Q1 2024 Lennar Corp Earnings Call

Operator: These statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in our earnings release and our SEC filings, including those under the caption, Risk Factors, contained in Lennar's annual report on Form 10-K, most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking... I would like to thank all of you for joining us today, executives. Very good. Good morning everybody, and thank you for joining us today.

Payments are inherently subject to risks and uncertainties.

Many factors could affect future results and may cause <unk> actual activities or results to differ materially from the activities and results anticipated in forward looking statements. These factors include those described in our earnings release.

<unk> filings, including those under the caption risk factors contained in <unk> annual report on Form 10-K, most recently filed with the SEC. Please note that <unk> assumes no obligation to update any forward looking statements.

I would like to introduce your host Mr. Stuart Miller Executive Chairman and co CEO, Sir you may begin.

Stuart A. Miller: Hey, good morning, everybody and thank you for joining us today.

Stuart A. Miller: I'm in Miami today, together with John Jaffe, our co-CEO and President, Diane Bessette, our Chief Financial Officer, David Collins, who you just heard from, our Controller and Vice President, Bruce Gross, our CEO of Lennar Financial Services, and a few others are here with us as well. As usual, I'm going to give a macro and strategic overview of the company. After my introductory remarks, John's going to give an operational overview, updating construction costs, cycle time, and some of our land strategy and position. As usual, Diane is going to give a detailed financial highlight, along with some limited guidance for the second quarter and for year 24. And then, of course, we'll have our Q&A session. As usual, I'd like to ask that you please limit yourself to one question and one follow-up, so that we can accommodate as many as possible. So let's go ahead and begin.

Stuart A. Miller: And then Miami today, together with Jon Jaffe, our co CEO and President Diane Bessette, Our Chief Financial Officer, David Collins, who you just heard from our controller and Vice President Bruce gross our CEO of Lennar financial services and a few others, who are here with us as well.

Stuart A. Miller: As usual I'm going to give a macro and strategic overview of the company. After my introductory remarks, John is going to give an operational overview update on construction cost cycle time, and some of our land strategy and position as usual Diane is going to give a detailed financial highlight along.

Stuart A. Miller: With some limited guidance for the second quarter and full year 2004, and then of course, we will have our Q&A session.

Speaker Change: As usual I would like to ask that you. Please limit yourself to one question and one follow up so that we can accommodate as many as possible.

Speaker Change: So let's go ahead and begin we're very pleased to report another very solid and consistent quarter of operating results for Lamar.

Stuart A. Miller: We're very pleased to report another very solid and consistent quarter of operating results for Lennar. We continued to execute our operating plan effectively into the first quarter, driving excellent operating results, and we have simply never been better positioned from balance sheet to execution to operating strategy to address market conditions as they unfold for the remainder of the year and beyond. In the first quarter, we started 18,338 homes; we sold 18,176 homes, and we delivered 16,798 homes.

Speaker Change: We continue to execute our operating plan effectively into the first quarter driving excellent operating results and we are simply never been better position from balance sheet to execution to operating strategy to address market conditions as they unfold for the remainder of 'twenty four.

Speaker Change: And beyond.

Speaker Change: In the first quarter, we started 18338 homes, we sold 18176 homes and we delivered 16798 loans.

Stuart A. Miller: While we expect deliveries for the year to be approximately 10% higher than last year at 80,000 homes, next quarter, we expect to start approximately 21,000 homes, sell approximately 21,000 homes, and deliver between 19,000 and 19,500 homes. Admittedly, we aren't quite there yet, but we are getting closer and closer to an even-flow manufacturing model that we believe will continue to enhance our cash flow, our bottom line, as well as our predictability. Last year, we grew at a 10% pace in a very difficult year.

Speaker Change: While we expect deliveries for the year to be approximately 10% higher than last year at 80000 homes.

Speaker Change: Next quarter, we expect to start approximately 21000 homes sell approximately 21000 homes and deliver between 19000 19500 homes.

Speaker Change: Admittedly, we aren't quite there yet, but we're getting closer and closer to an even flow manufacturing model that we believe will continue to enhance our cash flow our bottom line as well as our predictability.

Speaker Change: <unk>.

Speaker Change: Last year, we grew at a 10% pace in a very difficult year, and we believe we will grow at a 10% pace again, this year and a complicated economic and complicated economic conditions.

Stuart A. Miller: And we believe we'll grow at a 10% pace again this year in a complicated economic condition. And it is being done by a carefully designed program to maintain volume, maximize efficiencies and cost reductions around production, maintain an even flow of production and sales, and rebuild our asset base and balance sheet in order to drive cash flow, effective capital allocation, and higher returns. That is total shareholder returns on assets and returns on equity. I know I didn't mention margin yet. That's because, as I've said before, margin is the springing mechanism that enables all of this to happen.

Speaker Change: And it is being done by a carefully designed program to maintain volume.

Speaker Change: Maximize efficiencies and cost reductions around production, maintaining an even flow of production and sales and rebuild our asset base and balance sheet in order to drive cash flow effective capital allocation and higher returns.

Speaker Change: That is total shareholder returns returns on assets and returns on equity.

Speaker Change: I know I didn't mentioned margin yet that's because as I've said before margin is the springing mechanism that enables all of this to happen.

Stuart A. Miller: This quarter, our margin was 21.8 percent, somewhat higher than expected, and next quarter, we expect our margin to be approximately 22.5 percent, depending on market conditions. And for the full year, we expect our margin to be approximately the same as last year's full year margin of 23.3 percent, but that, of course, will depend on market conditions as well. We will see.

Speaker Change: This quarter, our margin was 21, 8% somewhat higher than expected and next quarter, we expect our margin to be approximately 22, 5% depending on market conditions and for the full year, we expect margin to be approximately the same as last year's full year margin of $23 three <unk>.

Speaker Change: But that of course will depend on market conditions as well we will see.

Speaker Change: Additionally, we've continued to drive strong cash flow and allocate over $500 million to repurchase three 4 million shares of stock and improve our balance sheet with a homebuilding debt to total capital ratio of under 10%.

Stuart A. Miller: Additionally, we've continued to drive strong cash flow and allocate over $500 million to repurchase 3.4 million shares of stock and improve our balance sheet with a home building debt-to-total capital ratio of under 10%. While we know we have accumulated a sizable $5 billion of cash on our books, we are crafting our strategy for appropriate capital allocation. Overall, the macroeconomic environment remains relatively strong for new homebuilders. The general theme remains primarily focused around very strong demand for housing, limited by the chronic housing shortage that is particularly problematic for working-class families and their ability to find affordable or attainable supplies.

While we know we have accumulated a sizable $5 billion of cash on our books, we are crafting our strategy for appropriate capital allocation.

Speaker Change: Overall, the macroeconomic environment remains relatively strong for the new homebuilders.

Speaker Change: The general theme remains primarily focused around very strong demand for housing limited by the chronic housing shortage that is particularly problematic for working class families and their ability to find affordable or attainable supply.

Speaker Change: Demand for that product remains robust if it can be built at an attainable price point.

Stuart A. Miller: Demand for that product remains robust if it can be built at an attainable price point. The economic environment driving demand has been relatively favorable, supported by low unemployment and fairly strong consumer confidence. Generally speaking, consumers remain employed, they are confident that they will remain employed, and they believe that their compensation is likely to rise. This is often the foundation of a very strong housing market. Along with the supply shortage, the additional limiting factor continues to center around affordability, driven by the impact of higher interest rates and stubborn inflation. With higher interest rates, affordability continues to be tested as higher monthly payments make qualifying for a loan increasingly difficult. At the same time, inflationary pressures have driven traditional cost-of-living expenses higher over the past two years, which has made saving for a down payment increasingly difficult.

Speaker Change: The economic environment driving demand has been relatively favorable supported by low unemployment and fairly strong consumer confidence jet.

Speaker Change: Generally speaking consumers remain employed they are confident that they will remain employed and they believe that their compensation is likely to rise.

Speaker Change: This is most often the foundation of a very strong housing market.

Speaker Change: Along with the supply shortage the additional limiting factor continues to center around affordability.

Speaker Change: Driven by the impact of higher interest rates and stubborn inflation.

Speaker Change: With higher interest rates affordability continues to be tested as higher monthly payments make qualifying for a loan increasingly difficult.

Speaker Change: At the same time inflationary pressures have driven traditional cost of living expenses higher over the past two years, which has made savings breakdown payment increasingly difficult.

Stuart A. Miller: Higher prices have also started to lead to increased personal and credit card debt as families stretch to pay their bills. We've started to see early evidence of debt delinquency showing up and derailing some mortgage applications. While interest rates have continued to move higher and lower, as the Fed continues to seek economic data indicating that inflation has been controlled, the consumer has been navigating an affordability gauntlet. New homebuilders have worked out a variety of incentive structures that range from interest rate buydowns to closing cost pickups to price reductions, all designed to meet the purchaser at the intersection of need and affordability. Those incentives have increased and decreased as interest rates have moved up and down.

Speaker Change: Higher prices have also started to lead to increased personal and credit card debt as family stretch to pay their bills.

We started to see early evidence of that delinquency showing up and derailing some mortgage applications.

Speaker Change: While interest rates have continued to move higher and lower as the fed continues continues to see economic data, indicating that inflation has been control. The consumer has been navigating an affordability gauntlet.

Speaker Change: The new homebuilders have worked out a variety of incentive structures that range from interest rate buy down to closing cost pickups to price reductions all designed to meet the purchaser at the intersection of need and affordability.

Speaker Change: Those incentives have increased and decrease as interest rates have moved up and down homebuilders have been uniquely able to capture demand by using these incentives to unlock the affordability and strength and enabled purchasers to transact.

Stuart A. Miller: Homebuilders have been uniquely able to capture demand by using these incentives to unlock the affordability constraint and enable purchasers to transact. Against this backdrop, in our first quarter, we've been focused on and consistent in executing our core operating strategy. We've continued to migrate to a pure play manufacturing model across our home building platform and each of our 40 home building divisions in order to reduce production costs while we generate consistent cash flow. Additionally, we are reengineering our products for efficiency and volume in order to enhance our inventory turn and grow volume to contribute to build a balanced and, therefore, healthier overall housing market. We have also continued to migrate to a land-wide balance sheet while we grow our business and expand market share in order to drive total shareholder returns, return on inventory, and return on equity.

Speaker Change: Against this backdrop, our first quarter in our first quarter, we've been focused on and consistent in executing our core operating strategy.

Speaker Change: We've continued to migrate to a pure play manufacturing model across our homebuilding platform in each of our 40 homebuilding divisions in order to reduce production costs, while we generate consistent cash flow.

Speaker Change: Additionally, we are reengineering, our products for efficiency and volume in order to enhance our inventory turn and grow volume to contribute to build a balanced and therefore healthier overall housing market.

Speaker Change: We have also continued to migrate to a land light balance sheet, while we grow our business and expand market share in order to drive total shareholder returns return on inventory and return on equity.

Speaker Change: We are so to speak continuing to modernize and upgrade the Lin our airplane, while we are flying the plane and putting execution and safety first as we fly.

Stuart A. Miller: We are, so to speak, continuing to modernize and upgrade the Lennar airplane while we are flying the plane and putting execution and safety first as we fly. It has been a busy and productive quarter for Lennar, and we continue to do well in the short term while we continue to build our platform for continued and future success. So, let me break some of this down.

Speaker Change: It has been a busy and productive quarter for Lamar and we've continued to execute in the short term, while we continue to build our platform for continued and future success.

Speaker Change: So let me break some of this down.

Speaker Change: On the operational side, we are running under a by design operational model, where we are starting homes at a pace designed to increase market share, while we maximize logistics and efficiencies in order to benefit from reduced construction.

Stuart A. Miller: On the operational side, we are running under a by-design operational model where we are starting homes at a pace designed to increase market share while we maximize logistics and efficiencies in order to benefit from reduced construction costs. Our trade partners are given visibility on starts and timing expectations so that they can be more efficient and help pass efficiency savings on to our customers through more affordable products. By driving volume, we gain market share in most of our core markets as we lean in when others pull back. Our trade partners see a consistent and dependable partner that is worthy of the designation of builder of choice. We work side-by-side with our trade partners while we attract additional trade partner relations.

