical historical trends, though the typical fourth quarter slowdown in net orders in 2022 was more pronounced than normal.

However, we can provide no assurance whether or to what extent typical seasonal performance trends will occur in 2023, or at all.

First Quarter Second Quarter Third Quarter Fourth Quarter

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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;

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;

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For fiscal 2022, our turnover rate was 21%, made up of 19% voluntary turnover and 2% involuntary turnover.

For fiscal 2021, our turnover rate was 16%, made up of 15% voluntary turnover and 1% involuntary turnover.

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

In order to achieve our strategic goals, it is essential for us to attract, promote and retain qualified personnel, particularly the local division leaders who manage our businesses in our served markets and partner with all constituents.

Therefore, we strive to create an engaging internal environment that offers our employees satisfying work, with meaningful opportunities for career growth and development, and rewarding short- and long-term compensation programs that are aligned with achieving our business goals.

Therefore, we strive to create an engaging internal environment that offers our employees satisfying work, with meaningful opportunities for career growth and development, rewarding short- and long-term compensation programs that are aligned with achieving our business goals, employee home purchase and referral programs, and employment milestone service awards.

In addition, we offer our employees benefit programs, which include medical, dental and vision insurance, a savings/retirement plan, life and disability insurance, and tuition reimbursement, along with an array of voluntary benefits designed to meet individual needs.

We engage nationally recognized outside compensation and benefits

consulting firms to objectively evaluate our programs and benchmark them against peers and other similarly sized organizations.

We believe our position as an industry leader in sustainability also supports our ability to both attract and retain high-caliber talent.

We engage nationally recognized outside compensation and benefits consulting firms to objectively evaluate our programs and benchmark them against peers and other similarly sized organizations.

In 2022, for the second year in a row, we were named to Forbes’ list of America’s Best Midsize Employers.

We believe this recognition reflects in part our focus on cultivating a supportive and inclusive workplace culture that encourages the growth and development of our team members.

Our top division and regional leaders average more than 11 years of tenure with us, and the local leaders responsible for land acquisition, entitlement, and development average over nine years with us.

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Our leadership team’s long service history provides consistency in managing our business and helps reinforce and sustain our company culture through all levels of the organization.

Promoting High Ethical Standards.

We are committed to achieving our business goals with integrity and high ethical standards that apply to our directors, officers and employees.

All employees are required to complete training on our Ethics Policy, which includes their affirming compliance with the guidelines contained therein.

In addition, we maintain an ethics committee that is focused on compliance and ethics matters for our business.

We also have an independently operated hotline and reporting website through which our employees and third parties can report ethics-related concerns.

To promote an inclusive workforce and the professional growth of the diverse individuals who join us, our employment policies prohibit discrimination based on race, color, religion, national origin, ancestry, familial status, age, veteran status, physical disability, mental disability, medical condition, gender, gender identity, sexual orientation, marital status, or any other legally protected status .

We are committed to supporting a work culture that treats all employees fairly and with respect, promotes inclusivity, provides equal opportunities for the professional growth of the diverse individuals who join us, and advancement based on merit.

At November 30, 2022, based on information available to us, females made up approximately 41% of our workforce and 33% of our managerial employees, with ethnic and racial minorities making up approximately 38% of our workforce and 22% of our managerial employees.

In addition, 36% of our board of directors are women or ethnic minorities.

We intend to continue using a combination of targeted recruiting, talent development and internal promotion strategies to expand the diversity of our employee base across all roles and functions.

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We support a dedicated Internet-based learning platform with a broad portfolio of written, audio-visual and interactive enterprise-wide and discipline-specific policy and training materials.

This platform includes a library of more than 300 self-directed courses and virtual, instructor-led programs for employees at all levels of our organization.

This platform includes a library of approximately 300 self-directed courses and virtual, instructor-led programs for employees at all levels of our organization.

New employee orientations, functional role training, and our required annual ethics training and certification, are provided on this platform.

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To recognize and promote outstanding employees, we conduct a comprehensive talent and succession planning review process on an annual basis, focused on identifying top-performing, high-potential, and diverse team members for advancement to key field and corporate leadership roles.

This review process is overseen by the management development and compensation committee of our board of directors, which also guides updates and refinements to our human capital investment and development strategies.

