What changed in this filing

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Item 1. Business

2024-01-19 compared with 2023-01-20 · 152 added, 133 removed, 320 unchanged (47% 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 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.

We have been building homes for more than 65 years, with over 680,000 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.

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Our financial services operations, which accounted for the remaining .5% of our total revenues in 2023, 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”), which is an unconsolidated joint venture between us and a third party.

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.

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“community” is a single development in which new homes are constructed as part of an integrated plan;

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

“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, 2019, 2021 and 2023, and book value per share as of November 30, 2019, 2021 and 2023:

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

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

We also operate in various submarkets within these major markets.

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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.

In our business, we use the term “product” to mean and encompass a home’s floor plan design and interior/exterior style, amenities, functions and features.

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

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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.

In addition, we find our homebuyers can have a strong emotional attachment to our products 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.

We typically focus on metropolitan areas with favorable long-term economic and population growth prospects that we believe have the potential to sustain a minimum of 800 homes delivered per year, and target land parcels that meet our investment return standards.

Identified consumer preferences and home sales activity largely direct where our land acquisition teams search for available land.

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.

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.

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

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.

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 options and upgrades available in our KB Home Design Studios.

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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 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.

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 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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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.

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.

These deviations may include starting construction on a small number of homes in a community before corresponding purchase contracts are signed with homebuyers to more quickly meet customer delivery expectations and generate revenues;

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

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.

There have been and may in future periods be circumstances where we deviate from certain of the above principles.

These include starting construction on a certain number of homes in a community before corresponding purchase contracts are signed with homebuyers to more quickly meet customer delivery expectations and generate revenues, particularly in markets with low resale home inventory, as we saw during 2023.

Generally, we target having roughly 65% to 70% Built to Order homes in production, 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.

Significant supply chain disruptions beginning in 2020, primarily due to the 2019 coronavirus disease (“COVID-19”) pandemic and related public health control efforts, substantially lengthened our average construction cycle time and hindered our even-flow home production process into 2023.

During this period, we experienced building materials and construction services

shortages, delays with respect to state and municipal permitting, inspection and utility processes, unpredictable shipment schedules and other issues that prompted us to revise the sequencing of construction steps from time to time and, in some cases, order items in advance of starting a home to mitigate delays.

In 2023, we achieved a meaningful sequential improvement in our construction cycle times each quarter beginning with the second quarter, driven by a stabilizing supply chain and improved construction services availability, as well as our ongoing initiative to simplify our product offerings, particularly our design options and upgrades.

Similar and other circumstances could arise that may lead us to make specific short-term shifts from our KB Edge principles.

Asset Efficiency.

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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 within our communities;

focusing on controlling direct construction costs;

increasing inventory turns to the extent practical;

balancing pace, price and construction starts at each community;

balancing pace, price and construction starts at each community to optimize 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”;

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Customer Obsession.

Based on more than 65 years of experience, we believe the best homes start with the people who live in them.

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 ambitious guidepost, 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 to feel that once their home is built, they can see themselves in their new home.

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.

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• 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.

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 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, structural and non-structural systems, and components and devices that are aligned with the preferences identified in our surveys and other data sources.

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 .

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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 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 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.

In 2023, we continued to be one of the highest-ranked national homebuilders 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 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.

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• 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.

and advanced technological features and devices, as compared to some other new and resale homes.

• Sustainability .

Our homes are engineered to be highly energy efficient and include features that support healthier indoor environments.

Our homes are designed to be ENERGY STAR® certified — a standard that fewer than 10% of new homes nationwide meet — offering greater comfort, well-being and utility cost savings than new homes without certification.

• 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.

Additionally, at our KB Home Design Studios, our homebuyers have the opportunity to select from a broad range of included features, design options and upgrades.

• 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.

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• 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 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:

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• 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;

• Utilizing online tools to serve homebuyers where possible;

• Organizing virtual events with the broker community to introduce new communities;

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In addition, as part of our commitment to sustainability, which is discussed further below under “Environmental, Social and Governance,” and providing our customers a simple path to homeownership, we continue to work towards the goal of paperless homebuying.