Speaker Change: <unk> costs.

Speaker Change: Our trade partners are giving visibility on starts and timing expectations.

Speaker Change: They can be more efficient and health past efficiency savings onto our customers through more affordable product.

By driving volume, we're gaining market share in most of our core markets as we lean in when others pull back.

Speaker Change: Our trade partners shaved consistent and dependable partner that is worthy of the designation of builder of choice.

Speaker Change: We work side by side with our trade partners, while we attract additional trade partner relationships.

Stuart A. Miller: Participants find that they have dependable and consistent work with our production strategy, which leads to higher productivity and, therefore, cost savings. Through market share growth in local markets, we enhance the ability to better manage our costs, improve our efficiency of operation, reduce cycle times with efficient production templates, and improve our inventory. John will discuss this in more detail in just a few minutes.

Speaker Change: Participants find that they have to spend a dependable and consistent work with our production strategy, which leads to higher productivity and therefore cost savings.

Speaker Change: Through market share growth in local markets, we enhance the ability to better manage our costs enhance our efficiency of operations reduced cycle times with efficient production templates and enhanced our inventory turn.

Speaker Change: John will discuss this in more detail in just a few minutes.

Speaker Change: Driving our confidence to start homes at pace in order to achieve maximum efficiency in the field is the <unk> machine.

Stuart A. Miller: Driving our confidence to start homes at pace in order to achieve maximum efficiency in the field is the Lennar machine. The machine is a combined program of digital marketing, sales consultant engagement, and dynamic pricing. We've described the machine on previous calls, and many of you have now come to our office to see it in action.

Speaker Change: The machine is a combined program of digital marketing sales consultant engagement and dynamic pricing.

Speaker Change: We've described the machine in prior calls and many of you have now come to our office to see it in action.

Speaker Change: The machine has completely changed the manner in which we sell loans and enables us to drive maximum efficient production.

Stuart A. Miller: The machine has completely changed the manner in which we sell homes and enables us to drive maximum efficient production. If we build a home, we sell that home. We sell by digitally acquiring leads through our digital marketing program. Then we filter those leads so the best leads go directly to our sales professionals.

Speaker Change: If we build the homes, we sell that home we sell by digitally acquiring leads through our digital marketing programs. Then we filter of those leads so the best leads go directly to our sales professionals. They nurture those best leads or customers, while our dynamic pricing model assists in.

Stuart A. Miller: They nurture those best leads or customers while our dynamic pricing model assists in dynamically tailoring pricing in real time to meet the market given consumer desires, market conditions, and competitive factors. The dynamically adjusted pricing, using incentives or price alterations, automatically adjusts our margin, up or down, while we maintain production and sales. We set production to efficiency, we match sales pace to production, and we deliver the homes we build while we carefully maintain controlled inventory levels, all while reducing production costs and driving consistent cash flow. I know it all sounds easy, but it's not.

Speaker Change: Dynamically tailoring pricing in real time to meet the market, giving consumer desires market conditions and competitive factors.

Speaker Change: Dynamically adjusted pricing using incentives or price alteration automatically adjusts our margin up or down while we maintained production and sales space.

Speaker Change: We set the production to efficiency, we met sales pace to production and we deliver the homes, we build while we carefully maintain controlled inventory levels, all what all while reducing production costs and driving consistent cash flow.

Speaker Change: I know it all sounds easy, but it's not that big.

Stuart A. Miller: This has been a core pillar of the programming that we've been reworking over the past years, and it's really starting to kick in and work quite well. Next, through our labor focus on volume, with production and sales being in even better alignment, we are intensifying our focus on producing affordable and attainable products across our platform. We recognize that the chronic housing shortage is a critical issue, and it's more than just a great talking point. The reality is that our industry needs to find solutions to building a healthier housing market that is attainable for participants across the economic landscape. Working-class housing is essential to the effective functioning of our cities across the country, and we hear that from mayors and governors everywhere.

Speaker Change: This has been a core pillar of the programming that we've been reworking over the past year, and it's really starting to kick in and work quite well.

Speaker Change: Next to our laser focus on volume with production and sales being an even better alignment we are intensifying our focus on producing affordable and attainable products across our platform.

Speaker Change: We've recognized that the chronic housing shortage is a critical issue and it's more than just a great talking point with.

Speaker Change: The reality is that our industry needs to find solutions to building a healthier housing market that has that is attainable to participants across the economic landscape.

Speaker Change: Working class housing is essential to be effective working of our cities across the country and we hear that from mayors and governors everywhere.

Speaker Change: So we've been working on using our strategies for production and cost efficiencies to help build a healthier housing market that is accessible to everyone.

Stuart A. Miller: So we've been working on using our strategies for production and cost efficiencies to help build a healthier housing market that is accessible to everyone. Of course, it all starts with lower production costs across our platforms. Land, we know, is getting more expensive. Impact fees are also getting more expensive, and labor costs have been rising as well. We can only reduce our input costs by increasing the productivity and efficiency of our operations.

Speaker Change: Of course, it all starts with lower production costs across our platform.

Speaker Change: Land, we know is getting more expensive impact fees also are getting more expensive and labor costs have been rising as well we.

Speaker Change: We can only reduce our input costs by increasing productivity to efficiencies of our operations.

Stuart A. Miller: Our focus has been on doing just that. We're building more consistent products that we call our core products, that are carefully value engineered, and we are using our start pace to enable an engineered production cycle as well, enabling us to reduce cycle time and to work with our trade partners to build efficiencies in logistics and the way that we run our community production. We've also continued working on additional product approaches to help build a healthier housing market. We've intensified our focus on build-to-rent, that is, community-scale, and single-family-for-rent, scattered home-sell market. We believe that we can and need to build additional production for professionally owned housing that can fill an important need. But those professional purchasers need cost efficiencies in today's interest rate environment in order to make their rents attainable, and we can provide them.

Speaker Change: Our focus has been on doing just that.

Speaker Change: We're building more consistent products that we call our core products that are carefully value engineer and we are using our start pace to enable an engineered production cycle as well, enabling us to reduce cycle time and to work with our trade partners to build efficiencies and logistics.

Speaker Change: And the way that we run our community production.

Speaker Change: We've also continued working on additional product approaches to help build a healthier housing market.

Speaker Change: We've intensified our focus on build to rent that is community scale and single family for rent scattered home sale markets.

Speaker Change: We believe that we can and need to build additional production for professionally owned housing that can fill an important need.

But those professional purchasers meat cost efficiencies in today's interest rate environment in order to make the wrench attainable and we can provide that.

Stuart A. Miller: There are families who are building their future and aspire to a single-family lifestyle with backyards and schools and parks, but who can't yet afford a down payment or don't have the credit characteristics to qualify for the mortgage that they need. Institutional buyers are filling that void for those families. Many across the industry have criticized the professionally owned market and the investor class that competes with primary homeowners to purchase product for rental. This is FWAD.

Speaker Change: There are families who are building their future and aspire to single family lifestyle, with backyards and schools and parks, but who can't get afford a down payment or don't have the credit characteristics to qualify the mortgage that they need.

Speaker Change: Institutional buyers are filling that void for those families.

Speaker Change: Across the industry have criticized the professionally owned market and the Investor class that competes with primary homeowners to purchase product for rentals.

Speaker Change: This is flawed thinking.

Stuart A. Miller: Thank you. Those investors are actually filling a critical need for underserved families who seek to bridge the lifestyle of their family while they build the down payment and credit score to ultimately achieve home ownership. This is the critical, equitable side of home production, and institutional buyers are not competitors to the primary buyers. They are additive to the valuable housing stock, enabling those who don't have a family to achieve the lifestyle they want while they build their capital capacity.

Speaker Change: Those investors are actually filling a critical need for the underserved families who seek to bridge the lifestyle for their family, while they build the down payment and credit score to ultimately achieve homeownership.

Speaker Change: This is the critical equitable side home production and the institutional buyers are not competitors to the primary buyers. They are additive to the valuable housing stock, enabling those who don't have.

Speaker Change: Family that can help them achieve the lifestyle they want while they build their capital capacity.

Speaker Change: We are working across our platform with our institutional partners to produce more structured programs to provide more housing for those who need professional ownership as a stepping stone for the ultimate home of their own.

Stuart A. Miller: We are working across our platform with our institutional partners to produce more structured programs to provide more housing for those who need professional ownership as a stepping stone for the ultimate home of their own. We are also engaging our Blue Chip multifamily platform to build attainable rental products in an off-balance sheet configuration. We have a strong history of successfully building multifamily product across the country. We have been building those products in an off-balance sheet configuration, and we expect to continue to build this vital, attainable product without encumbering our balance sheet. Finally, we have built and continue to refine our land strategy by design as well in order to dovetail with our production orientation. Every home that is going to be built needs a home site with a permit, and those home sites need to be optioned and off-balanced until we're ready to build.

Speaker Change: We are also engaging our blue chip multifamily platform to build attainable rental product in an off balance sheet configuration.

Speaker Change: We have a strong history of successfully building multifamily product across the country.

Speaker Change: We have been building those products in an off balance sheet configuration, and we expect to continue to build this vital attainable product without encumbering our balance sheet.

Speaker Change: Finally, we have built and continue to refine our land strategy by design as well in order to dovetail with our production orientation.

Speaker Change: Every home that is going to be built needs a home site with a permit and those homes sites need to be options and off balance sheet until we're ready to build.

Stuart A. Miller: We continue to focus on a just-in-time delivery program for land, just like we have for lumber and appliances and other products, and we continue to make excellent progress in this regard. We accomplish this by both negotiating option deals with landowners and developers and also creating structured land bank strategies, often with private equity. By consistently focusing on our landmine strategy, we've materially enhanced and generated consistent cash flow through the ups and downs of interest rate changes, and we've enhanced our balance sheet and our liquidity even after redeeming debt and purchasing stock over the past years, along with purchasing $500 million of shares of stock through this quarter. Our balance sheet is situated today with a 9.6% home building debt-to-total cap ratio, with $5 billion of cash on hand and Accordingly, we have the flexibility to allocate capital strategically, first, of course, to grow, while also retiring debt, paying appropriate dividends, and repurchasing shares of Lennar stock. As a result, this quarter, we raised our dividend to $2 per share and authorized an additional $5 billion of stock repurchases as we continue to drive total shareholder returns.

Speaker Change: We continue to focus on adjusting time delivery program for land just like we have for lumber and appliances and other products and we continue to make excellent progress in this regard.

Speaker Change: We accomplished this by both negotiating option deals with landowners and developers and we also.

Speaker Change: And also creating structured land bank strategies, often with private equity capital.

Speaker Change: By consistently focusing on our land light strategy with materially enhanced and generated consistent cash flow through the ups and downs of interest rate changes and we've enhanced our balance sheet and our liquidity, even after redeeming debt and purchasing stock over the past years along with purchase.

Speaker Change: <unk> $500 million of shares of stock through this quarter.

Speaker Change: Our balance sheet is situated today with a nine 6% homebuilding debt to total cap ratio with $5 billion of cash on hand, and $0 drawn on our revolver and with an expected $3 5 billion plus or minus of net cash flow over this next.

Speaker Change: Year.

Speaker Change: Accordingly, we have the flexibility to allocate capital strategically first of course to grow while also retiring debt paying appropriate dividends and repurchasing shares of our stock.

Speaker Change: Accordingly, this quarter, we have raised our dividend to $2 per share and authorized an additional $5 billion of stock repurchases as we continue to drive total shareholder returns.

Even with these capital allocations. Many have suggested that given the tremendous success of our migration to a land light program, we have accumulated too much cash on our balance sheet, which limits the ability of our returns to move higher.

