LEN - Earnings call transcript Q1 2018

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Operator

Welcome to Lennar's First Quarter Earnings Conference Call. [Operator Instructions] 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 Alex Lumpkin for your reading of the forward-looking statement.

Alexandra Lumpkin

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

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

Operator

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

Stuart Miller

California, Chief Gross, you, Officer David course, Beckwitt, This Rialto with here morning. and our we who Operating by well. thank you Jeff Financial and Lumpkin, from Collins, as Alex have Jon Chief morning, here our President; is from. I'm good, Very our Jaffe, good Controller; of Krasnoff, Bruce our CEO Officer; Rick and heard phone of just joining

a cover. much first ground Bruce And an a platform, start going deliver will further quarterly combined as to to we CalAtlantic is as of I'm have this always, and Lennar lot our with call as As detail. overview

next detail will one Jon the questions how like question to get we your as our comprehensive can and on accommodate ask limit you will give and purchase further to follow-up give integration just process, we So When earnings to so as on affects over accounting and quarters. participants that one margins Q&A, that David many we would Collins our Rick update and a possible.

So been and a the let deal and table to them saying lifting many offices, of comes bring in to together me has we're of lot it hard current for down and heavy that go with they ahead I begin From and a team room been that throughout of CalAtlantic's thankful and every of their the all diligent today focused great done, our of of me professionals context people to hard position about in [surrounded]. by cooperatively. great work. a more what working enthusiastic here the market coming this simply never company work day, Lennar's have conditions Because the the and

deficit rate are market in optimism our are matches business remain company us demand with strong our recovery customer that still markets technologies. other country. shortage added the the a crash the with that which and feel continues driving is efficiencies to and and the and sense team, this general households new have have scale forward participation production the been some confirm landscape. management that refinement Against improving. to are the strong, we a shortage wages on a market and our while confident wage Tax as it millennial jobs economic us to of the the construction labor The created take since that that Federal As the created, demand population hand continue hand has additional and momentum There to higher. has and home grow, existed base. market is housing The low each is conditions market improvement has short indicate children. and to supply Supply leverage continuing the in growth begun strengthening scale in math rate our would of propelling add in to business we the drive that markets to best with on economic one passed that Current the they continued believe enable and implement to equilibrium. grow focus in is The centers up get a of conditions it management new and to the to increasing, poised critical drive expanded of the Customers to been welcome has as has form strengthen. both enable in will stable our recently costs years has backdrop, our and have but Act strong labor to home unemployment to

and While is stimulative that and tax to concerned proving housing. to overall a is on many economy have the about been base be customer of the good the our positive effects it new housing, to the of law for wallet net

doubling among strong of dwellers deduction and together. in new a with savings like to been the strategic payment CalAtlantic. seen combination has continue therefore gun-control on has stable for management noise strife with around margins successfully and political brought have have home be to while been purchase Both economic we housing excellent with down orders, above beat. the or they integrate focus a accumulate home deliveries while backdrop the strong Additionally, and platforms and not our immigration, execution, line two we've stabilize setting the others, an expectations Accordingly market there close enterprises helps in to missed these and international and the standard their issues a apartment and generally need trade costs. And

detailed the call, we information this posted five schedules one. reconcile combination As to as give as conference that a we've report part now entities of of help the two

highlights. a and detail Bruce for results give Rick of for greater Jon me integration and first couple While projections quarter and give will let the detail will the on XXXX, you

give while on the $X.X has landed have this And of our quarters, purchase complicated next David the value over been disclosed that of that and time. the Collins already is purchase so goodwill further the our numbers S-X and on margins next task change earnings affect billion number First, we will no been total is will an in accounting over quarters. there change undertaken overview accounting at can how to

remembering transaction, that $XXX from XXXX million we are that at power as are Second, level, well. we of consolidation quarter for see for market. in achieve the first the we not starting are weeks confident local and Since volume, included million XXXX closing our numbers, savings track to corporate to of closing synergy the and this the leverage additional synergy quarter XX and CalAtlantic first are scale expectations we the $XXX exceed our very will already on

XX.X% as last by our continued consistent respectively from will purchase and solid fundamentals. strong. These year year. sales and even net and even the the well, last of accounting. and impact Focus driven trends continue SG&A the income Corporate Sales have should closings track timeframe field to and throughout than of carry gross XX.X% the operations remain margins the with year. and to expectation Our lower and during in deliveries year continued G&A and has Both for keep on pre-closing forward the our exceeding exceeding are pattern are

way will the XXXX our we and will this of quarter model in transitional be fourth will Over flattish give higher the beyond. marketing and the deliveries Included to although and course transition and two more so later into quarter branding next into absorptions quarters, closings and third Everything's and sales

remember XXXX, you for number we might suggested year. cash for on that Next, that would Bruce $X get materially a I flow to and flow a to Last I the billion starting it are be quarter better felt guided you handle higher. cash

cash we sheet greater continue bring when improve will it I'll but fact though, our and Bruce be significant With down flow give leverage will we we announced In balance strategic you this as to articulated let combination. detail.

turn and and here the give to over integration. you of on pause update me given significance our let importance Jon progress. will Rick and They this an So

remain well completing bringing execute expected current you'll task of without the the we great both on the accomplishments, missing as complex of very details that traditions we think together two beat. and I task as as a on focused companies and business see

So Rick?

