# KB HOME (KBH) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from KB HOME's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/795266/000079526625000014/kbh-20241130.htm Accession: 0000795266-25-000014 Filing date: 2025-01-24 Report date: 2024-11-30 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/KBH/ All MD&A years: /company/KBH/mda/ Previous year: /company/KBH/mda/fy2023/ (FY 2023) Next year: /company/KBH/mda/fy2025/ (FY 2025) Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                  RESULTS OF OPERATIONS Our discussion and analysis below is focused on our 2024 and 2023 financial results, including comparisons of our year- over-year performance between these years.  Discussion and analysis of our 2022 fiscal year specifically, as well as the year- over-year comparison of our 2023 financial performance to 2022, are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended 28 November 30, 2023, filed with the SEC on January 19, 2024, which is available on our investor relations website at investor.kbhome.com and the SEC website at www.sec.gov. RESULTS OF OPERATIONS Overview.  Revenues are generated from our homebuilding and financial services operations.  The following table presents a summary of our consolidated results of operations (dollars in thousands, except per share amounts): [[GREPCENT_TABLE]] [["","Years Ended November 30,","","Variance"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues:"],["Homebuilding","$6,902,239","","$6,381,106","","$6,880,362","","8%","","(7)%"],["Financial services","27,847","","29,523","","23,414","","(6)","","26"],["Total","$6,930,086","","$6,410,629","","$6,903,776","","8%","","(7)%"],["Pretax income:"],["Homebuilding","$802,028","","$731,783","","$1,033,615","","10%","","(29)%"],["Financial services","48,890","","39,494","","38,451","","24","","3"],["Total","850,918","","771,277","","1,072,066","","10","","(28)"],["Income tax expense","(195,900)","","(181,100)","","(255,400)","","(8)","","29"],["Net income","$655,018","","$590,177","","$816,666","","11%","","(28)%"],["Earnings per share:"],["Basic","$8.70","","$7.25","","$9.35","","20%","","(22)%"],["Diluted","$8.45","","$7.03","","$9.09","","20%","","(23)%"]] [[/GREPCENT_TABLE]] In 2024, our operational execution contributed to year-over-year increases in total revenues, net income and diluted earnings per share.  Our performance for the year reflected, among other things, key longer-term housing market drivers remaining largely positive, including favorable demographic trends, rising household formations, solid employment, wage growth and the ongoing undersupply of new and resale homes.  At the same time, affordability constraints stemming largely from rising mortgage interest rates tempered buyer demand in 2024.  Our net orders in 2024 increased 18% year over year to 13,093, and the pace of monthly net orders per community rose to 4.4 from 3.8 in 2023, despite uneven market conditions during the current year that were driven primarily by buyer discomfort with volatile mortgage interest rates, persistent inflationary pressures and general economic concerns.  To navigate this business environment, we focused on balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context.  With this approach, we implemented price increases in most of our communities in the 2024 first half, selectively adjusted prices at certain communities in the third quarter to help stimulate demand, and, given our backlog entering the period, held prices relatively stable in the seasonally slower fourth quarter.  Additionally, we continued to employ targeted sales strategies throughout the year, as we have to varying degrees since the 2022 second half, including homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydowns), to help drive order activity and minimize cancellations, especially during periods of rising mortgage interest rates.  Reflecting these actions, and relatively soft net order levels in the year-earlier quarter, our 2024 fourth quarter net orders and net order value each grew 41% year over year, with all of our homebuilding reporting segments generating increases.  Our cancellation rate as a percentage of gross orders for the 2024 fourth quarter improved to 17%, from 28% for the 2023 fourth quarter and, together with our improved build times compared to a year ago, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 69% for the 2024 fourth quarter from 49% for the year-earlier quarter. 29 Homebuilding revenues for 2024 and 2023 were comprised of housing revenues and land sale revenues.  Housing revenues of $6.90 billion grew 8% from the previous year, due to a 7% increase in the number of homes delivered to 14,169 and a slight increase in the overall average selling price of those homes to $486,900.  Approximately 50% of our homes delivered in 2024 were to first-time homebuyers.  Homebuilding operating income for 2024 increased 6% to $763.9 million, compared to $718.7 million for 2023 and, as a percentage of homebuilding revenues was 11.1%, compared to 11.3%.  Our homebuilding operating income margin for 2024 primarily reflected a 20 basis point decrease in our housing gross profit margin to 21.0%, as selling, general and administrative expenses as a percentage of housing revenues were nearly even with the prior year at 10.0%.  Net income and diluted earnings per share for 2024 grew 11% and 20%, respectively, each as compared to 2023.  The increase in diluted earnings per share for 2024 was driven by higher net income and the favorable impact of our common stock repurchases over the past several quarters. Our return on equity (“ROE”) for 2024 was 16.6%, compared to 15.7% for 2023.  ROE is calculated as net income for the year divided by average stockholders’ equity, where average stockholders’ equity is based on the ending stockholders’ equity balances of the trailing five quarters. We believe our strong balance sheet and liquidity position helped provide us with the flexibility to operate effectively through the evolving market conditions during the year and pursue our priorities of investing in land and land development to support future growth and returning capital to our stockholders.  In 2024, we continued to take a balanced approach in allocating our capital aligned with these priorities.  Our investments in land and land development for 2024 increased 58% year over year to $2.84 billion.  In addition, we repurchased approximately 4.7 million shares of our common stock at a total cost of $350.0 million, which represented about 6% of our shares that were outstanding at the start of the year, and in the 2024 second quarter, our board of directors increased the quarterly cash dividend on our common stock by 25% to $.25 per share, from $.20 per share.  We paid a cash dividend at this higher rate in the 2024 second, third and fourth quarters.  We ended 2024 with total liquidity of $1.68 billion, comprised of $598.0 million of cash and cash equivalents and $1.08 billion of available capacity under our Credit Facility.  We had no cash borrowings outstanding under the Credit Facility at November 30, 2024.  Reflecting our increased investments in land and land development, we ended 2024 with 258 active communities, up 7% year over year.  Although the number of homes in our ending backlog at November 30, 2024 was down 20% year over year to 4,434, mainly reflecting a 28% improvement in our 2024 average build time, we believe we are well-positioned for 2025, as described below under “Outlook.”  HOMEBUILDING Financial Results.  The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Revenues:"],["Housing","$6,898,667","","$6,370,421","","$6,880,362"],["Land","3,572","","10,685","","\u2014"],["Total","6,902,239","","6,381,106","","6,880,362"],["Costs and expenses:"],["Construction and land costs"],["Housing","(5,449,382)","","(5,020,783)","","(5,210,802)"],["Land","(2,101)","","(9,492)","","(2,541)"],["Total","(5,451,483)","","(5,030,275)","","(5,213,343)"],["Selling, general and administrative expenses","(686,848)","","(632,094)","","(629,645)"],["Total","(6,138,331)","","(5,662,369)","","(5,842,988)"],["Operating income","763,908","","718,737","","1,037,374"],["Interest income and other","32,101","","13,759","","704"],["Equity in income (loss) of unconsolidated joint ventures","6,019","","(713)","","(865)"],["Loss on early extinguishment of debt","\u2014","","\u2014","","(3,598)"],["Homebuilding pretax income","$802,028","","$731,783","","$1,033,615"]] [[/GREPCENT_TABLE]] 30 [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Homes delivered","14,169","","13,236","","13,738"],["Average selling price","$486,900","","$481,300","","$500,800"],["Housing gross profit margin as a percentage of housing revenues","21.0%","","21.2%","","24.3%"],["Adjusted housing gross profit margin as a percentage of housing revenues","21.1%","","21.4%","","24.8%"],["Selling, general and administrative expenses as a percentage of housing revenues","10.0%","","9.9%","","9.2%"],["Operating income as a percentage of homebuilding revenues","11.1%","","11.3%","","15.1%"]] [[/GREPCENT_TABLE]] Revenues.  Homebuilding revenues of $6.90 billion for 2024 grew 8% from the prior year due to an increase in housing revenues, partly offset by a decrease in land sale revenues.  In 2024, housing revenues grew 8% from the previous year, reflecting a 7% increase in the number of homes delivered and a slight increase in their overall average selling price.  The year-over-year growth in the number of homes delivered reflected increases of 28%, 9% and 7% in our West Coast, Southeast and Southwest homebuilding reporting segments, respectively, partially offset by a 10% decrease in our Central segment.  The slightly higher average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher- priced West Coast homebuilding reporting segment, and a decrease in homebuyer concessions.  We generated $3.6 million of land sale revenues in 2024, compared to $10.7 million of such revenues in 2023.  Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions. Operating Income.  Our homebuilding operating income increased 6% in 2024, as compared to the previous year, primarily reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses.  In 2024 and 2023, homebuilding operating income included total inventory-related charges of $4.6 million and $11.4 million, respectively, as discussed in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report.  As a percentage of homebuilding revenues, our homebuilding operating income for 2024 decreased 20 basis points year over year to 11.1%, mainly due to a lower housing gross profit margin.  Excluding inventory-related charges for both periods, our homebuilding operating income margin declined 30 basis points to 11.1% in 2024 from 11.4% in 2023.  •Housing Gross Profits – In 2024, housing gross profits of $1.45 billion grew 7% from the previous year, reflecting an increase in housing revenues, partly offset by a decrease in our housing gross profit margin.  Housing gross profits for 2024 and 2023 included inventory-related charges associated with housing operations of $4.6 million and $11.4 million, respectively.    Our housing gross profit margin for 2024 was 21.0%, down 20 basis points from the previous year, primarily due to product and geographic mix shifts of homes delivered and higher relative construction and land costs, largely offset by decreases in both inventory-related charges and homebuyer concessions.  As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for 2024 and 1.9% for 2023.  Excluding the inventory-related charges associated with housing operations described above, our adjusted housing gross profit margin decreased 30 basis points year over year to 21.1% in 2024.  The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under “Non-GAAP Financial Measures.” •Land Sale Profits – Land sale profits totaled $1.5 million for 2024, compared to $1.2 million for 2023.  31 •Selling, General and Administrative Expenses – The following table presents the components of our selling, general and administrative expenses (dollars in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","% of Housing Revenues","","2023","","% of Housing Revenues","","2022","","% of Housing Revenues"],["Marketing expenses","$158,108","","2.3%","","$143,577","","2.2%","","$136,262","","2.0%"],["Commission expenses (a)","238,327","","3.5","","222,743","","3.5","","220,466","","3.2"],["General and administrative expenses","290,413","","4.2","","265,774","","4.2","","272,917","","4.0"],["Total","$686,848","","10.0%","","$632,094","","9.9%","","$629,645","","9.2%"]] [[/GREPCENT_TABLE]] (a)Commission expenses include sales commissions on homes delivered paid to internal sales counselors and external real estate brokers. Selling, general and administrative expenses for 2024 increased 9% from the prior year.  