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Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 Results of Operations 
 
 OVERVIEW 
 Revenues are generated from our homebuilding and financial services operations. The following table presents a summary of our consolidated results of operations (dollars in thousands, except per share amounts): 
 
 Three Months Ended February 28, 
 2026 2025 Variance 
 
 Revenues: 
 Homebuilding $ 1,072,059 $ 1,387,041 (23) % 
 Financial services 4,952 4,736 5 
 Total revenues $ 1,077,011 $ 1,391,777 (23) % 
 Pretax income: 
 Homebuilding $ 34,789 $ 131,831 (74) % 
 Financial services 5,535 7,526 (26) 
 Total pretax income 40,324 139,357 (71) 
 Income tax expense 
 (6,900) (29,800) 77 
 Net income $ 33,424 $ 109,557 (69) % 
 Diluted earnings per share 
 $ .52 $ 1.49 (65) % 

 Market conditions in the 2026 first quarter remained challenging, as persistent affordability pressures, cautious buyer sentiment, heightened macroeconomic uncertainties and geopolitical tensions tempered demand. While these factors softened overall housing market activity in the current period, with the conflict in the Middle East that began on the last day of our fiscal quarter introducing additional uncertainty for already wary consumers, the longer-term outlook continues to be favorable, supported by positive demographic trends and an ongoing undersupply of homes. 
 Within this operating environment, we experienced healthy traffic at our communities in the quarter, as we continued the simplified sales approach we implemented a year ago. With this strategy, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices. 
 We believe our approach has resonated with consumers. In the 2026 first quarter, with a steady conversion of traffic to sales, the lowest cancellation rate we have experienced in the past four years and our higher average community count, we generated 2,846 net orders, a 3% increase year over year, with a monthly net order pace per community of 3.5, nearly even with the year‑earlier quarter. Our average community count rose 7% year over year to 274, and our ending community count increased 8% to 276, reflecting our continued investments in land and land development to support future growth. The value of net orders for the 2026 first quarter was $1.36 billion, about the same as the year-earlier quarter, with the higher net order volume partly offset by a slight decrease in the average selling price of those net orders to $479,400. 
 During the quarter, while selling through our existing inventory, we emphasized sales of our Built to Order homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes. Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025. Supported by demand for personalized homes and a 22% year-over-year improvement in our build times, our mix of net orders in the quarter was predominantly Built to Order, which we believe will enable us to achieve 70% Built to Order deliveries in the 2026 second half. Although our overall backlog declined year over year, the number of homes in backlog increased 15% sequentially from November 30, 2025, reflecting the higher net orders in the 2026 first quarter. 
 Homebuilding revenues for the three months ended February 28, 2026 consisted of housing revenues and nominal land sale revenues. For the corresponding period of 2025, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2026 first quarter decreased 23% year over year to $1.07 billion, due to a 14% decrease in the number of homes delivered to 2,370 and a 10% decline in their average selling price to $452,100. Approximately 50% of our homes delivered in the 2026 first quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the 
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 beginning of the quarter grew to 76% for the 2026 first quarter, from 62% for the year-earlier quarter, mainly due to our improved build times and a greater percentage of homes sold and delivered in the same quarter. 
 Homebuilding operating income for the three months ended February 28, 2026 was $33.0 million, compared to $127.3 million for the year-earlier period. As a percentage of revenues, homebuilding operating income was 3.1% for the 2026 first quarter, compared to 9.2% for the corresponding 2025 period, reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues. Inventory-related charges totaled $2.2 million for the current quarter and $1.5 million for the year-earlier quarter. Our housing gross profit margin was 15.3%, compared to 20.2% for the year-earlier quarter, primarily due to price reductions we implemented in conjunction with our simplified sales strategy to stimulate demand, higher relative land costs, product and geographic mix, and reduced operating leverage. Our selling, general and administrative expenses as a percentage of housing revenues increased 120 basis points year over year to 12.2%, mainly due to a decrease in operating leverage from lower housing revenues, partly offset by $8.0 million of insurance recoveries. Net income and diluted earnings per share for the three months ended February 28, 2026 were $33.4 million and $.52, respectively, compared to $109.6 million and $1.49, respectively, for the three months ended February 28, 2025. Our diluted earnings per share for the 2026 first quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters . 
 We continue to take a balanced approach to capital allocation, guided by market conditions and our priorities of investing in land and land development to support future growth and returning capital to our stockholders. Our investments in land and land development for the 2026 first quarter totaled $567.2 million, a 38% decrease compared to the year-earlier quarter; the prior period included the purchase of two sizable land parcels in our Southwest homebuilding reporting segment. During the 2026 first quarter, we repurchased 843,339 shares of our common stock at a total cost of $50.0 million, compared to 753,939 shares at a total cost of $50.0 million in the year-earlier quarter. We ended the 2026 first quarter with total liquidity of approximately $1.20 billion, including cash and cash equivalents and $998.4 million of available capacity under the Credit Facility. We had $200.0 million of cash borrowings outstanding under the Credit Facility at February 28, 2026. 
 Although our ending backlog value at February 28, 2026 decreased 23% year over year to approximately $1.70 billion, we believe we are well positioned to achieve our projections for the 2026 second quarter and full year, as described below under “Outlook.” 
 
 HOMEBUILDING 
 Financial Results . The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price): 
 
 Three Months Ended February 28, 
 2026 2025 
 Revenues: 
 Housing $ 1,071,474 $ 1,387,041 
 Land 585 — 
 Total 1,072,059 1,387,041 
 Costs and expenses: 
 Construction and land costs 
 Housing (907,513) (1,107,414) 
 Land (516) — 
 Total (908,029) (1,107,414) 
 Selling, general and administrative expenses (131,044) (152,288) 
 Total (1,039,073) (1,259,702) 
 Operating income 32,986 127,339 
 Interest income 
 1,281 2,079 
 Equity in income of unconsolidated joint ventures 
 522 2,413 
 
 Homebuilding pretax income $ 34,789 $ 131,831 
 
 

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 Three Months Ended February 28, 
 2026 2025 
 Homes delivered 2,370 2,770 
 Average selling price $ 452,100 $ 500,700 
 Housing gross profit margin as a percentage of housing revenues 15.3 % 20.2 % 
 Adjusted housing gross profit margin as a percentage of housing revenues 15.5 % 20.3 % 
 
