KB Home (NYSE:KBH) Q4 2018 Earnings Conference Call Transcript

Jan 09, 2019 • 05:00 pm ET


KB Home (NYSE:KBH) Q4 2018 Earnings Conference Call Transcript


Loading Event

Loading Transcript


Good afternoon. My name is Devon, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2018 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the Company's opening remarks, we will open the lines for questions. Today's conference call is being recorded and will be available for replay on the Company's website, kbhome.com, through February 9.

Now, I would like to turn the call over to Jill Peters, Senior Vice President, Investor Relations. Jill, you may begin.

Jill Peters

Thank you, Devon. Good afternoon, everyone, and thank you for joining us today to review our results for the fourth quarter fiscal 2018. With me are Jeff Mezger, Chairman, President and Chief Executive Officer; Jeff Kaminski, Executive Vice President and Chief Financial Officer; Matt Mandino, Executive Vice President and Chief Operating Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Treasurer.

Before we begin, let me note that during this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results and the company does not undertake any obligation to update them. Due to factors outside of the company's control, including those detailed in today's press release and in filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, a reconciliation of the non-GAAP measures referenced during today's discussion to their most directly comparable GAAP measures can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com.

And with that, I will turn the call over to Jeff Mezger.

Jeff Mezger

Thank you, Jill. Good afternoon, and happy new year to all of you. We produced solid results in 2018 as we continued to increase our scale, expanding total revenues to over $4.5 billion. We also significantly improved our profitability. We grew our operating margin by 120 basis points to 8.3% within our Returns-Focused Growth Plan's 2019 target range, and expanded our gross margin to just above 18%, excluding inventory related charges for each metric. As a result, we increased our pretax income by 27% to nearly $370 million and, excluding the accounting charges related to the federal tax legislation, we delivered return on equity of 14.4%, a 440 basis point improvement as compared to the prior year.

As we review our results relative to the guidance we provided prior to the start of our 2018 fiscal year, we finished the year stronger across most of our key financial metrics, including both operating and gross margin, SG&A, ROIC and ROE. Overall, this past year reflected solid execution on our three-year Returns-Focused Growth Plan in achieving or exceeding most of our targets under the plan by the end of year two. Specific to the fourth quarter, our results were consistent with the update