LEN - Earnings call transcript Q1 2019

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Operator

Welcome to Lennar's First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded.

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

Alexandra Lumpkin

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

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

Operator

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

Stuart Miller

David as will guidance a first further with XXXX. our joining start everybody. our Great, Officer; some is Beckwitt operational course our Officer; detail to going Controller; overview. here Diane Financial President well thank Diane Chief Jon our by and Bessette for results you. am Collins, morning I This will I'm brief of deliver as and additional quarter Executive Good Jaffe, morning with Rick brief our phone. Chief Rick Jon overview, and a give on

one you get participants so like to possible. follow-up as many one always limit that and question Q&A, that I'd As questions can we as to when accommodate just your ask to we

we are ahead housing be solid very throughout pleased the quarter, results. go market and to say and choppy me our let to continued first report So begin that, well,

than slightly seems and the and as XXXX than the the did had corrected better market we as expected sales expected 'XX, quarter it achieved is somewhat Generally of first now as and the half on solid the though we deliveries spring in margin paused speaking, strengthening Although, back as lower selling season. in quarter progressed. we revenues, footing, we see begin

increases We higher first appreciation housing even and rate, more housing stalled continued fourth market Looking prices the back. mismatch quarter employment, prices slow home consumer between and pulled sales accelerate a quarter, participation clearly wage strong interest create market. Through the as the to moderated first and economic buyer price higher growth, and backward, and growth rate the home XXXX the through combined to and rates rapid affordable drove as to confidence saw interest to return consumer traffic a quarter through expectations.

to by shortage driven spring we believe that production quarter This fundamental continue noted a accelerate deficit we for end simply continues We've as of around is market weather This well-documented the the guidance place housing country. define has stabilizer tested. in for Against missed the unusual through to been need the both deficit of and in that it demand selling last to live remain the driven and has to adjusted that over be has dwellings and pause, progression, this rent, demand market took and decade. for persisted primarily small by season. acted an housing for conditions that the as housing strong. has conditions consistently as backdrop, production overall deliveries in the are a Given continue strength choppy was economic X%. natural that miss to a timing recalibrated, Lennar performed while well optimistic shift by low a now in attributable driven and by we short underlying affordability will said of Supply country to a sale continue the

exceeded our X%, through upper the the driven earnings end and our other orders demand New achieved the progressively by debt year. of $XXX improving position guidance total strong XXX a million shares point of repurchase by the stock month improvement We enables quarter. almost of this on cash quarter to hand net of ratio cap and with which up opportunistically is XX.X%, million over last of to us another X basis end a

cash debt continue generate to to to expect opportunistically flow XXXX down use both stock. cash excess growth pay strong repurchasing the to while for and expect We remainder of

interface, Additionally, continue reduce Company our structure our operation, significant as a enhance be of significant well. technology create we our customer efficiencies our reduce internal the cost and to SG&A initiatives in as reservoir opportunity around

very by We and sale on to technology to estate of core mortgage drive business is note, still on line our better beginning business. well we our focus monetizing and opportunities in our of this build the first as platform management to reflected focused to cash as lines being bottom majority we business envision continue underwriter and repositioning or change be a efficiencies sale our on the improvement. We're the progress we laser continue business retail of of reverting order enhance title our the a brokerage homebuilding and mousetrap. the as final On the opportunistically adoption that we in real non-core and completed quarter, flow. at retail incrementally assets In as

contracted hospital close is to our second the asset we sell the quarter. that asset to Midwest in and a in remnant Additionally, from expected Rialto

with and encouraged our I and market, that very are remainder the to say has we year. me just let what position been excited signals a Jon about of over even business our market about Rick, housing by strategy choppy Diane, the recent Before and turn we're

improvement in from and profit, generating flow to of we're SG&A. consistent bottom scale our have our to Through we be reduce and cash we and use strategic in XXXX, reflected course, benefit continuing that's we'll Of and line the in cash amassed debt. markets size strong each

sheet balance of is we repurchase use opportunistically shares. the to Our strengthening while weakness markets

partner to while assets additional cash companies generate overhead. non-core enhance shedding can are help with customers who reducing and to We experience our tech

As of to the wake and about the homebuilding we the pause, XXXX. remainder redefine itself are in optimistic the of stabilize market continues recent

turn expect and Diane in fully that, position, give we with improving to between to Rick. with cash dynamic and will that increased based year bottom profitability model, further me through and QX XX,XXX And line the While expectations, our XX,XXX full guidance additional XXXX operating homes some strong margins on and and our land flow. direction strategy reiterate with pricing our will we efficiency, deliver year existing over general on our let

Richard Beckwitt

growth increase softer Stuart. for Thanks, into second XXXX. deliveries short average into sales were This construction was to fell and will development a in the will quarter some Deliveries homes XX% shift guidance largely our of negatively strong spite country. and across adverse a somewhat in scheduled the X.X by the our In our second X,XXX conditions, first QX for quarter top Revenues quarter. by billion, shift price. of representing increase quarter totaled our delays, the and These affected and of quarter. weather driven by we quarter third deliveries bottom-line conditions in first and achieved a from market increase XX% deliveries X.X% driven

production of by a We schedule with to expect more end the build flow non-weather even to affected times QX. return

However, projections construction with successfully delay, in weather start of starts notwithstanding the track and got through the our QX end accelerated on internal cumulatively QX.

