LEN - Earnings call transcript Q2 2018

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Operator

Welcome to Lennar’s Second 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 Alexandra Lumpkin for the reading of the forward-looking statement.

Alexandra Lumpkin

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

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

Operator

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

Stuart Miller

how a to the real to will will go Diane me overview Jon Thank you. me It’s operational detail this give that people. among President; our comprehensive quarterly a When on going let ahead like and give I let guidance our Diane conference And with Financial Alex. one questions Good of one general Bessette, you, further a purchased Chief here our reconcile our on as and is call consensus this Rick am detail new always with am Officer our I say as on get you have others. ask to expectations. and operations always and synergies Officer; to morning. your would CalAtlantic some affected brand deliver limit Lennar we a here overview Q&A, and our will and full Rick Jon on Jaffe, And our morning results and am the platform, progress will to believe, Rick combined I hard I Beckwitt, question as start to ground say cover. Executive results so just Thank to Chief give we update and and now Diane follow-up. to quarter combined give then and accounting Jon that numbers. have. has lot first but and I that our

through down hard comes results by all cooperatively. and corporate saying the from it team of coming a I said So let a derived and and offices quarterly great enthusiastic am in it together and people last it say both I office. the excellent that throughout our manner deal been for team ahead grown me a the this professionals again, done in in have evolving begin the our become Because this acquisition, me hard, offices, room their position with here about in diligent focused to as of From has company worked thankful to are the work. and the continued the our of homebuilding Lennar which here to great go in of work we I leader our division going quarter increasingly today that’s to industry. and working many

ever around our current landscapes changing and operational We adjusting have to are but adaptable well-positioned only not more become strategies, nimble to we on execute us. the

implement continue overall, many the production, continues concerns to while be and law housing, additional existed can population strong homes housing about since strong. millennial in has children, for be of and general we and have housing wages that a is market interest There demand housing optimism the costs questions and and is The trade execution, to crash the are tax economic to sense grow a forming of the to rates, Unemployment labor and to remained management increasing rate that continue the the our rising home demand It excellently confident, recovery higher. affordable confirm is structured overcoming continues remained of income has dual labor about and/or has we positive Overall, while market. to short seems labor shortages Consumers to years drive limiting it still market proving add to at and the scale time. resurgent see to continue take base in believe of strong shortages, each is customer improving. housing. market which The that and participation tensions, is resilient. we to the shortage, still markets platform. Federal historic so to with sustaining momentum households it positioned rising serious with focus new having Accordingly, producing beat. is equilibrium. the effect a As one new good is wallet conditions of supply our construction a landscape, stable driven a in and are economic that remained and some has they headwinds. The with operating and to because to on The and supply the in is production economy Tax we express this while and family business, And strengthen. will our macro the leverage lows. stimulative strong get centers welcome take are will our strong Act deficit land not enhance have feel some since our international technologies team, to to Even the efficiencies management missed

orders, year. we and home for deliveries exceed expectations We the have new the and quarter seen well-positioned this remainder of margins are

strategic over turn Rick short I and few make me let a Before to Jon, notes.

our the total to that’s debt XX.X%, end at of capitalization quarter. First, the second

to net debt total XX%. Our cap is

sheet. have $XXX it cash down higher cash out refinance. of $XXX remaining million notes Rialto used the strong rightsizing debt we and flow press We to our paid down release, of notes paying our plus strong interest and in did without noted of we start As balance flow million rate and

We cash will continue strong flow debt of future. to look the the reduction on as we and will remain to focused drive

debt to Next, remaining the repositioning that outstanding a seamless the pay-down enterprise. of way of paves Rialto’s

As Rialto’s noted in the our last conference consider Fargo call, engaged we and have Wells for Bank strategic to alternatives Deutsche proper future.

public will quarter from have this We and timeframe last then that formal give process noted months begun conclude as We a warranted. consideration approximately for of XX a to we process. update

pure-play reverting this Rialto While I updates homebuilding at process time, our to committed remain core don’t platform. our have the to on we strategy further of

interest believed new industry, We centers to our market Many Door’s while reducing that values. Door, Open valuation sell. with technology friction to X.X to homebuilding the home leading with platform, Open the that interested Door noted ago. simply very taking have recent home is Open the executes compatible the years Open home our Lennar friction sale transformational first to our transaction. home at Door those invested company in of some there with and in in reinvestment Door out welcome of customers of to help. customers is strategy Open a offers strategy. Finally, homes the We purchase a the automates home would be come

outgrow to as Open many Additionally, their home first their grow, families Door customers help. is there

Door home purchase, engaging months over help. there Open move-up the the postpone their customers and dreaded showing Lennar because broker experience, is a to is potential Some

believed to the Door that selling as in we together way Open Open like fear used invested Just To-date, sell the to car transaction. changes underwrote getting friction Door purchaser buyers, this We our the drive the Lennar help. the homes the car there by causes embedded partnership Open well friction Door to a is a serious cost worked interface could new homes. we opportunity stress selling has that the selling the capability in team as as Open strike and of to and concluded Lennar exceptionally in and Door better concept, more to markets. enabled in is management out our procrastination well it’s customer alleviate people expanding and the and and potential of in home Lennar used program. move-up used more and buy industry and our as make to could potential well

technology and they business need, space have from the the ideas We and building come resource customers grow. We are us great have to the is them the get to only scale better they approach and rooms we purchase and no get avoid strategy. the can is don’t technology invest teams initiative. can then a to home homeowners proxy the accommodating experience benefit There platforms our technology they and and first-time story and also customers execute adapt for technology our that and management guidance with of Door We business Lennar’s with our Door Open existing home enable and market. for with and develop. experience a look the and to better. look platform. for work who we we and just reaching let a talent on home we friction formidable and to crave. new aggravation operational Door or innovative hype, the enabling that is to management technologies not to while sell from Open the out enhance are We This family technology that Open managerial better homes, execution. We their our to a move-up sales they benefits growing want

digital with have are company, the company of part and the management digital energy investments These We Blueprint, the worked not mortgage that teams the are talented Blend network notary notarized among others. the now platform of strategy.