As a percentage of housing revenues, selling, general and administrative expenses for 2024 were nearly even with 2023, primarily reflecting higher costs, including marketing and other expenses associated with the increase in our community count during the year to position our operations for growth, mostly offset by increased operating leverage from higher housing revenues.  Interest Income/Expense and Other.  In 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we held an ownership interest.  Further information regarding this gain is provided in Note 11 – Other Assets in the Notes to Consolidated Financial Statements in this report.  In 2023, interest income and other was comprised solely of interest income.  Interest income, which is generated from short-term investments, increased to $19.6 million in 2024, compared to $13.8 million in 2023 due to our higher average balance of cash equivalents and a higher average interest rate in 2024.  Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates. We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs.  The amount of interest incurred generally fluctuates based on the average amount of debt outstanding for the period and the interest rate on that debt.  In 2024, total interest incurred of $105.6 million decreased from $107.1 million in 2023 primarily due to there being no borrowings under the Credit Facility in 2024.  All interest incurred during 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period.  As a result, we had no interest expense for 2024 or 2023.  Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. Equity in Income (Loss) of Unconsolidated Joint Ventures.  Our equity in income of unconsolidated joint ventures was $6.0 million for 2024, compared to a nominal equity in loss of unconsolidated joint ventures for 2023.  The year-over-year improvement in 2024 mainly reflected homes delivered by an unconsolidated joint venture in California.  In 2023, our unconsolidated joint ventures did not deliver any homes.  Further information regarding our investments in unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. Net Orders, Backlog and Community Count.  The following table presents information about our net orders, cancellation rate, ending backlog, and community count for the years ended November 30, 2024 and 2023 (dollars in thousands): [[GREPCENT_TABLE]] [["","","Years Ended November 30,"],["","","2024","","2023"],["Net orders","","13,093","","11,084"],["Net order value (a)","","$6,473,895","","$5,346,541"],["Cancellation rate (b)","","14%","","26%"],["Ending backlog \u2014 homes","","4,434","","5,510"],["Ending backlog \u2014 value","","$2,242,907","","$2,667,679"],["Ending community count","","258","","242"],["Average community count","","248","","245"]] [[/GREPCENT_TABLE]] 32 (a)Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period. (b)Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period. Net Orders.  Net orders from our homebuilding operations for the year ended November 30, 2024 grew 18% from the previous year, reflecting an increase in the pace of monthly net orders per community to 4.4 in 2024, compared to 3.8 in 2023.  The value of our 2024 net orders rose 21% year over year as a result of the net order growth and a 3% increase in the overall average selling price of net orders to $494,500.  In 2024, the year-over-year growth in our overall net order value reflected increases in each of our homebuilding reporting segments, ranging from 13% in our Southeast segment to 48% in our Central segment. Our cancellation rate as a percentage of gross orders for the year ended November 30, 2024 improved year over year, reflecting buyers’ ability and willingness to close on their homes when available for delivery. Backlog.  The number of homes in our backlog at November 30, 2024 decreased 20% from the previous year mainly due to a 28% improvement in our 2024 average build time.  The potential future housing revenues in our backlog at November 30, 2024 were down 16% year over year, reflecting fewer homes in our backlog, partially offset by a 4% increase in the average selling price of those homes.  Backlog value decreased in each of our four homebuilding reporting segments, with decreases in value ranging from 5% in our Central segment to 29% in our Southeast segment.  Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.  Community Count.  Our average community count for 2024 expanded slightly from the previous year, and our ending community count grew 7%.  The year-over-year increase in our ending community count primarily reflected our investments in land and land development in 2023 and 2024 generating new community openings over the past 12 months that exceeded the number of communities selling out during the same period.  Our ending community count for 2024 also reflected a 58% year- over-year increase in our investments in land and land development for the year, as discussed below under “Liquidity and Capital Resources.” HOMEBUILDING REPORTING SEGMENTS Operational Data.  The following tables present information about our homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count, and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands): [[GREPCENT_TABLE]] [["","","Years Ended November 30,"],["","","Homes Delivered","","Net Orders","","Cancellation Rates"],["Segment","","2024","","2023","","2024","","2023","","2024","","2023"],["West Coast","","4,316","","3,365","","3,982","","3,623","","14%","","17%"],["Southwest","","2,890","","2,699","","2,645","","2,386","","10","","17"],["Central","","4,051","","4,506","","3,917","","2,784","","14","","40"],["Southeast","","2,912","","2,666","","2,549","","2,291","","19","","27"],["Total","","14,169","","13,236","","13,093","","11,084","","14%","","26%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","Net Order Value","","Average Community Count"],["Segment","","2024","","2023","","Variance","","2024","","2023","","Variance"],["West Coast","","$2,780,631","","$2,423,459","","15%","","80","","76","","5%"],["Southwest","","1,225,604","","1,032,334","","19","","43","","44","","(2)"],["Central","","1,427,132","","965,994","","48","","76","","79","","(4)"],["Southeast","","1,040,528","","924,754","","13","","49","","46","","7"],["Total","","$6,473,895","","$5,346,541","","21%","","248","","245","","1%"]] [[/GREPCENT_TABLE]] 33 [[GREPCENT_TABLE]] [["","","November 30,"],["","","Backlog \u2013 Homes","","Backlog \u2013 Value"],["Segment","","2024","","2023","","Variance","","2024","","2023","","Variance"],["West Coast","","1,211","","1,545","","(22)%","","$874,364","","$1,025,381","","(15)%"],["Southwest","","1,134","","1,379","","(18)","","532,371","","616,717","","(14)"],["Central","","1,133","","1,267","","(11)","","436,093","","458,593","","(5)"],["Southeast","","956","","1,319","","(28)","","400,079","","566,988","","(29)"],["Total","","4,434","","5,510","","(20)%","","$2,242,907","","$2,667,679","","(16)%"]] [[/GREPCENT_TABLE]] As discussed above under Item 1 – Business in this report, the composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course.  In addition, with our Built to Order model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design choices and options buyers select.  These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods. Financial Results.  Below is a discussion of the financial results of each of our homebuilding reporting segments.  Further information regarding these segments, including their pretax income (loss), is included in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report.  The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures, which is also presented in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report, and/or interest income and expense.  In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment described in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report.  Corporate and other had operating losses of $149.0 million in 2024, $142.6 million in 2023 and $145.3 million in 2022.  The financial results of our homebuilding reporting segments for 2024 and 2023 were impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered. West Coast.  The following table presents financial information related to our West Coast homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): [[GREPCENT_TABLE]] [["","Years Ended November 30,","","Variance"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues","$2,932,058","","$2,321,093","","$3,050,506","","26 %","","(24) %"],["Construction and land costs","(2,367,008)","","(1,888,422)","","(2,345,754)","","(25)","","19"],["Selling, general and administrative expenses","(195,436)","","(165,712)","","(184,619)","","(18)","","10"],["Operating income","$369,614","","$266,959","","$520,133","","38 %","","(49) %"],["Homes delivered","4,316","","3,365","","4,186","","28 %","","(20) %"],["Average selling price","$679,300","","$689,800","","$728,700","","(2) %","","(5) %"],["Operating income as a percentage of revenues","12.6%","","11.5%","","17.1%","","110bps","","(560) bps"]] [[/GREPCENT_TABLE]] In 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues.  In 2023, revenues were generated solely from housing revenues.  Housing revenues for 2024 grew 26% from 2023 due to an increase in the number of homes delivered, partly offset by a decrease in their average selling price.  Operating income for 2024 was also up year over year, reflecting higher housing gross profits, partially offset by higher selling, general and administrative expenses.  As a percentage of revenues, this segment’s 2024 operating income increased from the previous year, reflecting a 70 basis-point expansion in the housing gross profit margin to 19.3% and a 40 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.7%.  The housing gross profit margin expansion primarily reflected lower 34 relative construction and land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer concessions and product and geographic mix shifts of homes delivered.  Inventory-related charges associated with housing operations decreased to $2.9 million in 2024, compared to $4.9 million in 2023.  The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues was mainly due to improved operating leverage from increased housing revenues, partly offset by higher costs including marketing and other expenses associated with our expanded community count in this segment. Southwest.  The following table presents financial information related to our Southwest homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): [[GREPCENT_TABLE]] [["","Years Ended November 30,","","Variance"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues","$1,309,950","","$1,169,948","","$1,110,045","","12 %","","5 %"],["Construction and land costs","(984,730)","","(896,089)","","(789,651)","","(10)","","(13)"],["Selling, general and administrative expenses","(96,438)","","(85,235)","","(82,002)","","(13)","","(4)"],["Operating income","$228,782","","$188,624","","$238,392","","21 %","","(21) %"],["Homes delivered","2,890","","2,699","","2,592","","7 %","","4 %"],["Average selling price","$453,300","","$431,200","","$428,300","","5 %","","1 %"],["Operating income as a percentage of revenues","17.5%","","16.1%","","21.5%","","140bps","","(540)bps"]] [[/GREPCENT_TABLE]] This segment’s revenues in 2024 were generated solely from housing revenues.  In 2023, revenues were comprised of both housing revenues and land sale revenues.  Housing revenues for 2024 grew 13% year over year, reflecting increases in both the number of homes delivered and their average selling price.  Land sale revenues totaled $6.0 million in 2023.  Operating income rose from the previous year, primarily due to higher housing gross profits, partly offset by higher selling, general and administrative expenses and the absence of land sale profits in 2024.  Land sale profits totaled $1.1 million in 2023.  As a percentage of revenues, operating income increased year over year, primarily due to a 140 basis-point expansion in the housing gross profit margin to 24.8%, with selling, general and administrative expenses as a percentage of housing revenues nearly even at 7.4%.  The year-over-year improvement in the housing gross profit margin mainly reflected lower relative construction and land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer concessions, and product and geographic mix shifts of homes delivered.  Central.  