UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended November 30, 20202021

or

Securities Registered Pursuant to Section 12(g) of the Act: None

KB HOME

FORM 10-K

FOR THE YEAR ENDED NOVEMBER 30, 20202021

PART I

General

KB Home is one of the largest and most recognized homebuilding companies in the U.S. We have been building homes for over 6065 years, with nearly 645,000over 655,000 homes delivered since our founding in 1957. We build a variety of new homes designed primarily for first-time and first move-up, as well as second move-up and active adult homebuyers, including attached and detached single-family residential homes, townhomes and condominiums. We offer homes in development communities, at urban in-fill locations and as part of mixed-use projects. Our homebuilding operations represent the majority of our business, accounting for 99.6%99.7% of our total revenues in 2020.2021. Our financial services operations, which accounted for the remaining .4%.3% of our total revenues in 2020,2021, offer various insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets. Our financial services operations also provide mortgage banking services, including residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through KBHS Home Loans, LLC (“KBHS”), which is an unconsolidated joint venture we formed with Stearns Ventures, LLC (“Stearns”).between us and a third party.

Unless the context indicates otherwise, the terms “we,” “our” and “us” used in this report refer to KB Home, a Delaware corporation, and its predecessors and subsidiaries. We also use the following terms in our business with the corresponding meanings: “home” is a single-family residence, whether it is a single-family home or other type of residential property; “homes delivered” are homes for which the sale has closed and title has passed to a customer; “community” is a single development in which new homes are constructed as part of an integrated plan; and “community count” is the number of communities we have open for sales with at least five homes/lots left to sell.

Markets

Reflecting the geographic reach of our homebuilding business, we have ongoing operations in the eightnine states and 4547 major markets presented below. We also operate in various submarkets within these major markets. We may refer to these markets and submarkets collectively as our “served markets.” For reporting purposes, we organize our homebuilding operations into four segments — West Coast, Southwest, Central and Southeast.

KB Edge consists of the following key principles with respect to customers, land, products and operations:

We also cultivate and leverage close supplier and business partner relationships to integrate into or offer with our products architectural elements (such as flex spaces that can serve multiple purposes, quiet zones or home offices), building materials, construction techniques, and structural and non-structural systems, components and devices that are aligned with the preferences identified in our surveys and other data sources, including with the design options and upgrades we offer. With our focus on affordability, we seek out innovative techniques, materials and items to help meet homebuyers’ priorities at attainable price points.

From our synthesis of the foregoing consumer research and related activities, we give our homebuyers a wide array of choice to craft the new home that fits their particular lifestyle and priorities, including their homesite, floor plan, elevation and structural options. Our homebuyers can visit our KB Home Design Studios, where they get both advice and the opportunity to select from a broad range of included features, design upgrades and options that will help personalize their home.

We believe our approach differentiates us in the homebuilding industry and, along with our company culture that sustains it, enhances customer satisfaction. We are proud of the high levels of satisfaction our homebuyers have reported to us and on outside surveys. In 2020, even with the challenges we faced associated with the outbreak of the 2019 coronavirus disease (“COVID-19”),2021, we achieved the top rank for customer satisfaction among homebuilders in third-party surveys, which we believe reflects the effective dedication we have to our homebuyers.

centered our external brand identity and messaging around Built on Relationships®. Built on Relationships also encapsulates the importance of customer, as discussed above, and other key relationships – with suppliers, trade contractors, land sellers and municipalities – to the success of our business. The key components we highlight as part of our brand identity include:

We typically sell our homes through our commissioned sales associate employees from sales offices located in or adjacent to furnished model homes in each community. WithWe also use electronic sales capabilities, which we have progressively enhanced since 2020, as the outbreak of COVID-19the 2019 coronavirus disease (“COVID-19”) pandemic and the related responses by public health and governmental authorities to contain and combat its outbreak and spread (“COVID-19 control responses”), we adapted and progressively enhanced accelerated our electronic sales capabilities during 2020use of technology to give our customers a variety of convenient ways to shop for and purchase a new KB home, including, among other things:

In addition, as part of our commitment to sustainability, which is discussed further below under “Environmental, Social and Governance,” and providing our customers a simple path to homeownership, we continue to work towards the goal of paperless homebuying. Over the past few years, we have eliminated a significant amount of paper from our home purchase contract by reducing the number of forms required to complete the process and digitizing as many of the remaining forms as possible. We plan to make additional investments in our digital sales and marketing tools in 2021.