in company’s and that industry investing our execution. can technologies and are our teams We change tech enhance

We a are mousetrap. building better simply

and all closings cash where people. and run People people. sheet. businesses of strategic that a have and Sales, and people team. People on focus part ancillary margins, adapt them teams they core. to find into to the It technologies time. execute flow change the and right-size I and People companies. the to trains new me comes People and on school incorporate and and started. let for this proud with am balance revert great said, starts, we old really So great down People it’s make I directions conclude find be the

thanked the I a ahead us. of I have once execute. and diligence to It’s a We exciting associates Because their comfortably platform, across our their have and them, deal Lennar, for can that continue work our difference again of say the expertise. people the operating well-prepared and make and our company, will have platforms of lot is great that accomplished to

Jon. So let with Rick and me over that, to turn

Rick Beckwitt

Stuart. Thanks,

Let the $XXX totaled quarter CalAtlantic million, second quarter and I summarizing our by XXXX. you Jon start update XX% for integration. up me will in the then earnings and quickly results on the Net from

produced. Our core really operations homebuilding

the a year, XXXX. prior increase. the New dollar quarter a totaled the of XX,XXX for from representing homes, backlog quarter, billion, with orders quarter up with totaled representing and ended homes a XXXX. XX,XXX homes, respectively billion, We with We from $X.X XX% up of $X quarter Revenues from dollar which increase. the XX% the was delivered the value XX% of approximately billion, XX% in XXX% XX% a solid up XX,XXX $X.X sales value in

Our the the of top write-up, guided construction backlog progress quarter. the last XX.X%, gross in and margin, totaled to range excluding we which was

the day-to-day Finally, of of our associates significantly scale the all-time they prior quarter our for increased highlights These a leverage. business our our low, our our lot integration. marks lower by everything second hard was X.X%. the from I SG&A CalAtlantic associates geographic work have can’t achieved on an think power results our guidance in driving of operating the across quarter and and enough accomplished. and focused were This than country

and well me fully you numbers these we success give company. let on transition CalAtlantic ahead schedule. where as and of one Operationally, operating is demonstrate This are color proceeded into additional has smoothly we While our Lennar the some stand. integration, are of integrated we

we importantly, scale. operating synergies national are realizing and More new true from now the market our local stemming

been operations in new to and As the XX and divisions Lennar absorption, share, resulting have Lennar last to X with CalAtlantic were XX X markets or remaining the time I to XX%. continue we reducing of and Prior by regions reduce combined while in had The quarter, headcount divisions highlighted have maintain operations in increased XX divisions increase merger, today. divisions CalAtlantic approximately divisions, markets. significant XX our been cycle our SG&A with Operationally, the Two markets. and regions able XX has homebuilding savings. with operation market

program center has eliminated XX and times program also and the services Included to division X homebuilding reducing construction design We X services cycle The transition from been Everything’s design offices, processing XX corporate XX regional branches CalAtlantic financial is centers, center. offices, impressive the financial and cost. and

communities closeout but to Lennar converted an continued communities, have CalAtlantic communities products continuing products, XX Everything’s CalAtlantic and to with XXX with XXX products, Included been product. have CalAtlantic option-light the are the communities Excluding converted remaining an

focus markets with XX% to XX to product. one leverage to by operating really to significantly Everything’s we Included developers average will that access builder the in top has increase benefits With share that markets Lennar we This in three mutually are its in are is significant XX one number approximately third-party mind, last the intense now CalAtlantic many center with their XX%. developers in continue and conversion an cycle in met cost our XX approximately finding land. products our XX capital new just in the days an saving the have need in mass converting our days structures. to our between Simply and beginning sources to landowners product Jon both leverage. will converting our and leading and of seeing markets times. range the product community. are access are a builder quarter. conversion. mind This seeing trades they XX%, number highlight market Our and the want beneficial design us increased this to that share from of and approximately and average, put, We savings share critical increased this to we Keep explore XX market and product we On showing CalAtlantic on reduced XX are by and

two On the and week. the are divisions migration we good technology more making side, and side homebuilding completing this on will our systems system progress be we

are be few We next migrating months X to completed. track X until for divisions to week the on each

all for migration out now writing also We services operation. system our operation Eagle completed the financial of are and mortgages have our currently mortgage

rate increased where opportunity We legacy the capture are approximately seeing already is larger rate the we from platform communities scale. that the this to XX% benefits given feel from increased capture have CalAtlantic and of XX% there over our we entire

like Jon. turn I’d to over it to Now,

Jon Jaffe

you synergies our we we cost of on like exceed synergies. we on call, on are where million are I last Rick. up-to-date million. by track Thanks, I’d exceed to synergy’s that target $XXX we focus On expect communicated with for our bring to quarter’s pleased fiscal to ‘XX XXXX an year target total of fiscal am report $XX by $XX that for $XXX to now that million. additional year million