XX.X% Our first quarter. X.X, gross the margin in totaled

market guidance our of was on inventory to our lower prior with to production the this it strategy our side While QX machine to and keep announced was price our going. consistent

to will shareholder believe that operating continue is the and right higher We that and this value. margins IRRs increase strategy

the in highlights marks earnings first the and Homebuilding from an this quarter in of operating X.X%, leverage. the SG&A up XXX the power increased million and was local sale of all-time operating totaled market quarter, the quarter homes prior XX% year. Our our on scale low

our demonstrating at increased operating our the earnings fact proud rate are from quarter margin homebuilding the XXXX. Net XX% we're increased up faster than much particularly revenues efficiency. earnings XXX of operating Our points basis million core again once totaled XX that year-over-year a for growing

so by of pro were prior quarter forma with tied count. guidance in we with the XX,XXX of XX% the year approximately from track for down harsh openings, from the On communities up be New orders in from should QX directly delayed the quarter beginning in community a orders XXXX X% X.X to the X% basis, value of were exceeding dollar high-end increase. active homes on The the quarter the totaled a Orders third X%. by the XX% community billion, the many our quarter new a year. representing decline weather prior

increased rates mortgage to quarter, moderated traffic, quarter, in last sales reduced combination the absorptions mentioned lower sales I higher incentives. our of and prices and fourth leading demand As

significantly homebuilding every mortgage our orders rates home through to reversal saw traffic first sales community During centers. Most increases on-site new combined year-over-year order we in changes with increases. divisions. quarter, our in saw The month. we in activity importantly, marketing impact and lower our welcome in each quarter, one market price of of website and at this increased traffic by increase this traffic of experienced moderating our spurred lower We improved prices on in These month programs sales first trends first up and/or our both our performance sequential sequential an led and a growth picked of this XX come quickly each thereafter. digital these driven

some seen in homebuyer seasonal, clearly this activity sentiment. shift noticeable is While a of have we

scores combined position to underwriting the I'd on incentives in of point the selling to we first we XX,XXX In have quarter, from the the in current below operating fourth housing XX% to maximize originated FHA that in incentives changes rely a achieve we any to In start higher from our points puts strong did now with over rather $X.X and inventory FICO above loans. tighten to pricing use an the policy a underwriting first sales us the to billion. heart of ended XXX to price gross will to strategic XX reached price This increase that focus standards to in themselves. than addition, We enter quarter underwrite both a are place is on by a dollar on quarter XXXX. designed homes market we FHA a case, and and spring reversion ratios value with like that with basis by model as requires system. margins continue great that automated margins season. and XXXX. while decline by FHA XXXX backlog the This sales recent operating optimistic backlog of the inflection discuss volume dynamic the debt-to-income our results loans we've with lenders was manually to briefly

over loans impacted the last Eagle process we less have Based of be manual the The loans by Company analysis as verifications, calculations of requires changes than the these Mortgage it still on can that approved, of our has qualifying slightly changes. While is believe additional impact our our the five and to that longer total would loans hurdles. takes made insignificant. X% these net quarters been Lennar

Before strategic forward you three and previously The I with discussed and update development a existing me turn entitlement are moving initiatives. quarter their brief give of let on opportunities portfolios. and it pursuing to new vehicle and is last over initiatives running. Jon, actively Each we up the our underwriting land

footprint territory of land In geographic homebuilding existing the addition, in these our more increase Florida. of our will of outside markets asset to light many strategy we of operations. structures two expanded expanded include This have

are with existing markets to other and developers structures we several regional program. are expand discussions advanced use this and these continuing Lastly, to in

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

Jonathan Jaffe

going give platform Thanks production with I'm an costs operating and to on our leverage. Rick. construction direct Today, first SG&A along synergies, update our

million SG&A achieve with on XXXX savings direct prior synergies XXX from this million corporate from million and $XXX and First, we for of savings. remain our guidance XXX track construction merger cost of to for

for per for in the along very still lumber shortages, of mission from square that for from industry tariffs, several of construction with a many Next, the with each us. faces codes in as the construction foot. price. pressures trades work scale with quarter a costs cost becoming quarters our This share with how had new relationships a quarter. production size we energy average the on low we beginning We choice refer they market the together stricter is our puts efficiencies fourth We're comes what forge labor to benefits for profitability will to that year. can builder hand factory meaningful costs crisis, understand lowering materialize our on trade in partners We've see first of articulated construction so maximize the the I would been the all the just back builder to the these sequentially bottom our without our trade of as made what ongoing and anticipated to improve to effort labor cost and while We've with working these to our Simply in results pressure the turn can want of cost small cycle time. to the partners give X.X% labor where increase for hand of perspective we over goal efforts first accomplishing you better on which put, later material focus, and lower the preferred pace we've a which benefit We utilize our our program are be cost in improving partners. trade trades. line some the discussed significant over headwind