Employee Safety.

This review process is overseen by the management development and compensation committee of our board of directors, the members of which have significant experience and insight into human capital management, talent development and executive compensation across a variety of organizational structures, as well as strong backgrounds in executive leadership.

Employee Safety and Wellness.

We strive to provide a safe working environment for our employees, as well as our trade partners, as discussed below under “Social Practices.” In addition to the benefits programs described above, we offer a wellness program designed to support our team members’ general health.

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Monthly interactive webinars address topics such as holistic health, including nutrition, and preventive care.

We have continued to enhance our wellness program throughout 2021, and see it as a positive way to create and strengthen internal connections with and among our employees.

During 2020, we implemented various steps to address the safety and health of our workforce due to the COVID-19 pandemic.

Some examples include the following:

temporarily closed our offices and established new safety protocols and procedures;

maintained regular communication regarding the impacts of the pandemic on our team members and operations;

developed and refined a playbook to guide the safe return to offices, communities, and work sites;

provided paid time off for those directly impacted by COVID-19 and instructed those who are infected to stay home;

offered additional paid time off for employees to receive their COVID-19 vaccines and recover from resulting side effects;

increased cleaning protocols across all locations;

established physical distancing procedures, modifying workspaces, and providing personal protective equipment and cleaning supplies for employees who need to be onsite;

and invested in our IT systems to support a working environment that encompasses a mix of remote and in-person arrangements.

We continued, and in some instances, expanded these efforts throughout 2021 to help enhance our employees’ well-being and productivity.

We have continued to enhance our wellness program throughout 2022 with wellness challenges and monthly wellness webinars, and see it as a positive way to create and strengthen internal connections with and among our employees.

Since the beginning of the COVID-19 pandemic over two years ago, we have strived to provide our employees with the resources to balance their personal and professional obligations amid the challenges associated with periodic outbreaks and control responses of varying severity, with many of our employees working remotely, often in accordance with public health rules.

As we believe a hybrid approach of in-office and remote participation is how many work environments are or will be structured, and it has been effective for most of our operations, we implemented a flexible work program in our division and corporate office locations throughout 2022 that establishes a certain number of in-office workdays and is intended to help our employees to maintain a reasonable professional/personal life balance as we continue to invest in and protect our strong company culture.

Environmental, Social and Governance (“ESG”)

For nearly 15 years, we have made a dedicated effort to become a leading national company in sustainability, which encompasses our ESG practices.

We believe our longstanding, industry-leading sustainability 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.

In addition to our internal executive team, we monitor evolving trends and gather input and guidance for our initiatives through a panel of external advisors that we call our National Advisory Board, which 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.

For more than 15 years, we have made a dedicated effort to be an industry leader in sustainability, which encompasses our ESG practices.

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.

We have established an Environmental Management System (“EMS”), through which we focus on continually reducing the greenhouse gas (“GHG”) emissions associated with the use of the homes 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.

Environmental Practices .

We are committed to building energy-efficient homes and have progressively expanded our sustainability program and use of technological advancements to make renewable solar energy, water efficiency, waste reduction and indoor environments that support personal wellness available to our buyers.

As most of the energy consumed during a home’s multi-decade life occurs after we deliver the home to our customers, we have made energy efficiency central to our efforts to help reduce carbon and other greenhouse gas (“GHG”) emissions, and see enhancing the conservation of natural resources in a home’s day-to-day use as a key part of our business strategy.

As most of the energy consumed during a home’s multi-decade life occurs after we deliver the home to our customers, our products’ energy efficiency is central to our efforts to help reduce carbon and other GHG emissions.

As a result, enhancing the conservation of natural resources in a home’s day-to-day use is a key part of our business strategy.

ENERGY STAR Commitment .

The cornerstone of our energy-efficiency initiatives is building 100% ENERGY STAR certified new homes, a standard to which we committed in 2008.

ENERGY STAR is a voluntary U.S.

Environmental Protection Agency (“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.

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.

We were the first national homebuilder to make every new home we build ENERGY STAR certified, and have built over 175,000 high-performance ENERGY STAR certified new homes since 2000, more than any other builder in the nation.

