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Housing retailer KB Home (KBH) has recorded a net loss of $3.6 million in Q2 FY2023 when compared to $2.7 million year over year.
The Los Angeles, California-based company’s diluted loss per share was $0.02.
The company’s revenues for Q2 FY 2023 were $7.3 million, a slight decrease from Q2 FY 2022 revenues of $7.7 million.
It reported a gross profit of $2.07 million for the quarter in review as compared to $2.26 million for the same quarter a year ago.
The company’s net operating loss of the quarter was $1.6 million as compared to $1.8 million year over year. Net operating income was primarily affected by continued business development expenses related to Illinois and New Jersey, new license applications, and new operation startup expenses.
Net loss included non-cash charges of $0.9 million for loss on impairment and $0.2 million for stock-based compensation.
Adjusted EBITDA loss was $0.7 million when compared with a $1.3 million loss year over year. It was an improvement of 46% over the prior quarter.
Total current assets were $7.2 million, total assets $32.6 million, total current liabilities $10.8 million, and total liabilities were $31 million as of April 30.
(*Adjusted EBITDA is a non-GAAP financial measure that excludes certain items such as interest, taxes, depreciation, amortization, impairment charges, stock-based compensation and other non-recurring items.)
KB Home CEO Jeffrey Mezger said in a press release that the company delivered solid results in Q2 despite the headwinds facing the housing industry. "We are pleased with our second-quarter performance, as we generated strong gross margins, improved our adjusted EBITDA margin by 460 basis points year over year and increased our backlog value by 25% to $4 billion."
He added that the company is well-positioned to capitalize on the long-term fundamentals of the housing market, such as low inventory, favorable demographics, low interest rates and rising household formation.
However, he also acknowledged that the current conditions are challenging and that the company is adjusting its pricing strategy to stimulate demand.
"High mortgage rates and persistent inflation, together with an uncertain economy, have made homebuyers more cautious since the middle of last year," Mezger said. "We are getting more aggressive with our pricing ahead of the spring selling season, in order to generate new orders and maintain our market share."
KB Home expects its housing revenue for Q3 FY 2023 to be between $1.25 billion and $1.40 billion, below analysts’ consensus estimate of $1.37 billion.
The company also expects its average selling price to decline by about 5% sequentially in Q3 due to its pricing actions.
KB Home’s stock price fell by 2.9% to close at $34.91 on June 22, 2023, following the earnings release.
The stock has underperformed the broader market and its peers in the past year, as it faced rising competition, supply chain disruptions and higher costs.
According to Yahoo Finance, KB Home’s stock price has gained only 4% in the past year, compared to a 36% increase for the S&P 500 index and a 16% increase for the iShares U.S. Home Construction ETF (ITB), which tracks the performance of homebuilding companies.
KB Home’s main competitors include Meritage Homes (MTH), M.D.C. (MDC), Tri Pointe Homes (TPH), M/I Homes (MHO), Toll Brothers (TOL), PulteGroup (PHM), Taylor Morrison Home (TMHC), Century Communities (CCS), Dream Finders Homes (DFH) and Summit Materials (SUM).
A report in Seeking Alpha says KB Home has some room to get cautiously bullish into 2023, as it can benefit from stabilizing mortgage rates and declining inflation pressures that can support housing demand and construction margins.