LEN - Earnings call transcript Q4 2017

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Operator

Welcome to Lennar's fourth quarter earnings conference call. [Operator Instructions]. Today's conference is being recorded.

If you have any objections, you may disconnect at this time. I would now turn the call over to Alex Lumpkin for the reading of the forward-looking statement.

Alexandra Lumpkin

morning. good and you, Thank Today's conference Lennar's flows, including regarding forward-looking and may financial condition, include business, cash statements, results prospects. statements call of strategies operations,

the could conference results note on contained to forward-looking Forward-looking occurred, any activities morning's give these future differ not and may subject to in relate to that affect on results. Form inherently Lennar's date Lennar's including to represent Please those future recently in as materially are include to estimates obligation statements cause actual update filings, uncertainties. forward-looking any statements in of intended SEC are from forward-looking only factors statements. assurance annual Many with this this report those under and our risks yet Because described the most SEC. activities actual These Lennar call the to matters XX-K, the and not Factors anticipated have factors the results and Risk statements. filed Lennar's no and release assumes press results statements that or caption

Operator

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

Stuart Miller

who of here Very Alex our Diane Jaffe, Alex. you, and morning, Rick just course, our President and Bruce from. you This Vice staff Jon heard our Bessette, good, our and, Beckwitt, Lumpkin, Chief Collins, President; our I'm Controller; Officer; thank Operating Officer; Chief with Gross, Financial David legal Treasurer; from

here. We Jeff also of have CEO Krasnoff, Rialto

going Rick Jon brief our strategic detail. and the Bruce going integration As combination. a will start overview, ask update give to further and also Instructions]. I'm of always, [Operator then give on CalAtlantic with brief a to Today, I'm to

miss the ahead noncore derived addressing So transaction. that non-Rialto onetime quarter and room from line bottom begin in by let highlighting shifting the a our me of fourth by elephant the go

it profitability benefit will still shortfall rate. first ability actual fourth the we produce our the lower that quarter is and the to federal confidentiality more agreement in covered substance, will transaction that can from this shift its tax disclose this say than overall. While by the benefits that company line, restricts Bottom quarter,

our the platform. from We healthy end execute to closed we've And of been our be core growth, transaction, to stable we created and have optimism continued or of stronger. have to operating WCI to for -- to and in market of here time our working in getting our generally business the additional to on the that new country, operations productive and beginning net as recently the announced generally across of very The to it's a the We began into WCI wages orders, focused economic plan to unemployment let at our and has very passed the the very it's translating improving. paying migrate the a exciting own. XX.X%, that to its transaction, innovate on sense Through of been able of to business our of strategic announce to Generally the balance pleased preclosing of business federal we're position quarter. strong housing home and grow with business strong, process the margins of that evolve on growing tax say the been every target were levels and Aside produced sense CalAtlantic, shortage continue transaction, our track acquisition attitude future exciting fourth we time, combination be we as very aspect and has Lennar. pure-play There cap continue At been quarter, the particularly ended continued at to the Against and cash general year debt act expectations. we momentum our sheet. shifted be Accordingly, that seen the Rialto in even integrated low to that all and business, on company as market year. earnings, is have the least fourth labor at our the has me and rate we operators, to speaking, continued homebuilding industry. landscape. a same economic Lennar, At we confirm a and the line strategy at Multifamily highest industry, and for while integration our deliveries a continue industry-transforming the environment we the are ahead we be target customers fully it's in refining to to with LMC on with for perform and added continues the the focusing moving continue is our jobs after above higher. and backdrop, wage the a continues same total to homebuilding

of mortgage initial are many tax been and its housing that it to suggesting mixed is the readings with concerned about law the reviews bag on new While economy, is the has by estate that be generally effects and of housing. stimulative of impacts, local around taxes economic real offset momentum about stability optimistic growth. for deductibility and overall good of Concerns and deduction, taxes the and the -- of interest state to seem reduction mortgage

tax We we in and typical on each of their studied our effect the at of specific impacts buyer is have markets, levels. generally our positive that profile the found carefully law the income

frustrated a a payment and create for a purchase home new deduction savings to standard down personal Additionally, stability. apartment the doubling of group of help the accumulate dwellers should

combination will production will strong of This in strategic though successful two demand deficits that and we land really by together homebuilders selling sets with industry. cost a the limited offset be season, as for years, been stage the largest from of even drive somewhat very and power construction the that the We supply the to economy, increases. pricing continue and move to feel upcoming and through past have continue

about As we these companies we both the closing, to you've leadership the a on Both all remain down. in professionals skipped these for board. creating operating and combination. drive Already, CalAtlantic to cost We our upcoming and quarter this quickly, markets morning X% enthusiastic our defined build the best-of-class over sales the from XX. platforms most have have up lines at and we operations use a I'd most before, and can the since seamlessly these conference about across to experienced of teams the believe efficiently are XX%, decades. like the deliveries the seeing spend scale in that country. operating technologies the efficiencies companies the improve transaction. two focused and is product were preparing with backlog the have to that heard integrate best in companies believe beat break two that strategic quickly. sales, with expectations in we efficiencies closing not and we above drive on the the know announced we of can up transaction and execute With to the on from and CalAtlantic continued very February exceeded closings -- and guidance. Likewise, and believe business convention to industry that drive us team announcement have combination we extended for In And innovate all hand CalAtlantic. our best you we synergies up XX% scale, backlogs markets This time on fourth calls, are some year's, for the while Lennar's last as

its integration, integration Beckwitt Given and Rick the importance and and and timing. an I combination on and the have of this update progress provide Jaffe give the planning to significance Jon of you invited transparency

well that start will quickly accomplishments to on beat. as you of together could expected bringing needed two see you business great we and and we move the execute focused think on the as current are task and companies without off? complex missing traditions a Rick, efficiently both as I details