As focused of highlighted last guarding presented to we all and machine, this in on delivering divisions and by on year. we our production trades quarter, delivered even to starts the the plan plans slow we throughout committed We on delivery our the trades to. homes the QX are

and conditions have stood first increase selling them commitment leads but to slow of environment of model noted, requests drives wet time. then based by we will that production of that a maintaining production for will the fourth margin, Many with platform and is our cost sales which we trade execution who XX%. of turn our for on internet our during that help work. free basis. everything work and to high community-based Their back start this many is there commitments an quantity simplicity extreme leads to on while out working who weather now pulled consultants included, sales flow to partners the it decide homes our we specifically in create our of on value choice and scheduled and our to the the us. during and to with Diane. more to and everything each delivered of noting one with first of start peers with on our and Rick goal over which driven market to structure; providing the set trade As new In set our community customers internet quarter combination to Its slowed all strategic plan simplifies our evenly, with to the our of still start a some efficiently we The one as efforts quality high even for consultants community deal low to, an spreading home is needed. builder production, to their technology remind while With partners, our more interfered information pricing time Lennar size of our improve extended our turn the four, our on combined quarter our at concluding process levered right Two, A reduced This contributor home process conditions; has visit appointment the one leverage and operating overhead to big commission from the improvement X.X%. able our focus down the average SG&A are trades are we’re scale of platform sales included three, this is first to choice. which realtor to us early general digital buy of customer to divisions. pillars, continued our offline, We improvement leads return to X.XX% from basis responsibility reach proving to by cost XX of XXX,XXX the year-over-year our appointment in and I and points year-over-year process QX like sequentially in in and QX, which price over an someone buyer. basis a to is internet cash builder These four would the in customer platform another This QX. customers XX reduction are points great I now. had a operational conclude dynamic in that a on to allows campaigns. result just or to reschedule follow appointment produces our total our is marketing up net leads homebuilding built current capital obviously, down. to driven immediately

Diane Bessette

and everyone. John morning you, Thank good to

So let with from starting quarter so reemphasize first me summarize two a points homebuilding. and and our few

from XXXX These you've from included not the forma at QX fiscal prior comparable. its QX decreased deliveries and XXXX December QX and last XX% XXXX our deliveries pro XX% of As pro actual month deliveries. was increased looking heard the deliveries deliveries, does XXXX CalAtlantic year year which deliveries forma truly

Our first the in quarter gross XX.X%, gross or excluding CalAtlantic and of construction XX.X% sales was was progress. home margins backlog accounting prior on write-up year purchase XX.X% margin

gross with XXXX in QX through sales and were due an consistent increase the focus in increase cost then by construction impacted of margins to high slowing point pace QX incentive Our delivery. lumber in XXXX prices on our

scale to then new was the results of focus new improved as order quarter to us continued initiatives John new and due our as primarily quarter heard operating benefits prior increases a increased dollar our X.X% CalAtlantic first turning leverage orders, SG&A XX% The obtaining decrease orders the technology for to acquisition. detailed. you've on As the was from as And XX% compared X.X% first year. well our increased of in size say, as and result

QX forma at drops the in year-over-year new pro decreased rate and order committed flat at XXXX, forma XXXX, full decreased same accounts the X.X. from pro near QX Our new that’s and X% orders,

the approximately And XX% financial say, was pure But a homebuilding million our of in million included sales combine year. $XX.X joint then of XXXX, as of about to an of And rate $XXX.X heard turning the finally, QX joint million that to with homebuilder. and related XX%. we play reversion cancelation homebuilding prior $XXX QX services, to interest one had a remember gain to other earnings consistent in categories, compared our you've year, us sale venture, the our venture. again land last loss Our

insurance and estate agency -- million. title quarter, its our resulted gain business During the in transactions the and retail real first mortgage services sold its a of approximately segment these $X.X underwriter its brokerage business, but majority of business of insurer retail financial title net underwriter,

As a largest headcount title result X,XXX been approximately of title our from transaction, of X,XXX of after a the to was these color retail on end these little financial just to has the services completion strategic transactions. business And then transactions, a more approximately sale underwriter. insurance add agency which at reduced year and

Title States equity you So, treatment connections announced. sold this Title as State equity sales components of we and meet we the to at look States and we of requirement Combination received this these provided that will results financing seller therefore, Title. did accounting you'll at their of majority we previously time. both transaction, as require not States ownership the transaction to debt consolidate and of In operations the our see number minority with in substantial

note and of full $XX.X increased related from XXXX. services Rialto So looking $X.X there quarter size to services $XX.X mortgage Mortgage component sold, $XX.X operating not with the additional Title of current components flat of And quarter quarter and been combined QX million are investment the in to at services, of to related XXXX. net the confirm earnings finance as in the cost Title year. of then, by is in as was year volume at a due a the decrease moved of at a with a focus the such, $X.X non-control the million financial compared in volumes earnings prior million operating measures increased decline platform business transactions $XX.X number asset to detail related connection originations in reductions included in million net then one million earnings to the result and to to CalAtlantic sale operating CalAtlantic of follows. in XXXX financial earnings the right increase information though, from point the sale a States the were $X.X relatively our to adjusted of and prior segment, year. transactions offset full Even business. prior operating to XXXX due to with Originations increased Total Rialto both business. a QX into million financial our fourth the Title for retail of QX billion presentation. has has the prior regarding in as or management RMF period and of of,

