Q2 2024 Lennar Corp Earnings Call

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Speaker Change: Welcome to our second quarter earnings Conference call. At this time, all participants are in a listen only mode. After the presentation. We will conduct a question and answer session. Today's conference is being recorded if you have any objections you may disconnect at this time.

Operator: Welcome to Lennar's second quarter earnings conference call. At this time, all participants are in a listen-only mode.

Operator: After the presentation, we will conduct a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to David Collins for the reading of the forward location. Thank you, and good morning, everyone.

Speaker Change: I'll now turn the call over to David Collins for the reading of the forward looking statements.

David M. Collins: Thank you and good morning, everyone. Today's conference call May include forward looking statements, including statements regarding <unk> business financial condition results of operations cash flows strategies and prospects.

David M. Collins: Today's conference call may include forward-looking statements, including statements regarding one hour's business, financial condition, results of operations, cash flows, strategies, and processes. Such forward-looking statements represent only Lennar's estimates on the date of his conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainty. 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.

Speaker Change: We're looking statements represent only one estimates on the date of this conference call and are not intended to give any assurance as to actual future results.

Speaker Change: Because forward looking statements relate to matters that have not yet occurred. These statements 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.

David M. Collins: These factors include those described in our earnings release and our SEC filings, including those under the captioned 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. I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman. Sir, you may begin.

Speaker Change: Our earnings release, and our SEC 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.

Speaker Change: I would now like to introduce your host Mr. Stuart Miller Executive Chairman, Sir you may begin.

Stuart A. Miller: Thank you and good morning, everybody and thank you for joining today and then Miami today together with Jon Jaffe, our co CEO and President Diane Bessette, our Chief Financial Officer.

Stuart A. Miller: Thank you and good morning everybody, and thank you for joining us today. I'm in Miami today together with Jon Jaffe, our co-CEO and President, and Diane Bessette, our Chief Financial Officer. David Collins, who you just heard from, is our Controller and Vice President. Bruce Gross is here, our CEO of Lennar Financial Services, and we have a few others 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 times, and some other operating metrics. As usual, Diane's going to give a detailed financial highlight, along with some limited guidance for our third quarter and full year 2024. And then, of course, we'll have our question and answer period.

Speaker Change: David Collins, who you just heard from.

Speaker Change: Our controller and Vice President Bruce.

Speaker Change: Bruce gross this year, our CEO of winter are financial services, and we have a few others as well.

Speaker Change: 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 updating construction cost cycle time and some other operating.

Speaker Change: Overview.

Speaker Change: As usual Diane is going to give a detailed financial highlights along with some limited guidance for our third quarter and full year 2024, and then of course, we will have our question and answer period and 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.

Speaker Change: As possible.

Stuart A. Miller: And, 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. But before I begin, however, I would like to express, on behalf of all of the associates of Lennar, the sadness we all feel for the recent loss of another pioneer of our industry, Don Horton. While we homebuilders compete, sometimes aggressively, in the field and across geographies, it is always with humble admiration and respect for our competitors. We learn from each other. We have a reference for all of their accomplishments. We learn from their successes and sometimes their failures, and we are pushed to be our very best by their comparative accomplishments.

Speaker Change: Before I begin however, I would like to express on behalf of all of the associates of Illinois.

Speaker Change: This travelers sadness, we all feel for the recent loss of another pioneer of our industry Don Horton.

Speaker Change: While we homebuilders compete sometimes aggressively in the field and across geographies. It is always with humble admiration and respect for our competitors.

Speaker Change: We've learned from each other we have reference for all of their accomplishments.

Speaker Change: We've learned from their successes and sometimes there are failures and were pushed to be our very best buy their comparative accomplishments.

Stuart A. Miller: This business is not easy, and those who succeed over years are to be admired. Don was a tremendous success among homebuilders, and his success spanned decades. He climbed from humble beginnings to the greatest heights within our industry. To the associates of D.R. Horton, as well as to Don Horton's family, we express our most sincere condolences, and we look forward to continuing to live, to learn, to admire, and, yes, to compete with the D.R. Horton name as you carry on Don's tremendous legacy.

Speaker Change: This business is not easy and those who succeed over years or it could be admired.

Speaker Change: John was a tremendous success among homebuilders and his success spanned decades.

Unknown Executive: Dick Collins from Humboldt beginnings to the greatest heights within our industry.

Speaker Change: <unk> declined from humble beginnings to the greatest types within our industry.

Unknown Executive: To the associates of DR Horton, as well as to the Don Horton family, we express our motion to your condolences, and we look forward to continuing to live, to learn to admire, and yes, to compete with the DR Horton name as you carry on Don's tremendous legacy.

Speaker Change: The associates of D. R Horton as well as to Don Horton family, We express our most sincere condolences and we look forward to continuing to live to learn to admire Mds to compete with the Dr. Horton name as you carry on <unk> tremendous legacy.

Speaker Change: With that said, let me begin my remarks today.

Stuart A. Miller: With that said, let me begin my remarks today. We're very pleased to report another consistent and solid quarter of operating results for Lennar. We have continued to execute our operating plan effectively throughout the first half of 2024 as we have driven production pace and sales pace in sync, while we have used our margin as a point of adjustment to enable consistent production. Furthermore, even as market conditions have changed. This program has driven excellent operating results to date, and we have simply never been better positioned as a company, from balance sheet to operating strategy to execution, to be able to adjust to a changing market as it unfolds for the remainder of 2024 and beyond. In the second quarter, we started approximately 21,400 homes, we sold approximately 21,300 homes, and we delivered approximately 19,700 homes, keeping us on target to deliver approximately 80,000 homes for the year.

Stuart Miller: With that said, let me begin my remarks today. We're very pleased to report another consistent and solid quarter of operating results for Lennar. We have continued to execute our operating plan effectively throughout the first half of 2024, as we have driven production pace and sales pace in sync, while we have used our margin as a point of adjustment to enable consistent production, even as market conditions have changed.

We're very pleased to report another consistent and solid quarter of operating results for Illinois.

Speaker Change: We have continued to execute our operating plan effectively throughout the first half of 2024, as we have driven production pace and sales pace in sync.

While we have used our margin as a point of adjustment to enable consistent production.

Speaker Change: Even as market conditions have changed.

Speaker Change: This program has driven excellent operating results to date, and we have simply never been better positioned as a company from balance sheet to operating strategy to execution to be able to adjust to a changing market as it unfolds for the remainder of 2024 and beyond.

Stuart Miller: This program has driven excellent operating results to date, and we have simply never been better positioned as a company, from balance sheet to operating strategy to execution, to be able to adjust to a changing market as it unfolds for the remainder of 2024 and beyond. In the second quarter, we started approximately 21,400 homes. We sold approximately 21,300 homes, and we delivered approximately 19,700 homes, keeping us on target to deliver approximately 80,000 homes for the year. Next quarter, we expect to start shell and deliver similar consistency as we continue to drive a continuously improving, even flow manufacturing model that we believe will continue to enhance our cash flow, our bottom line, as well as our predictability.

Speaker Change: In the second quarter, we started approximately 21400 homes, we sold approximately 21300 homes and we delivered approximately 19700 homes keeping us on target to deliver approximately 80000 homes for the year.

Speaker Change: Next quarter, we expect to start shell and deliver similar consistency as we continue to drive a continuously improving even flow manufacturing model that we believe will continue to enhance our cash flow our bottom line as well as our predictable.

Stuart A. Miller: Next quarter, we expect to start, sell, and deliver similar consistency as we continue to drive a continuously improving even flow manufacturing model that we believe will continue to enhance our cash flow, our bottom line, as well as our predictability. We've continued to target a consistent production and growth rate in order to maintain volume, minimize production costs, and maintain an even flow of production and sales, all in order to drive cash flow, effective capital allocation, and higher returns.

Speaker Change: Alrighty.

Stuart Miller: We've continued to target a consistent production and growth rate. In order to maintain volume, minimize production costs, maintain even flow production and sales, all in order to drive cash flow, effective capital allocation, and higher returns. Our primary goal is to migrate to a pure play asset-life manufacturing model that will be supported by a durable, just-in-time home-site delivery program that will enable simultaneous growth and cash flow. We believe that a cash flow enabled capital allocation strategy will drive higher shareholder returns, higher returns on assets, and ultimately higher returns on equity. As we migrate to a desired end state, margin is the springing mechanism that enables results to happen.

Speaker Change: We've continued to target a consistent production and growth rate in order to maintain volume minimize production costs maintain even flow production and sales all in order to drive cash flow effective capital allocation and higher returns.

Stuart A. Miller: Our primary goal is to migrate to a pure-play, asset-light manufacturing model that will be supported by a durable, just-in-time, home-site delivery program that will enable simultaneous growth and cash flow. We believe that a cash flow-enabled capital allocation strategy will drive higher shareholder returns, higher returns on assets, and ultimately higher returns on equity. As we migrate to our desired end state, margin is the springing mechanism that enables this all to happen.

Speaker Change: Our primary goal is to migrate to a pure play asset light manufacturing model that will be supported by a durable just in time homesite delivery program that will enable simultaneous growth and cash flow.

Speaker Change: We believe that our cash flow enabled capital allocation strategy will drive higher shareholder returns higher returns on assets and ultimately higher returns on equity.

Speaker Change: As we migrate to our desired end state margin is the springing mechanism that enables this all to happen.

Stuart A. Miller: This quarter, our margin was somewhat higher than expected at 22.6%, up from 21.8% last quarter. Next quarter, we expect our margin to be approximately 23%, depending on market conditions. And for the full year, we remain focused on driving margins to be approximately the same as last year's four-year margin of 23.3%.

Stuart Miller: This quarter, our margin was somewhat higher than expected at 22.6%, up from 21.8% last quarter. Next quarter, we expect our margin to be a production which 23% depending on market condition. and for the full year, we remain focused on driving margin to be approximately the same as last year for year margin of 23.3%. While we understand that we will require that that will require a substantially higher fourth quarter margin, that accomplishment is partially embedded in our backlog. While, as I have said before, the rest of that story will depend on market conditions, interest rates, and consumer confidence as we go through the remainder of the year.

Speaker Change: This quarter, our margin was somewhat higher than expected excellent two 6% upfront 21, 8% last quarter.

Speaker Change: Next quarter, we expect our margin to be approximately 23% depending on market conditions.

Speaker Change: And for the full year, we remain focused on driving margin to be approximately the same as last year full year margin of 23, 3%.

Stuart A. Miller: Well, we understand that we will require that that will require a substantially higher fourth quarter margin. That accomplishment is partially embedded in our backlog, while, as I have said before, the rest of that story will depend on market conditions, interest rates, and consumer confidence as we go through the remainder of the year. We will see.

Speaker Change: While we understand that we will require that that will require a substantially higher fourth quarter margin that accomplishment is partially embedded in our backlog while as I have said before the rest of that story will depend on market conditions interest rates and consume.

Speaker Change: Our confidence as we go through the remainder of the year, we will see.

Stuart Miller: We will see. While we have been refining our operating platform, we've continued to drive strong cash flow and have allocated over $600 million to repurchase across the least 3.8 million shares of stock. And additionally, to repay over $550 million of senior debt as we continue to improve our balance sheet with a home building debt to total capital ratio of just 7.7%.

Speaker Change: While we have been refining our operating platform. We've continued to drive strong cash flow and have allocated over $600 million.

Stuart A. Miller: While we have been refining our operating platform, we've continued to drive strong cash flow, and we have allocated over $600 million to repurchase approximately 3.8 million shares of stock and additionally, to repay over $550 million of senior debt as we continue to improve our balance sheet with a home building debt to total capital ratio of just 7.7%. While we continue to hold a sizable $3.6 billion in cash on our books, we are crafting our strategy for strategic capital allocation in pursuit of our structural objectives, which I will discuss further in just a few minutes.

Speaker Change: The repurchase of approximately $3 8 million shares of stock and additionally to repay over $550 million of senior debt as we continue to improve our balance sheet with a homebuilding debt to total capital ratio of just seven 7%.

Stuart Miller: While we continue to hold a sizeable $3.6 billion of cash on a book, we are crafting our strategy for strategic capital allocation in pursuit of our structural objectives, which I will discuss further in just a few minutes.

Speaker Change: While we continue to hold a sizable three $6 billion of cash on our books, we are crafting our strategy for strategic capital allocation in pursuit of our structural objectives, which I will discuss further in just a few minutes.

Stuart Miller: But let me briefly address the economic environment. Overall, the macroeconomic environment remains relatively constructed for home builders. There are challenges, and there are opportunities. The demand for housing remains strong, limited by affordability, interest rates, and sometimes wavering consumer confidence. Additionally, the chronic housing shortage, driven by over a decade of underproduction of housing stock, is additionally problematic for families seeking affordable or attainable supply. Demand remains robust if it can be supplied and an attainable price point, with interest rate support that enables the consumer to transact. Through our second quarter, interest rates started lower and felt constructed at approximately 6.3% as the market was adjusting to a new normal.

Stuart A. Miller: But let me briefly address the economic environment. Overall, the macroeconomic environment remains relatively constructive for homebuilding. There are challenges, and there are opportunities. The demand for housing remains strong, limited by affordability, interest rates, and sometimes wavering consumer confidence. Additionally, the chronic housing shortage, driven by over a decade of underproduction of housing stock, is additionally problematic for families seeking affordable or attainable supplies.

Speaker Change: But let me briefly address the economic environment.

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

Speaker Change: There are challenges and there are opportunities.

Speaker Change: The demand for housing remains strong limited by affordability interest rates and sometimes wavering consumer confidence.

Speaker Change: Additionally, the chronic housing shortage driven by over a decade of underproduction of housing stock is additionally, problematic for families seeking affordable or obtainable supply.

Stuart A. Miller: Demand remains robust if it can be supplied at an attainable price point with interest rate support that enables the consumer to transact. Through our second quarter, interest rates started lower and felt constructive at approximately 6.75% as the market was adjusting to a new normal. Then, during the quarter, rates began a gradual climb to 7.3% before dropping again as the quarter ended.

Speaker Change: Demand remains robust if it can be supplied and entertain an attainable price point with interest rates support that enables the consumer to transact.

Through our second quarter interest rates started lower and felt constructed at approximately six and three quarter percent as the market was adjusting to a new normal.

Stuart Miller: Then, through the quarter, rates began a gradual climb to 7.3% before dropping again as the quarter ended. Concurrently, consumers remained employed. They are confident that they will remain employed, and they believe that their compensation will rise as well. This is most often the foundation of a very strong housing market. But the chronic supply shortage, the impact of interest rates on affordability, as well as persistent and stubborn inflation, have moderated housing market strength. In response, new home builders have worked out incentive structures that range from interest rate buy down to closing cost pickups to price reduction designed to meet the purchaser at their intersection of need and affordability.

Speaker Change: Then during the quarter.

Speaker Change: <unk> began a gradual climb to seven 3% before dropping again as the quarter ended.

Stuart A. Miller: Concurrently, consumers remained employed. They are confident that they will remain employed, and they believe that their compensation will rise as well. This is most often the foundation of a very strong housing market. But the chronic supply shortage, the impact of interest rates on affordability, as well as persistent and stubborn inflation, have moderated housing market strength. In response, new homebuilders have worked out incentive structures that range from interest rate buydowns to closing cost pickups to price reductions designed to meet the purchaser at their intersection of need and affordability. Those incentives have increased and decreased as interest rates have moved up and down.

Speaker Change: Concurrently consumers remains employed they.

Speaker Change: Our confidence that they will remain employed and they believe that their compensation will rise as well.

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

Speaker Change: But the chronic supply shortage the impact of interest rates on affordability as well as persistence and stubborn inflation have moderated housing market strength.

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

Stuart Miller: Those incentives have increased and decreased as interest rates have moved up and down. Home builders, particularly those with strong balance sheets and ready access to capital, have been able to adjust, capture demand, and drive efficiencies by using incentives to reduce the affordability constraint and enable purchases to transact.

Speaker Change: Those incentives have increased engine and decrease as interest rates have moved up and down.

Stuart A. Miller: Homebuilders, particularly those with strong balance sheets and ready access to capital, have been able to adjust, capture demand, and drive efficiencies by using incentives to reduce the affordability constraint and enable purchasers to transact. Against this backdrop, in our second quarter, we continued to execute our core operating strategy. That strategy has been to refine a manufacturing production model that is pure play home building and land light asset light. And simply put, that is what we are refining.

Speaker Change: Homebuilders, particularly those with strong balance sheets and ready access to capital have been able to adjust capture demand and drive efficiencies by using incentives to reduce the affordability constraints and enable purchases to transact.

Stuart Miller: Against this backdrop, in our second quarter, we have continued to execute our core operating strategy. That strategy has been to refine a manufacturing production model that is pure planning, home development, and land-like asset life, and simply put, that is what we are refining. As I noted last quarter, we have begun refining our manufacturing model. We have also been actively migrating to a pure play and land-like operating structure across our home building platform and each of our 40 home building divisions. To start with manufacturing, we continue to refine our manufacturing platform that has maintained production and shell space while we continue to engineer our homes for efficiency and volume.

Speaker Change: Against this backdrop in our second quarter, we have continued to extricate execute our core operating strategy.

Speaker Change: That strategy has been to refine a manufacturing production model that is pure play homebuilding and land light asset light and.

Speaker Change: And simply put because that is what we are refining.

Stuart A. Miller: As I noted last quarter, we have been refining our manufacturing model. We have also been actively migrating to a pure-play and land-like operating structure across our home-building platform and each of our 40 home-building divisions, and Start with Manufacturing. We've continued to refine our manufacturing platform that has maintained production and sales pace while we continue to engineer our homes for efficiency and volume. Driving volume enables us to offer more attainable products. We add needed supply to the market, we meet the needs of the consumer, and we contribute to building a balanced and, therefore, healthier housing market.

Speaker Change: As I noted last quarter, we have begun.

Speaker Change: We have been refining our manufacturing model. We have also been actively migrating to a pure play and land light operating structure across our homebuilding platform in each of our 40 homebuilding divisions.

Speaker Change: So start with manufacturing.

Speaker Change: We've continued to refine our manufacturing platform that has maintained production in shelf space, while we continue to engineer our homes for efficiency and volume.

Stuart Miller: Driving volume enables us to offer more attainable products. We add needed supply to the market, we move the needs of the consumer, and we contribute to building a balanced and therefore healthier housing market. In doing so, we have enhanced our inventory turn and grown volume as we generate substantial cash flow. The consistency of our production and shell program across our platform, together with constructive capital allocation, enable us to simultaneously enhance shareholder returns, returns on inventory, and ultimately return on equity.

Speaker Change: Driving volume enables us to offer more obtainable product.

Speaker Change: As needed supply to the market and meet the needs of the consumer and we contribute to building a balanced and therefore healthier housing market.

Stuart A. Miller: In doing so, we have enhanced our inventory turn and grown volume as we generate substantial cash flow. The consistency of our production and sales program across our platform, together with constructive capital allocation, enables us to simultaneously enhance shareholder returns, returns on inventory, and ultimately return on equity.

Speaker Change: In doing so we have enhanced our inventory turn and grown volume as we generate substantial cash flow.

Speaker Change: The consistency of our production and sales program across our platform platform together with constructive capital allocation enable us to simultaneously enhance shareholder returns returns on inventory and ultimately return on equity.