Richard Beckwitt

Stuart. Thanks,

billion strategic cash The on announced the we of everyone $X.X $X.X cash. senior me start XX, included portion billion, by notes for reminding assumed. the After $X.X debt the net to billion with of of October and CalAtlantic consideration XX% stock announced transaction, acquisition. we Let which for we pay that XX% our included issued combination

XXXX. we the mentioned, on closing Stuart merger anticipate XX, February As

Our $XX billion. from will create huge of in with the of combined local will XX% The the CalAtlantic in to local markets. XX% This XX-month latest shares strategic drive nation's will mass ranging a excess market combination revenues largest top markets in XX have the builder in company with XX savings. critical nation with many largest position three

line bottom with due diligence line integrating we deal, announcement to the drive top and both the our period the and have on focused been companies since of plan a two During performance.

closes, of reduced selecting associates detailed be In new of a both scale elimination in operations. one markets field from we two and I'm divisions, they the XX. from, recognize weeks. operations map for. have the companies with senior will the cost market, Diego, Decisions is from say include significant made two five up a our communicate all of overhead had market, right already LA/Ventura to decisions, our the company to we current operating our the largest to we happy the CalAtlantic footprint will accommodate in through Lake improvements. that production have will remaining synergies technology Salt and from three and costs, of presidents, new up the public and direct from schedule. will significant presidents, duplicate and all to been on and integration regional company We which San markets, costs, divisions to efficiencies, division City, per synergies into XX have result on road and personnel, regardless The we We've include current new with personnel. both player division companies new bench the When in and deal remaining operating best Indianapolis which divisions and selected work with on associates regions, next XX and the homebuilding four; divisions associates and the all The leverage. division corporate employment of Orlando. deep regard choose high-quality the spoken combined savings, These

our an a company. growth key will However, personnel parts relevant that our execution standpoint drive created leaders business. cost entire companies integration and touch from since that companies of our drive across acquisition these from associates an and both both from We go-forward associates we've all retained and the in process team purchasing footprint, savings includes the significant land

decisions, value land priorities technology integration purchasing. streamlining, been EI conversion, Our acquisition, have product and engineering

of are standpoint, of the to prior ahead conversions closing the well critical From go-forward these in are day the selected. each system mapped will been areas. and decisions operating of out time We System have line a being our technology already closing. start

and plans. profile identify opportunities WCI as integration, the announcement with market of endorsed tech efficient line. purchase standpoint, increased we standpoint, simultaneous land when leverage Our did both cross-marketing goal I companies, both and Jon acquisition our have we all the reviewing CalAtlantic a system build-out to plans operating our from us is land these From benefit be on of division to been of been home the the acquisition since from regional companies of consistent on the our one calling the and product our the product significant merger. From opportunities has to the capitalize This allowed a best-selling underwriting, the negotiating CalAtlantic local have and presidents by assets. most through scale have in land

be a CalAtlantic make to higher by product XXX to the which and offering In on as communities of Center community product agreement the country. products. each Everything's master Lennar land review margins. of a and Lennar, WCI, facilitate to each our Center XX this Village by other sold cycle us the most costs. most Lennar communities. like given has begun construction remaining cases, cheaper several Jon by To that the I and into cases, will Village faster and whether remain to the In outsized Design is determine brands. entered company rebranding product of and CalAtlantic thinking agreement, analyzed completed lower commands some this is to designed for walk our now All and all and Lennar with CalAtlantic closing communities expected, jump-start allows communities, engineering will forward on over future important Design XX% and or X% CalAtlantic would Lennar CalAtlantic this building the Purchasing approximately far Included construct it us of we existing to to higher be prior construction through product permits turn construction have marketing across benefit schedule returns times accelerate build. faster to type to of approximately conversion price element or a Pursuant the pull Builder will merger or homes development, homes value and the Yesterday, build under opportunity sales the by strategic I'd our to conversion from company We the important quarters, rebranded profits driver this Builder and company. the start rebranded WCI Jon This process, we've to next brands. already deal. of will in CalAtlantic, the the over to XX% combination. of are the owned Of other with both the

Jonathan Jaffe

$XX years least Thanks, $XXX million expect fiscal publicly XXXX announced synergies realize and million and at we in respectively. in Rick. XXXX, We that to

filing, our million told costs. years we synergies will The direct our in we XXXX, XXXX the will the million board in prior synergies, construction and merger fiscal of $XXX million of XXXX, that directors come be $XXX these reported lower $XXX S-X from agreement respectively. signing believe As in to and majority

homes represents the from with we approximately feet construction costs. per a million would savings increase savings leverage just to square per Lennar's XXX square million $X.XX this be cost combined feet. volume associated XX to production as equates foot to Contributing from volume that we year, square foot, X.X% as this our expect the will stand-alone million greater savings direct per Given X.X% XXX current Lennar's of

put some a place and We chain world-class team. have from supply up associates Lennar, new of additions made team to CalAtlantic the in already

with teams. division presidents, organized are our five centers We chain vice a and XX-member team, purchasing supply regional regional purchasing three operating

