Lennar Reports Fourth Quarter and Fiscal 2021 Results

MIAMI, Dec. 15, 2021 /PRNewswire/ --

2021 Fourth Quarter Highlights – comparisons to the prior year quarter

• Net earnings per diluted share increased 39% to $3.91 (increased 55% to $4.36, excluding mark to market losses on strategic technology investments)
• Net earnings increased 35% to $1.2 billion (increased 50% to $1.3 billion, excluding mark to market losses on strategic technology investments)
• Revenues increased 24% to $8.4 billion
• Deliveries increased 11% to 17,819 homes
• New orders increased 2% to 15,539 homes; new orders dollar value increased 16% to $7.3 billion
• Backlog increased 26% to 23,771 homes; backlog dollar value increased 45% to $11.4 billion
• Homebuilding operating earnings of $1.8 billion, compared to operating earnings of $1.1 billion
• Gross margin on home sales improved 300 basis points ("bps") to 28.0%
• S,G&A expenses as a % of revenues from home sales improved 150 bps to 6.0%
• Net margin on home sales improved 460 bps to 22.0%
• Financial Services operating earnings of $111.4 million, compared to operating earnings of $151.2 million
• Multifamily operating earnings of $9.3 million, compared to operating earnings of $26.7 million
• Lennar Other operating loss of $176.2 million, compared to operating loss of $1.2 million
• Years of supply owned homesites decreased to 3.0 years
• Controlled homesites increased to 59%
• Homebuilding cash and cash equivalents of $2.7 billion
• Retired $850 million of homebuilding senior notes due in fiscal year 2022
• Repurchased 10 million shares of Lennar common stock for $977.4 million
• Homebuilding debt to total capital of 18.3%, the lowest in the Company's history

2021 Fiscal Year Highlights – comparisons to the prior year

• Net earnings, revenues, deliveries, new orders and net margin for 2021 were the highest in the Company's history
• Net earnings per diluted share increased 82% to $14.27 (increased 66% to $13.00, excluding mark to market gains on strategic technology investments)
• Net earnings increased 80% to $4.4 billion (increased 64% to $4.0 billion, excluding mark to market gains on strategic technology investments)
• Revenues increased 21% to $27.1 billion
• Deliveries increased 13% to 59,825 homes
• New orders increased 15% to 64,543 homes
• Net margin on home sales improved 510 bps to 19.7%
• Retired $1.15 billion of homebuilding senior notes due in fiscal year 2022
• Repurchased 14 million shares of Lennar common stock for $1.37 billion
• Return on equity improved 790 bps to 22.6%

Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, today reported results for its fourth quarter and fiscal year ended November 30, 2021. Fourth quarter net earnings attributable to Lennar in 2021 were $1.2 billion, or $3.91 per diluted share, compared to $882.8 million, or $2.82 per diluted share in the fourth quarter of 2020. Net earnings attributable to Lennar for the year ended November 30, 2021 were $4.4 billion, or $14.27 per diluted share, compared to $2.5 billion, or $7.85 per diluted share for the year ended November 30, 2020.

Stuart Miller, Executive Chairman of Lennar, said, "While supply chain challenges continued to dominate both the homebuilding and the broader economic narrative in the fourth quarter, we are pleased to report record fourth quarter earnings of $1.2 billion, or $3.91 per diluted share, compared to $882.8 million or $2.82 per diluted share for the quarter last year. Excluding mark to market losses on our public strategic technology investments, fourth quarter 2021 earnings were $1.3 billion, or $4.36 per diluted share. For the full year, we delivered just under 60,000 homes generating EPS of $14.27 per diluted share ($13.00 per diluted share before mark to market gains) for an 82% increase over the prior year (66% before mark to market gains)."

"Our record fourth quarter results reflect both continued strength in the housing market across the country, and continued housing supply shortage driven by limited entitled land, labor and supply chain constraints, and 10 years of production shortfall. While our new orders grew a controlled 2% compared to last year's seasonally strong fourth quarter, we achieved a homebuilding gross margin of 28.0% and homebuilding SG&A of 6.0%, leading to a 22.0% net margin, all of which are all-time Company records."

Rick Beckwitt, Co-Chief Executive Officer and Co-President of Lennar, said, "During the fourth quarter, our community count increased 7% year over year as we continued to make excellent progress on our land light strategy. This was evidenced by our years owned supply of homesites improving to our previously stated goal of 3.0 years at the end of the fourth quarter from 3.5 years last year, and our controlled homesite percentage increasing to 59% from 39% for those same periods."

"We ended the quarter with $2.7 billion in cash, no borrowings on our $2.5 billion revolver and homebuilding debt to capital of 18.3%, an all-time Company low. Our land lighter model resulted in incremental cash flow generation during the fourth quarter which we used towards the repurchase of 10 million shares of our common stock for just under $1 billion, and debt reduction of $850 million. These transactions, combined with our significant earnings, contributed to a return on equity of over 22%."