Stuart Miller: Let me turn to pure play. We are a home builder that builds affordable housing in strategic markets that fill the chronic supply shortage. We will continue to reduce exposure to all non-core assets. We are intensifying our focus on producing affordable and attainable products across our platform. Land is more expensive; impact is getting more expensive, and laboring material costs have been rising as well. We can only reduce the cost of housing by increasing productivity through efficient choose of our operation. Our focus has been on doing just that. We are building more consistent products that we call our core products that are carefully value engineered, and we are using our start pace to refine an engineered production cycle, enabling us to reduce cycle time.

Speaker Change: Let me turn to pure play.

Stuart A. Miller: We are a homebuilder that builds affordable housing in strategic markets that fill the chronic supply shortage. We will continue to reduce exposure to all non-core assets. We are intensifying our focus on producing affordable and attainable products across our platform. However, land is more expensive, impact fees are getting more expensive, and labor and material costs have been rising as well. We can only reduce the cost of housing by increasing productivity through efficiencies in our operations.

Speaker Change: We are a homebuilder that builds affordable housing in strategic markets, let Phil the chronic supply shortage.

Speaker Change: We will continue to reduce exposure to all non core assets.

Speaker Change: We are intensifying our focus on producing affordable unobtainable products across our platform.

Speaker Change: Land is more expensive impacts these are getting more expensive and labor and material costs have been rising as well.

Speaker Change: We can only reduce the cost of housing by increasing productivity through efficiencies of our operation.

Stuart A. Miller: Our focus has been on doing just that. We are building more consistent products that we call our core products that are carefully value engineered, and we are using our start pace to refine an engineered production cycle, enabling us to reduce cycle time and work with our trade partners to build efficiencies in logistics and the way that we run our community production. We are building attainable homes for primary purchasers who can afford a down payment and qualify for a mortgage. And as market conditions dictate, we have and will use incentives to enable primary purchasers to purchase and achieve home ownership.

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

Speaker Change: We are building more consistent product that we call our core products that are carefully value engineer and we are using our start pace to refine and engineered production cycle, enabling us to reduce cycle time and to work with our trade partners to build efficiencies and <unk>.

Stuart Miller: And to work with our trade partners to build efficient choose in logistics and the way that we run our community production. We are building attainable homes for primary purchasers who can afford a down payment and qualify for a mortgage. And, as market conditions dictate, we have and will use incentives to enable primary purchasers to purchase and achieve home ownership. We have also continued working on additional product approaches to help build a more healthy housing market. We have intensified our focus on build to rent, community scale, and single family for rent scattered home across markets. We believe that we can and need to build additional production for professionally owned housing that can fill an important additional need.

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

Speaker Change: We are building attainable homes for primary purchasers, who can afford a downpayment and qualify for a mortgage and as market conditions dictate we have and will use incentives to enable primary purchasers to purchase and achieved home ownership.

Stuart A. Miller: We have also continued working on additional product approaches to help build a more healthy housing market. We have intensified our focus on build-to-rent, community-scale, and single-family-for-rent, scattered homes across markets. We believe that we can and need to build additional production for professionally owned housing that can fill an important additional need. Those professional purchasers need cost efficiencies in today's interest rate environment in order to make their rents attainable, and we can provide that.

Speaker Change: We have also continued to work that will continue working on additional product approaches can help build a more healthy housing market.

Speaker Change: We have intensified our focus on build to rent community scale and single family for rent scattered homes across markets.

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

Stuart Miller: Those professional purchasers need cost efficiencies in today's interest rate environment in order to make their rents attainable, and we can provide that. There are many families who are building their future and aspire to single-family lifestyle with backyard schools and parks, but you can't yet afford a down payment or don't have the credit characteristic to qualify the mortgage that they need. Institutional buyers fill that void for those families. Many have criticized the professionally owned market and the investor class that competes with primary homeowners to purchase product for rentals. This is quad thinking. We are also engaged in repurposing our blue chip multifamily platform to build attainable rental products in an off balance configuration.

Those professional purchasers new cost efficiencies in today's interest rate environment in order to make their rent obtainable and we can provide that.

Stuart A. Miller: There are many families who are building their future and aspire to a single-family lifestyle with backyards, 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.

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

Stuart A. Miller: Institutional buyers fill that void for those families. However, many have criticized the professionally owned market and the investor class that competes with primary homeowners to purchase product for rent. This is Quad Think. We are also engaged in repurposing our blue chip multifamily platform to build attainable rental products in an off-balance sheet configuration. We will build a singular product, another core product, called our Emblem Series. It will be built by our home building division but will be built with private equity capital.

Speaker Change: Institutional buyers filled that void for those families.

Claude: Many have criticized the professionally owned market and the Investor class that competes with primary homeowners to purchase product for rentals. This is Claude thinking.

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

Stuart Miller: We will build a singular product, another core product called our Emblem series. It will be built by our home building division, but will be built with private equity capital. We have a strong history of successfully building multi-family products across the country. We have been building those products in an off balance configuration, and we expect to continue to build this vital attainable product without encumbering our balance. Currently, we are repatriating capital that has been deployed in prior multi-family engagements. We are under contract to sell the assets of LMB 1 Fund 1. There are multiple buyers, and we are working through the closing process of each asset with those buyers.

Speaker Change: We will build a singular product another core product called our emblem series it will be built by our homebuilding divisions, but will be built with private equity capital.

Stuart A. Miller: We have a strong history of successfully building multifamily products 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. Concurrently, we are repatriating capital that has been deployed in prior multifamily engagements, and we are under contract to sell the assets of LMV Fund 1. There are multiple buyers, and we are working through the closing process for each asset with those buyers.

Speaker Change: Have a strong history of successfully building multifamily products across the country.

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

Speaker Change: Concurrently we are repatriating capital that has been deployed in prior multifamily engagements.

Speaker Change: We are under contract to sell the assets of <unk> One fund one.

Speaker Change: Lindsay Fund one.

Speaker Change: They're there.

Speaker Change: There are multiple buyers and we are working through the closing process of each asset with those buyers.

Stuart Miller: We expect the assets will close throughout the second half of 2024. Also, as we continue to stay laser-focused on our pure play and asset life strategy of generating cash and increasing returns, we are regularly reviewing the best strategy for other multi-family assets that are on both. We may decide to monetize additional assets also in the second half of 2024. On a combined basis, these transactions could result in cash proceeds of approximately $250 million in the second half of the year.

Stuart A. Miller: We expect the assets will close throughout the second half of 2024. Also, as we continue to stay laser-focused on our pure play and asset-light strategy of generating cash and increasing returns, we are regularly reviewing the best strategy for other multifamily assets that are on book, and we may decide to monetize additional assets also in the second half of 2024. On a combined basis, these transactions could result in cash proceeds of approximately $250 million in the second half of the year. So let me turn to just in time.

Speaker Change: We expect the assets will close throughout the second half of 2024.

Speaker Change: Also as we continue to stay laser focused on our pure play and asset light strategy of generating cash in increasing returns. We are regularly reviewing the best strategy for other multifamily assets that are on book and we may decide to monetize additional assets also.

Speaker Change: In the second half of 2024.

Speaker Change: On a combined basis. These transactions could result in cash proceeds of approximately $250 million in the second half of the year.

Stuart Miller: So let me turn to Justin Time.

Speaker Change: So let me turn to just in time.

Stuart Miller: We have been complementing our manufacturing model with a durable Just in Time finished home site delivery system. Every home that is going to be built needs a home site with a permit, and those home sites need to be auctioned and off balance used until we are ready to go. We continue to focus on a just-in-time delivery program for Lenn, just like we have for Londer and the appliances, and we continue to make excellent progress in this regard.

Stuart A. Miller: We have been complementing our manufacturing model with a durable, just-in-time, finished home site delivery system. 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-balance sheet until we are ready to build. We continue to focus on a just-in-time delivery program for land, just like we have for lumber and appliances, and we continue to make excellent progress in this regard. As always, we have always executed option land deals with third-party developers. Those deals are not always available, and there are no developers in many of our markets.

Justin: We have been complementing.

Justin: Our manufacturing model with a durable just in time finished homesites delivery system.

Justin: Every home that is going to be built needs a home site with a permit and those homesites needs to be options and off balance sheet until we are ready to build.

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

Stuart Miller: While we have always executed option-land deals with third-party developers, those deals are not always available, and there are no developers in many of our markets. We only become structurally and durably land-white and asset-white by both negotiating option deals with landowners and developers, and also creating structured land strategies with private equity capital or permanent capital. Accordingly, we have worked with a series of private equity partners to create a home-site purchase platform where land is held in developed and ultimately delivered on a rolling-option basis to the manufacturer as homes are ready to be started. This platform is a backstop for purchased land to be developed and delivered just in time to the manufacturer without land risk to that manufacturer.

Justin: While we have always executed.

Justin: Executed option land deals with third party developers those deals are not always available and there are no developers and many of our markets.

Justin: We only become structurally and Durably land light and asset light.

Stuart A. Miller: We only become structurally and durably land-like and asset-like by both negotiating option deals with landowners and developers and also creating structured land strategies with private equity, capital, or permanent. Accordingly, we have worked with a series of private equity partners to create a home-site purchase platform where land is held and developed and ultimately delivered on a rolling option basis to the manufacturer as homes are ready to be started. This platform is a backstop for purchased land to be developed and delivered just in time to the manufacturer without land risk to that manufacturer.

Justin: Both negotiated an option deals with landowners and developers and also creating structured land strategies with private equity capital or permanent capital.

Justin: Accordingly, we have worked with a series of private equity partners to create a home site purchase platform, where land is held in develop and ultimately delivered on a rolling option basis through the manufacturer as homes are ready to be started.

Justin: This platform as a backstop for purchased land to be developed and delivered just in time to the manufacturer without land risk to that manufacturer.

Stuart Miller: By consistently focusing on a land-lite strategy, we have materially enhanced and generated consistent gas well through the option downs of interest rate changes, and we have enhanced our balance sheet and our liquidity. A balance sheet, as I know earlier, is situated with a 7.7 percent depth to capital ratio, home-go-be depth to capital ratio, with $3.6 billion of cash on hand, and $0.0 billion is being drawn on our revolver. We have the flexibility to allocate capital strategically first, of course, to growth, while also retiring debt, paying appropriate dividends, and repurchasing shares of one of our stock.

Stuart A. Miller: By consistently focusing on our land life strategy, we have materially enhanced and generated consistent gas flow through the ups and downs of interest rate changes, and we have enhanced our balance sheet and our liquidity. Our balance sheet, as I noted earlier, is situated with a 7.7% debt-to-capital ratio, home building debt-to-capital ratio, with $3.6 billion of cash on hand and $0 being drawn on our revolver. We have the flexibility to allocate capital strategically, first, of course, to growth, while also retiring debt, paying appropriate dividends, and repurchasing shares of Lennar stock.

Justin: By consistently focusing on our land light strategy.

Justin: We have materially enhanced and generated consistent gas flow through the ups and downs of interest rate changes and we have enhanced our balance sheet and our liquidity.

Justin: Our balance sheet as I noted earlier is situated with a seven 7% debt to capital ratio homebuilding debt to capital ratio with $3 $6 billion of cash on hand and $0.

Under our revolver.

Justin: We have the flexibility to allocate capital strategically first of course to grow while also retiring debt paying appropriate dividends and repurchasing shares when our stock.

Stuart Miller: We are aware that many have suggested that we have accumulated too much cash on our balance sheet, and our leverage is very limited, which limits the ability of our returns to move higher. While we have understood the concern, we have remained patient, as we have evolved not just the migration to land-lite configuration, but also have remained focused on the long-term durability of the structures involved.

Justin: Yes.

Stuart A. Miller: We are aware that many have suggested that we have accumulated too much cash on our balance sheet and our leverage is very limited, which limits the ability of our returns to move higher. While we have understood the concern, we have remained patient as we have evolved not just the migration to land-like configurations but also remained focused on the long-term durability of the structures involved. Private equity capital can be fickle. By driving volume through these programs, we have gained advantage insights into the refined workings of our strategic land program.

We are aware that many have suggested that we have accumulated too much cash on our balance sheet and our leverage is very limited, which limits the ability of our returns to move higher.

Justin: While we have understood. The concern we have remained patient as we have evolved not just the migration to land light configuration, but also have remain focused.

Justin: On the long term durability of the structures involved.

Stuart Miller: Private equity capital can be thick. By driving volume through these programs, we have gained advantage insights into the refined workings of our strategic land programs. Although we have a number of constructive partners in this regard, I would like to especially thank Ryan Malat and Angela Gordon for being an incredible and selfless partner in helping to evolve these programs over the past years. He has been truly invaluable in execution and evolution and, of course, never a mercenary in any engagement. With Ryan's help, the underlying plumbing system for the land strategies has been refined, and questions have been answered as to the durability of the relationships that make up the counterparty relationship with the home building part.

Equity capital can be fickle.

Justin: By driving volume through these programs, we have gained advantage insights into the refining workings of our strategic land programs.

Stuart A. Miller: Although we have a number of constructive partners in this regard, I would like to especially thank Ryan Millett and Angela Gordon for being an incredible and selfless partners in helping to evolve these programs over the past year. Ryan has been truly invaluable in execution and evolution, and, of course, never a mercenary in any engagement.

Justin: Although we have a number.

Justin: Of constructive partners in this regard I would like to especially thank Ryan will lap and then Zillow Gordon for being an incredible and southwest partner in helping to evolve these programs over the past years.

Justin: He has been truly invaluable in execution and evolution and of course, we never immersed scenario and then the engagement.

Stuart A. Miller: With Ryan's help, the underlying plumbing system for the land strategies has been refined, and questions have been answered as to the durability of the relationships that make up the counterparty relationship with the home building partners. Building on our experience, on our last earnings call, we announced that we were rekindling our focus on a strategic spinoff of most of our remaining land in order to create a permanent capital vehicle that can offer developed home sites to Lennar.

Justin: With Ryan helped the underlying plumbing system for the land strategies has been refined and questions had been answered as to the durability of the relationships that make up the counterparty relationship with the homebuilder and partner.

Stuart Miller: Living on our experience, building on our experience. On our last earnings call, we announced that we will rekindle in our focus on a strategic spin-off of most of our remaining land in order to create a permanent capital vehicle that can option develop home sites to Lennar, recycle capital into new home sites, and distribute market-appropriate returns to shareholders. I am pleased to inform you that we have made substantial progress over the last 90 days, and we confidentially submitted a draft registration statement to the SEC a few weeks ago. We are currently looking at approximately a $6 billion to $8 billion of land that we expect to spin off into a new public company with no associated debt.

Justin: Building on our experience on our building on our experience.

Justin: On our last earnings call, we announced that we were rekindling our focus on on a strategic spinoff of most of our remaining land in order to create a permanent capital vehicle that can option developed homesites to lenore recycle capital into new home sites and distal.

Stuart A. Miller: Recycle capital into new home sites and distribute market-appropriate returns to shareholders. I am pleased to inform you that we have made substantial progress over the last 90 days, and we confidentially submitted a draft registration statement to the SEC a few weeks ago. We are currently looking at approximately six to eight billion dollars of land that we expect to spin off into a new public company with no associated debt.

Justin: Reviewed market appropriate returns to shareholders.

Justin: I am pleased to inform you.

Justin: That we have made substantial progress over the last 90 days and we confidentially submitted a draft registration statement to the SEC a few weeks ago.

Justin: We are currently looking at approximately a $6 billion to $8 billion $6 billion to $8 billion of land that we expect to spin off into a new public company with no associated debt.

Stuart Miller: The goal of this spin-off is to accelerate our land-wide strategy, which would allow for off-balance treatment of the land assets. We are excited about the opportunity that we believe this spin-off will bring us to the innovations that we have developed for the operation of the spun-off entity. Following this spin-off, the new public company will be completely independent from Lennar. Lennar will have option purchase agreements to purchase back-finished home sites on a just-in-time basis. Our team, led by Fred Rothman, has been fully dedicated to bringing this project to life as soon as we can, but we are still early in the process, and there is no specific timeline to completion or guarantee that the transaction will be completed.

Stuart A. Miller: The goal of the spinoff is to accelerate our land life strategy, which would allow for off-balance sheet treatment of the land assets. We are excited about the opportunities that we believe this spinoff will bring us for the innovations that we have developed for the operation of the spinoff entity. Following the spinoff, the new public company will be completely independent from Lennar.

Justin: Goal of the spin off is to accelerate our land light strategy, which would allow for off balance sheet treatment of the land assets.

Justin: We are excited about the opportunities that we believe the spinoff will bring us to the innovations that we have developed for the operation of the spun off entity.

Justin: Following the spinoff the new public company, we will be completely independent from Lanotte Linda.

Stuart A. Miller: Lennar will have option purchase agreements to purchase back-finished home sites on a just-in-time basis. Our team, led by Fred Rothman, has been fully dedicated to bringing this project to life as soon as we can. But we are still early in the process, and there is no specific timeline for completion or guarantee that the transaction will be completed. Because of the ongoing review by the SEC, we cannot comment further on the spinoff, but we look forward to providing you with an update on progress and timing in the future.

Speaker Change: <unk> will have option purchase agreements to purchase back finished homesites on a just in time basis.

Speaker Change: Our team led by Fred Rothman has been fully dedicated to bringing this project to life as soon as we can but we are still early in the process and there is no specific timeline to completion or guarantee that the transaction will be completed.

Stuart Miller: Because of the ongoing review by the SEC, we cannot comment further on the spin-off, but we look forward to providing you with an update on progress and timing in the future. After the spin-off, the new company would be another bucket of capital; in other words, additive, consistent, and compatible with other relationships that have existed and will continue to thrive alongside Lennar. 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 options. Our balance would remain very strong with consistent earnings and gas flow to continue to pay down debt and to leave purchase stock.

Because of the ongoing review by the SEC, we cannot comment further on the spinoff, but we look forward to providing providing you with an update on progress and timing in the future.

Stuart A. Miller: After the spinoff, the new company would be another bucket of capital, in other words, additive, consistent, and compatible with other relationships that have existed and will continue to thrive alongside Lennar. 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 options.

Speaker Change: After the spin off the new company would be another bucket of capital in other words additive consistent and compatible with other relationships that have existed and will continue to thrive alongside of Illinois.

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

Speaker Change: <unk>.

Stuart A. Miller: Our balance sheet would remain very strong with consistent earnings and cash flow to continue to pay down debt and to repurchase shares. So, let me conclude and say, at Lennar, we are continuing to modernize and upgrade the Lennar operating platform as we drive consistent production and sales. It has been a busy and productive quarter, and we have continued to execute in the short term while we build our platform for continued and future success.

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

Stuart Miller: So let me conclude and say, at Lennar, we are continuing to modernize and upgrade the Lennar operating platform as we drive consistent production and sales. It has been a busy and productive quarter, and we have continued to execute in the short term while we build our platform for continued and future success. Our second quarter of 2024 has been another strategic and operational from the company. While market conditions have remained challenging, we have consistently learned and found ways to address market needs. We know that the man is strong and there is a chronic housing supply shortage that needs to be built.

Speaker Change: So let me conclude and say at <unk>, we are continuing to modernize and upgrade but when our operating platform as we drive consistent consistent production and sales.

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

Stuart A. Miller: Our second 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.

Our second quarter of 2024 has been another strategic and operational success for our company.

Speaker Change: While market conditions have remained challenging we have consistently learn and found ways to address market.

Speaker Change: To address market needs we.