chain from experience the Lennar's who associates' the Texas the Pacific-Ryland in as associates benefit Florida, leveraged supply manages and Standard the merger and will operating will California well integration managed We the Centex-Pulte organization. of process -- Everything's to officially of and supply chain in CalAtlantic three execution existing activity as be Lennar larger centers merger. purchasing Included

road contracts have and all and Plans we manufacturing, components operational earlier. synergy are Show created based place detailed national evaluated one-on-one on with two items. targets manufacturers synergies volume. described vendors. a and which Plans with and suppliers, of supply such for as Builders SG&A structure action the synergies, place we and have the taking started along combined International engineering. the at exploration strategic This to trusses chain We've between task week, major block, have as with map Meetings by We place and the in the contracts already capture Rick by private in the in Orlando companies completion commenced date already prioritizes national with product are awarding meetings of are panelization, value of label vertical set, our category. concrete for integration

reduction month I'd synergies turn average ability the this. comments confident efficient increase synergies and now Lennar's for Included gain per integration execution, invested converted to cycle which sales will for it and we construction Additionally, XX like in communities an and S-X will X.X Stuart we time see a profitability and are all as much we'll high communities side. in to pace two as from are days when leverage capital. as this discussed process in combination internal the direct rate leverage of of XX are those on per X to for of in of on to sales more XXXX CalAtlantic plans Everything's back deliver sales the increase SG&A platform, will month. to we're cycle times, costs, This of will reduce where in converted on return pace lower cost The days on place to some deliver our greater base, the Based filing over the our XXXX. sales

Stuart Miller

Great. Thanks, Thanks, Jon. Rick.

Rick you are simply as from hear So we Jon, can it. and put, on

are we this of from critical have would down integration, the you team. as We this elements exactly broken and expect executing

will the we platform the drive build companies to go to before, efficiently two and demonstrate noted innovation to homebuilding together we effectively best continue savings we and these the I've engaged industry and demonstrate, in expect as to and in As forward, bring process.

our to to on greater give let detail me with So and David. to turn Bruce financials, that, over

Bruce Gross

good and Stuart, morning. Thanks,

were earnings company's Our The per share. net diluted $XXX.X quarter core million fourth metrics for $X.XX the exceeded expectations. or operational

strategic driven increased to the compared in projections home quarter wholly This $X.XX by and impacted into Excluding quarter quarter onetime would owned which energy XX% of the deliveries. the $XXX,XXX. estimate from earnings and reduced of average consensus fourth increase by have selling to Hurricane fourth deliveries XXXX, sales was credits. by diluted net in XXXX an by and transaction Stuart $X.XX increase in shifted highlighted beginning favorably fourth the we Irma, At exceeded quarter, Revenues our of first Harvey that per of million X% Hurricane share, quarter impacted or $X.XX. were a by $XXX.X X% the the XXX price we fourth we

team this Our these able XXX managed during fourth through the operational to of homes period return normal. deliver and to challenging approximately quarter as XXX were operations

stated approximately climbed segment. increase construction was our an The once X% costs. driven the a was margins X% land gross was sales segment, in X% an Our improved up margin X.X% the square year-over-year approximately average than on Homebuilding direct costs, to in East in increase were labor The again margin goals. by improvement to and home sale material $XX with by and were Gross basis foot our West costs Homebuilding and construction to percentages increased points our Sales margin driven quarter year-over-year offset year's highest increase per gross have prior due in XX.X%, was price. XX.X%. in which incentives partially gross percentage XX fourth better by primarily

Our quarter revenue lower SG&A commissions to broker in was as to a from quarter was as percent X.X% the and of fourth This history, a primarily X.X%. this company's and decrease lowest SG&A The external home percentage the continues leverage. percentage in fourth compared drive improvement improved year. the in due was to prior sales operating

that operating of margin $XX.X to for and the This joint venture, was quarter the land our other was XX%. with quarter the will the with the communities, XX quarter communities we the a net $XX transaction million. XX that We guidance and closed quarter highlighted for strategic is during category million to first combined The the Our end was $XX attributable shift into of new sale opened communities. to active XXX XXXX. compared shortfall million quarter

homeowners New XX%, increased quarter. the increased value for order new dollar and the XX%

base per month, the which year. sales X.X per was Our community similar sales to was prior

tool carefully decreased unsold homebuilding homes, manage volume. by which community, a completed Our enabled as result, an is lowest or our dynamic per calculates X.X XXXX. per only XXX in to And us pricing homes community year-over-year to This again. inventory to since inventory XX% has XXX increase our despite our level

X,XXX the totaling $XXX quarter, we purchased million. homesites, During

soft with strategy. our continued We pivot

some strategic West However, and and XX,XXX our controlled controlled. now which homesites total region, this purchases are have are quarter, we the XXX,XXX and owned in did homesites, larger XXX,XXX owned of

down pretax Turning prior the segment billion $X.X operating X% to the compared $XX.X the to billion million $X.X volume $XX.X Financial million of originations was to decreased versus in XX% the $XX.X year. million to $XX.X million in from year. year, prior prior Mortgage while had earnings compared refinance Services. This decreased year. Mortgage to in income prior

environment. homebuyers originations. more We of to and have purchase to year. our drop pricing a refinance XX% XX% shifted now prior which rate this has the origination led in compared Lennar represents The was of to competitive capture business, quarter XX% The

