KB Home — Q3 2026 Form 10-Q
Reporting period: Three and nine months ended August 31, 2026; comparisons are with the corresponding 2025 periods. Amounts are in U.S. dollars. KB Home operates homebuilding businesses across four regions and a financial services business.
Financial and operating performance
| Metric | Q3 2026 | Q3 2025 | Nine months 2026 | Nine months 2025 |
|---|---|---|---|---|
| Total revenue | $1.297 billion | $1.620 billion | $3.487 billion | $4.542 billion |
| Pretax income | $81.2 million | $143.2 million | $158.8 million | $425.0 million |
| Net income | $65.3 million | $109.8 million | $126.1 million | $327.3 million |
| Diluted EPS | $1.05 | $1.61 | $2.00 | $4.60 |
| Homebuilding gross margin | 16.5% | 18.2% | 15.7% | 19.2% |
- Q3 homebuilding revenue fell 20%, with 2,732 homes delivered, down 19%; average selling price was $473,000, slightly lower year over year. Nine-month deliveries declined 19% to 7,497, and average selling price declined 5% to $462,900.
- Q3 homebuilding operating income was $67.1 million, down 49%; operating margin was 5.2%, versus 8.1%. Management attributed margin pressure principally to pricing, higher relative land costs and lower operating leverage. Adjusted housing gross margin, a non-GAAP measure excluding inventory-related charges, was 16.8% versus 18.9%.
- Net orders declined 12% in Q3 to 2,604; monthly orders per community fell to 3.1 from 3.8. The cancellation rate was 18%, versus 17%. Ending backlog increased 2% in homes and 3% in value year over year, to 4,398 homes worth $2.05 billion. Built to Order homes represented 74% of Q3 deliveries.
- Financial services pretax income was $7.4 million in Q3, down 15%, and $19.6 million for nine months, down 20%. The decline reflected weaker title and insurance results and lower mortgage joint-venture income.
Cash flow, debt and liquidity
- Operating cash flow was negative $228.9 million for the first nine months, versus positive $31.8 million a year earlier. The main uses included a $326.5 million increase in inventories, alongside lower earnings and increases in receivables.
- Cash and cash equivalents were $160.1 million at August 31, 2026, compared with $230.4 million at November 30, 2025. Reported total liquidity was $942.4 million, including $783.4 million available under the revolving credit facility.
- Notes payable totaled $2.109 billion, up from $1.693 billion at fiscal year-end, including $415 million drawn on the revolving facility. Debt-to-capital increased to 35.7% from 30.3%. The company reported compliance with its debt covenants.
- Cash dividends were $0.25 per share in Q3. The company repurchased 0.9 million shares for $50 million during the quarter; $725 million remained under its $1 billion authorization at quarter-end.
Changes, outlook and material matters
- Management described housing conditions as challenging and weaker than the prior quarter. Higher mortgage rates, persistent inflation, uncertainty and increased resale inventory weighed on buyer confidence and pricing. The S&P Global Ratings corporate credit rating was lowered to BB from BB+ in July 2026, with a negative outlook.
- Management expects Q4 2026 deliveries of 3,000–3,500, housing revenue of $1.45–$1.65 billion, and housing gross margin of 16.0%–16.6%, assuming no inventory-related charges. Q4 SG&A is projected at 10.3%–10.9% of housing revenue, effective tax rate at approximately 26%, and ending community count at 270–275. The company expects to repurchase up to $50 million of shares.
- Full-year 2026 projections are 10,500–11,000 deliveries, $4.90–$5.10 billion housing revenue, 16.0%–16.2% housing gross margin assuming no inventory-related charges, SG&A of 11.5%–11.7% of housing revenue, and an effective tax rate of approximately 23%. Management expects Q4 gross margin to decline sequentially and says further build-time improvement may be more gradual.
- The company plans to relocate its headquarters from Los Angeles to Tempe, Arizona. Estimated total costs are $8–$12 million, mostly through 2027, with some costs into 2028; $3.4 million had been recognized through Q3.
- Section 45L tax credits for qualifying homes delivered after June 30, 2026 were repealed under the 2025 tax law. The filing says this reduced the tax-credit benefit in the reported 2026 periods.
- A Department of Justice civil subpoena concerning inspection, rating, marketing and advertising of ENERGY STAR-certified homes remains under review. The company is cooperating; a possible loss or penalty is described as reasonably possible but not probable or estimable. The filing also notes ordinary-course litigation and uncertainty in warranty and self-insurance estimates.
- Outstanding performance bonds were $1.35 billion and letters of credit were $55.1 million. Land option contracts represented $1.68 billion of aggregate purchase price, generally without specific-performance requirements. Inventory impairment and land-option abandonment charges totaled $10.7 million for nine months; further charges could arise if market conditions or plans change.
Investor verification priorities
- Track orders, cancellations, backlog conversion and Built to Order mix against management’s delivery and revenue outlook.
- Assess whether price pressure, land costs and lower operating leverage continue to reduce gross margins, particularly against Q4 and full-year guidance.
- Monitor operating cash flow, inventory investment, revolving-credit borrowings, debt maturities and liquidity after the credit-rating downgrade.
- Review land acquisition and development commitments, inventory impairments, and the scale and timing of share repurchases relative to cash needs.
- Follow developments in the DOJ subpoena, construction-defect and self-insurance exposures, headquarters relocation costs, and the interim principal financial officer arrangement disclosed in the filing.