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

Stuart Miller: We will continue to drive production to meet the housing shortage that we know persists across our markets. With that said, as interest rates have shied and normalized, and if the Fed is actually going to begin to cut rates, we believe a hand up demand will be activated and we will be well prepared. If not, we will continue to produce volume and add to market supply. For that, we are well prepared. Even though higher rates have remained sticky, strong kinds of demand have found ways to access the housing market. Given consistent execution, we are extremely well-positioned for even greater success as strong demand for affordable offerings continues to see short supply.

Stuart A. Miller: We will continue to drive production to meet the housing shortage that we know persists across our market. With that said, as interest rates subside and normalize, and if the Fed is actually going to begin to cut rates, we believe pent-up demand will be activated, and we will be well prepared. If not, we will continue to produce volume and add to market supply. For that, we are well-prepared. Even though higher rates have remained sticky, strong pent-up demand has found ways to access the housing market.

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

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

Speaker Change: If not we will continue to produce volume and add to market supply.

Speaker Change: For that we are well prepared.

Speaker Change: Even though higher rates have remained sticky strong pent up demand, which has found ways to access the housing market.

Stuart A. Miller: Given consistent execution, we are extremely well positioned for even greater success as strong demand for affordable offerings continues to seek 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 will focus on our manufacturing model and continue to act. We will focus on our pure play business model and reduce exposure to non-core assets.

Speaker Change: Given consistent execution, we are extremely well positioned for even greater success as strong demand for affordable offerings continues to see short supply.

Stuart Miller: Perhaps most importantly, our extraordinarily strong balance sheet affords us flexibility and opportunity to consider and execute upon thoughtful innovation for our future. We will focus on our manufacturing model and continue to execute. We will focus on our PLA business model and reduce exposure to non-core assets. We will continue to drive to just-in-time home site delivery and an asset-like balance sheet, and we will continue to allocate capital to grow, get retirement, and stop-re purchases as appropriate. We have the luxury to execute flawlessly in the short term while we continue to return capital to our shareholders who dividend and stock buyback, while we also, and I emphasize, also, pursue strategic distribution to shareholders that fortifies our future.

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 will focus on our manufacturing model and continue to execute.

Speaker Change: We will focus on our pure play business model and reduce exposure to non core assets.

Stuart A. Miller: We will continue to drive to just-in-time home site delivery and an asset-light balance, and we will continue to allocate capital to growth, debt retirement, and stock repurchases as appropriate. We have the luxury of executing 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 this, pursue strategic distributions to shareholders that fortify our future. We have clearly earned an enviable position.

Speaker Change: We will continue to drive to just in time time, homesite delivery and an asset light balance sheet.

And we will continue to allocate allocate capital to growth debt retirement and stock repurchases as appropriate.

Speaker Change: We have the luxury 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 also pursue strategic distribution to shareholders that fortifies our future.

Stuart Miller: We have clearly, clearly earned an enviable position. As I look forward to a successful 2024, we are well-positioned and expect to see much more of the same. We are confident that by design, we will continue to grow, perform, and drive one area to new levels of consistent and predictable performance. We are guiding to 20,500 to 21,000 closing next quarter with approximately a 23% margin. And we do expect to deliver approximately 80,000 homes this year, with a little over a 23% margin. We also expect to repurchase an excess of $2 billion of stock in 2024 as we continue to drive very strong cash flow.

Speaker Change: We are clearly clearly earned an enviable position.

Stuart A. Miller: As I look forward to a successful 2024, we are well positioned and expect to see much more of the same. We are confident that, by design, we will continue to grow, perform, and drive Lennar to new levels of consistent and predictable performance. We are guiding to 20,500 to 21,000 closings next quarter with approximately a 23% margin. And we do expect to deliver approximately 80,000 homes this year with a little over a 23% margin.

As I look forward to a successful 2024, we are well positioned and expect to see much more of the same we.

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

Speaker Change: We are guiding to 2500 to 21 closings next quarter with approximately a 23% margin.

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

Stuart A. Miller: We also expect to repurchase in excess of $2 billion of stock in 2024 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 want to turn it over to John. Good morning.

Speaker Change: We also expect to repurchase in excess of $2 billion of stock in 2024, as we continue to drive very strong cash flow.

Stuart Miller: We look forward to a very strong year.

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

Stuart Miller: And for that, I want to thank the extraordinary associates of One for their tremendous focus, effort, and talent.

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

Unknown Executive: And with that, let me turn over to John.

John Lovallo: Good morning. The European stiller are operational teams that will now continue to apply and improve on the execution of the core operating strategies. Each quarter are divisions further defined elements of these strategies and how they can more effectively work in concert.

Jonathan M. Jaffe: As you heard from Stuart, our operational teams at Lennar continue to refine and improve upon the execution of our core operating strategy. Each quarter, our divisions further refine the elements of these strategies and how they can more effectively work in concert. We are laser-focused on creating an even-flow, production-first home builder designed to deliver maximum results. As part of this process, Stuart, myself, and our regional presidents traveled to our divisions, meeting with their management teams after the close of each quarter to review each of the elements of our operating strategy.

John: Good morning, and Europe from Stewart, our operational teams that we are continuing to refine and improve upon the execution of our core operating strategies each quarter. Our divisions further refine the elements of these strategies and how they can more effectively working concert.

John: Our laser focus on creating an even flow production first homebuilder designed to deliver maximum results as.

As part of this process for myself and our regional presidents travel to our divisions, leading to their management teams. After the close of each quarter to review each of the elements of our operating strategy. In fact, we're in the middle of these reviews right now taking today off of course to address our earnings but back at it tomorrow in these meetings we learned together.

Jonathan M. Jaffe: In fact, we're in the middle of these reviews right now, taking today off, of course, to address our earnings, but back at it tomorrow. In these meetings, we learned together what is working and what needs improvement. With the end goal in mind of even flow production, we have built a strong sense of confidence in the liability and results driven by selling the right homes at the right pace. Every day, our divisions learn from their engagement with the Lennar machine, constantly adjusting and trying new tactics. The machine produces information in the form of dashboards for analysis and decision-making. There is a continuous feedback loop as needs move from the top of the funnel, through the funnel, and ultimately to the sail.

John Lovallo: In fact, we're in the middle of these reviews right now, taking today off, of course, to address our earnings, but back at it tomorrow. In these meetings, we learn together what is working and what needs improvement. With the end goal in mind of even flow production, we have built a strong sense of confidence in the liability and results given by selling the white holes at the right pace. Every day, our divisions learn from their engagement with the one arm machine, constantly adjusting and trying new tactics. The machine produces information in the form of dashboards, analysis, and decision making.

John: What is working and what needs improvement.

John: With the end goal in mind that even flow production, we have built a strong sense of confidence and reliability and results driven by selling our rifles at the right pace.

John: Every day, our divisions learn from their engagement with Illinois machine constantly adjusting and trying new tactics. The machine producers information in the form of dashboards for analysis and decision making.

John Lovallo: There are a continuous feedback loop as neat move from the top of the funnel through the funnel and ultimately to a sale. This review enabled lower customer acquisition costs while also improving the customer experience. Again, this quarter, operating result produced starts that were evenly matched with sale and projected to be evenly matched again in the third quarter. We will continue to refine this process of matching sale and production pace, delivering even more dependable and predictable production, which provides maximum benefit to us applying trade partners. Last quarter, I described to you how our divisions hold Machine Monday meetings to optimize the selling of the right homes at the right price based on the prior week's activities.

John: There is a continuous feedback loop as we've moved from the top of the funnel through the funnel and ultimately to a sale. This review enables lower customer acquisition costs, while also improving the customer experience.

Jonathan M. Jaffe: This review enabled lower customer acquisition costs while also improving the customer experience. Again, this quarter, our operating results produced starts that were evenly matched with sales and are projected to be evenly matched again in the third quarter. We will continue to refine this process of matching sales and production paces, delivering even more dependable and predictable production, which provides maximum benefit to our supply chain and our trade partners. Last quarter, I described to you how our divisions hold Machine Monday meetings to optimize the selling of the right homes at the right price based on the prior week's activity.

John: Again this quarter. Our operating results produced starts that were evenly matched with sales are projected to be evenly matched again in the third quarter. We will continue to refine this process of matching sales and production pace delivering even more dependable and predictable production, which provides maximum benefit to our supply chain and our trade partners.

John: Last quarter I described to you how our divisions whole machine learning meetings to optimize the selling of the right homes at the right price based on the prior to reach activities. Our operating teams review dashboards comparing actual result to the planned activity and make adjustments in real time to marketing plans for the upcoming week.

John Lovallo: Our operating teams review dashboards comparing how to result to the planned activity and make adjustments in real time to marketing plans for the upcoming week. Currently, these meetings are focused on how to cost effectively have higher quality leads, but what we refer to as less hay and more needles. In turn, this reduces the overall number of leads we interact with, delivering more higher quality leads to our team. These improvements will result in a better customer experience, higher conversion rates, and lower customer acquisition costs. In our second quarter, as interest rates fluctuate at around 7%, this process informed us that to where we have priority power or where we need to buy down interest rates and to a other incentives to achieve the desired pace.

Jonathan M. Jaffe: Our operating teams review dashboards comparing actual results to the planned activity and make adjustments in real time to marketing plans for the upcoming week. Currently, these meetings are focused on how to cost-effectively harvest higher quality leaves, what we refer to as less hay and more needles.

John: These meetings are a focus on how to cost effectively direct higher quality leads.

John: What we refer to as less hey, and more needles.

Jonathan M. Jaffe: In turn, this reduces the overall number of leads we interact with, delivering more high-quality leads to our team. These improvements will result in a better customer experience, higher conversion rates, and lower customer acquisition costs. In our second quarter, as interest rates fluctuated around 7%, this process informed us as to where we have pricing power or where we need the buy-down of interest rates and other incentives to achieve the desired pace.

John: This reduces the overall number of leads we interact with delivering more higher quality leads to our team.

John: These improvements will result in a better customer experience higher conversion rates and lower customer acquisition costs.

John: And our second quarter as interest rates fluctuate at around 7%. This process informed us as to where we have pricing power or where we need the buy down of interest rates and there are other incentives to achieve the desired pace.

John Lovallo: The living pace resulted in achieving the pace resulted in ending the quarter with an average of less than one unsolved completed home for community, and in the amount of growth of 19% in sales and 15% in deliveries year over year. Our sales pace of 5.7 homes for community Q2 is up from the pace of 4.8 last year. This increase was, by design, the match to start pace of 5.8 homes for community in Q2. The match sales pace to production pace means the sales pace we choose varied across our markets. We're able to flex sale pace faster or slower as needed in order to match production on a community-like community basis.

John: Delivering paste resulted are.

Jonathan M. Jaffe: Achieving the pace resulted in ending the quarter with an average of less than one unsold completed home per community and enabled our growth of 19% in sales and 15% in deliveries year over year. Our sales pace of 5.7 homes per community in Q2 is up from the pace of 4.8 last year. This increase was by design to match the start pace of 5.8 homes per community in Q2. The match sales pace to production pace means the sales pace we achieve varies across our market, because we are able to flex sales space faster or slower as needed in order to match production on a community-by-community basis.

John: We're achieving the pace resulted in ending the quarter with an average of less than one unsold completed homes per community and enable our growth of 19% of sales and 15% deliveries year over year.

John: Our sales pace of $5 seven homes per community in Q2 is up from the pace of $4. Eight last year. This increase was by design the master start pace of five eight homes per community in Q2.

John: The mat sales pace to production pace manager sales pace, we achieved varied across our markets, we're able to flex sales pace faster or slower as needed in order to match production on a community by community basis.

Jonathan M. Jaffe: Next, I'll discuss cycle time and construction costs. As I mentioned, by continuously improving the way we execute this game plan of predictable and reliable production, we deepen our partnerships with our trade partners. We focus on maintaining both a high volume and, importantly, a consistent volume of homes under construction that allows our trade partners to reduce their input costs despite the inflationary macro environment. This strategy, along with value engineering and skewed rationalization, produces many efficiencies benefiting our trade partners.

John Lovallo: Next, I'll discuss cycle time and construction costs. As I mentioned, I continuously improve the way we execute this game plan of predictable and reliable production. We deepen the partnerships with our trade partners. We focus on reaching with both a high volume and, importantly, a consistent volume of homes under construction allows our trade partners to reduce their input costs despite the inflationary macro environment. This strategy, along with value engineering and skewed rationalization, produces many efficiencies benefiting our trade partners. For the second quarter, cycle time decreased by 4 days sequentially from Q1 down to 115 one day, one on a 50 day non-average, the single family homes, a 30% decrease you over year.

Speaker Change: Next I will discuss cycle time and construction costs.

Speaker Change: As I mentioned are continuously improving the way we execute this game plan, a predictable and reliable production, we deepen the partnerships with our trade partners.

Speaker Change: Focus on maintaining both a high volume and importantly, a consistent volume of homes under construction that allows our trade partners to reduce their input costs. Despite the inflationary macro environment.

Speaker Change: This strategy, along with value engineering, and SKU rationalization produces many efficiencies benefiting our trade partners.

Speaker Change: Consistently starting homes, even as interest rates rose during the quarter, we increased our starts by 9% from the prior year and 78% sequentially from Q1.

Jonathan M. Jaffe: By consistently starting homes, U.S. interest rates rose during the quarter. We increased our start by 9% from the prior year and 70% sequentially from Q1. In the second quarter, cycle time decreased by four days sequentially from Q1 down to 150 days on average for single-family homes, a 30% decrease year-over-year.

Speaker Change: For the second quarter cycle time decreased by four days sequentially from Q1 down to 151 150 days on average to single family homes, a 30% decrease year over year.

Jonathan M. Jaffe: We expect to see cycle time continue to improve as we become increasingly more efficient. Looking at the second quarter, as expected, our construction costs also decreased sequentially from Q1 by about 1% and on a year-over-year basis by about 9%. Moving forward, to drive further efficiencies and cost reductions, we are making significant progress on utilizing highly-valued engineered airfoil plans, which, as Stuart mentioned, we call a core product strategy. These are our first starts at these homes in Texas late in the second quarter, and we'll see expanded starts throughout Texas and Florida in the third quarter with first deliveries in our fourth quarter.

John Lovallo: We expect to see cycle time continue to improve as we become increasingly more efficient. Looking at the second quarter, as expected, our construction costs also decrease sequentially from Q1 by about 1% and on the year-over-year basis by about 9%. Moving forward, to drive further efficiencies and cost reductions, we are making significant progress on utilizing highly-bodied, entered-air home plans, which is to mention we call it a home planning strategy. These are our first targets of these homes in Texas, late in the second quarter, and we will see expanded dark throughout Texas and Fard in the third quarter with first deliveries in our fourth quarter.

Speaker Change: We expect to see cycle times continue to improve as we become increasingly more efficient.

Speaker Change: Looking at the second quarter as expected our construction costs also decreased sequentially from Q1 by about 1% and on a year over year basis by about 9%.

Speaker Change: Moving forward to drive further efficiencies and cost reductions, we're making significant progress on utilizing highly valued engineered home brands, which as Stuart mentioned, we call our core product strategy.

Speaker Change: Our first starts of these homes in Texas late in the second quarter, we will see expanded store throughout Texas and Florida in the third quarter with first deliveries in our fourth quarter.

John Lovallo: The initial success of these core plans is seen as we engage with our trade partners and believe this will improve our position as a builder of choice. The reduced cost and time to build these core plans will help us achieve the goal of delivering more attainable housing beneath the needs of the home buying consumer.

Jonathan M. Jaffe: The initial success of these four plans can be seen as we engage with our trade partners and believe this will improve upon our position as a builder of choice. The reduced cost and time to build these core plans will help us achieve the goal of delivering more attainable housing to meet the needs of the home-buying consumer. Next, I'll discuss our landmines drive.

Speaker Change: The initial success of these floor plans as soon as we engage with our trade partners and believe this will improve upon our position as a builder of choice.

Speaker Change: To reduce cost and time to build these core plans will help us achieve the goal of delivering more attainable housing to meet the.

Speaker Change: In each of the home buying consumer.

John Lovallo: Next, I will discuss our land-like strategy. In the second quarter, we continue to effectively work with our strategic land and land bank partners, where they purchased land on our behalf, and then delivered just the time home site through a home building machine. In the second quarter, about 90% of our 1.7 billion, or approximately 16,000 home sites, required in the quarter with finished home sites purchased from these various land structures. This goes for the progress in the quarter of our supplied home sites as improved to 1.2 years now from 1.7 years, and controlled home site percentage increased to 79% from 70% year over year.

Speaker Change: Next I'll discuss our land light strategy in.

Jonathan M. Jaffe: In the second quarter, we continue to effectively work with our strategic land and land bank partners, where they purchase land on our behalf and then deliver just-in-time homesites to our home building machines. In the second quarter, about 90% of our $1.7 billion, or approximately 16,000 homesites acquired in the quarter, were finished homesites purchased from these various land structures. This showed further progress in the quarter. Our supply of owned home sites has improved to 1.2 years, now from 1.7 years, and the control home site percentage increased to 79% from 70% year over year.

Speaker Change: In the second quarter, we continued to effectively work with our strategic land and land Bank partners.

Speaker Change: They're purchasing on our behalf and then deliver adjusted net home sector homebuilding machine in.

Speaker Change: In the second quarter about 90% of our $1 7 billion or approximately 16000 home sites acquired in the quarter were finished home sites purchased from these various manning structures.

Speaker Change: This drove further progress in the quarter of our supply of owned Homesites has improved to one two years down from $1 seven years and control Homesites percentage increased to 79% from 70% year over year.

John Lovallo: These improvements in the execution of our operating strategies, resulting in reduced cycle time and less land owned, has increased their cash flow as well as improved our inventory trend, which now stands at 1.6 versus 1.3 last year, at a 23% increase.

Jonathan M. Jaffe: These improvements in the execution of our operating strategies, resulting in reduced cycle time and less land owned, have increased our cash flow, as well as improved our inventory churn, which now stands at 1.6 versus 1.3 last year, a 23% increase. The second quarter demonstrated ongoing progress in the execution of each of the strategies Stuart and I have reviewed.

Speaker Change: These improvements in the execution of our operating strategies, resulting in reduced cycle time and less land. One has increased our cash flow as well as improved our inventory churn, which now stands at one six versus $1 three last year, a 23% increase.

John Lovallo: In the second quarter of the industry, I'm going to progress in the execution of each of the strategies stored in our review. We start with a focus on what our marketing and sales machine, then total production, and onto land strategies. The focus on improving and connecting these strategies together, driving them in more consistency and improvement. The finding of these strategies means that change is constant, and the focus and hard work to execute is consistent. Yes, change can be challenging, but our associates are leaning into each of these strategies, embracing the challenges and are executing at even higher levels.

Speaker Change: The second quarter demonstrated ongoing progress in the execution of each of the strategies Stuart and I will review with you.

Jonathan M. Jaffe: We started with a focus on what are marketing and sales machines, then into our production, and on to land strategy. We focus on improving and connecting these strategies together, driving even more consistency and improvement. Defining these strategies means that change is constant, and the focus and hard work to execute are consistent.

Speaker Change: Starting with a focus on one of our marketing and sales machine than to our production and onto land strategies to focus on improving the connectivity strategies together driving even more consistency and improvement.

Speaker Change: Finding these strategies means that change is constant and the <unk>.

Speaker Change: Focus and hard work to execute is consistent.

Diane J. Bessette: Yes, change can be challenging, but our associates are leaning into each of these strategies, embracing the challenges, and executing at even higher levels. I also want to thank our associates for their commitment to this effort, and now I'd like to turn it over to Diane. Thank you, Joan, and good morning, everyone.