Stuart A. Miller: Even with these capital allocations, many have suggested that given the tremendous success of our migration to our land-like program, we have accumulated too much cash on our balance sheet, which limits the ability of our returns to move higher. While we have understood the concerns, we have remained patient as we have evolved not just the migration to the land-like configuration but also remained focused on the long-term durability of the land-bank structures involved. Private equity capital can be fickle. By driving volume through these programs, we have gained privileged insights into and refined the workings of our strategic land bank. The underlying plumbing systems for the land banks have been refined, and questions have now been answered as to the durability of the capital partners that make up the counterparty relationships with their home building partners, namely us. Our consistent volume helped define both trust and dependability and has taken those relationships to another level, as neither party flinched as market conditions tested the boundaries of those relationships. While adjustments were made, and lessons were learned, the structures and relationships became stronger and more durable.

Speaker Change: While we have understood. The concern we have remained patient as we as they evolve not just the migration to the land light configuration, but also have remained focused on the long term durability of the land bank structures involved.

Speaker Change: But equity capital can be fickle.

Speaker Change: By driving volume through these programs, we have gained advantaged insights into and refined the workings of.

Our strategic land banks.

Speaker Change: The underlying plumbing systems for the land bank has been refined and questions have now been answered as to the durability of the capital partners that make up the counterparty relationships with their homebuilding partner mainly us.

Speaker Change: Our consistent volume helped define both trust and dependability and has taken those relationships to another level as neither party flinch as market conditions tested the boundaries of relationships.

Speaker Change: While adjustments were made in lessons were learned the structures and relationships became stronger and more durable.

Stuart A. Miller: Accordingly, we have now rekindled our focus on a strategic spinoff that can be cleanly focused on fortifying durable land strategies. By spinning our own land, excess land, in a taxable spin, we believe that we can create an additional, though with permanent capital, vehicle that can auction developed homesites to Lennar and recycle capital into new homesites, while distributing market-appropriate returns to shareholders. We have stood up a straw man vehicle that is under consideration, currently with about four billion dollars of land. It could be more, it could be less, and it is under development and consideration right now.

Speaker Change: Accordingly, we have now rekindled our focus on our strategic spinoff that can be cleanly focused on fortifying durable land strategy.

Speaker Change: By spinning our own land excess land in a taxable spin we believe that we can create an additional.

Speaker Change: With permanent capital.

Speaker Change: Vehicle that can option developed home sites for Lamar and recycle capital into new Homesite.

Speaker Change: While distributing market appropriate returns to shareholders.

Speaker Change: We have stood up a strong man vehicle that is under consideration currently with about $4 billion of land it could be more could be less and it is under development in consideration right now.

Speaker Change: Such a such a transaction would distribute capital to shareholders. It would reduce inventory on winners books and it would provide permanent dependable capital for future land options are.

Stuart A. Miller: Such a transaction would distribute capital to shareholders, it would reduce inventory on Lennar's books, and it would provide permanent, dependable capital for future land owners. Our balance sheet would remain very strong with consistent earnings and cash flow to contribute to pay down debt and continue to repurchase shares. We know we've had a false start on a prior spin concept, and there's no promise of certainty or completion on this program.

Speaker Change: Our balance sheet remains very strong with consistent earnings and cash flow to contribute to pay down debt and continue to repurchase stock.

Speaker Change: We know we've had a false start on our prior spin concept and there is no promise of certainty or completion on this program, but on the positive side, our chief operating officer, Fred Rothman is singularly focused on this initiative and Fred likes to get things done.

Stuart A. Miller: But on the positive side, our Chief Operating Officer, Fred Rothman, is singularly focused on this initiative, and Fred likes to get things done. We'll keep you apprised of progress, but progress should happen relatively quickly, as this transaction is far simpler in structure. With that said, let me conclude by saying that our first quarter of 2024 has been another strategic and operational success for our company. While market conditions have remained challenging, we have consistently learned and found ways to address market needs. We know that demand is strong, and there is a chronic housing supply shortage that needs to be filled.

Speaker Change: We'll keep you apprised of progress, but progress should happen relatively quickly as this transaction is far simpler and structure.

Speaker Change: With that said, let me conclude by saying that our first quarter of 2024 has been another strategic and operational success for our company.

Speaker Change: While market conditions have remained challenging we are consistently learned we've consistently learned and found ways to address market needs.

Speaker Change: We know that demand is strong and there is a chronic housing supply shortage that needs to be filled.

Stuart A. Miller: We will continue to drive production to meet the housing shortage that we know persists across markets. With that said, as interest rates subside and normalize, and if the Fed is going to begin to actually cut rates, we believe that pent-up demand will be activated, and we will be well-positioned and well-prepared. If not, we will continue to produce volume and increase market share. To date, we have seen overall market conditions remain generally constructive for the industry.

Speaker Change: We will continue to drive production to meet in the housing shortage that we know persists across market.

Speaker Change: With that said as interest rates subside, a normalize and if the fed is going to begin to actually cut rates. We believe that pent up demand will be activated and we will be well positioned and well prepared.

Speaker Change: If not we will continue to produce volume and increase market share.

Speaker Change: To date, we have seen overall market conditions remain generally constructive for the industry.

Stuart A. Miller: Even though higher interest rates have remained sticky, strong pent-up demand has found ways to access the housing market. Given consistent execution, we are extremely well positioned for even greater successes as strong demand for affordable housing continues to see short supply. Perhaps most importantly, our extraordinarily strong balance sheet affords us flexibility and opportunity to consider and execute upon thoughtful innovation for our future. We have the luxury of continuing to execute flawlessly in the short term, while we continue to return capital to our shareholders through dividends and stock buyback, while we also, and I emphasize the word also, pursue strategic distribution to shareholders that fortifies our future as well. We have clearly earned an enviable position.

Speaker Change: Even though higher interest rates have remained sticky strong pent up demand has found ways to access the housing market given consistent execution, we are extremely well positioned for even greater successes as strong demand for affordable offering continues to see short supply.

Speaker Change: Perhaps most importantly, our extraordinarily strong balance sheet affords us flexibility and opportunity to consider and execute upon thoughtful innovation for our future.

Speaker Change: We have the luxury to continue to execute flawlessly in the short term, while we continue to return capital to our shareholders through dividend and stock buyback, while we also and I emphasize the word also.

Speaker Change: <unk> strategic distribution to shareholders that fortifies, our future as well.

Stuart A. Miller: As we look ahead to a successful 2024, we are well positioned for and expect to see much more of the same. We are confident that, by design, we will continue to grow, to perform, and to drive Lennar to new levels of consistent and predictable performance. We are guiding to 19,000 to 19,500 closings next quarter with approximately a 22.5% margin, and we expect to deliver approximately 80,000 homes this year with a little over a 23% margin. We also expect to repurchase in excess of $2 billion of stock as we continue to drive very strong cash flow. We look forward to a very strong year, and for that, I want to thank the extraordinary associates of Lennar for their tremendous focus, effort, and talent. And with that, I will turn it over to John. Good morning.

Speaker Change: We have clearly earned an enviable position.

Speaker Change: As we look ahead to a successful 2024, we are well positioned for and expect to see much more of the same we.

Speaker Change: We are confident that by design, we will continue to grow to perform and to drive <unk> to $2, two new levels of consistent and predictable performance.

Speaker Change: We are guiding to 19000 to 19500 closings next quarter with approximately a 22, 5% margin and.

Speaker Change: And we expect to deliver approximately 80000 homes this year with a little over 23% margin.

Speaker Change: We also expect to repurchase in excess of $2 billion of stock as we continue to drive very strong cash flow.

Speaker Change: We look forward to a very strong year.

Speaker Change: And for that I want to thank the extraordinary associates at <unk> for their tremendous focus effort and talent and with that let me turn it over to John.

Jonathan M. Jaffe: As you heard from Stuart, our operational teams at Lennar continue the execution of our core operating strategies in our first quarter. The focus starts with the law, marketing, and sales. Every quarter, our divisions continuously learn from their engagement with the Lennar machine, gain knowledge on how to use this information for decision making, provide feedback for enhancements, and improve the machine and execution of our strategies. This continuous loop of learning and improvements drives applied analytics, which enable us to improve our matching of sales to our production. You can see the evolution of this improvement in our operating results as sales were evenly matched with starts in the first quarter and are projected to be evenly matched again in the second quarter.

John: Morning, as you heard from Stuart our operational teams at <unk> continue the execution of our core operating strategies that our first quarter. The focus starts with a lower marketing and sales machine every quarter, our divisions continuously learn from their engagement with enormous share gain.

John: And how to use this information for decision, making provide feedback for enhancements and improve the machine with execution of our strategies. This continuous loop of learnings and improvements drive for flight analytics, which enable us to improve our matching of sales to a production pace.

John: You can see this evolution you can see the evolution of this improvement in our operating results. Our sales were evenly matched the starts in the first quarter are projected to be evenly matched again in the second quarter. While there is more progress to be made this matching of sales and production is leveling out of our closings from quarter to quarter. The goal is even Florida.

Jonathan M. Jaffe: While there is more progress to be made, this matching of sales and production is leveling out our closings from quarter to quarter. The goal is to have even flow deliveries, whereby design starts gradually increase quarter over quarter to ultimately provide a consistent number of deliveries throughout the year. This operating model produces the most significant of all the efficiencies that benefit our trade market. To optimize the pricing of each home, this strategy is more than just about the pace of sale but about selling the right homes at the right price. In every division, Mondays are now referred to as machine Mondays.

John: Liveries, whereby design starts gradually increased quarter over quarter to ultimately provide a consistent number of deliveries throughout the year. This operating model produces the most significant of all the efficiencies that benefit our trade partners.

John: To optimize the pricing of each phone. This strategy is more than just about selling above the pace of sales without selling the right homes at the right price.

John: And every division Mondays are now referred to as machine Web base, our operating teams gathered to review dashboards informing them of the prior which results compared to the planned activity.

Jonathan M. Jaffe: Our operating teams gather to review dashboards, informing them of the prior week's results compared to the planned activity. This analysis of the prior week's activity, from digital marketing leads to sales pace and price of homes sold, is evaluated to see if we solved the lighthouse, thus informing our decision-making and the plotted course of action for the current week. As the week unfolds, this is re-evaluated to make it more relevant.

John: This analysis of the prior which activity from digital marketing leads to sales pace and price of homes sold as evaluated to see if we sold the right homes, that's informing our decision, making and the plot a course of action for the current week to.

John: So we can fold this was reevaluated to make adjustments. All this analysis enables each divisions make ongoing adjustments matching sales production as well as progress towards completion.

Jonathan M. Jaffe: All of this analysis enables each division to make ongoing adjustments, matching sales to unsold production, as homes progress towards completion. In our first quarter, as interest rates fluctuated, this process informed us as to where we have pricing power or where we need buy-down of interest rates and or other incentives to maintain the desired pace. The confidence we have in this by-design sales strategy allows us to maintain a consistent score.

John: And our first quarter as interest rates fluctuated. This process informed as to where we have pricing power or where we need buy down of interest rates and or other incentives to maintain the desired pace.

John: Confidence we have in this by design sales strategy.

John: <unk> allows us to maintain consistent starts.

Jonathan M. Jaffe: These starts lead to increased market share. This is seen in a growth of 28% in sales and 23% in deliveries year over year, as our consistent starts have filled the void of other builders who pulled back. This consistency of starts and related share gains has positioned Lennar with a number one or two market share in 33 of our 40 operating divisions, with 23 of these 33 divisions having the number one market share. Here are some examples of our markets where we have both the leading market share position and have also increased that share. In the Carolinas, market share in Raleigh improved to 20%, up from 16%, and in Charleston at 24%, up from 22%. In the Midwest, our market share in Indianapolis is up 7% to 34%. Minnesota is up 4% to 29%, and Chicago is up 5% to 24%.

John: New starts lead to increased market share. This is jared our growth of 28% in sales and 23% of deliveries year over year as our consistent starts have filled the void of other builders who pulled back.

John: This consistency of sets and related share gains have positioned <unk> with a number one or two market share and 33 of our 40 operating divisions with 23 of these 33 divisions, having the number one market share.

John: Here are some examples of our markets, where we have both the leading market share position and also have increased their share in.

John: In the Carolinas market share in Raleigh improved to 20% up from 16% in Charleston at 24% up from 22%.