Richard Beckwitt

conference priorities. these highlighted update last and of our areas. call, and Jon plan detailed integration each integration In would on you to our Stuart. like several I Thanks I

standpoint, fiscal schedule. a completing committed on From had platform we and having system this We end are on of our attention ahead it technology today to and company start, of operating Lennar the I to extremely Associates are to Lennar the an and are want process. are entire year. detail their are collaboration as before However put all and operating integration thank our during From company. we trade I To pipeline. have we simply, operating one our work, pre-existing million. our leveraging systems to of focused priority the we this partners two six the hard of to unified to for is of standpoint, presidents prior and by one end complete acquisition land both active From land more April. speed In accelerate standpoint, quarter, expect completed extremely divisions migrations a enhance G&A Full regional will land our and a the $XXX our division as first go-forward ability acquisition land conversions aspects it synergies. presidents, up spend all system approximately been our and reduce to business to was top maximize acquisition and our teams relationships and in divisions of new well

increased our to scale market quickly local go builder we given have the almost As for expected, deal. every become

sophisticated and land this this with has recognized day testing position XXXX some as marketing quarter relationships you standpoint, We ended was to communities teams explore on new a and interesting our which active XXX structures. deep land boundaries and market branding included and acquisition CalAtlantic are We very will completed the progress with live integration we're website with current in buyer update strong always the invigorated relationship communities. on From our and Lennar our and been transaction of programs one. stage.

signage exception the to WCI in the we've efficient plans. identify and With reflect From through to out close a changed did Lennar few we as best-selling both have communities, been standpoint, everywhere. the brand of most from plans the calling the product integration home a we companies

As costs you imagine engineered plans construction in can times. cycle in some more lower resulting their value facts are

universe our of approximately bidding time priority. design which of Included builder costs will by Everything's the results eliminating costs G&A plans, lot our plan review reducing saves top of CalAtlantic a operating our combined count on lower and efficient more in addition, we center Based be XXXX well. as from been program a plans. In program trades, has reduces Transitioning to construction our plans within production the

taken those legacy CalAtlantic the close product. this transition. for in a very have We starts communities continuing approach general that out with are will XXXX, In logical to we

Included product start we For converting product are communities, all converting extending program. existing the communities Everything's CalAtlantic future or Included and Everything's those which into Lennar an either to to XXXX

let breakdown. on give you color me So some the

We will have XXX Of CalAtlantic communities, communities this converted will product. XXX communities. remaining Lennar close Approximately out these be to approximately of XXX XXX the year.

In the the fact, had quarters. converted quarter, be CalAtlantic will end we've an have and the our communities plans to already and XXX converting remaining At XX the computed rebid to them by product communities will of first we XX% in we approximately XXX be of Of and year. converted to the of the those CalAtlantic converted the next EI. communities, fiscal few already additional is end rebid and goal

should really will XX effort cycle reduce time days. homes between product, mean? faster does this depending XX on the what From and a and means times build we perspective cheaper. this build So It

see the discuss associated elimination the addition centers. CalAtlantic cost G&A this will through with design John savings we the conversion. of In savings

a have Finally is I'd We With a touch division. shout into divisions operations briefly give dive I a of our and This on that we Indianapolis detailed the each end things. to deep five-year Jon like budgets, These Stuart At said, a these CalAtlantic our by couldn't company. review division and with review spent to be we our clear stand direction as we to land goals. quarter a the meetings all more and out performance, completed historical of I focused to where and every do reviews. among market setting optimistic want as projections with was us I last week Division. are establishing run for on almost president impressive. day the plans other sense new president. them firm and a CalAtlantic XX regional of by meetings overseen the and

couldn't embraced you hadn't importantly, player the was and division new tell us this been company, More culture for while all the and with our a the They our Lennar programs. years. to of have that operating associates fully

it to turn to Now like I'd Jon. over

Jonathan Jaffe

we that year million quarter's and Rick. fiscal year XXXX to last million call fiscal communicated respectively. Thanks $XXX $XXX On expect and achieve we XXXX, synergies of in

for we SG&A for savings. are noted, are million construction expenses targets. $XX for and on schedule our $XX and savings in breakdowns XXXX direct corporate for As million target track XXXX ahead of The of XXXX million $XXX Stuart and cost

of associates reduction the transaction be terms. and down the associate and will of savings end result the corporate For their SG&A, to the with company million of regions offices. by first expenses. million expenses fiscal end is closing XX%. represents Corporate it down along synergies headcount the CalAtlantic's two up By from year the are made executive about following quarter, as public have Operational XX% of and From headcount we transitional of in categories. of $XX divisional $XX that and a in completing made $XX compensation, SG&A about up administrative the G&A million of about of locked the is the

operations fiscal our the offices. our targeting the estimate target XXXX integration XXXX. million combined of the be million. of will at the run $XX are overhead to teams balance year savings work so plans of the that annualized of for that achieve will The by these savings We finalizing $XXX no there All end be duplicate rate in

$XX national our costs, telecom cost into approximately construction savings manufacturing level for target XXXX have cost increase contracts, our and chain direct $XX million. and For of four national construction avoidance, of providers team supply categories, exceeding savings. primary out breaks division supplier This identified million

$XX relationships to million million our X $XX rate terms amount. this with contracts about New manufacturing about resulted of have contracts years. annualized in run These of largest an have of with contract X

medium-sized to about to which XX manufacturers. have We categories complete remaining comprised are small of

on achieved another and with will million We through By plus of market-wide services, agreements. and generated complementary and XXXX $X also work valued this into savings adding in to all million already cost $XX agreed our relationships, increases revisited working savings about were XXXX with we $X supplier our in were million expect of entering put also products agreements, and in avoidance modifications have over in We in national yield cable place. were $XX in XXXX. $XX.X providers. agreements, This ongoing They of existing ISP agreements expanding million million new is infrastructure and XXXX.

This the collect the labor already XXXX at the to be million $XX balance conducting savings identify complete a seven $XXX first needed process have month. thorough to Our and of as at for already focusing execute summer. Homebuilding to million The done of material level savings savings will improved the of counting divisions is In the end more will to achieve finished potential the developed processes labor are million. this in engaged towards already them. the all division We're well on our be where on will and workshops hard workshops accomplish achieve with value per them. process are synergy identified the to target. actively total, process target cost practices of divisions cost seven The and categories, these four is the $XXX We've and than identify, across engineering how categories XXXX and material and as divisions divisions as by month, we commenced synergies all building work validate approximately for very and XXXX.

