KB Home (NYSE:KBH) Q3 2020 Earnings Conference Call - Final Transcript

Sep 22, 2020 • 05:00 pm ET

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KB Home (NYSE:KBH) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon. My name is Devin, and I will be your conference operator today. I would like to welcome everyone to KB Home 2020 Third Quarter Earnings Conference Call. [Operator Instructions] 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 at the company's website kbhome.com, through October 22.

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

Executive
Jill Peters

Thank you, Devin. Good afternoon, everyone and thank you for joining us today to review our results for the third quarter fiscal 2020. On the call are Jeff Mezger, Chairman, President, and Chief Executive Officer; Matt Mandino, Executive Vice President and Chief Operating Officer; Jeff Kaminski, Executive Vice President and Chief Financial 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.

Executive
Jeffrey T. Mezger

Thank you, Jill. Good afternoon, everyone. We hope you, your families and your colleagues continue to be healthy and safe. After navigating through the initial disruption from COVID-19 that we experienced in the spring, we are encouraged by the robust recovery in housing market demand that has favorably impacted our business. We are very pleased with our solid third quarter results, a key highlight of which was our significantly higher margins reflecting the strong demand and a leaner more efficient business. Equally as important as the strength of our financial results, this quarter was the acceleration in our net orders and growth in our backlog, which positions us very well as we move into 2021.

Specific to the quarter, we generated total revenues of about $1 billion and diluted earnings per share of $0.83. We delivered higher profitability year-over-year on a lower revenue base with an operating income margin that expanded 180 basis points to 9.6%, excluding inventory related charges. Our operating margin growth was due almost entirely to the expansion of our housing gross margin, which increased to 20.6%. On a per unit basis, we grew our operating income to nearly $37,000, an increase of 23%.

Finally, our execution during the quarter, drove our pretax income 10% higher