KB Home (KBH) Cash Flow Statement

The wide quarterly swings in OCF/NI, from 3.02 in 2025Q4 to -3.75 in 2026Q1, suggest that net income is not a reliable proxy for cash generation in this business. The negative working capital changes in Q1 quarters (e.g., -$469.3M in 2025Q1) appear to reflect seasonal land and construction spending, but the magnitude of the swings warrants monitoring. Investors should focus on the cumulative cash conversion over a full cycle rather than any single quarter.

The FCF trajectory is highly seasonal and cyclical, with strong positive FCF in Q4 and Q3 of 2025, but deep negative FCF in Q1 quarters. This pattern suggests that KB Home's cash flow is heavily dependent on the timing of land purchases and home deliveries. The recent 2026Q1 FCF of -$138.6M, despite a modest net income of $33.4M, indicates that the company is investing heavily in land and work-in-progress, which may be a bet on future demand. However, given the revenue decline, investors should question whether this investment will generate adequate returns.

CapEx is consistently low, around $10-14M per quarter, which is minimal relative to revenue and suggests that the company's capital needs are primarily for land acquisition and development rather than fixed assets. This low CapEx intensity allows KB Home to generate substantial FCF when operating cash flow is positive, but it also means that the company's cash flow is more sensitive to working capital changes. The depreciation and amortization figures are also small, indicating that the asset base is not heavily depreciated, which is consistent with a land-light model.

The working capital changes are large and negative in Q1 quarters, reflecting the typical seasonal build-up of land and construction-in-progress. However, the magnitude of the negative swings in 2025Q1 and 2026Q1 (-$469.3M and -$179.5M, respectively) suggests that KB Home is increasing its land investment even as revenue declines. This could indicate that management is positioning for a recovery, but it also raises concerns about inventory absorption if demand remains weak. The positive working capital changes in Q4 quarters (e.g., $140.5M in 2025Q4) suggest that the company is able to convert inventory into cash during the peak selling season.

The company has consistently repurchased shares, with buybacks ranging from $50M to $200M per quarter, while dividends have remained stable around $16-19M. This suggests that management views the stock as undervalued and is using excess cash to reduce share count. However, given the recent revenue decline and negative FCF in Q1 quarters, the sustainability of these buybacks depends on the company's ability to generate positive cash flow in the rest of the year. Investors should monitor whether buybacks are funded by debt or by operating cash flow.

The cumulative OCF of $571.7M is actually lower than cumulative net income of $1.14B, which suggests that on a cumulative basis, the company has not converted all of its earnings into cash. This divergence is likely due to the significant investment in working capital, particularly land and inventory, which has absorbed cash. However, the positive OCF in recent quarters (e.g., $306.8M in 2025Q4) indicates that the company is able to monetize its investments. The gap between net income and OCF may also reflect the timing of land purchases and home deliveries, which can vary significantly from quarter to quarter.