fund. million first stabilization X.X compared their earnings to volume of in in margins LMV this the due X.X operating about And compared our quarter In had for at so decrease And quarter recorded then operating prior This during to million related million loss million were of operating to XX.X prior of X.X X.X compared year. properties earnings looking and quarter, our prior million RMF, year. sales of first our of related the lower year. quarter during we first looking break the in to XXXX, and the securitization was as the the to at revenue an even promote segment Multifamily, to the in quarter, the Multifamily

value As our fees you'll we've creating note, a fund. that to have noted and been platform, promote moving small our build-to-sell from P&L. we within category other on balance and a for new finally, And by sheet a while, earnings a then build-to-hold see just

category this the the XXXX So, prior QX, of combined December reminder, our million we've in are with X and technology as investments fund million investments compared to Rialto strategic remaining earnings assets, Xst, X effective primarily a year. which into the in

total our during million, XX.X%. total borrowings ended at balance the mentioned, the end cash. capacity. We were billion quarter, owned are with billion sheet, moving share. shares sites facility million as for quarter value approximately million. And increased to XX,XXX was XXX,XXX the the XX X our revolving grew XX.X which XX.XX home million our quarter and repurchased At share, are available we of book a XXX stockholders' controlled. cap homebuilding Stuart of end, per and debt of of our And quarter to XXX,XXX to of XXX per had of February the owned about we the XX, to At and Turning on equity credit X.X controlled

So now to and turning XX,XXX. guidance, I'd for to orders we like XX,XXX second with guidance quarter. some homebuilding, between new provide expect Starting the

We expect to deliver between XX,XXX and XX,XXX homes.

We expect our QX average between XXX,XXX. sales price XXX,XXX to and be

our and XX We assets of loss. category in to category to financial to And our between the joint to range range $X turning expect the QX million. will XX for and a gross about approximately strategic X.X%. Rialto loss to land the million XX% to businesses, the And earnings XX.X%, XX QX million. of our million investments, our to be And of million. our a then other our ventures, We a be believe will expect Multifamily loss QX SG&A of earnings expect approximately services million be we legacy related XX be of sales ancillary margins in other and homebuilding XX for believe we we X.X% combined and the

XX.X%. to tax be We about QX X.X about our be revenue expect to G&A our rate total corporate of and

still few we year solid on thought the then and be And the a it be is uncertain ground, should for will is provide guidance XXX to turning given EPS full bit would the we to data year progresses. points of helpful count share preliminary additional believe Our should million fiscal market guidance more and XXXX, range $X.XX produce XXXX. the that shares. This less quarter. an we dollars a adjust as This about for $X.X to

we so delivery, XXX,XXX will We with current mentioned and expect starting XXX,XXX. remain relatively sales from Stuart as homes. to XX,XXX approximately between XX,XXX flat deliver our level, So average to believe price

of regarding be range gross ancillary of Multifamily is XX.X% to of range couple the million XXX range be build-to-sell to in to to to our reflects and a in GAAP This recognized of assets, and in Our delta completed of earnings as we our shares additional assets changes the are of then finally, X.X% instead having estimate that and have as that accumulation stabilized. be a XXX means future will be profit migration in of value The will to a accumulated sell we businesses, our in million, change XX%, is should XXX X.X%. financial fair million should this Fund investment range expected in our a margin complete of services the assets our our and LNV the then our comments the to And approximately we basis, XXcompleted our assets compare SG&A stabilized earnings of increase. million. million and of X Strategic amount the as XX additional platform. full as on stabilize, from value market in I, earnings should

generation in forward future well strong our and profitability have are look to in and progress XXXX, we believe quarters. flow we positioned cash we summary, in to So reporting

like I with And turn operator so to for that, to the over questions. would it

Operator

Raymond [Operator Buck Horne James. from Instructions] comes Our from first question

open. now is line Your

Buck Horne

the terms point geographically? phases example through and other Just seeing in maybe foreign you're and in factors color markets an could you with helpful. And what demand absorption just be price by us start map buyers any with there characterize certain of would California just as for trend example? walking and Any

Jonathan Jaffe

coastal saw, which And an of saw traffic quarter traffic first and in described nationally, sales. that us And each what in and of same Valley affordable Area, more more recovery and in should markets which the expected California in Diego. Bay market Orange and a for County be the Central Sacramento, a and the we slightly we improvement was the pattern month in we expensive the quality recovery we've sequentially San in California, Rick the slower particularly saw

Richard Beckwitt

Yes, is Rick. this

in saw started by As From each quarter. comparison to the I in we each December got down to that said our sequential we year-over-year, that overall a that negative an X% February increases standpoint, every in finally division the my with we have. variance and month month, comments, quarter for netted positive in a

across much months market quarter, absorption You saw. pace every months-to-months we saw in increases and throughout pretty the was in that that

Jonathan Jaffe

margins expectation like just you're the backlog So, improving. whether synergies going it a margins forward the wondering, other the making? of that are reduced tailwinds any the in function XXXX? that the is are margins mix the the the Or or And product you could quantify. it’s I'm labor sounds incentives production stabilizing there and/or rest is changes in would that that in affect trends or in of lumber, of

Richard Beckwitt

start that first to Diane’s we the the move some that guidance backlog generated by the that close with we incentives that with will in fourth we quarter regard I sales The out second to affected will in So, our inventory. in of the the our and are generated quarter use sales of and QX. quarter some

