Quarterly performance
Overall average selling price of homes delivered expanded 22% YoY to approx. $486,000, reflecting increases across the business. Ending backlog value grew 55% to $5.71 billion. Inventories grew 8% to $5.20 billion.
Strong demand
KB Home is seeing strong demand for homes. On its quarterly conference call, the company stated that it is seeing a tailwind from favorable demographics as the largest subset of millennials is nearing the peak age for first-time home ownership and the oldest of the Gen Zs are entering their homebuying years.
Improvements in employment and wage growth along with the shift to working from home are supporting demand. The company’s monthly absorption rate remained strong at 6.6 net orders per community even as it implemented price increases across many of its communities. Net order value increased 15% to $2.2 billion. Net orders increased sequentially through the quarter and the company expects the spring selling season to be robust.
Supply chain challenges
During the quarter, KB faced supply chain challenges which were made worse by the Omicron variant. Along with the strain on labor, the company faced challenges with regards to the availability of material such as flexible ductwork, double ovens, garage doors, windows, cabinets and HVAC equipment.
The company has turned to alternate suppliers to supplement many of its product needs with comparable items and it is also ordering items well in advance to mitigate delays. KB expects the shortage of materials to continue throughout this year.
Outlook
For the second quarter of 2022, housing revenues are expected to range between $1.55 billion and $1.65 billion. Average selling price of homes is estimated to be approx. $490,000 in Q2. Homebuilding operating income margin is estimated to be 14.3-14.7%, excluding impacts of inventory-related charges.
For the full year of 2022, housing revenues are estimated to be $7.2-7.6 billion. Average selling price is expected to range between $490,000 and $500,000. Homebuilding operating income margin is expected to be 16.0-16.6%.
Click here to read the full transcript of KB Home’s Q1 2022 earnings conference call