 Selling, general and administrative expenses as a percentage of housing revenues 12.2 % 11.0 % 
 Operating income as a percentage of revenues 3.1 % 9.2 % 

 Revenues . Homebuilding revenues for the three months ended February 28, 2026 consisted of housing revenues and nominal land sale revenues. In the three months ended February 28, 2025, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2026 first quarter declined 23% from the year-earlier quarter, driven by a 14% decrease in the number of homes delivered and a 10% decline in their overall average selling price. Our 2026 first-quarter housing revenues included year-over-year decreases of 25% in our West Coast homebuilding reporting segment, 42% in our Southwest segment and 19% in our Central segment, partially offset by an 11% increase in our Southeast segment. The decline in the number of homes delivered largely resulted from our having 29% fewer homes in backlog at the beginning of the 2026 first quarter, as compared to the year-earlier quarter. The lower average selling price primarily reflected a combination of product and geographic mix factors and the price reductions we implemented in 2025 in conjunction with our simplified sales strategy to stimulate demand. 
 Land sale revenues for the three months ended February 28, 2026 totaled $.6 million. There were no land sales during the three months ended February 28, 2025. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions. 
 Operating Income . Our homebuilding operating income for the three months ended February 28, 2026 decreased 74% from the prior-year period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2026 first quarter included inventory-related charges of $2.2 million, compared to $1.5 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended February 28, 2026 was 3.1%, compared to 9.2% for the corresponding 2025 period, mainly due to a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of housing revenues. 
 • Housing Gross Profits – Housing gross profits of $164.0 million for the three months ended February 28, 2026 were down 41% year over year, reflecting lower housing revenues and a 490 basis-point decrease in our housing gross profit margin to 15.3%. The decline in the housing gross profit margin primarily reflected the price reductions we implemented a year ago, higher relative land costs, product and geographic mix, and reduced operating leverage. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.8% and 1.7% for the three months ended February 28, 2026 and 2025, respectively. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 15.5% for the 2026 first quarter decreased 480 basis points year over year. The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under “Non-GAAP Financial Measures.” 
 • Land Sale Profits – Land sales generated essentially break-even results for the three months ended February 28, 2026. There were no land sales during the three months ended February 28, 2025. 
 • Selling, General and Administrative Expenses – The following table presents the components of our selling, general and administrative expenses (dollars in thousands): 
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 Three Months Ended February 28, 
 2026 % of Housing Revenues 2025 % of Housing Revenues 
 Marketing expenses $ 38,715 3.6 % $ 39,663 2.9 % 
 Commission expenses (a) 39,580 3.7 47,166 3.4 
 General and administrative expenses 52,749 4.9 65,459 4.7 
 Total $ 131,044 12.2 % $ 152,288 11.0 % 
 

 (a) Commission expenses include sales commissions on homes delivered paid to internal sales counselors and external real estate brokers. 
 Our selling, general and administrative expenses for the three months ended February 28, 2026 decreased 14% compared to the year-earlier period, largely reflecting the favorable impact of $8.0 million in insurance recoveries and a decrease in commission expenses as a result of fewer homes delivered in the 2026 period. As a percentage of housing revenues, our selling, general and administrative expenses for the three months ended February 28, 2026 increased 120 basis points year over year, mainly due to a decrease in operating leverage from lower housing revenues, partly offset by insurance recoveries. 
 Interest Income/Expense . Interest income, which is generated from short-term investments, was $1.3 million for the three months ended February 28, 2026, compared to $2.1 million for the year-earlier quarter. The year-over-year decrease for the three months ended February 28, 2026 reflected our lower average balance of cash equivalents and a lower interest rate in the 2026 period. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates. 
 We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month periods ended February 28, 2026 and 2025 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. 
 Equity in Income of Unconsolidated Joint Ventures . Our equity in income of unconsolidated joint ventures was $.5 million for the three months ended February 28, 2026, compared to $2.4 million for the year-earlier period, mainly reflecting a decrease in the number of homes delivered by an unconsolidated joint venture in California. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. 
 Net Orders, Cancellation Rates, Backlog and Community Count . The following table presents information about our net orders, cancellation rate, ending backlog and community count (dollars in thousands): 
 
 Three Months Ended February 28, 
 2026 2025 
 Net orders 2,846 2,772 
 Net order value (a) $ 1,364,312 $ 1,346,067 
 Cancellation rate (b) 12 % 16 % 
 Ending backlog — homes 3,604 4,436 
 Ending backlog — value $ 1,696,190 $ 2,201,933 
 Ending community count 276 255 
 Average community count 274 257 

 (a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period. 
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 (b) Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period. 
 Net Orders . Net orders for the 2026 first quarter increased 3% compared to the year-earlier quarter, reflecting growth of 12% in our West Coast homebuilding reporting segment and 10% in our Southwest segment, partially offset by declines of 6% and 8% in our Southwest and Central segments, respectively. The pace of monthly net orders per community was 3.5 in the 2026 first quarter, nearly even with 3.6 for the corresponding 2025 quarter, as the increase in net orders was more than offset by the impact of a higher average community count. The value of net orders for the 2026 first quarter was $1.36 billion, relatively even with the year-earlier quarter, as the higher net order volume was partly offset by a slight decrease in the average selling price of those net orders to $479,400. Our cancellation rate as a percentage of gross orders for the three months ended February 28, 2026 was 12%, compared to 16% for the year-earlier period. 
 In the 2026 first quarter, we continued the simplified sales approach we implemented a year ago. With this strategy, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices. In addition, while selling through our existing inventory, we emphasized sales of our Built to Order homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes. Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025. Supported by demand for personalized homes and a 22% year-over-year improvement in our build times, our mix of net orders in the quarter was predominantly Built to Order. 
 Backlog . The number of homes in our backlog at February 28, 2026 decreased 19% compared to February 28, 2025. Our overall backlog value at February 28, 2026 declined 23% year over year due to the lower number of homes in backlog and a 5% decrease in their average selling price, reflecting the price reductions implemented during 2025 as well as product and geographic mix. Backlog value was down year over year in each of our homebuilding reporting segments, with decreases ranging from 11% in our West Coast segment to 46% in our Southwest segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations. Although our overall backlog declined year over year, the number of homes in backlog increased 15% sequentially from November 30, 2025, reflecting the higher net orders in the 2026 first quarter. 
 Community Count . We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our ending community count for the 2026 first quarter grew 8% and our average community count increased 7%, each as compared to the year-earlier quarter. 
 
