EVOLUTION & REVOLUTION OF OUR BUSINESS ... Evolution and Revolution Disciplined business...

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  • EVOLUTION & REVOLUTION OF OUR BUSINESS

    Jeff Mezger, Chairman of the Board, President and CEO

  • © 2016 KB Home 2

    Key Messages for Today

     Enduring History

     Evolution and Revolution

     Macroeconomics

     Expectations

    2

  • © 2016 KB Home 3

    Enduring History

     Delivered 578,543 homes since our founding in 1957

     Geographically diverse with operations in 36 markets

     Focus on first-time and first move-up buyer segments

     Built-to-Order™ strategy

     Industry leader known for innovation & sustainability

  • © 2016 KB Home 4

    Not Just Another Homebuilder

    What makes us different, makes us better

    4

  • © 2016 KB Home 5

    Evolution and Revolution

     Disciplined business practices drive incremental change

     Quality and operational excellence, supported by strong partnerships

     Consumer-focused innovation

     Revolutions – ask “why not?”

  • © 2016 KB Home 6

    Evolution and Revolution in Action

    Evolution  Brand recognition

     Inspired designs

     Amazing selection

     Great value

    5,000 Solar Powered Homes

    10,000 Water Smart Homes

    100,000 Energy Star Homes

    120+ LEED Platinum Homes

    Revolution

     Questioning assumptions

     Looking for new opportunities

     Disruptive technologies

     Partnering on Give Me 2 ideas

    Engage | Develop | Participate

  • © 2016 KB Home 7

    Prototype the Future

  • © 2016 KB Home 8

    The Sustainable DIFFERENCE™

    85 82

    78 75

    72

    68 65

    62

    2007 2008 2009 2010 2011 2012 2013 2014 2015

    60

    KB Home

    National Average HERS Score

    The average new KB home is 40% more energy efficient than a typical new home, and 70% more efficient than a typical resale home

  • © 2016 KB Home 9

    Economic Indicators

    Legend

    Healthy

    Caution

    Concern

    Economic Growth (GDP)

    1.4% (Q2 2016)

    Unemployment Rate

    5.0% (September 2016)

    Inflation

    1.1% CPI (Annual Rate)

    Mortgage Rates

    3.48% (September 2016)

    Consumer Confidence

    Index 104.1 (September 2016)

    [ - ]

    [ ~ ]

    [ ~ ]

    [ + ]

    [ + ]

    Housing Affordability

    Index 157 vs. 100 (Norm)

    Housing Starts

    1.14M units annualized (Up 1% YOY)

    Existing Home Sales

    5.33M units annualized (Up 1% YOY)

    New Home Sales

    609K units annualized (Up 21% YOY)

    Existing Homes Inventory

    4.6 months vs. 6.0 (Norm)

    [~ ]

    [~ ]

    [ ~ ]

    [ + ]

    [ ~ ]

    Macro Housing

  • © 2016 KB Home 10

    2016 JCHS Household Projections

    Source: JCHS Policy Advisory Board. Mr. Daniel McCue’s presentation.

  • © 2016 KB Home 11

    2016 JCHS Household Projections

  • © 2016 KB Home 12

    Consumer Confidence Index

    12

    20

    40

    60

    80

    100

    120

    140

    160

    In September, Consumer Confidence Rose to its Highest Level Since August 2007, a Favorable Indicator

    For Future Homebuyer Demand

  • © 2016 KB Home 13

    Housing Affordability Index

    13

    95

    105

    115

    125

    135

    145

    155

    165

    175

    185

    195

    205

    215

    225

    Affordability Remains Attractive Despite Reaching a Seven-Year Low Due to the Widening Gap Between

    Rising Home Prices and Wage Growth

  • © 2016 KB Home 14

    Single-Family Existing Home Sales

    14

    2,500

    3,000

    3,500

    4,000

    4,500

    5,000

    5,500

    6,000

    6,500

    Existing Home Sales Decreased Year Over Year for the First Time Since November 2015, Due to the Low Supply of Affordable Homes

    (in thousands)

  • © 2016 KB Home 15

    New Single-Family Home Sales

    15

    150

    325

    500

    675

    850

    1,025

    1,200

    1,375

    New Home Sales were 21% Higher than a Year Ago, Still Well Below Historical Levels

    (in thousands)

  • © 2016 KB Home 16

    Existing and New Home Inventory

    16

  • © 2016 KB Home 17

    Third Quarter 2016 Highlights

     Steadily improving financial performance with gains across key operational and financial measures

     Housing revenues up 14%, driven by an 11% increase in deliveries

     Increased backlog value 17% to $1.85 billion

     Meaningful improvement in operating margin, primarily through a reduction in SG&A ratio

     Earnings per share grew 83%

     Continued upswing in demand

     Increased activity in affordable submarkets, primarily from first-time and first move-up buyers

     Growth opportunity, based on our significant expertise in serving these buyers

  • © 2016 KB Home 18

    Expectations for 2017 and Beyond

     Work with us to further strengthen our partnerships and all our businesses

     Contribute Give Me 2 ideas  Brand  Value  Innovation

     Get ready for 2017 and beyond

    Engage | Develop | Participate