Speaker Change: Change can be challenging, but our associates are leaning into each of these strategies embracing the challenges and are executing at even higher levels.

John Lovallo: I also want to thank our associates for their commitment to this effort, and now if I could turn it over to Payow.

Speaker Change: Also want to thank our associates for their commitment to this effort and now I'd like to turn it over to Diane.

Diane Bessette: Thank you, Joan, and good morning, everyone. Students, Joan, have provided a great deal of color regarding our home building performance. So therefore, I'm going to spend a few minutes on my results with our financial services operations.

Diane J. Bessette: Thank you John and good morning, everyone Stuart and Jon has provided a great deal of comments regarding our homebuilding performing so therefore I'm going to spend a few minutes on the results of our financial services operations summarize our balance sheet highlights and then provide estimates for Q3, so starting with financial services.

Diane J. Bessette: Stuart and Joan have provided a great deal of color regarding our home building performance. So I'm going to spend a few minutes on the results of our financial services operations, summarize our balance sheet highlights, and then provide estimates for two and three. So starting with finance... For the second quarter, our financial services team had operating earnings of $146 million. The strong earnings were primarily driven by an increase in home building volume and a higher capture rate.

Diane Bessette: Summarize our value, highlight, and then provide estimates for Q3. So starting with finance.

Diane J. Bessette: The second quarter, our financial services team had operating earnings of $146 million with strong earnings was primarily driven by an increase in homebuilding volume and a higher capturing Additionally, there is a constant drumbeat drumbeat to embrace technology to continue to find ways to run a more efficient business.

Diane J. Bessette: Additionally, there is a constant drumbeat to embrace technology to continue to find ways to run a more efficient business. Our financial services team is intensely dedicated to providing a great customer experience for each homebuyer and has created true partnerships with our homebuilding teams to best accomplish that goal. That partnership is clearly reflected in their solid results. 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 $3.6 billion of cash and no borrowings on our $2.2 billion revolving credit facility.

Diane Bessette: of the United States and the United States and the United States. Our financial services team is intensely dedicated to providing a great customer experience for each home buyer and has created two partnerships with our homebuilding teams to best accomplish that goal. That partnership is clearly reflected in their solid results.

Diane J. Bessette: Our financial services team is intensely dedicated to providing a great customer experience for each home buyer and has created through partnerships with our homebuilding teams to best accomplish that goal that partnership is clearly reflected in your solid results.

Diane Bessette: Let's turn to our balance. 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 3.6 billion of cash and no borrowers on our 2.2 billion dollar revolving credit facilities. This provided total liquidity of 5.8 billion. As a result of our continued focus on balance, efficiency, and reducing our capital investment, we once again made significant progress on our goal of becoming land life.

Diane J. Bessette: 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.

Diane J. Bessette: This provided total liquidity of $5.8 billion. 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 land-like. At quarter end, as John indicated, our years owned improved to 1.2 years from 1.7 years in the prior year, and our home sites controlled increased to 79% from 70% in the prior year, our lowest years owned and highest control percentage in our history. At quarter-end, we owned 91,000 homesites and controlled 340,000 homesites for a total of 431,000 homesites.

Diane J. Bessette: Results of these actions is that we ended the quarter with $3 6 billion of cash and no borrowings on our $2 2 billion.

Diane J. Bessette: They've not been credit facility. This provided total liquidity with liquidity of $5 8 million.

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 landline.

Diane Bessette: At quarter end, as John indicated, our years on improved to 1.2 years from 1.7 years in the prior year, and our home site's control increased to 79% from 70% in the prior year. Our lowest years owned and highest control percentage in our history. At quarter end, we owned 91,000 home sites and control 340,000 home sites for a total of 431,000 home sites. We believe this portfolio provides us with a strong competitive position to continue to gain market share in a capital-efficient way. We spent 1.7 billion on land purchases this quarter. However, about 90% were finished home sites where vertical construction will soon begin.

Diane J. Bessette: At quarter end as John indicated our years on improved to one two years from one seven years in the prior year and our Homesites controlled increased to 79% from 70% in the prior year.

Diane J. Bessette: <unk> used owned and highest controlled percentage in our history.

Speaker Change: Quarter end, we owned 91000, Homesites and controls 340000, Homesites for a total of 431000 unchanged we.

Diane J. Bessette: We believe this portfolio provides us with a strong competitive position to continue to gain market share in a capital efficient way. We spent $1.7 billion on land purchases this quarter, but about 90% 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. Of the homes closed during the quarter, about 60% were from our third-party land structures where we purchased the homesite on a finished basis.

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

Speaker Change: Spent $1 $7 billion on land purchases. This quarter. However, about 90% 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.

Diane Bessette: This was consistent with our manufacturing model of buying land on a Justin Pine basis, which is less capital intensive. Of the homes closed during the quarter, about 60% were from our third-party land structures where we purchased the home site on a finished basis. As we continue to reduce our ownership of land and purchase home sites on a Justin Pine basis, our earnings should more consistently approximate cash flow. And over time, it would be our goal to align capital return to shareholders more closely with that cash flow. And finally, our inventory turn was 1.6 times, up from 1.7 times last year, and our return on inventory was 31.4%, up 110 basis points in last year.

Speaker Change: Plus the homes closed during the quarter about 60% were from our third party land structures, where we purchased the homesites on a finished patients.

Diane J. Bessette: As we continue to reduce our ownership of land and purchase home sites on a just-in-time basis, our earnings should more consistently approximate cash flow. And over time, it would be our goal to align capital return to shareholders more closely with that cash flow. And finally, our inventory turn was 1.6 times, up from 1.7 times last year, and our return on inventory was 31.4%, up 110 basis points. During the quarter, and consistent with our production focus, we started about 21,400 homes and ended the quarter with approximately 40,000 homes and inventory excluding models. This inventory number included about 1,100 homes that were completed unsold, which is less than one home per community, as we successfully managed our finished inventory level.

Speaker Change: We continue to reduce our ownership of land and purchase Homesites on adjusting time basis, our earnings should more consistently approximate cash flow and over time, it would be our goal to align capital return to shareholders.

Speaker Change: Mostly with that cash flow.

And finally, our inventory turn was one six times up from one seven times last year and our return on inventory was 31, 4% up 110 basis points from last year.

Diane Bessette: During the quarter, and consistent with our production focus, we started about 21,400 homes and ended the quarter with approximately 40,000 homes in inventory, excluding models. This inventory number included about 11,100 homes that were completed on sole, which is less than one home per community, as we successfully managed our finished inventory levels. And looking at our debt maturity profile, we repaid 454 million of our 4.5% senior notes due April 2024, and we repurchased in the open market 100 million of senior notes due November 20, 2077, at an average price of 98 points.

Speaker Change: During the quarter and consistent with our production focus we started about 21400 homes and ended the quarter with approximately 40000 homes in inventory excluding models.

Speaker Change: This inventory number included about 1100 homes that were completed unsold, which is less than one home per community as we successfully manage our finished inventory levels.

Diane J. Bessette: Looking at our debt maturity profile, we repaid $454 million of our 4.5% senior notes due April 2024, and we repurchased in the open market $100 million of senior notes due November 2027, at an average price of $98.3 million. Our next step in maturity is not until May 2025. We continue to benefit from our previous pay-downs of senior notes and strong earnings generation, which brought our home building debt total cap down to 7.7% at quarter end, our lowest ever, and a remarkable improvement from 13.3% in the prior year. Consistent with our commitment to increasing shareholder returns, we repurchased $3.8 million of our outstanding shares for $603 million. Additionally, we paid total dividends of $139 million this quarter.

Speaker Change: When looking at our debt maturity profile, we repaid $464 million of about four 5% senior notes due April 2024, and we repurchased in the open market $100 million of senior notes due November 2027, and an average price of 98 point shares our next step mature.

Diane Bessette: of 26. Our next step maturity is not until May of 2025. We continue to benefit from our previous paydowns of senior notes and strong earnings generation, which for our home building that still cap down to 7.7 percent at quarter end, our lowest ever, and a remarkable improvement from 13.3 percent in the prior year. Consistent with our commitment to increasing shareholder returns, we re-purchased 3.8 million of our outstanding shares for 600 and 3 million. Additionally, you paid total dividends as quarter of 139 million.

Speaker Change: Surety is not until may of 2025.

Speaker Change: We continue to benefit from our previous Paydowns of senior notes through strong earnings generation, which brought our homebuilding debt to total cap down to seven 7% at quarter end, our lowest ever and a remarkable improvement from 13, 3% in the prior year.

Speaker Change: Consistent with our commitment to increasing shareholder returns, we repurchased $3 8 million of our outstanding shares for 603 million. Additionally, we paid total dividends this quarter of $139 million.

Diane Bessette: In just a few final points on our balance sheet, our stockholders' equity increased to almost 27 billion, and our book value per share increased to 97.8 million. In summary, the strength of our balance sheet's strong liquidity and low leverage provides us with significant confidence and financial flexibility as we move through 2024 and beyond.

Speaker Change: And just a few final points on our balance sheet, our stockholders' equity increased to almost $27 billion and our book value per share increased to 90 788.

Diane J. Bessette: And just a few final points on our balance sheet: our stockholders' equity increased to almost $27 billion, and our book value per share increased to $97.88. 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 and beyond. And so with that brief overview, I'd like to turn to Q3 and provide some guidance. We expect Q3 new orders to be in the range of 20,500 to 21,000 homes as we continue to sell homes in line with our production pace.

Speaker Change: In summary, the strength of our balance sheet strong liquidity and low leverage provides us with significant confidence and financial flexibility as we move through 2024 and beyond.

Diane J. Bessette: We anticipate our Q3 deliveries to also be in the range of 20,500 to 21,000 homes, with a manufacturing focus of efficiently turning inventory into cash. Our Q3 average sales price on those deliveries should be in the range of $420,000 to $425,000. And we expect gross margins to be about 23%, and our SG&A to be in the range of 7.3% to 7.5%, with both estimates having some plus or minus depending on market conditions.

Diane Bessette: And so, with that brief overview, we would like to turn 2.3 and provide some guiding estimates. We expect 2.3 EU orders to be in the range of 20,500 to 21,000 homes as we continue to sell homes in line with our production page. We anticipate our 2.3 deliveries to also be in the range of 20,500 to 21,000 homes, with the manufacturing focus of efficiently turning inventory into cash. Our 2.3 average sales price on those deliveries should be in the range of 420,000 to 425,000. And we expect most margins to be about 23 percent, and our SDNA to be in the range of 7.3 to 7.5 percent, with both estimates having some plus and a minus depending on market conditions.

And so with that brief overview I'd like to turn to Q3 and provide some guidance estimates.

Speaker Change: We expect Q3, new orders to be in the range of 20 521000 homes as we continue to sell homes in line with our production payments. We anticipate our Q3 deliveries to also be in the range of 20 521000 homes with our manufacturing focus.

Speaker Change: Of efficiently training inventory into cash.

Speaker Change: Our Q3 Q3 average sales price on those deliveries should be in the range of 420000 to 425000.

Speaker Change: We expect gross margins to be about 23% and our SG&A to be in the range of seven 3% to seven 5% with first both estimates, having some plus or minus depending on market conditions.

Diane Bessette: So, to combine combating joint venture lay-in sales and other categories, we expect to have earnings of about 20 million. We anticipate our financial services earnings for 2.3 to be in the range of 135 to 140 million, based on expected product mix in our mortgage operations. We expect a loss of about 20 million for our multi-family business, and this estimate does not include the impact of the multi-family transactions that Stuart outlined in his narrative; though specific timing is still uncertain. And then, turning to when our others, we expect a loss of about 25 million for this category.

Diane J. Bessette: For the combined home building joint venture, land sales, and other categories, we expect to have earnings of about $20 million. We anticipate our financial services earnings for Q3 to be in the range of $135 to $140 million based on the expected product mix in our mortgage operation. We expect a loss of about $20 million for our multi-family business, and this estimate does not include the impact of the multi-family transactions that Stuart outlined in his narrative since the specific timing is still uncertain.

For the combined homebuilding joint venture land sales and other categories, we expect to have earnings of about $20 million.

Speaker Change: We anticipate our financial service earnings financial services earnings for Q3 to be in the range of $135 million to $140 million based on expected product mix and our mortgage operations, we expect a loss of about $20 million for our multifamily business and this estimate does not include the.

Speaker Change: <unk> of the multifamily transactions that Stuart outlined in his narrative choose the specific timing is still uncertain.

Diane J. Bessette: And then turning to Lennar Other, we expect a loss of about $25 million for this category. This 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 our quarter. Our Q3 corporate G&A should be about 1.8% of total revenues, and our charitable foundation contribution will be based on $1,000 per home delivery. We expect our tax rate to be about 24.25%, and the weighted average share count should be about 271 million shares.

Speaker Change: And then turning to our other we expect a loss of about $25 million finished category. This estimate does not include any potential mark to market adjustments for our.

Diane Bessette: This estimate does not include any potential market market adjustments for our public technology investments since that adjustment will be determined by their stock prices at the end of our quarter. Our Q3 corporate GNA should be about 1.8 percent of total revenues, and our charitable foundation contribution will be based on $1,000 per home delivery. We expect our tax rate to be about 24.25 percent, and the weighted average share count should be about 271 million shares. And so, on a combined basis, these estimates should produce an EPS range of approximately $3.50 to $3.65 per share for the quarter.

Speaker Change: Technology investments since that adjustment will be determined by their stock prices at the end of our quarter.

Speaker Change: Q3, corporate G&A should be about one 8% of total revenues and our charitable foundation contribution will be based on $1 per home delivery.

Speaker Change: Our tax rate to be about 24, 25% and the weighted average share count should be about 271 million shares and so on a combined basis. These estimates should produce an EPS range of approximately $3 50 to $3 65 per share for the <unk>.

Diane J. Bessette: And so on a combined basis, these estimates should produce an EPS range of approximately $3.50 to $3.65 per share for the quarter. For the full year, as we mentioned, we remain focused on delivering 80,000 homes, which would be 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 such, we are still targeting a total capital allocation of at least $2.5 billion for 2024. $1.7 billion has already been utilized to repurchase shares and reduce our debt levels through Q2.

Speaker Change: Correct.

Diane Bessette: For the full year, as we mentioned, we remain focused on delivering 80,000 homes, which would be a 10 percent growth year over the year, with a growth margin that is consistent with last year's growth margin. We also remain confident with our cash flow generation. As such, we are still targeting a total capital allocation of at least 2.5 billion for 2024. 1.7 billion has already been utilized to repurchase shares and reduce our debt levels to Q2. And so, the balance will be applied to additional share repurchases in the second half of the year.

Speaker Change: For the full year as we mentioned we remain focused on delivering 80000 homes, which would be at 10% growth year over year with a gross margin that is consistent with last year's gross margin.

Speaker Change: Answer remain confident with our cash flow generation as such we are still targeting a total capital allocation of at least $2 5 billion for $2021 7 billion has already been utilized to repurchase shares and reduce our debt levels through Q2, and so the balance will be applied to additional share.

Diane J. Bessette: And so the balance will be applied to additional share repurchases in the second half of the year. And with that, I will turn it over to the applicant. Thank you.

Speaker Change: Our repurchases in the second half of the year and with that let me turn it over to the operator.

Diane Bessette: And with that, let me turn it over to the thank you.

Operator: We will now begin the question and answer session of today's conference call. We ask that you limit your questions to one question and one follow-up question until all questions have been answered. If you would like to ask a question, please unmute your phone, press star 1, and record your name clearly when prompted. If you need to withdraw your question, you may use star 2.

Speaker Change: Thank you we will now begin the question and answer session of today's conference call. We ask that you limit your questions to one question and one follow up question until all questions have been answered.

Unknown Executive: We will now begin the question and answer session of today's conference call.

Unknown Executive: We ask that you limit your questions to one question and one follow-up question until all questions have been answered. If you would like to ask a question, please unmute your phone. Press star one and record your name clearly when prompted. If you need to withdraw your question, you may use star two. Again, that is star one to ask a question.

Speaker Change: Like to ask a question. Please on mute your phones press star one and record your name clearly when prompted if you need to withdraw. Your question. You May you start to again that is star one to ask a question. Our first question comes from Stephen Kim from Evercore ISI. Please go ahead.

Operator: Again, that is Star 1 to ask a question. Our first question comes from Stephen Kim from Evercore ISI. Please go ahead.

Stephen Kim: Our first question comes from Stephen Kim from Evercore ISI. Please go ahead. Thanks very much, guys. I appreciate all the color and solid results in the quarter.

Stephen Kim: Thanks very much, guys. I appreciate all the color and solid results in the quarter. I wanted to first start with the land asset structures that you're envisioning particularly for spending. I know you said that there's going to be more information provided at a later date, but you did offer up that it would have about six to eight billion dollars of land.

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

Speaker Change: And.

Speaker Change: Solid results in the quarter.

Stuart Miller: I wanted to first start with the land asset structures that you're envisioning, particularly the spin. I know you said that there's going to be more information provided at a later date, but you did offer up that it would have about $6 to $8 billion a land. That's higher than I think that you previously envisioned. I think you said it would have no debt. The team would be led by Fred Rothman. And so, just taking some of those, I'm curious what additional land assets are now being included versus what you previously thought. When you say the spin will have no debt, do you mean on a standalone basis?

Stephen Kim: I wanted to first start with the.

Stephen Kim: The land asset structures that you're in.

Speaker Change: Envisioning, particularly to spin I know you said that there's going to be more information.

Speaker Change: <unk> at a later date, but you did offer up or that it would have about $6 billion to $8 billion Atlanta Thats higher than I think that you previously envisioned.

Stephen Kim: That's higher than I think that you previously envisioned. I think you said it would have no debt. The team would be led by Fred Rothman.

Speaker Change: I think you said it would have no debt.

Speaker Change: Team will be led by Fred Rothman and.

Stephen Kim: And so just taking some of those, I'm curious what additional land assets are now being included versus what you previously thought. When you say the SPIN will have no debt, do you mean on a standalone basis? It will operate with no debt, and if so, are you going to feed the entity with cash, do you think?

Speaker Change: So just taking some of those I'm curious what additional land assets are now being included versus what you previously thought.

Speaker Change: When you say the spin will have no debt do you mean on a standalone basis.

Stuart Miller: It will operate with no debt. And if so, are you going to feed the entity with cash, you think?

Speaker Change: It will operate with no debt and if so are you going to see the entity with cash do you think and then lastly is the entity going to be staffed by currently our employees or primarily industry external personnel.

Stephen Kim: And then lastly, is the entity going to be staffed by current Lennar employees or primarily industry external personnel? So, that's a bunch of questions in one question, Steve. We see you.

Stuart Miller: And then lastly, is the entity going to be stacked by current Lennar employees or primarily industry, you know, external personnel?

Stuart Miller: So, naturally, a bundle of questions and one question, Steve. We see you.

Speaker Change: So that's a bundle of questions in one question, Steve we see Ya.

Stuart Miller: So, as noted with that, we've limited in what we can talk about just for clarification. It's being spun with no debt. We do have land assets on our books and have continued to as we have evolved our thinking and structuring of the land assets. As I noted, we stood up a strong man with a $4 billion number as we were following their thinking. You've just included more of the assets that we have given more detail than that would be outside of the boundaries.

Stuart A. Miller: So, as noted, we're fairly limited in what we can talk about. Just for clarification, it's being spun out with no debt. We do have land assets on our books and have continued to do so as we have evolved our thinking and structuring of the spun entity.

