KB Home Conference Call Highlights

KB Home KBH reported its second quarter earnings on Tuesday. Shares of the company are down 5 percent.

Below are some key highlights from its conference call:

• Results reinforced that our investment and product positioning strategies are working, and we are well-positioned for continued revenue and profit growth.
• Our quarter-end backlog value of $1.1 billion best illustrates this point, this is our highest quarter-end backlog since 2008.
• Revenues for the quarter increased to $589 million and net income grew to $28 million.
• During the quarter, we opened 29 new communities.
• Our revenue increased by 7% even with a slight decline in units delivered.
• Averaged a 197 communities open for sale.
• We continue to focus on opening communities in more desirable submarkets that feature strong demand, higher income levels and higher median home prices.

• We will continue to invest in land and land development in support of our growth targets with the goal of increasing market share within our current operating footprint.
• Over the past few years we have built a solid growth trajectory through establishing a specific set of objectives that we have shared on previous earning calls.
• Expect a significant number of grand openings in our fourth quarter and should end the year with our community count up approximately 15% versus year-end 2013.
• Our second key initiative is to grow revenue per community.
• We've achieved our stated gross margin goal in the low-20s to mid-20s.
• Over time, we do expect to increase our order rates to more historical levels to drive additional revenue growth per community.
• KB Home continues to be on the front lines of the homebuilding industry in terms of environmental stewardship.
• In our third quarter, we experienced traffic levels that were solidly up across our communities, further evidence that there is strong demand. Our traffic levels were up 24% versus last year.
• As I often point out, homebuilding is a very local business and we are seeing very diverse market dynamics throughout our four regions.
• We saw net orders increase 24%, and net order value rise 35% over last year. As a result, our quarter and backlog value in California grew by 68%.

• We expect to see sequential improvement in our Q4 housing gross profit margin as compared to the third quarter.
• We believe that the improvement in our fourth quarter gross profit dollars per unit will be particularly strong.
• At the end of the third quarter, the valuation allowance was approximately $833 million.
• In conclusion, we're solidly profitable and we are building momentum.