We market our homes to prospective homebuyers and real estate brokers through a variety of media, and use data analytics to target our advertising and measure its effectiveness and efficiency in terms of generating leads and net orders. In recent years and in response to the growing number of millennial and Generation Z homebuyers, we have increased our emphasis on digital marketing, through search engine marketing, interactive Internet-based applications, email, social media outlets, our website and other evolving communication technologies. We also use print media, billboards, radio, magazine and newspaper advertising in our served markets, as necessary.

Our corporate management and support personnel develop and oversee the implementation of company-wide strategic initiatives, our overall operational policies and internal control standards, and perform various centralized functions, including architecture; purchasing and national contracts; treasury and cash management; land acquisition approval; risk and litigation management; accounting and financial reporting; internal audit and compliance activities; information technology (“IT”) systems; marketing; and investor and media relations.

Community Development and Land Inventory Management

Developable land for the production of homes is a core resource for our business. Based on our current strategic plans, we seek to own or control land sufficient to meet our forecasted production goals for the next threefour to fivesix years. In 2021,2022, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return standards. However, we may periodically sell certain land interests or monetize land previously held for future development.

Our community development process generally consists of four phases: land acquisition, land development into finished lots for a community (if necessary), home construction and delivery of completed homes to homebuyers. Historically, our community development process has typically ranged from 12 to 1824 months in our West Coast homebuilding reporting segment, with a somewhat shorter duration in our other homebuilding reporting segments. The development process in our West Coast homebuilding reporting segment is typically longer than in our other segments due to the municipal and regulatory requirements that are generally more stringent in California. Our community development process varies based on, among other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors. In 2021, as noted above under “Business Strategy,” we experienced extended community development timelines due to nationwide supply chain disruptions that created shortages of

Although they vary significantly in size and complexity, our single-family residential home communities typically consist of 50 to 200 lots per product line, with lots ranging in size from 1,9001,700 to 9,00011,000 square feet. In our communities, we typically offer three to 15 home design choices. We also generally build one to three model homes at each community so that prospective homebuyers can preview the various products available. Depending on the community, we may offer premium lots

We generally structure our land acquisition and land development activities to minimize, or defer the timing of, expenditures in order to reduce both the market risks associated with holding land and our working capital and financial commitments, including interest and other carrying costs. We typically use contracts that, in exchange for a small initial option payment or earnest money deposit, give us an option or similar right to acquire land at a future date, usually at a pre-determined price and pending our satisfaction with the feasibility of developing and selling homes on the land and/or an underlying land seller’s completion of certain obligations, such as securing entitlements, developing infrastructure or finishing lots. We refer to land subject to such option or similar contractual rights as being “controlled.” Our decision to exercise a particular land option or similar right is based on the results of our due diligence and continued market viability analysis after entering into such a contract. Information related to our land option contracts and other similar contracts is provided in Note 7 – Inventory Impairments and Land Option Contract Abandonments and Note 8 – Variable Interest Entities (“VIEs”) in the Notes to Consolidated Financial Statements in this report.

The following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 20202021 and 2019:2020:

We, act as the general contractor for the majority of our communities, and engageor outside general contractors in all other instances. We, or the outside general contractors we may engage, contract with a variety of independent subcontractors,contractors, who are typically locally based, to perform all land development and home construction work through theirthese independent contractors’ own employees or subcontractors. We do not self-perform any land development or home construction work. These independent subcontractorscontractors also supply some of the building materials required for such production activities. Our contracts with these independent subcontractorscontractors require that they comply with all laws applicable to their work, including wage and safety laws, meet performance standards, follow local building codes and permits, and abide by our Ethics Policy referenced under Item 10 – Directors, Executive Officers and Corporate Governance in this report.