The following table presents financial information related to our Central homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): [[GREPCENT_TABLE]] [["","Years Ended November 30,","","Variance"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues","$1,452,794","","$1,831,914","","$1,749,231","","(21) %","","5 %"],["Construction and land costs","(1,136,420)","","(1,420,063)","","(1,336,986)","","20","","(6)"],["Selling, general and administrative expenses","(144,942)","","(153,248)","","(140,248)","","5","","(9)"],["Operating income","$171,432","","$258,603","","$271,997","","(34) %","","(5) %"],["Homes delivered","4,051","","4,506","","4,339","","(10) %","","4 %"],["Average selling price","$357,800","","$405,500","","$403,100","","(12) %","","1 %"],["Operating income as a percentage of revenues","11.8%","","14.1%","","15.6%","","(230)bps","","(150)bps"]] [[/GREPCENT_TABLE]] This segment’s revenues in 2024 and 2023 were comprised of both housing revenues and land sale revenues.  Housing revenues for 2024 declined 21% from the prior year to $1.45 billion, reflecting decreases in both the number of homes delivered and the average selling price of those homes.  Land sale revenues were $3.2 million in 2024, compared to $4.7 million in 2023.  Operating income for 2024 was down year over year mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.  Land sale profits were $1.1 million in 2024, compared to $.1 million in 2023.  As a percentage of revenues, operating income declined from the previous year, reflecting an 80 basis-point decrease in the housing 35 gross profit margin to 21.7% and a 150 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.0%.  The year-over-year decline in the housing gross profit margin was mainly driven by higher relative construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest.  The housing gross profit margin for 2024 included inventory-related charges of $.8 million, compared to $2.5 million in 2023.  The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues was primarily due to reduced operating leverage from lower housing revenues. Southeast.  The following table presents financial information related to our Southeast homebuilding reporting segment for the years indicated (dollars in thousands, except average selling price): [[GREPCENT_TABLE]] [["","Years Ended November 30,","","Variance"],["","2024","","2023","","2022","","2024 vs 2023","","2023 vs 2022"],["Revenues","$1,207,437","","$1,058,151","","$970,580","","14 %","","9 %"],["Construction and land costs","(956,682)","","(815,760)","","(731,813)","","(17)","","(11)"],["Selling, general and administrative expenses","(107,642)","","(95,262)","","(86,585)","","(13)","","(10)"],["Operating income","$143,113","","$147,129","","$152,182","","(3)%","","(3)%"],["Homes delivered","2,912","","2,666","","2,621","","9 %","","2 %"],["Average selling price","$414,600","","$396,900","","$370,300","","4 %","","7 %"],["Operating income as a percentage of revenues","11.9%","","13.9%","","15.7%","","(200)bps","","(180)bps"]] [[/GREPCENT_TABLE]] This segment’s revenues for 2024 and 2023 were generated solely from housing operations.  In 2024, housing revenues grew year over year due to increases in both the number of homes delivered and the average selling price of those homes.  Operating income was down from 2023, reflecting higher selling, general and administrative expenses, partly offset by higher housing gross profits.  As a percentage of revenues, operating income decreased from 2023 primarily due to a 210 basis-point decline in the housing gross profit margin to 20.8% that mainly reflected higher relative construction and land costs, and product and geographic mix shifts of homes delivered, partly offset by a decrease in inventory-related charges and improved operating leverage from higher housing revenues.  In 2024, inventory-related charges associated with housing operations were $.5 million, compared to $4.0 million in 2023.  Selling, general and administrative expenses as a percentage of housing revenues improved 10 basis points year over year to 8.9%. FINANCIAL SERVICES REPORTING SEGMENT The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Revenues","$27,847","","$29,523","","$23,414"],["Expenses","(6,133)","","(5,726)","","(5,762)"],["Equity in income of unconsolidated joint ventures","27,176","","15,697","","20,799"],["Pretax income","$48,890","","$39,494","","$38,451"],["Total originations (a):"],["Loans","10,241","","9,167","","8,402"],["Principal","$4,109,025","","$3,630,734","","$3,335,837"],["Percentage of homebuyers using KBHS","87%","","83%","","71%"],["Average FICO score","743","","736","","734"]] [[/GREPCENT_TABLE]] 36 [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Loans sold (a):"],["Loans sold to GR Alliance","9,240","","9,017","","7,563"],["Principal","$3,682,769","","$3,588,618","","$3,026,290"],["Loans sold to other third parties","1,121","","347","","861"],["Principal","$469,207","","$123,258","","$287,436"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Mortgage loan origination mix (a):"],["Conventional/non-conventional loans","53%","","59%","","67%"],["FHA loans","35%","","27%","","20%"],["Other government loans","12%","","14%","","13%"],["Loan type (a):"],["Fixed","84%","","92%","","98%"],["ARM","16%","","8%","","2%"]] [[/GREPCENT_TABLE]] (a)Loan originations and sales occurred within KBHS. Revenues.  Our financial services reporting segment, which includes the operations of KB HOME Mortgage Company, generates revenues primarily from insurance commissions and title services. In 2024, financial services revenues declined 6% year over year due to decreases in both insurance commissions and title services revenues.  Pretax income.  Our financial services pretax income for 2024 grew 24% from the previous year, reflecting an increase in the equity in income of our unconsolidated joint venture, KBHS, partly offset by a decrease in operating income from our insurance and title services businesses.  In 2024, the equity in income of our unconsolidated joint ventures rose 73% year over year as a result of an increase in KBHS’ income.  The year-over-year growth in KBHS’ income was primarily due to a gain of $2.1 million in the fair value of interest rate lock commitments (“IRLCs”) in 2024, compared to losses of $16.0 million in 2023.  Also contributing to the year-over-year increase in KBHS’ income was a higher principal amount of loans originated, which mainly reflected increases in both the number of homes we delivered and the percentage of homebuyers using KBHS.  In 2024, 87% of the buyers financing their home purchases used KBHS, compared to 83% in the prior year.  Further information regarding our investments in unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report. INCOME TAXES Income Tax Expense.  Our income tax expense and effective income tax rate were as follows (dollars in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Income tax expense","$195,900","","$181,100","","$255,400"],["Effective income tax rate","23.0%","","23.5%","","23.8%"]] [[/GREPCENT_TABLE]] Our effective tax rate for 2024 was slightly lower than the previous year, mainly due to a $4.0 million decrease in state taxes, a $2.4 million increase in excess tax benefits related to stock-based compensation and a $1.5 million decrease in non- deductible compensation expense, partly offset by a $5.9 million decline in Section 45L tax credits we recognized primarily from building energy-efficient homes. The IRA tied Section 45L tax credit qualification for energy-efficient homes built on and after January 1, 2023 to new homes achieving ENERGY STAR certification.  Based on guidance the IRS issued in September 2023, fewer of the ENERGY STAR homes we build in California meet the heightened qualification standard the IRS selected for homes built in that state relative to other states. The heightened tax credit qualifications contributed to our recognizing less Section 45L tax credits in 2024 than in 2023.  Subject to future guidance, regulation or legislation, we have opted to build homes in many of our markets beginning in 2025 to an alternate version of ENERGY STAR under which our homes delivered will continue to be highly energy efficient and qualify for ENERGY STAR certification but not qualify for Section 45L tax credits, as we believe the additional costs necessary for some of our homes to satisfy the higher Section 45L standards outweigh the possible benefits 37 from meeting them for both our business and our buyers.  Therefore, we expect to realize fewer such tax credits compared to prior periods, including in 2025 and future years as compared to 2024. On June 27, 2024, California enacted Senate Bill 167 (“SB-167”), which, among other things, suspended California net operating loss (“NOL”) utilization and imposed a cap of $5.0 million on the amount of California business incentive tax credits companies can utilize, effective for tax years beginning on or after January 1, 2024 and before January 1, 2027.  This act suspends our ability to use our California NOLs for the years ended November 30, 2025 through 2027.  SB-167 includes an extended carryover period for the suspended California NOLs with an additional year carryforward for each year of suspension.  This act had no impact on our income tax expense for the year ended November 30, 2024 and will have no impact on our income tax expense in future periods.  However, it is expected to impact the timing of tax payments, resulting in a higher amount of taxes paid for the years ended November 30, 2025 through 2027 and a lower amount of taxes paid when the California NOLs can be utilized. Under current accounting standards, we expect volatility in our income tax expense in future periods, the magnitude of which will depend on, among other factors, the price of our common stock and the timing and volume of stock-based compensation award activity, such as employee exercises of stock options and the vesting of restricted stock awards and performance-based restricted stock units (each, a “PSU”). Further information regarding our income taxes is provided in Note 14 – Income Taxes in the Notes to Consolidated Financial Statements in this report. NON-GAAP FINANCIAL MEASURES This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with generally accepted accounting principles (“GAAP”).  We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations, and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information.  However, because it is not calculated in accordance with GAAP, this non-GAAP financial measure may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP.  Rather, this non-GAAP financial measure should be used to supplement the most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting our operations. Adjusted Housing Gross Profit Margin.  The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Housing revenues","$6,898,667","","$6,370,421","","$6,880,362"],["Housing construction and land costs","(5,449,382)","","(5,020,783)","","(5,210,802)"],["Housing gross profits","1,449,285","","1,349,638","","1,669,560"],["Add: Inventory-related charges (a)","4,597","","11,424","","34,760"],["Adjusted housing gross profits","$1,453,882","","$1,361,062","","$1,704,320"],["Housing gross profit margin as a percentage of housing revenues","21.0%","","21.2%","","24.3%"],["Adjusted housing gross profit margin as a percentage of housing revenues","21.1%","","21.4%","","24.8%"]] [[/GREPCENT_TABLE]] (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 38 period without regard to variability of housing inventory impairment and land option contract abandonment charges.  This financial measure assists us in making strategic decisions regarding community location and product mix, product pricing and construction pace.  SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION As of November 30, 2024, we had $1.34 billion in aggregate principal amount of outstanding senior notes, no borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan.  Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by certain of our subsidiaries (“Guarantor Subsidiaries”), which are listed on Exhibit 22.  Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best interest.  See Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report for additional information regarding the terms of our senior notes, the Credit Facility and the Term Loan.  The guarantees are full and unconditional and the Guarantor Subsidiaries are 100% owned by us.  The guarantees are senior unsecured obligations of each of the Guarantor Subsidiaries and rank equally in right of payment with all unsecured and unsubordinated indebtedness and guarantees of such Guarantor Subsidiaries.  