construction million we savings for a XXXX, $XXX on exceed by and for now year $XXX for for fiscal down are $XXX For and direct track savings to to SG&A $XX of corporate breaks expected of XXXX million our Approximately, about savings. million $XX million total $XX target cost million million. expenses

administrative expenses reduction $XX to divisions, manufacturers, public a following of closing now company about of from executive expenses. estimate corporate savings achieving local exceeding million overhead and and For have it’s million national builder annual the Operational of We target $XX synergies. locked along $XXX savings compensation, the SG&A million trades, at our that and we made that XXXX of Rick $XXX SG&A are headcount direct with key in Becoming associate for G&A for about choice regions the of million in XXXX. up suppliers that’s savings, the in for cost of categories. construction $XX the run-rate along offices the highlighted. represents million about made Corporate up and of these our synergies with

target savings identified last exceeding of we now gave of XXXX million you have approximately increased $XX $XX for quarter. We million the

of big very market scale, combined Included these Everything’s Our efficient drivers our with savings. platform, significant are

dynamic relationships Additionally, for jobsite Last focus number synergy flow on our received kicking readiness, enhance all of accuracy the about even production, our increasing cycle and span our pricing partners intense our our with I cost spoke quarter, trade work. off workshops. we bids

as as focus The validate labor takeoff increased We value scale. We at and and synergies areas our have key XX conducted practices. divisions. material leveraging improve at all of workshops are categories cost workshops well collect the and verification building across now identify, engineering,

purchasing increase evaluate we opportunity. also supplier rebate to with synergy or Lennar is ability saving able identified all of chain our a workshop one our completed improve direct workshops, to divisions compiled of and driving every then divisions and from for platform. meet utilization cost information Through any these above have are supply national direct respective We exceed shared our the to effectiveness add which regional our that targets XX management The I workshop strongly are division our their plans. team, execution that division. process. to tracking this other this cost our our feel the involve programs national teams our the each and opportunity opportunities to quickly on demonstrating our process, entire synergy of all are in teams The across key

total me Value Let for plans specification over rightsizing at category synergy along and our trade at the scale will savings. million select our million workshops local workshops. partners categories and identified with plans XXXX. specification driving engineering We $XX top as of Plans with about describe the cost for overall $XX changes leveraging briefly will X for our and savings. division of framing home lower our represent lumber, this

and categories and HVAC, we will the million save flooring scale local our For through in $XX our each with drywall, around national programs of leveraging these trades.

these of meet target cost we other or exceed and million construction are of categories, progress synergies. to our track our direct XXXX in on Given $XXX

see We tariffs. this political accomplish the serious expect prices a the especially with market, labor labor to to of the and immigration. industry on softening in tight We do lumber current headwinds environment not of trade backdrop any supply, despite expect international elevated

our gives see with trades success we of our bids Builder a We our us as strategic X now Choice more as trades attract in lesser availability such some approximately to per to that with most categories. tariffs, where up most have all-time bid are X and operating the increase markets advantage being on rebar in softening the respect can as work. X be protected for per at We dependent as high thousand minor to transportation. freed board like due hundred screws bids to is to upon see inventories believe garage to compared doors, trade feet contracts, as increases dollars are X of we products and seen With few impact more lumber we increased of products some to nails. some a an foundation peaked in expect this rebar still, there has in of To over Here are home. lumber, which $XXX a national extent,

As I the all This pieces. highlight together process quarterly the that quarter, pulls to Lennar’s want I last is did of operations review.

Their of all of quarter over improve resulting us the to focus suppliers Diane. plan Here management effectiveness open The of as sessions or merger. dedication, regional of the with our how to of goals. more. sometimes partners first local the I cover operations our all. I to our address agreements would a this the Rick connected controller full our business. With manufacturers division from like merger-related of also and are to it associated, issues, the track financials and that, quarter I while to turn land and clear on team work thank and presidents, discussions accomplish and integration Stuart, We would businesses and regional all associates trade to merge our customers, trade the trades. like the our both evidence expectations. keep These along hard they to and inspire and aspects want incredible also challenges I thank tackled our partners, exceeding us second company on

Diane Bessette

everyone. you, and Thank morning Jon good to

details let quarter. our provide the of I some the our a consensus compared Before numbers in second of understanding as me results, noise to assist quarter give in the analysis simple to of

and is the is separated average be $X.XX difference The representing difference. is can of our first, all compare the is difference $X.XX. This items two $X.XX analyst estimates operating non-operating our Our items, reported difference the results. operating or categories: $X.XX. $X.XX EPS outperformance second, of This you into actual representing of feet and as expectations $X.XX to $X.XX of

the with you items. two category. of So, the components let are the this starting me There distinct categories give three to details non-operating

is expectation million of item the backlog first of approximately The for write-up is approximately recorded will write-up. is was and the approximately these subsequent was amount The write-up $XXX accounting and The total through $XXX flow The QX to quarters. fiscal for million. difference actual timing amounts purchase just in CalAtlantic XXXX construction record same. in of between The amount progress. two

QX item for just million integration termination. $XX lease costs actual were The is was million. costs such severance second cost expectation as and the and The $XX

XX% quarter. to expected were and tax The The is third credits impacts energy taken relates actual rate difference XX.X%. the item tax rate. of in tax QX rate the The was the that was

