Lennar Reports Third Quarter 2023 Results

• Net earnings per diluted share of $3.87
  • $3.91, excluding mark-to-market losses on technology investments
• Net earnings of $1.1 billion
• Deliveries increased 8% to 18,559 homes
• New orders increased 37% to 19,666 homes; new orders dollar value increased 30% to $8.6 billion
• Backlog of 21,321 homes with a dollar value of $9.9 billion
• Total revenues of $8.7 billion
• Homebuilding operating earnings of $1.5 billion
  • Gross margin on home sales of 24.4%
  • S,G&A expenses as a % of revenues from home sales of 7.0%
  • Net margin on home sales of 17.4%
• Financial Services operating earnings of $148 million
• Multifamily operating loss of $9 million
• Lennar Other operating loss of $26 million
• Homebuilding cash and cash equivalents of $3.9 billion
• Years supply of owned homesites of 1.5 years and controlled homesites of 73%
• No outstanding borrowings under the Company's $2.6 billion revolving credit facility
• Homebuilding debt to total capital of 11.5%
• Redeemed $425 million of 5.875% homebuilding senior notes due November 2024
• Repurchased $50 million aggregate principal amount of senior notes due in fiscal year 2024
• Repurchased 3 million shares of Lennar common stock for $366 million

MIAMI, Sept. 14, 2023 /PRNewswire/ -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's leading homebuilders, today reported results for its third quarter ended August 31, 2023. Third quarter net earnings attributable to Lennar in 2023 were $1.1 billion, or $3.87 per diluted share, compared to third quarter net earnings attributable to Lennar in 2022 of $1.5 billion, or $5.03 per diluted share. Excluding mark-to-market losses on technology investments in both years and one-time items in the prior year, third quarter net earnings attributable to Lennar in 2023 were $1.1 billion or $3.91 per diluted share, compared to third quarter net earnings attributable to Lennar in 2022 of $1.5 billion or $5.18 per diluted share.

Stuart Miller, Executive Chairman and Co-Chief Executive Officer of Lennar, said, "Market conditions remained constructive for new homebuilders during our third quarter, as the Fed continued to use tighter money supply and higher interest rates as tools to battle inflation, while enabling continued economic growth. At the same time, short housing supply, absorbed by strong primary and pent-up demand, continued to define a strong sales environment. Homebuilders continued to use incentives, including buy-downs, to offset rising interest rates and tighter capital, which limit affordability. Our solid third quarter performance reflects strong strategic focus, and even as the month of August saw another uptick in interest rates, we were able to continue to drive sales pace."

Mr. Miller continued, "Against this backdrop, our third quarter earnings were $1.1 billion, or $3.87 per diluted share, compared to $1.5 billion, or $5.03 per diluted share last year. Our average sales price per home delivered was $448,000 in the third quarter, compared to almost $500,000 last year, and our home deliveries were 18,559, up 8%, and our new orders were 19,666, up 37%, year over year. Our homebuilding gross margin in the third quarter was 24.4%, reflecting cost reductions, and with homebuilding S,G&A expenses of 7.0%, led to a 17.4% net margin."

"While our operating performance remained strong, we continued to strengthen and fortify our balance sheet and our future. During the quarter, we repaid $475 million of debt and repurchased $366 million of our common stock ending the quarter with homebuilding debt to total capital of 11.5%, the lowest in our history, no borrowings on our $2.6 billion revolver and cash of $3.9 billion. With cash on hand exceeding our debt, and with overall liquidity of $6.5 billion, our balance sheet has never been in a stronger position."

Jon Jaffe, Co-Chief Executive Officer and President of Lennar, said, "During the quarter, we continued the execution of our land light strategy. This was evidenced by our years supply of owned homesites improving to 1.5 years from 2.2 years and our controlled homesite percentage increasing to 73% from 69% year over year.

Operationally, our cycle time during the quarter was down 32 days sequentially as the improving supply chain and labor market positively impacted our production times. Concurrently, the Lennar Machine continued to drive sales pace in concert with production. Accordingly, quarterly starts and sales pace were 4.9 homes and 5.2 homes per community, respectively, and we ended the third quarter with approximately 1,400 completed, unsold homes, about one home per community."