 HOMEBUILDING REPORTING SEGMENTS 
 Operational Data. The following tables present information about our homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands): 
 
 Three Months Ended February 28, 
 Homes Delivered Net Orders Cancellation Rates 
 Segment 2026 2025 2026 2025 2026 2025 
 West Coast 710 849 1,002 898 10 % 15 % 
 Southwest 378 678 514 545 9 14 
 Central 675 751 660 720 15 16 
 Southeast 607 492 670 609 12 20 
 Total 2,370 2,770 2,846 2,772 12 % 16 % 
 
 
 
 

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 Three Months Ended February 28, 
 Net Order Value Average Community Count 
 Segment 2026 2025 Variance 2026 2025 Variance 
 West Coast $ 662,134 $ 607,179 9 % 101 88 15 % 
 Southwest 221,527 269,222 (18) 38 40 (5) 
 Central 235,600 239,725 (2) 66 68 (3) 
 Southeast 245,051 229,941 7 69 61 13 
 Total $ 1,364,312 $ 1,346,067 1 % 274 257 7 % 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 February 28, 
 
 Backlog – Homes Backlog – Value 
 Segment 2026 2025 Variance 2026 2025 Variance 
 West Coast 1,233 1,260 (2) % $ 786,497 $ 879,894 (11) % 
 Southwest 603 1,001 (40) 261,772 488,714 (46) 
 Central 857 1,102 (22) 306,886 400,205 (23) 
 Southeast 911 1,073 (15) 341,035 433,120 (21) 
 Total 3,604 4,436 (19) % $ 1,696,190 $ 2,201,933 (23) % 

 The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course. In addition, with our Built to Order business model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design choices and options buyers select. These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods. 
 Financial Results . Below is a discussion of the financial results for each of our homebuilding reporting segments. Further information regarding these segments, including their pretax income (loss), is included in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report. The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures and/or interest income and expense. 
 In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $33.8 million and $36.5 million in the three months ended February 28, 2026 and 2025, respectively. 
 The financial results of our homebuilding reporting segments for the three months ended February 28, 2026 and 2025 were impacted to varying degrees by price reductions and other homebuyer concessions we extended to buyers in conjunction with our sales strategies, as well as product and geographic mix shifts of homes delivered. 
 West Coast . The following table presents financial information related to our West Coast segment (dollars in thousands, except average selling price): 
 
 Three Months Ended February 28, 
 2026 2025 Variance 
 Revenues $ 449,209 $ 601,649 (25) % 
 Construction and land costs (384,332) (491,168) 22 
 Selling, general and administrative expenses (39,658) (43,989) 10 
 Operating income $ 25,219 $ 66,492 (62) % 
 

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 Three Months Ended February 28, 
 2026 2025 Variance 
 Homes delivered 710 849 (16) % 
 Average selling price $ 632,700 $ 708,700 (11) % 
 Operating income as a percentage of revenues 5.6 % 11.1 % (550) bps 

 This segment’s revenues for each of the three months ended February 28, 2026 and 2025 were generated solely from housing operations. Housing revenues for the three months ended February 28, 2026 declined from the year-earlier period, reflecting decreases in both the number of homes delivered and their average selling price. Operating income for the three months ended February 28, 2026 declined year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income as a percentage of revenues for the 2026 first quarter decreased from the year-earlier quarter due to a 400 basis-point decline in the housing gross profit margin to 14.4% and a 150 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.8%. The year-over-year decrease in the housing gross profit margin was primarily due to price reductions, higher relative construction and land costs, product and geographic mix, and reduced operating leverage. For the three months ended February 28, 2026, inventory-related charges associated with housing operations were $.6 million, essentially the same as in the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2026 was mainly due to higher marketing and other expenses associated with our expanded community count in this segment and a decrease in operating leverage from lower housing revenues, partly offset by insurance recoveries. 
 Southwest . The following table presents financial information related to our Southwest segment (dollars in thousands, except average selling price): 
 
 Three Months Ended February 28, 
 2026 2025 Variance 
 Revenues $ 180,232 $ 312,879 (42) % 
 Construction and land costs 
 (141,919) (232,718) 39 
 Selling, general and administrative expenses 
 (15,706) (21,386) 27 
 Operating income $ 22,607 $ 58,775 (62) % 
 
 
 Homes delivered 378 678 (44) % 
 Average selling price $ 476,800 $ 461,500 3 % 
 Operating income as a percentage of revenues 12.5 % 18.8 % (630) bps 

 In each of the three-month periods ended February 28, 2026 and 2025, this segment’s revenues were generated solely from housing operations. This segment’s housing revenues for the three months ended February 28, 2026 decreased year over year, driven by a decrease in the number of homes delivered, partly offset by an increase in their average selling price. Operating income for the three months ended February 28, 2026 decreased year over year due to lower housing gross profits, partially offset by lower selling, general and administrative expenses. As a percentage of revenues, this segment’s operating income for the 2026 first quarter declined from the year-earlier quarter, reflecting a 430 basis-point decrease in the housing gross profit margin to 21.3% and a 200 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.7%. The year-over-year decrease in the housing gross profit margin for the three months ended February 28, 2026 primarily reflected higher relative land costs and decreased operating leverage on lower housing revenues, partly offset by lower construction costs. There were no inventory-related charges associated with housing operations for the three months ended February 28, 2026, compared to $.3 million of such charges for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2026 was mainly due to a decrease in operating leverage from lower housing revenues. 
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 Central . The following table presents financial information related to our Central segment (dollars in thousands, except average selling price): 
 
 Three Months Ended February 28, 
 2026 2025 Variance 
 Revenues $ 223,608 $ 275,613 (19) % 
 Construction and land costs 
 (190,454) (219,896) 13 
 Selling, general and administrative expenses 
 (23,060) (30,229) 24 
 Operating income $ 10,094 $ 25,488 (60) % 
 
 Homes delivered 675 751 (10) % 
 Average selling price $ 331,300 $ 367,000 (10) % 
 Operating income as a percentage of revenues 4.5 % 9.2 % (470) bps 