Now, the stated deliveries, to increase and price expectations to previously I me the QX our operating is difference relate turn operating results in between let margins out-performance. as actual or average operating and this items category. The sales

average that $XXX,XXX. let deliveries quarter Both XX% in quarter a homebuilding. of result CalAtlantic increase details sales walk primarily with second home the you by of increased from these backdrop, acquisition. of through an second starting the in and sales results increase price So a our XX% Revenues wholly-owned were to XX% the increases driven in with me

SG&A prior noted, improved segment. in a in U.S. incentives construction benefit an costs. X% increase were Rick improved and quarter our highest per driven Sales to margins. as due gross just was by and The X.X% as points basis year. our labor Also purchase quarter square our operating second the Rick excluding material X.X% gross The X% details technology the our a costs Rick few in second compared margins in in X.X% second in were SG&A about the was history and and the from from was to quarter leverage comments And as continued the well XX.X% increase XX quarter in foot margin lowest direct our homebuilding gross on improvement prior percent which home up to year’s CalAtlantic second $XX.XX construction sales backlog progress. of XX.X%, about company’s X% was initiatives. QX percent as was margin noted, As write-up X.X%, gross to accounting

second of the operating result communities a excluding XXX gross XX.X%, and prior XX.X% construction of new as margin compared above active quarter closed our write-up backlog the margin percent, We was communities. end the noted So X,XXX the communities in SG&A opened net to second during year. in and quarter progress and to XXX the quarter with

New orders increased value again XX% as dollar order of XX% result increased and the new primarily a CalAtlantic.

on call, conference were X.X%. highlighted the be where our pace we during As quarter, last expected our products, to about CalAtlantic sales we second transitioning we

that exceeded we pace an X.X%. with actual sales of However expectation

completed homes X which is X,XXX community were This in homes decrease is community. the from home about roughly Our X.X per quarter at year. homes about per unsold a end, prior

$XXX have During development spend X,XXX of $XXX million. sites the and second quarter, totaling million home we land purchased

controlled. profitability XX% million $XX $XX.X $X.X finally, of $X.X of owned purchase from Our earnings by XXX,XXX prior then operating sale to financial XXX,XXX, controlled other second driven earnings strategic and venture had from and Originations prior are in quarter And in segment while XX,XXX loss operating the the second million were to to our million And combined land from are the billion, year compared $XX.X billion X% a $XX.X to of $XX.X $XX.X of million only originations services had earnings quarter, financial primarily refis. our two compared home are to a increased in sales. million of land business, year. increased are from now sites of last turning million the which year. services, and Mortgage owned category joint

for loss in million company of our the have in year. is this technology due per The versus the improved X And earnings competitive two million with higher from our The We loans earnings applications. of total reductions business details $XX.X in purchase used mortgage Blend. to of business increase loan $X.X Rialto on market quarter by driven into a originated. platform related operating total multifamily turning Mortgage then securitizations, earnings very XX,XXX have while, new of in million XX experience. we of investment communities, the for had refis second in contributed a amounts shown earnings Including of day process approximately warehouse using noted business have have and LMV in million contributed platform XX in already a X resulting billion. investments several April turning to a the $XX.X the mortgage approximately of $X net year. portfolios is Rialto’s up mix their streamlined apartments. quarter, million prior as the prior closings of well operating we with addition notes. development being the $X.X totaling mortgage results monetized $XX.X over and sale approximately follows. Fund of were retirement to $XX.X is million in The bank The X the multifamily, from earnings a of had million Direct profit Rialto, million, properties of of of Total going under as from then a a to $XX.X to to second leased a transaction higher values $X.X year. the and $X.X of apartments and construction, which to to remaining from in excluding and went of of $X.X interest. of two segment Finance digital X% revenue are before senior expenses. of operating the we the was $X.X quarter, And pipeline a and were completed lines, businesses I. XX,XXX these CalAtlantic prior leading primarily had promote lower are management fees. $XX.X management $X.X driven of mortgage cost compared interest the Rialto both after by development the ended led billion drop The expense, live The as commercial G&A year with increased non-controlling primarily million the those the and operating combined has assets As prior and million million earnings from We and properties purchase million are our segment million G&A diversified $XXX in properties to business operating customer $X.X XX% compared application in as that with million benefited $XXX million

Our be of tax lower a of new due extended as year were rate the lower previously $XX.X and we closed to prior to using homebuilding of sheet, $XXX the home as mentioned to for million turning notes cash. during in And XX.X%. Stuart The homes is the the energy efficient balance repaid tax second impact million quarter available for that quarter senior than of we cash. rate quarter, primarily with And mentioned, ended credits $XXX then million federal was X.XX% rate our XXXX. CalAtlantic

total XX%. As a debt net cap was result, to

$XX.XX increased and total also homebuilding $XXX reduction the senior $XXX our of June on of also to X.X% million share. of X million thus value grew cash, Lennar repaid notes During billion the book a share X% we Rialto’s per and billion. remaining quarter, Stockholders’ notes equity using to paid $XX.X off $X.X we senior per

our we as now balance turning follows. the homebuilding, with for guidance So, for to deliveries in year reaffirm guidance starting the new previous our orders, of

be $XX,XXX. deliveries and orders We new expect to QX

deliveries be orders and QX be to $XX,XXX to expect $XX,XXX. We new

price, be For sales average and QX our we price $XXX,XXX about expect QX to sales about $XXX,XXX. average

higher in progress gross XX.XX% margins QX that XX.XX% given excluding be XX.X% expect to gross and we between for between and the and margins, backlog margins, construction and to gross write-ups quarter. deliveries QX be For in XX.X%