Speaker Change: So.

Speaker Change: As noted with fairly limited in what we can talk about.

Speaker Change: Just for clarification, let's be spun with no debt.

Speaker Change: We do have land assets on our books and have continued to as we have evolved our thinking and structuring of the.

Spot LNG.

Stuart A. Miller: As I noted, we have stood up a straw man with a $4 billion number as we refine their thinking. We've just included more of the assets that we have. Giving more detail than that would be outside of the boundaries. What I noted about Fred is that he was leading the effort to build the filing that was filed with the SEC. We haven't gone beyond that to talk about the population of this spun asset.

Speaker Change: <unk>.

As I noted we have stood up a strong man with $4 billion number.

Speaker Change: We will refine their thinking.

Speaker Change: Just included more of the assets that we have.

Speaker Change: Giving more detailed than that would be outside of the boundaries.

Stuart Miller: That I noted about Fred is that he has been leading the effort to build the filing that was filed with the SEC. And we haven't, we haven't gone beyond that to talk about the population of this on asset. But that is something that we'll discuss at some future date.

Speaker Change: That I noted above Fred is that he has been leading the effort.

Speaker Change: Two.

Speaker Change: Build the filing that was filed with the SEC.

Speaker Change: And we haven't we haven't gone beyond that to talk about the population of.

Speaker Change: Of this fund asset.

Stuart A. Miller: That is something that we'll discuss at some future date. It was more to highlight that we have a dedicated team that is very focused on the execution of the program that we are putting forth. There will be more detail as we report in the future. Okay, so I guess we're going to, that's fine. I guess we're just going to have to wait for more information. That's fine.

Speaker Change: That is something that we'll discuss at some future date. It was more to highlight that we have a dedicated team that is very focused on the execution of the program that we're putting forth and there will be more detail as we are.

Stuart Miller: And there's more to highlight that we have a dedicated team that is very focused on the execution of the program that we are putting forth and that will be more detail as we report in future.

Speaker Change: As we report in the future.

Stephen Kim: Okay, so I guess we're going to find a guess we're just going to have to wait for more info. That's fine.

Speaker Change: Okay. So I guess, we're good at.

Speaker Change: That's fine I guess, we're just going to have to wait for more info.

Speaker Change: That's fine that's correct.

Stephen Kim: The second question I have related to your gross margin. I mean, I think you alluded to the curiosity that people have about the guide. So you need to imply something around 25% or something in 4Q. And I'm hoping you can talk about what kind gives you confidence that the 4Q gross margin will rise. And in particular, I know that you have talked about your even flow production schedule, perhaps affecting the seasonal cadence of gross margin. So maybe I can ask the question this way. If hypothetically market conditions were to be stable for like a whole year, how much seasonal variance would you generally expect by quarter?

Speaker Change: Second question I had.

Stephen Kim: That's correct, it relates to your gross margin. I mean, I think you alluded to the curiosity that people have about, you know, the guide seeming to imply something around, you know, 25% or something in 4Q. And, you know, I'm hoping you can talk about what gives you confidence that the 4Q gross margin will rise. And in particular, I know that you have talked about your even flow production schedule, perhaps affecting the seasonal cadence of gross margin. So maybe I can ask the question this way: if, hypothetically, market conditions were to be stable for like a whole year, you know, how much seasonal variance would you generally expect by quarter?

Speaker Change: Have relates to your gross margin I mean, I think you alluded to the curiosity that people have about the guide seems to imply something around 25% or something in <unk>.

Speaker Change: I'm, hoping you can talk about what kind of gives you confidence that the <unk> gross margin will rise and.

Speaker Change: And in particular, I know that you have talked about youre, even flow production schedule.

Speaker Change: Perhaps affecting the seasonal cadence of gross margin. So maybe I can ask the question. This way if hypothetically market market conditions were to be.

Speaker Change: Stable for like a whole year.

Seasonal variance would you generally expect by quarter would it be that your fourth quarter, which generally have the highest margin.

Stephen Kim: Would it be that your fourth quarter would generally have the highest margin with a consistent set of market conditions and help us think through the quarterly cadence?

Stuart A. Miller: You know, would it be that your fourth quarter would generally have the highest margin, you know, with a consistent set of market conditions? You know, and help us think through the quarterly cadence. Well, first, let me say that we've been clear that we are migrating to a much more even flow model, and that will take some of the seasonality out of the margin variance that has been historic and has been seasonal, but some of it. Some of it just tends to ebb and flow along with market conditions during different seasons of the year. We do understand that margins will be materially higher in the fourth quarter. Some of that is seasonal.

Speaker Change: With a consistent set of market conditions.

Speaker Change: And help us think through the quarterly cadence.

Stuart Miller: Well, first let me say that we've been clear that we are migrating to a much more even played model, and that will take some of the seasonality out of the margin variance that has been historic and has been seasonal. But some of it, some of it just tends to have been well along with our market conditions during different seasons of the year. We do understand that margins will be materially higher in the fourth quarter; some of that is seasonal, some of that has been directional in terms of the work that we've done on building both core plans and reducing our construction costs as we have continued to build volume and continued to consistently address a somewhat volatile market.

Speaker Change: Well first let me say that we've been clear that we are migrating to a much more even flow model and that will take some of the seasonality out of.

Speaker Change: The margin variance that had been historic and has been seasonal.

Speaker Change: But some of it.

Speaker Change: Some of it just tends to ebb and flow along with market conditions during shoes during different seasons of the year.

Speaker Change: We do understand that margins will be materially higher in the fourth quarter. Some of that is seasonal some of that has been directional in terms of.

Speaker Change: The.

Speaker Change: The work that we've done on building, both core plans and reducing our.

Speaker Change: Construction costs as we have continued to build volume.

Speaker Change: Continue to.

Speaker Change: But to consistently address a somewhat volatile market.

Stuart A. Miller: Some of that has been directional in terms of the work that we've done on building both core plans and reducing our construction costs as we have continued to build volume and continued to consistently address a somewhat volatile market. We have earned not only the respect but the cooperation of our trade partners and the understanding that they can depend on production. And we have used that cooperation to be able to build a more efficient program. But it takes some time for some of those savings to flow through.

Stuart Miller: We've not earned not only the respect for cooperation of our trade partners and understanding that they can depend on production, and we have used that cooperation to be able to build a more efficient program, attention time for some of those savings to flow through. We do have visibility as to what those savings are and how they're flowing through. And, as I said, some of that improvement in margin is embedded in our backlog. Of course, as the market edge inflows, some of it driven by interest rate, some by consumer confidence, we'll have to see how shells and pricing resolve as we go through the remainder of the year, and we'll leave that open and we'll see that together as market conditions present.

Speaker Change: Earned not only the respectful cooperation of our.

Speaker Change: Our trade partners and understanding that they can depend on production and we had used that cooperation to be able to build a more efficient program. It takes some time for some of those savings to flow through.

Stuart A. Miller: We do have visibility as to what those savings are and how they're flowing through. And as I said, some of that improvement in margin is embedded in our backlog. Of course, as the market ebbs and flows, some of it driven by interest rates, some by consumer confidence, we'll have to see how sales and pricing resolve as we go through the remainder of the year. And we'll leave that open, and we'll see that together as market conditions present themselves. Diane, would you like to add anything to that?

Speaker Change: We do have visibility as to what those savings are flowing through.

Speaker Change: And as I said some of that improvement in margin is embedded in.

Speaker Change: Our backlog of course as the market ebbs and flows some of it driven by interest rates some by consumer confidence.

Speaker Change: We'll have to see how sales and pricing resolve as we go through the remainder of the year.

Speaker Change: We leave that open.

We'll see that together as market conditions present.

Stuart Miller: As I said, as you know, the expense field expense. So that, in another cell, generally, if you look back last year, for example, 232.4, we had about a four-end basis point benefit just from the field. So that 45 basis points is a pretty consistent lift up. Lift that we get from 232.4, just from the other centers.

Speaker Change: And then yes.

Diane J. Bessette: Yes, Steve, the other thing is, as you know, the field expense. So, in and of itself, generally, if you look back last year, for example, from Q3 to Q4, we had about a 40 basis points benefit just from the field. So, you know, that 40, 50 basis points is a pretty consistent lift up that we get from Q3 to Q4 just from the field. Okay, great.

Speaker Change: Yes, it can skew the other thing is as you know the extension to yield expense so that in and of itself generally if you look back last year. For example from Q3 into Q4, and we had about a 40 basis point benefit just from the field. So that 40 to 50 basis points, which is pretty consistent.

Speaker Change: No.

Speaker Change: Lift uplift that we get from Q3 to Q4 just from fuel expenses.

Stuart Miller: Okay, great. That's helpful. So just to make sure I understand, it sounds like the seasonal aspects, which might be the field expenses, fairly minor benefit to your 4Q. And so it sounds like you're attributing more of the stronger 4Q gross margin to actually your scale advantages that you've been building up. That sounds like something that's more persistent and not necessarily something that is particular to a fourth quarter, per se. So this sort of gives us a thought process that your margins are generally improving as you've been improving your scale. And that's the message that we should take back for this 4Q lifting gross margin.

Stephen Kim: That's helpful. So just to make sure I understand, it sounds like the seasonal aspects, you know, which might be the field expenses, you know, are a fairly minor benefit to your 4Q. And so it sounds like you're attributing more of the stronger 4Q gross margin to actually your scale advantages that you've been building up. That sounds like something that's more sort of, you know, persistent and not necessarily something that is particular to a fourth quarter per se, right?

Speaker Change: Okay, Great. That's helpful. So just just to make sure I understand it sounds like.

Speaker Change: The seasonal aspects, which might be the field expenses.

Speaker Change: It's fairly fairly minor benefit to your <unk> and so it sounds like you're attributing more of the stronger <unk> gross margin to actually your scale advantages that <unk> been building up that sounds like something that's more.

Speaker Change: Sort of.

Speaker Change: Persistent and not necessarily something that is particular to.

Speaker Change: Fourth quarter per se right and so this gives us a thought process that your margins are generally improving as you've been improving your scale and thats. The message that we should take back for <unk>.

Stuart A. Miller: And so this sort of gives us a thought process that your margins are generally improving as you've been improving your scale. And that's the message that we should take back for, you know, this 4Q lift in gross margin. I think that's a good takeaway.

Speaker Change: <unk> lift in gross margins.

Stuart Miller: So I think that's a good takeaway. And I think that in many ways, this is structural and durable for the future. So a lot of what we've been doing on the one hand has been needed by the fact that market conditions have moved around quite a bit, as I noted. It's needed to illustrate moving up through this last little cast of edges. But on the other hand, the cost savings and the way that we are, number one, configuring production in the field, and number two, re-engineering our product lines to be much more consistent with core products that are repeatable for market to market and across individuals.

Stuart A. Miller: And I think that in many ways, this is structural and durable for the future. So, you know, a lot of what we've been doing, on the one hand, has been muted by the fact that market conditions have moved around quite a bit, as I noted, interest rates moving up through this last quarter. You know, cast an edge. But on the other hand, the cost savings and the way that we are, number one, configuring production in the field and, number two, reengineering our product lines to be much more consistent with core products that are repeatable from market to market and across individuals are creating durable efficiency that will be with us for years to come. So, yeah, I think that this will be sticky and stay with us as we move forward. Perfect. Thanks so much, guys. I appreciate all the help.

Speaker Change: So I think thats a good takeaway.

Speaker Change: And I think that in many ways. This is structural and durable for the future.

Speaker Change: So a lot of what we've been doing.

Speaker Change: On the one hand.

Speaker Change: Has been muted by the fact that market conditions have moved around quite a bit as I noted interest rates moving up through this last quarter.

Speaker Change: Cash flow hedges.

Speaker Change: But on the other hand.

Speaker Change: The cost savings and the way that we are number one configuring production in the field and number two.

Re engineering, our product lines to be much more consistent with core products that are repeatable from market to market and across individual markets.

Stuart Miller: It's creating a durable efficiency that will be with us for years to come. So, yeah, I think that this will be sticky and stay with us as we move forward.

Speaker Change: As creating durable efficiency that will be with us for years to come. So I think that this will this will be sticky and stay with us as we move forward.

Stephen Kim: Perfect. Thanks so much, guys. Appreciate all the help.

Perfect. Thanks, so much guys I appreciate all the help.

Unknown Executive: You bet.

Speaker Change: You bet.

Carl Reichardt: Next we'll go to the line of Carl Reichardt from BTIG. Please go ahead. Thanks, everyone. Thanks for taking my questions. John, you mentioned differentiating among markets at pricing power versus the need to increase incentives. Can you talk a bit about what those markets are or were in the second quarter? And then in particular, I'm interested in Florida with existing home inventory higher. Some evidence that they can capacity from the rental market coming back to for sale, second homes. Can you talk maybe specifically about those metrics too? Thanks. There are color saw and not the Florida markets continued strength, particularly from Southeast Florida up the eastern coast of Florida.

Carl Edwin Reichardt: You bet. Next, we'll go to the line with Carl Reichardt from BTIG. Please go ahead. Thanks. Good morning, everyone.

Speaker Change: Next we'll go to the line of Carl Reichardt from BTG. Please go ahead.

Carl Edwin Reichardt: Thanks, Good morning, everyone. Thank you for taking my questions.

Carl Edwin Reichardt: Thanks for taking my questions. John, you mentioned differentiating among markets that pricing power versus the need to increase incentives. Can you talk a bit about what those markets are or were in the second quarter? And then, in particular, I'm interested in Florida with existing home inventory hire, some evidence of vacant capacity from the rental market coming back to for sale, second homes. Can you talk maybe specifically about those metros, too?

Speaker Change: John you mentioned differentiating among markets that pricing power versus the need to increase incentives can you talk a bit about what those markets are were in second quarter and then in particular I'm interested in Florida with the existing home inventory higher some evidence of vacant capacity from the rental market coming back to for sale second homes can you talk maybe.

Speaker Change: Specifically about those metros too thanks.

Jonathan M. Jaffe: Thanks. We saw continued strength in most of Florida's markets, particularly from southeast Florida up the eastern coast of Florida. We saw very strong year-over-year growth, which indicates that the underpinnings of market demand are there. I would say we saw more of a return to seasonality in southwest Florida this year. Still see strength in that market, but definitely saw that occur. I saw real strength up through the Carolinas, Atlanta, and up into the mid-Atlantic.

Erica: Erica we saw.

Speaker Change: And most of the Florida markets continued strength.

Erica: Particularly from Southeast Florida.

Speaker Change: The eastern coastal Florida, we saw very strong year over year.

John Lovallo: We saw very strong year-to-year growth in our pace, which indicates that the underpinnings of the market demand over there. I would say we saw more of the return to seasonality in Southwest Florida this year. So, she's strength in that market, but yet definitely saw that occur. Saw real strength up through the Carolinas of Atlanta and up in the Mid-Atlantic. And then in Texas saw the ability to continue at a pace to match up production, which is against support by the underlying demand. Out West, strength is seen in some of the mountain areas in Denver and Salt Lake City.

Speaker Change: Growth in our pace.

Speaker Change: Which indicates that the underpinnings of the market demand over there.

Speaker Change: I would say we saw more of a return to seasonality in southwest Florida.

Speaker Change: This year.

Speaker Change: So she has strength in that market, but yes.

Speaker Change: Yes definitely saw saw that occur.

Speaker Change: So real strength up through the Carolinas Atlanta.

Speaker Change: And up into the mid Atlantic.

Jonathan M. Jaffe: And then in Texas, saw the ability to continue at a pace that the matchup production, which is... Out West, strength is seen in some of the mountain areas in Denver and Salt Lake City, and then out in California, really led by affordability and the Empire, and just ongoing. There's a lot of abandoned bowels in the Bay Area.

Speaker Change: And then in Texas saw the ability to continue.

Speaker Change: Our pace to match, our production which is.

Again supported by the underlying demand.

Speaker Change: West strength was seen in some of the mountain areas.

Speaker Change: In Denver, and Salt Lake City.

John Lovallo: And then up in California, I was really led by Florida building in an empire and just ongoing like a man involved in the Bay Area.

Speaker Change: And then up in California really led by.

Speaker Change: The affordability in the inland Empire and just ongoing.

Speaker Change: The demand imbalance in the Bay area.

Stuart Miller: Thank you for that, John. And then I have sort of a broader question. As you at Lanar and some others have kind of transitioned away from, I guess what you could call a land speculation type of business model years ago to more of a vertically integrated manufacturer, retailer, building more spec, pricing more aggressively. Do you think the consumer is becoming conditioned to expect discounts in the market, especially seasonal ones, the same way we've seen it in other sort of big ticket retail businesses? And I ask in part because pricing and changing in base pricing has been a bit of an issue in this business, given that homes are also investments as opposed to simply consumer products, and so stability and prices of value to some degree.

Carl Edwin Reichardt: Thank you for that, John. And then I have sort of a broader question. As you at Lennar and some others have kind of transitioned away from, I guess, what you could call a land speculation type of business model years ago to more of a vertically integrated manufacturer and retailer, building more spec, and pricing more aggressively. Stuart, do you think the consumer is becoming conditioned to expect discounts in the market, especially seasonal ones, the same way we've seen it in other big-ticket retail businesses?

Speaker Change: Thank you for that John.

Speaker Change: And then I have sort of a <unk>.

Speaker Change: A question.

Stuart A. Miller: As you at <unk> and some others have kind of transitioned away from I guess, what you could call land speculation type of business model years ago to more of a vertically integrated manufacturer retailer building more spec pricing more aggressively Stuart do you think the consumer is becoming condition too.

Carl Edwin Reichardt: And I ask in part because pricing and changing in base pricing has been a bit of an issue in this business given that homes are also investments as opposed to simply consumer products, so stability and prices of value to some degree. So maybe you can talk about how the consumers are responding or might respond in the long run if their views are changing on when they buy, how they buy, and what they ask for secularly. Thanks.

Speaker Change: Expect discounts in the market, especially seasonal ones. The same way we've seen it in other sort of big ticket retail businesses and I ask in part because.

Stuart A. Miller: Pricing and changing and base pricing has been a bit of an issue in this business given that homes are also investments as opposed to simply consumer products and so stability in prices of value to some degree. So maybe you can talk about how the consumers responding or might respond in the long run if their views are changing on on when they buy how they.

Stuart Miller: So maybe you can talk about how the consumers are responding or might respond to the long run if their views are changing on when they buy, how they buy and what they ask for, securely. Thanks. So I think we're looking at a moment in time where, on the one hand, there is a supply shortage, but on the other hand, the consumer, out of necessity, is looking for elements of incentives or discounts to be able to afford to be able to access thousands stock that they need. I don't think that we can draw long-term conclusions about this counting from this moment in time.

And what they ask for secondly, thanks.

Carl Edwin Reichardt: So, you know, Carl, I think we're looking at a moment in time where, on the one hand, there is a supply shortage, but on the other hand, the consumer, out of necessity, is looking for elements of incentives or discounts to be able to afford, to be able to access the housing stock that they need. I don't think that we can draw long-term conclusions about discounting from this moment in time, and I think it's very differentiated from the broader retail world in that we have a structural and chronic supply shortage, and it's too aggressive to try to draw conclusions as to the way the market will evolve in the future from today's current configuration. I appreciate your thoughts and ideas. Thanks, Stuart. Thanks, all. I'm going to leave that. Thank you. Next, we'll go to the line of Susan Maklari from Goldman Sachs. Please go ahead. Thank you. Good morning, everyone.

So I think Paul the.

Paul: I think.