As net model and a towards result margins, a have we in focused have higher on them geared a production we but margin. sales as will and some are incentive operating of said, those lower really our gross

we’re the we incentives look will through we get to point offer a up. As have that pace optimistic production able be where year, to to keep less that to

how we have to sales the beginning year see season and goes. just heart the will We’re now of

Operator

Our ISI. question comes from next Evercore from Stephen Kim

line now open. is Your

Stephen Kim

make mean of sort obviously jumpy. are bit industry gotten of perspective ask of taking to in clearly, your I little a your comment job a normalized books continuing Good sort the get to record be that you, just and in about bit last to year rates that environment, a last because sure now the tough little about a we when back natural pause environment. want we year, to I Stuart, Wanted overall

call moving back characterizing that decline a that look on of a in really pause. when a would the last at but X.X%, sort the But middle in you demand sort lot the threshold above thought X.X% people to specifically it which be think people's than didn't the beginning out rate year, industry So, you’re than pause. keyed occurred taking the little a rates of was I I lower the in of think north of mortgage think now would because in half most mortgage we natural year demand the take I

in because threshold we that as record mortgage now you forward do here be believe do which have that X% the in represents like last economic growth so, that a year that another threshold a we And might go of an books, important year be X.X% line should believe maybe or with you rate.

sorry in on get of last will interplay sense rates happened outlook for your over think and as happen you of the years. the couple to we I’m your want what last generalized -- year next what’s what the forward mortgage year your happened reflection Just go

Stuart Miller

to to a go interest quick at components. sticker shock this rapidity match between increase that I natural for a outside had shock accelerated increase in buyers time that quarter, let natural the together quarters the up, and both seen which to rate third about So, rate. is articulated even comments, sales rates that of talked moving ASP of Steve, pause as a which it two last miss the have my quarter prices and that on from that pause moving the I were terms of when which An and this of was And the and and back with felt you a expectation, in I approach interest reason natural and rates at in with rates, the rapid quarter, very buyers need have sticker ASP of just it been beginning number it very was moving. quarter and we a top me normal layered up rate highlight came a created in last

increasing has and of layering additionally we today, my price even The two has depreciation, response to in itself reflects have price demand serious when depreciation and articulated, of I stall wages increasing. bit really fronts back seen top used depreciation, quite on seen in a have in word markets kind of has the various continued things be back that slow we pull think interest seen But families. I And on really comments. price down. subsiding. that rates. seen that seen, the brought So both seen the strong. in I fairly pull as we've think a back And moderation more into I We've market about what we've certainly have income participation Unemployment the of on both rate equilibrium. low. We've we as said the economy dual combination in to seen reduction been

with as now set come general are together And the people with of sales we’re really home right the market has seeing economy stage rates welcome together price, the moving that us, to with so these our average centers, right at stability things visit in of interest direction that a forward. terms in moving

think home Now most yet what X.X people I the to production, referencing, still per is keep deficit haven't a million production against that that normalized back that home we homes drop, remember year. seen production still

been a that We for period decidedly below of well very have long number time.

housing to live, need still we tested, people been has test been affordability pulled have a that back. affordability so, shortage, has a And place

that And and so, pretty good. look market we think looks of forward the kind

fourth kind at rate to And some it with interest what price think of As I think moves sticker together the I just do improving saw inflection we quarter average sales is rapidity quickly in shock. of that it more was and an quarter which alongside that point, to an has with and rate X.X% created about economy. third your too the happened question rate,

Richard Beckwitt

it point back point could And rebooting reset to got were in been between just locked gotten And and now, could has people a didn't why, see buyer they like one expectation qualification afford. we at another And positive home QX, Steve, that, they action products And I'd said so the computer. they that's what when and the with really was regard as issue we just mismatch here. where Stuart, we buy. in to in on that a a

Stephen Kim

part entry cases the has times other years two many the thing absolutely anymore move. is shift to that's been that, of going be can you've target Talking at been about in make got that of even price level are all the as which on points rate the and market which to increasing. to ASP right the is couple you last overall. the one the But three has rapidity growing at over affordable been Obviously, ASPs with

sort that that and hidden so mix. there of And sort of ASP mix blended

way was as Did you moderate, about, you to of in more sustainable little the back you were they question in entry about -- curious expect you made FHA. is at -- as did is, they envisioning move more sustained a environment talk did an you then thing the pace that a slowdown when are -- I growth bit going surprised so, ASP level. the of And of half when little level the talking that My were you move talked the the bit about ASP And at when be timing on that? a that well? surprised where as you’re about growth you ASP or question the that they -- the talking to you FHA at are did

Stuart Miller

ASP we're Well, question squeezed way start into let with you and that questions one. the the noting me two by

recalibrating So points interest ASP, exactly increase ASP's been in is have It's price. be you've price hard SG&A that do I seen the moving to and affordability to that. and and offset of to that. so at a of cost lower focus if very prices rates in lower keep as of because and even technology market, is focus size we our affordable short have up recognize program, by seen construction because this in driven ASP moderate partner dramatically and costs tested as been scale things in was building some Choice at supply to size to we've to structure moving our all And production as getting land in And relates an laser given costs and program Builder scale the working why it we've been cost that produce and to structures up we've pause got going on accelerated housing local to has our part because at shift both there using well generated and that by But both up prices, acceleration and difficult the us part more at our end. the really recalibrate think costs.

that rationalized So to is lower them level for increases. community price that’s to that defined I the likely slower going be by the some and down. that is I cost at affordability going Case-Shiller the and structure cost and is prices the both what And yesterday that you’ve behind seen still you're curve, of the we’re have in price building come are challenge little the the to to SG&A bit to going seeing think think level be accommodate to see increases caps a acceleration

Rick the relates to it let FHA, future. I think as going go and that’s wave And of going to hit ahead that. I’m be to more the

Richard Beckwitt

And been particularly de been is the for with -- impact said while. has weren’t something We the to I timing announcement. surprised rumbling This as a us that’s net but, or the minimis.