 In each of the three months ended February 28, 2026 and 2025, this segment’s revenues were generated solely from housing operations. Housing revenues for the three months ended February 28, 2026 were down from the year-earlier period due to decreases in both the number of homes delivered and their average selling price. Operating income for the three months ended February 28, 2026 declined from the corresponding year-earlier period mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. This segment’s operating income as a percentage of revenues for the 2026 first quarter decreased from the year-earlier period due to a 540 basis-point decline in the housing gross profit margin to 14.8%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 10.3%. The housing gross profit margin for the three months ended February 28, 2026 declined year over year mainly due to price reductions, higher relative construction and land costs, and product and geographic mix. Inventory-related charges associated with housing operations for the three months ended February 28, 2026 were $.6 million, compared to $.3 million for the year-earlier period. For the three months ended February 28, 2026, the year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues was mainly due to the favorable impact of insurance recoveries, partly offset by decreased operating leverage from lower housing revenues. 
 Southeast . The following table presents financial information related to our Southeast segment (dollars in thousands, except average selling price): 
 
 Three Months Ended February 28, 
 2026 2025 Variance 
 Revenues $ 219,010 $ 196,900 11 % 
 Construction and land costs 
 (189,069) (162,056) (17) 
 Selling, general and administrative expenses 
 (21,104) (21,767) 3 
 Operating income $ 8,837 $ 13,077 (32) % 
 
 
 Homes delivered 607 492 23 % 
 Average selling price $ 359,800 $ 400,200 (10) % 
 Operating income as a percentage of revenues 4.0 % 6.6 % (260) bps 

 This segment’s revenues for the three months ended February 28, 2026 were comprised of housing revenues and nominal land sale revenues. For the three months ended February 28, 2025, this segment’s revenues were generated solely from housing operations. Housing revenues for the three months ended February 28, 2026 rose from the year-earlier period to $218.4 million due to an increase in the number of homes delivered, partly offset by a decrease in their average selling price. Operating income for the three months ended February 28, 2026 was down year over year, mainly reflecting lower housing gross profits. As a percentage of revenues, operating income for the 2026 first quarter declined from the year-earlier quarter due to a 400 basis-point decrease in the housing gross profit margin to 13.7%, partly offset by a 140 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.7%. The year-over-year decrease in the housing gross profit margin for the three months ended February 28, 2026 mainly reflected price reductions, higher construction and land costs, product and geographic mix, and an increase in inventory-related charges, partly offset by an increase in operating leverage. Inventory-related charges associated with housing operations for the three months ended February 28, 2026 were $.9 million, compared to $.2 million for the year-earlier quarter. The year-over-year improvement in selling, general and 
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 administrative expenses as a percentage of housing revenues for the three months ended February 28, 2026 was mainly due to an increase in operating leverage from higher housing revenues. 
 
 FINANCIAL SERVICES REPORTING SEGMENT 
 The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): 
 
 Three Months Ended February 28, 
 2026 2025 
 Revenues $ 4,952 $ 4,736 
 Expenses (1,550) (1,539) 
 Equity in income of unconsolidated joint venture 
 2,133 4,329 
 Pretax income $ 5,535 $ 7,526 
 
 Total originations (a): 
 Loans 1,594 2,067 
 Principal $ 605,878 $ 868,655 
 Percentage of homebuyers using KBHS 81 % 90 % 
 Average FICO score 743 746 
 
 Loans sold (a): 
 Loans sold to GR Alliance 1,341 1,421 
 Principal $ 516,009 $ 575,300 
 Loans sold to third parties 364 563 
 Principal $ 125,932 $ 249,977 
 

 (a) Loan originations and sales occurred within KBHS. 
 Revenues . Financial services revenues for the three months ended February 28, 2026 grew 5% from the corresponding year-earlier period, reflecting higher insurance commission revenues, partly offset by lower title services revenues. The year-over-year increase in insurance commission revenues was primarily due to higher estimated future renewal commissions. Title services revenues decreased mainly due to fewer homes delivered in the 2026 period. 
 Pretax income. Financial services pretax income for the three months ended February 28, 2026 decreased 26% from the year-earlier period, primarily due to lower equity in income of our unconsolidated joint venture, KBHS. The equity in income of KBHS declined 51% year over year, reflecting a decrease in KBHS’ income. This was mainly due to fewer loans originated as a result of both a decrease in the number of homes we delivered and a lower percentage of our homebuyers using KBHS. The impact of the lower loan volume on KBHS’ income was partially offset by a $.2 million gain in the fair value of IRLCs in the three months ended February 28, 2026, compared to a $1.5 million loss for the year‑earlier period. 
 Further information regarding our investments in unconsolidated joint ventures, including KBHS, is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. 
 
 INCOME TAXES 
 Income Tax Expense. Our income tax expense and effective tax rates were as follows (dollars in thousands): 
 
 Three Months Ended February 28, 
 2026 2025 
 Income tax expense $ 6,900 $ 29,800 
 Effective tax rate 17.1 % 21.4 % 

 Our effective tax rate for the three months ended February 28, 2026 decreased from the year-earlier period, primarily due to the higher impact of excess tax benefits related to stock-based compensation relative to the lower pretax income we generated for the 2026 period. 
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 On July 4, 2025, the OBBBA was signed into law. Among its provisions is the repeal of Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026. As a result, our income tax expense and effective tax rate take into account the anticipated lower Section 45L benefit for the homes delivered after the effective date. The other tax-related provisions of the OBBBA did not have a material impact on our consolidated financial statements. 
 Further information regarding our income taxes is provided in Note 13 – Income Taxes in the Notes to Consolidated Financial Statements in this report. 
 