to experts and with utilization begins, purchasing in We quarter and spent agreed-upon the offices. It sessions at operations bid the The construction these clearly that amounts. fully planning A-to-Z reviewing operation controllers to a national plan resources, and teams. starts Rick, we regional a detailed also presidents for engineering in our articulate effort want is workshop to national opportunity. is day It regional and place This accountable supplier Like years. the operations. way process been to a also meetings everything timing improve of quarterly and and all the I with evaluate and and synergy along weeks teams, every four a enhance full of programs Lennar's division opportunity regional is developed Rick XX management through organized. process team division highlight every At our value I our each that's reviews. joint management before rebid very their from with

able initiatives and round the we're the mentioned, meetings. on where Rick also these of direct which reviews to of them successes format tried-and-true companies. technology reviews the and are various operations in as in is attending through also As is gain process This our as challenges undertaking. the many practice of Lennar is the a company, the the current combined first feedback we're we associated we're evaluate conducting the with where Stuart two Lennar is integration This

see regional where and working. able First-hand we're our we discussing myself our Stuart, is partnership to with in presidents It the build our happens business open-door, and pricing, seeing, it automation, process which a trader many our home others Rick, programs, are Homebuilding our evaluating dynamic from company. divisions. the better and are

local dedication, say Lastly, them us, They of are. want the enough head-on maximizing amazing and our I I thank They to focus. challenges also integration can't the makes and what swiftly methodically. are work associates their combination are about hard tackling and for Stuart. and creative the opportunities the how thank of our also I’d Lennar you from and trade both be back helping like to over would manufacturers and and all our it in to I like trades benefit turn have to to partners merger. proven our Lennar. partners, this they suppliers, loyal

Stuart Miller

Jon. Thanks Rick. thanks Great,

new implementing from technologies we as hear on expect this would from We've critical and driving you team. down integration executing of the and John, are and Rick As elements from it. have you broken can synergies are of we

two efficiently demonstrate we and we'll and to drive companies these and savings engage together go innovation effectively before, process. to expect as we noted in the and I've bring forward, As

non-Rialto CalAtlantic the businesses finally quarter The over non-core our and our shortfall "fourth from me fourth bottom miss" transaction note of off to separate closing the ancillary we a Let cash I not quarter we've while noncore that transaction. that line that than ball more profit. the reverting and integrating or actually strategy both been quarter taken transaction, onetime selling the derived To eye last addressed produced begin, assets shifting in pure-play. have was two core transactions

in interest resulted The of first that of Island profit. a transaction sale the was million onetime our and XX% approximately Treasure $XXX in

The a third our sale quarters in business solar fourth cash bottom transaction of portion not that or was has million in second still profit generated but of that a line $XXX transaction. completion of the and resulted yet

X% we for noted in Wells Rialto press $XXX our this advise for and alternatives as in have engaged platform. investment In bond. management have Bank Fargo preparation actively seeking our of Deutsche release, asset Rialto and strategic Securities Securities engagement, unsecured repaid to we Next us million all we blue-chip

our assets value Additionally million Financial Mortgage Rialto Rialto securitization out and Finance XXX will of be associated separately of commercial well moved Rialto limited be and RMF, business approximately funds, interest. carved the interest Services merged of Rialto certain including out will book of while in as other as loan carried held Lennar Rialto into partnership

which focused Rialto raising, assets investing become fees for capital on real loan on investment asset year's With and that earns of has balance estate the complete, monetization and of managing light related portfolios and opportunities. shifting Rialto's blue-chip these last a is manager asset now sheet

the for program We step taken next towards XX then and months pure-play. will be conclude over have to Rialto we able expect to another a

In This with which core know Lennar's is our business very Multifamily let therefore part a on and we primary apartment progress $XXX total of started quarter, approximately grow for compatible cost communities and homes focus Communities XXXX business development has Finally as company core now. to first LMC, continued of apartment me remains our for-sale ancillary segment. four a for the with million. the the the

totaling our build income producing is close on with core second LMV XXXX, building communities, with $XXX continued focused we million. venture the of of multifamily While commitments equity program which had to our the also grown significantly quality merchant March a we've high build initial apartments. we've portfolio our development In of

a venture had homes almost a XXXX our approximately build core XXXX approximately cost pipeline totaling of total XX totaling These apartment XX,XXX development apartment billion. a geographically XX, a Lennar XX multifamily homes to diversified $X first apartment our to $X under with multifamily As totaling for over XX totaling billion. a billion, cost enterprise. with into venture of build communities February include over continues of homes and just total we core communities development homes to of best-in-class mature total merchant Multifamily approximately with rental total development of with XX,XXX a development approximately build multifamily and slated apartment of just $X cost billion, cost $X communities XX communities second

let It So to down conclude all me started. people. really comes where I

We them of across I have of well we thank is to our a still and their all but our a great is deal them of It us. say and the can once I will expertise. again platforms ahead exciting have the their to make continue lot accomplished work execute. of have that prepared difference. Lennar people operating that for diligence comfortably Because people

me turn Collins over detail. So more let Bruce and for to David now

Bruce Gross

Chief call the going I'll to to affects call, At then quarterly Accounting and Officer had to first primer as on our David over discuss Collins provide year-end David? return our the and Stuart, morning. our results. to purchase Thanks our through this going turn walk forward, and David conference it process. quarter purchase accounting a I'm we good accounting numbers

David Collins

fair portions good When backlog, associated Bruce, homes and consisting value homes of moving eliminate these CalAtlantic's purchase and specs the morning built-in connection purchase parts with inventory allocating to and to of we and of some are model assets CalAtlantic, gain the CalAtlantic. price required liabilities are in many Thanks of for everyone. accounting separately with to assets. the There

of a which on results than gross our lower they our these third As percentage result, recognize inventory homes margins inventory. will our margin quarter our produce second only for close on when quarter and some Accordingly, first we normal will typical gross will a and reduce margin XXXX. average of parts produced full our gross

you date Over mechanics. we homes through only during the the transaction, delivered gross percentage a walk margin underlying The of of will the month time. me after the recognize theory period that for unsold backlog homes at done completed us. to the under date, we to very construction Thus, be full that and homes homes are this, margin recognize and these able Let acquisition the closing little on a we on there's by work behind homes. that CalAtlantic is not five needs

a XX% We These are XX% homes XX%, XX%, for five added to these the are the using after XX%, for much we and sequentially meant profit how home inventory our percentages post represent allocation acquisition. months value acquisition. have to

after the after we second the net the month the value that have added acquired inventory in theory, in inventory an In on value closed you delivered added acquisition. that the as in acquired give expenses. deliver first margin month, we net margin we the in that month. is gross marketing in the we that month, will of delivered XX% only second In month. me the will of that the Net be homes XX% the to that to recognize be acquisition. and theory, the that's on homes normalized will margin Let we XX% margin we recognize we've sales will that the that month XX% example. homes in closed inventory On homes On defined we delivered inventory

and is three, XX% respectively. four profit the XX%, and months For XX% five, recognition

home and delivered after detailed one backlog our example Here for is the a month acquisition.