Operator

question from comes RBC Markets. Michael Capital next Our from

is Your line now open.

Michael Eisen

for Dahl. Mike Actually, on Eisen Mike

guys are resets Just What I strategy be be with guys the this made wanted where to up addressing would follow taking strategy? products comments you it or a times how a success from footage and base specifically. prices, Lennar regions was environment. guys few you more specific whether standpoint on how square you those to are seeing some you for you pricing are talk And that now doing moderating down this whether smaller -- pricing it have about hoping and most then

Richard Beckwitt

start Jon you to want off?

Jonathan Jaffe

Sure.

Lennar -- that this we approach was product. part most market-by-market very the the this with For takes

So and where that on markets level. square some really other allow the down price we at in happen footage County, land Texas, we footage other to markets will have have for remain and hasn’t we as reduced end higher example, where of a have Antonio, will extreme doesn’t overall California, the where taken points the San Orange square an basis

do the value first a structure, to moderate you've that we three move up, whatever time all move competition, target cost affordably consumer. price as price of market our we're it’s trying in us, to on at we whether focus, big against really resale has from as the been second so time that level buyer, the entry marketplace be can heard up how Our against

recognizing So to program laser the at that price to production got price points really be we focused to is keep issue point down affordability on and very an that. responsive efficient each

Richard Beckwitt

best we value adjustments, best for us to best to product -- to what provide your and capture second laser are question -- should our customers. regard of for in our and features with include Included focused very just the Yes, Everything's product the the value portion we the to so best margin provide on point get

look now. on regional opportunities So going we adjustments, right we at included we footprints, features, we look at have make

and on were mix, year-over-year So we basis. And is prices home. but a pricing, From some our we're focused year-over-year on Texas very on starting some general parts lower footprint regard you of if quarter, bit the with of of smaller you’ll some look is we're to sales basis last that in ASP, the flat for little a see deliver that just Carolinas that that. a of to at just

is about is -- down about Our average backlog year-over-year down price backlog and X%.

that So made. that pricing impact you have really at Diane we said, gives adjustments a shouldn’t our true as forward. and But of margin going the some look Jon

Jonathan Jaffe

included value more president, to complete that in Just Indianapolis, the and of offering to regional their same to the morning the customer -- to with that really presence price, features on lower to the was the and up at are from product, is product our their so Everything’s having follow a just to allows I there it. folks in pay through And offered picking made, extra gone with us no of product Included point converting chatting there a value the up is, without Everything's sales to our pace with Included. same for available communities CalAtlantic options because this platform they've the value and that deliver offering Rick Included A what division they're better included Everything's getting they finding example good more customer. the features

the affordability. of us address allows also that So issue

Michael Eisen

savings, those just favor between different And of synergies, all then following the are it helpful. there, comments just that desire appreciate lumber in lower very it, down working the some applying impact few taking cost the buckets on lower color to and margins and up velocity. them the gross that there's Got road, be seems pricing, a higher the offset by your to

luck. over we and think higher operating you think term the the what normal you last How longer a some -- model? this higher of or are if is seen guys XX.X% as for years business do? Thanks XX% can we've company new about higher back this good volume help can So to the us few can moving levels margins

Richard Beckwitt

Well, crack take a it. at maybe I'll

we’re one full and of I year our get years of company get like companies that’s the think right over now And only year. we fiscal really into guidance. SKUs only given not to the -- current do the outside

Stuart Miller

we’re while and we’re that we recognizing year season market, me So to with rest will a coming spring said, that look at see taking and add this selling exactly of let we wait how that conservative forward say, out the look of as shapes up. the choppy this

and recalibrate to as pricing focus really like, all we've little our taken come. bit to and technologies net just recalibrate to slower and we’d the with we it while internal see cost driving always -- on regard is And tools a size structure using times margin our various our we’re than our through of the we strategies. some of haven’t our progress on We scale and is incremental, through SG&A. that it’s that the structure that cost time Remember spent have acquired focusing a lot

focused Jon When these hear So of you the things to cost on are talk and initiatives margin. lower Choice SG&A all a Builder about listen generating when better like mousetrap a it’s and a and you about higher our net a building SG&A. mechanisms that interface, or structure and recalibrating our me higher customer margin, generating about our lower lower internal talk all and generating gross

business market be we a be be choppy, little as down these initiatives little will we results some the be we side might produce cost a of the might think and know pricing might bit expected, the as recognize that might while up, So ahead, what that but them both we focused exactly on we're than the can't slower as be. predict might of well

Next question?