John: In the Midwest, our market share in Indianapolis was up 7% to 34%, Minnesota is up 4% to 29% in Chicago at a 5% to 24%.

Jonathan M. Jaffe: Our market share in San Antonio grew by 6% to almost 24%. In San Diego, we grew from 35% to 40%. In the Central Valley, from 31% to 38%. And in Tucson, from 14% to 18%.

John: Our market share of San Antonio grew by 6% almost 24 in San Diego, We grew from 35% to 40 and Central Valley from 31% to 38 in the 2014% to 18%.

Jonathan M. Jaffe: In Florida, our market share increased in Tampa from 15% to 21% and in Jacksonville from 17% to 24%. Here in Miami, while we did not grow our industry-leading market share, we did maintain a very healthy 75% share. Our sales pace of 4.9 homes per community in Q1 is up from the pace of 3.9 in Q1 of last year. This increases by design to match the start space of 4.9 from the fourth quarter of 2023. In our first quarter, the 30-year fixed rate was 7.37% at the start of the quarter, then down to 6.75% in the middle of January, and back up above 7% in the middle of February.

John: In Florida, our market share increase in Tampa from 15% to 21% and then Jacksonville from 17% to 24%.

John: Miami, while we did not grow our industry, leading market share we did maintain a very healthy 75% share.

John: Our sales pace of four homes per community in Q1 is up from the pace of three nine in Q1 of last year. This.

John: This increase was by design to match the starts pace of $4 nine from the fourth quarter of 2023.

John: First quarter was 30 year fixed rate.

John: 737% at the start of the quarter, then down to $6 75 in the middle of January and back up above 7% in the middle of February.

Jonathan M. Jaffe: Using insights from dynamic pricing, our homebuilding teams work closely with our Lennar mortgage teams to find the right mortgage solutions, homebuyer by homebuyer, based on cycle time and construction cost. As we continuously improve the way we execute this game plan, we are also continuously working to deepen our partnerships with our trade partners. We focus on maintaining both a high volume and a consistent volume of homes under construction. These and the other efficiencies discussed benefit our trade partners, enabling us to lower construction costs and cooperate with our partners. By consistently starting homes, even as interest rates rose above 7% during the quarter, we increased our starts by 38% from the prior year, and they were flat sequentially from Q4. This consistent and increased level of starts attracts a larger trade base to Lennar and, together with a normalized supply chain, led to another meaningful improvement in our cycle. For the first quarter, cycle time decreased by 7 days sequentially from Q4 down to 154 days on average for single-family homes, a 30% decrease year-over-year.

John: Using insights from dynamic pricing, our homebuilding teams work closely with our with our mortgage teams to find the right mortgage solutions homebuyers by homebuyer.

John: On the cycle time of construction costs.

John: As we continuously improve the way we execute this game plan. We're also continuously working to deepen the partnerships with our trade partners, we focus on maintaining both a high volume and a consistent volume of homes under construction. These and the other efficiencies discussed benefit our trade partners, enabling us to lower construction costs.

In a cooperative manner without traders.

John: By consistently starting homes, even as interest rates rose above 7% during the quarter, we increased our staff by 38% from the prior year and flat sequentially from Q4.

John: This consistent and increased level of starts attracts larger trade base toward Ara and together with a normalized supply chain, that's another meaningful improvement in our cycle time.

John: For the first quarter cycle time decreased by seven days sequentially from Q4.

John: 154 days on average for single family homes, a 30% decrease year over year.

Jonathan M. Jaffe: With cycle time stabilizing combined with ongoing efficiency gains, we are now designing build templates that will further reduce cycle time on future starts. We focus on building volume, consistency, predictability, cycle time, and even flow to achieve production efficiencies, enabling our trade partners to lower their supply chain and labor costs. Looking at the first quarter, as expected, our construction costs fell sequentially from Q4 by about 2% and on a year-over-year basis by about 11%. Moving forward, to drive further efficiencies and cost reductions, we are laser focused on the consistent use of highly valued engineered home plans, which, as Stuart mentioned, we call our core product strategy. This strategy has recently begun implementation in Texas and is scheduled to be rolled out in Florida this year and will follow thereafter in the rest of our market.

John: The cycle time stabilizing combined with ongoing efficiency gains we are now designing build templates that will further reduce cycle time on future store.

John: We focus on the building largely volume consistency predictability cycle time, and even flow to achieve production efficiencies, enabling our trade partners to lower their supply chain and labor costs.

John: Looking at the first quarter as expected our construction cost fell sequentially from Q4 by about 2%.

John: Year over year basis by about 11%.

John: Moving forward to drive further efficiencies and cost reductions we are laser focus on the consistent use of highly valued engineered home plans, which as Stuart mentioned in the call our core product strategy.

John: This strategy has recently begun implementation of Texas and is scheduled to be rolled out in Florida. This year and we will follow thereafter in the rest of our markets.

Jonathan M. Jaffe: These engineered efficiencies, together with significantly higher use frequency of these core plans, will further cement our position as the builder of choice for the trade partner. The reduced cost and time to build these core plans will help us achieve the goal of delivering attainable housing to meet the needs of the home-buying consumer. Next, I'll discuss our land-wide strategy. In the first quarter, we continued to effectively work with our strategic land and land bank partners where they purchased land on our behalf and then delivered just-in-time homesites to our home building machine, as Stuart described. In the first quarter, about 80% of our $1.6 billion in land acquisitions in the quarter were finished homesites purchased from these various land structures.

John: These engineered efficiencies together with significantly higher use frequency of these core plans will further cement our position as a builder of choice with our trade partners.

John: The reduced cost and time to build these core plans will help us achieve the goal of delivering attainable housing to meet the needs of the home buying consumer.

John: Next I'll discuss our land light strategy and the first quarter, we continued to effectively work with our strategic plan with land and land Bank partners with a purchase land on our behalf and then deliver just in time home sites to our homebuilding machine and Stuart described in the first quarter about 80% of our $1 $6 billion of.

John: Land acquisitions in the quarter were finished homesites purchased from these various structures.

Jonathan M. Jaffe: This 80% reflects a prior deal of prior land purchased into these structures that is now being delivered to us for Homestar. In the first quarter, about 90% of our new land acquisitions were acquired into our off-balance sheet land structure. We continue to make significant progress in the first quarter as our years of supply own, Their supply of owned home sites improved to 1.3 years, now for 1.9 years, and our controlled home site percentage increased to 77% from 68% year-over-year. The bottom line is focusing on our operating strategies, which result in a reduced cycle. The reduction in land-owned has increased our cash flow, as well as improved our inventory churn, which now stands at In the first quarter, we continue to refine the execution of the strategies Stuart and I have reviewed with you. From the Lennar marketing and sales machine to production processes and land strategies, our focus is consistent, improvements are continuous, and change is ever-present. Stuart said it sounds simple, but it isn't.

John: This 80% reflects a prior let's review of prior land purchase into these structures.

John: Now being delivered to us for home starts in.

John: In the first quarter about 90% of our new land acquisitions, we acquired into our off balance sheet land structures.

John: We continue to make significant progress in the first quarter as our years of supply one.

John: Their supply of owned Homesites improved to $1 three years down from one nine years and our controlled homesites percentage increased to 77% from 68% year over year. The bottom line is focusing on our operating strategies, which resulted in reduced cycle time.

John: Reduction in land, one has increased our cash flow as well as improved our inventory turn.

John: Now stands at one five versus $1 three last year, a 15% increase.

For the first quarter, we continued to refine the execution of the strategies Stuart I've reviewed.

John: From the lower marketing and sales machine to our production processes and land strategies. Our focus is consistent improvements are continuous and changes of rhopressa.

John: George said, it sounds simple, but it isn't.

Jonathan M. Jaffe: It's a lot of hard work, a lot of trial and error, and it takes a lot of grit. Fortunately, we have a great team of associates who have embraced each of these strategies and are executing at the highest levels. I want to add my appreciation for their hard work and dedication, and now I'd like to turn it over to Diane. Thank you, Joan. Good morning, everyone.

Hard work a lot of trial and error.

John: It takes a lot of grid. Fortunately, we have a great team of associates, who have lending leaned into each of these strategies and are executing at the highest levels.

Speaker Change: Add my appreciation for their hard work and dedication.

Speaker Change: Like to turn it over to Diana.

Diana: Thank you Tony and good morning, everyone is feeling and John have provided and thinking of color regarding our homebuilding performance.

Diane J. Bessette: So, Stuart and Joan have provided a great deal of cover regarding our home building performance. So, therefore, I'm going to spend a few minutes on the results of our financial services operations. Again, we will summarize our balance sheet highlights again and then provide high-level estimates for Q2 2024. So starting with financial services... For the first quarter, our financial services team had operating earnings of $131 million. Mortgage operating earnings were $100 million, compared to $59 million in the prior year. The increase in earnings was driven by an increase in lock volume, which was the result of higher home building volume and a higher capture rate, as well as higher profit per locked loan, which resulted from higher secondary margins and lower cost per loan, as the team continues to focus on efficiency. Title operating earnings were $33 million compared to $23 million in the prior year.

Diana: Therefore enzymes and spend a few minutes on the results of our financial services operations summarize again, our balance sheet highlights and then provide high level estimates for Q2 2020 slot.

Starting with financial services.

Diana: First quarter, our financial services team had operating earnings of $171 million.

Diana: Mortgage operating earnings of $109 compared to $59 million in the prior year.

Diana: The increase in earnings was driven by an increase in lock volume, which is the result of higher homebuilding volume and a higher capture rate as well as higher profit pro Max loan, which resulted from high end secondary margins and lower cost per loan as the team continues to focus on efficient case.

Diana: The final operating earnings were $33 million compared to $23 million in the prior year.

Diane J. Bessette: Title earnings increased primarily as a result of higher volume and greater productivity as the team continues to embrace technology to run a more efficient business. These solid results were accomplished as a result of great synergies between our Homebuilding and Financial Services teams. They truly represent the spirit of 11R.

Diana: While earnings increased primarily as a result of higher volume and greater private productivity as the team continues to embrace technology to run online business.

Diana: These solid results were accomplished as Mary Johnson, great synergies between our homebuilding and financial services team.

Diana: Truly represent the spirit of one <unk>.

Diane J. Bessette: So now turning to our balance sheet. This quarter, once again, we were steadfast in our determination to turn our inventory and generate cash by maintaining production and pricing homes to market, with the goal of delivering as many homes as possible to meet housing demand. The result of these actions was that we ended the quarter with $5 billion of cash and no borrowings on our $2.6 billion retirement credit facility. This provided a total liquidity of $7.6 billion.

Diana: Now turning to our balance sheet this quarter once again.

Fast and our determination to turn our inventory and generate cash on maintaining production and pricing homes to market with the goal of delivering as many homes as possible to the housing demand that we see.

Diana: Now some of these actions was that we ended the quarter with $5 billion of cash and no borrowings on our $2 6 billion.

Diana: And similar to that.

Diana: This provided a total liquidity of seven 6 billion.

Diane J. Bessette: As a result of our continued focus on balance sheet efficiency and reducing our capital investments, we once again made significant progress on our goal of becoming asset light. As John mentioned at quarter end, our years owned improved to 1.3 years from 1.9 years in the prior year, and our home sites controlled increased to 77% from 68% in the prior year. Our lowest years of ownership and highest controlled percent in our, At quarter end, we owned just under 97,000 homesteads and controlled 323,000 homes on sites, for a total of 420,000 homesteads.

Diana: As a result of our continued focus on balance sheet efficiency and reducing our capital investments. We once again made significant progress on our goal of becoming asset line as John mentioned at quarter end <unk> owned interest to one three years from one nine years in the prior year and our Homesites controlled.

Diana: Increased to 77% and 68% in the prior year, our lowest years owned and highest control percent NII stream.

Diana: At quarter end, we own just under 97000, Homesites and controlled 323000 sites.

Diana: Total of 420000 Homesites.