The guarantees are effectively subordinated to any secured indebtedness of such Guarantor Subsidiaries to the extent of the value of the assets securing such indebtedness, and structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries. Pursuant to the terms of the indenture governing the senior notes and the terms of the Credit Facility and Term Loan, if any of the Guarantor Subsidiaries ceases to be a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X using a 5% rather than a 10% threshold (provided that the assets of our Non-Guarantor Subsidiaries do not in the aggregate exceed 10% of an adjusted measure of our consolidated total assets), it will be automatically and unconditionally released and discharged from its guaranty of the senior notes, the Credit Facility and the Term Loan so long as all guarantees by such Guarantor Subsidiary of any other of our or our subsidiaries’ indebtedness are terminated at or prior to the time of such release. The following tables present summarized financial information for KB Home and the Guarantor Subsidiaries on a combined basis, excluding unconsolidated joint ventures and after the elimination of (a) intercompany transactions and balances between KB Home and the Guarantor Subsidiaries and (b) equity in earnings from and investments in the Non-Guarantor Subsidiaries.  See Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report for additional information regarding our unconsolidated joint ventures. [[GREPCENT_TABLE]] [["","","November 30, 2024"],["Summarized Balance Sheet Data (in thousands)"],["Assets"],["Cash","","$543,233"],["Inventories","","4,981,097"],["Amounts due from Non-Guarantor Subsidiaries","","500,321"],["Total assets","","6,657,479"],["Liabilities and Stockholders\u2019 Equity"],["Notes payable","","1,691,679"],["Amounts due to Non-Guarantor Subsidiaries","","382,356"],["Total liabilities","","2,928,169"],["Stockholders\u2019 equity","","3,729,310"]] [[/GREPCENT_TABLE]] 39 [[GREPCENT_TABLE]] [["","","Year Ended November 30, 2024"],["Summarized Statement of Operations Data (in thousands)"],["Revenues","","$6,306,940"],["Construction and land costs","","(4,962,430)"],["Selling, general and administrative expenses","","(653,832)"],["Interest income from Non-Guarantor Subsidiaries","","31,164"],["Pretax income","","753,018"],["Net income","","570,818"]] [[/GREPCENT_TABLE]] LIQUIDITY AND CAPITAL RESOURCES Overview.  We have funded our homebuilding and financial services activities over the last several years with: • internally generated cash flows; • public issuances of debt securities; • borrowings under the Credit Facility; • the Term Loan; • land option contracts and other similar contracts and seller notes; • public issuances of our common stock; and • letters of credit and performance bonds. We manage our use of cash in the operation of our business to support the execution of our primary strategic goals.  Over the past several years, we have primarily used cash for: •land acquisitions and land development; •home construction; •operating expenses; •principal and interest payments on notes payable; •repayments of borrowings under the Credit Facility; •dividends paid to stockholders; and •repurchases of our common stock. Cash flows for each of our communities depend on their stage of development and can differ significantly from reported earnings.  Early stages of development or expansion can require significant cash outflows for land acquisition, entitlements, land development, and construction of roads, utilities, landscaping, model homes and other items.  Because these costs are capitalized as a component of our inventories and are not recognized in our statement of operations until a home is delivered, we incur significant cash outflows prior to recognizing earnings from a delivered home.  As homes are delivered, which in some cases may be a year or more after the related land development or entitlement work commences, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflows associated with the land and home construction were previously incurred.  We ended 2024 with total liquidity of $1.68 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility.  Cash and cash equivalents totaled $598.0 million at November 30, 2024, compared to $727.1 million at November 30, 2023.  Cash equivalents included in the total were $385.1 million at November 30, 2024 and $508.2 million at November 30, 2023, and were mainly invested in interest-bearing bank deposit accounts and money market funds.  We had no cash borrowings outstanding under the Credit Facility as of November 30, 2024.  Based on our financial position as of November 30, 2024, and our business forecast for 2025 as discussed below under “Outlook,” we have no material concerns related to our liquidity.  We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.  Cash Requirements.  Our material cash requirements include the following contractual and other obligations: Notes Payable.  We have outstanding variable-rate borrowings under the Term Loan, and outstanding fixed-rate senior notes and mortgages and land contracts due to land sellers and other loans with varying maturities.  As of November 30, 2024, our notes payable had an aggregate principal amount of $1.70 billion, with $.5 million payable within 12 months.  Future interest payments associated with the Term Loan and our senior notes, together with the unused commitment fee associated 40 with our Credit Facility, totaled $421.7 million as of November 30, 2024, with $102.1 million payable within 12 months.  The Term Loan will mature on August 25, 2026.  Our next senior note maturity is our $300.0 million in aggregate principal amount of 6.875% Senior Notes due 2027.  Further information regarding our notes payable is provided in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report. Leases.  We have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months.  As of November 30, 2024, the future minimum payments required under these leases totaled $22.3 million, with $10.6 million payable within 12 months.  Further information regarding our leases is provided in Note 13 – Leases in the Notes to Consolidated Financial Statements in this report. Inventory-Related Obligations.  As of November 30, 2024, we had inventory-related obligations totaling $44.4 million, comprised of liabilities for inventory not owned associated with financing arrangements as discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“TIFE”) assessments.  Approximately $11.6 million of these inventory- related obligations are payable within 12 months.  However, TIFE assessment obligations are paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature.  Investments in Land and Land Development.  Our investments in land and land development increased 58% to $2.84 billion in 2024, compared to $1.80 billion in 2023.  Land acquisition expenditures, which are included in our investments in land and land development, increased 166% to $1.24 billion from $465.8 million in the year-earlier period.  Approximately 44% of our total investments in land and land development in 2024 were related to land acquisitions, compared to approximately 26% in 2023.  While we made strategic investments in land and land development in each of our homebuilding reporting segments during 2024 and 2023, approximately 58% and 56%, respectively, of these investments for each year were made in our West Coast homebuilding reporting segment.  In 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards.  While we expect our land acquisition activity to increase in 2025 as compared to 2024, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards. The following table presents the number of lots we owned or controlled under land option contracts and other similar contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands): [[GREPCENT_TABLE]] [["","","November 30, 2024","","November 30, 2023","","Variance"],["Segment","","Lots","","Carrying Value","","Lots","","Carrying Value","","Lots","","Carrying Value"],["West Coast","","23,956","","$2,915,543","","18,220","","$2,455,336","","5,736","","$460,207"],["Southwest","","13,117","","845,910","","7,017","","830,514","","6,100","","15,396"],["Central","","21,056","","839,920","","17,328","","942,168","","3,728","","(102,248)"],["Southeast","","18,574","","926,647","","13,411","","905,628","","5,163","","21,019"],["Total","","76,703","","$5,528,020","","55,976","","$5,133,646","","20,727","","$394,374"]] [[/GREPCENT_TABLE]] The number and carrying value of lots we owned or controlled under land option contracts and other similar contracts at November 30, 2024 increased year over year, reflecting land investments in 2024, partly offset by homes delivered and our abandonment of 8,389 previously controlled lots.  The number of lots we owned and controlled as of November 30, 2024 increased 37% from November 30, 2023.  The number of lots in inventory as of November 30, 2024 included 18,923 lots under contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023.  Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 49% at November 30, 2024, compared to 27% at November 30, 2023.  Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.  Land Option Contracts and Other Similar Contracts.  As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance.  Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract.  In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date.  We typically have the ability not to 41 exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers.  If we were to acquire all the land we had under land option contracts and other similar contracts at November 30, 2024, we estimate the remaining purchase price to be paid would be as follows: 2025 – $1.42 billion; 2026 – $670.2 million; 2027 – $243.9 million; 2028 – $116.5 million; 2029 – $58.1 million; and thereafter – $0. Liquidity.  The table below summarizes our total cash and cash equivalents, and total liquidity (in thousands): [[GREPCENT_TABLE]] [["","","November 30,"],["","","2024","","2023"],["Cash and cash equivalents","","$597,973","","$727,076"],["Credit Facility commitment","","1,090,000","","1,090,000"],["Letters of credit outstanding under the Credit Facility","","(8,260)","","(6,650)"],["Credit Facility availability","","1,081,740","","1,083,350"],["Total liquidity","","$1,679,713","","$1,810,426"]] [[/GREPCENT_TABLE]] Capital Resources.  Our notes payable consisted of the following (in thousands): [[GREPCENT_TABLE]] [["","November 30,"],["","2024","","2023","","Variance"],["Term Loan","$358,826","","$358,156","","$670"],["Senior notes","1,329,704","","1,327,934","","1,770"],["Mortgages and land contracts due to land sellers and other loans","3,149","","3,808","","(659)"],["Total","$1,691,679","","$1,689,898","","$1,781"]] [[/GREPCENT_TABLE]] Our financial leverage, as measured by the ratio of debt to capital, improved 130 basis points to 29.4% at November 30, 2024, compared to 30.7% at November 30, 2023.  The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).  LOC Facility.  We maintain a LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business.  On September 12, 2024, we entered into an amendment to the LOC Facility that increased the limit of letters of credit we may issue under it from $75.0 million to $100.0 million, and extended the expiration date from February 18, 2027 to February 13, 2028.  As of November 30, 2024 and 2023, we had letters of credit outstanding under the LOC Facility of $73.3 million and $12.5 million, respectively. Performance Bonds.  As discussed in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.33 billion and $1.32 billion of performance bonds outstanding at November 30, 2024 and 2023, respectively. Unsecured Revolving Credit Facility.  We have a $1.09 billion Credit Facility that will mature on February 18, 2027.  The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments.  The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility.  As of November 30, 2024, we had no cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility.  The Credit Facility is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report. Under the terms of the Credit Facility and the Term Loan, we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, consolidated leverage ratio (“Leverage Ratio”), and either a consolidated interest coverage ratio (“Interest Coverage Ratio”) or minimum liquidity level, each as defined therein.  Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from comparable GAAP or other commonly used terms.  The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: 42 •Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021.  •Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.  The Leverage Ratio is calculated as the ratio of our consolidated total indebtedness to the sum of consolidated total indebtedness and consolidated tangible net worth, all as defined under the Credit Facility and the Term Loan. •Interest Coverage Ratio or liquidity – We are also required to maintain either (a) an Interest Coverage Ratio of greater than or equal to 1.50 at the end of each fiscal quarter; or (b) a minimum level of liquidity, but not both.  