Mr. Miller concluded, "As the Fed continues to focus on its goal of reducing inflation, we have remained vigilant and focused on our operating strategies. As we look ahead to our fourth quarter, we expect to deliver between 21,500 to 22,500 homes with a gross margin between 24.4% to 24.6%. We will continue to fortify our balance sheet with significant liquidity and operate from a position of strength, repurchasing stock and reducing debt, thus enabling us to continue to execute on our core strategies and outperform in periods of growth as well as uncertainty."

RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 2023 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 2022

Homebuilding

Revenues from home sales decreased 2% in the third quarter of 2023 to $8.3 billion from $8.4 billion in the third quarter of 2022. Revenues were lower primarily due to a 9% decrease in average sales price of home deliveries, partially offset by an 8% increase in the number of home deliveries. New home deliveries increased to 18,559 homes in the third quarter of 2023 from 17,248 homes in the third quarter of 2022. The average sales price of homes delivered was $448,000 in the third quarter of 2023, compared to $491,000 in the third quarter of 2022. The decrease in average sales price of homes delivered in the third quarter of 2023 compared to the same period last year was primarily due to pricing to market and product mix.

Gross margins on home sales were $2.0 billion, or 24.4%, in the third quarter of 2023, compared to $2.5 billion, or 29.2%, in the third quarter of 2022. During the third quarter of 2023, gross margins decreased because revenues per square foot decreased year over year as the Company priced homes to market, which was partially offset by a decrease in costs per square foot due to lower material costs. In addition, land costs increased year over year.

Selling, general and administrative expenses were $583 million in the third quarter of 2023, compared to $486 million in the third quarter of 2022. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 7.0% in the third quarter of 2023, from 5.8% in the third quarter of 2022, primarily due to an increase in the use of brokers due to current market conditions.

Financial Services

Operating earnings for the Financial Services segment were $148 million in the third quarter of 2023, compared to $63 million in the third quarter of 2022. In 2022, the operating earnings included a $36 million one-time charge due to an increase in a litigation accrual related to a court judgment. Excluding this one-time charge, operating earnings were $99 million in the third quarter of 2022. The increase in operating earnings in 2023 was primarily due to a higher profit per locked loan in the Company's mortgage business as a result of higher margins, and higher lock volume because of an increased capture rate. There was also an increase in profitability in the Company's title business primarily due to benefits of the Company's technology efforts.

Other Ancillary Businesses

Operating loss for the Multifamily segment was $9 million in the third quarter of 2023, compared to operating earnings of $46 million in the third quarter of 2022. Operating loss for the Lennar Other segment was $26 million in the third quarter of 2023, compared to operating loss of $118 million in the third quarter of 2022.

RESULTS OF OPERATIONS 
NINE MONTHS ENDED AUGUST 31, 2023 COMPARED TO
NINE MONTHS ENDED AUGUST 31, 2022

Homebuilding

Revenues from home sales were $22.0 billion and $22.1 billion in the nine months ended August 31, 2023 and 2022, respectively. Revenues were flat primarily because of a 6% increase in the number of home deliveries, which was offset by a 6% decrease in average sales price of home deliveries. New home deliveries increased to 49,292 homes in the nine months ended August 31, 2023 from 46,335 homes in the nine months ended August 31, 2022. The average sales price of homes delivered was $448,000 in the nine months ended August 31, 2023, compared to $479,000 in the nine months ended August 31, 2022. The decrease in average sales price of homes delivered in the nine months ended August 31, 2023 compared to the same period last year was primarily due to pricing to market and product mix.

Gross margins on home sales were $5.0 billion, or 22.9%, in the nine months ended August 31, 2023, compared to $6.4 billion, or 28.7%, in the nine months ended August 31, 2022. During the nine months ended August 31, 2023, gross margins decreased because revenues per square foot decreased year over year as the Company priced homes to market and costs per square foot increased primarily due to higher material and labor costs. In addition, land costs increased year over year.