Jon Jaffe, Co-Chief Executive Officer and Co-President of Lennar, said, "During the quarter, our homebuilding machine continued to be laser focused on production, even while our cycle time expanded about two weeks from the third quarter driven by rapidly changing supply chain issues. The impact of supply chain issues and increased cycle times were partially offset by accelerated construction starts throughout the year."

"In this turbulent environment, we are confident that we are implementing the right playbook with our Builder of Choice position and our simplified Everything's Included^® business model to successfully navigate current supply chain dynamics. Our strong and deep-rooted relationships with our trade partners have helped mitigate the impact of labor and supply shortages. Our quarterly starts and sales pace remained strong and consistent at 4.5 homes and 4.3 homes per community, respectively, in the fourth quarter."

Mr. Miller concluded, "The housing industry continues to exhibit strong demand, outweighing supply, and we are confident that we will continue to generate solid growth and enhance our current market position. Accordingly, as we look forward to 2022, we expect to deliver approximately 67,000 homes with a 27.0% - 27.5% gross margin for the year, with more or less 12,500 homes at a gross margin of approximately 26.75% in the first quarter. Overall, we are operating from a position of strength with an excellent balance sheet enabling us to continue to execute on our core strategies."

RESULTS OF OPERATIONS

THREE MONTHS ENDED NOVEMBER 30, 2021 COMPARED TO
THREE MONTHS ENDED NOVEMBER 30, 2020

Homebuilding

Revenues from home sales increased 26% in the fourth quarter of 2021 to $8.0 billion from $6.3 billion in the fourth quarter of 2020. Revenues were higher primarily due to an 11% increase in the number of home deliveries and a 14% increase in the average sales price. New home deliveries increased to 17,819 homes in the fourth quarter of 2021 from 16,090 homes in the fourth quarter of 2020. The average sales price of homes delivered was $448,000 in the fourth quarter of 2021, compared to $393,000 in the fourth quarter of 2020.

Gross margins on home sales were $2.2 billion, or 28.0%, in the fourth quarter of 2021, compared to $1.6 billion, or 25.0%, in the fourth quarter of 2020. During the fourth quarter of 2021, an increase in revenues per square foot was offset by an increase in costs per square foot as the majority of homes delivered during the fourth quarter of 2021 had higher costs from lumber purchases made earlier in the year. Overall, gross margins improved year over year as land costs on homes closed remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Selling, general and administrative expenses were $477.6 million in the fourth quarter of 2021, compared to $475.1 million in the fourth quarter of 2020. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.0% in the fourth quarter of 2021, from 7.5% in the fourth quarter of 2020. This was the lowest percentage for a quarter in the Company's history primarily due to a decrease in broker commissions and benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $111.4 million in the fourth quarter of 2021, compared to $151.2 million in the fourth quarter of 2020. The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market.

Other Ancillary Businesses

Operating earnings for the Multifamily segment were $9.3 million in the fourth quarter of 2021, compared to $26.7 million in the fourth quarter of 2020. Operating loss for the Lennar Other segment was $176.2 million in the fourth quarter of 2021, compared to an operating loss of $1.2 million in the fourth quarter of 2020. The Lennar Other operating loss for the fourth quarter of 2021 was primarily due to mark to market losses on the Company's strategic technology investments that went public during the year ended November 30, 2021.

RESULTS OF OPERATIONS

YEAR ENDED NOVEMBER 30, 2021 COMPARED TO
YEAR ENDED NOVEMBER 30, 2020

Homebuilding

Revenues from home sales increased 22% in the year ended November 30, 2021 to $25.3 billion from $20.8 billion in the year ended November 30, 2020. Revenues were higher primarily due to a 13% increase in the number of home deliveries and an 8% increase in the average sales price. New home deliveries increased to 59,825 homes in the year ended November 30, 2021 from 52,925 homes in the year ended November 30, 2020. The average sales price of homes delivered was $424,000 in the year ended November 30, 2021, compared to $395,000 in the year ended November 30, 2020.

Gross margins on home sales were $6.8 billion, or 26.8%, in the year ended November 30, 2021, compared to $4.7 billion, or 22.8%, in the year ended November 30, 2020. The gross margin percentage on home sales increased primarily as a result of price appreciation as the increase in revenues per square foot outpaced the increase in costs per square foot.

Selling, general and administrative expenses were $1.8 billion in the year ended November 30, 2021, compared to $1.7 billion in the year ended November 30, 2020. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.1% in the year ended November 30, 2021, from 8.1% in the year ended November 30, 2020, due to a decrease in broker commissions and benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $491.0 million ($490.4 million net of noncontrolling interests) in the year ended November 30, 2021, compared to $481.0 million ($495.0 million net of noncontrolling interests) in the year ended November 30, 2020. The year ended November 30, 2020 included a $61.4 million gain on the deconsolidation of a previously consolidated entity. Excluding this gain, the improvement in operating earnings during the year ended November 30, 2021 was primarily due to an increase in volume and margin in the title businesses, partially offset by lower mortgage net margins driven by a more competitive mortgage market.