As progress shifted. write-ups and backlog previously have some of for construction mentioned, the in

approximately million we we approximately be $XXX SG&A, the now And about given in expect to to quarter. in so QX. record million QX X.X%, QX And in X.X% again higher that and QX and $XX for deliveries SG&A about expect

QX million. combined X,XXX. of about net sales about year We be And other expect we end category and count joint of $X expect finally and our the the QX community earnings at to income, land about breakeven to ventures, for

earnings be million $XX to million QX about expect million. and and Turning earnings $XX to Financial Services, QX between we $XX

we $XX million. of Rialto, expect and expect earnings QX million. and to have about be million for And $XX million be $XX slight to and loss QX QX QX earnings to For $XX between earnings about multifamily, a we

with For expect of leverage total to revenue. see corporate year X.X% the at we full G&A,

integration we have in continuing costs, believe $XX million of and costs approximately in will that amount we each QX For a quarter. QX, small integration

For to for be we QX tax rate for tax the XX%. QX our expect and rate,

weighted be shares. the about share count, QX share should and for QX XXX For average million count

during end increase $X.XX. put together And guidance, the so provided previously costs, of QX write-up We progress the increases to integration QX the $X ancillary end EPS, cash progress range should provided. billion again in at the related of forecast of before also construction construction and components debt the CalAtlantic pay-downs. businesses range of you backlog to and should call. low then conference This our of the the be of $X.X to excluding to the on $X.XX in $X.XX. in be as billion the in flow last an This integration of our our generation our write-up target EPS backlog EPS, of previously costs range looking range costs excluding remain and with is and And range and $X.XX low

with positioned And year profitable to and up back we are well strong I to now it So, deliver in for questions. it these conclusion in to the turn operator open goals another will mind, XXXX. in

Operator

Thank you, speakers.

from [Operator question Our session. Wells the Instructions] We question-and-answer comes Stephen will from now first Fargo. begin East

is line open. Your

Rick Beckwitt

you are Stephen, there?

Stephen East

me? Yes, can you hear

Rick Beckwitt

go. There we we There go.

Stephen East

on you all detail. side all slowing it any of are the the in the seeing are like in other looking you and are and guess demand. in world I really to your seasonal with than our Congratulations mouth, the thanks so product? your numbers our anything seeing of for it, lot first there put integration I seeing seen want slowing where fieldwork quarter. chatter we is quarter haven’t don’t looks words Alright. about Start it given slowdown, a in what CalAtlantic, but and at of than if not Nice other type seasonal so you

Jon Jaffe

Jon, is right Steve, way describe I to it, this the across think seasonal platform. the exactly is

low and supporting economic strong seeing inventory your good of you economy fieldwork. environment growth, are see job in as the demand We very

second us the not change. otherwise. we a seeing definitely results, are anything strong we that our but So, had are seasonal causes seeing We to quarter evidenced by spring as think

Stuart Miller

of to back goes some It Steve. remarks, my opening

supply growing well. growing that you deficit is of cutting of short I think in the looking still there a the market put affordable short demand product some existing just hard And are in and as against age You at the there millennials the to we demand. seem are It’s coming production that have very out homes. of headwinds, in still they the supply and a on demand a hear of are lot that and people buy families in face flies of and coming from patterns noise some but of is are press, still forming confidence that the the strong, to that where all ground

Stephen East

the up savings, integration million and And it $XXX great. was Alright, the on take takes how long you bump wondering I you long. didn’t then to it

as little you a that. guess this include or that maybe One, I net ordered the inflation look I getting rank if on is bit then see and specifically you ‘XX you around Jon we and coming seeing So built does that both that incremental where more little from? are the And more out ‘XX questions to are into bumps you a continue in that’s it? bit specificity where guess inflation, of is two

Jon Jaffe

numbers what that the about is. marketplace from synergy talk We the is

the of with it’s corner way with synergy those up a spectrum material really put and brought free-cutting With are it’s is that but material, example, details given the trades. said ours for framers panels we all plate and that putting framing if and might foundations is perhaps or respect our follow come deal example. I our lumber contracts $X together, a the say way of we we the $X.XX, workshops a we our are together as way some went $X.XX, up, seeing So, top that for $X.XX if you panelizing working to out on a of lumber of it, where labor lot or type net be of really our across foot down working

have to you it’s because there, also it’s geographic say differences. or that all So, hard here

market markets, one in bigger category. some a in find and opportunity we we it So will a will another different in be have in category

Stephen East

okay. it, Got

have we On the you you switch? of will, get in – if you E&I from from that know the the to are will cost savings engineer but field same those CalAtlantic EI you and where plans saw an I going the keeping type from EI value you are those, gotten would some of an

Rick Beckwitt

In cost many those. cases, get will we more savings from

that handful in village I similar most continuing we will really be will lighter with that be what be to modified of and there will or EI product that want communities a a to to communities So, that have the reiterate we build future option have in the builders. CalAtlantic do Texas of program few

Jon Jaffe

produce As said, we which the lower comments of type at square we foot the look look plan had Lennar we CalAtlantic Stephen, cost to a market. and plan, specific I for will specific that that at a satisfy plan a an X,XXX needs for in plan a my is customer also and submarket

cost best the efficient the cycle a, which which has best to is very plan, what’s one most plan. the one build, it’s much So,

Stephen East

and lot thanks congratulations. a Okay,

Rick Beckwitt

Thanks.