 NON-GAAP FINANCIAL MEASURES 
 This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with GAAP. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations, and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information. However, because it is not calculated in accordance with GAAP, this non-GAAP financial measure may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement the most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting our operations. 
 Adjusted Housing Gross Profit Margin. The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): 
 
 Three Months Ended February 28, 
 2026 2025 
 Housing revenues $ 1,071,474 $ 1,387,041 
 Housing construction and land costs (907,513) (1,107,414) 
 Housing gross profits 163,961 279,627 
 Add: Inventory-related charges (a) 
 2,155 1,455 
 Adjusted housing gross profits $ 166,116 $ 281,082 
 
 Housing gross profit margin as a percentage of housing revenues 15.3 % 20.2 % 
 Adjusted housing gross profit margin as a percentage of housing revenues 15.5 % 20.3 % 

 (a) Represents inventory impairment and land option contract abandonment charges associated with housing operations. 
 Adjusted housing gross profit margin is a non-GAAP financial measure, which we calculate by dividing housing revenues less housing construction and land costs excluding housing inventory impairment and land option contract abandonment charges (as applicable) recorded during a given period, by housing revenues. The most directly comparable GAAP financial measure is housing gross profit margin. We believe adjusted housing gross profit margin is a relevant and useful financial measure to investors in evaluating our performance as it measures the gross profits we generated specifically on the homes delivered during a given period. This non-GAAP financial measure isolates the impact that the housing inventory impairment and land option contract abandonment charges have on housing gross profit margins, and allows investors to make comparisons with our competitors that adjust housing gross profit margins in a similar manner. We also believe investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of housing inventory impairment and land option contract abandonment charges. This financial measure assists us in making strategic decisions regarding community location and product mix, product pricing and construction pace. 
 
 Liquidity and Capital Resources 
 Overview. We have funded our homebuilding and financial services activities over the last several years with: 
 • internally generated cash flows; 
 • public issuances of debt securities; 
 • borrowings under the Credit Facility; 
 • the Term Loan; 
 • land option contracts and other similar contracts and seller notes; 
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 • public issuances of our common stock; and 
 • letters of credit and performance bonds. 
 We manage our use of cash in the operation of our business to support the execution of our primary strategic goals. Over the past several years, we have primarily used cash for: 
 • land acquisitions and land development; 
 • home construction; 
 • operating expenses; 
 • principal and interest payments on notes payable; 
 • repayments of borrowings under the Credit Facility; 
 • dividends paid to stockholders; and 
 • repurchases of our common stock. 
 We ended the 2026 first quarter with total liquidity of approximately $1.20 billion, including cash and cash equivalents and $998.4 million of available capacity under the Credit Facility, with $200.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $200.5 million at February 28, 2026, compared to $228.6 million at November 30, 2025. Cash equivalents included in the total were $45.0 million at February 28, 2026 and $152.6 million at November 30, 2025, and were mainly invested in interest-bearing bank deposit accounts and money market funds. Based on our financial position as of February 28, 2026, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months. 
 Cash Requirements . In the three months ended February 28, 2026, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2025. 
 Investments in Land and Land Development. Our investments in land and land development for the 2026 first quarter totaled $567.2 million, a 38% decrease compared to the year-earlier period; the prior period included our purchase of two sizable land parcels in our Southwest homebuilding reporting segment. In the three months ended February 28, 2026, land acquisition expenditures, which are included in our investments in land and land development, decreased to $234.3 million, or 41% of our total investments, compared to $538.0 million, or approximately 58% of our total investments, in the corresponding period of 2025. While we made investments in land and land development in each of our homebuilding reporting segments during the three months ended February 28, 2026 and 2025, approximately 44% and 47%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment. 
 For the remainder of 2026, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities that meet our investment return standards. 
 The following table presents the number of lots we owned or controlled under land option contracts and other similar contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands): 
 
 February 28, 2026 November 30, 2025 Variance 
 Segment Lots Carrying Value Lots Carrying Value Lots Carrying Value 
 West Coast 20,481 $ 3,075,043 20,750 $ 3,048,056 (269) $ 26,987 
 Southwest 11,639 1,046,060 11,142 969,260 497 76,800 
 Central 20,241 721,833 20,614 758,962 (373) (37,129) 
 Southeast 10,896 861,034 12,106 894,524 (1,210) (33,490) 
 Total 63,257 $ 5,703,970 64,612 $ 5,670,802 (1,355) $ 33,168 

 The carrying value of lots we owned or controlled under land option contracts and other similar contracts at February 28, 2026 increased slightly from November 30, 2025, mainly due to land and land development investments during the three months ended February 28, 2026. The number of lots we owned or controlled as of February 28, 2026 decreased 2% from November 30, 2025, largely reflecting homes delivered and our strategic abandonment of 3,423 previously controlled lots, partly offset by newly optioned lots during the period. The number of lots in inventory as of February 28, 2026 included 7,787 lots under contract where the associated deposits were refundable at our discretion, compared to 7,715 of such lots at 
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 November 30, 2025. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 41% at February 28, 2026, compared to 43% at November 30, 2025. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards. 
 Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at February 28, 2026, we estimate the remaining purchase price to be paid would be as follows: 2026 – $949.5 million; 2027 – $620.6 million; 2028 – $183.4 million; 2029 – $71.1 million; 2030 – $0; and thereafter – $0. 
 Liquidity. The table below summarizes our cash and cash equivalents, and total liquidity (in thousands): 
 
 February 28,
2026 November 30,
2025 
 Cash and cash equivalents $ 200,526 $ 228,614 
 Credit Facility commitment 1,200,000 1,200,000 
 Borrowings outstanding under the Credit Facility (200,000) — 
 Letters of credit outstanding under the Credit Facility (1,610) (1,610) 
 Credit Facility availability 998,390 1,198,390 
 Total liquidity $ 1,198,916 $ 1,427,004 
 

 Capital Resources. Our notes payable consisted of the following (in thousands): 
 
 February 28,
2026 November 30,
2025 Variance 
 Credit Facility $ 200,000 $ — $ 200,000 
 Term Loan 358,425 358,317 108 
 Senior notes 1,332,072 1,331,584 488 
 Mortgages and land contracts due to land sellers and other loans 2,761 3,076 (315) 
 Total 
 $ 1,893,258 $ 1,692,977 $ 200,281 