Diane J. Bessette: We believe this portfolio provides us with a strong competitive position to continue to grow market share in a capital efficient way. As John mentioned, we spent $1.6 billion on land purchases this quarter, but 80% were finished homesites where vertical construction will soon begin. This is consistent with our manufacturing model of buying land on a just-in-time basis, which is less capital intensive. Our goal is that, over time, we will continue to reduce our ownership of land and purchase home sites on a just-in-time basis, and our earnings should more consistently approximate cash flow as the need to reinvest back in the business is lessened. And finally, looking at returns, our inventory return was 1.5 times, and our return on inventory was 30.5%. During the quarter, and consistent with our production focus, we started about 18,300 homes and ended the quarter with just under 40,000 total homes in Minnesota. This inventory number includes about 2,200 models and also includes about 1,000 homes that were completed unsold, which is less than one home per community, as we successfully manage our finished inventory levels.

Diana: We believe this portfolio provides us with a strong competitive position to continue to grow market share in a capital efficient way.

Diana: As John mentioned, we spent one 6 billion on loan purchases. This quarter. However, 80% were finished homesites with vertical construction will soon begin this is consistent with our manufacturing model of buying land on adjusting time basis, which is less capital intensive.

Diana: Our goal is that overtime, we will continue to reduce our ownership with land and purchase homesites on adjusting time basis, and our earnings should more consistently approximate cash flow immediately invest reinvest back into digital interaction.

Finally, looking at returns our insight churn was one five times and our return on inventory was 45%.

Diana: Second quarter and consistent with our production focus we started about 18800 600 homes and ended the quarter with just under 40000 total homes and any insight into.

Diana: And finally number includes about 2200 models and also includes about 1000 homes that were completed unsold, which is less than one home per community as we successfully managed our finished inventory levels.

Diana: Consistent with our commitment to strategic capital allocation, we repurchased $8 5 million of our outstanding shares.

Diana: $506 million.

Diana: Recently during the quarter Krishna mentioned, we increased our annual dividend to $2 per share from $1 50 per share we paid total dividends this quarter of $179 million.

Diana: And looking at our debt maturity profile. Our next senior note maturity is 454 million, which is due in April 2024, So next month.

Diane J. Bessette: Consistent with our commitment to strategic capital allocation, we repurchased $3.4 million of our outstanding shares for a total of $506 million. Additionally, during the quarter, as Stuart mentioned, we increased our annual dividends to $2 per share from $1.50 per share. So we paid total dividends of $139 million this quarter. And looking at our debt maturity profile, our next GMA maturity is $454 million, which is due in April 2024, so next month. Then, there are no maturities until May of 2025.

Diana: There are no maturities until may of 2025.

Diana: We continue to benefit from our previous Paydowns are key announcements strong earnings generation, which brought our homebuilding debt to total capital down from nine six at quarter end, an improvement from $14 two in the prior year.

Diana: We remain committed to increasing shareholder returns, our stockholders' equity increased to almost $27 million and our book value per share increased to $95 74, and our return on equity was 15, 8% in summary, the strength of our balance sheet strong liquidity and low leverage provides us with.

Diana: Significant confidence and financial flexibility as we move through 2020.

Diane J. Bessette: We continue to benefit from our previous paydowns of senior notes and strong earnings generation, which brought our holding debt total capital down to $9.6 at quarter end, an improvement from $14.2 in the prior year. We remain committed to increasing shareholder returns. Our stockholders' equity increased to almost $27 billion, and our book value per share increased to $95.74, and our return on equity was 15.8%.

Speaker Change: So with that brief overview I'd like to turn to Q2.

Speaker Change: To provide some high level guidance.

Speaker Change: In mortgage we expect Q2 orders to be in the range of 20 921300 homes as we keep our production pace and Sam's page closely aligned.

Speaker Change: Typically Q2 deliveries to be in the range of 19 to 19 519500 homes with a continued focus of efficiently Chinese new signings of cash.

Speaker Change: Q2 average sales price should be in the range of 420000 to 425000.

Speaker Change: <unk> gross margin to be about 22, 5% and our SG&A about seven 2% with both estimates, having some plus or minus depending on market conditions.

Diane J. Bessette: In summary, the strength of our balance sheet, strong liquidity, and low leverage provide us with significant confidence and financial flexibility as we move through 2024. With that brief overview, I'd like to turn to Q2 and provide some high-level guidance. Starting with new orders, we expect Q2 new orders to be in the range of 20,900 to 21,300 homes as we keep our production pace and sales pace closely aligned. We anticipate Q2 deliveries to be in the range of 19,000 to 19,500 homes with a continued focus on efficiently turning inventory into cash. Our Q2 average sales price should be in the range of $420,000 to $425,000.

Speaker Change: <unk> homebuilding joint venture land sales and other categories.

Speaker Change: To have earnings of about $25 million in.

Speaker Change: We anticipate our financial services earnings for Q2 should be in the range of $110 million to $115 million based on expected product mix and our mortgage operations.

A loss of about $20 million for our multifamily investment and also home loss of about 20 million firmly in our other category.

Speaker Change: Among our other estimate does not include any potential.

Speaker Change: Mark to market adjustments to our public technology investments since that adjustment will be determined by their stock prices at the end of the quarter.

Diane J. Bessette: We expect gross margins to be about 22.5% and our SG&A to be about 7.2%, with both estimates having some plus or minus depending on market conditions. For the combined home building, joint venture, land sales, and other categories, they expect to have earnings of about $25 million. We anticipate our financial services earnings for Q2 to be in the range of $110 million to $115 million based on the expected product mix in our mortgage operation.

Speaker Change: Corporate G&A should be about one 8% of total revenues and.

Speaker Change: And our charitable contribution will be based on $1000 per home delivered we expect our tax rate to be about 24, 5% and the weighted average share count should be approximately 274 million shares and show on a combined basis. These estimates should produce an EPS range of approximately.

Speaker Change: Currently $3 15 to $3 25 per.

Speaker Change: <unk> for the second quarter.

Speaker Change: For the year, we remain committed to delivering 80000 homes, which is about a 10% growth year over year with a gross margin that is consistent with last year's gross margin.

Speaker Change: We remain confident with our cash flow generation as we indicated as such we are still targeting a capital allocation of at least $2 $5.155 billion, which will be allocated to the April debt maturity that I mentioned and the balance to share repurchases with that point returning over to the operator.

Diane J. Bessette: We expect a loss of about $20 million for our multifamily business and also a loss of about $20 million for our Lennar Other category. The Lennar Other estimate does not include any potential mark-to-market adjustments to our public technology investments since that adjustment will be determined by their stock prices at the end of the quarter. Our Q2 corporate G&A should be about 1.8% of total revenue, and our charitable contribution will be based on $1,000 per home delivered. We expect our tax rate to be about 24.5%, and the weighted average share count should be approximately 274 million shares. And so, on a combined basis, these estimates should produce an UPS range of approximately $3.15 to $3.25 per share for the second quarter.

Speaker Change: Thank you at this time.

Speaker Change: We'll begin the question and answer session. Please limit to one question and one follow up.

Speaker Change: I would like to ask a question you May press star one.

Speaker Change: To withdraw your question you May Press Star Q1 moment. Please for the first question.

Speaker Change: Sure.

Speaker Change: And that comes from Alan Ratner with Zelman and Associates. Your line is open.

Alan Ratner: Hey, guys. Good morning, nice quarter and thanks for all the great commentary so far very helpful. I appreciate it.

Speaker Change: Stuart.

Alan Ratner: First one I wanted to ask you.

Alan Ratner: It sounds like you and maybe I'm reading too much into this but it sounded like you were kind of touching on kind of mortgage qualification issues a little bit more than you have in recent quarters and I'm curious if you've seen something specifically in the near term that is kind of leading you to highlight that or if youre just kind of comment more broadly on the fact that affordability.

Operator: For the full year, we remain committed to delivering 80,000 homes, which is about 10% growth year over year, with a gross margin that is consistent with last year's gross margin. We also remain confident with our cash flow generation, as we indicated. As such, we are still targeting a capital allocation of at least $2.5 billion, $454 million, which will be allocated to the April debt maturity that I mentioned, and the balance to share repurchase. And with that, I turn it over to the audience. Thank you. At this time, we will begin the www.larryweaver.com. .......

Alan Ratner: Is stretched which I don't think as much of a surprise to anybody at this point.

Alan Ratner: So I think it starts with the fact that affordability is stretched but we are definitely seeing a little bit more credit card debt in personal debt from the customers showing up in their applications. We have seen some delinquencies in some of that debt Bruce maybe you'd like to comment a little on that.

Alan Ratner: Sure.

Bruce E. Gross: And I think what we're seeing is when you look at the new iOS in particular.

Alan Ratner: And that comes from Alan Ratner with Zell Miller. Hey, guys, good morning. Nice quarter. And thanks for all the great commentary so far. Very helpful. I appreciate it.

Bruce E. Gross: More of the burden <unk> or having a higher percentage relating to debt to total income. So there is more debt to pay off.

Bruce E. Gross: And that's something new that we've noticed this quarter.

Stuart A. Miller: Stuart, you know, the first question I wanted to ask you is, It sounds like you were kind of touching on mortgage qualification issues a little bit more than you have in recent quarters, and I'm curious if you've seen something specifically in the near term that is kind of leading you to highlight that, or if you're just kind of commenting more broadly on the fact that affordability is stretched, which I don't think is much of a surprise So I think it starts with the fact that affordability is stretched, but we are definitely seeing a little bit more credit card debt and personal debt from customers showing up in their applications. We have seen some delinquencies on some of that debt. Bruce, maybe you'd like to comment a little on that?

Bruce E. Gross: We often work with the buyers and we're able to work through a lot of the conditions, but that one is something that we've seen differences last quarter.

Speaker Change: Gotcha, Bruce Great to hear your voice and thank you for thank you for that.

Speaker Change: And then second question it seems like the market is generally tracking in line with what you expected three months ago, and I think the guidance reflects that.

Speaker Change: Stuart I think three months ago, probably.

Speaker Change: Really the main differences I think we and you and probably everybody.

Speaker Change: Probably expecting rates to be lower by now and some of the inflation metrics might be a little bit stickier than than people were hoping for so when you think about the margin guide for the back half of the year. It does imply a pretty healthy ramp and I think your comments last quarter suggested an expectation that as rates move down you would be able to pull back a little bit on incentive.

Bruce E. Gross: Sure. I think what we're seeing is when you look at the NILS, in particular, more of the NILS are having a higher percentage relating to debt-to-total income. So there's more debt to pay off, and that's something new that we've noticed this quarter. We often work with the buyers, and we're able to work through a lot of the conditions, but that one point is something that we've seen different this last quarter. Gotcha.

Speaker Change: In disc ops and I'm, just curious if that.

Speaker Change: Thought process has changed at all or if youre seeing enough on the demand side today that you have either already done.

Alan Ratner: Bruce, great to hear your voice, and thank you for that info. And then, second question, you know, it seems like the market is generally tracking in line with what you expected three months ago, and I think the guidance reflects that. You know, Stuart, I think three months ago the main difference was that we and you and probably everybody were probably expecting rates to be lower by now, and some of the inflation metrics might be a little bit stickier than people were hoping for. [inaudible] So, really interesting question, Alan, and let's start with the fact that demand is strong. And I can't emphasize that enough that demand is strong. Now, with that said, there's limited supply, and there's also affordability factors that are playing into this.

Speaker Change: The heavy lifting on pulling back on incentives or you're confident that that's going to transpire over the next few months.

Speaker Change: So really interesting question Allen.

Allen: And let's start with the.

Allen: The fact that demand is strong.

Allen: And I can't emphasize that enough, but demand is strong now with that said there is limited supply and there is also affordability factors that are playing into this and yes. There was a bit of enthusiasm in the market that interest rates were going to be moving down a number of times as we.

Allen: We went through 2020 for some of that enthusiasm has subsided, but I love about our program is that our program cuts stupid level.

Allen: What I don't see as another ramp up in interest rates, but anything can happen.

Speaker Change: Got it.

Speaker Change: Inflation hasn't yet revealed itself as fully under control and I don't feel like the fed.

Speaker Change: <unk> built up that confidence yet that says we're ready to start moving interest rates and our program enables us to achieve quite well.

