Lennar Reports First Quarter 2023 Results

       First Quarter 2023 Highlights - comparisons to the prior year quarter

• Net earnings per diluted share increased 22% to $2.06
• Decreased 21% to $2.12, excluding mark-to-market losses on technology investments in both years
• Net earnings increased 18% to $597 million
• Decreased 23% to $615 million, excluding mark-to-market losses on technology investments in both years
• Deliveries increased 9% to 13,659 homes
• New orders decreased 10% to 14,194 homes; new orders dollar value decreased 18% to $6.4 billion
• Backlog decreased 29% to 19,403 homes; backlog dollar value decreased 33% to $9.0 billion
• Total revenues increased 5% to $6.5 billion
• Homebuilding operating earnings decreased to $907 million, compared to operating earnings of $1.1 billion
• Gross margin on home sales decreased 570 basis points ("bps") to 21.2%
• S,G&A expenses as a % of revenues from home sales improved 10 bps to 7.4%
• Net margin on home sales decreased 560 bps to 13.8%
• Financial Services operating earnings of $78 million, compared to operating earnings of $91 million
• Multifamily operating loss of $22 million, compared to operating earnings of $5 million
• Lennar Other operating loss of $41 million, compared to operating loss of $403 million
• Homebuilding cash and cash equivalents of $4.1 billion
• Years supply of owned homesites improved to 1.9 years, compared to 2.7 years
• Controlled homesites increased to 68%, compared to 63%
• No outstanding borrowings under the Company's $2.6 billion revolving credit facility
• Homebuilding debt to total capital improved to 14.2%, compared to 18.3%
• Repurchased 2 million shares of Lennar common stock for $189 million

MIAMI, March 14, 2023 /PRNewswire/ -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's leading homebuilders, today reported results for its first quarter ended February 28, 2023. First quarter net earnings attributable to Lennar in 2023 were $597 million, or $2.06 per diluted share, compared to first quarter net earnings attributable to Lennar in 2022 of $504 million, or $1.69 per diluted share. Excluding mark-to-market losses on technology investments in both years, first quarter net earnings attributable to Lennar in 2023 were $615 million or $2.12 per diluted share, compared to first quarter net earnings attributable to Lennar in 2022 of $800 million or $2.70 per diluted share.

Stuart Miller, Executive Chairman of Lennar, said, "During the quarter, we saw a generally strong economy at the intersection of high inflation and strong employment numbers, while the housing market continued down a winding road of trying to find its footing. In December, interest rates and sticker shock continued to constrain sales activity, while in January and early February, lower interest rates energized sales. In late February, a spike in interest rates impacted website and community traffic and had a slight impact on sales. The Federal Reserve stayed its course of raising interest rates to cool inflation, though has yet to reach desired results. Homebuyers are considering the possibility that today's interest rate environment may be the new normal. Accordingly, the housing market continues shifting as growing household and family formation continued to drive demand against a chronic supply shortage."

Mr. Miller continued, "Against this backdrop, we are pleased to announce our first quarter results which reflect execution of our previously articulated operating strategies. In the first quarter, our earnings were $597 million, or $2.06 per diluted share, compared to $504 million, or $1.69 per diluted share for the first quarter last year. Excluding mark-to-market losses on our technology investments, first quarter earnings were $615 million, or $2.12 per diluted share, compared to $800 million, or $2.70 per diluted share for the first quarter last year, a 23% and 21% decrease year over year, respectively."

"Consistent with our clear strategy of maintaining sales pace, our home deliveries were 13,659, up 9% over last year, and above the high end of our guidance estimate given at the beginning of the quarter. Concurrently, in order to drive sales, we moderated homebuilding gross margin to 21.2% and carefully managed homebuilding S,G&A expenses of 7.4%, leading to a 13.8% net margin. Our gross margin declined by 570 basis points year-over-year as we adjusted the price of both our new home sales and homes in backlog to market to promote deliveries and reduce cancellation rates."

"We also matched our sales pace to starts pace and drove sales by 'pricing to market' to turn inventory, generate cash, and maximize returns. Accordingly, our new orders in the first quarter were down 10%, year over year, which compares favorably to reported market conditions, including a cancellation rate of 21%, compared to 10% last year. Our sales volume and pricing have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and there is still demand as we navigate the rebalance between price and interest rates."

"We have also remained very focused on our balance sheet and liquidity. Accordingly, at quarter end, we had homebuilding debt to capital of 14.2%, the lowest in our history, no borrowings on our $2.6 billion revolver and cash of $4.1 billion. With liquidity of approximately $6.7 billion and no debt maturing until next fiscal year, our balance sheet has never been in a stronger position."

Rick Beckwitt, Co-Chief Executive Officer and Co-President of Lennar, said, "Much of our balance sheet and inventory management progress was driven by the execution of our land strategy, while simultaneously driving sales, deliveries and managing production. Our ending community count for the quarter was 1,217, which was up slightly from year-end. We continued to make significant progress on our land light strategy. This was evidenced by our years supply of owned homesites improving to 1.9 years from 2.7 years and our controlled homesite percentage increasing to 68% from 63% year over year."