cost as million gains $XX.X a profit partially year. refinanced the approximately fee the operating apartments. of offset lease company's profit are and by of title income, these sale versus the the communities, decreased over and slightly a a Including of the delivered of up, with management segment's XX,XXX totaling in the share by segment driven total XX,XXX $XX.X development $X.X apartments to XX million G&A We The completed approximately $XX.X with $X.X well operating as $XX.X construction, and have million XX under expenses. primarily X we ended quarter billion in of diversified transaction in Multifamily billion. to operating XX properties prior pipeline development Our properties quarter, million which from approximately

and securitizations, of quarter of in year, carried and primarily million of mortgage prior equity loans amounts interest with $X.X in million The net billion finance At to million of of Fund Our due contributed end, X.X% Rialto estate was are current other, in $XX.X million lower $XX.X Rialto $XXX compared segment the produced year. the investment interest. earnings of the the interest prior in in million real and of which million. commercial contributed $X earnings million management million totals estate $XX.X the margins, to operating million X hypothetical for resulting year X both compared $XX.X includes decrease fees includes versus carried noncontrolling $XXX undistributed business which $XXX the $XX.X real earnings into management in million and distributions. now from prior operations The $XX.X earnings funds Rialto in X.X% of year. volume and core lower earnings,

good remaining portfolio had assets million from purchases. to a the Our loss the as progress make $XX.X we continued monetizing investments and on early direct of FDIC

quarter Rialto of warehouse and were ended for the a interest $X.X lines, the liquidity assets closing position We FDIC $XXX to million in expense, be G&A strong $XX.X the was and have under our Rialto approximately the at contract portfolio assets quarter. in loan the and year of reduced are REO all million expenses with million. and end, the other now million cash. to first quarter, $XX with excluding also remaining remaining

reform is rate due for The XXXX prior XX.X%. the tax a current XX.X% approximately credits remeasurement in the of recognized of onetime additional in the the higher The was effective prior tax of the recorded XXXX XX% XX%. quarter year's first rate year. related effective million quarter Our rate federal to tax to tax tax to rate. than approximately our result is $XX quarter noncash the of the Excluded in from tax deferred to energy as rate our lower of primarily assets will bill our from be a fourth charge reduce XXXX new

increase with sheet only of a net debt balance despite to million Our at year. WCI XXX capital all-cash year-over-year of acquiring the an for points remains basis this total strong XX.X%, in of transaction start an $XXX

Our our outstanding provide approximately flexibility and billion $X of on facility. liquidity streams exceptional with borrowings financial revolving $X.X credit billion cash no

in During the quarter, we senior combination. XXXX, also senior $XX.XX notes connection the share to are equity per million X.XX% and redeemed related $XXX million in CalAtlantic $X.X of in X.XX% to and grew the senior million our And billion, the XXXX. with X.XX% of of due due notes $XXX XXXX that in to were we per due $XXX notes to share. fund and expenses increased to merger book cash the Stockholders' portion value issued

in Controller Before provide will and for He him quarter wanted first purchase providing time I for primer to felt David combination accounting to good CalAtlantic. over goals, details Officer. to Collins, with process. starting Accounting our on the this purchase We is a turn with Chief provide I be you call the our a accounting XXXX the

David. So turn me to let it

David Collins

Thanks, Bruce.

goodwill in acquisition value assets the at February CalAtlantic will liabilities acquisition, of partially gross stock and to significant There which inventory, already been of to as for Lennar's impact investments forward. date, adjustments which fair is backlog the of to gross have will result and be assets, The these the liabilities of on of final our These sold. date, expected the be entities, through will margins the impact a that Certain to impact margins adjustments XXXX acquired going of early QX other XXXX. assets to, is the on is be that assumed goodwill required XX, but recognized in writeup from adjustments will as value contingent and part will them include, the As the on transaction. the the acquisition acquisition the debt. a as value and part the acquired well homes price, evaluate of purchase amount unconsolidated more required record we fair be date limited not

we have measurement to allocation our date. We time this call. first conference to April in one on year our of We expect our look to forward of you allocation is The the by file change provisional from first within up quarter to updating the completed quarter a year. XX-Q period subject purchase acquisition

Bruce Gross

goals XXXX. would like Note call to to in in I quarter CalAtlantic. these provide conference Lennar we March our will first Now some update for that at numbers include

First, deliveries.

to We for deliver XX,XXX XXXX. XX,XXX and are homes currently expecting between

We the expect for second quarter. for to third XX% first the conversion XX% fourth ratio XX% backlog approximately the of a and quarter, and for XX% quarters over

being between XXXX the expected of and the increase to with margin operating improvement margins first the match is expect then the We volumes The be approximately operating year margin as full XXXX level quarter to XX%; gross lowest seasonality year. approximately be the XX.X%. and SG&A, quarters, throughout X%. There will

refinanced the million be significant and half quarterly the continue XXXX prior operating will that are However, expected consistent impacted the $XXX the range year-over-year fairly be year. in volume year, first impact to in for XXXX decline Financial to with million Services the to the comparisons. $XXX margins should of of

in first result, and a quarter to second are quarter As earnings. lower expected result year-over-year

However, we be the do earnings expect third see quarter to to year-over-year fourth and for higher.