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were ENERGY STAR certified in the past three years.

According to the EPA, ENERGY STAR certified new homes achieve a 20% energy efficiency improvement on average compared to new homes built to local code, and even more compared to resale homes.

According to the EPA, ENERGY STAR certified new homes achieve a 20% energy-efficiency improvement on average 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 reduce GHG emissions by approximately 3,287 pounds (1.5 metric tons) per year compared to a typical home.

Based on our energy use analysis, our homes currently save our homeowners an estimated average of $1,300 annually on utility bills compared to typical resale homes.

Our commitment to building ENERGY STAR certified homes has also enabled us to earn significant federal energy tax credits.

Our commitment to building ENERGY STAR certified homes has also enabled us to earn significant federal tax credits.

GHG Emission Reductions .

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For comparison, a typical resale home today has a HERS Index score of 130.

Our focus on sustainability has made us the #1 energy-efficient national homebuilder based on having the lowest publicly reported HERS Index among large production homebuilders.

We built our first solar home in 2005 and introduced our first all solar community in 2011.

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In recent years, we have expanded our sustainability portfolio to include enhancing our homes’ indoor environment with high-performance ventilation systems and low- or zero-VOC products.

In 2020, we announced a partnership with Well Living Lab, a collaboration between Delos Living LLC, a wellness real estate and technology company, and the Mayo Clinic, an academic medical center.

The Well Living Lab focuses exclusively on researching how indoor environments can improve human health and well-being.

Under this partnership, in 2021, we built a concept home in Phoenix, Arizona to demonstrate how advancements in design and construction materials as well as wellness intelligence ecosystems and biometric smart devices can make a significant potential contribution to the overall health of the home’s residents.

Separately, beginning in mid-2021, we included MERV-13 rated air filters, one of the highest rated residential air filters on the market, as standard at all of our new communities.

Every KB home incorporates high-performance ventilation that regularly introduces fresh outdoor air and, together with comprehensive air sealing, helps to reduce indoor air pollutants.

In addition, since mid-2021, we have included MERV-13 rated air filters, one of the highest-rated residential air filters on the market, as standard in all of our new communities.

These filters are designed to remove dust, pollen, mold and certain bacteria and viruses for better air quality compared to lower-rated air filters, and exceed current ENERGY STAR requirements.

Our new homes also include a high-efficiency heating and cooling system designed to provide better comfort in every room, as well as smartphone-controllable thermostats, which can learn homeowner patterns and help save money on electric bills each year without impacting comfort.

Consumer Awareness .

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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.

According to the EPA, WaterSense labeled products use at least 20% percent less water compared to products that are not labeled.

To date, we have built over 18,000 WaterSense and Water Smart homes, more than any other homebuilder, and installed over 900,000 WaterSense labeled fixtures, collectively helping to save an estimated 1.6 billion gallons of water per year.

According to the EPA, WaterSense labeled products use at least 20% percent less water compared to products that are not WaterSense labeled.

To date, we have built over 19,000 WaterSense and Water Smart homes, more than any other homebuilder, and installed over 1.0 million WaterSense labeled fixtures, collectively helping to save an estimated 1.7 billion gallons of water per year.

We were the first national homebuilder to implement the new WaterSense Labeled Homes Program, Version 2, which was released in February 2021 and requires homes to be at least 30% more water efficient than a typical new home.

In July 2022, we announced that every home built in our future Arizona, California and Nevada communities will be WaterSense labeled.

Additionally, these homes will be rated using the RESNET HERS H2O ® system to ensure they meet the EPA’s requirements, helping homeowners use less water as well as lower their utility bills in some of the most drought-affected areas of the country.

Awards and Recognition .

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• 2022 ENERGY STAR Partner of the Year – Sustained Excellence Award – Our 12th consecutive award for demonstrating leadership in energy-efficient construction;

• 2021 ENERGY STAR Certified Homes Market Leader Awards – A record 25 awards in all, one in each of our primary markets nationwide, recognizing excellence in energy-efficient home building;

• 2021 WaterSense Sustained Excellence Award – The seventh consecutive year we have received this award for our achievements in constructing water-efficient homes;

• Newsweek 2021 and 2022 lists of America’s Most Responsible Companies – We were the only national homebuilder to receive this distinction each year for the past two years for demonstrating leading ESG practices, specifically, our industry-leading environmental initiatives, dedication to social responsibility and strong corporate governance standards.