Jon Jaffe, Co-Chief Executive Officer and Co-President of Lennar, said, "During the quarter, consistent with our strategy of cost control and cycle time reduction, our homebuilding machine continued to be intensely focused on carefully managing production. Our cycle time during the quarter was up slightly sequentially, but we believe it will improve in the back half of the year as the improving supply chain and labor picture will positively impact our production times. Our quarterly starts and sales pace were 3.7 homes and 3.9 homes per community, respectively, and we ended the first quarter with approximately 1,300 completed, unsold homes, about one home per community, demonstrating our focus on inventory management." 

Mr. Miller concluded, "As we have seen over the past quarters, interest rates are fluctuating and are likely to continue to move, and the housing market will continue to rebalance pricing and interest rates. While we have a clear-cut strategy of execution, we will only give broad boundaries for deliveries and gross margin. For the second quarter of 2023, the range for deliveries will be between 15,000 to 16,000 homes and gross margin will be 21.0% to 21.5%. For the full year 2023, the range for deliveries will be between 62,000 to 66,000 homes. We continue to fortify our balance sheet with significant liquidity and operate from a position of strength, enabling us to continue to execute on our core strategies and outperform in periods of uncertainty."

 RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 2023 COMPARED TO
THREE MONTHS ENDED FEBRUARY 28, 2022

Homebuilding

Revenues from home sales increased 7% in the first quarter of 2023 to $6.1 billion from $5.7 billion in the first quarter of 2022. Revenues were higher primarily due to a 9% increase in the number of home deliveries. New home deliveries increased to 13,659 homes in the first quarter of 2023 from 12,538 homes first quarter of 2022. The average sales price of homes delivered was $448,000 in the first quarter of 2023, compared to $457,000 in the first quarter of 2022. The decrease in average sales price of homes delivered in the first quarter of 2023 compared to the same period last year was primarily due to pricing to market and product mix as a larger percentage of deliveries occurred in the Company's Texas segment.

Gross margins on home sales were $1.3 billion, or 21.2%, in the first quarter of 2023, compared to $1.5 billion, or 26.9%, in the first quarter of 2022. During the first quarter of 2023, gross margin decreased because revenues per square foot were flat year over year as the Company priced homes to market while costs per square foot increased primarily due to higher materials and labor costs. In addition, land costs increased year over year.

Selling, general and administrative expenses were $450 million in the first quarter of 2023, compared to $428 million in the first quarter of 2022. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.4% in the first quarter of 2023, from 7.5% in the first quarter of 2022, as the Company focused on improving its leverage combined with the benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $79 million ($78 million net of noncontrolling interests) in the first quarter of 2023, compared to $91 million, in the first quarter of 2022. The decrease in operating earnings was primarily due to a lower profit per loan in the Company's mortgage business as a result of lower lock volume.

Other Ancillary Businesses

Operating loss for the Multifamily segment was $22 million in the first quarter of 2023, compared to operating earnings of $5 million in the first quarter of 2022. Operating loss for the Lennar Other segment was $40 million ($41 million net of noncontrolling interests) in the first quarter of 2023, compared to operating loss of $403 million in the first quarter of 2022. Lennar Other operating loss in the first quarter of both 2023 and 2022 was primarily due to unrealized mark-to-market losses on the Company's publicly traded technology investments.

Tax Rate

For the three months ended February 28, 2023 and 2022, the Company had a tax provision of $185 million and $167 million, respectively, which resulted in an overall effective income tax rate of 23.7% and 25.0%, respectively. In the three months ended February 28, 2023, the Company's overall effective income tax rate was lower than last year primarily due to the reinstatement of the new energy efficient homes credit as a result of the enactment of the Inflation Reduction Act during the third quarter of 2022.

Share Repurchases

During the three months ended February 28, 2023, the Company repurchased 2 million shares of its common stock for $189 million at an average share price of $94.59.

Liquidity

At February 28, 2023, the Company had $4.1 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under its $2.6 billion revolving credit facility, thereby providing approximately $6.7 billion of available capacity.

Guidance

The following are the Company's expected results of its homebuilding and financial services activities for the second quarter and fiscal year 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 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. Important factors that could cause such differences 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 risks described in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended November 30, 2022. 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 first quarter earnings will be held at 11:00 a.m. Eastern Time on Wednesday, March 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 203-369-0606 and entering 5723593 as the confirmation number.

Lennar's reportable homebuilding segments and all other homebuilding operations not required to be reported separately have divisions located in:

East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington
Other: Urban divisions

Of the total homes delivered listed above, 63 homes with a dollar value of $31.7 million and an average sales price of $503,000 represent home deliveries from unconsolidated entities for the three months ended February 28, 2023, compared to 25 home deliveries with a dollar value of $9.4 million and an average sales price of $375,000 for the three months ended February 28, 2022.

Of the total homes listed above, 97 homes with a dollar value of $38.3 million and an average sales price of $394,000 represent homes in seven active communities from unconsolidated entities for the three months ended February 28, 2023, compared to 44 homes with a dollar value of $17.3 million and an average sales price of $393,000 in five active communities for the three months ended February 28, 2022.

Of the total homes in backlog listed above, 200 homes with a backlog dollar value of $84.4 million and an average sales price of $422,000 represent the backlog from unconsolidated entities at February 28, 2023, compared to 98 homes with a backlog dollar value of $36.6 million and an average sales price of $373,000 at February 28, 2022.

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

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SOURCE Lennar Corporation