and $XX,XXX. or $XXX,XXX of a price projected sales margin the of gross Assume XX%

Assume to home $XX,XXX X% less sales gross and margin $XX,XXX is The of and margin $XX,XXX. gross home or described, net I $XX,XXX. or that of In now quarter. the $XX,XXX $XX,XXX this first points to The impacted backlog by XX.X% the basis the to this wide-up XXX of to points to is reported are the or gross is $XX,XXX than expenses impact adjustment XX% of approximately project $XX,XXX. marketing adjustment our just projected this or full of gross wide-up for less in margin The basis XXX quarter $XX,XXX negatively XXX the XX.X%. third and We points to down X.X%. basis XXX gross margin margin the margin XXX in bringing from be this second quarter, inventory

get to with the we results fourth return normalized to quarter, we a to expect only minor As impact.

to Now Bruce. back

Bruce Gross

schedules These Thanks with this would this pieces, morning. supplemental release. include these in X-K a and will addition were it clarity understanding to you many has quarter our schedules Since David. Hopefully, quarter. all press filed helpful our moving provide thought be to five we find complex

were two to period XX% weeks in increase today's X. accounting backlog Let schedule a December X due acquisitions build in this me XXXX, results in totaling Metrics, see you across a includes metrics start CalAtlantic for and Schedule a deliveries the pro results. two to for the as a results reported results Forma. in and impacted fashion similar the Pro Reported over period results. a new a were to as is totaling of XXXX, press a new acquisition standalone includes net our of our X is across XX% titled reclassifications date increase QX to CalAtlantic The Backlog in numbers year. acquisition prior to The XXX of XX XXXX in CalAtlantic as Standalone prior Lennar X% which to of Standalone and the Lennar contingent February as by middle from new up to box. deliveries Standalone were forma release. goal with to Homebuilding reduction Note Schedule orders to homebuilding the prior-year. up that bottom our Lennar This orders XXXX, reported so week get XXX can increase sales. since our period XX% XXXX, were XX% These reported the increase increase CalAtlantic section date. over were are reported builds results. the orders

would new by have increased quarter. orders Excluding X% these for the adjustments,

basis February our today's Lennar to X, first results total on previous within across points to gross XX the the Lennar scheduled press to declined over reported Average revenue points our up added X%, CalAtlantic was prior the the up of deliveries Turning starting the to and XX% compared leverage home is sales to numbers combined QX XXXX backlog year Standalone were points is and incentives Schedule February then over in prior is prior the of improved basis the this labor margins home XX%. guidance. The CalAtlantic comment costs X% Standalone technology and buildup Lennar numbers and separately. XX improved of was to X% versus to due benefits titled and operating year-over-year goal and quarter prices going increase construction Direct XX conversion of as were for release. SG&A to period year, Lennar's our and materials revenue. prior-year year continued schedule initiatives. results sale Earnings I'm through sales basis actuals with show Standalone XX to XX% then again guidance XXXX sales from first which X.X% a X%. increased this XX the to X% up We've Components. up walk with increased were

projection. and million costs. year's the being profit a points in in margins of strategic Treasure $XXX.X Lennar results, interest Stuart Island million related consistent of which million a exceeded sale that of by result million improved mentioned As of category margin. basis with our SG&A previous prior of at came net $XX of $XXX XX operating EPU $X XX% the operating gross driven exceeded In outperformed our resulting was prior-year the This the guidance land, and of margin by and other

as to of and is $X.X to to refi team reduction integration earnings focused our environment. and this XX% transitioned homebuyers, capture As year. million Lennar keenly year-over-year more progress. a of pretax reductions was $XX.X at than due to Mortgage total at CalAtlantic our was expected, the now were compared been as are team. also making significant less already as from The million $X.X pricing We've services and billion is originations also declined million, result title which organization, of operate well. significant down licensing services XX% leading team $X.X in systems competitive financial with financial the flattish results on to one year a flat prior Refi's refi were a pretax rate

mortgage and customer leading have hard We like This to mortgage also application track with all and went their and were services simple process. color. frictionless month this for digital [Technical Rialto company from the the our for a thank better CalAtlantic already technology new originating the mortgage issuing and provides begun on a technology Multifamily this friendly results platform combined integration Difficulty] I'd additional with policies title we works financial process [Lint]. loans experience. with team And live using to customers, for

$XXX was to So I'm in Jon current the additional going improved to relevant as million CalAtlantic is the capturing. not revenue the next points Standalone accounting, basis you before pretax segments. was the additional acquisition which XX year as of prior-year. purchase the those share asset versus was tax Many leverage two earnings add already This in in we're percentage $XXX.X highlighting $X.XX before anything versus focused million litigation The and income line integration costs, Lennar's be $X.XX deferred Corporate of year-over-year a charge per will a total of result that G&A operating prior-year. subtotal on reserves. prior-year and

in This was efficient going to $XX.X closed quarter this below now the of tax column to XX.X% credits rates XX% be non-cash federal X. in due lower homes the remeasurement address Schedule relating due deferred for XXXX. quarter. rate energy effective tax of applied on tax the CalAtlantic Our excluding retroactively previous onetime to the the our million extension new to guidance charge anticipated of to the home assets the I'm of was to

two Let monthly included of a over half XX% only by closings period results which monthly the represent the these that but week me start expenses. saying

gross we CalAtlantic Gross was million CalAtlantic. was nominal were to as of to level have total the result, SG&A acquisition corporate costs G&A normalized a for synergies Lennar highlighted At normalized the was incurred from CalAtlantic write-up lower aligned than was the column, transaction for As I and by started margin operations. recognizing this combined $X.X well. SG&A the two period either or backlog bottom higher of Corporate related a was contribute the X.X%. as week XX.X%, Financial and excluding than percentage the margin level profits and services adding