The Interest Coverage Ratio is the ratio of our consolidated adjusted EBITDA to consolidated interest incurred, each as defined under the Credit Facility and the Term Loan, in each case for the previous 12 months.  Our minimum liquidity is required to be greater than or equal to consolidated interest incurred, as defined under the Credit Facility and the Term Loan, for the four most recently ended fiscal quarters in the aggregate. In addition, under the Credit Facility and the Term Loan, our equity investments in joint ventures and Non-Guarantor Subsidiaries and other unconsolidated entities as of the end of each fiscal quarter cannot exceed the sum of (a) $104.8 million and (b) 20% of consolidated tangible net worth.  Further, for so long as we do not hold an investment grade credit rating, as defined under the Credit Facility and the Term Loan, the Credit Facility and the Term Loan do not permit our borrowing base indebtedness, which, subject to certain exceptions, is the aggregate principal amount of our and certain of our subsidiaries’ outstanding indebtedness for borrowed money and non-collateralized financial letters of credit, to be greater than our borrowing base (a measure relating to our inventory and unrestricted cash assets). The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants that we are subject to with respect to our notes payable.  The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of November 30, 2024: [[GREPCENT_TABLE]] [["Financial Covenants and Other Requirements","","Covenant Requirement","","Actual"],["Consolidated tangible net worth","","","$3.13billion","","$4.02billion"],["Leverage Ratio","","",".600","",".298"],["Interest Coverage Ratio (a)","","","1.500","","11.501"],["Minimum liquidity (a)","","","$86.1 million","","$598.0 million"],["Investments in joint ventures and Non-Guarantor Subsidiaries","","","$908.7 million","","$413.6 million"],["Borrowing base in excess of borrowing base indebtedness (as defined)","","","n/a","","$2.87billion"]] [[/GREPCENT_TABLE]] (a)Under the terms of the Credit Facility and the Term Loan, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.  The indenture governing our senior notes does not contain any financial covenants.  Subject to specified exceptions, the indenture contains certain restrictive covenants that, among other things, limit our ability to incur secured indebtedness, or engage in sale-leaseback transactions involving property above a certain specified value.  In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets.  As of the date of this report, we were in compliance with the applicable terms of all our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility, and the mortgages and land contracts due to land sellers and other loans.  Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance.  Our ability to access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments.  There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit 43 Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration). Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties.  At November 30, 2024, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $14.1 million. Senior Unsecured Term Loan.  We have a $360.0 million Term Loan with the lenders party thereto that will mature on August 25, 2026, or earlier if we secure borrowings under the Credit Facility without similarly securing the Term Loan (subject to certain exceptions).  The Term Loan is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report. Unconsolidated Joint Ventures.  As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located.  As of November 30, 2024, one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets.  None of our other unconsolidated joint ventures had outstanding debt at November 30, 2024. Credit Ratings.  Our credit ratings are periodically reviewed by rating agencies.  In March 2024, S&P Global Ratings upgraded our corporate credit rating to BB+ from BB and maintained its rating outlook at stable.  In May 2024, Moody’s Ratings upgraded our corporate credit rating to Ba1 from Ba2 and changed its rating outlook to stable from positive. Consolidated Cash Flows.  The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Net cash provided by (used in):"],["Operating activities","$362,722","","$1,082,699","","$183,418"],["Investing activities","(50,119)","","(58,062)","","(71,773)"],["Financing activities","(440,752)","","(627,493)","","(73,583)"],["Net increase (decrease) in cash and cash equivalents","$(128,149)","","$397,144","","$38,062"]] [[/GREPCENT_TABLE]] Operating Activities.  Generally, our net operating cash flows fluctuate primarily based on changes in our inventories and our profitability.  Our net cash provided by operating activities in 2024 mainly reflected net income of $655.0 million and a net decrease in receivables of $16.6 million, partly offset by a net increase in inventories of $385.8 million and a net decrease in accounts payable, accrued expenses and other liabilities of $7.2 million.  Net cash provided by operating activities in 2023 primarily reflected net income of $590.2 million and a net decrease in inventories of $426.8 million, partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $62.2 million and a net increase in receivables of $12.9 million. Investing Activities.  In 2024, our net cash used in investing activities included $39.3 million for net purchases of property and equipment and $14.5 million for contributions to unconsolidated joint ventures.  These uses of cash were partially offset by a $2.0 million return of investments in unconsolidated joint ventures and $1.7 million of proceeds from the sale of an investment.  In 2023, our uses of cash included $35.5 million for net purchases of property and equipment and $27.7 million for contributions to unconsolidated joint ventures.  These uses of cash were partly offset by a $5.1 million return of investments in unconsolidated joint ventures. Financing Activities.  In 2024, our uses of cash included stock repurchases and excise tax payments totaling $353.7 million, dividend payments on our common stock of $71.6 million, tax payments associated with stock-based compensation awards of $25.0 million and payments on mortgages and land contracts due to land sellers and other loans of $.9 million.  The cash used was partially offset by $10.4 million of issuances of common stock under employee stock plans.  In 2023, net cash was used for stock repurchases totaling $411.4 million, net repayments under the Credit Facility of $150.0 million, dividend payments on our common stock of $56.8 million, tax payments associated with stock-based compensation awards of $14.2 million, and payments on mortgages and land contracts due to land sellers and other loans of $3.8 million.  The cash used was partially offset by $8.9 million of issuances of common stock under employee stock plans.  44 Dividends.  In the 2024 first quarter, our board of directors declared a quarterly cash dividend of $.20 per share of common stock.  Our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.25 per share in the 2024 second quarter, and declared quarterly dividends at the new higher rate for the 2024 second, third and fourth quarters.  In the 2023 first and second quarters, our board of directors declared quarterly cash dividends of $.15 per share of common stock.  Our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.20 per share in the 2023 third quarter, and declared quarterly dividends at the new higher rate for the 2023 third and fourth quarters.  All dividends declared during 2024 and 2023 were also paid during those years.  Quarterly cash dividends declared and paid during the years ended November 30, 2024 and 2023 totaled $.95 per share and $.70 per share of common stock, respectively.  The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions. Shelf Registration Statement. We have an automatically effective universal shelf registration statement that was filed with the SEC on July 10, 2023 (“2023 Shelf Registration”).  The 2023 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined.  Our ability to issue securities is subject to market conditions and, with respect to debt securities, other factors impacting our borrowing capacity.  We have not made any offerings of securities under the 2023 Shelf Registration.  Share Repurchase Program.  As of November 30, 2022, we had $150.0 million of availability to repurchase up to $300.0 million of our outstanding common stock under an April 7, 2022 board authorization.  In the 2023 first quarter, we repurchased 1,965,442 shares of our common stock on the open market pursuant to this authorization at a total cost of $75.0 million.  On March 21, 2023, our board of directors authorized us to repurchase up to $500.0 million of our outstanding common stock.  This authorization replaced the 2022 board of directors authorization, which had $75.0 million of remaining availability.  In the 2023 second, third and fourth quarters, we repurchased 7,278,995 shares of our common stock on the open market pursuant to this authorization at a total cost of $336.4 million, bringing our total repurchases for the year ended November 30, 2023 to 9,244,437 shares of common stock at a total cost of $411.4 million.  As of November 30, 2023, there was $163.6 million of remaining availability under this share repurchase authorization.  In the 2024 first quarter, we repurchased 826,663 shares of our common stock in the open market pursuant to the 2023 board of directors authorization at a total cost of $50.0 million.  On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock.  This authorization replaced the 2023 board of directors authorization, which had $113.6 million of remaining availability.  In the 2024 second, third and fourth quarters, we repurchased 3,898,518 shares of our common stock at a total cost of $300.0 million, bringing our total repurchases for the year ended November 30, 2024 to 4,725,181 shares of common stock at a total cost of $350.0 million.  Repurchases under the current authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other conditions.  This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares.  As of November 30, 2024, there was $700.0 million of remaining availability under this share repurchase authorization. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.  In 2025, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.  During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity securities or potential new issuances of debt or equity securities to support our business needs.  The amounts involved in these transactions, if any, may be material.  In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire.  Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or other factors, including those described below under “Outlook” and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The accompanying consolidated financial statements were prepared in conformity with GAAP.  The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented.  45 Actual results could differ from those estimates and assumptions.  See Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in this report for a discussion of our significant accounting policies.  The following are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant estimates, judgments and/or other assumptions in their application. Homebuilding Revenue Recognition.  We recognize homebuilding revenue by applying the following steps in determining the timing and amount of revenue to recognize: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if applicable; and (5) recognize revenue when (or as) we satisfy a performance obligation.  Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation to deliver a completed home to the homebuyer when closing conditions are met.  Revenues from home sales are recognized when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date.  Little to no estimation is involved in recognizing such revenues. We may periodically elect to sell parcels of land to third parties if such assets no longer fit into our strategic operating plans or are zoned for non-residential development.  Revenues from land sales are recognized when we have satisfied the performance obligation(s) within the sales contract, which is generally when title to and possession of the land and the risks and rewards of ownership are transferred to the land buyer on the closing date.  Certain land sales contracts may require management judgment in determining the appropriate revenue recognition, but the impact of such transactions is generally immaterial. Inventories and Cost of Sales.  