Speaker Change: We're looking at a moment in time, where on the one hand, there is a supply shortage.

Paul: But on the other hand.

Paul: The consumer out of necessity is looking for elements of incentives or discounts.

Paul: To be able to afford to be able to access the housing stock that they need I don't think that we can draw long term conclusions.

Paul: Discounting from this moment in time.

Stuart Miller: And I think it's very differentiating from the broader retail world in that we have a structural and chronic supply shortage. There will be a moment in time where affordability is less challenged. At that moment in time, the supply shortage will be a more dominant thing. And I think you'll quickly see a snap back to where the man will come to market, outstrip this supply, and some of the discounting, a lot of the discounting will kind of snap back to normal levels. So I could be... Overly aggressive to try to draw conclusions just to the way the market will evolve in the future from today's current configuration.

Paul: And I think it's very differentiated from the broader retail world.

Paul: We have a structural and chronic supply shortage there will be a moment in time Euro affordability is less challenged at that moment in time.

Paul: Supplies shortage will be more dominant theme and I think youll.

Quickly she.

Paul: A.

Paul: A a snapback to where demand will come to market outstrip the supply.

Paul: And some of the discounting a lot of the discounting will kind of snap back to normal levels.

Paul: So I think it would be.

Paul: Overly aggressive to try to draw.

Paul: Conclusions as to the way the market will evolve in the future from today's current configuration.

Stuart Miller: I appreciate your thoughts. Thanks, Stuart. Thanks, all.

Speaker Change: I appreciate your thoughts thanks, Stuart Thanks Al.

Susan Maklari: Thank you. Next, we'll go to line up Susan Maklari from Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. I want to focus a bit on the cash flows and thinking about the capital allocation. You know, Stuart, in the past, you've mentioned getting net income and free cash flow closer to being in line together.

Speaker Change: You bet.

Speaker Change: Thank you next we will go to the line of Susan Mcclary from Goldman Sachs. Please go ahead.

Susan Marie Maklari: Thank you good morning, everyone.

Susan Marie Maklari: I want to focus a bit on the cash flows and think about capital allocation. You know, Stuart, in the past, you've mentioned getting net income and free cash flow closer to being in line together. As you think about a lot of the initiatives that you're putting in place and the progress you're making there, can you talk about how far out you think you are from achieving that, and what are the roadblocks that perhaps still exist to getting there?

Susan Marie Maklari: I wanted to ask a.

Susan Marie Maklari: A bit on the cash flows and thinking about the capital allocation is doing in the past you mentioned getting net income and free cash flow closer to being in line together as you think about a lot of the initiatives that youre, putting in place and the progress Youre, making there can you talk about how far out you think you are from achieving that and what are the.

Diane Bessette: As you think about a lot of the initiatives that you're putting in place and the progress you're making there, can you talk about how far out you think you are from achieving that and what are the roadblocks that perhaps still exist to getting there?

Speaker Change: The roadblocks that perhaps still exist to getting there.

Diane Bessette: No, I'll pass that to Diane for a second. I'll jump in. I think with each quarter that goes by, we're getting closer to closer and sometimes we exceed, you know, if you look at this quarter, for example, a matter of age, or let's just call it 950 million, and our capital allocation when you combine the shared purchases and the debt paydowns was in excess of that right at about 1.1 billion. So it adds to close a little bit, sometimes it's a little short, and sometimes it's a little over, but I think the important thing is that as we continue to really focus on being the manufacturer and have even well really become even more prominent in our business and just in purchasing on a Justin pine basis.

Stuart A. Miller: I think with each quarter that goes by, we're getting closer to closer, and sometimes we exceed them. You know, if you look at this quarter, for example, net earnings, let's just call it $950 million, and our capital allocation, when you combine the share repurchases and the debt paydowns, was in excess of that, right, at about $1.1 billion. So as we close a little bit, sometimes it's a little short, and sometimes it's a little over, but I think the important thing is that as we continue to really focus on being the manufacturer and have EvenFlow really become even more prominent in our business and purchasing on a just-in-time basis, I think you're going to see those two much more consistently aligned.

Speaker Change: Yes pass active dynamic or second go ahead, and I'll jump in I think with each quarter that goes by we're getting questions or concerns with potentially exceed if you look at this quarter. For example on that earnings analyst call at $950 million and our <unk>.

Speaker Change: Capital allocation.

Combined with share repurchases and the debt.

Speaker Change: Pay downs and etc that ran at about $1 1 billion. So it ebbs and flows a little bit sometimes it's a little short and sometimes it's a little over but I think the important thing is that as we continue to really focus on being a manufacturer and have even flow.

Speaker Change: Really become even more prominent in our business and jumps in purchasing on adjusting time basis, I think youre going to see those too much more consistently aligned.

Diane Bessette: I think you're going to see those too much more consistently aligned.

Diane Bessette: Okay, that's helpful. And then as you do think about the business further out and, you know, as I said, the initiative that you're going through, what is the level of cash balance that you will eventually feel comfortable holding on the balance sheet? How much will you need to sort of maintain the business, and how do you think about the allocation of the amount that comes in above that level? That's a fair question.

Stuart A. Miller: Okay, that's helpful. And then, as you think about the business further out, and you know, as I said, the initiatives that you're going through, what is the level of cash that you will eventually feel comfortable holding on the balance sheet? How much will you need to sort of maintain the business? And how do you think about the allocation of the amount that comes in above that level? It's a fair question. It's a good question.

Speaker Change: Okay. That's helpful. And then as you think about the business further out and as I said the initiatives that you're going through what.

Speaker Change: What's the level of cash balance that you will eventually feel comfortable holding on the balance sheet. How much will you need to sort of maintain that Vince mentioned, how do you think about the allocation of the amount that comes in above that level.

Stuart A. Miller: And I think that we are not quite there in being able to project out exactly how to think about that. You know, as we go through and have gone through some of the reconfigurations, we have been. I want to say surprised, but surprised is too aggressive a word, to the upside and to the downside as to exactly how cash flows from quarter to quarter through the year.

Speaker Change: It's a fair question. It's a good question and I think that we are.

Diane Bessette: It's a good question, and I think that we are not quite there in being able to project out exactly how to think about that. You know, as we go through and have gone through some of the reconfigurations, we have been, I want to say surprised, but it surprises to a glass of a word to the upside and to the downside as to exactly how cash flows from quarter to quarter through the year. And the answer to your question is going to be directly tied to how our cash engine plays as fix and bricks flow through the operational manufacturing machine that we have.

Speaker Change: Not quite there in being able to.

Project out.

Speaker Change: Exactly how to think about that.

Speaker Change: No.

Speaker Change: As we go through and have gone through some of the Reconfigurations.

Speaker Change: We have been.

Speaker Change: I want to say surprised but it surprised us too aggressive award.

Speaker Change: To the upside and to the downside as to exactly how cash flows.

Speaker Change: Quarter to quarter through the year.

Stuart A. Miller: And the answer to your question is going to be directly tied to how our cash ebbs and flows as sticks and bricks flow through the operational manufacturing machine that we have. I think that we are leaving ourselves some latitude to develop, you know, some real-time understanding and expertise in how those dollars will flow in and out, and it's why we've been a little stubborn about using our cash a little bit more aggressively, particularly as we craft the spin company. It adds complications to some of these calculations, and these structural changes make them a little bit complicated. Diane, do you want to add anything to that?

Speaker Change: And the answer to your question is going to be directly tied to how our cash ebbs and flows as fiction, which flow through the operational misses.

Speaker Change: Manufacturing machine that we have I think that we are leaving ourselves some latitude.

Diane Bessette: I think that we are leaving ourselves some latitude to develop, you know, some real-time understanding and expertise in how those dollars will flow in and out.

Speaker Change: To develop.

Speaker Change: Some real time understanding and expertise in how those dollars will flow in and out and it's why we've been a little stubborn on using our cash a little bit more aggressively, particularly as we craft.

Diane Bessette: And why we've been a little stubborn on using our cash a little bit more aggressively, particularly as we craft the spin company. It adds complications to some of these calculations, and the structural changes make it a little bit complicated.

Speaker Change: The spin company.

Speaker Change: Edge complications of some of these calculations.

Speaker Change: And these structural changes make it a little bit complicated and you want to add.

Diane Bessette: So I do want to ask you that. Yeah, I think I said it's really just in support of that. If you look at the statistic that I mentioned, which is when you look at the delivery into this quarter, 60% of the deliveries had homes that were purchased on the finished features. And so, as I think, as you see that migrate higher, that does get us to a more consistent, predictive, and visible cash flow. And then we get to that point. I think we can really start to have a conversation about what's that balance because that consistency and visibility has now, you know, come to work.

Diane J. Bessette: Yeah, the only other thing I'd say that's really just in support of that is if you look at the statistic that I mentioned, which is when you look at the deliveries this quarter, 60% of the deliveries had homes that were purchased on the finished basis. And so I think as we see that migrate higher, that does get us to a more consistent, predictable, and visible cash flow. And then when we get to that point, I think we can really start to have a conversation about what that balance is because that consistency and visibility have now, you know, come into more play. Okay, thank you for the thoughts. I appreciate it. Good luck with everything.

Speaker Change: And it's been it's really just in support of that is <unk>.

Speaker Change: The statistics that I mentioned niches.

Speaker Change: When you look at the deliveries this quarter, 60% of the deliveries.

Speaker Change: <unk> had homes that were purchased on the Finnish patients and so as I think as we see that migrate higher net to us get us to a more consistent predictable and visible cash flow and then when we get to that point I think we can.

Speaker Change: I realized that can have a conversation about what's that balance.

Speaker Change: Because that consistency and visibility has now.

Diane Bessette: Okay. Thank you for the thoughts. I appreciate it.

Speaker Change: Coming to my focus.

Speaker Change: Okay. Thank you for the thoughts I appreciate it and good luck with everything.

Diane Bessette: Good luck with everything. Let me just say one more thing. There's another element of that, and that is appropriate for growth. So it's something that's another part of the occasion. We remain growth minded as we build structures for the future. So that's another variable that goes into that question about how much cash do we retain? Yeah.

Susan Marie Maklari: Susan, let me just say one more thing. There's another element to that, and that is appropriate capital for growth. So it's something that's another part of the equation. We remain growth-minded as we build structures for the future. So that's another variable that goes into that question about how much cash we require. Yeah, no, that makes sense. Thank you. Thank you. Next, we'll go to the line of Alan Ratner from Zellman & Associates. Please go ahead.

Susan Marie Maklari: Susan Let me just say one more thing.

Susan Marie Maklari: As another element of that and that is appropriate capital for growth. So its something thats. Another part of the equation, we remain growth minded.

Susan Marie Maklari: As we build structures for the future. So that's another variable that goes into that question about how much cash diluted team.

Speaker Change: Yes, just something that makes sense, yeah, no that makes sense alright. Thank you.

Diane Bessette: That makes sense, Stuart. Thank you.

Speaker Change: Thank you next we'll go to the line of Alan Ratner from Zelman <unk> Associates. Please go ahead.

Alan Ratner: Next we'll go to the line of Alan Ratner from Zelman & Associates. Please go ahead. Hey guys, nice quarter and congrats on all the behind-the-scenes work on pivoting towards just-in-time. I think it's going to be exciting to see it all done in the quarters and years ahead.

Alan S. Ratner: Hey, guys. Nice quarter and congratulations on all the behind-the-scenes work on pivoting towards just-in-time. I think it's going to be exciting to see it all done in the quarters and years ahead.

Alan S. Ratner: Hey, guys nice quarter and congrats on all the behind the scenes work.

Alan S. Ratner: Pivoting towards just in time, I think it's going to be exciting to see it all all done in the quarters and years ahead.

Stuart A. Miller: Stuart, you know, first question, last quarter, you guys kind of referenced a little bit of, I guess, a weakening in that the overall quality, the credit quality of the consumers you were seeing by, you know, the potential buyers in your community is maybe some higher credit card debt and lower credit scores. And I think at the time, you were kind of the first to address that, and we've since heard some more anecdotes about it, both from, you know, home builders as well as other industries.

Alan Ratner: Stuart, you know, first question, last quarter, you guys kind of referenced a little bit of a, I guess, a weakening in that overall quality, the credit quality of the consumers you were seeing by the potential buyers in your community is maybe some higher credit card debt, lower credit scores. And I think at the time you were kind of the first to kind of address that, and we've since heard some more anecdotes about that both from, you know, home builders as well as other industries. So just curious, my first question: you know what you are seeing from the consumer today?

Speaker Change: Stuart first question last quarter, you guys kind of referenced a little bit of a I guess a weakening in that.

Overall quality of the credit quality of the consumers who were seeing by end of potential buyers in your community and maybe some higher credit card debt lower credit scores.

Speaker Change: At the time, you were kind of the first to kind of.

Speaker Change: Yes that and we've since heard some more anecdotes about that both from homebuilders as well as other industries. So just curious my first question. What you are seeing from the consumer today are you seeing more kind of yellow flags red flags unfolding or have things been pretty pretty stable.

Stuart A. Miller: So just curious, my first question is, you know, what you are seeing from the consumer today. Are you seeing, you know, more kind of yellow flags or red flags unfolding, or have things been pretty stable? Yeah, thanks, Alan. You're right.

Stuart Miller: Are you seeing, you know, more kind of yellow flags or red flags unfolding, or have things been pretty stable since then? Yeah, thanks. You're right. We did detail that in the last quarter we call. I felt it was important to put out there at the time; since that time, it has been a much better documented. And so, you know, I think it's fairly well known that there has been some movement upward in consumer debt, you know, the debt of some of our customers. It has not spiked since then. There's not changed materially to the negative.

Alan S. Ratner: We did detail that in the last quarterly call. I felt it was important to put that out there at the time. Since that time, it has been much better documented, and so, you know, I think it's fairly well known that there has been some movement upward in consumer debt, you know, the debt of some of our customers. It has not spiked since then.

Speaker Change: Yes.

Speaker Change: Thanks Alan.

Speaker Change: Youre right, we did detailed that in the last.

Speaker Change: Recall I felt it was in.

Important to put out there at the time since that time. It has been the most that are documented and.

Speaker Change: And so.

Speaker Change: I think it's fairly well known.

<unk> has been some movement upward in.

Speaker Change: Consumer debt.

Speaker Change: The debt of some of our customers.

Stuart A. Miller: It has not changed materially to the negative, but there's no question that given inflation rates and the cost of living expenses, the consumer is definitely feeling a little bit more stressed, and we are starting to see a little bit more credit challenges as customers come through, but that's consistent with what we were seeing last quarter. And, of course, that makes the interest rate movement all the more important – it creates more sensitivity.

Speaker Change: It has not spiked since then there has not changed materially to the to the negative.

Stuart Miller: But there's no question that, given inflation rates and the cost of living expenses, the consumer is definitely feeling a little bit more stressed. And we are starting to feel a little bit more credit challenge as customers come through. But that's consistent with what we were seeing last quarter. And of course, that makes the interest rate movement all the more creates more sensitivity. So, as interest rates have started to subside a little bit, it'll be interesting to see how that recalls with the current state of the consumer. And we're looking forward to discussion about the conditions that they present.

Speaker Change: But theres no question that given inflation rates and the cost of living expenses. The consumer is definitely feeling a little bit more stressed and we are starting to feel a little bit more credit.

Speaker Change: Challenge as customers come through but thats consistent with what we were seeing last quarter.

Stuart A. Miller: So, as interest rates have started to subside a little bit, it will be interesting to see how that ripples with the current state of the consumer, and we're looking forward to addressing market conditions as they present. Great, I appreciate that update on that and it's encouraging here that it's not, you know, it's not accelerating or the deterioration is not getting worse.

Speaker Change: And of course that makes the interest rate movement.

Speaker Change: All the more.

Speaker Change: It creates more sensitivity.

Speaker Change: No.

Speaker Change: As interest rates has started to subside a little bit it will be interesting to see.

Speaker Change: Thank you.

Speaker Change: Referrals with.

Speaker Change: The current state of the consumer and.

Speaker Change: We're looking forward to addressing market conditions as they present.

Alan Ratner: Great.

Speaker Change: Great I appreciate that update on that and encouraging to hear at least it's not.

Alan Ratner: I appreciate that update on that and encouraging. Here, at least, it's not accelerating or the deterioration is not going to work.

Speaker Change: It's not accelerating or the.

Speaker Change: Deterioration is not getting worse.

Alan Ratner: Second, I'd love to spend a minute just talking about the SG&A and the corporate expense line because I think that was the one area on the model that maybe was a little bit worse than guided for. And I think in general, it's been trending higher than a year ago. And I know there's a lot that could potentially be driving that. Obviously, you know, broker commissions and things like that could be a function of where demand is. But I know you've got a lot of stuff going on behind the scenes as well with Spinco and apartments.

Alan S. Ratner: Second, you know, I'd love to spend a minute just talking about the SG&A and the corporate expense line because I think that was the one area on the model that maybe was a little bit worse than guided for, and I think, in general, it's been trending higher than a year ago. And I know there's a lot that could potentially be driving that, obviously, you know, broker commissions and things like that could be a function of where demand is.

Speaker Change: Second I would love to spend a minute just talking about the SG&A and the corporate expense line because I think that was the one area on the model that maybe was a little bit worse, and then guided for and I think in general it's been trending higher than a year ago, and I know theres, a lot that could potentially be driving that obviously.

Speaker Change: Broker commissions and things like that could be a function of where demand is but I know you've got a lot of stuff going on behind the scenes as well with spin co in apartments, and I was hoping you could just spend a minute or two talking about what's going on with the SG&A where.

Alan S. Ratner: But I know you've got a lot of stuff going on behind the scenes as well with SpinCo and the apartments. And I was hoping you could just spend a minute or two talking about what's going on with SG&A, where you see it going forward beyond the third quarter and, you know, kind of pick apart the pluses and minuses there. Yeah, you know, we probably didn't spend enough time on SCMA.

Diane Bessette: And I was hoping you could just spend a minute or two talking about what's going on with the SG&A, where you see that going forward beyond the third quarter and, you know, kind of pick apart the pluses and minuses there. Yeah, it's, you know, we probably didn't spend enough time on SNA. I thought about that as I was writing my remarks. You know, SNA is, it's not the, the type programming that we've had historically, simply because we're all working on so much and recalibrating the way that this business actually operates. And if you think about the fact that over the past few years we've probably migrated about $20 billion of land to off-balance, you kind of programming in favor of adjusting time delivery system.

Speaker Change: Where you see that going forward beyond the third quarter and kind of pick apart the pluses and minuses there.

Stuart A. Miller: I thought about that as I was writing my remarks. You know, SCMA is not the tight programming that we've had historically, simply because we are working on so much in recalibrating the way that the business actually operates. And if you think about the fact that, over the past few years, we've probably migrated about $20 billion of land to off-balance sheet kind of programming in favor of a just-in-time delivery system. And the development of that delivery system, in and of itself, is a reorganization of the entire platform and comes with some cost advantages and flows that are flowing through SCMA.

Speaker Change: Yes.

Speaker Change: We probably didn't spend enough time on SG&A I thought about that as I was writing my remarks.

Speaker Change: SG&A is.

Speaker Change: It's not the.

Speaker Change: Type programming that we've had historically simply because we are all working on so much and recalibrating the way the business actually operates.

Speaker Change: If you think about the fact that over the past few years.

Speaker Change: Probably migrated about $20 billion of land to off balance sheet kind of programming in favor of adjusting time delivery system and the development of that delivery system in and of itself is a reorganization of the entire platform.