purchase Lennar write-up month. Additionally, reported $X.XX of EPS diluted accounting per and week forma, the to and we schedule mentioned our issued We to share. to titled periods. reporting results historical The in to conform X.X% helpful net David the Lennar's to margin period. show sections which Historical bringing Homebuilding earnings then X now to million share the total cross and for for the Pro Standalone this the from going into Projected. backlog of Metrics, down $XXX.X section CalAtlantic I'm the be backlog XX impact shares deliveries discuss pro release gross is two and the million tie press of in The and and orders thought acquisition increase Forma would provide due Schedule outstanding new count to of

for for remainder with to backlog of provided quarter new we orders, modeling. the our deliveries XXXX you Additionally, projections each help and for your

providing column projecting in As on to guidance future. historical the far be expect to a XX,XXX. to and with and deliveries the you our we clarity guidance Schedule approach for difficult model We're add for right to total continue see are can this then X, year XXXX in additional XXXX we

for the Additionally, I more to company in provide key some like would goals XXXX.

are be of the XXX,XXX and to for CalAtlantic, With in year. backlog write-ups be XX.X% average with year expected between margins full company excluding to sales to the XX%. XXXX of for Gross prices full the addition and XXX,XXX for the

given XX.XX% and and were the the synergies expected and second on fourth third quarter range on the the that expected between approximately be XX.X% to to XX.XX% are be both CalAtlantic The higher volumes and track quarter acquisition. list is a of in XX% to

and SG&A to year full be expect between We X.X% X%.

provided projected be X.X%. quarter XX.XX% X.X% between from XX.X% to the between XXX services of XXX David are expected to full volumes $XXX to range Financial be and margins quarter and leverage expected $XXX between points of quarterly be XXX higher gross X.X% are in points backlog and in for third between impact is XXX Operating will second to year and million between largest quarter to and synergies be to are the projected to to X% with at year. margins the X.X%. and The and projected the and see for million QX. in fourth basis basis an QX the The again adjustments be and is and X% which

The second quarter is to expected million. to million be $XX $XX

million The to million $XX third to and $XX quarter $XX fourth million $XX quarter million. the

$XX to Rialto, quarter to be fourth XXXX. and million for sale expected to is quarter for $XX million we profits into apartment year still one the year. With full have we between QX to Turning $XX $XX is highest The million million. $XX range profitability. of million Multifamily, projecting the approximately a as expect $XX million the expected are to shifted

to leverage combined be million approximately is be quarter The the QX income and and of year expected G&A quarter and of million, second QX. X.X% third The $XX sales the is quarter fourth $XX Corporate million with $X in land million venture $XX expected to $XX joint the other be loss of see full will million about to total a between is and breakeven category profit. slight profit in revenue. QX at in approximately expected

separate for be $XXX the to item costs $XXX and a will that full line. to deal approximately and million million on report we year integration expect We

should We the rate XXX approximately weighted to XX% million for share effective expect tax our of quarters. for in shares. be each The remaining count average approximately be XXXX the year

quarters million and quarter the increases XXX third million. second the However, XXX and to fourth

to throughout and with pro We reconciles XXXX. segment and to earnings to profitable provided to mind Reconciliation on for his is another scheduled expect in well year Non-GAAP X a you Homebuilding with the deliver we're XXXX X the forma these net help previously. approximately count which community our to numbers you title provide net year-end schedules Statistics briefly touch by Pro Schedule goals Schedule to reported be in with information strong in X XXXX positioned XXXX. forma our your I’m by going comparisons

Finally, increased capital billion a stockholder's $XX.XX debt our balance equity to of net and sheet remains share $XX.X grew XX.X% per book share. our value total to per with strong to

although to quarter, the XXXX. reduce cash billion to at quarter and first we further $XXX our We our the and end sheet retire very highlighted priority with flow debt significant with generating on focused credit as facility had Stuart extended and our well balance leverage. is are During flexibility increased $X.X financial we to positioned million of cash maturity

call costs would to thanking the $X ancillary paydowns. it all remaining information for up operator debt turn and I approximately the over operations the XXXX, $X.X questions. with today. expect of work me for and to cash in their team we quarters billion that preparing all For this of conclude by for corporate from of hard billion of related And to it to entire the open CalAtlantic let like before generate businesses,

Operator

now Alan [Operator Instructions] Sir, & Our Associates. Zelman Ratner is first question is from your of coming line open.

Alan Ratner

was question get clarification to first hoping the My synergies, on of bit just I a little here.

that’s XXXX you to see. hit obviously great track well on to are your numbers So guys and

to product related to margin, CalAtlantic trying we Is you’re margin going flow as or about thinking top in is XX% about cost the - your offsets for any to XX.X% to the about on think partial a just there XXXX whatever some that margin creep normalized is feel On get towards margin the direct you be reposition I’m or should a guiding to gross either when there this current on the Included. synergies think year, through of we to line? maybe offsetting of factors there a gross Everything's is

Richard Beckwitt

our perspective, synergies. margin the On the includes really guidance

portfolio. out So that as from that that at home year, continue should through And gravitating or the XXXX entire of about this transaction. we’ll the the we coming product through the that move level be on CalAtlantic and XX% to build margin sites

Alan Ratner

XXXX are you you're you guiding When - the at for remain over in to level, XXXX? XX continue or flat on referring basis at because percentage more say that a synergies

Richard Beckwitt

the but at that value we correct, place. Yes, into that we went as the accounting through were took that’s the portfolio fair underwrote those and assumptions

Alan Ratner

there. guidance, just on bit that quarterly you you think dip growth the expect going to a and guys on in XQ of see related a on repositioning then I And breakout you like it lower do of the alluded got some order to to just the on looks

like not related year. that's back of in expect like you because it quarter to the in clarify date or that market you're the reaccelerate to terms anything slowdown to of want seeing to what Just half that seems anything

Stuart Miller

anything market not or in absolutely No, that. to slowdown like tied the any

our accelerating we expect We transition Included slowdown the of transitions. design Everything's work rates start moving. we through just picking and program communities see we’re to quarter studio to up the Everything's going as as just absorption mild that’s a Included implementing getting and that for start even As from a second approach times cycle going basically some to we to and