• 2022 ENERGY STAR Certified Homes Market Leader Awards – A record 28 awards in all, recognizing excellence in energy-efficient home building;

• 2022 WaterSense Sustained Excellence Award – The eighth consecutive year we have received this award for our achievements in constructing water-efficient homes and our 12th consecutive year being recognized by WaterSense;

• Newsweek’s 2023 list of America’s Most Responsible Companies – Our third consecutive year recognized for demonstrating leading ESG practices, specifically, our industry-leading environmental initiatives, dedication to social responsibility and strong corporate governance standards.

Our annual sustainability reports, which we have published on our website since 2008, contain more information about our programs, goals, and achievements.

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We have published a Human Rights Statement that outlines our commitment to maintaining a work culture that treats all employees fairly and with respect, promotes inclusivity, provides equal opportunities for the professional growth of the diverse individuals who join us, and advancement based on merit.

We earned a place on Forbes’ 2021 list of America’s Best Midsize Employers, the only national homebuilder to receive this distinction.

In 2021, we were also the only national homebuilder named to The Wall Street Journal’s “Management Top 250” list, which identifies the most effectively managed U.S.

companies, as developed by the Drucker Institute.

Management Top 250 measures corporate effectiveness by examining performance in the areas of customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.

In 2022 and 2021, we were named to The Wall Street Journal’s Management Top 250 list, which identifies the most effectively managed U.S.

companies, as developed by the Drucker Institute, and were the only national homebuilder to receive this recognition in both years.

The Management Top 250 measures corporate effectiveness by examining performance in the areas of customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.

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

To get a sense of 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.

Our commitment to our communities is not solely about the homes we build.

Our KB Cares philanthropic program helps to build strong social ties through efforts ranging from assisting people in challenging circumstances to educating the next generation.

Our commitment to the communities we serve is not solely about the homes we build, as we strive to also make social contributions that intersect with the nature of our business.

Our KB Cares philanthropic program 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 are 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.

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 addition, over the past several years, we have partnered with Jared Allen’s Home for Wounded Warriors to build homes for wounded veterans with accessibility features that meet their current and future needs.

W e are also one of the founding partners of the Building Talent Foundation, whose mission is to advance the education, training and career progression of young people and people from underrepresented groups as skilled technical workers and business owners in residential construction.

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.

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.

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 Practices .

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• Our board is unclassified and directors stand for election annually under a majority voting standard in an uncontested election.

• Stockholders approved measures with potential “anti-takeover” effects to protect valuable deferred tax assets.

• Stockholders should be entitled to voting rights in proportion to their economic interest.

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• We proactively engage with stockholders year-round.

In 2021, many stockholder dialogues included discussions on our ESG programs’ progress.

In 2022, many stockholder dialogues included discussions on our ESG programs.

Two directors are liaisons to management on ESG matters.

• Our board monitors cybersecurity risks and related evolving physical, electronic and other protection strategies and initiatives.

• Boards should have a strong, independent leadership structure.

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36% are women or racial or ethnic minorities.

• Stockholders elected three new candidates at our 2021 Annual Meeting, and a new director joined the board later in 2021, promoting its refreshment.

• Two new directors joined the board in 2021, promoting its refreshment.

• Boards should develop management incentive structures that are aligned with the long-term strategy of the company.

• At our 2021 Annual Meeting, our proposal to approve named executive officer compensation received 85% support.

• Management compensation is designed to advance our long-term strategic goals.

• In response to stockholder feedback, we have implemented changes in our executive compensation program, as discussed in our 2023 Proxy Statement.

• Management compensation is designed to encourage the achievement of our long-term strategic goals.

More information concerning our corporate governance can be found in our Proxy Statement for the 2023 Annual Meeting of Stockholders (“2023 Proxy Statement”).

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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.

Environmental costs and accruals were not material to our operations, cash flows or financial position in 2022, 2021 or 2020.

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.

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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.

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.

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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’s website at www.sec.gov.

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 investorrelations@kbhome.com or at our principal executive offices.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business