Stuart Miller: And the development of that delivery system in and of itself is a reorganization of the entire platform and comes with some cost edge and flow that are flowing through SNA. And in particular, as we now start building an additional subsidiary kind of program that regard meaning the some of a large part of the other land that we own and building this thing. So you can imagine that some of the edges of both of SNA will be altered from its normal course by some kind of anomalous additions that are flowing through. So, Diane, maybe you can give a little bit more color on that.

Speaker Change: And comes with some cost ebbs and flows that are flowing through SG&A and in particular as we now start building an additional subsidiary kind of program in that regard meaning.

Stuart A. Miller: And in particular, as we now start building an additional subsidiary kind of program in that regard, meaning a large part of the other land that we own and building Estinco, you can imagine that some of the edge and flows of SCMA will be altered from its normal course by some kind of anomalous additions that are flowing through. So, Diane, maybe you can give a little bit more color on that. Yeah, I think that's right.

Speaker Change: Some of our large part of the other land that we own.

Speaker Change: And building a spin so you can imagine that some of the ebbs and flows of SG&A will be altered from its normal quarters.

Speaker Change: Bye.

Diane J. Bessette: By some kind of anomalous additions that are flowing through so Diane maybe you can give a little bit more color on that yes, I think thats right.

Diane Bessette: Yeah, I think that's right. You know, I think you've seen the incredible progress and transformation of a balance with regard to the years on and the percent of land that we control. And so therefore, you know, they have been more expensive with those transactions to accomplish that greater value. So I think that's all my color that corresponds with what Stuart is mentioning. Also, I think initially we just remember that. And I know everybody's experiencing this. The insurance costs have gone up. So, as we, you know, think about our insurance policies and our deductibles and things like that.

Diane J. Bessette: You know, I think you've seen the incredible progress and transformation of our balance sheet with regard to the year zone and the percent of land that we control. And so, therefore, you know, there have been more expenses with those transactions to accomplish that greater goal. So I think that's a little more color that corresponds with what Stuart was mentioning.

Speaker Change: I think you've seen the incredible progress and transformation of our balance sheet with regard to the <unk> zone.

Speaker Change: And the percent of land that we control and so therefore.

Speaker Change: There has been more expenses with those transactions to accomplish that greater can shine.

Speaker Change: So I think that will not color.

Speaker Change: <unk>.

Diane J. Bessette: Also, I think, additionally, Steve, just remember that, and I know everybody's experiencing this, but insurance costs have gone up. So as we, you know, think about our insurance policies and our deductibles and things like that, there's a little bit of that. Also, incredibly focused on generating non-broker leads.

Mentioning also I think additionally stages remember that.

Speaker Change: And I know everybody is experiencing that and insurance costs have gone up so as we.

Speaker Change: Think about our insurance policy deductibles and things like that there's a little bit of that.

Diane Bessette: You know, there's a little bit of that also incredibly focused on generating non-broker needs. And so sometimes, depending on market conditions, that requires a little bit more digital marketing advertising spend. So most open together, the one thing I would note though is that the increase was not related to higher broker spend. We've been really focused on keeping that at a lower level. So, however, the offset to that is perhaps a little bit more digital spend so that you are creating those non-broker needs. You know, look, I'm just going to answer this and say that I think if you can't really break it down and compartmentalize the costs that are flowing through.

Speaker Change: Also incredibly focused on generating non brokerage, we introduced sometimes depending on market conditions that requires a bit more.

Diane J. Bessette: And so sometimes, depending on market conditions, that requires a little bit more. Digital Marketing and Advertising Spend, so those all came together. The one thing I would note, though, is that the increase was not related to higher broker spend. We've been really focused on keeping that at a lower level, so, however, the offset to that is perhaps a little bit more digital spend so that you are meeting those non-broker needs. Yeah, you know, look, I've just got to add to this and say that I think if you, we can't really break it down and compartmentalize the costs that are flowing through.

Speaker Change: Digital marketing and advertising spend.

Speaker Change: Together, the one thing I would note, though is that the increase was not related to higher broker spend we've been really focused on keeping that lower level. So.

Speaker Change: However, the offset to that is perhaps a little bit more digital extension that you are taking those non programming.

Speaker Change: Look I've, just got a acquisitions say that I think it would be.

Speaker Change: We can't really break it down and compartmentalize the costs that are flowing through.

Stuart Miller: It's a little bit of a jumbled picture. But if you look at the base operation in every part of our operation, from construction costs and all the way through SG&A, we are getting more and more efficient. And as we go through these next quarters, there will be a little bit of cloudiness in some of that. But as we go through to the other side, we think we're building a much better efficiency model that has been a much better in terms of capital deployment, capital positioning, and capital allocation that will work through long-term benefit of the company.

Stuart A. Miller: It's a little bit of a jumbled picture, but if you look at the base operation and every part of our operation, from construction costs and all the way through SG&A, we are getting more and more efficient, and as we go through these next quarters, there will be a little bit of cloudiness in some of that, but as we break through to the other side, I think we're building a much better efficiency model that is going to work much better in terms of capital deployment, capital positioning, and capital allocation that will work to the long-term benefit of the company. Yeah, I think, as I think about it, you know, as we talk about the benefits that we, the operational benefits from maintaining production and even flow, the same relates to this as we continue to maintain the levels of off-balance sheet transactions to generate the cash flow and the returns that it has been, we will also become more efficient with managing those. I appreciate you running through all of that detail, so thanks a lot guys. Hey, you bet. Next, we'll go to the line of Michael Rehaut from J.P. Morgan. Please go ahead. Good afternoon.

Little bit of a jumbo picture, but if you look at the base operation in every part of our operation from construction costs and all the way through SG&A, we are getting more and more efficient and as we go through these next quarters, there will be a little bit of cloudiness and some of that but.

Speaker Change: But as we break through to the other side, we think we're building a much better efficiency model that has been a work much better in terms of capital deployment capital positioning and capital allocation that will work for the long term benefit of the company I think as I think about it.

Diane Bessette: Yeah, I think as I think about it, you know, as we talk about the benefits that the operational benefits from maintaining production, even for the same relates to this as we continue to maintain the levels of off balance, e transactions to generate the castle in the terms that it has been. We will also become more efficient with managing those costs. Understood. I appreciate your comments for all of that detail.

Speaker Change: As we talk about the benefits that we have the operational benefits from maintaining production and even the same as it relates to that as we continue to maintain the levels of.

Speaker Change: Off balance sheet transactions to generate the cash flow and returns and it has been we will also become more efficient with managing those costs.

Speaker Change #100: Understood I appreciate you run it through all of that detail. So thanks, a lot guys.

Alan Ratner: So thanks a lot, guys. David Beck.

Speaker Change #101: You bet.

Michael Rehaut: Next, we'll go to the line of Michael Rehaut from JPMorgan. Please go ahead. Good afternoon. Thanks for taking my questions. I wanted to just circle back to cover a lot of ground and obviously appreciate all the detail. Just wanted to circle back if I could try to get a little more clarity on the 4-2 gross margins. And appreciate your comments earlier, Diane, around the 40 or 50 dips of kind of operational leverage. Just wanted to make sure I'm understanding it correctly. I believe earlier, Stuart, you said that it was in part based on backlog, part based on what you expect to do, your market conditions, et cetera.

Speaker Change #102: Next we will go to the line of Michael Rehaut from JP Morgan. Please go ahead.

Michael Jason Rehaut: Thanks for taking my questions. I wanted to just circle back on, covered a lot of ground, and obviously appreciate all the detail. Just wanted to circle back, if I could, try and get a little more clarity on the four Q gross margins. And, you know, appreciate your comments earlier, Diane, around the 40 or 50 bps of kind of operational leverage. Just wanted to make sure I'm understanding it correctly.

Michael Jason Rehaut: Good afternoon, Thanks for taking my questions.

Michael Jason Rehaut: Wanted to just circle back to covered a lot of ground and obviously appreciate all the detail.

Wanted to circle back if I could try and get a little more clarity on.

Michael Jason Rehaut: The <unk> gross margins and I appreciate your comments earlier, Diane around 40 or 50 bps.

Speaker Change #104: Kind of operational leverage just wanted to make sure I'm understanding it correctly I believe earlier Stuart you said that it was in part based on backlog part based on what you expect to do.

Michael Jason Rehaut: I believe earlier, Stuart, you said that it was in part based on backlog, part based on what you expect to do, your market conditions, et cetera. The point of, you know, backlog versus market conditions is kind of curious. If that 25 percent type gross margin is, in fact, what you're seeing in a part of your backlog today, because obviously, part of that backlog would be delivered in the upcoming How much of the 25% is based off of the backlog versus, perhaps, as rates have come down over the last month?

Speaker Change #104: Market conditions et cetera.

Michael Rehaut: On the point of, you know, backlog versus market conditions is kind of curious on, you know, if that 25%-ish type gross margin, if that is in fact what you're seeing in a part of your backlog today because obviously part of that backlog would be delivered in the upcoming quarter at 23% gross margins. How much of the 25% is based off of the backlog versus perhaps as rates have come down over the last month, you know, we're also thinking that maybe there's a little less incentive out there today and wondering about current orders if that's also kind of a better margin today.

Speaker Change #104: Hum.

Speaker Change #105: On the point of backlog versus market conditions, just kind of curious on.

Speaker Change #105: If that 25% ish type gross margin if that is in fact.

What youre seeing in a part of your backlog today, because obviously part of that backlog would be delivered in the upcoming quarter at 23% gross margins how.

Speaker Change #105: How much of the 25% is based off of the backlog versus.

Speaker Change #105: Perhaps as rates have come down.

Speaker Change #105: Over the last months.

Michael Jason Rehaut: We're also thinking that maybe there's a little less incentives out there today and wondering about current orders, if that's also kind of a better margin today, and I don't know if mix is a part of it as well, but just trying to get a little more granular on the drivers of that 4Q improvement versus 3Q. Good morning, Mike.

Speaker Change #105: We're also thinking that that maybe theres, a little less incentives out there today and wondering about.

Speaker Change #105: Current orders if that's also kind of a better margin today and.

Michael Rehaut: And, you know, I don't know if mix is a part of it as well, but just trying to get a little more granular on the, you know, drivers of that, you know, 4-Q improvement versus 3-Q.

Speaker Change #106: I don't know if mix is a part of it as well, but just trying to get little more granular on the draw.

Speaker Change #106: Drivers of that <unk> improvement versus <unk>.

Stuart Miller: Good morning, Mike. Thanks for the question. So, this is an imperfect calculation. It is always appropriate to floor through production cost reduction. And so giving more detail is a little bit complicated. Some of that and some of the higher margins will flow through our third quarter. Some of it will flow through the fourth quarter and some into the next year. It's hard to know exactly where those numbers will flow through. And so there's not a lot more detail that we can give. It's just that directionally. We understand margin; you know, margin. It's in part driven by the price that we get for home; it's in part driven by the cost.

Stuart A. Miller: Thanks for the question. So this is an imperfect calculation. It is always imperfect to flow through production cost reduction, and so giving more detail is a little bit complicated. Some of that and some of the higher margins will flow through our third quarter; some of it will flow through the fourth quarter, and some into the next year. It's hard to know exactly where those numbers will flow through, and so there's not a lot more detail that we can give. It's just that, directionally, we understand margin. Margin is in part driven by the price that we get for a home; it's in part driven by the cost we pay for the building of that home, as we have been focusing on volume at a time when there is variability in the market.

Speaker Change #107: Hi, good morning, Mike.

Speaker Change #108: Thanks for the question.

Speaker Change #108: So.

Speaker Change #109: This is an imperfect calculation.

Speaker Change #109: It is always is perfect to flow through.

Speaker Change #109: Production cost reduction.

Speaker Change #109: And.

Speaker Change #109: And so giving more detail as well.

Speaker Change #109: A little bit complicated some of that and some of the higher margins will flow through our third quarter.

Speaker Change #109: Some of it will flow through the fourth quarter and some into the next year, it's hard to know exactly where those numbers will flow through.

Speaker Change #109: And so there's not a lot more details that we can give it shifts that's directionally we understand margin.

Speaker Change #109: Margin is.

Speaker Change #109: Part driven by the price that we get for home, it's in part driven by the cost for.

Stuart Miller: We pay for the building of that home as we have been focusing on volume at a time where there is variability in the marketplace. We've been able to rethink not only our product lines and our core products, but also the cost structure that we work with with our trade partners. And so it's important, in part flowing through the revenue side, in part flowing through the cost side of the equation. And we're going to see how that evolves as we go through. And while all of that is happening, we are still continuing to shell homes in the current market conditions as it actually flows.

Speaker Change #109: For the building of that AUM as we have been focusing on volume at a time, where there is.

Speaker Change #109: Variability in the marketplace.

Stuart A. Miller: We've been able to rethink not only our product lines and our core products but also the cost structure that we work with our trade partners. And so it's in part flowing through the revenue side, in part flowing through the cost side of the equation, and we're going to see how that evolves as we go. And while all of that is happening, we are still continuing to shell out homes in the current market conditions as it ebbs and flows.

We've been able to we think not only our product lines and our core products, but also the.

Speaker Change #109: The cost structure that we have worked with with our trade partners and so it's in court and in part flowing through the revenue side and part flowing through the cost side of the equation and we're going to see how that evolves as we go through and while all of that is happening.

Speaker Change #109: We are still continuing to sell homes in the current market conditions as it ebbs and flows so it's a little hard to put the pieces together, but those are the pieces that we see coming together as we give guidance and as we've tried to do the best weekend to tell you what we see ahead.

Stuart Miller: So it's a little hard to put the pieces together, but those are the pieces that we see coming together as we give digestion as we try to do the best we can to tell you what we see ahead. Of course, the part that is in backlog, we understand components of it, but we're not sure which homes will close in the third quarter and into the first. And as for the homes that we will sell over the next months, we're going to have to wait and see how the market evolves in a volatile market condition, as we've been.

Stuart A. Miller: So it's a little hard to put the pieces together, but those are the pieces that we see coming together as we give guidance and as we try to do the best we can to tell you what we see ahead.

Stuart A. Miller: And of course, the part that is in the backlog, we understand components of it, but we're not sure which homes will close in the third or the fourth quarter and into the first. And as for the homes that we will sell over the next months, we're going to have to wait and see how the market evolves in a volatile market condition as we've been experiencing it. I don't know if that's helpful, but I wish I could give it to you in a more granular form. Yeah, no, no, no.

Speaker Change #110: Of course.

Speaker Change #110: The part that is in.

Speaker Change #110: Backlog, we understand components of it but we're not sure of which homes will close in the third and the fourth quarter and into the first.

Speaker Change #110: And as for the homes that we will sell over the next months.

Speaker Change #110: We're going to have to wait and see how the market evolves in a volatile market condition as we have done that.

Michael Rehaut: Yeah. I don't know if that's helpful, but I wish I could give it to a more granular form. Yeah, no, no, yeah.

Speaker Change #110: I don't know if thats helpful, but I wish I could give it to you in more granular form.

Speaker Change #111: Yes, no no no.

Speaker Change #110: Yes.

Michael Rehaut: No, so what's the one I think that you alluded to in Chennai, and I should think about the continual increase in interest rates for most of Q2. Of course, that impacts the closings in Q3, and so if we see some stability and that we don't have a crystal ball on that, but if we see some stability with rate, instead of the increase that we saw last quarter, that will also be helpful to margins. So what we're showing to you, of course, we deliver in Q4. Right. No, no, no, thank you for that, Diane. Maybe my second question, I just wanted to focus on more maybe, you know, kind of month-to-month trends, and you kind of alluded to this earlier that, you know, earlier in the quarter, you're dealing with a little bit of higher rates, perhaps, you know, using more incentives.

Diane J. Bessette: Yeah. One of the things that you alluded to is incentives, and as you think about the continual increase in interest rates for most of Q2, of course, that impacts the closings in Q3. And so if we see some stability, and we don't have a crystal ball on that, but if we see some stability with rates instead of the increase that we saw last quarter, that will also be helpful to margins. And what we show in Q3, of course, we do it in Q4. Right. No, no, no.

Speaker Change #110: Yes.

I think you alluded to it's incentives and as you think about the continual increase for months.

Speaker Change #110: And interest rates for most of Q2 of course that impacts the closings in Q3.

So if we see some stability in that we don't have a crystal ball on that but if we see some stability with range.

Speaker Change #110: Status the increase that we saw.

Speaker Change #110: Last quarter that will also be helpful to margins.

Speaker Change #110: So what we sell into today of course, we deliver in Q4.

Michael Jason Rehaut: Thank you for that, Diane. Maybe my second question is, I just wanted to focus on more maybe, you know, kind of month to month trends. And you kind of alluded to this earlier that, you know, earlier in the quarter, you were dealing with a little bit of higher rates, perhaps, you know, using more incentives, just wanted to get a sense. And then, obviously, more recently, rates have come in a little bit. I just wanted to try to get a sense, if possible, around how that impacted incentives as a percent of sales throughout the quarter, and if there was a high watermark perhaps earlier in the quarter, and just trying to get a sense of where you might be relative to that higher watermark, you know, let's say a couple of months ago, in terms of trying to gauge pricing power and the level of incentives in the marketplace today versus Well, let me start, and maybe Diane will give us some additional information.

Speaker Change #113: Right I don't know that thank you for that Diane.

Speaker Change #112: Maybe my second question.

Speaker Change #114: I just wanted to focus on more maybe.

Speaker Change #114: Kind of month to month trends and you kind of alluded to this earlier that.

Speaker Change #114: Earlier in the quarter youre dealing with a little bit of higher rates, perhaps using more incentives.

Michael Rehaut: Just wanted to get a sense, and then obviously more recently rates coming in a little bit. Just wanted to try to get a sense as possible around, you know, how that impacted incentives as a percent of sales throughout the quarter, and, you know, if there was a high watermark, perhaps earlier in the quarter, and just trying to get a sense of where you might be relative to that higher watermark. You know, let's say a couple of months ago, in terms of trying to engage pricing power and level of incentives in the marketplace today versus, you know, and rates were 30-40 bit higher, let's say.

Speaker Change #114: I just wanted to get a sense and then obviously more recently rates coming in a little bit.

I just wanted to try to get a sense if possible around.

Speaker Change #114: How that impacted.

Speaker Change #114: Incentives as a percent of sales.

Speaker Change #114: Throughout the quarter and.

Speaker Change #114: There was a high watermark, perhaps earlier in the quarter and.

Speaker Change #114: Just trying to get a sense of where you might be relative to that higher watermark.

Speaker Change #114: Let's say a couple of months ago in terms of trying to gauge.

Speaker Change #114: Pricing power and level of incentives in the marketplace today versus <unk>.

Speaker Change #115: Rates were $30 40 bps higher let's say.

Stuart Miller: Well, let me start. Maybe Diane, give it some additional color. But remember, as I said in my remarks, that when we started the quarter, the rates were at about six and three quarters. As we went through the quarter, it migrated up to about 7.3. It wasn't really until right at the end of our quarter that illustrates kind of took a sudden turn in the opposite direction. So that didn't really reflect itself through our quarter, certainly not many of the deliveries in our quarter. So, you know, what we have found is that the current market condition is pretty sensitive to illustrate movements.

Speaker Change #116: Well, let me start maybe Diane will give us some additional.

Speaker Change #115: Yes.