Alan Ratner: And yes, there was a bit of enthusiasm in the market that interest rates were going to be moving down a number of times as we went through 2024. But some of that enthusiasm has subsided. What I love about our program is that it cuts through the middle. What I don't see is another ramp-up in interest rates, but, you know, anything can happen. Inflation hasn't yet revealed itself as fully under control, and I don't feel like the Fed has built up that confidence yet that says we're ready to start moving interest rates.

Speaker Change: Interest rates moved down in fact were.

Speaker Change: We're really levered to the effect that if interest rates move down our margins should do quite well.

Speaker Change: But to the extent that interest rates basically stay the same or migrate upward a little bit.

Speaker Change: We're still pushing volume pushing focused on rationalizing expenses or the cost of building homes to gather with maximizing price and minimizing incentives that actually have to be used in order to Jenny.

Stuart A. Miller: And our program enables us to succeed quite well if interest rates move down. In fact, we're really levered to the fact that if interest rates move down, our margins should do quite well. But to the extent that interest rates basically stay the same or migrate upward a little bit, we're still pushing volume, pushing the focus on rationalizing expenses or the cost of building homes together with maximizing price and minimizing incentives that actually have to be used in order to generate strong margins. So our view today stands exactly as it was three months ago, even though there was more enthusiasm at that time for rates going down.

Speaker Change: It generates strong margins.

Speaker Change: So our view today stands exactly as it was.

Speaker Change: Three months ago, even though there was more enthusiasm at that time for rates going down.

Speaker Change: We feel pretty strongly that we're going to be able to.

Speaker Change: Pump less the margin levels that we've talked about.

Speaker Change: And the environment, regardless of how it moves forward, while we have a lot of levers to pull and I think that we're growing connected to the market and we're very focused on production and I think that production is leverage of costs, whether it's SG&A or cost of production and I think we're going to be able to.

Speaker Change: Reduce our margin.

Speaker Change: One weekend.

Speaker Change: I think you covered assets as we said.

Stuart A. Miller: We feel pretty strongly that we're going to be able to achieve the margin levels that we've talked about in the environment, regardless of how it moves forward. Now, we have a lot of levers to pull, and I think that we're really connected to the market, and we're very focused on production. And I think that production means leverage of cost, whether it's SG&A or cost of production, and I think we're going to be able to make our margin. I think you covered that.

We continue to refine our ability to focus on the right price per home.

Speaker Change: We feel confident rollouts become even better at.

Thus in communities and markets, where we can pull back on incentives even more.

Speaker Change: And we will continue to refine that and I think thats informs our confidence in what we see for the rest of the year.

Great. Thanks, a lot guys appreciate it.

Speaker Change: You bet.

Speaker Change: The next question comes from Stephen Kim with Evercore. Your line is open.

Stephen Kim: Yes, thanks, very much guys I appreciate all the color.

Stephen Kim: A little bit of difficulty catching all your comments, so apologies if I'm repeating anything here.

Alan Ratner: As we said, we continue to refine our ability to focus on the right price per home, which we feel confident will allow us to become even better at those communities and markets where we can pull back on incentives even more. And we'll continue to refine that. And I think that informs our confidence in what we see for the rest of the year. Great. Thanks a lot, guys.

Stephen Kim: But.

Stephen Kim: I believe so.

Stephen Kim: You were discussing.

Stephen Kim: Maybe a new iteration of core Tara maybe I don't know if you are still calling it that but this time you talked about $4 billion worth of land I think being included in an entity.

Stuart A. Miller: I appreciate it. You bet. The next question comes from... 2014 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services Yeah, thanks very much guys, appreciate all the color. I had a little bit of difficulty catching all your comments, so apologies if I'm repeating anything here. But I believe, Stuart, you were discussing maybe a new iteration of Corterra. I don't know if you're still calling it that, but this time you talked about $4 billion worth of land being included in this entity. I just wanted to get some more color around that.

Stephen Kim: Just wanted to get some more color around that so it's not about a half years' worth of land, how does that $4 billion different from what was initially conceived I think you initially talked about $4 billion, but I believe most of those have now already been put into fund structures. So.

Stephen Kim: Is this $4 billion in land and how is it different and then is it including other maybe not.

Stephen Kim: We might consider non core assets as well. So you can just give us some more color on this new core Tara.

Stuart A. Miller: So is that about a half year's worth of land? How is that $4 billion different from what was initially conceived? I think you initially talked about $4 billion, but I believe most of those have now already been put into fund structures. So what is this $4 billion in land, and how is it different? And then, is it including other, maybe, what we might consider non-core assets as well? If you could just give us some more color on this new Corterra. Okay, so first of all, I have PTSD from going backwards and talking about the prior spin, so I'm not going to use the Cortera name right now. Is that okay with you, Steve? So I'm not going to talk about this as a reincarnation of Quartera because it isn't.

Speaker Change: Okay. So.

Speaker Change: So first of all iron PTSD going backwards and talking about the prior spin so I'm not going to use the portera name right now, but that's okay with you Steve.

Steve: Totally fine.

Steve: Okay. Good.

Steve: Im not going to talk about this as the reincarnation of courtyard because it isn't.

With.

Steve: The prior spending we were focused number one on the tax free spend and number two it was basically our multifamily single family for rent assets.

Steve: Yet we were splitting into a different kind of operation. This was specifically taxable spin straight down the fairway land that is basically under production, but it is.

Regular.

Steve: <unk>.

Steve: Operating land.

Steve: It is not.

Steve: Excess or ancillary property or anything like that it.

Stuart A. Miller: With the prior spin, we were focused, number one, on a tax-free spin, and number two, it was basically a multifamily, single-family for rent assets that we were spinning into a different kind of operation. This is specifically taxable spin, straight down the fairway, land that is basically under production, that is, you know, regular. Operating land, it is not, you know, excess or ancillary property or anything like that; it should be cash flowing immediately, and it is just a straightforward spin on a land program that dovetails extremely well with what we already have in place relative to other land banking programs. This enables us to build yet another vertical that will be complementary to the others that we have, but it gives us a broader range of feeders that enable us to fortify the durability of our land life strategy, and that's been our focus: how do we make sure and ensure that the market conditions we have today are market conditions that we can depend on in the future?

Steve: It should be cash flowing.

Immediately and it is it is just a straightforward spin of a land program. It dovetails extremely well with what we already have in place rep.

Steve: Relative to other land banking programs. This enables us to build yet another vertical that will be complementary to the others that we have but it gives us a broader range of theaters that enable us to fortify the durability of our land light strategy.

Steve: And Thats been our focus is how do we make sure and ensure that the market conditions. We have today are market conditions that we can depend on in the future. Yes, we have land developers, yes, we have land sellers that we option land from but we also have the added benefit of land banking structures and we are.

Steve: Creating another and unique land banking structure with a permanent capital vehicle accurate view that it enables us to create durability that confidence that as we go forward just like with lumber just light was appliances land becomes more of a commodity that we take down just in time.

Stuart A. Miller: Yes, we have land developers. Yes, we have land sellers that we auction land from, but we also have the added benefit of land banking structures, and we're creating another unique land banking structure with a permanent capital vehicle attribute that enables us to create that durability, that confidence that as we go forward, just like with lumber, just like with appliances, land becomes more of a commodity that we take down just in time. That's really helpful. I appreciate the distinction there.

That's really helpful. I appreciate the distinction there.

Steve: How about these other assets, which were initially can seem to be in this entity previously called core Tara.

Steve: Are there any plans for that.

Stuart A. Miller: How about these other assets which were initially conceived to be in this entity that had previously been called Corterra? Are there any plans for that? Well, I think it's widely known that relative to our first fund of multifamily, where we do have some investment, that is currently under discussion as to how it will, it has come to the end of its fund life, and we're considering either a sale or some kind of extension program or something. Those assets will, over time, burn off. The new focus on multifamily is to be building in a more distinctly private equity-based program where we become much more of a production engine for more affordable products. The products that we were building historically have kind of fallen out of favor given interest rate changes, and yet affordable rental product is very desirable and something that we can produce much more comfortably within the Lennar Homebuilding Division, and so it will be much more of a production, merchant-build kind of program That's helpful. Thanks very much for that.

Speaker Change: Well I think it's widely known that the debt relative to our first fund of multifamily.

Speaker Change: We do have some investment that is <unk>.

Speaker Change: Currently under discussion as to how it will.

Speaker Change: It has come to the end of this fund life and we're considering either a sale or some kind of extension program or something those assets will over time.

Speaker Change: Burn off.

Speaker Change: New focus on multifamily has to be building and a more distinctly private equity based program, where we become much more of a production engine for more affordable products. The products that we were building historically.

Speaker Change: Kind of fallen out of favor given interest rate changes.

Speaker Change: And yet affordable rental product is very desirable and something that we can produce much more comfortably within the limit of our homebuilding divisions.

Speaker Change: And so it will be much more of a reduction merchant build kind of program spending regularly just like the rest of our product.

Speaker Change: Okay got you that's helpful. Thanks, very much for that.

Stuart A. Miller: The second question I had is, I think earlier you were discussing in your prepared remarks the cash that you have on your balance sheet, you know, $5 billion, and I think you acknowledged that there was some interest in seeing how you were going to deploy that. And I believe you talked about that, your response to that was that you talked about the strengthening of your relationship with your land partners, how that had evolved, how it had been tested, you know, over the last year and a half. And you have come through that now to a place where you have now a much more robust relationship battle-tested with your partners. And so it seemed to me that you were suggesting that the excess cash that you were holding maybe no longer served the purpose that it once did. I want to make sure that I am paraphrasing what you were saying correctly.

Speaker Change: The second question I had is I think earlier you were discussing in your prepared remarks.

Speaker Change: The cash that you have on your balance sheet, you know $5 billion. I think you acknowledged that there was some interest in seeing how you are going to deploy that.

Speaker Change: And I believe you talked about that your response to that was that.

Speaker Change: <unk> talked about a strengthening of your relationship with your land partners, how that even a ballpark would it have been tested.

Speaker Change: Over the last year, and a half and youll come through that now too.

Speaker Change: At a place where you have now a more a much more robust relationship battle tested with your partners and so it seems it seems to me that you were you're suggesting that the excess cash that you were holding maybe no longer serve the purpose that it once did I want to make sure that empower.

Speaker Change: And paraphrasing, what you were saying correctly and.

Stuart A. Miller: And if so, it sort of still leaves open the question of, is there anything else that you might be waiting for, you know, that you want to be patient about seeing before maybe deploying that cash? You know, look, we've been unapologetic about being patient as we've migrated to a land-like strategy. We've wanted to be patient about recognizing that we are developing new sources of land relationships. We want to make sure that as the market ebbs and flows, that what we depended on didn't evaporate, and then all of a sudden, we needed to have capital to be able to grow, to be able to produce.

Speaker Change: And if so it sort of still leaves open the question of.

Speaker Change: Is there anything else that you might be waiting for.

Speaker Change: You want to be patient about it.

Speaker Change: See before maybe deploying that cash.

Speaker Change: Look we've been unapologetic about being patient as we migrated to a land light strategy. We wanted to be patient about recognizing that we are developing new sources of.

Speaker Change: Land relationships, we want to make sure that as the market ebbs and flows that.

Speaker Change: Well, we depended on didn't evaporate and then all of a sudden we needed to have capital to be able to grow to be able to produce.

Stuart A. Miller: I think we've gained a tremendous amount of confidence in the structures that we've built, and we're continuing to gain that confidence. We're looking to build more of those structures in order to have that durability baked in so that we, you know, we're very comfortable holding a stronger balance sheet to just make sure that as we go forward, we continue to grow forward and have the capacity to do that. I think as we gain confidence, the need for holding that cash becomes less and less important. I think that our $5 billion share repurchase authorization is an indicator that we're leaning more into returning capital to shareholders along with our dividends, and it's all in stepping stones. We're not afraid to go slower rather than go fast, but the fact of the matter is we don't have anything else out there that we're looking at, that we're anticipating using cash for. It is simply safety stock, so to speak, to make sure that the plumbing system we put in place is durable for the future and will continue to make sure that we're positioned for the future.