Housing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable, in which case the affected inventories are written down to fair value or fair value less associated costs to sell.  Fair value is determined based on estimated future net cash flows discounted for inherent risks associated with the real estate assets, or other valuation techniques.  Due to uncertainties in the estimation process and other factors beyond our control, it is possible that actual results could differ from those estimated.  Other than model homes, our inventories typically do not consist of completed unsold homes.  However, as discussed above under Item 1 – Business in this report, we may have unsold completed or partially completed homes in our inventory. We rely on certain estimates to determine our construction and land costs and resulting housing gross profit margins associated with revenues recognized.  Construction and land costs are comprised of direct and allocated costs, including estimated future costs for the limited warranty we provide on our homes, and certain amenities within a community.  Land acquisition, land development and other common costs are generally allocated on a relative fair value basis to the homes or lots within the applicable community or land parcel.  Land acquisition and land development costs include related interest and real estate taxes. In determining a portion of the construction and land costs recognized for each period, we rely on project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred.  It is possible that actual results could differ from budgeted amounts for various reasons, including construction delays, construction resource shortages, increases in costs that have not yet been committed, changes in governmental requirements, unforeseen environmental hazards or other unanticipated issues encountered during construction and other factors beyond our control.  While the actual results for a particular construction project are accurately reported over time, variances between the budgeted and actual costs of a project could result in the understatement or overstatement of construction and land costs and homebuilding gross profits in a particular reporting period.  To reduce the potential for such distortion, we have set forth procedures that collectively comprise a critical accounting policy.  These procedures, which we have applied on a consistent basis, include assessing, updating and revising project budgets on a monthly basis, obtaining commitments to the extent possible from independent contractors and vendors for future costs to be incurred, reviewing the adequacy of warranty accruals and historical warranty claims experience, and utilizing the most current information available to estimate construction and land costs to be charged to expense.  Variances to the budgeted costs after an estimate has been charged to expense that are related to project costs are generally allocated on a relative fair value basis to the remaining homes to be delivered within the community or land parcel, while such variances related to direct construction costs are generally expensed as incurred.  The variances between budgeted and actual costs have historically not been material to our consolidated financial statements.  We believe that our policies provide for reasonably dependable estimates to be used in the calculation and reporting of construction and land costs. Inventory Impairments and Land Option Contract Abandonments.  Each community or land parcel in our owned inventory is assessed to determine if indicators of potential impairment exist.  Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit 46 margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.  If indicators of potential impairment exist for a community or land parcel, the identified asset is evaluated for recoverability. When an indicator of potential impairment is identified for a community or land parcel, we test the asset for recoverability by comparing the carrying value of the asset to the undiscounted future net cash flows expected to be generated by the asset.  The undiscounted future net cash flows are impacted by then-current conditions and trends in the market in which the asset is located as well as factors known to us at the time the cash flows are calculated.  These factors may include recent trends in our orders, backlog, cancellation rates and volume of homes delivered, as well as our expectations related to the following: product offerings; market supply and demand, including estimated average selling prices and related price appreciation; and land development, home construction and overhead costs to be incurred and related cost inflation.  Generally, a community must have a projected gross profit margin percentage below approximately 5% to proceed to a recoverability test and a potential fair value evaluation.  Our overall housing gross profit margin in the 2024 fourth quarter was 20.9%, and as of November 30, 2024, fewer than 10 communities were evaluated for recoverability based on their gross margins.  However, if there is a sustained economic slowdown or other factor(s) that lead to moderate or significant decreases in new home prices in certain submarkets, more communities could begin to approach gross margin levels where we would conduct a fair value analysis.  Any resulting impairment(s) from such an analysis(es) could be material.  Additionally, we have $116.2 million of deposits and pre-acquisition costs at November 30, 2024 related to land option contracts and other similar contracts.  If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs. The following table presents information regarding inventory impairment and land option contract abandonment charges included in construction and land costs in our consolidated statements of operations (dollars in thousands): [[GREPCENT_TABLE]] [["","Years Ended November 30,"],["","2024","","2023","","2022"],["Inventory impairments:"],["Number of communities or land parcels written down to fair value","\u2014","","\u2014","","4"],["Pre-impairment carrying value of communities or land parcels written down to fair value","$\u2014","","$\u2014","","$65,372"],["Inventory impairment charges","\u2014","","\u2014","","(24,077)"],["Post-impairment fair value","$\u2014","","$\u2014","","$41,295"],["Land option contract abandonments charges","$4,597","","$11,424","","$13,224"]] [[/GREPCENT_TABLE]] There were no inventory impairment charges in 2024 or 2023.  The inventory impairment charges in 2022 reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development. As further described in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report, given the inherent challenges and uncertainties in forecasting future results, our inventory assessments at the time they are made take into consideration whether a community or land parcel is active, meaning whether it is open for sales and/or undergoing development, or whether it is being held for future development or held for sale. We record an inventory impairment charge on a community or land parcel that is active or held for future development when indicators of potential impairment exist and the carrying value of the real estate asset is greater than the undiscounted future net cash flows the asset is expected to generate.  These real estate assets are written down to fair value, which is primarily determined based on the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques. We record an inventory impairment charge on land held for sale when the carrying value of the real estate asset is greater than its fair value.  These real estate assets are written down to fair value, less associated costs to sell.  The fair value of such real estate assets is generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information. 47 Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it continues to meet our investment return standards.  Assessments are made separately for each optioned land parcel on a quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others: current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and home construction costs; and projected profitability on expected future housing or land sales.  When a decision is made not to exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our marketing strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs.  The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated future net order and cancellation rates; and the expected timeline to build and deliver homes sold.  While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to 10 years and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2024 within five years.  The following table presents as of November 30, 2024 and 2023, respectively, the estimated timeframe of delivery for the last home in an applicable community or land parcel and the corresponding percentage of total inventories such categories represent within our inventory balance (dollars in millions): [[GREPCENT_TABLE]] [["","0-2 years","","3-5 years","","6-10 years"],["","$","","%","","$","","%","","$","","%","","Total"],["2024","$2,849.2","","52%","","$2,554.7","","46%","","$124.1","","2%","","$5,528.0"],["2023","2,367.2","","46","","2,565.4","","50","","201.0","","4","","5,133.6"]] [[/GREPCENT_TABLE]] The inventory balances in the 0-2 years and 3-5 years categories were located throughout all of our homebuilding reporting segments and collectively represented 98% and 96% of our total inventories as of November 30, 2024 and 2023, respectively.  The inventory balances in the 6-10 years category were primarily located in our Central and Southeast segments and were mostly comprised of active, multi-phase communities with large remaining land positions. Due to the judgment and assumptions applied in our inventory impairment and land option contract abandonment assessment processes, and in our estimations of the remaining operating lives of our inventory assets and the realization of our inventory balances, particularly as to land held for future development, it is possible that actual results could differ substantially from those estimated, especially in periods of volatile housing market or economic conditions.  Deterioration in the supply and demand factors in the overall housing market or in an individual market or submarket, or changes to our operational or selling strategy at certain communities may lead to additional inventory impairment charges, future charges associated with land sales or the abandonment of land option contracts or other similar contracts related to certain assets.  Due to the nature or location of the projects, land held for future development that we activate as part of our strategic growth initiatives or to accelerate sales and/or our return on investment, or that we otherwise monetize to help improve our asset efficiency, may have a somewhat greater likelihood of being impaired than other of our active inventory. We believe the carrying value of our inventory balance as of November 30, 2024 is recoverable.  Our considerations in making this determination include the factors and trends incorporated into our impairment analyses, and as applicable, the prevailing regulatory environment, competition from other homebuilders, inventory levels and sales activity of resale homes, and the local economic conditions where an asset is located.  In addition, we consider the financial and operational status and expectations of our inventories as well as unique attributes of each community or land parcel that could be viewed as indicators for potential future impairments.  However, if conditions in the overall housing market or in a specific market or submarket worsen in the future beyond our current expectations, including, among other things, from increases in mortgage interest rates, higher inflation, worsening supply chain and/or other production-related challenges, or if future changes in our business strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments or land option contract abandonments, or both, related to our current inventory assets.  Any such charges could be material to our consolidated financial statements. Warranty Costs.  We provide a limited warranty on all of our homes.  The specific terms and conditions of our limited warranty program vary depending upon the markets in which we do business.  We estimate the costs that may be incurred under each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each home is recognized.  In assessing our overall warranty liability at a reporting date, we evaluate the costs for warranty-related items on a combined basis for all of our previously delivered homes that are under our limited warranty program. 48 Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience.  