million and we $XX expect profits the a Rialto, million year. between to range $XX for of Turning

expects sell approximately have be year second Multifamily communities first to $XX quarter The our multifamily is in half expected to XXXX. half, million. higher to of expected than X is X and profitability to first the the

of size $XX million year. full However, communities million in profits a smaller and $XX should these than in are with XXXX between transactions. result for the range This

category, And quarter G&A to quarters. expected quarter ventures, and look first approximately of other expect the coming revenues joint second portion million to the of then quarter income, land the X is invest continue The fourth and tax will XX%, quarter percentage over is the XXXX. balance noncash transaction in company $XX year-over-year earlier, from be shifted we The the at a in in of deferred total quarter XXXX million quarter. first as first be sales that and as onetime fourth a of profit quarterly the approximately this The charge. mentioned a the for million primarily as last $XXX spread approximately to $XX strategic the expected we the third initiatives. asset to effective over year, the I Corporate from in is small be category tax profit excluding just technology breakout with and profit we rate the significant our breakeven as steady for

Our the net cash to and increase reduce X% community XXXX deliver XX% XXXX. first significant positioned of expected ending expected, in our The be to we approximately With year. the increase count use to our well strategies contribution cash to will in prioritized flow earnings with operating of XXX, debt. count throughout spread strong are from is

With to these positioned well strong, year in XXXX. profitable are deliver goals in mind, another we

Let operator questions. turn back it me to the now open to it up for

Operator

Instructions]. from [Operator And Fargo. question Wells our Stephen from first comes East

Stephen East

at Builders' Show. me hope can I also hear you the I'm okay.

information of a So here. ton

the million, you in happening, was of of So the question S-X I what was the million guidance? $XXX $XXX was is first the $XXX through lot a you the that walk versus in million explained as not but you when what $XXX savings at guess, the million look all

Richard Beckwitt

and doing conservative transaction interest to upside. to an Steve, focused other then detailed being to the that we we analysis, transaction, on shareholders it's we what The folks as the the might accomplish. also we very the more could since knew announcing -- were Street. Rick. in We're We had just there on was we have knew wanted were And table we our put

Stephen East

land Costs little that? how the up was was the gross guess, you. gross a X% Okay. Or reported? up the margin what the drive? play to then you else And driving that the right. I margin. level to being in bit. And I both X%, me primarily from surprised quarter, dynamic a I all perspective All labor and guess, pricing switching addition got that in incentives

Jonathan Jaffe

sales. our of taken The cost earlier had that is Jon. flowing really in it's cost increases the increase Steve, of year were that lumber place through but bulk

well framing, was up to of to year-over-year. we expect that as in by to with behind higher driving course, Empire but flow it moderated, Since well. land that's up into will that. June like major of were -- basis, that's XX% And that, our up see September. some that lumber sell impact Coastal associated margins. as then, So our itself we're XX% a margins we that the particularly in have and attribute Lumber Dynamic as and positive impact continue, lumber, and incentives markets our as California, so in on that made seeing helping both which do labor down, of and increase has from earlier X% the evidence we definitely driver is, materials Inland increase is process, don't pricing,

Stephen East

us? quantify you can for And quantify to that do Okay. that try or want to you

Richard Beckwitt

highlight that we come So bit points down did have little the in region Western a dynamic was sales that that incentives the XX year-over-year, tool. was driven pricing and basis by using ahead

Stuart Miller

more throughout becomes tool our the as improvement incremental see pricing company. to Steve, continue, dynamic adopted understood and and more you'll And

Stephen East

Okay.

at next those incentives? bring Stuart, all to say, the year can it you capture, how do you much down think As like look you in now,

Stuart Miller

that would to somewhat XX all Their wait goes. dance. each see these it of it's hard and to We've knew implementing, are a of is predict. It's harder exactly to be and going initiatives. divisions, I with They next We're and timing where predict. the even question. sit, got watch

us can So with we're each incremental what the take low And by it quarter can initiative, just see we table us. can And quarter. or with high bring additionally, how looking start improvements. think at improvement we'll to increments to new I new how that it new take

from So there's room these lot initiatives. of think all for improvement a I of

Operator

Carl question Reichardt from from BTIG. next comes Our

Carl Reichardt

called you mind? would I is direct about other labor versus when wanted be the that at elements? the out to cost in reduction do you've the What Jon, ask versus split savings your you materials think leverage the look greatest Where merger. you between

Jonathan Jaffe

Well, on from the standpoint, prioritization materials a to it's going be side.

split over into to of because high as math shortage the it, take volume actual bit probably longer out to there, going the look converted the two exists expand it's on the evenly behind the you ability which at trades first a Labor, pretty in going little that. We’re and to have the categories. that national between greater attack it's labor it's up definitely to priority, but to get trades contracts. But the

Carl Reichardt

the kind Rick, communities in for little then near-term And CAA. were about you to talk a Okay. bit the changeover

positions, As chance them focused time? longer-term entry bring Is right. I've do about as move flexibility product if that more thinking And over could land being you it there than kind a of look towards at market? it of to change what product level choice and move-up got their you to more see you alter you you, that a of I'm have then mix slightly perhaps

Richard Beckwitt

have in world, in So Lennar are flexibility product great we got, certainly, things product. what or the in selection. deals, the platted move-up have that you, go-forward We

that convert and CalAtlantic there in brand. to Builder brand WCI have EI. in be product we And Village ultimately our We some may that

have looking and ones lower put all. and should increase We, deals, figuring there. great we individual spent to velocity some I, So we do at at a got think in we time flexibility priced have Jon lot which any product of out

see do the all you'll above. So of us

Jonathan Jaffe

I And as of and community be that, analysis community, IRR. always, best it's both just going produces returns, margin what would by add submarket a by submarket the to

