KB Home, a prominent U.S. homebuilder, reported its second-quarter earnings for fiscal 2025, showcasing a decline in both revenue and net income. The company’s revenues totaled $1.53 billion, down from $1.71 billion in the same quarter last year. Homes delivered decreased by 11% to 3,120, while net orders fell by 13%, totaling 3,460.

Operating income for the homebuilding segment was recorded at $131 million, compared to $188 million in the prior year, with a homebuilding operating income margin of 8.6%. This marks a decrease from 11.1% year-over-year, attributed to a lower housing gross profit margin and higher selling, general, and administrative expenses ratio. The housing gross profit margin was reported at 19.3%, down from 21.1% the previous year. Excluding inventory-related charges, the adjusted housing gross profit margin was 19.7%, compared to 21.2% a year ago, reflecting the impact of price reductions, increased land costs, and geographic mix variations.

The company’s cancellation rate rose to 16%, compared to 13% in the prior year, indicating a shift in market dynamics. The average selling price increased slightly to approximately $489,000, aided by strong demand in specific markets, while total liabilities rose to $3.02 billion, up from $2.87 billion.

KB Home expects to generate housing revenues between $6.3 billion and $6.5 billion for the full fiscal year. The third-quarter guidance anticipates homebuilding revenues between $1.5 billion and $1.7 billion, and the average selling price for the quarter is projected to be between $470,000 and $480,000. The anticipated housing gross profit margin for the third quarter is estimated to range from 18.1% to 18.7%.

The company has revised its capital allocation strategy, investing over $513 million in land acquisition and development. Despite this, the total land-related investments for the first half of fiscal 2025 reached approximately $1.43 billion, compared to $1.26 billion a year earlier.

For shareholder returns, KB Home repurchased $200 million worth of its shares at an average price of $53.55 per share, which is below its current book value. This repurchase aligns with a commitment to enhance shareholder value and return capital, reflecting a disciplined approach to managing its capital amid softer market conditions.

The firm maintains a total liquidity of $1.2 billion, comprising $308 million in cash and $882 million available under its revolving credit facility. The debt-to-capital ratio stands at 32.2%, reflecting the company’s leverage position.

Looking ahead, KB Home will continue to adapt its strategies to address market conditions as it targets approximately 250 active communities for the remainder of fiscal 2025, focusing on navigating ongoing challenges in order volume and pricing transparency.