 Our financial leverage, as measured by the ratio of debt to capital, increased 260 basis points to 32.9% at February 28, 2026, compared to 30.3% at November 30, 2025 due to cash borrowings outstanding under the Credit Facility. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity). 
 LOC Facility . We maintain the LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, which expires on February 13, 2028, we may issue up to $100.0 million of letters of credit. As of February 28, 2026 and November 30, 2025, we had letters of credit outstanding under the LOC Facility of $57.3 million and $68.2 million, respectively. 
 Performance Bonds . As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.36 billion and $1.37 billion of performance bonds outstanding at February 28, 2026 and November 30, 2025, respectively. 
 Unsecured Revolving Credit Facility . We have a $1.20 billion Credit Facility that will mature on November 12, 2030. The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.70 billion under certain conditions, including obtaining additional bank commitments. The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the 
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 Credit Facility. As of February 28, 2026, we had $200.0 million of cash borrowings and $1.6 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report. 
 Under the terms of the Credit Facility and the Term Loan, we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, Leverage Ratio, and either an Interest Coverage Ratio or minimum liquidity level, each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from comparable GAAP or other commonly used terms. The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: 
 • Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.70 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after August 31, 2025 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after August 31, 2025. 
 • Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter. The Leverage Ratio is calculated as the ratio of our consolidated total indebtedness to the sum of consolidated total indebtedness and consolidated tangible net worth, all as defined under the Credit Facility and the Term Loan. 
 • Interest Coverage Ratio or liquidity – We are also required to maintain either (a) an Interest Coverage Ratio of greater than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both. The Interest Coverage Ratio is the ratio of our consolidated adjusted EBITDA to consolidated interest incurred, each as defined under the Credit Facility and the Term Loan, in each case for the previous 12 months. Our minimum liquidity is required to be greater than or equal to consolidated interest incurred, as defined under the Credit Facility and the Term Loan, for the four most recently ended fiscal quarters in the aggregate. 
 In addition, under the Credit Facility and the Term Loan, our equity investments in joint ventures and non-guarantor subsidiaries and other unconsolidated entities as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million and (b) 20% of consolidated tangible net worth. Further, for so long as we do not hold an investment grade rating, as defined under the Credit Facility and the Term Loan, the Credit Facility and the Term Loan do not permit our borrowing base indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries’ outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our inventory and unrestricted cash assets). 
 The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants that we are subject to with respect to our notes payable. The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of February 28, 2026: 
 
 Financial Covenants and Other Requirements Covenant Requirement Actual 
 Consolidated tangible net worth > $2.77 billion $3.81 billion 
 Leverage Ratio < .600 .311 
 Interest Coverage Ratio (a) > 1.500 5.616 
 Minimum liquidity (a) > $109.1 million $1,198.9 million 
 Investments in joint ventures and non-guarantor subsidiaries < $867.2 million $469.4 million 
 Borrowing base in excess of borrowing base indebtedness (as defined) n/a $2.04 billion 

 (a) Under the terms of the Credit Facility and the Term Loan, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity. 
 The indenture governing our senior notes does not contain any financial covenants. Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in sale-leaseback transactions involving property above a certain specified value. In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets. 
 As of February 28, 2026, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility and the mortgages and land contracts due to 
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 land sellers and other loans. Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance. Our ability to access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments. 
 There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration). 
 Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At February 28, 2026, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $2.8 million, secured primarily by the underlying property, which had an aggregate carrying value of $20.7 million. 
 Senior Unsecured Term Loan . We have a $360.0 million Term Loan with the lenders party thereto that will mature on November 12, 2029, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions). The Term Loan is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report. 
 Unconsolidated Joint Ventures. As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. As of February 28, 2026, one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets. None of our other homebuilding unconsolidated joint ventures had outstanding debt at February 28, 2026. 
 Consolidated Cash Flows . The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): 
 
 Three Months Ended February 28, 
 2026 2025 
 Net cash provided by (used in): 
 Operating activities $ (125,367) $ (334,321) 
 Investing activities (17,972) (10,664) 
 Financing activities 114,694 15,250 
 Net decrease in cash and cash equivalents 
 $ (28,645) $ (329,735) 

 Operating Activities . Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability. Our net cash used by operating activities for the three months ended February 28, 2026 mainly reflected a net decrease in accounts payable, accrued expenses and other liabilities of $148.1 million and a net increase in inventories of $38.0 million, partly offset by net income of $33.4 million and a net decrease in receivables of $2.8 million. In the three months ended February 28, 2025, our net cash used by operating activities primarily reflected a net increase in inventories of $416.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $99.0 million, partly offset by net income of $109.6 million and a net decrease in receivables of $39.3 million. 
 Investing Activities . In the three months ended February 28, 2026, our net cash used in investing activities consisted of $13.2 million for net purchases of property and equipment and $4.7 million of contributions to unconsolidated joint ventures. In the three months ended February 28, 2025, the net cash used in investing activities included $11.2 million for net purchases of property and equipment, partly offset by a $.6 million return of investments in unconsolidated joint ventures. 
 Financing Activities . In the three months ended February 28, 2026, cash was provided by $200.0 million of net borrowings under the Credit Facility and $.5 million of issuances of common stock under employee stock plans. The cash provided was partly offset by stock repurchases of $50.0 million, tax payments associated with stock-based compensation awards of $18.2 million, and dividend payments on our common stock of $17.3 million. In the three months ended February 28, 2025, cash was provided by $100.0 million of net borrowings under the Credit Facility and $.4 million of issuances of common stock under employee stock plans. The cash provided was partly offset by stock repurchases of $50.0 million, dividend payments on our common stock of $19.3 million and tax payments associated with stock-based compensation awards of $15.9 million. 
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 Dividends. In the 2026 and 2025 first quarters, our board of directors declared, and we paid, a quarterly cash dividend of $.25 per share. The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions. 
 Share Repurchase Program. On October 9, 2025, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock. As of November 30, 2025, there was $900.0 million of remaining availability under this share repurchase authorization. In the three months ended February 28, 2026, we repurchased 843,339 shares of our common stock at a total cost of $50.0 million. Repurchases under the authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other conditions. This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares. As of February 28, 2026, there was $850.0 million of remaining availability under this share repurchase authorization. 
 As stated above, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. For the remainder of 2026, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions. During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity securities or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire. Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or other factors, including those described below under “Outlook,” and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions. 
 