Operator

Ivy from Zelman next Our comes Zelman from & Associates. question

Ivy Zelman

or detailed you can the Rick you're builder, so extremely overview, at said On position. so when your largest and over it's the my market, top you in X first that. benefits know guess, Jon the X least Jon, of I scale. maybe, of about for impressive, question, X/X thanks, I talk

you through then scale? follow-up, other please. see And everyone Assuming walk can get have every I of to benefits a maybe else, deal land before you

Jonathan Jaffe

from have this know markets we dominant we And the positions. already these where Sure.

is and have access priority priority market As a Equally we you said, is there. to where have foremost supply. the to position land important we labor first a Ivy, position the relative

able we we've us Lennar's tremendous you added to strong As at volume going the The square that and Lennar, volume. builder in building just on give a we'll over think partners, focused of labor to is conference I peace to based huge productivity us focus over. truly feet, additional choice critical of put to trade for for to a become XXX to their know becoming force workers million for have very be front seen already because which choice consistent progress past keep and tremendous going opportunity builder job, That's takes up is from trades the calls, their to that, that plans the on us. same the the the them, of benefit for

Richard Beckwitt

on side thing, best biggest, machine, Ivy, the sales in of have last people. the homes people When want that especially operating you one and equation, it's the come And to sell operation.

attract great new home we the in organization. So consultants

Jonathan Jaffe

almost for be about success be additional And a social our lot I at cost to and the with would had online leverage relative a our tremendous we and just marketing we've going calls, lower will add, too, customers to even marketing, high-quality to really, opportunity lower the additional because media as talked our presence, that that's on in and -- bring no have this effort able digital to scale at do costs. focus

Ivy Zelman

helpful. very That's Great.

a you've one profitability sure may cetera, and integration, mentioned derive as of but response. you could the lot the Is maybe that you investment Jon, just as So you finalized being at even concrete about the panelization, there, backward block, but [indiscernible]? a this appreciate look combination, a timing you you only lot think question, any those something that talked -- with the I'm few maybe it opportunity take backward impact from obviously, of and the it's example. could an I type return integration. to And that for be framing February. in know second years? et Or The in

Jonathan Jaffe

it's at definitely vertically of deep that on an in scale opportunity as example, longer bit build going the the time we're to But have in little horizon a -- process. look just homes Florida. activity have into [indiscernible] Florida, we There's tremendous carefully. it's to the that's Florida XX,XXX because State Ivy, We are if with you integrated.

values what detail whether Those determine now. what are any to, work those it's it's is more prioritization really and goes to definitely underway. really we will But right whether get in block that first, it's will are, things the of at We and in concrete truss talk plans Texas. premature will Florida, create

Richard Beckwitt

think someone something to is you'll we'll I on and Ivy, the get us see, pricing you'll do of we start do probably in. some as the and see dynamics a to business stand-alone sort mutual understand flow-through, what arrangement then the with And of basis.

Jonathan Jaffe

to of all been have equation. as builder side, of been effort. the you, Paul take well He's as remind heading a Ivy, the the this what supplier just of have accomplish we we up Dodge, I'd whole on sides And both understanding good this. so He's aspects it'll on side

Stuart Miller

to the next attention local in labor consolidating this around is is on of local with be builder concentrated focus local going national cost to squarely strong savings going be important Probably, a through yes, focus the of around terms and focus. labor. becoming just consolidation our starting really lowest-hanging of And the and material has to level contracts. largest Ivy, down been in and the greatest is the driving the fruit. structure. and -- side force. and The the So finish a business the the up, in It's We're the benefit big

us, of fruit. that's kind tier to So low-hanging of second the

this about very incorporated beginnings how the integration go tier, at as tiers, that have homes, fruit Jon the industry strategically and we get sense talk third combination. myself we as Rick been that's core the we will an Rick, That be some quickly. that the vertical these of able can I be When XX,XXX forward. that various highlights and and building will at focus and the look a to we elements we look in enables at way lot before about As to market. you're integration change a each way, the Florida look happening at economical this scale do of looking third tier that getting think a believes is us to and in develop hope scale. haven't at process The local of these in lowest-hanging building very been savings we drivers of things that we at

The behind. second and third quickly level will come

Ivy Zelman

that's No, helpful. extremely

about week talk can you -- many more, you sneak I'll hits how sorry, that in you digital digital I'm see mentioned And how successful quick, or marketing. from Just initiative? Jon, one a

Jonathan Jaffe

is I that. the look people at for get actually impactful That's as number information. metric from think of the leads we we ask who most

leads what So that to for leads information. versus hits, to are people but hard who to, are which tell interested enough is ask

from over per to We our marketing social quarter program. generate XXX,XXX are outreach leads continuing

Stuart Miller

And from marketing digital let numbers viewpoint, what the we in impressive. say the being it. inning can and as me do of with our We parenthetically, ourselves producing first are just very view that we're

better can better are getting create we belt in So targeting digital very customers interested focused think on are our a conveyor products. great that and we at And we of that and engagement.

to more arena. in this there's come So

Operator

Our Kim next Evercore. from Stephen from comes question

Stephen Kim

well. I'm Hopefully hear also Show. Builders' me you the at can

pretty existing in spread try have. taking initiatives organization, land some has laid You've integration. guess, the was envision of over that as some ahead whether impressive equation. I will side that out for to curious talk get I the you you been if had And any what you to larger that of little given spend to of into about of could a you for a the bit land overlapping markets the

side what different you you in Lennar from on if could terms from spend maybe expect expectations, of the comment alone. just So stand land