Backlog

Our “backlog” consists of homes that are under a purchase contract but have not yet been delivered to a homebuyer. Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less cancellations) generated during the current period minus the number of homes delivered during the current period. Our backlog at any given time will be affected by cancellations, homes delivered and our community count. Backlog value represents potential future housing revenues from homes in backlog. Our cancellation rates and the factors affecting such rates are further discussed below under both Item 1A – Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Competition, Seasonality, Delivery Mix and Other Factors

In markets experiencing extensive construction activity, including areas recovering from earthquakes, wildfires, hurricanes, flooding or other natural disasters, there can be severe craft and skilled trade shortages that limit independent subcontractors’contractors’ ability to supply construction services to us, which in turn tends to drive up our costs and/or extend our production schedules. Elevated construction activity, and reallocations of staff for public safety priorities after natural disasters or otherwise, has also contributed to measurable increases in the amount of time needed to obtain governmental approvals or utility service activations and, combined with tariffs imposed or increased by the U.S. and other governments, the cost of certain raw building materials, such as steel, Canadian lumber, drywall and concrete, or finished products. InSince 2020, we have experienced intensifying building material cost pressures, particularly for lumber, and production capacity issues with some of our main product suppliers, reflecting increases insustained high levels of homebuilding and renovation activity andcombined with supply chain constraints over the course of the year largely associated withdisruptions stemming from international and domestic COVID-19 control responses. Sinceresponses and economy-wide labor shortages in the U.S. In addition, since 2013, we also have seen higher prices for desirable land amid heightened competition with homebuilders and other developers and investors (both domestic and international), particularly in the land-constrained areas where we operate. We expect these upward cost trends to continue in 2021,2022, if and as housing market activity grows and there is greater competition for these resources.

(corresponding to most of our second quarter and part of our third quarter) than at other times of the year. This “selling season” demand results in our typically delivering more homes and generating higher revenues from late summer through the fall months (corresponding to part of our third quarter and all of our fourth quarter). However, as illustrated in the table below, the outbreak of COVID-19 and the related COVID-19 control responses beginning in mid-March 2020 disrupted our usual seasonal patterns in 2020, with our 2020 second quarter net order activity measurably constrained followed by a significant rebound in our 2020 third and fourth quarters, resulting in a higher percentage of net orders in those quarters, compared to corresponding quarters in previous years. The seasonal pattern of our homes delivered and housing revenues in 20202021 was affected by the above-mentioned impact on our net ordersslightly more in the second quarter as well as a slowdownline with typical historical trends. However, we can provide no assurance whether or to what extent typical seasonal performance trends will return in our housing starts in that quarter.2022, or at all.

For nearly 15 years, we have made a dedicated effort to further differentiate ourselves from other homebuilders and resale homes through our ongoing commitment to become a leading national company in sustainability.sustainability, which encompasses our ESG practices. We seek out innovative technologiesbelieve our longstanding, industry-leading sustainability initiatives provide tangible benefits for our customers, our operations and systemsthe environment, and distinctly differentiate us from other builders of new homes and from resale homes. In addition to further improveour internal executive team, we monitor evolving trends and gather input and guidance for our initiatives through a panel of external advisors that we call our National Advisory Board, which we established in 2009 solely for these purposes. These advisors, who have a broad and diverse set of personal and professional perspectives,

Government Regulations and Environmental Matters

Our operations are subject to myriad legal and regulatory requirements concerning land development (including governmental permits, taxes, assessments and fees), the homebuilding process, employment conditions and worksite health and safety. These requirements often provide broad discretion to government authorities, and they could be interpreted or revised in ways that delay or prohibit project development or home sales, and/or make these activities more costly. The costs to comply, or associated with any noncompliance, are, or can be, significant and variable from period to period.

Under applicable environmental laws (including those aimed at protecting against climate change impacts), we may be responsible for, among other things, removing or remediating hazardous or toxic substances even where we were not aware of their presence or on land we previously owned. In addition to incurring clean-up costs, the presence of harmful substances on or near our properties may prevent us from performing land development or selling homes. Also, we are subject to federal, state and local rules that can require us to undertake extensive measures to prevent or minimize discharges of stormwater and other materials from our communities, and to protect wetlands and other designated areas.

