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

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Michael Rehaut: Okay. Thanks for that. I guess second question, I think Steve Kim talked about, maybe looking at some of your guidance metrics as conservative, I think around closings. The question I had was, I think it was part of his comments, it talked about this four to five pace maybe continuing through the rest of the year. It does seem from your comments and others that seasonality and some more positive trends have come back throughout so far this year. But alongside that perhaps you’d also expect seasonality to kick in both ways. And historically you look at 3Q orders, they’re down anywhere from 20% to 30% sequentially on a sales pace basis versus 2Q and then 4Q historically they fall off another roughly 20%. So if seasonality is coming back to the business in a kind of a more normal quarter-to-quarter cadence, it does seem like you are obviously guiding to some return to normalcy.

Is it fair to assume, and I’m not asking for quarterly guidance in 3Q, 4Q, but from a seasonality perspective, is that kind of the right way to think about it if we’re kind of returning to plus or minus, a normal type of cadence throughout the year?

Jeffrey Mezger: Certainly, my expectation, Mike, that we’re normalizing on the cadence. Our move from Q2 to 3Q and Q3 to 4Q is not as great as you just articulated. Our Q3 is typically down about 10% from Q2 and then Q4 is down 5% to 10% could be in parts because of the markets we’re in are a little warmer climate and you get a lot of snow birds that come down in the winter and things like that. But in a normal year, we’ll run 4, 5.5 in the second quarter and then it’ll come down a little in the third quarter and come down a little in the fourth quarter and then over the year, you’ll average between 4 and 5. So based on what we’re seeing right now in a consumer behavior and we qualified it because there’s a lot of unknowns out there, but based on what we’re seeing, we think the markets are starting to normalize.

Operator: And the next question comes from the line of Buck Horne with Raymond James. Please proceed with your question.

Buck Horne: Hey. Thanks for the time. I appreciate it. Just stepping back from a higher level question for you. Have you guys started to see any shift in consumer preferences? Just thinking through like work from home trends and as more companies are trying to mandate some sort of return to office, as the year has progressed, I’m just wondering if you’ve seen any changes in terms of like community locations or the floor plans that your customers are choosing. Has there been any shift noticeable in your business in terms of shifting work from home preferences or I guess conversely, is there still a strong driver in terms of the need for home office space in the business?

Jeffrey Mezger: I don’t know that we’ve seen any shift yet. But I do know that buyers are putting offices in there €“ they’ll take the fourth or fifth bedroom and convert it to a home office of some kind. So as we looked at it back when that was a big topic, the work from home, most people were still buying houses that were within 30 to 45 minutes of their employer. So their view was, we can own a home here, drive a little further to work, but we’re only having to go in the office a couple days. It’s not like they would move to Kansas City while working in San Jose, they’d move to Stockton while working in San Jose. So I don’t know, we’ve seen a big geographic shift and we’re certainly not seeing a shift right now in the size of the home or what they’re spending in our studios. It’s been pretty static for the last 18 months.

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