Richard Beckwitt

deals aspects the number they're company; division one of not I'm out two, operations those And successful, and on dollar after the past, that through What in amount Steve, because give all and from on number going not keeping makes the highlighted now. focused stall acquisition business. pause yet deals organization drive a tell has Stuart totally a opportunities to fruit; to growing. growth. machines really going because president, low-hanging is, one, and going coordinated number when land integrating as that regional are you prepared is our But I of the we're become teams can that president, three, So a you entire and

personnel and acquisition personnel development and personnel significant my in as heavy deals. I So future gone in and purchasing land the are that's in of the highlighted Jon I heavy because the company. we've reviewing commentary,

looking Our presidents value and these pace at deals. of transactions, each absorptions enhancement those maximizing one isolating in regional division and presidents are and

Jonathan Jaffe

go tools, we of process the that also Steve, at priority add top the from approval acquisition running ground will skip the analytics, giving and our it's acquisition I'd executing process, on field, the we they game clarity that look plan. as Jon. perspective our absolute hit could have in the integration, so of operational the teams as not about underwriting teams, terms beat how a we of of prioritized can the land

Stuart Miller

These is Steve. are beat in And are a of overview then plans constructed. our an Rick's I now. as action overview you a let They as primary of have group or being add to initiatives. don't think integration put not been just the want place. And here, me and on Jon skipping plans. I action right focus primer that And think

As and thank They're them the to numbers bringing grow, They're order this that we close to company plans and out Hopefully, actively and in transaction. whole for the pro year a Pete. consolidated to They plan. it over are just better been convey that's going we're land spending focus after couldn't the place Scott, forma dollars many from one as be sourcing waiting their and relates guys how going be not help be a with the trajectory to is opportunities. to level. land, enacted there tremendous consolidated we've land next we to And from the each cooperation there to we're The we're of you are those plan enough to day to expectations and as primary able well each attention. divisional to to put of up being looking leadership close expected. we And come it's these benefiting Larry ideas to in point, is, give maintain course to We'll exactly at that process. throughout the last combine. professionalism our and together

Stephen Kim

side to construction more No, that's gets progress equation. -- is looking next it as little Great. of as the at very segue sort kind of which a bit in a of the question, helpful. my And

second Included? it Everything's two-part is a share to was conversion of And of kind before, done sourcing to the think long make studio into design which do that actually. with you example, details, takes row. largely expire there's the of you of there integrated sorts a And season, from industry, give us your curve, a the sort that Are first, then Included? all long of could question, CalAtlantic is this Just be of a concern need contracts how the time or something able guess, year, with learning with you I conversion you lined get question the you've Is So staff? be believe I up of really to lot your conversion concerned kind spring the part timing, embedded if you integrate to being little supervisory first, could on Those effectively? EI you for trades need ducks a Included, you, us curious there selling Everything's a as know to the to takes. just will do about of a Everything's sense how to to for sort where in if a have year,

just bit the year us time which with some But not put that to comfort unified lot, address to this going of a a that important maybe and be that recognizing super there. shared anything to specifically doing, so you're strategy. be guard just off going of You've out is if market a a could you're you gives caught going

Stuart Miller

some on communities fill not the that product sure a Jon's the that product, And is up an started. implemented. you've between incrementally with to start done. effectively race finishing And and racecar those existing of is an getting Steve, that strategic in and in of This orderly blanks. product started. between changes just as make a versus just the and there off, we difference There is that track. most the they existing we are are on differential combination be going making WCI. are integration, an arbitrary to This kind me get seen of overview, process is let to But some keep this is something of just

the So the it as is going a something of process to been has of orderly actually in implementing Everything's process that's Jon? Included part past. be an

Jonathan Jaffe

product lead CalAtlantic sense out we'll And build and that sense then plan with existing look to community over finish which through make communities it of their product. does and at. when by was as which highlighting some this communities it Included Everything's design and Rick them starts to his makes transition to in community in game it studio a comments format. to So the

Now right? in existing in we about to project have Lennar that and It's how know each the we difficult question Included it, not already know your create. We is that something Everything's portfolio, is, to market.

know. Now about remember, products really the combination one strategic we of know reasons are its we excited and markets its this is we

products. the know we So

We the also levels and the done consistent, existing to in an just know CalAtlantic product put seamless markets. Lennar be research, that We've a community. EI and will package somewhat Included so that the those transition on Everything's

we we turn the quarters product, EI as as as into some will So Builder the finish virtually product. to over and Included under XXXX, the and of the be in brands. CalAtlantic corner see out WCI will appropriate starts bulk continue Village my then or you'll product Everything's out transition that to of or our second third It's expectation when XXX% switch

Richard Beckwitt

how personnel other never two we operational -- And to -- Indianapolis. this That's think know it's realize how know design purchase it, In it. build how it, City it's it, and I important all Lake do to this, to Steve, point. done the across for really in final that the It's know got know how how to whole you EI. to source that operation only to markets nation, Salt markets that one of we've know have combined have

So this thing. new is a not

Jonathan Jaffe

and obvious It's by divisions Those that. of market and -- that's be presidents other platform only purchasing will coming are regional and Included really know Not presidents product he But and this our with and supported out. that divisions supported over. Jon all president again, regional, one marketing CalAtlantic by all regional national that teams, regional, know regional the teams, national obviously. exception inside Everything's

Stuart Miller

or to a follow-up, builders not adapt seen an number thing a And on Included do. It's on not look, side. It's side. adopt. the it's the sale production of It -- very are benefits a to copy a Everything's and the because easy attractive we time. the as it There a to It what process be learned orderly. learned and take on process learning, just a attractive is just We've or process. It's program. behaviors. but try adapt be Everything's will we're an some implemented big really production program. will is over will They Included implementation side. that will marketing time. It's some production It's take has confident as

Stephen Kim

And Great. the about what spring?

