KB Home (NYSE:KBH) Q1 2023 Earnings Call Transcript

Buck Horne: All right. That’s real helpful. I appreciate that. And then my last one, just in terms of the cancellations and maybe the that you guys have absorbed so many cancellations over the past couple quarters. Are you guys keeping most of the customer’s deposits on those cancellations? Or are you refunding some of that? Or what’s the amount of €“ kind of the average amount of non-refundable/hard money that the customer has when they sign a new contract with you guys?

Jeffrey Mezger: Yes. On average around the system buckets about 2% and if they cancel and their €“ they had a loan approved and , we’ll retain on the deposit.

Operator: And the next question comes from the line of Alex Barron with Housing Research Center. Please proceed with your question.

Alex Barron: Yes. Thanks guys. Yes, I wanted to ask a little bit about the two markets, I guess where the orders still haven’t come back fully. I guess that was the Central and the Florida market or Southeast markets. Was that still somewhat intentional on your part, and not fully €“ still focusing on delivering the higher margin backlog before incentivizing sales? Or are those things largely behind us and then you expect orders to get back to normal next quarter?

Jeffrey Mezger: Rob, do you want to take that?

Robert McGibney: Yes. So I would say that it’s €“ part of what you mentioned is, is a driver, we talked on our last quarter about our strategy with the backlog and the higher backlog communities. In the Central region, they have really high backlogs. So there have been communities where we didn’t make the early price adjustments there, which were just starting to now or did during the quarter, and we’re seeing those sales paces pick up. As far as the Southeast, they performed really well on the gross sales side, especially as we got towards the end of the quarter. So as some of the older sales that we have in backlog may have purchased when rates were lower, as those work through the system here over the next couple of months, I expect that the Southeast is going to bounce back pretty quickly.

Alex Barron: Got it. My second question had to do more with the balance sheet. So I believe you guys have some debt coming due next quarter about $350 million due in May. Just curious if the plan there is to pay those off with cash or to potentially raise debt and take advantage and maybe do more of the share buyback given the big discount or just thoughts around those two topics?

Jeff Kaminski: Right. Alex, we refi that debt actually last year. So our next maturity is actually our term loan, and it’s not until 2026. So we have no near-term debt maturities at this point.

Operator: Thank you. At this time, we have reached the end of the question-and-answer session. And ladies and gentlemen, that does conclude today’s teleconference. Thank you for your participation. You may now disconnect your lines.