Factors that affect our warranty liability include the number of homes delivered, historical and anticipated rates of warranty claims, and cost per claim.  We periodically assess the adequacy of our accrued warranty liability, which is included in accrued expenses and other liabilities in our consolidated balance sheets, and adjust the amount as necessary based on our assessment.  Our assessment includes the review of our actual warranty costs incurred to identify trends and changes in our warranty claims experience, and considers our home construction quality and customer service initiatives and outside events.  Based on this assessment, we may from time to time adjust our warranty accrual rates, which would be applied on a prospective basis to homes delivered.  Although adjustments to the accrual rates are generally infrequent, they may be necessary when actual warranty expenditures have increased or decreased on a sustained basis, as was the case in recent years when we revised our warranty accrual rates to reflect trends in our warranty expenditures.  Based on our assessment, we may also make adjustments to our previously recorded accrued warranty liability.  Such adjustments are recorded in the period in which the change in estimate occurs.  In 2023, we made an adjustment to increase our accrued warranty liability by $4.0 million.  There were no such adjustments during 2024 and 2022.  We have not made any material changes in the methodology used to establish our accrued warranty liability during 2024, 2023 and 2022.  Our accrued warranty liability is presented on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.  Estimates of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. While we believe the warranty liability currently reflected in our consolidated balance sheets to be adequate, unanticipated changes or developments in the legal environment, local weather, land or environmental conditions, quality of materials or methods used in the construction of homes or customer service practices and/or our warranty claims experience could have a significant impact on our actual warranty costs in future periods and such amounts could differ significantly from our current estimates.  A 10% change in the historical warranty rates used to estimate our accrued warranty liability would not result in a material change in our accrual.  Self-Insurance.  We maintain, and require the majority of our independent contractors to maintain, general liability insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance.  These insurance policies protect us against a portion of our risk of loss from claims related to our homebuilding activities, subject to certain self- insured retentions, deductibles and other coverage limits.  We self-insure a portion of our overall risk through the use of a captive insurance subsidiary.  In Arizona, California, Colorado and Nevada, our contractors’ general liability insurance primarily takes the form of a wrap-up policy under a program where eligible independent contractors are enrolled as insureds on each community.  Enrolled contractors generally contribute toward the cost of the insurance and agree to pay a contractual amount in the future if there is a claim related to their work.  We record liabilities based on the estimated costs required to cover reported claims, claims incurred but not yet reported, and claim adjustment expenses.  These estimated costs are based on an actuarial analysis of our historical claims and expense data, as well as industry data.  Our self-insurance liabilities are presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.  The amount of our self-insurance liability is based on an analysis performed by a third-party actuary that uses our historical claim and expense data, as well as industry data to estimate these overall costs.  These estimates are subject to uncertainty due to a variety of factors, the most significant being the long period of time between the delivery of a home to a homebuyer and when a structural warranty or construction defect claim may be made, and the ultimate resolution of any such construction defect claim.  Though state regulations vary, construction defect claims are reported and resolved over a long period of time, which can extend for 10 years or more.  As a result, the majority of the estimated self-insurance liability based on the actuarial analysis relates to claims incurred but not yet reported.  Therefore, adjustments related to individual existing claims generally do not significantly impact the overall estimated liability.  Adjustments to our liabilities related to homes delivered in prior years are recorded in the period in which a change in our estimate occurs.  During 2024, 2023 and 2022, we recorded adjustments to increase our previously recorded liabilities by $5.5 million, $6.5 million and $7.0 million, respectively.  The adjustments in 2024, 2023 and 2022 resulted from changes in estimates due to actual claims experience differing from previous actuarial projections and, in turn, impacting actuarial estimates for existing and potential future claims.  We have not made any material changes in our methodology used to establish our self-insurance liabilities during 2024, 2023 or 2022. The projection of losses related to these liabilities requires the use of actuarial assumptions.  Key assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended period of time.  These estimates are subject to variability due to the length of time between the delivery of a home to a homebuyer and when a construction defect claim is made, and the ultimate resolution of such claim; uncertainties regarding such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or interpretations, among other factors.  Due to the degree of judgment involved and the potential for variability in these underlying assumptions, our actual future costs could differ from those estimated.  In addition, changes in the frequency and severity of reported claims 49 and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements. A 10% increase in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in increases of approximately $28.7 million in our liability and approximately $9.3 million in our receivable as of November 30, 2024, and additional expense of approximately $19.4 million for 2024.  A 10% decrease in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in decreases of approximately $25.8 million in our liability and approximately $6.8 million in our receivable as of November 30, 2024, and a reduction to expense of approximately $19.0 million for 2024.  Estimates of insurance recoveries and amounts we have paid on behalf of other parties, if any, are recorded as receivables when such recoveries are considered probable.  These estimated recoveries are principally based on actuarially determined amounts and depend on various factors, including, among other things, the above-described claim cost estimates, our insurance policy coverage limits for the applicable policy year(s), historical third-party recovery rates, insurance industry practices, the regulatory environment, and legal precedent, and are subject to a high degree of variability from year to year.  Because of the inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from amounts currently estimated. Legal Matters Accruals.  We record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable.  Assessing the probability of losses and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants, regulatory agencies, mediators, arbitrators, responsible third parties and/or courts, as the case may be.  Recorded contingent liabilities are based on the most recent information available and actual losses in any future period are inherently uncertain.  If future adjustments to estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges during the period in which the actual loss or change in estimate occurred.  In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility the ultimate loss will materially exceed the recorded liability.  While we cannot predict the outcome of pending legal matters with certainty, we do not believe any currently identified claim or proceeding, either individually or in aggregate, will have a material impact on our results of operations, financial position or cash flows. Income Taxes.  As discussed in Note 14 – Income Taxes in the Notes to the Consolidated Financial Statements in this report, we evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect to whether deferred tax assets will be realized.  This evaluation considers, among other factors, our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward periods, and conditions in the housing market and the broader economy.  The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related deferred tax assets become deductible.  The value of our deferred tax assets in our consolidated balance sheets depends on applicable income tax rates.  We base our estimate of deferred tax assets and liabilities on current tax laws and rates.  In certain cases, we also base this estimate on business plan forecasts and other expectations about future outcomes.  Changes in positive and negative evidence, including differences between our future operating results and estimates, could result in the establishment of an additional valuation allowance against our deferred tax assets.  Accounting for deferred taxes is based upon estimates of future results.  Judgment is required in determining the future tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns.  Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated financial statements.  Also, changes in existing federal and state tax laws and corporate income tax rates could affect future tax results and the realization of deferred tax assets over time. We recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of the provision for income taxes.  Our liability for unrecognized tax benefits, combined with accrued interest and penalties, is reflected as a component of accrued expenses and other liabilities in our consolidated balance sheets.  Judgment is required in evaluating uncertain tax positions.  We evaluate our uncertain tax positions quarterly based on various factors, including changes in facts or circumstances, tax laws or the status of audits by tax authorities.  Changes in the recognition or measurement of uncertain tax positions could have a material impact on our consolidated financial statements in the period in which we make the change. INFLATION Since 2021, product and labor costs and general inflation in the economy have increased and remained elevated compared to the prior decade.  In turn, we experienced rising land and construction costs, particularly for building materials and construction service providers’ rates, warranty repair costs, and compensation and benefit expenses to attract and retain talent.  These trends are expected to continue to an extent in 2025, though they may worsen compared to prior years. We generally enter into land option contracts and other similar contracts to acquire rights to land for the construction of homes a significant 50 period of time before development and/or sales efforts commence.  Accordingly, to the extent land acquisition costs are fixed, subsequent increases or decreases in our home selling prices will affect our profits.  As the selling price of each of our homes is fixed at the time a buyer enters into a home sales contract, and because we generally commence construction of a home only after we have a signed sales contract with a homebuyer, any interim construction-related cost inflation can result in lower housing gross profit margins.  In order to help, but not entirely moderate that effect, we typically enter into fixed-price contracts with our larger trade partners and building material suppliers for specified periods of time. Inflation is often accompanied by higher and more volatile interest rates, which may negatively impact housing affordability and the confidence of potential homebuyers, and adversely impact demand for our homes.  Inflation may also increase our financing costs, as borrowings under our Credit Facility, if any, and Term Loan typically accrue interest at a variable rate based on SOFR.  We expect the inflationary pressures on our business to continue in 2025.  While we attempt to pass on increases in our costs through increased home selling prices, including for design choices and options, market forces and buyer affordability constraints can limit our ability to do so.  