Other Ancillary Businesses

Operating earnings for the Multifamily segment were $21.5 million in the year ended November 30, 2021, compared to $22.7 million in the year ended November 30, 2020. Operating earnings for the Lennar Other segment were $733.0 million in the year ended November 30, 2021, compared to an operating loss of $10.3 million in the year ended November 30, 2020. The operating earnings for the year ended November 30, 2021 were primarily due to mark to market gains on the Company's strategic technology investments that went public during the year and the sale of our solar business.

Debt Transactions

In the fourth quarter of 2021, the Company retired $600 million aggregate principal amount of its 4.125% senior notes due January 2022 at par and retired early, at a premium, $250 million aggregate principal amount of its 5.375% senior notes due October 2022. The loss on early retirement of the $250 million senior notes was $7.4 million.

During the year ended November 30, 2021, the Company retired $1.15 billion aggregate principal amount of senior notes which included those senior notes described above and $300 million aggregate principal amount of its 6.25% senior notes due December 2021.

Tax Rate

For the years ended November 30, 2021 and 2020, the Company had a tax provision of $1.4 billion and $656.2 million, respectively, which resulted in an overall effective income tax rate of 23.5% and 21.0%, respectively. The overall effective income tax rate was lower in 2020 primarily due to the retroactive extension of the new energy efficient home tax credit during the first quarter of 2020.

Shares Repurchases

During the fourth quarter of 2021, the Company repurchased 10 million shares of its common stock for $977.4 million at an average per share price of $97.74. For the year ended November 30, 2021, the Company repurchased 14.0 million shares of its common stock for $1.37 billion at an average per share price of $97.45.

Liquidity

At November 30, 2021, the Company had $2.7 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under its $2.5 billion revolving credit facility, thereby providing $5.2 billion of available capacity.

2022 Guidance

The following are the Company's expected results of its homebuilding and financial services activities for the first quarter and fiscal year 2022:

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 the potential negative impact to our business of the ongoing coronavirus (COVID-19) pandemic; slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; supply shortages and increased costs related to construction materials and labor; cost increases related to real estate taxes and insurance; reduced availability of mortgage financing, increased interest rates or increased competition in the mortgage industry; reductions in the market value of the Company's investments in public companies; decreased demand for our homes or Multifamily rental apartments; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies, including our land lighter strategy 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; unfavorable losses 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, 2020. 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 fourth quarter earnings will be held at 11:00 a.m. Eastern Time on Thursday, December 16, 2021. The call will be broadcast live on the Internet and can be accessed through the Company's website at www.lennar.com. If you are unable to participate in the conference call, the call will be archived at www.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-3605 and entering 5723593 as the confirmation number.

LENNAR CORPORATION AND SUBSIDIARIES
Summary of Deliveries, New Orders and Backlog
(Dollars in thousands, except average sales price)
(unaudited)

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

East: 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, 37 homes with a dollar value of $12.9 million and an average sales price of $349,000 represent home deliveries from unconsolidated entities for the three months ended November 30, 2021, compared to 52 home deliveries with a dollar value of $16.0 million and an average sales price of $308,000 for the three months ended November 30, 2020.

Of the total new orders listed above, 34 homes with a dollar value of $12.1 million and an average sales price of $356,000 represent new orders in four active communities from unconsolidated entities for the three months ended November 30, 2021, compared to 34 new orders with a dollar value of $10.5 million and an average sales price of $309,000 in four active communities for the three months ended November 30, 2020.

Of the total homes delivered listed above, 95 homes with a dollar value of $31.6 million and an average sales price of $332,000 represent home deliveries from unconsolidated entities for the year ended November 30, 2021, compared to 112 home deliveries with a dollar value of $36.1 million and an average sales price of $322,000 for the year ended November 30, 2020.

Of the total new orders listed above, 136 homes with a dollar value of $48.8 million and an average sales price of $359,000 represent new orders from unconsolidated entities for the year ended November 30, 2021, compared to 119 new orders with a dollar value of $37.3 million and an average sales price of $314,000 for the year ended November 30, 2020.

Of the total homes in backlog listed above, 79 homes with a backlog dollar value of $28.6 million and an average sales price of $363,000 represent the backlog from unconsolidated entities at November 30, 2021, compared to 38 homes with a backlog dollar value of $11.5 million and an average sales price of $302,000 at November 30, 2020.

(1) During both the three months and year ended November 30, 2021, the Company acquired 232 homes in backlog.

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SOURCE Lennar