Operator

And & our Associates. Zelman next comes question from Alan you. Thank from Ratner

open. is line Your

Alan Ratner

Good the room Bruce and are quietly. Jon if the you Diane progress all Hi, impressive very guys. Congrats as morning. and congrats of and listening and on well to Rick in

I was and your as seeing determine are a in and you am about at are front touch reading I progress more today quarter prepared number and on bit on comments what the the and you to are release options, lot little higher. with is the remarks the So, momentum I moving little see the I and on to dig when mentioned quote what you in have sellers. are look know there? between to lots hoping think of expecting landowners your your that what far there in really a so If progress through hearing count as I controlled the land some was seeing you you bit just wanted well I you conversations your as And exactly that a lines are

and any that was on this could side just was just connecting curious us de-leveraging give cash us thinking hoping on well the you with of potential well? is are repurchase So, I activity your current you the buyback very dots to cash as an internal there generation an willing generation share there quarter. the or if goal target as impressive timing then of I kind and as update on debt and there

Rick Beckwitt

Rick. So, it’s

right with are to we need some us interesting What developers now, regional intense side, the structures coming have and land to focus be I we these the activity. we increase Stuart to found XX% the you pretty meeting because On you when market our over Jon is share, an create presidents, to are deals XX% have have right to a included. key all country now. been

right now. where And them had we not were where hunt is times the to in the happening so there past, down, hunt

on and business a IRR in a move special in country can you conversations to is that’s option across with based it’s lower that, take and deal, as margin bit of the little do will business will business, leading XXXX, that higher option something little capital So a of some engaged what increase our position see and into dramatic increase we that, we business developers our these we are see help bit trying we create but to going change. and which cash amount to time to is sources the but an will that you it’s do are

Alan Ratner

think and I remainder by for M&A year this ‘XX etcetera. then were some paying additional generation, you then And had billion really deal given the down focused of before think capacity on current the debt on getting the of where level is the you you of and are cash either activity, repurchase similar to share net the for Rick. I number year the to year, a having the thinking just Thanks, debt the some end $X

is So, the to about right way kind that still of that? think

Stuart Miller

is in think size of terms I scope yes. and answer the

squarely numerous that ahead scope. we cash But ourselves the look optionality from open be of the I in can I terms how deployed will leave our cash generation of middle as numbers see quarters. the you think today, particularly posted we in is to think

paying rate. We are at down an debt accelerated

year, the down the to even rest as that ability pleased quarter as the pay really and is through we are refinance this generative. sets We without cash we of it with which up much more got did

into year, to going again as a cash next balance we go our but options have excess are we So very have leave sheet. well open, and crafted we will we I think

Rick Beckwitt

my good am Stuart, trying I Alan, a of out debt maturity my to friend, made how it. figure to change point reference, just and as screensaver our ladder

Alan Ratner

guys. Thanks, luck. Got it. Good

Operator

Stephen next Thank from from our ISI. question you. Evercore comes Kim And

is line open. Your

Stephen Kim

land about, and just Yes, so very Hi, things I I talk and boy, about XXXX. a your answer dramatic to you good. land structures phrases likely much which intentions to and many to couple congratulations your a trying guys. on Rick thank I if that Alan’s something question could. guess is are wanted in in forward, use change to interesting question of his said going you interesting, special about create you is follow-up

options dramatic in, let’s of the want not sure was interesting what So to hint that are understanding of I follow-up percentage arrangements us are saying, or to to structure give am the new or a So spend revenues into could deals in are when dramatic in said make as you you changes to changes a XXXX, aspect you I what and some something on that say, because referring land looking that industry? trying and you else? particularly is as likely and special just

Rick Beckwitt

some number conversations in into our capital close sources is stated developers, programmatic and structure, is in Stephen, our a right With do I some that organization, one of is how objective on just-in-time of lot be in efficient of detail, two returns to lot utilize mind, to our to end want we result with become our more our to cash. don’t a increase things, increase because sort two, natural internally but within now land. going there ability going the number on and would

and that, touch create focused and we something objectives. Stuart, points figure out that those Jon over are all So, on to those I are are and the it gets us

Jon Jaffe

out And piece left one flow. cash that Rick was the increase

Rick Beckwitt

Correct.

Stephen Kim

follow-up a to to over technology talk I am it the I that because material imagine Alright, Door lot cash expect wanted the jump you strategy. try Open I specifically rather ability these was could thought sort existing harnessing also about was in talk as that excellent. Stuart, if but Miami, premium I that you things you I a to probably includes the and they benefit industry’s will. initiatives, to going your for would, any when investments am advantage competitive point, vision Lennar others for The investments to was say could commentary about interesting. I of which talk to to you can I leave about have what flow garners just I weren’t whether your to hear thus sure intrigued your way I I homes, how down technology your on last was I you across recall they you in vision you what we there. from that, because improve new far? obviously innovations was invested in visited the about curious But about if happen from had could if very about a to share enthusiasm very specifically I wondering these home you said,

Stuart Miller

you that about are to that our home easy about not want and for the we of many elements their that towards about Wi-Fi that technology, others I first everybody more of in have questions. are have, it’s we Well, our the of Steve, and oriented of talking for automation to relationship Amazon we some are that’s it a the lot because interface, And and product perhaps most are and get customer initiatives all, offering asked we say importantly, and more hearing in there that head included around what have to our certification listening heard thank include.

like landscape. identifying furthered our cost down technology technologies to building landscape The going us of Door are own our So, acquisition our customer are Open internal bring initiatives technology has can those Altering Door. mean SG&A focused to has those or our very in our our be alter cost on can and initiatives reducing Open of enabled that very, of homes, some arenas.