If we are unable to raise selling prices enough to compensate for higher costs, or our borrowing costs increase significantly, our revenues, housing gross profit margin and net income could be adversely affected. RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements are discussed in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in this report. OUTLOOK  Key longer-term housing market drivers have remained largely positive during 2023 and 2024, including favorable demographic trends, rising household formations, solid employment, wage growth and the ongoing undersupply of new and resale homes.  While market conditions were uneven during 2024, we generated favorable operational and financial results.  We believe we are well-positioned to achieve our goals for 2025 based on our differentiated, highly customer-centric Built to Order business model, operational capabilities, affordable product offerings, lot supply, strong balance sheet and liquidity, substantial backlog value of $2.24 billion at November 30, 2024, improved build times, normalizing cancellation rates and planned community count growth, subject to the factors and risks described in this report.  We expect to be able to drive our build times lower in 2025 as we progress toward our goal of four months from start to home completion, which is at the lower end of our historical range, subject to the availability of skilled trades and building materials. Our key longer-term objectives remain to increase our scale, profitability and returns, as well as generate cash flows, by expanding our lot count through land acquisitions that meet our underwriting standards, opening new communities on time, driving net orders and balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context.  To do so, we expect to continue to calibrate at each community our home pricing and homebuyer concessions, if any, and inventory levels, based on homebuyer demand.  Our use of homebuyer concessions in 2025 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots remaining available for sale.  While we expect our land acquisition and development investment activity to increase in 2025 as compared to 2024 to support future growth, depending significantly on market conditions and available opportunities that meet our investment return standards, we will prioritize capital efficiency, developing lots where possible in smaller phases and balancing development with our starts pace to manage our inventory of finished lots. At the same time, we will plan to continue returning capital to our stockholders.  As of November 30, 2024, we had $700.0 million remaining under our current board of directors share repurchase authorization.  This provides us the opportunity to continue to repurchase our common stock in 2025, with the volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions.  Since our 2024 fiscal year ended, buyer hesitancy due to discomfort with volatile mortgage interest rates has continued to some degree. Through the first seven weeks of our 2025 first quarter, we generated 1,252 net orders, compared to 1,456 in the year-earlier period. As we are entering the stronger selling months of the quarter and with a meaningful number of community openings projected, we expect to close the gap on net orders relative to last year’s quarter.  We estimate that our net order comparison for the full 2025 first quarter will be roughly flat versus a strong comparable in our 2024 first quarter. 51 In considering the foregoing, our present outlook for the 2025 first quarter and the 2025 full year as to certain metrics is as follows: 2025 First Quarter – •We expect to generate housing revenues in the range of $1.45 billion to $1.55 billion, compared to $1.46 billion for the corresponding 2024 period, and anticipate our average selling price to be approximately $501,000, compared to $480,100 in the year-earlier period. •We expect our homebuilding operating income margin as a percentage of revenues to be approximately 9.5%, assuming no inventory-related charges, compared to 10.9% for the year-earlier quarter. ◦We expect our housing gross profit margin to be in the range of 20.0% to 20.4%, assuming no inventory-related charges, compared to 21.6% for the corresponding 2024 quarter. ◦We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 10.5% to 10.9%, compared to 10.8% for the 2024 first quarter. •We expect our effective tax rate will be approximately 23.0%.  The effective tax rate for the year-earlier quarter was 20.6%. •We expect our ending community count to be approximately 260, which would result in an 8% year-over-year increase in our average community count. 2025 Full Year – •We expect our housing revenues to be in the range of $7.00 billion to $7.50 billion, an increase from $6.90 billion for 2024. •We expect our average selling price to be in the range of $488,000 to $498,000, compared to $486,900 for 2024. •We expect our homebuilding operating income margin as a percentage of revenues to be approximately 10.7%, assuming no inventory-related charges, compared to 11.1% for 2024. ◦We expect our housing gross profit margin to be in the range of 20.0% to 21.0%, assuming no inventory-related charges, compared to 21.1% for 2024. ◦We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 9.6% to 10.0%, compared to 10.0% for 2024. •We expect our effective tax rate to be approximately 24.0%, compared to 23.0% for 2024. •We expect our ending community count to be approximately 250, compared to 258 for 2024. In addition to factors discussed elsewhere in this report, our future performance and the strategies we implement (and adjust or refine as necessary or appropriate) will depend significantly on prevailing economic, employment, homebuilding industry and capital, credit and financial market conditions and on a fairly stable and constructive political and regulatory environment (particularly in regard to housing and mortgage loan financing policies).  For instance, the Federal Reserve’s aggressive raising of the federal funds interest rate and other measures during 2022 and 2023 to moderate persistent U.S. inflation created significant and ongoing headwinds for the housing market, tempering consumer demand for homes and disrupting credit and lending markets.  While the Federal Reserve reduced interest rates three times in 2024, and may lower rates further in 2025 or later periods, we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes will positively affect demand or our business, results of operations or consolidated financial statements.  In addition, while we experienced improvement with respect to supply chain-related disruptions as described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we believe they could persist or possibly worsen to various degrees in 2025.  Further, and though the extent is uncertain and none of our communities or operations have been directly affected as of the date of this report, given the scope of the unprecedented wildfires in the Los Angeles County area in January 2025, we may experience some disruption in our homebuilding activities, and potentially with our orders and homes delivered, in the Southern California region during the year and beyond.  The potential extent and effect of these factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in 2024, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns.  52 FORWARD-LOOKING STATEMENTS Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”).  Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “hope,” and similar expressions constitute forward- looking statements.  In addition, any statements that we may make or provide concerning future financial or operating performance (including without limitation future revenues, community count, homes delivered, net orders, selling prices, sales pace per new community, expenses, expense ratios, housing gross profits, housing gross profit margins, earnings or earnings per share, or growth or growth rates), future market conditions, future interest rates, and other economic conditions, ongoing business strategies or prospects, future dividends and changes in dividend levels, the value of our backlog (including amounts that we expect to realize upon delivery of homes included in our backlog and the timing of those deliveries), the value of our net orders, potential future asset acquisitions and the impact of completed acquisitions, future share issuances or repurchases, future debt issuances, repurchases or redemptions and other possible future actions are also forward-looking statements as defined by the Act.  Forward-looking statements are based on our current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our operations, economic and market factors, and the homebuilding industry, among other things.  These statements are not guarantees of future performance, and we have no specific policy or intention to update these statements.  If we update or revise any such statement(s), no assumption should be made that we will further update or review that statement(s) or update or revise any other such statement(s).  In addition, forward-looking and other statements in this report and in other public or oral disclosures that express or contain opinions, views or assumptions about market or economic conditions; the success, performance, effectiveness and/or relative positioning of our strategies, initiatives or operational activities; and other matters, may be based in whole or in part on general observations of our management, limited or anecdotal evidence and/or business or industry experience without in-depth or any particular empirical investigation, inquiry or analysis. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors.  The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following: •general economic, employment and business conditions; •population growth, household formations and demographic trends; •conditions in the capital, credit and financial markets; •our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; •the execution of any securities repurchases pursuant to our board of directors’ authorization; •material and trade costs and availability, including the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; •consumer and producer price inflation; •changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve may increase to moderate inflation, as it did in 2022 and 2023, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; •our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; •our compliance with the terms of the Credit Facility and the Term Loan; •the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility; •volatility in the market price of our common stock; •home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; 53 •weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; •competition from other sellers of new and resale homes; •weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas, and the unprecedented wildfires in the Los Angeles County area in January 2025; •any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; •potential regulatory instability associated with the upcoming change in the U.S. presidential administrations; •government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; •changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes; •changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; •disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict and other attacks in the Middle East region and military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; •the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto; •the availability and cost of land in desirable areas and our ability to timely and efficiently develop acquired land parcels and open new home communities; •impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; •our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred; •costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals; •our ability to use/realize the net deferred tax assets we have generated; •our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, and in entering into new markets; •our operational and investment concentration in markets in California; •consumer interest in our new home communities and products, particularly from first-time homebuyers and higher- income consumers; •our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California; 54 •our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures; •income tax expense volatility associated with stock-based compensation; •the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; •the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; •the performance of mortgage lenders to our homebuyers; •the performance of KBHS; •the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; •information technology failures and data security breaches; •an epidemic, pandemic or significant seasonal or other disease outbreak, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; •widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and •other events outside of our control.