Speaker Change: I think we've gained a tremendous amount of confidence in the structures that we've developed.

Speaker Change: We're continuing to gain that confidence, we're looking to build more of those structures.

Speaker Change: In order to have that durability baked in.

Speaker Change: So that.

Speaker Change: We are.

Speaker Change: But we're very comfortable holding a stronger balance sheet to just make sure that as we go forward. We continue to grow forward and have the capacity to do that I think as we've gained confidence.

Speaker Change: The need for holding that cash becomes less and less important I think that our $5 billion share repurchase authorization is an indicator that we're leaning more into returning capital to shareholders along with our dividend.

Speaker Change: And it's all in stepping stones.

Speaker Change: Not afraid to go slower rather than to go fast, but the fact of the matters. We don't have something else out there that we're looking at that we're anticipating using cash for it is simply safety stock so to speak to make sure that.

Speaker Change: <unk>.

Speaker Change: Plumbing system, we put in place is durable for the future and and we'll continue to make sure that we're positioned for the future.

Stuart A. Miller: And as we get that confidence, you can expect that we'll be buying back more stock, and that's where the allocation of capital is going to go. It's not going to go to something else that's unanticipated right now. Great. Thanks so much, guys.

Speaker Change: And as we get that confidence you can expect that we'll be buying back more stock and thats, where the allocation of capital is going to go it's not going to go to something else that's unanticipated right now.

Speaker Change: Great. Thanks, so much guys.

Speaker Change: Okay. Thank you Steve.

Michael Jason Rehaut: Thank you. The next question comes from Mike Rehaut with J.P. Morgan. Your line is now open. Thanks. Good morning, everyone, or just about this afternoon.

Speaker Change: The next question comes from Mike Rehaut with Jpmorgan. Your line is now open.

Thanks.

Michael Jason Rehaut: Good morning, everyone.

Michael Jason Rehaut: Just about this afternoon.

Michael Jason Rehaut: I appreciate all the detail and color as always two questions first a little bit more.

Stuart A. Miller: I appreciate all the detail and color, as always. But I have two questions. First, a little bit more, obviously, on this proposed land spin, and just want to make sure I'm thinking about it correctly, because initially, I think Steve's prior question, you know, it kind of hits on different areas of your current land program or, you know, prior iterations of how you're thinking about, you know, moving different assets on or off the balance sheet. So it kind of sounds like this might be more of a, Horton and the fact that there's a lot of land that is on the four-star entity that has a lot of rights of first refusal, etc.

Michael Jason Rehaut: On the.

Michael Jason Rehaut: On this proposed land spin.

Michael Jason Rehaut: And just wanted to make sure I'm thinking about it correctly because initially.

Michael Jason Rehaut: To Steve's prior question.

Michael Jason Rehaut: It's kind of hit on different areas.

Michael Jason Rehaut: Of your current land program or.

Michael Jason Rehaut: Prior iterations of how Youre thinking about.

Michael Jason Rehaut: Moving different assets on or off the balance sheet. So.

Michael Jason Rehaut: It kind of sounds like.

Michael Jason Rehaut: This might be more of a.

Michael Jason Rehaut: <unk>.

Michael Jason Rehaut: When you talk about a spin and the new or separate vehicle.

Michael Jason Rehaut: My mind is kind of moving a little bit towards the four star type of relationship of.

Michael Jason Rehaut: That they have with with D. R. Horton.

Michael Jason Rehaut: And the fact that there's a lot of land.

Michael Jason Rehaut: On the four star.

Michael Jason Rehaut: Entity that that is.

Michael Jason Rehaut: Have a lot of rights of first refusal et cetera to two.

Michael Jason Rehaut: Gordon as opposed to.

Stuart A. Miller: As opposed to something that I thought was more the direction when you started talking about this, which was kind of more moving land towards your existing land banking or land banker relationships, primarily thinking about the large facility that you have with Angela Gordon. So, I just want to make sure that I'm thinking about it correctly in terms of it being more the former than the latter.

Michael Jason Rehaut: Something that I thought was more of the direction. When you started talking about this which was kind of more moving land towards your existing land banking or land bankers relationships primarily.

Michael Jason Rehaut: Thinking about the large facility that you have with Angelo Gordon.

Michael Jason Rehaut: So just wanted to make sure that I'm thinking about it correctly in terms of it being more of the former than the latter.

Stuart A. Miller: And, you know, in thinking about that four billion number, I mean, right now, you know, in your press release, you have about four and a half billion of, 4.7 billion of land and land under development, so $4 billion would be a huge number, a huge percentage of that amount. I just want to make sure that I'm understanding that $4 billion is coming out of that bucket, and that would, in effect, represent over 80% of your lots owned that are on your balance sheet today. So, Mike, I recognize your thirst for more detail, and we'll give you more detail as we refine our program. And I wouldn't be thinking about it through the lens of a four-star rating.

Michael Jason Rehaut: And.

Michael Jason Rehaut: Thinking about that 4 billion number we right now on your press release you have.

About $4 5 billion.

Michael Jason Rehaut: <unk>.

Michael Jason Rehaut: $4 seven of land and land under development.

Michael Jason Rehaut: It's a $4 billion would be a huge number a huge percentage of that of that amount.

Michael Jason Rehaut: I want to make sure that I'm understanding that that $4 billion is coming out of that bucket and that would in effect represent.

Michael Jason Rehaut: Over 80% of your lots owned that are on your balance sheet today.

Speaker Change: So Mike I recognize your thirst for more detail and we'll give you more detail as we refine our programs and.

Speaker Change: I wouldn't be thinking about it through the lens of four star, we're probably not going to go in that direction, but we recognize that you would like to know more and we'll.

Stuart A. Miller: We're probably not going to go in that direction, but we recognize that you would like to know more, and we'll give you greater detail as we refine the program. The only thing I would add, because you might have been alluding to it, is that this will be structured so there won't be any consolidation on our balance sheet. It would be a true, a true spin-off of land that's in a separate entity, so we wouldn't have any of those complexities of consolidation.

Speaker Change: We'll give you greater detail as we refine the program.

Speaker Change: Mike the only thing I would add.

Speaker Change: Ben Hogan and intuitive digital destruction, so there won't be any consolidation on our balance sheet. It would be to achieve spin of land that's in a separate entity.

So we wouldn't have any.

Speaker Change: Complexities of consolidation.

Speaker Change: Okay. So just on that point.

Michael Jason Rehaut: Okay, so just on that point, if you're talking about a $4 billion-type number, it would appear that that represents, again, over 80% of the land-in-land underdevelopment. So we're talking about, in effect... The majority of your land holdings. Is that the right way to think about it? We have been moving to a landline strategy; that would be correct. Okay, secondly, on the gross margin front, I was asked earlier about the back half of the year, and it seems like to get to the guidance of roughly flat year-over-year for the full year, you're looking at back half gross margins of roughly 24 percent on average. You talked about the mortgage market being perhaps less potentially of a downward slope throughout the year than was initially anticipated. What is necessary to hit that 24 percent in the back half?

Speaker Change: If you're talking about a 4 billion type of number.

Speaker Change: It would appear that that represents the.

Speaker Change: Over 80%.

Speaker Change: The land and land under development, So we're talking about in effect.

Speaker Change: The majority of your land holdings is that is that the right way to think about it.

Speaker Change: We have been moving to a land light strategy that would be correct.

Speaker Change: Okay.

Speaker Change: Secondly on the on the gross margin front.

Speaker Change: Okay.

Speaker Change: Asked earlier about.

Speaker Change: Back half of the year and it.

Speaker Change: It seems like to get to the guidance of roughly.

Speaker Change: Flat year over year for the full year Youre looking at back half gross margins of roughly 24% on average.

Speaker Change: We talked about maybe the b mortgage market being <unk>.

Speaker Change: Perhaps less potentially of a downward slope throughout the year than was initially anticipated.

Speaker Change: What is necessary to hit that 24% in the back half is it.

Speaker Change: Kind of already.

Stuart A. Miller: I would assume on the books from a land cost basis or construction cost basis. Or do there, you know, you need to have, you know, less costly incentives or better pricing? Because, you know, at this point, to the extent that that doesn't come through, it'd seem like, you know, the only way to hit that 24% if it was much more of just a mix in what's coming through the pipe, so to speak. So, as we've detailed, our focus on programming has been really carefully crafted by design to focus on using our production programs to bring down costs and to use our machines to focus on the right pricing, whether it's price increases that the market gives them, or whether it's the very carefully crafted use of incentives. So, the first thing is reconciliation. Together with proper pricing, we feel comfortable that we're going to be able to migrate in that direction. The second part of it is leverage.

Speaker Change: I assume on the books from a.

Speaker Change: Land cost basis construction cost basis.

Speaker Change: Or are there.

Speaker Change: Do you need to have.

Speaker Change: Less costly incentives or better pricing.

Speaker Change: Uh huh.

Speaker Change: Because at this point.

Speaker Change: To the extent that that doesn't come through it seem like.

Speaker Change: The only way to hit that 24% if it was much more of just a mix and whats coming through the pipe so to speak.

Speaker Change: So as we've detailed our focus and programming has been.

Speaker Change: Really carefully crafted by design.

Speaker Change: To focus on using our production.

Speaker Change: Programs to bring down costs.

Speaker Change: And to use our.

Speaker Change: Our machine.

Speaker Change: To focus on right pricing.

Speaker Change: Whether it's price increases as the market gives them or whether it's a very carefully crafted use of incentives.

Speaker Change: So the first thing is <unk>.

Boston.

Speaker Change: Reconciliations together with.

Speaker Change: Proper pricing.

Speaker Change: Feel comfortable that we're going to be able to migrate in that direction. The second part of it is leverage.

Stuart A. Miller: As we go through the year, we're generally producing and delivering more homes, so there's some embedded leverage in that. And so there are a lot of moving parts that make up our view of where our margin is likely to go. Of course, market conditions can change. They can change for the positive and for the negative.

Speaker Change: We go through the year, we're generally producing and delivering more homes. So there are some embedded leverage in that.

Speaker Change: And so there are a lot of moving parts that make up our view of where our margin is likely to go of course market conditions can change.

Speaker Change: They can change to the positive and the negative.

Stuart A. Miller: And we've been very clear that that margin is somewhat of a springboard for maintaining the volume that we expect to maintain. So there'll be elements of the economic environment that factor into it as well. Can I detail specifically what the relationships are in those numbers?

Very clear.

Speaker Change: That margin is somewhat of a springboard for maintaining the volume that we expected to maintain so there'll be elements of the economic.

Speaker Change: Like environment that factor into it as well.

Speaker Change: Can I detailed specifically what the relationships are in those numbers I don't think so right now, but it's a combination of all of those pieces that will drive our margins to where we expect them to be for the year. We do have some visibility in some of the sales that have come through and we continue to have confidence.

Michael Jason Rehaut: I don't think so right now, but it's a combination of all of those pieces that will drive our margins to where we expect them to be for the year. We do have some visibility into some of the sales that have come through, and we continue to have confidence that we're going to be able to get to that number, those numbers by the end of the year. I think, as we said earlier, assuming interest rates stay relatively flat with where they are, we think we can continue to improve our operational view of how to increase margins in that same interest rate environment. Thanks so much. You can't do that.

Speaker Change: Since that we're going to be able to get to that number to those numbers by the end of the year.

Speaker Change: And I think as we said earlier.

Speaker Change: Assuming interest rates stay relatively flat with where they are we think we can continue to improve our operational review how to increase margins in that same interest rate environment.

Speaker Change: Great. Thanks, so much.

Speaker Change: Okay you bet.

Kenneth Zener: Thank you. The next question comes from Kenneth Zener with Seaport. Partners, your line is open. Good morning, everybody, or afternoon now.

Speaker Change: Thank you. The next question comes from Kenneth Zenner with Seaport Research Partners. Your line is open.

Kenneth Zener: Good morning, everybody or afternoon now.