As part of our due diligence process for land acquisitions, we often use third-party environmental consultants to investigate potential environmental risks, and we require disclosures, representations and warranties from land sellers regarding environmental risks. We also take steps prior to our acquisition of the land to gain reasonable assurance as to the precise scope of any remediation work required and the costs associated with removal, site restoration and/or monitoring. To the extent contamination or other environmental issues have occurred in the past, we will attempt to recover restoration costs from third parties, such as the generators of hazardous waste, land sellers or others in the prior chain of title and/or their insurers.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4 and 5 and proxy statements, as well as all amendments to those reports are available free of charge through our investor relations website at investor.kbhome.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). They can also be found at the SEC’s website at www.sec.gov. We will also provide these reports in electronic or paper format free of charge upon request made to our investor relations department at investorrelations@kbhome.com or at our principal executive offices. We intend for our investor relations website to be the primary location where investors and the general public can obtain announcements regarding, and can learn more about, our financial and operational performance, business plans and prospects, our board of directors, our senior executive management team, and our corporate governance policies, including our articles of incorporation, by-laws, corporate governance principles, board committee charters, and ethics policy. We may from time to time choose to disclose or post important information about our business on or through our investor relations website, and/or through other electronic channels, including social media outlets, such as Facebook® (Facebook.com/KBHome) and Twitter® (Twitter.com/KBHome), and other evolving communication technologies. The content available on or through our primary website at www.kbhome.com, our investor relations website, including our sustainability reports, Human Rights Statement, Supplier Code of Conduct and other ESG-related policies, or social media outlets and other evolving communication technologies is not incorporated by reference in this report or in any other filing we make with the SEC, and our references to such content are intended to be inactive textual or oral references only.

None.

None.

Our legal proceedings are discussed in Note 18 – Legal Matters in the Notes to Consolidated Financial Statements in this report.

Not applicable.

Information about our Executive Officers

The following table presents certain information regarding our executive officers as of December 31, 2020:2021:

Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” As of December 31, 2020,2021, there were 562569 holders of record of our common stock.

Information regarding the shares of our common stock that may be issued under our equity compensation plans is provided below under Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in this report.

The following table summarizes our purchases of our own equity securities during the three months ended November 30, 2020:2021:

As of November 30, 2020, we had 2,193,947 shares authorized for repurchase under a share repurchase program approved by our board of directors in 2018. On July 8, 2021, our board of directors authorized us to repurchase a total of up to 4,000,0005,000,000 shares of our outstanding common stock. This authorization reaffirmed and incorporated the then-current balance of 1,627,0002,193,947 shares that remained under athe prior board-approved share repurchase program.authorization. In 2018,the 2021 third quarter, we repurchased 1,806,053purchased 4,668,600 shares of our common stock pursuant to this authorization at a total cost of $35.0$188.2 million. As of November 30, 2020,2021, we had 2,193,947331,400 shares authorized for repurchase.

The shares purchased during the three months ended November 30, 20202021 were previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards. These transactions are not considered repurchases under the board of directors’ authorization.

Stock Performance Graph

The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30:

Comparison of Five-Year Cumulative Total Return

Among KB Home, S&P 500 Index and

Dow Jones US Home Construction Index

Our discussion and analysis below is focused on our 20202021 and 20192020 financial results, including comparisons of our year-over-year performance between these years. Discussion and analysis of our 20182019 fiscal year specifically, as well as the year-over-year comparison of our 20192020 financial performance to 2018,2019, are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019,2020, filed with the SEC on January 24, 2020,22, 2021, which is available on our investor relations website at investor.kbhome.com and the SEC’s website at www.sec.gov.

Since 2020, we continuehave experienced intensifying building material cost pressures, particularly for lumber, and production capacity issues with some of our main product suppliers, reflecting sustained high levels of homebuilding and renovation activity combined with supply chain disruptions stemming from international and domestic COVID-19 control responses and economy-wide labor shortages in the U.S. Our housing gross profit margin on homes delivered in the latter part of 2021 were especially impacted by high lumber costs during the period in which these homes were started. In 2021, the continuing supply chain disruptions, combined with construction services availability constraints and delays with respect to navigatestate and municipal construction permitting, inspections and utilities, extended our construction cycle times by several weeks and delayed many expected deliveries and new community openings during our fiscal year. We believe these challenging conditions will generally persist into 2022 and potentially throughout the year. We have incorporated these trends into our performance expectations, as presented below under “Outlook.”

Homebuilding revenues for 2021 grew 37% from the previous year due to an uncertain economic landscape,increase in housing revenues that reflected 26% growth in the number of homes delivered to 13,472 and a 9% increase in the overall average selling price of those homes to $422,700. In 2021, homebuilding operating income rose 109% year over year to $661.3 million and, as a percentage of homebuilding revenues, improved 400 basis points to 11.6%. The increase in our homebuilding operating income margin was driven by significant improvements in both housing gross profit margin and selling, general and administrative expenses as a percentage of housing revenues. Our pretax income margin improved 340 basis points to 12.1%, and net income and diluted earnings per share increased 91% and 92%, respectively, each as compared to 2020. Our 2021 results included a $5.1 million loss on early extinguishment of debt associated with our purchase, pursuant to a tender offer that expired on June 8, 2021, of $269.8 million in aggregate principal amount of our 7.00% senior notes due 2021 (“7.00% Senior Notes due 2021”) prior to their maturity date. . Our 2020 results included severance charges of $6.7 million, as described below under “COVID-19 Pandemic Impact.”