Over the past few years, we have eliminated a significant amount of paper from our home purchase contract by reducing the number of forms required to complete the process and digitizing as many of the remaining forms as possible.

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

Over the past several years, we have eliminated a significant amount of paper from our home sales contract by reducing the number of forms required to complete the process and digitizing as many of the remaining forms as possible.

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

We also use print media and advertising, billboards and radio in our served markets.

Homebuyer Profile .

We focus on offering a variety of homes with a standardized set of base functions and features that are generally priced to be affordable for those with household incomes within a range of the local area’s median level in order to position our products to be attainable for the largest demand segments of the relevant submarket.

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, as well as multi-story floorplans that attract a wide range of homebuyers.

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;

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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 four to six years.

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.

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 2024, 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.

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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.

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.”

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.

For example, in 2022 and 2023, we modified our land development strategy, electing where appropriate to build in smaller phases, and in some cases, to defer the start of the next phase of lots in a community to align with expected demand.

In calibrating our investments to evolving market conditions, we increased our investments in land acquisition and land development in the 2023 second half, as compared to the 2023 first half.

We believe the conditions we experienced in 2023 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 150 lots per product line, with lots ranging in size from 1,800 to 11,000 square feet.

In our communities, we typically offer three to 15 home design choices.

In our communities, we typically offer four to 15 home design choices.

We also generally build one to three model homes at each community so that prospective homebuyers can preview the various products available.

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

distance to major employment and retail centers;

and site design and product (home designs and specifications) plans that are consistent with our commitment to building 100% ENERGY STAR homes using 100% WaterSense® labeled fixtures, as discussed below under “Environmental, Social and Governance.”

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.

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.

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, as discussed below under “Environmental, Social and Governance.”

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.

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.

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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.

To minimize the costs and risks of unsold homes in 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.

As discussed above under “Business Strategy,” we generally commence construction of a home 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.

Other than model homes, our inventories typically do not consist of a significant number of completed unsold homes.

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.

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.

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.

Although our typical cycle time from home sale to delivery has historically ranged from six to seven months, supply chain disruptions and other production-related issues contributed to our build times and overall cycle times remaining extended in 2023 and 2022.

We achieved meaningful improvement in our build times beginning in the 2023 second quarter, driven by a stabilizing supply chain and improved construction services availability, and remain committed to further reducing our build times in 2024 and moving closer to our historical levels of between four to five 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.

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

We source all of our building materials from third parties and seek out products that provide independent sustainability assessments.

We source all of our building materials 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.

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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 home purchase contract 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 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.

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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 to small local enterprises.

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, home construction cycle time, and the design options and upgrades 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.

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.

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, hurricanes, flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services, which in turn tends to drive up our costs and/or extend our production schedules.

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.

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.

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 2023, if and as there is greater competition for these resources across a disrupted global supply chain.

We expect these upward cost trends to continue in 2024, particularly 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.

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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 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.

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, with our 2022 second half net orders negatively impacted by many prospective buyers electing to pause on their homebuying decision and a 2022 fourth quarter slowdown that was more pronounced than

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 2024, 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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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, 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.

Therefore, we strive to create an engaging 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.

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.

In addition, our named executive officers who are responsible for setting our overall strategy average 20 years of tenure with us and more than two decades in the homebuilding industry.

Our top division and regional leaders average nearly 12 years of tenure with us, and the local leaders responsible for land acquisition, entitlement, and development average over nine years with us.

In addition, our named executive officers who are responsible for setting our overall strategy have an average tenure of 21 years.

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.

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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.

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

Talent Acquisition and Workforce Development.

In addition to our strong talent and career development programs that drive a high rate of internal promotions within KB Home, we are constantly working to attract the best possible candidates to add to our employee team.

Through our efforts to engage top talent, we have proactively increased the diversity of our workforce while adding specialized skills and experiences to our team.

In addition to recruiting experienced homebuilding industry candidates, we have invested in several programs with the objectives of deepening our bench of talent to bring new ways of thinking into the mix and expanding the ethnic and gender diversity of our team.

In recent years, we have invested in both our college/university and military veteran recruiting programs.