So a progression. just normal that's

Operator

And question comes from JPMorgan. Michael next of our Rehaut

open. is now line Your

Michael Rehaut

versus looking that of I Included. of should growth. over I to different impact the of you’re guys one of think debate CalAtlantic CalAtlantic of a XX% the about communities conversion possibly and so, question of of at back benefits back terms of shifting year back the are how include some around get And Lennar roughly elements benefits your for Everything's half half the going the guess growth to step recall roughly the First to you in of just function about terms let’s able blended pace the X that from effectively that we sales let's achieved. of mean sales say in a those to has X better the - order over? Does the Everything's on that communities guidance, community where the sales out to of in CalAtlantic Thinking Included to pace communities pace your conversion average that and say if relative a

Richard Beckwitt

it’s I’ll other it guys at stab Rick the So I'll a jump in. then let take and

just I a think program. seeing transitioning you're

in my those that's is number to year. communities. construction that to to pace just transitioning sales build that said we regard EI pace because communities little communities, of can the or not to those the were out normally in And a inventory it's product do very As over I there their accelerate with an going certain remarks,

faster ones CalAtlantic pace legacy are in or For that product, absorption to construction then times. and clearly from see to year slight cycle converted EI, and a converted that And Lennar are getting pick to this a the absorptions CalAtlantic Lennar see CalAtlantic EI getting up pace. those product we’ll you'll faster

that to absorptions. move into of the start we with smooth the absorptions more more XXXX, Lennar you’ll see are As level consistent a

CalAtlantic that some entire and the Although priced across of the it portfolio. blend full have higher won't is

Stuart Miller

you to way want Jon in?

Jonathan Jaffe

a I Included, design Everything's of from that you sales Rick’s transition would to platform the center varies. as add to commentary timing also

production process. the very you whole it much later much that very really In normal oriented process. sales in to with in program having Everything's discussion a sell the to the ties about of happens to timing deal have earlier So transition. selections we’re Included In for the option option the approach, timing the

with that have Rick combined factors work Stuart the So that to and account we’ll into that take you through have period. mentioned,

running So Everything's fully Included baked we the whole and you'll of the have absorption program and a platform. that higher then up across think I see impact

Michael Rehaut

you next cash question makes to sense. around Bruce the I so the like I you with - and comments congrats provide the was and about billion think your over to your year and helpful how companies capital standpoint and the around that within update thoughts the to and use expectations think guess opening like pretty or I Stuart you're how positive positive told levers guess towards so or terms flow. could thinking with and noticed goal about I regards a and exceeding that's remarks on provide an that? could for a combined flow about well second the that around dollars continued it in that a couple that sounded the that of how that. to years was some I put look your major, can cash flow flow No, - question longer what two about rights next in cash is updated and How to of term pivot capital different from you with cash the allocation soft hoping

Stuart Miller

the cycle design deal the might Everything's of the long putting your highlighted more platform, structure as properly own the the lot Included here. create Rialto, that Well me some we absorption cash Yes, here reverting strong a affections balance a enable subtle deal assets there. a To would and stand way would elements the central me company of monetized. think that focus and Mike of on to that it's picked up, little have you're number terrific blush partners only one our was you positioned making fact management to cash is around is of out sheet times better have that this being about a I say CalAtlantic of rationalizing flow and how it to of want and Included this but think one, than to Everything's other you that the expertise when Cash part you have accelerate being really pure to missed very story of thought in I team Bruce with great first let of play business all about flow we as the of run thought a the forward. non-core and recognizing that rates us navigate can reduce migration and to back program underwriting and flow. from to studio trade enhances our use revolved you flow cash about we're its

properly in and the know focused we as combination going to It's this that products for in be conservatized talking this strong transaction and that and backbone course share combination to markets technologies they’re of mousetrap. better and the we gaining first was put of new building with. Everything's about with closed well to better going markets, cash and the platform fact model flows as we cash be very started But call. and in years have stronger can conference help a the about worked it's it And this we’re years market through we’re building out we’re about that we’ve as we strategic last that starting Included Bruce confidence, that getting Remember with know, migrate we a think that platform. we are that that much so flow our better build stronger about and number

drive debt think up quickly we to able at cap to levels building we total some that down cap a down company, total beginning take to excess continue be and we're better only step flows be cash to debt component and bottom-line is cap shareholders. paying flow drive return is our capital a be this elements increasing to these in going can Then And able to of think but a also certainly but proper cash sheet. we to had cash very comfortable the bring started have equity will to to capital really of very level to to over strong. to back articulations way debt or the it we’ll employ, total returning All down shareholders by to to where and grow for also the strong few next one we because not balance also a level envision flows the debt debt us, paying we the to years

Operator

Evercore Stephen from comes ISI. question of Kim next Our

Your line open. now is

Unidentified Analyst

what not on Thanks to the mention actually books time? process it Tray or thought sounds this expect It's that point What in that for that about asset something of because be or Steve. Island like you was you was attractive information at had control I the helpful. the all why was initially that going that’s happen. to that guided gave ask really divesting for for around to sale now, want sale earlier about or asset Treasure your

Stuart Miller

think time. been we’re our core don't the of focus quite that many ancillaries was you much for that to Island I one sale as happy talk and long other business. brought up the because We actually of with I’m of asset business our trying works Tray a Good them components the in that's about Treasure on

It terms non-core quarterly in to guiding capital was a in and us sets program. an asset was what it forward the want haven't contributor. really we one it an of a becomes for of Island a additional investment we it miss. the formally something not happen Basically this but tied our involved lumpy we kind that lot going always we It's over in would and had guided predict remain right asset up You're was next in years thinking require a books, transaction part of these five-point that terms they was are participatory current we happen our that Treasure will not invested was around and that they a on and can't of when our up kind program. ones – nonproductive that in nonproductive to

with is or they current move doing many this are and So are we what by can is line of forward looking we’re monetize we deploy effectively. capital at our contributors generating and more bottom assets -

what that's So really profit we to recognized you're XX% seeing it bottom Island of have and we hearty sold a redeploy. capital - Treasure line profit we with