 Supplemental Guarantor Financial Information 
 As of February 28, 2026, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $200.0 million of borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan. Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries. Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best interest. See Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report for additional information regarding the terms of our senior notes, the Credit Facility and the Term Loan. 
 The guarantees are full and unconditional, and the Guarantor Subsidiaries are 100% owned by us. The guarantees are senior unsecured obligations of each of the Guarantor Subsidiaries and rank equally in right of payment with all unsecured and unsubordinated indebtedness and guarantees of such Guarantor Subsidiaries. The guarantees are effectively subordinated to any secured indebtedness of such Guarantor Subsidiaries to the extent of the value of the assets securing such indebtedness, and structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries. 
 Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and the Term Loan, if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes, the Credit Facility and the Term Loan so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release. 
 The following tables present summarized financial information for KB Home and the Guarantor Subsidiaries on a combined basis, excluding unconsolidated joint ventures and after the elimination of (a) intercompany transactions and balances between KB Home and the Guarantor Subsidiaries and (b) equity in earnings from and investments in the Non-Guarantor Subsidiaries. See Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report for additional information regarding our unconsolidated joint ventures. 
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 February 28,
2026 November 30,
2025 
 Summarized Balance Sheet Data (in thousands) 
 Assets 
 Cash $ 161,335 $ 170,338 
 Inventories 5,354,284 5,311,390 
 Amounts due from Non-Guarantor Subsidiaries 271,163 278,680 
 Total assets 6,401,091 6,360,871 
 
 Liabilities and Stockholders’ Equity 
 Notes payable $ 1,893,258 $ 1,692,977 
 Amounts due to Non-Guarantor Subsidiaries 446,354 438,762 
 Total liabilities 2,923,414 2,831,933 
 Stockholders’ equity 3,477,677 3,528,938 
 

 
 
 Summarized Statement of Operations Data (in thousands) Three Months Ended 
 February 28, 2026 
 
 Revenues $ 973,591 
 Construction and land costs (816,892) 
 Selling, general and administrative expenses (125,420) 
 Interest income from Non-Guarantor Subsidiaries 4,370 
 Pretax income 36,614 
 Net income 30,614 

 
 Critical Accounting Policies and Estimates 
 The preparation of our consolidated financial statements requires the use of judgment in the application of accounting policies and estimates of uncertain matters. There have been no significant changes to our critical accounting policies and estimates during the three months ended February 28, 2026 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2025. 
 
 Recent Accounting Pronouncements 
 There are no recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements. 
 
 Outlook 
 We continue to view the long‑term outlook for the housing market favorably, supported by positive demographic trends and the ongoing undersupply of homes. However, we expect the challenging market conditions we experienced in the 2026 first quarter – marked by persistent affordability pressures, cautious buyer sentiment, heightened macroeconomic uncertainties and geopolitical tensions softening demand – to continue in the near term. The conflict in the Middle East, which began on the last day of our fiscal quarter, has introduced additional uncertainty for already wary consumers, with the related capital and credit market volatility along with rising fuel prices and mortgage interest rates weighing on economic sentiment and negatively affecting affordability. We began to experience these impacts in our business in March with softer‑than‑expected net order activity in the month. To the extent the conflict and the associated trends continue or worsen, net order activity could remain subdued, including net orders for our Built to Order homes. 
 Within this operating environment, we plan to maintain our simplified sales approach we implemented one year ago. With this strategy, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices. We expect this approach, together with our current community count, to support steady buyer activity, subject to typical seasonal patterns and headwinds associated with the conflict in the Middle East. In addition, while selling through our existing inventory, we will continue to emphasize sales of our Built to Order homes, with the goal of bringing the Built to Order mix of homes delivered closer to our historical average of 60% to 70%. We were encouraged that our mix of net orders in the 2026 first quarter was predominantly Built to Order, which 
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 supports our belief we will achieve 70% Built to Order deliveries in the 2026 second half. Net orders for the quarter increased 3% year over year, contributing to a sequential 15% increase in our backlog from November 30, 2025, despite a 19% year‑over‑year decline. With the inherent lag between sale and delivery for Built to Order homes, we expect to continue growing our backlog. A larger backlog of Built to Order homes is expected to provide many benefits, including higher gross margins than we typically generate on inventory sales. We also intend to continue focusing on improving our build times and tightly managing our direct construction costs. 
 While our shift toward Built to Order homes will contribute to a temporary trough in the number of homes delivered during the 2026 first half, as the higher level of Built to Order homes we are selling now is expected to benefit third‑ and fourth‑quarter deliveries, and we have intentionally slowed our inventory starts, it is a purposeful reset that we believe positions us to be a stronger company in the second half of the year and beyond. We also anticipate a more favorable regional mix of homes delivered during the 2026 second half, particularly a greater proportion from our Northern California operations, which have historically generated higher average selling prices and higher margins. In addition, we believe that both our housing gross profit margin and our selling, general and administrative expenses as a percentage of housing revenues will benefit in the 2026 second half from an expected increase in operating leverage. 
 We have maintained a strong financial position and financial flexibility, supported by our Credit Facility, which we expanded at the end of our 2025 fiscal year. For the remainder of 2026, in order to strengthen our long-term growth platform, we intend, subject to the operating environment and available opportunities, to acquire and control additional land positions within attractive submarkets in our served markets that meet our investment standards. We also plan to continue to develop land we own in a manner that prioritizes capital efficiency, including developing lots where possible in smaller phases and aligning development with our starts pace to optimally manage our inventory of finished lots. Reflecting our ongoing investments in land and land development, our ending community count for the 2026 first quarter increased 8% year over year to 276. We expect to reach our peak community count for the year within the second quarter at the height of the Spring selling season, which enhances our ability to drive net orders. 
 Consistent with our balanced approach to capital allocation, we plan to continue returning capital to our stockholders, primarily through additional share repurchases. As of February 28, 2026, we had $850.0 million remaining under our current board of directors share repurchase authorization. This provides us the opportunity to repurchase our common stock in the remainder of 2026, with the pace, volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions. 
 In considering the foregoing and that our 2026 first quarter net orders were below the level we anticipated for our prior full-year delivery guidance, we have lowered our range for the year. While we anticipate refining our full-year guidance and providing additional details as we gain further clarity on the Spring selling season, our present outlook for the 2026 second quarter and full year as to certain metrics is as follows: 
 2026 Second Quarter 
 • We expect deliveries to be in the range of 2,250 to 2,450, compared to 3,120 for the 2025 second quarter. 
 • We expect to generate housing revenues in the range of $1.05 billion to $1.15 billion, compared to $1.52 billion for the corresponding 2025 period. 
 • We expect our housing gross profit margin will be in the range of 15.0% to 15.6%, assuming no inventory-related charges, compared to 19.7% for the corresponding 2025 quarter. 
 • We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 12.4% to 13.0%, compared to 10.7% for the 2025 second quarter. 
 • We expect our effective tax rate will be approximately 19.0%, compared to 24.2% for the year-earlier quarter. 
 • We expect our ending community count to be in the range of 265 to 275, compared to 253 for the corresponding 2025 quarter. 
 • We expect our common stock repurchases to be in the range of $50.0 million to $100.0 million. 
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 2026 Full Year 
 • We expect deliveries to be in the range of 10,000 to 11,500, compared to 12,902 for 2025. 
 • We expect our housing revenues to be in the range of $4.80 billion to $5.50 billion, compared to $6.21 billion for 2025. 
 • We expect our effective tax rate will be in the range of 23.0% to 25.0%, compared to 22.6% for 2025. 
 In addition to factors discussed elsewhere in this report, our future performance and the strategies we implement (and adjust or refine as necessary or appropriate) will depend significantly on economic, employment, homebuilding industry and capital, credit and financial market conditions, as well as a fairly stable and constructive political and regulatory environment, particularly in regard to housing and mortgage loan financing policies. This includes U.S. trade policy and any tariffs, and other countries’ countervailing measures, that remain in effect on raw building materials such as steel, lumber, drywall and concrete, and/or finished products. Though certain tariffs and countervailing measures instituted in 2025 have affected pricing in adjacent sectors, we have not experienced significant cost increases or raw material/finished product availability constraints to date. However, if U.S. or foreign governments take actions that cause tariff-related cost or availability pressures to escalate or expand, we could experience higher construction costs and/or supply chain disruptions that would affect our business and consolidated financial statements in future reporting periods. 
 We also believe the ongoing significant volatility in global energy, credit and capital markets, international shipping instability, and negative consumer confidence impacts from the conflict in the Middle East, particularly if it intensifies or is prolonged, could cause supply chain disruptions, increase our land development and input costs – such as for lumber and oil‑ and petroleum‑based building products – or reduce our revenues or housing gross profit margins beyond our ability to offset through pricing or cost‑management initiatives. Additionally, while the Federal Reserve reduced interest rates in 2025 and may lower rates further in 2026 or later periods, there is no assurance it will do so, or that any reduction(s), or other monetary policy changes, will meaningfully lower mortgage interest rates or positively affect demand or our business, results of operations or consolidated financial statements. 
 The potential extent and effect of these and other factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in the three months ended February 28, 2026, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues, margins and returns. 
 