We are also a founding supporter of the Building Talent Foundation, which was established by the Leading Builders of America to address the severe and persistent labor shortage across skilled trades by creating a sustainable workforce in residential construction.

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.

At November 30, 2023, females made up approximately 42% of our workforce and 33% of our managerial employees, with ethnic and racial minorities making up approximately 37% of our workforce and 22% of our managerial employees.

In addition, 45% of our board of directors are women or ethnic minorities.

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To help advance our employees’ personal growth and drive consistent execution of our business strategy, including our customer obsession philosophy, we provide training opportunities that align with team members’ responsibilities over the arc of their careers with us.

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

We support a dedicated internet-based learning platform, KBU, with a broad portfolio of written, audio-visual and interactive enterprise-wide and discipline-specific policy and training materials that provides all employees with access to training, development and other resources to help them elevate their performance and careers.

We believe training through KBU not only supports employee job performance and development but also sustains and enhances our inclusive culture and strengthens our brand.

We believe these programs, which include environmental sustainability programs, ethics training and more, help our team work better together.

This platform includes a library of approximately 412 self-directed courses and virtual, instructor-led programs for employees at all levels of our organization and 50 leadership and managerial training topics.

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

In 2023, 69 managers at various levels across our divisions and departments attended KB Home’s 6-session Managing Essentials training series in our live, virtual classroom, bringing the total number of managers who have completed this comprehensive program to more than 413 over the past ten years.

During 2023, our team members completed more than 28,169 courses in total, an average of approximately 13 courses per employee.

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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.

To help our team members mitigate stressors arising from the outbreak of the COVID-19 pandemic and the related COVID-19 control responses, we expanded our wellness program offerings and made them available online so that every employee had access to them.

Our wellness program offerings are available online

so that every employee has access to them.

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

We have continued to enhance our wellness program throughout 2023 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.

As an outcome of the disruption of the COVID-19 pandemic, we saw a hybrid approach of in-office and remote participation as the predominant way work environments are structured.

Since 2022, we have operated our business utilizing a flexible work program in our division and corporate office locations that establishes a certain number of in-office workdays and is intended to help our employees maintain a reasonable professional/personal life balance as we continue to invest in and protect our strong company culture.

Environmental, Social and Governance (“ESG”)

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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.

We have established an Environmental Management System (“EMS”), through which we focus on continually improving the energy efficiency of our homes so, among 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.

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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, 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.

According to the U.S.

Energy Information Administration, about 22% of total energy use in the U.S.

in 2022 was due to daily residential living.

With most of the energy consumption during a home’s multi-decade life occurring after we deliver the home to the customer, our products’ energy efficiency is a key part of our efforts to help minimize a home’s impact on the environment, including the GHG and other carbon emissions produced, from its day-to-day use.

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 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.

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.

We were the first national homebuilder to make a broad commitment to building ENERGY STAR certified homes, and have built over 188,000 high-performance ENERGY STAR certified new homes since 2000, more than any other builder in the nation.

By comparison, the EPA estimates only about 10% of all new homes in the U.S.

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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.

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 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.

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

GHG Emission Reductions .

We have a goal to reduce the estimated GHG emissions (metric tons per year) 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.

Our benchmark for measuring the achievement of this goal is the Home Energy Rating System (HERS®) Index, as each HERS Index score point reduction equates to a 1% improvement in energy efficiency relative to a standard new home and potentially reduces GHG emissions by an average of 0.1 metric tons (as calculated based on the states in which we operate).

Therefore, we expect to attain our GHG emissions reduction goal if we reduce our national average HERS Index score by five points, from 50 in 2020 to a target of 45 for 2025.

GHG Emission Goal .

We have a goal to reduce 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.

Our benchmark for measuring the achievement of this goal is the Home Energy Rating System (HERS®) Index, as each HERS Index score point reduction equates to a 1% improvement in energy efficiency relative to a standard new home and potentially creates less GHG emissions by an average of 0.1 metric tons (as calculated based on the states in which we operate).

Therefore, we expect to attain our GHG emissions goal if we lower our national average HERS Index score by five points, from 50 in 2020 to a target of 45 for 2025.