Operator

question comes Associates. from next Ratner Zelman from Alan Our

line Your now is open.

Alan Ratner

improvement here, and market. great the the color in all thanks the Nice about quarter to hear for

to I quarter which heard wanted the still and little February you bit XQ more. orders question seems to just guide, First a positive expect slipping on be a you momentum on would through year-over-year I little It if a down correctly orders, given the bit bit in in it like the the surprising. to saw dig little seem

just weather see is playing a that, kind more bit what’s So out? how that the of and little talk function of experienced can a you you into delays you going about that do

Richard Beckwitt

Jon, start me let off.

and late this Some communities bunch closing quarter. of it just we really of the we’ve of communities a on quarter track, in a will have get is function but that is back that out got

number the So we you’re you Jon, to seeing community reflection for count. And of now. I’ll a sales opportunities of have further

Jonathan Jaffe

same that would the I make Just point.

QX for us on of you actually As that of ‘XX top the right of projected look at, sales pace for sales in ‘XX. we pace is had QX

just that’s result highlighting that the that it’s year. we’re count So given with feel we very equivalent position good our but driving projecting that’s you’re about pace a community sales last

Alan Ratner

seem growth? looks target just Can So then pretty you support a like back little talk just the of a like level ramp your to to hit bit the or that growth starts the year-end in full of year. year healthy about then, half it the what

Jonathan Jaffe

increase the a through as year. have we natural We moved

second, year our I mentioned, quarter we third we for starts our third, and but second the increased that to into in starts. haven't so still and throughout are as first move largest We’re, out we to mentioned as trying quarter level all from

this still years. beginning up will year be to fourth largest our to Third that's and even prior but deliveries, for moderate compared

Alan Ratner

could second add investment, many on a buyer progressing, curious that's the resale? us of give in if I actually what Stuart active an your is update can of that Got maybe percentage now okay. in and that the topic, right you how utilizing been Opendoor is their kind it, a iBuyer how one, separate your orders just if And on markets being

Stuart Miller

greater programs serving in can its on of And well who has their up -- how that to rolling a lost agenda I really many has each to enthusiastic Opendoor but track team with a really to in toolbox say, offering we've your customers our customers us to a as now are achieving team We enters the tool in what and we only with about change turn program privilege just sales adoption about Opendoor are coordination enabled that with them a more move out And to is just bit focusing within management this Jon? on on out aggressive of we and “We I'll the we're finding of have their in, a we're but I us is all, we Opendoor it of refining but and the let Board but our system I their there. best what class. in out and whereas that many market-by-market new exactly with the well. we we Jaffe greater adoption together about as use and in talk market we that mechanism up interface for where they have program have rollout accelerated importantly Jon own a is the in solution.” And have little is launch “Jeez, both the the Jon Opendoor, are enthusiastic but visit division. first of in has come in in have all very Opendoor our the we second, we rethinking Opendoor is them monitoring not work friction month-by-month program. markets, we go business its doing have program say have new and have Lennar a home more love have with right economics. our So that -- is trade is first markets model, tremendous the really customer program how I’ve management of program quite out done we're of really way we a what taking own admit the and our working world market-by-market. sell.” a an rolling And mapped Opendoor side-by-side and to include

Jonathan Jaffe

jointly Stuart Opendoor Just division, great our opened yesterday Opendoor XXth presented it's as our process learning been the Opendoor, sales noted, Austin, Texas. operating market team to platform. our a have And with to in we as we with

in divisions await in finding we're and than learned the market is Our opening, their eagerly execution process of better towards each the prior lessons better opening and that one.

as Phoenix, XX reached has our first a We I division of activity a and that's transactions execution. of just in we're said better level have and seeing some month, better

that We buyers. it buyers incremental very our we're it about solution helps also in often that. that rate a they excited our broker yet, home So view not sell spend they buyer reach earlier a it’s and very to the process involved equation. as in reduces so cancellation our lower the to as and It will have are don’t growth have

relationship enthusiastic So as Stuart program. said, we’re about team We a the management with the extremely there. great working got

learn from and hand-in-hand from we’re them, estate working and each improving both technology learn operations are from other. from to We us, learn We that. real they

Stuart Miller

understand its way out that open management management progressively that we since are And and we change here one change to to interact the pull and add is point thing more well where friction program learning, customer me learning better friction points process quite is door own. around to better worked on a our we working clock change and transact. from and associates that have the important the our are about migrate way there with worked most has way to is Let this maybe of things you've a our the Opendoor, are management, of

engaged better and are get with Blend, doing that but with, and evolving better of is most we perhaps the with to to internally we of We we Hippo. parts that exciting are with not as with program. States Title something Opendoor going communicate and one just ability learning the others this, are our at are and with We're

initiatives ability better and all them are of Last our a -- work with enthusiasm great technology them to better deal getting is but and the time. Our integrate for we question? have

Operator

Michael from comes Our from last JPMorgan. question Rehaut

is open. line now Your

Michael Rehaut

just kidding one obviously. XX have parts, I just question in

across as the better in to question sense, talked get other how as season progressed hoping and being market the choppy California? particular at the First I related throughout incentives. mortgage quarter, -- incentives to throughout progressed. you rates on selling saw you in parts improving quarter was same time just a and I they spring was wondering of -- about the that’s the but what perhaps