 Forward-Looking Statements 
 Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “hope,” and similar expressions constitute forward-looking statements. In addition, any statements that we may make or provide concerning future financial or operating performance (including without limitation future revenues, community count, homes delivered, net orders, selling prices, sales pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings per share, or growth or growth rates), future market conditions, future interest rates, and other economic conditions, ongoing business strategies or prospects, future dividends and changes in dividend levels, the value of our backlog (including amounts that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries), the value of our net orders, potential future asset acquisitions and the impact of completed acquisitions, future share issuances or repurchases, future debt issuances, repurchases or redemptions and other possible future actions are also forward-looking statements as defined by the Act. Forward-looking statements are based on our current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding industry, among other things. These statements are not guarantees of future performance, and we have no specific policy or intention to update these statements. If we update or revise any such statement(s), no assumption should be made that we will further update or revise that statement(s) or update or revise any other such statement(s). In addition, forward-looking and other statements in this report and in other public or oral disclosures that express or contain opinions, views or assumptions about market or economic conditions; the success, performance, effectiveness and/or relative positioning of our strategies, initiatives or operational activities; and other matters, may be based in whole or in part on general observations or opinions of 
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 our management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical investigation, inquiry or analysis and are not intended, and do not express, factual assertions about past events. 
 Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following: 
 • general economic, employment and business conditions; 
 • population growth, household formations and demographic trends; 
 • conditions in the capital, credit and financial markets; 
 • our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; 
 • the execution of any securities repurchases pursuant to our board of directors’ authorization; 
 • material and trade costs and availability, including the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; 
 • consumer and producer price inflation; 
 • changes in interest rates, including those set by the Federal Reserve, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; 
 • our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; 
 • our compliance with the terms of the Credit Facility and the Term Loan; 
 • the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility; 
 • volatility in the market price of our common stock; 
 • our obtaining adequate levels of affordable insurance for our business and our ability to cover any incurred costs, liabilities or losses that are not covered by the insurance we have procured or that are due to our deciding not to procure certain types or amounts of insurance coverage; 
 • home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; 
 • weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; 
 • competition from other sellers of new and resale homes; 
 • weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas; 
 • lingering economic and financial market impacts from the prolonged shutdown of the federal government’s operations in October and November 2025, and any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown) or significant portion thereof, and financial markets’ and businesses’ reactions to any such failure; 
 • potential instability associated with the regulatory and executive policies, proposals and orders of the U.S. presidential administration, including any directed at or affecting our operations, business practices or capital allocation strategies; 
 • government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies, and the potential significant scaling back or ending of the federal conservatorship of the government-sponsored enterprises), the homebuilding industry, or construction activities; 
 • changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes and the pending expiration of such tax credits in 2026; 
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 • changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries, and financial markets’ and business’ reactions to any such policies; 
 • disruptions in world and regional trade flows, economic activity and supply chains due to the military conflicts in the Middle East and in Ukraine, including those stemming from wide-ranging sanctions and other restrictions the U.S. and other countries have imposed or may further impose respectively on Iranian or Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; 
 • the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto; 
 • the availability and cost of land in desirable areas and our ability to timely and efficiently develop acquired land parcels and open new home communities; 
 • impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; 
 • our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred; 
 • costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals; 
 • our ability to use/realize the net deferred tax assets we have generated; 
 • our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, and in entering into new markets; 
 • our operational and investment concentration in markets in California; 
 • consumer interest in and responsiveness to our new home communities, products and simplified selling process and transparent pricing initiatives, particularly from first-time homebuyers and higher-income consumers; 
 • our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California; 
 • our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures; 
 • income tax expense volatility associated with stock-based compensation; 
 • the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; 
 • the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; 
 • the performance of mortgage lenders to our homebuyers; 
 • the performance of KBHS; 
 • the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; 
 • information technology failures and data security breaches; 
 • an epidemic, pandemic or significant seasonal or other disease outbreak, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; 
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 • widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and 
 • other events outside of our control. 
 Please see our Annual Report on Form 10-K for the year ended November 30, 2025 and other filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our business.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
KB HOME 10-Q

Item 2. Management’s Discussion and Analysis