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.

Solar and Clean Energy .

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

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In 2020, we were the first national homebuilder to offer a complete roof-integrated solar-paneled system.

In 2022, we built over 3,500 solar homes in California, representing nearly 90% of our homes built in the state that year.

In 2023, we built over 3,000 solar homes in California, representing roughly 100% of our homes built in the state that year.

As of November 30, 2023, approximately 90% of our model homes and sales offices in California were powered by solar energy.

We are building all-electric homes in many areas across the country in response to consumer demand, and in some cases, local building code requirements.

Each all-electric home produces approximately 3,800 pounds less CO 2 per year compared to dual-fuel homes, minimizing the GHG emissions generated over the life cycle of our homes.

In 2023, approximately 38% of our total homes delivered were all-electric, incorporating heat pumps and other energy-efficient technology.

Indoor Environments .

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

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.

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 the homes we build 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.

KB homes also feature interior door hardware with antimicrobial protection intended to inhibit the growth of microbes, such as bacteria, mold and mildew, on product surfaces.

Consumer Awareness .

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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.

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% 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.

We were also the first national homebuilder to implement in 2021 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.

In 2023, we built more than 2,800 WaterSense labeled homes, compared to 1,760 in 2022, with all these homes in both years following the WaterSense Labeled Homes Program, Version 2.

To date, we have built over 21,800 WaterSense labeled and Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.1 million WaterSense labeled fixtures, collectively helping to save an estimated 1.7 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.

Waste Reduction .

We strive to use natural resources and building materials in the most efficient manner possible, which not only conserves precious natural resources but also reduces costs for our business.

We also seek to reduce waste on our construction jobsites and in our offices, along with mitigating or diverting potential pollution and e-waste.

By prioritizing sustainable practices and encouraging suppliers to do the same, we may be able to reduce our environmental impact.

Awards and Recognition .

We have been recognized with major national awards for our leading sustainability practices, including:

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

• 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.

• 2023 ENERGY STAR Partner of the Year – Sustained Excellence Award – This was our 13th consecutive award for demonstrating leadership in building highly energy-efficient homes;

• 2023 ENERGY STAR Market Leader Awards – We set a new industry record by earning an unprecedented 29 awards, more than any other homebuilder;

• 2023 WaterSense Sustained Excellence Award – We were once again the only national homebuilder to receive this honor in 2023, which is the highest level of recognition given by the EPA WaterSense program.

This is the 13th consecutive year we have been recognized for our achievements in constructing water-efficient homes;

• Newsweek’s 2024 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 four years in a row.

This recognition is based on our industry-leading environmental and social practices;

• Newsweek’s 2023 list of America’s Most Trustworthy Companies – This is the second 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 2023 List of America’s Climate Leaders – We were the highest-ranked homebuilder on the inaugural list, in consideration of, among other things, our annualized reductions in emission intensity and carbon disclosure rating;

• Fortune’s 2023 Change the World List – We were the first and only homebuilder on the list, which recognizes companies that have created a positive impact on society through activities such as sustainability that are part of their core business strategies.

We were honored for building the first residential microgrid communities of all-electric, solar- and battery-powered homes in California.

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.

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.

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 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.

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 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.

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,” 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;

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Corporate Governance Practices .

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.

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:

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• Our board has a strong independent lead director with significant responsibilities and authority.

• Independent directors lead all board committees.

• Only independent directors serve on board committees.

• Boards should adopt structures and practices that enhance their effectiveness.

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45% are women or racial or ethnic minorities.

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

• The average tenure of our board members is seven years, with five new directors having joined since 2021, promoting its refreshment.

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

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

• We take stockholder feedback into account in our executive compensation program, as discussed in our 2024 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 2024 Annual Meeting of Stockholders (“2024 Proxy Statement”).

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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.

However, environmental costs and accruals were not material to our operations, cash flows or financial position in 2023, 2022 or 2021.

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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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 Twitter® (Twitter.com/KBHome), and other evolving communication technologies.

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 ESG-related 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.

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What changed 10-K

Item 1. Business