Richard Beckwitt

model. that we the priced see to each our We using that in quarter we're homeowners as product. going the period and to we to believe we I of said, to continue move moved in the market we to to start do throughout that as inventory through with as through and pricing as moved dissipate, QX Well, we've into level incentivize is to is to our our started order continue we’ve conversations QX to had this quarter. dynamic incentives going And something completed

Jonathan Jaffe

and as we earlier said Rick the the use let’s And California, incentives we then lower to in and Central Michael, end more markets, the quarter to incentives are pace of the lessening we particularly markets, they that definitely those did markets, those the are with improvement towards markets, just markets. in incentives affordable first respect sales Valley, coastal generate saying with than consistent what coastal say, proportionally the the I central market Sacramento, see all on are was those the

Michael Rehaut

Okay.

Now for thank shifting return bit on secondly, little you that. guess I just gears a to equity.

metric or do balance sheet next ROE powerful be three How let's there? down share had a you do cap of as below two it valuation assets you to terms with for of are get multiples. and well that that obviously different that different that your you sales pretty peers, as when as in say, in repurchase terms go You've title the want larger relates see are you and more off your willing core because look ROE relationship And business, businesses what over with again where to instance where repurchase you the has doing do parts slimming initiatives et between as your of want you metric returning see being kind highlighted share to total asset additional in highlighted the some to of you aggressive sales or of and brokerage of do or selling and some some cetera. to terms to years, at your

Stuart Miller

combination -- think return going one to I get on and equity think strong generating and But on that to very what say ROE. of we part stronger a call. doing of the earnings question So, focused driver a in strong I be our and are that SG&A earnings just power try more coming Jon we're relative primary is in -- I let we’re me from going to to

going down to opportunity force an the we've LMV whether that that the we going we're assets to do ancillary multi-family not as it’s issue. FivePoint. or We As it’s pare that but values have, continue there intrinsic whether we've to businesses, think to we are said, program are to

certainly we're So haven’t going increase using internal and bottom to those And the migrate are strategy, with technology, on core force we be. are focused to But as to that’s going be external to issue a going business Rialto. initiative going we're line. we not to where to is focus

Operator? one go question. to more Let's

Operator

the queue. Yes, we do in questions few a have

Stuart Miller

Let's take more. one

Operator

Thank you.

comes Our Stephen Wells question from East next from Fargo.

now is line Your open.

Stephen East

squeezing for in there me you Stuart. Thank

First you combined company. got big this

pace that you ability talk the what the off are all optioning get you fast option faster about And asset? willing a you talk geographies can first about you maybe all developer to about talk as how Could accelerate some. maybe, in you now have starting land land where look more are you to a of of at to you your or all then at process and yet? about You are if your can ground little them bit -- you that think and agreements with talked

Richard Beckwitt

Rick, it’s So Stephen.

an over into of last about with place, deals to and position or what’s return we’ve got equity, catapulted that it’s As our arrangements next identified going asset -- enhance three a sort really getting it’s two control back will that deals of be that to mover -- months years on that is we us last just Stuart pivot This a brought the program the ago. the I the back on we mentioned we place. to our biggest XX% program XX% to moving question, light quarter, can the that expect based where XX three in north regard

this So we continue to going are on.

purchase markets, as will of type contract, as in them this. you I the to the a parts the from necessarily without coming of owned not structured. from far of them these see the quarter count we directly in concentration And deliveries way right they Southeast. we’ve controlled to may have that are other our said You of as see a because that expanded And our higher arrangement last given things like vehicles

just leave it Let’s there.

Stephen East

question. as immediate your you turn And in you broader think community more in you community big about growth, then and growth will growth bigger a question growing your your satisfied a enough. all be communities if Alright, your unit your fair really would how sense, question? will, you When year? business and picture a fast And just this a picture then on think you positive

Richard Beckwitt

Yes.

month We So about year-over-year closing regard communities on come just weather this to of get see the had a really first delayed where quarter. we community a you'll activity of count. QX because by we communities flat going. going QX, us and we programs double whammy last in bunch XX time did with that the into had sales were had good get of a out a start to had We because

as So we And we market. we see count to normalized grow more into will move we year-over-year we said, comparison get the to QX. in as start forward a plan community as

Stephen East

you So comfortable and be unit think from a do how about picture, time? bigger you where would over growth your

Richard Beckwitt

to we’ve X% about that As business minimum unit X% activity. we think past, to with of we regard in want said to grow a to X% our the

year the or or will recovers for is to our is tied code Some a of year going some But on associated that really little a absorption X% market incremental next growth. a to be higher community be with since of zip the bit two. basis community-by-community but toX% that

Stuart Miller

back we migrated there. found going joining. evidence look fourth is third and appreciate the We move building back to that first said, everybody here. for the giving say we’re we’re We a home how that you to Okay, we as circle quarter. ready to I felt market going ground to the entered wrap I speak on we a from optimistic you up housing forward. and update We’ll and forward let and to joining to quarter. firm we to quarter. me that that Thank in it just checking first started with an our stabilization found where But that in had is highlighted and of has want next we are market pause that

Operator

conference. That Thank concludes today’s for your participation. you

You may now disconnect.

Lennar (LEN) 27 Mar 192019 Q1 Earnings call transcript