Stuart A. Miller: But remember, as I said in my remarks, that when we started the quarter, the rates were at about six and three quarters. As we went through the quarter, they migrated up to about 7.3. It wasn't really until right at the end of our quarter that interest rates kind of took a sudden turn in the opposite direction. So that didn't really reflect itself in our quarter, certainly not in any of the deliveries in our quarter.

Speaker Change #117: Color, but remember as I said in my remarks, when we started the quarter rates were at about six and three quarters.

Speaker Change #117: As we went through the quarter it migrated up to about seven three it wasn't really until right at the end of our quarter and interest rates kind of took a sudden charter in the opposite direction.

Speaker Change #117: So.

Speaker Change #117: That didn't really.

Speaker Change #117: Reflect itself.

Speaker Change #117: <unk> quarter, certainly not in any of the deliveries in our quarter.

Stuart A. Miller: So what we have found is that the current market condition is pretty sensible to interest rate movements. And there is a relationship, and a very direct one, between interest rates migrating higher and the need for higher incentives to offset some of those interest rates. Interest rates migrated to the 7.3 kind of range, and there were higher incentives that went along with interest rates at that level. And I think that's, You know, something that we can kind of expect is going to continue as rates trend up. There will be a little bit more incentive as rates trend down. You know, it seems that some of the incentives have come off.

Speaker Change #117: So.

Speaker Change #117: What we have found is that of the current market condition is pretty sensitive to interest rate movements.

Stuart Miller: And there is a relationship in a very direct one between interest rates migrating higher and the need for higher incentives to offset some of those interest rates. It became a little more difficult as interest rates migrated to the 7.3 kind of range. And there were higher incentives that went along with interest rates at that level. And I think that that's, you know, something that we can kind of expect. There's going to continue as rates trend up. There will be a little bit more incentive as rates trend down. You know, it seems that some of the incentives come off.

Speaker Change #117: <unk>.

Speaker Change #117: There is a relationship and a very direct one between interest rates migrating higher and the need for higher incentives to offset some of those interest rates.

Speaker Change #117: Came a little more difficult as is.

Speaker Change #117: Interest rates migrated to the seven three kind of range.

Speaker Change #117: There were higher incentives that went along with interest rates at that level.

Speaker Change #117: And I think that that's.

Speaker Change #117: Okay.

Speaker Change #117: Something that we can kind of expect it is going to continue as rates trend up there will be a little bit more incentives as rates trend down.

Speaker Change #117: It seems that that some of the incentives to come off.

Diane J. Bessette: And we'll have to see if that continues to hold up, continues to be the consistent pattern. An order of magnitude is an everyday kind of assessment that moves around a little bit. I don't think I can peg for you that 25 basis points in the interest rate translates into X number of incentive dollars spent in one area or another. It's very market by market, and the consumer base is very different in different markets. Diane, any... Yeah, I think that's right.

Diane Bessette: And we'll have to see if that continues to hold up, continues to be the consistent pattern. And order of magnitude, you know, it's an everyday kind of assessment that moves around a little bit. I don't think I can pay for you that 25 basis points and interest rate translates into X number of incentive dollars spent in one area or another. It's very market by market, and the consumer base is very different and different markets. Yeah, I think that's right. I think, and to answer your question like so, if we look at the incentives given in March, April, and May, each month those incentives, as a percent, did increase, which is very consistent with what Stuart said.

Speaker Change #117: And we'll have to see if that continues to hold up continues to be the consistent pattern.

Speaker Change #117: In order of magnitude.

Speaker Change #117: <unk>.

Speaker Change #117: It's an everyday kind of assessment that moves around a little bit I don't think I can pay for you that 25 basis points and interest rate translates into X number of incentive dollars spent in one area or another it's very market by market and the consumer basis.

Speaker Change #117: Very different in different markets.

Michael Jason Rehaut: I think, and to answer your question, Mike, so as we looked at the incentives given in March, April, and May, each month those incentives, as a percent, did increase, which is very consistent with what Stuart said. It really mirrored the direction of interest rates. So as they've moderated... It would be our hope that the levels that we saw in May would also match. Great, thanks so much.

Speaker Change #117: Yes, I think that trains I think to answer your question, Mike. So as we looked at the incentives given in March April and May each month, those incentives as a percent did increase which is very consistent with what Stuart said really mirrors, where the direction of interest rates.

Michael Rehaut: It really mirrors the direction of interest rates. So if we, as they've moderated. It would be our hope that the levels that we saw in May would also moderate. Great. Thanks so much. Okay.

Speaker Change #117: As they've moderated.

It would be our hope that the levels that we saw in May would also moderate.

Speaker Change #118: Great. Thanks, so much.

Michael Rehaut: Thanks, Mike.

Speaker Change #119: Okay, Thanks, Mike and let's take one more question. Please.

Kenneth Zener: And let's take one more question, please.

Kenneth Zener: And for our final question, we'll go to the line of Kenneth Zener from Seaport Research Partners. Please go ahead. Hello, everybody. Well, I think we could avoid a lot of the gross margin comments if one queue perhaps is just the bottom and gross margin versus flat math we're doing, but I want to focus on gross margin seasonality that brick from the fixed field cost because that's kind of straightforward and modelled model. Now, you're instead of one queue or like 10.4, great disclosure in your queue, what was it in two queue versus the kind of five to six level in 1819?

Michael Jason Rehaut: Okay, thanks, Mike. And we'll take one more question. And for our final question, we'll go to the line of Kenneth Zener from Seaport Research Partners. Please go ahead. Hello, everybody.

Speaker Change #121: And for our final question will go to the line of Kenneth <unk> from Seaport Research partners. Please go ahead.

Speaker Change #120: Hello, everybody.

Kenneth Robinson Zener: Well, I think we could avoid a lot of the gross margin comments if one Q perhaps is just the bottom in gross margin versus the flat math we're doing. But I want to focus on gross margin seasonality, separate from the fixed field cost, because that's kind of a straightforward and modelable model. Now, Instead of in 1Q or like 10.4, great disclosure in your Q, what was it in 2Q versus the kind of 5 to 6 level in 18-19?

Well I think we could avoid leathers grew.

Speaker Change #122: Gross margin comments <unk>, perhaps is just the bottom in gross margin versus a flat math, we're doing but.

Kenneth: I want to focus on gross margin seasonality.

Speaker Change #124: Separate from the fixed fuel cost because that's kind of straightforward debatable model.

Kenneth: Now.

Your incentives and <unk> 10 for great disclosure in your Q, what was it in <unk> versus the kind of five to six level in 18, 19, and I'm asking because.

Kenneth Robinson Zener: And I'm asking because, It seems to even flow your model, which helps, obviously, cost, creates a little incentive seasonality, which I think, separates from the macro and the rates, because when you build a house, you know, first half, less sales demand. So it's kind of like selling ice in winter.

Kenneth Zener: And I'm asking because it seems even flow your model, which helps obviously cost creates a little incentive seasonality, which I think separate from the macro and the rage because we're just trying to, when you build a house, you know, first half. Well, sales demand, so it's kind of like selling ice, the winter versus the second half, I believe, is you're thinking based on past trends. And if you can kind of talk about that, if I think that's what's missing in the Even Flow discussion a little bit, if you would, that was my first question. So again, we're asking specifically about the incentives on deliveries. Is that that's your first queue, so queue one and 8.9% in two, they were 9.4.

Kenneth: It seems even flow Youre model, which helps obviously costs.

Speaker Change #125: Creates a little incentive seasonality, which I think at separate from the macro and the rates because we're just trying to when you build the house first half glass sales demand. So it's kind of like selling ice the winter versus the second half I believe as Youre thinking based on past trends. If you could kind of talk about that piece.

Kenneth Robinson Zener: The second half, I believe, is your thinking based on past trends. And if you can kind of talk about that. Yves, I think... That's what's missing in the even flow discussion a little bit, if you would. That was my first.

Speaker Change #125: I think so.

Speaker Change #126: That's what's missing in the even flow discussion a little bit a few it that was my first question.

Stuart A. Miller: So, Ken, you were asking specifically about the incentives for delivery. Transcribed by https://otter.ai into the interest rate environment. I think that perhaps what you're really referring to on a broader basis is trying to punctuate that the gross margin on a go-forward basis should be more aligned with the changes that we've been talking about from an operational standpoint. So the sustainability and the durability of the efficiencies and the cost benefits that we're seeing in margin should be maintained on a quarter to quarter basis with a little bit of seasonality mixed in, but you should see a very strong and sustainable gross margin as we become even more proficient with swell.

Speaker Change #126: Sure.

Speaker Change #127: You were asking specifically about the incentives on deliveries.

Speaker Change #128: Q1 nine.

Speaker Change #128: 9% Q2, they were $9 four.

Stuart Miller: I'm not sure; of course, there's perhaps in two, but I really, as we've been saying, I really think it's more direct correlation, a more direct correlation to the interest rate environment. I think that perhaps what you're really referring to on a broader basis is trying to punctuate that the gross margin on a GoPro basis should be more aligned with the change that we've been talking about from the operational standpoint. So the sustainability and the durability of the efficiency season cost benefits that we're seeing in margin should be maintained on a quarter-to-quarter basis. But a little bit of seasonality may stand, but you should see a very strong and sustainable gross margin as we become even more efficient with even as well.

Speaker Change #128: Of course.

Speaker Change #128: Some seasonality, but I really as we've been saying I really think it's more a direct correlation in a more direct correlation to the interest rate environment, I think that perhaps what you're really referring to on a broader basis.

Speaker Change #128: I'm just trying to punctuate that the gross margin on a go forward basis should be more aligned with teen.

Speaker Change #128: Changes that we've been talking about from an operational standpoint, so the sustainability and the durability of the efficiencies and cost benefits that we're seeing in margin should be maintained on a quarter to quarter basis, but a little bit of seasonality next year that you should see a very strong and sustainable gross margin.

Speaker Change #128: As we become even more efficiently even as well I think thats split privately punctuated, sometimes there'll be some fluctuations in margin relative to the environment, but there is a lot in durability and sustainability.

Stuart A. Miller: I think that's what you're probably trying to punctuate, that sometimes there'll be some fluctuations in margin relative to the environment, but there's a lot of durability and sustainability in what you're seeing. Second question, I guess, Stuart, this is a little more for you in the sense that, You're comparing the ROI of your core home building with your Directionally going towards timing is as much tied to, You know, unknown things, right? And no need to get into that.

Stuart Miller: I think that's what you're probably trying to punctuate: that sometimes there'll be some fluctuations in margin, where it looks into the environment, but there's a lot of durability and sustainability in what you're seeing.

Speaker Change #128: Shane.

Speaker Change #129: Go ahead.

Stuart Miller: Good, second question, I guess, sir, this is a little more for you in the sense of your are it's comparing ROI of your core home building, which you're directionally going towards. Timing is as much tied to, you know, unknown things, right, and no need to get into that, but. Your choice to have so many other assets, which are, you know, third or 40% of your total asset base, how do you think of, you know, your ROI goes from 30% down to ROA, you know, kind of in the low teams there but. How is, you know, multi-family, I know that land will improve your home building returns.

Speaker Change #128: Yeah.

Speaker Change #130: Second question I guess Stuart this is little more for you in this sense.

Speaker Change #131: You are.

Speaker Change #131: Comparing ROI of your core homebuilding.

Speaker Change #131: Sure.

Speaker Change #131: Directionally going towards timing.

Speaker Change #131: As much tied to.

Speaker Change #131: Unknown tax rate and no need to get into that but.

Stuart A. Miller: But Your choice to have so many other assets, which are, you know, third or 40% of your total asset base, how do you think of, you know, your ROI goes from 30% down to ROA, you know, kind of in the low teens there, but, How is, you know, multifamily, I know that land will improve your home building returns, but do you really need like, you know, the multifamily is technology part of that core home building, in your opinion, I'm just trying to see how Philosophically, you think about these other assets, I realize we can't address the timing, but that's like the biggest drag on you achieve, you know, merging your ROI and your ROA and, Just seeing if we really need these other parts, in your longer-term philosophy. Not clear to me yet.

Speaker Change #131: Your choice to have so many other assets, which are third or 40% of your total asset base.

Speaker Change #132: How do you think.

Speaker Change #132: Your ROI goes from 30% down to Aro.

Speaker Change #132: Kind of in the low teens there but.

Speaker Change #132: How is multifamily I know that land will improve your homebuilding returns, but do you really need like.

Stuart Miller: But do you really need, like, you know, the multi-family is technology part of that core home building? In your opinion, I'm just trying to see how we really need these other parts in your longer term philosophies; it's not clear to me yet. Thank you. Well, you know, again, we're focused on being the very best home builder that we can be in doing our part in building a healthier housing market. The multi-family programming that we have in place is really quite adjacent to our core home building business. We basically already build the same product that the unquote product represents for a 4-shell market.

Speaker Change #133: The multifamily is technology part of that core homebuilding in your opinion I'm just trying to see how.

Speaker Change #133: Philosophically you think about these other assets I realize you can't address the timing, but that's like the biggest drag on you achieve.

Andrew: Merging your ROI Andrew ROA.

Andrew: And I'm.

Andrew: Just seeing if we really need these other parts.

Andrew: And your longer term philosophy, because it's not clear to me yet thank you.

Stuart A. Miller: Well, you know, again, we're focused on being the very best homebuilder that we can be and doing our part in building a healthier housing market. The multifamily programming that we have in place is really quite adjacent to our core home building business. We basically already build the same product that the uncore product represents for a for sale market. Building it for a full rent market is something that we can do at the division level because it is an adjacency to what we have already built. And we'll build it on a third-party platform. So we don't think that that will be impactful over the long term on ROI or A or any of those calculations.

Andrew: Well.

Andrew: Again, we're focused on being the very best homebuilder that we can be in.

Andrew: <unk>.

Andrew: Doing our part in building a healthier housing market.

Andrew: Multifamily programming that we have in place is really quite adjacent to our core homebuilding business, we basically only build the same product.

Andrew: The encore solid 12%.

Bill: For a for sale market Bill.

Stuart Miller: Building it for a rent market is something that we can do at the division level because it is adjacent to what we already build. And we'll build it in any third-party platform. But we don't think that that will be impactful over one turn to our IR or any of those calculations. In terms of technology, technology is a small component of the overall. It's a very important component of how we're building our business. Every element of our business is being modified, re-engineered. We thought in and around technology in the way that we actually operate from our machine that we've talked about.

Bill: Building it for a full rent market is something that we can do at the division level because it is an adjacency to what we already built.

Bill: And we'll build that a third party platform. So we don't think that that will be impactful over the long term too.

Bill: Two Aro <unk> Aro.

Speaker Change #136: Are any of those calculations.

Diane J. Bessette: In terms of technology, technology is a small component of the overall, but it's a very important component of how we're building our business. Every element of our business is being modified, re-engineered, rethought in and around technology and the way that we actually operate. From our machine, which we've talked about quite a bit, digital marketing to dynamic pricing and everything in between, that machine has been a game-changer in the way it has been informed by the technology investments and engagements that we have worked through over these past years. Technology in our company is going to keep us modern and relevant as we continue to be a better version of ourselves.

Speaker Change #136: In terms of technology.

Speaker Change #136: Technology is a small component of the overall, it's a very important component of how we are building our business every element of our business is being modified reengineer, we saw it in and around technology in the way that we actually in the way that we actually operate from.

Speaker Change #136: Our machine, which we've talked about quite a bit.

Stuart Miller: But that digital marketing to dynamic pricing and everything in between, that machine has been a game changer in the way it has been formed by the technology investments and engagements that we have worked through over these past years. The constant flow of technology, imagination and innovation, we, our company is going to keep us modern and relevant as we continue to be a better version of ourselves. So we will continue to be engaged with technology programming as we go forward. But many of the assets have these kinds of investments that have been part of our engagement in the past.

Speaker Change #136: <unk>.

Speaker Change #136: Digital marketing to dynamic pricing and everything in between that machine has been a game changer in the way. It has been informed by the technology investments and engagements that we have.

Speaker Change #136: We have worked through over these past years.

Speaker Change #136: The constant flow of technology imagination innovation through our company is going to keep us modern and relevant as we continue to be a better version of ourselves. So we will continue to be engaged with technology programming.

Diane J. Bessette: So, we will continue to be engaged with technology programming as we go forward. But many of the asset-heavy kinds of investments that have been part of our engagement in the past, those will be recalibrated out of the company and will be focused on things that are direct adjacencies to what we do, and that is, build affordable housing and fill the supply deficit that exists across the country. Yes, and can I say, obviously, it goes without saying, the spin-off will have a material impact, not only on ROI but ROE, so we're very focused on that.

Speaker Change #136: As we go forward, but many of the asset heavy kinds of investments that have been part of our engagement in the past those will be recalibrated out of the company and will be focused on things that are directly adjacencies to what we do and that is build affordable housing and filled with <unk>.

Stuart Miller: These will be recalibrated out of the company and will be focused on things that are directed to what we do, and that is build affordable housing and fill the supply deficit that exists across the country. Yes, in Canada, obviously goes up saying there's a full-heaven material impact, not only to ROI but also to focus on that. And there's one other comment on what the family not only is it important to us because the business is adjacent to our core business. But remember to recall what Stuart mentioned that they were doing in a very capital-efficient way using third-party capital.

Speaker Change #136: Applied deficit that exists across the country.

Speaker Change #136: Tenant taking obviously it goes without saying that the spinoff will have a material impact in Netherlands.

Speaker Change #136: <unk>.

Speaker Change #136: Very focused on that.

Diane J. Bessette: And just one other comment on the Rupple family. Not only is it important to us because the business is adjacent to our core business, but remember, recall what Stuart mentioned, that they were doing it in a very capital-efficient way. Complementary businesses are being funded in a very capital-efficient way. Notwithstanding that, though, we are monetizing the Fund One assets, and as Stuart mentioned, we're constantly looking at other assets. So it's an enormous focus on the company, and I think you'll see improvement in the go forward.

Speaker Change #136: And just one other comment on multifamily not only is it important to us because the business is adjacent to our core business, but recall that Stuart mentioned that they were getting in in a very capital efficient language with their current capital. So we feel like it's it's a.

Stuart Miller: So we feel like it's a complementary business being funded in a very capital-efficient way. Notwithstanding that, though, we are monetizing the fund. One answer to this statement, and we're constantly looking at other assets. So it's a really more of a focus on the company, and I think that's the improvement I'm going for.

Speaker Change #136: Complementary business being.

Speaker Change #137: <unk> is a very capital efficient way notwithstanding that we are monetizing the frontline announced mentioned in shipments and are constantly looking at other expenditure if you're a new earnings focus.

Speaker Change #137: On the company and I think you'll see improvement anchor for adventures.

Unknown Executive: Thank you very much. So thank you, everyone. Okay, thank you, Ken, and thank you everyone for joining us today. We look forward to continuing to deliver and providing further information on our progress as we move forward and build the best version of our company as we go forward. So thank you for joining, and we'll see you next time.

Ken: Thank you very much. So thank you everyone. Okay. Thank you Ken and thank you everyone for joining US today, we look forward to continuing to.

Ken: To deliver and.

Ken: I'll provide you further information on our progress as we move forward and build the best version of our company as we go forward. So thank you for joining and we'll see you next time.

Unknown Executive: That concludes today's conference. Thank you all for participating. You may disconnect your line, and please enjoy the rest of your day. Thank you for joining us today.

Operator: Thank you very much. That concludes today's conference. Thank you all for participating. You may disconnect your line, and please enjoy the rest of your day.

Speaker Change #139: That concludes today's conference. Thank you all for participating you may disconnect. Your line and please enjoy the rest of your day.