We and will technologies enable Those are construction and building a working on terms time. system system delivery in and help technologies around cycle and more efficient in production technique reduce construction. of

to that homes think seamless our differentiate will the the the drive are speed homebuilders. us with way. want to and from differentiator no Right the enabled new about separate market spots, costs other that Wi-Fi our We home home product all That’s the distribution big Lennar the I is also The around Amazon, now, a Wi-Fi platforms. and our initiatives we we shiny and they dead loss. home be home. at which of floor-to-ceiling, can we is are the and working enable between advantage are certification inclusions that the no with technologies will really will new through their home. existing At about in believe both level for are our the technology wall-to-wall our through but Wi-Fi for production you internet a from level be the agnostic we drive heat with seamless a with is looking working home running technologies can can building towards distribution all everybody have lot technologies bring the in new and down around we future but homes hype, and our end aptitude hotspot distribution. know Wi-Fi about and from best execution we as SG&A our where to mousetrap, offerings works We to customer, is and at and of existing the inclusions it the phone objects better engineer for market they that it that improve map home, and their an know day, distributing to enabled which enables not

our builders I single of component important to most this very enthusiastic are We Lennar think about is the ability differentiating disseminate. and versus other

reap in the those We new benefits to our interface, so that offering. product to we and have can our to and initiatives our disseminate built adapted and improve of lines customer and of our technologies them adopted communication divisions margins, out get field fashion new orderly out the

Stephen Kim

great. That’s Appreciate specific have or initiatives? you any Do it. goals, these of year actually with for targets to respect say, let’s next

Stuart Miller

So, in basis is The would point Steve, put market number change at tell points quarter and and moving. by basis quarter out time. reality us a and that exciting hype a piece XX a to happens increments that’s

for targets, internal to respectful. I see to And world. all we don’t is to think get It’s articulate about bumpy over road but have want the execution. outside We them and you we terms improvement directionally I are The skis. our goal of try think in out setting, will

Stephen Kim

thanks Thanks. very Okay, much.

Stuart Miller

bet. You

Operator

you. the Bank from next question John is from America. Thank Lovallo of And

Your line is open.

John Lovallo

you me in Hey, fitting guys. Thank here. for

clearly affordability high level executing that’s concerned certainly encouraging, point, a rates market the at in more cycle. really is this much are You and the at interest but

you evidence are are So what any the anything, cycle and home I best just want this to really would this are us that are negatively suggest demand seeing that higher clear higher rates, point? at impacting seeing you at be that on, days anything all prices of behind

Rick Beckwitt

start, it’s let So, me Rick.

are solid good seeing We still communities. in our traffic

seeing still are across for homes We customers ability qualify price all our points. to by

mind, to is solid. as is opening product real generally Confidence wage that is lot the rates there movement mortgage a not in side, got press on out in it’s of a on in said the have seen his that Stuart variable first and so up, comments, going is which a to growth issues, focus happening We is there. keep the rate there we sign while affordability

we all put and strong. the our headlines we is the at So those business look things together and business operate

John Lovallo

de-lever view, view out to that, and I just stock? your share focus where hear. big why exactly with huge should be heck to the just on is want trading opinion what the you not stock I mean understand would I is as mean, buy that Okay, if I least there put at understand of it if then where in your a that a that’s disconnect trading. wanted follow-up authorization but our you And or and share that out I a do and you

Rick Beckwitt

will and our of or else. very integration Look, cash not CalAtlantic flow that rightsizing are with I Street order anything sheet. business operations, In significant we strategy focused our And I flow our cash will that operations, the as from flow reverting our have our articulate with stay the flow we we generate We straight send that through to have by strategies highlighted the we deployment of of then balance business enhancing trying continue core cash we are made for order is, will flow, what to cash we that cash acquisition, are on signals at capital land on we sequence, and and enhancing are think strategic first strategy. what second combination orderly flow business, was that a excess, was to time. cash

we So that. out send like to want be and stuff just don’t want straight, to we signals

business the our right focus and Our of I we balance at now the top rightsizing on and operating game. sheet think are was this

John Lovallo

helpful. Thank you Very guys.

Rick Beckwitt

you. Thank

Operator

Thank you. from JPMorgan. And Michael line from the Rehaut next of the question is

Rick Beckwitt

there? Good morning, Mike. Are you

Operator

open. line Rehaut, is Michael Again, your

Michael Rehaut

Can here. hear I Yes, you me? am

Rick Beckwitt

we There go.