Jonathan Jaffe

place beginning And in development. to will the the with months I we couple take have the begun and of starting And relative stage construction next the the would partnership relative where land life XXXX. entitlements its cycle is timing the first in at Island we've land Treasure this from Jon our sales is in vertical

with create in the actually underway a really entitlement asset achieved was the lift being through value maturation So having development. Francisco difficult that San process and there the of going in

Unidentified Analyst

wanted to And multifamily going a the first venture model? partners multifamily action invested fact that the was have was that on or the in fund investment process incremental that opportunities already it building the venture you potential do fundamentally. you're second guys the new to venture that what out core fully you then or type build thought regarding around of the saw new recently Was launched with

Bruce Gross

first in So that was has assets committed billion fully $X.X first been of capital the pretty venture to venture. multifamily simple the it’s committed

is more no the in original achieved you the underwriting off to to there's we that performance That know first venture the projection So money chart. spend that on relative the based venture. in

core the the investors grow And of higher end one amount to in to we at funds venture. of than $X of than the productive by to cash anticipate build these to stacking the in and second day initial close wanted opportunities, that March these the a completed and different what that that We it’s gives product had off into that. we flow we close about billion have enormous our much that initial So monetize assets one. way billion venture is $XX two continue that will them us like produces did really ability to the all more an just selling of

Stuart Miller

of identifiable can of of heart that from program assets best-of-breed of new you of stacking that let the stream the sell Just fee funds me looked assets for our a the migration build business recurring. that to where apartment cash the a program. streams back been program. the say it company regular really flow Those apartment the and you in program. have for funds at these who very of much rental bottom-line that to and excitement predictable funds produce that to are monetization migration our and communities have add build community migration we that regular number merchant the will an around is studied They’ve a have build looked the generate where And will those at as strength and to and core many highlight us

at very capital raise up the to So been as building fill because best-of-class stack fund the for the next program brand and new moving our heart of we it’s much one keep rental forward, product. we're

Operator

coming question East Stephen Our of is from next Fargo. Wells

Your is line now open.

Stephen East

start then in And deal some you of maybe trying land cetera new your Rick you’re et So also to economies here at will. evaluate two things scale mentioned your you given comments structures integration looking the prepared into maybe that with one the but the I’ll question on if I'm about along that or business and those reinvesting like not those IT there numbers things would hit talking not digital into other of we about XXX see is or lines? spin chance something because you talking back million land any I’m million savings XXX innovative

Richard Beckwitt

you So let talk Stephen the first about and me listen carefully. to always as piece land that

look think in where as stand land we I right at the we now market.

in presence that, to we when meeting in puts deal local different us market discussed a announced subsequent the really and position. we our As

scope the to choice and have have deal structures been in a as various market sellers and programs this, they to size don't various land with and our really put Given the we've discussing together. opportunities

off the time or sheet Whether we point that. in closed testing how can time programs really boundaries the it’s we third-party to just till just having with that land of that go takedowns with keep far third-party in We’re land to the allows home us it balance whether fully dedicated developers.

very all of options all tuned now opportunities. just say stay on Steve these exploring just and right really focused we’re We’re I the

Stuart Miller

back been we and is forward really and this do that built cash taking the will and to IT, cash of and and the IP you And will me question has we Let reinvesting hoped of in the us do of had technology take I to that program go technologies. you will that flow question Steve we want flow part asked and the what enables driving about know we say strength. be business. do. This would in savings second to investing earnings some earning for our enhance

and think but constantly this and I this not a better reinventing static We technologies we you more see and will as become effective, this we better we're help because that or in investments seen environment ourselves and can synergies have the more and come technologies. sit to invest designed that not working And are will into a mousetrap. are build really redeployed not help structured that down would will carefully of on. can managed efficient in know being be us you us sit altered many These adjacencies others you things

I think in very our bright this is regard. future

Jonathan Jaffe

is that would to from sort have don't add another. would of - so carefully that I the Jon creep one benefit I bucket add this we separate that we very

in our SG&A affects So at looked and put how at bucket as we look we and and synergies that margins that. isolated that cost

we as we achieve there not very risk but each category. As think reinvesting that our want mentioned of we I are it not corporate what conceptually G&A carefully clear that manage look so is eye number. a at just as in the in investment technology Stuart little that's and as to We of only that manage keeping aware very on practically

Stephen East

XXX the for it high a was for seem [grand this calculated question, quick a I which around door] Multifamily follow-on pretty that. be ASPs to going deal given as on over company your are particular And the

I on a seeing in just broadly And entry then and but broadly So maybe the on assume what's color on you're demand level driving front? going Stuart business there. your little is demand just interested what

Stuart Miller

that I thing is are compound first of done Steve not fact questions. we want unaware The you've the to that highlight two

Stephen East

I’ll do best. my

Stuart Miller

ahead go the on Rick So Multifamily.

Richard Beckwitt

consistent On the have. we’re we demand the seeing strong that side, Communities Multifamily Multifamily in

markets disposition they’re rent periods the eight since We’re assets maximize the that of in going up not timing ultimately that that immediately vehicle value not but mind, hold we multiple most country. seeing luxury us seeing that With we’re program we’re sort hurting really absorptions. those in focused to now of an the of come to capture have communities growth, pipeline those and market, value the across assets. of the is we to are to build to year fact going which very sell time, the that program a some are assets in that assets These to demand of it's the core gives is really for but the really solid you're given depressing a market on of those in way the set

Stephen East

on then the family. single And

Richard Beckwitt

On the very price market the seeing all Entry at level demand country. solid side, across single family we’re strong. points is

that even color. seeing up is solid First price points time move we’re higher got additional Jon and the demand. at good you any

Jonathan Jaffe

per If you pace quarter in community month absorption just first was data look the compared per of monthly our X.X in X.X to XXXX. at XXXX sales

a seeing you strong across economy supply board. know Steve, the just limited demand and healthy that As