Stuart A. Miller: I want to start kind of high level here to understand, or for you to clarify, perhaps even flow, where starts lead orders, which is less cyclical. The first high-level question is, what is your start capacity based on your land partners, right? There's some type of guardrails we have there, and one of the big focuses of the industry is, are you going to grow or return in general? And on the land spin, why are you guys choosing to introduce this vehicle versus building out the homes or C-knowing it? as you have been doing back already, I guess.

Kenneth Zener: When it start kind of high level here to understand.

Kenneth Zener: Or for you to clarify, perhaps even flow where starts lead orders, which is less cyclical.

Kenneth Zener: First high level question.

Kenneth Zener: What is your start capacity based on kind of year land partners right. There is some type of guardrails, we have there and one of the big focuses of the industries are you going to grow or return in general and on the land spend.

Kenneth Zener: Are you guys choosing to introduce this.

Kenneth Zener: Vehicle versus building out the homes or see knowing yet.

Kenneth Zener: As you have been doing back already I guess.

Yes, so far.

Stuart A. Miller: So, first question first, production is clearly derived from how many home sites we have available. I think that we have mapped out what we think production can be given the home sites that we have coming through the system, and we would expect that what you're seeing as a production schedule is very well baked into both the land availability and each cycle of the coming developed home sites. So, you know, think about the way that you're seeing production put in place to get to that, Let's call it, 80,000 delivery number, plus some, you know, overage for what falls into the next year. But that's already baked into what the start space will be as I daylight it. We are about 21,000 starts this quarter, and of course, excellent visibility as to the home sites that are coming through the system for that, and likewise, into the next quarters as well. John, did you want to add anything to that?

Speaker Change: First question first.

Speaker Change: Production.

Speaker Change: As clearly derived from how many home sites we have available.

Speaker Change: That we have mapped out what we think the production.

Speaker Change: Can be given the home sites that we have coming through the system and we would expect that.

Speaker Change: But what you're seeing as a production schedule is very well baked into both the land availability and its cycle of the company developed home sites. So.

Speaker Change: Thinking about the way that you are seeing production put in place to get to that.

Speaker Change: Let's call it 80000.

Speaker Change: Delivery number plus some.

Speaker Change: Overage for what falls into the next year.

Speaker Change: That's already baked into what the start space will be as our daylighting.

Speaker Change: Sure.

<unk>.

Speaker Change: 21000 starts this quarter.

Speaker Change: Yes.

Speaker Change: Of course excellent visibility as to their home sites that are coming through the system for that and likewise into the next quarters as well.

Speaker Change: John did you want to yes.

Relative to this first question.

Jonathan M. Jaffe: Relative to this first question, as land goes into our land banking relationships, it goes into it with a takedown schedule that matches what Stuart just described, so there are no guardrails that limit our ability to execute on the planned volume. So then, as it relates to your second question, we've been very focused on building multiple sources of capital for our auctioning and loan banking programs, actually building a permanent capital vehicle rather than being completely reliant on private equity capital constantly coming into a program we felt was a greater good and a big benefit. So when you ask the question, why go in a different direction when some of the tried and true directions so far are viable as well? They are viable, and we continue to lean into those programs. This is an and rather than an or.

Speaker Change: The blended into our land banking relationships that goes into it with a takedown schedule that matches what Stuart just described so there are no guardrails that limit our ability to execute on the planned volume.

John: So then as it relates to your second question.

John: <unk>.

Speaker Change: We've been very focused on building.

Speaker Change: Multiple sources of capital for.

Speaker Change: Our optioning land banking programs.

Speaker Change: Actually building, a permanent capital vehicle, rather than them being completely reliant on private equity capital constantly coming into a program. We felt was the greater good and a big benefit. So when you ask the question why go in a different direction when some of the drivers.

Speaker Change: True direction, so far are viable as well they are viable and we continue to lean into those programs. This is an and rather than an or this to us is building that durability that confidence that the capital will be there even as the market ebbs and flows going forward.

Stuart A. Miller: This, to us, is building that durability, that confidence that the capital will be there even as the market ebbs and flows going forward. And so that's why we're choosing to build this way rather than just drive as we have by taking land from balance sheets, building CMO, and all of that. This is a cleaner way to build a permanent capital vehicle that's durable for the future.

Speaker Change: And so that's why we're choosing to build this way rather than just drive as we have.

Speaker Change: By putting taking land from balance sheet building C. Now and all of that this is a cleaner way to build a permanent capital vehicle that struggle for the future.

Kenneth Zener: Okay, I appreciate that. That's good. My second question is about margin communication, which is one of the factors affecting, you know, investors today. So margins and your forecast for the second half. Nobody knows the future, right? And you're trying to help us.

Speaker Change: Okay.

Speaker Change: I appreciate that because.

Speaker Change: That's good my second question is about margin communication, which is.

Speaker Change: One of the factors affecting.

Speaker Change: Investors today so.

Speaker Change: Margins.

Speaker Change: And your forecast for second half.

Speaker Change: Nobody knows the future right and you're trying to help us, but I think everything you would talk about even flow. It's much more important to your capital allocation and a true returns of your company as you go asset light. So do you see and I think we all can model what that free cash flow will be within a range.

Stuart A. Miller: But I think everything you've been talking about, even flow, is much more important to your capital allocation and the true returns of your company as you go asset light. So, you see, and I think we can all model what that free cash flow will be within a range. Do you see, when you get to that comfort level, where... You know, land is neutralized.

Speaker Change: Do you see when you get to that comfort level.

Speaker Change: Sure.

Speaker Change: Land is neutralized therefore, net income equals cash flow.

Kenneth Zener: Therefore, net income equals cash flow. Do you guys see yourself systematically buying back stock in line with net income? Or do you, you know, when we get to that point, or are you guys going to try to prime it? Obviously, with NVR, we see that they've run up a lot of cash. So do you guys, are you hoping to have buybacks match net income systemically when you're there? Or is there something else we should know about your thinking when that time arrives?

Speaker Change: You guys see yourself systematically buying back stock in line with net income.

Speaker Change: Or do you when you get to that point or are you guys going to try to time. It obviously with NV RBC that they've run up a lot of cash do you guys are you hoping to have essentially buybacks match net income systemically when youre there or is there something else, we should know about youre thinking when that time arrives. Thank you.

Stuart A. Miller: Thank you. No, I think that, generally speaking, I think we're migrating to a more orderly buyback program. We've been conservative in our buyback program, as I've noted, to, you know, make sure that the systems that we've put in place are durable for our future, so that conservatism shouldn't be confused with a different use of cash.

Speaker Change: No I think that generally speaking I think we're migrating to a more orderly buyback program, we've been conservative in our buyback program as I've noted too.

Speaker Change: Make sure that the the.

Speaker Change: Systems that we've put in place are durable for our future so that conservatism should we confused.

Speaker Change: We look ahead, we don't have a thought process around a different use of cash in fact, we're growing into the cash flow model that we've created and as we as we find that it is more durable sustainable.

Diane J. Bessette: In fact, we're growing into the cash flow model that we've created, and as we find that it is more durable, sustainable, and we test kind of the edges, we can kind of expect that the cash we're generating is basically going to go right back into stock buybacks. Yeah, Ken, I think what I would add is, as you know, previously we've prioritized debt repayment over that, but after we make this April payment, we'll only have $2 billion of notes outstanding, and it's, you know, one in 25, one in 26, and I think the others are in 27. So, you know, we don't have that priority to focus on anymore, so I, you know, I think Stuart's point is an important one that the stock buyback really does become the priority, because I think we've done a nice job of deleveraging the balance sheet from a debt standpoint.

Speaker Change: We test kind of the edges, we can kind of expect that the cash we're generating is basically going to go right back into stock buyback, yes, Tim I think what I would add is as you know previously we prioritize debt repayment over that one.

Speaker Change: After we made since April payment and it will only have $2 billion of notes outstanding and 125, one and 2006 and three others in 2007.

Speaker Change: Yes.

Speaker Change: We don't have that.

I already to focus on anymore.

Speaker Change: I think at this point is an important moment stock buyback does that become the priority is I think performing amongst javelin deleveraging the balance sheet and cash standpoint.

Agree and thank you very much.

Kenneth Zener: Agree, and thank you very much. Very good. And why don't we go to our last question now?

Speaker Change: Very good and why don't we go to our last question now.

Speaker Change: Thank you that last question is from John Lovallo with UBS. Your line is open.

John Lovallo: Thank you. That last question is from John Lovallo with UBS. Your line is open.

Stuart A. Miller: Hi guys. Thank you for taking my questions as well. I mean, I guess the first one, just going back to the spin for a moment.

John Lovallo: Hi, guys. Thank you for taking my questions as well I mean, I guess the first one just going back to <unk> for a moment.

John Lovallo: I mean, if the purpose here is to sort of guarantee capital for Lennar to grow and sort of guarantee land banking, even if private equity pulls back, it would seem that the spin would need to be very well financed and have a strong balance sheet. How much cash do you anticipate the spin needs? Probably not very much.

John Lovallo: The purpose here is to sort of guarantee capital through in order to grow in sort of guarantee land banking, even if private equity pulls back we would seem that the spin would need to be very well financed with strong balance sheet, how much cash do you envision the spin meeting.

Speaker Change: Probably not very much.

Speaker Change: I think that the assets.

Stuart A. Miller: I think that the assets, as they're configured, or as we're thinking about them, should be cash flowing pretty readily, and therefore, the spring will actually spend cash and, you know, bring in cash and redeploy it, and should work well on its own. Okay, I understand. And then maybe just zeroing in on the second quarter gross margin outlook, which is up about 70 basis points sequentially at the midpoint, can you just walk us through some of the moving pieces there in terms of Fixed Cost Leverage, Net Price, Incremental Cost Inflation, things of that nature. Yeah, I think that we can walk through it more in detail, but I think that, you know, if you look at the second quarter of last year, it's very comparable.

Speaker Change: And there are configured or as we're thinking about it should.

Speaker Change: It should be cash flowing pretty readily and therefore, the spin will actually spin.

Speaker Change: Cash and.

Speaker Change: Bringing in cash and redeploy them.

Speaker Change: And should work let alone some.

Speaker Change: Okay understood and then maybe just zeroing in on the <unk>.

Speaker Change: Second quarter gross margin outlook, which is up about 70 basis points sequentially at the midpoint can you just walk us through some of the moving pieces there in terms of fixed cost leverage net price.

Speaker Change: Cost employee incremental cost inflation things of that nature.

Yes, I think that I'm going to walk through in detail, but I think that.

Speaker Change: If you look at the second quarter of last year, it's not comparable so you can see the leverage pickup, particularly in field expenses just.

Stuart A. Miller: So you can see the leverage pickup, particularly in field expenses, you know, just by order of magnitude, you kind of get a lot of leverage just from that perspective. So that's certainly helpful. And, you know, I don't know that there's anything... There's more to say on that. I think we've talked about controlling incentives, showing the right homes, but part of the credibility should be just the operating leverage that we're going to get in addition to the other things that we spoke about.

Speaker Change: In order of magnitude.

Speaker Change: On a GAAP.

Speaker Change: A lot of pickup just from that perspective.

Speaker Change: So that's certainly helpful and.

Speaker Change: I don't know that Theres anything.

Speaker Change: More to say on that I think we've talked about controlling incentives showing the right homes.

Speaker Change: Part of the credibility should be just the operating leverage that we're going to get.

Speaker Change: In addition to the other things that we spoke about.

Okay, well... That wraps it up for this quarter. I thank everybody for joining us. We're proud of the quarter that we put forth. We look forward to reporting more progress as we go forward. Thanks for your time, and we'll see you next quarter. That concludes today's conference. Thank you for participating. Have a wonderful day, and you may.

Speaker Change: Okay. Thank you.

Speaker Change: Okay well.

Speaker Change: That wraps it up for this quarter I, thank everybody for joining months prior to the quarter that we put forth. We look forward to reporting more progress as we go forward. Thanks for your time and we'll get to next quarter.

Speaker Change: That concludes today's conference. Thank you for participating.

Speaker Change: Wonderful day and you may disconnect.

Speaker Change: Okay.