Michael Rehaut

Anyway, on afternoon on there. and what say wasn’t what I good about mute, Okay. to results. now happened the congrats I know don’t was was

growth appreciate wanted perspective XQ. all your I believe demand I that XQ just at numbers order and First, another on already. just the or reaffirmed Diane order comments looking and from for confirm, to

pro but the well? for As numbers XQ, those reiteration for pro and for XQ office XQ and I have it’s same and with of forma to believe had know given forma forma original of of you pro don’t number I CalAtlantic wanted forma still as I kind the X% if organic, XQ just what the was are XQ have a guidance that guess of XQ part don’t pro and part amount the

Diane Bessette

just understand Mike, to I the am number. trying

still forma minutes So, the are and that I the you are those a same to are right pro they compared ago. reaffirmation for made QX that QX and few asking still

Rick Beckwitt

beat the the I it QX in to think that to way think is is the additive year. about

Diane Bessette

the and quarter. away It’s from not fourth taking third

Michael Rehaut

Right.

know wanted the XX% you XX% XQ if estimate? above a growth guidance is number reported for I was to there full had given just was you that think upside of forma our I if to and because pro X% indeed that, number what

Rick Beckwitt

Stuart number that. on So that year I we and at you X% schedule the about answer look balance that forma pro based released you our maybe were gave XX% about notwithstanding depending up the in we prior guidance. above will the forma the be And the pro how we more of on when and sold said we as to call. was maintaining XX% we and We about we did year the projected X%. QX delivered our last QX was projected fact up that and because guided homes QX to to a in to are QX be X% QX, number,

Michael Rehaut

Okay, Rick. that’s helpful,

I my demand to think I also just second on before on clarification question. get

I from geography? any by think difference weakness points. price any to and or you a or I basic was just point you an or observational standpoint noticing segment relative just haven’t between that seen price had if you from standpoint, affordability demand are alluded strength affordability curious aside trend areas demographic of

Jon Jaffe

Jon. It’s

you this across pricing, and there the product is X we the earlier, economic have where very of strong said you demand. because there product strong platforms, in have seeing are where level locations, I As strength is conditions a really very move-up demand entry

XX% XXX,XXX communities leads about And quarter, me traffic specific lennar.com million internet couple quarter. leads, I besides the points in give year-over-year over still data strong are that lennar.com. was for that was year-over-year information to that our the ask think people on see to sort of view that maybe demand our what demand to which on the lead the XX% means is most you generation of a into and $X.X start we that is of forward and the seeing we second and for up up underlies that, turned

there really clarity the demand at lower the where have And higher price in is we move-up good products the we course that but platform. entire across there is markets move-up velocity demand. a and of So, seeing you strength point a product, still are than exceptional have

Michael Rehaut

question partners inclusive your current-owned had believe, at forward reported lot in about I of that, how strategic end land of types any Thank comments, Diane you for the your quarter going thought going that. some of back there be owned, different Rick, second more given XXX to XX% roughly That’s conversations purchasing of I land going that of efficient? guess great, regarding is you more your XXX,XXX your just to if land approach own Jon. of are become kind a developer lots to is conversations this developers, any hear your of having broadly was are to greater important which are effort towards the to marketplace. you to position land is curious particularly capital of with any if and leveraging very in size great those you course or position guess and I I that moving in your owned, strength again almost increased

Rick Beckwitt

earlier to is put to and like flow. cash thought would as it said are as maximize like returns right on a what do increase evaluating doing back we come this how I can at really another What to and What we I a time. I’d is company now

really is of like evolve address year. going and And that would next the I will when And lot that if so to conversations that on a happens. there over

Michael Rehaut

fair appreciate Thanks, it. Okay, I enough. guys.

Rick Beckwitt

Thank you.

last Okay, question.

Operator

James. of line next from Buck from Thank you. question Horne The Raymond the is

Your line is open.

Buck Horne

Quick Buck. of you because the to held a during little could the on power on what that the just price back It’s of raise just roughly quarter and if tell wondering were you integration effort us able thanks. during in pricing sales Hey, at quarter, communities if percentage CalAtlantic? question you of bit

Rick Beckwitt

year-over-year morning, So, say Case-Shiller we don’t really the you really track price local was division by is the that I by community over April basis. kind and information, look on out the at the comfortably April. Index happen division But will of the at it level up what that pricing this because increases came community

I it’s think X%. almost

and I to think as continues supply that is demand really pricing power, exist pricing pressure continues to market. constrained come to

good on the that build I are demand think indicator of relative a good continues constrained our and to we against really supply. job traffic Jon is demand website getting highlighting is strong did a advanced real a that to if the traffic even

Buck Horne

homebuilding thoughts core if And on to any trying the move just operation, in of terms about the division, to term obviously private to your multifamily, money helpful. thinking the business wall going longer has the wondering you that’s to the there in outside right evolved last prospects time are think is next get Okay, multifamily equity multifamily hold you just is that’s updated about still it a invested cord? the of that one

Stuart Miller

so that We think are we that Diane $X.X highlighted been billion multifamily highlighted, has proud together programs the just I in of put production. or

at to is and We have so. because some we certainly whether maturity have how to core, mature process and this year next a point, there the we think had, platform thinking we core evolve are attractive that be after openly not expect to that still reverting engaged happens, very a will or of but over strategy about

Rick Beckwitt

that to thing with synergies – the we But a That are gives additional and doing when you year. when are involved very regard focused you maturities. homes is are apartment cost in about of on construction XX,XXX us

evolution we So, it’s large core of that and the degree need to to a business. on focus just really

Buck Horne

perfect. That’s Congratulations. you, Thank Thank you. guys.

Rick Beckwitt

Okay.

who still with are we time. went in us, for I little know those So, bit over a

forward We progressing. are success. are really look with pleased continued how to We things

to down associates of I See forward trade platform, in what makes it look it in partners, again, conclusion, and to happen quarter. our then. all our say people reporting we people. will you We comes that’s the company, thank again Just third across the once

Operator

you. participating. concludes Thank you Thank this And today’s all for conference.

now disconnect. may You

Lennar (LEN) 26 Jun 182018 Q2 Earnings call transcript