Selling, general and administrative expenses were $1.5 billion in the nine months ended August 31, 2023, compared to $1.4 billion in the nine months ended August 31, 2022. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 7.0% in the nine months ended August 31, 2023, from 6.3% in the nine months ended August 31, 2022, primarily due to an increase in the use of brokers due to current market conditions.

Financial Services

Operating earnings for the Financial Services segment were $339 million in the nine months ended August 31, 2023, compared to $257 million in the nine months ended August 31, 2022. In 2022, operating earnings included a $36 million one-time charge due to an increase in a litigation accrual related to a court judgment. Excluding this one-time charge, operating earnings were $293 million in the third quarter of 2022. The increase in operating earnings in 2023 was primarily due to a higher profit per locked loan in the Company's mortgage business as a result of higher margins, and higher lock volume because of an increased capture rate. There was also an increase in profitability in the Company's title business primarily due to benefits of the Company's technology efforts.

Other Ancillary Businesses

Operating loss for the Multifamily segment was $38 million in the nine months ended August 31, 2023, compared to operating earnings of $52 million in the nine months ended August 31, 2022. Operating loss for the Lennar Other segment was $86 million in the nine months ended August 31, 2023, compared to operating loss of $630 million in the nine months ended August 31, 2022.

Tax Rate

For the nine months ended August 31, 2023 and 2022, the Company had tax provisions of $824 million and $951 million, respectively, which resulted in overall effective income tax rates of 24.2% and 22.4%, respectively. In the nine months ended August 31, 2023, the Company's overall effective income tax rate was higher than last year, primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the new energy efficient home credit, both during the third quarter of 2022.

Debt Transactions

In August 2023, the Company redeemed $425 million aggregate principal amount of its 5.875% senior notes due November 2024 at an early redemption price of 100% of the principal amount outstanding.

During the three months ended August 31, 2023, the Company repurchased $50 million aggregate principal amount of senior notes due in fiscal 2024. During the nine months ended August 31, 2023, the Company repurchased $208 million aggregate principal amount of senior notes due in fiscal 2024.

Share Repurchases

During the third quarter of 2023, the Company repurchased 3 million shares of its common stock for $366 million at an average share price of $121.96. During the nine months ended August 31, 2023, the Company repurchased 7 million shares of its common stock for $763 million at an average share price of $108.98.

Liquidity

At August 31, 2023, the Company had $3.9 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under its $2.6 billion revolving credit facility, thereby providing approximately $6.5 billion of available capacity.

Guidance

The following are the Company's expected results of its homebuilding and financial services activities for the fourth quarter of 2023:

About Lennar

Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. Lennar builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. LEN^X drives Lennar's technology, innovation and strategic investments. For more information about Lennar, please visit www.lennar.com.

Note Regarding Forward-Looking Statements: Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the homebuilding market and other markets in which we participate. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which are expressly qualified in their entirety by this cautionary statement and speak only as of the date made. Important factors that could cause differences between anticipated and actual results include slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; decreased demand for our homes, or for Multifamily rental apartments or single family homes; the potential impact of inflation; the impact of increased cost of mortgage financing for homebuyers, increased interest rates or increased competition in the mortgage industry; supply shortages and increased costs related to construction materials, including lumber, and labor; cost increases related to real estate taxes and insurance; the effect of increased interest rates with regard to our funds' borrowings on the willingness of the funds to invest in new projects; reductions in the market value of our investments in public companies; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies and our planned spin-off of certain businesses; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; the forfeiture of deposits related to land purchase options we decide not to exercise; the effects of public health issues such as a major epidemic or pandemic that could have a negative impact on the economy and on our businesses; possible unfavorable results in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the other risks and uncertainties described in our filings from time to time with the Securities and Exchange Commission, including those included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

A conference call to discuss the Company's third quarter earnings will be held at 11:00 a.m. Eastern Time on Friday, September 15, 2023. The call will be broadcast live on the Internet and can be accessed through the Company's website at investors.lennar.com. If you are unable to participate in the conference call, the call will be archived at investors.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-3809 and entering 5723593 as the confirmation number.

Contact:
Ian Frazer
Investor Relations
Lennar Corporation
(305) 485-4129

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SOURCE Lennar Corporation