Jonathan Jaffe

mean, what the Stephen, about do spring? What you

Stephen Kim

or are planning year? Just Maybe is doing that doing spring more the curious some I approach the of there's there way gearing the where much so spring this opposed go aggressive posture? quite say, the later particular the to, let's if selling become the just the that you that challenges at anything just time isn't season much you generally a reflects up of anything industry in integration. about and with affects to are entering as a was

Richard Beckwitt

Yes.

signed I to construction this the CalAtlantic. of So Steve, master importance agreement think that gets really we that with

the the Lennar communities This XX already and country homes We never across have brand. starting now that's has done been [indiscernible]. permitted in right

Stuart Miller

a doing that the each as is The already season purchased. The the product in are say, important exactly it uncertainty. being think the place. community The of thing let level certainty, much lot to going out. that with cloud each Steve, pretty at to We're I selling already set relates is what community is me there'd is spring, the mapping be be of Yes. to communities And not single okay? most spring going

the there As and be for the be prepared that's will the spring, if season, each selling we'll enter certainty question. spring level, at we community

Jonathan Jaffe

question, one I your just addresses think, comment, really, these questions. of more And but all

are call commencing operations we reviews. We already what community

teams same management is, really team, the going exactly around construction team, are every on everyone page, everyone So customer confirm meeting our that rolling the community, understand sales in community, make is in with road sure same to management the teams, that and where is direction. team combined community the care the map the new

Operator

Our question next comes of from America. from Bank Lovallo John

Peter Galbo

of an from labor happened more was mentioned the cost, the that actually outside for I It's X% XQ. in just the anything material X% other Bruce, any John. quarter. or in Galbo, Pete up was the mentioned from there's and in that I pushing labor on up costs hurricanes you wondering on increase year-over-year changes you disruptions if think

Jonathan Jaffe

that. take I'll Jon. It's

hero So I to is trend trade there repair into say. relative like pulled the you have I there said, constraint on But the continuing to that, the component. the it's nothing labor homebuilding the relative environment. just is side prices increased the that Even against bulk would that, in think of increase framing happening There's of improving business. unusual the gets and affecting even hurricanes, the by a labor large,

Peter Galbo

No, I I taking guess, again, appreciate topic higher a XX,XXX-foot that. the of the Stuart, on integration. here. just all appreciate And color view

that's competitors to may kind competitors respond, out are that that effectively just else on. may You dynamic guys of size smaller now your competitor. how thinking have double with have your of the how on, next thinking two builders guys are here wondering how respond changing going you about And the largest you're set about everything -- you

Stuart Miller

think on response. our way focused squarely focused configured, the all not we're we the And we're have that that eyes business. on I our competitive

season, It's selling dynamic focusing quarter integrating, for pricing a at while expect a level greater ready around division that is of much that come we per will are of certainty see independently the also configuring beyond lower number our combination place at redefine future. for profitability It's Lennar, enhancing going digital ourselves. XXX,XXX about initiatives with that seamless than implementation It's we leads track concurrently, will are on something ultimately, product the and the just to community It's we're halls you marketing driving season. making business at tool you selling our divisions preparing strategy, we not and even the through operates, spring that have on about higher. and on the the there's way the just combined how that not in the that. and Lennar our As we that very that company focused execution this and just of sure for spring divisions SG&A

can are again, mousetrap. to We we it build competitive can thinking we over -- box landscape about and said a outside how better way the think over how I've

is, rebuild marketing concentration better to large going ability to of local operations the production build approaches, kingdom the to a build we lines, competitive that sales homebuilding and the for that how vertically part, and so to And scale, internal and hasn't yet response less that seen. a that from the the better of can is the think the program than is concentration to consequence program rest in homebuilding build market for key us approaches we something us forward. world And this both

So feet. that's it about we're of how thinking XX,XXX from kind

Jonathan Jaffe

is taking Stuart's that's the of opportunities and see in obvious to associates overall what the front there have and on everybody, Lennar. what and And that people their and these in this teams, at And challenges forward so we we and that are enthusiastic excited enthusiasm what CalAtlantic the front just supporting is is welcoming of we're to looking that, people something opportunities. are really us about is comments and joining of the that on and not supporting culture us, group a about

Stuart Miller

All right.

conclusion, in for thank want us. listen, I everyone to So joining just

that that's I have And yet, integration, many, that look of say, CalAtlantic at business, getting efforts efforts as been both tireless mentioned on want Stowell we and this business, been call, articulated take forward Scott of as joins company call. that the about very who associates that -- us work and even that and forward. long with, way. been McCall, the that impressive the We're many Scott on come we'll we're to see very around it build and the Pete, to parting do as better where continue as and to this Directors companies. on and focused about And enthusiastic just our and a really go very the business especially moving can I comment can to it's Jeff think we we this the for and know Larry term. partnership and through haven't you be work term we've platform a we've focused we our it to think the I in on this forward, does Board enthusiastic about in combination. enthusiastic what We're begin short

So as as giving February on we for as integrate updates future progress us. you. Thank we we forward close report you going continue to XX, look this We forward. thank to quarterly and ultimately, you combination joining

Operator

you And participation. that your for conference. concludes today's Thank

all now disconnect. may You

Lennar (LEN) 10 Jan 182017 Q4 Earnings call transcript