Operator

comes Credit Suisse. question McClary next Susan And our of from

Your line is open. now

Susan McClary

that and you’re think about how maybe now ways especially In you've that to the the closed differently is the thinking than the you've that have market when market longer-term, are perhaps work you those talk approach sort can you builder ways about of before? make things about some of you're to Thinking other different your on about land done structure you there past, today as in of ground. they going of or could for that noted positioning could go thinking this some comments your a lot work strategies the become deal anything we or and things to this sort about today

Stuart Miller

have and the ourselves at size in we've work opportunity the to mass better kind we as certainty critical markets close and have with seller. we And of terms as both that we every of we to look the get just every land a volume the of market deals. enable well in structure to Look purchasing think better ability us in of the bring that deal, time. restructuring because sales land best-of-breed certainty a us terms deal in With seller to in as acquisition to breadth in land that moment of to deal really had get at want a structure enables we actually to and scope deals to the opportunity in and to experience

position developers and develop different, California is those it's markets mass well most markets strategies as markets negotiating in uniquely the relative companies, to So that the have critical we’ll across are markets. best are desirable from be Texas. country that belief have those the Different land for we we pull able work different will owners the two that that the our together and in to

have So position. the we those will but different each scale markets, be unique of us and really in gives it strategies that a expertise

Richard Beckwitt

is would developers, has have while truly Stuart that market positions. I the land different players but different market add - in it's markets standing that said long-term in is it long-term land there every

of benefit market. able situation pipeline land the control the now really we’re so seller in And given our and to that that Lennar a with and sit a to our down agreements both scale, structure land concentration win-win create

more had. So it’s forward We structure have just visibility to the deals. volume, same we more expertise going

Susan McClary

of the pretty And noted of you've demand buyers. the homes strong there Can you have level perhaps into price through that pressures ground rates talk or the points. all on these But you’ve saw that any ability lot end been people sort to getting the what it? the qualify from is then across talk you as the markets way hearing to in qualify these a and you're terms risen there definitely seen of higher entry

Stuart Miller

rate. it's contextualize. go and rates be of and what rate is an rates interest environment growth is What properly but more they're rate, coming family they've labor is our in is about customers Interest one never had talked there environment confidence improvement. the the And participation look certainty is two somebody right wages before. back get in up going are higher weren’t coming believe trends that in interest higher of within within kind about the low so more offset we’re that impact participation now a Yes, to somebody's with tend that to Those of context of tends homebuilding, to with the wage because will wages be. same flashpoint the unemployment able earners not job and additionally a or either field really enough work, of a generally seeing to finding they higher for

in at deficit increases the force what's Now same starts get the think constrained happening and what a acceleration all of environment. at question in crash. to rate remains far labor wages supply strong, the nosebleed with as it's very wait of see, And How just additional again to I but and we’re going right side at section that of of since up that think going and a amount I we participation question have how sit then production the because a healthy things to now of witnessed much are year we’re to every raises sitting the other in interest is there time. and fairly single the demand that

Operator

question is next Micenko Our Jack coming SIG. from of

Your is open. line now

Unidentified Analyst

I’m on for Shaw, actually Jack. is This

and So forward. was on going margins question gross first my affordability

guys you maybe and margins rest balancing as looks by increases year-over-year So but what of the some some the these your you pass were like points cost power, have talk generally affordability up act according at going first able our seems basis far, incentive check XX the type margins core you and between the like level affordability could but for lower that also about to of driven pricing the look heard builders entry been year buyer. Because to means forward. so or in we’ve concerns on increases

So could those maybe you address just issues?

Stuart Miller

Jon, why don’t you take that?

Jonathan Jaffe

is have as as We’re there to demand heard markets. clearly is are power and able you noted our we in from you strong our seeing commentary pricing

and slightly every price our at demand. operate we’re robust market the business we the to we our does market don't function seeing even differently. price entry to we level cost clearly But As very

of increase increase and price the strongest not to absorptions we terms that normal there. our in a significant level a prices basis have We on entry able And percentage is are dollars. at there

at relative we seen not programs their to can them extent again I yet, do we that continue seen out, that. of look we’ve to any at mortgages think to the really be closing different not we contribution And more which front so does customers able to that us of to costs. help in got runway to to with affordability can that indication yet, our absorption To look start change have helping

but happens So limited if as supply kind now, use and it’s a when to see environment. the yet steady, change, left horizon what we and very of asking a very have about questions the But bullets strong when. than start we anything don't you’re that right of still very on seeing demand other we

Unidentified Analyst

second follow-up forward. the services was financial And on going

further service the ability a as much things your that you’ll brought financial forward. putting that lot CalAtlantic given of one volume hasn’t with more leverage been now deliveries going be the segment and through up So as WCI maybe to

be and that that from operating about normalized leverage a there platform thinking can So get is today? you I kind we mean margin what of number should

Bruce Gross

you think helpful think points So about that forward. might you financial be about there's couple as a the leverage services as going

The we Lennar an the XX% rate financial mortgage first have on the services side is capture on one side. about

opportunity in We have have They CalAtlantic rate, to do XXs. an running the up higher bring product capture points. was the price more jumbo and

between year going So XX% XX% we and the program. up that's get to a somewhere the between that XX% of next let’s leverage to say add over lot

so that and there title With overhead did a CalAtlantic starting mortgage immediately CalAtlantic with will transactions add leverage lot underwriter we've be the as office the for back on well. we as on side. and leverage And additional the the there's opportunity title they’ll an well side, opportunities well. folks And we're underwriter financial not, as as have the well combined services secondary, on of

Unidentified Analyst

Is number there margin you're today? comfortable an like number with accretion or operating

Bruce Gross

two offline will you lot moving pieces I be could if through between so There that those the businesses, of helpful. walk a is

Stuart Miller

ranks It's to of way of through future. who end I sitting more is hear do the there. from the who that’s have year. Also really Welcome the forward McCall a company Thank as as have you here. to you'll a more sure want the to him and management want thank I Vice Senior quick here We people team in give to Okay, we But telling people forward say group those but we are we out as that have Jeff aboard. the let's to guiding go for attending. terrific and the a President through a look you so of that for it a and we're performing shout you forward joining. room, top-notch number are making good Jeff expected. in

Operator

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

may now disconnect. You

Lennar (LEN) 4 Apr 182018 Q1 Earnings call transcript