Our return on equity (“ROE”) for 2021 improved 810 basis points to 19.9%, compared to 11.8% for 2020. ROE is calculated as net income for the year divided by average stockholders’ equity, where average stockholders’ equity is based on the substantial net orders we generatedending stockholders’ equity balances of the trailing five quarters.

With the easing to varying degrees of restrictive public health orders to varying degrees in our served markets beginning in May 2020, and the associated ability to open our communities to walk-in traffic, following appropriate safety protocols and applicable public health guidelines, complemented by our enhanced virtual selling capabilities, as discussed under Item 1 – Business, our net orders began to rebound significantly. This positive momentum continued through thesignificantly following a low point in April 2020, second half, largely fueled by the combination of historically low mortgage interest rates, a limited supply of resale inventory, an underproduction of new homes over the past decade, favorable demographic trends and consumers’as steadily increasing desire to own a home. Reflecting this strong demand drove our 2020 thirdthird- and fourth quarterfourth-quarter net orders rose to their respective highest levels since 2005. Though thisthen-15-year highs. The sharp rise in net orders inover these periods substantially expanded the second half generated a substantial expansionnumber of homes in our backlog as discussed below,well as our deliveries and revenuesbacklog value. In 2021, demand for our third and fourth quarters were moderated primarily byhomes remained strong, with the negative effectsvalue of our net orders for the COVID-19 pandemicyear up 45% year over year to $7.68 billion. Our ending backlog value at November 30, 2021 increased 67% to approximately $4.95 billion, our highest fourth-quarter level since 2005, supporting our expectation for significant year-over-year growth in our 2020 second quarter.

Housing revenues of $4.15 billion for 2020 were down 8%in 2021 advanced 37% from the priorprevious year, due to a 10% decrease26% increase in the number of homes delivered partly offset byand a 2%9% increase in the overall average selling price of those homes. The higher volume of homes delivered was largely due to our backlog of homes at the beginning of the year (“beginning backlog”) increasing 54% from 2020, as well as strong net order growth in 2021. In addition, the number of homes delivered in 2020 was tempered primarily by the negative impact of the COVID-19 pandemic and related COVID-19 control responses. The year-over-year increase in the overall average selling price of our homes delivered in 2021 reflected strong housing market conditions, which enabled us to raise prices in the vast majority of our communities, as well as product and geographic mix shifts of homes delivered.

Our housing gross profit margin to 18.9%.

Selling, general and administrative expenses for 2021 increased 22% from the prior year, mainly due to an increase in commission expenses associated with our higher housing revenues, and an increase in general and administrative expenses. The year-over-year increase in general and administrative expenses primarily reflected higher costs associated with performance-based employee compensation plans, as well as expenses incurred to support current operations and expected growth, partly offset by a $4.3 million benefit from an Employee Retention Credit (“ERC”), which is discussed in Note 14 – Income Taxes in the Notes to Consolidated Financial Statements in this report, recognized in early 2021 and the severance charges of $6.7 million recorded in 2020. As a percentage of housing revenues, were 11.2%.our selling, general and administrative expenses improved 120 basis points in 2021 as compared to 2020, largely reflecting increased operating leverage due to our higher housing revenues, partly offset by the above-mentioned higher expenses.

The value of our 20202021 net orders rose 8%45% from 20192020 as a result of the growth in net orders and a 4%20% increase in the overall average selling price of those orders, with theseorders. These factors drivingdrove net order value expansion in threeall four of our four homebuilding reporting segments, ranging from 9%37% in our SouthwestWest Coast segment to 13% in our Central segment. Net order value93% in our Southeast segment declined 8% year over year due to a decrease in net orders, as thesegment. The higher overall average selling price of thosenet orders remained relatively flat.in 2021 largely reflected strong demand in most of our served markets as well as product and geographic mix shifts of net orders.