LEN - Earnings call transcript Q4 2020

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Operator

Welcome to Lennar's Fourth 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. [Operator Instructions] I will now turn the call over to Alexandra Lumpkin for the reading of the forward-looking statements.

Alexandra Lumpkin

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

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

Operator

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

Stuart Miller

macro morning, and and Jon as respectively, the morning, from here and Co-Chief everyone Lennar Controller; of on our Jon Miami production our Chief and, and order questions and Officer Alex remarks us We're and will count; heard for with and thank follow our overview land with being community the give as to attempt Financial time Executive perspective; to question will I'm our Rick more will up. who Jaffe and brief guidance. brief a to course, give and questions. plenty sales participate scaled-down and includes one attempt are here. talk detailed will in limit of Beckwitt highlights Officers going will just of Diane line construction your about socially-distanced they Services; Rick financial questions. answer for California a are and Officer; and talk once This I'll person have again, to you Executive and as Diane Colorado to please joining that keep Then well. per costs; Co-Presidents from; Collins, Dave And you overview in crew many we Bessette, usual, Good Financial Great. Chief about Bruce one Gross,

unusually results to across America's present this, home fourth of from and in and in which to XXXX. positioned for prevent to that to their great year. guide with extraordinarily strategy, results for have additionally, today, the Lennar expectations as with an with again the with start our came thanking would and year excellent in most myself extraordinary XXXX coast-to-coast arrival So I privilege another We Diane, an to associates challenging like to abrupt unexpected market, by once Company's an and work Jon expanding great - expectations stop started the homebuilder. Rick, and, Lennar with our of confidence aligned of XXXX the and profitable and refuge left desperate first, that hub with charity, top put COVID, everyone's to demand worked people address a for turned for high market was transact, all kindness of are with quarter and adapted of ways and associates and adjusted, The the interact life. country then Lennar concept, active on a perfectly gear learned of new back of brand strong the pristine home, acts new into in that to the full-year and cared a communities

a resolution ground we to rates market from not is and and an new providing mortgage never American the larger sell is current not the taken, essential strong, growing a demand. from and ample can supply. this to market home, homes as has price prices a and and deposit engagement towards traditional housing and is across every of demand than demand slow of higher. for aspiration yard been are to once postponed purchase to and see The are movies say which those digital It and and equities would positive accumulated ranges under Low with are for of than afford stimulus call demand home the more with than home, purchase simply transactions. with is constrained driving same. the Lennar and throughout for macro created as evolve safe existing, past of higher. far enabling is clean demand a growing the yesterday's liquid purchase life, the family generation, frictionless strategic with has past market. hard thus home place cycle, money an do customers shortage, dwellers will well, activated less is buyers demand, dollars and a Demand making moving home, pricing proposition government rather a friction years and more of family homes first-time housing the trading wired production and been simply as limited for XX high up the fed the workforce as homebuyers overview, supply, savings every like let housing their becoming greater the and early and, reaction. me is growing. a a and first-time than and easy As not provide and and pivoted kitchen participants The second-time population, spacious growing moving enables homes, prices again higher years larger, marketplace higher sell to vacations The the trends. office, level course, that formation the by Opendoor, them a their faster to families the as nicer are entry own. very homes they over millennial strong homes has With of American This dream as is many shelter quickly, restaurants level seen, pushing visited prices Concurrently, in formation from The of XX are COVID-driven country. ultimately and and in a buyer prices homeownership investment, Apartment homes more home pandemic expected, sell led the range strong enabling way a not to entry the a

by and these it growing across the well-documented more more expensive, crisis country is workforce exacerbating While seems building solution are housing. the housing trends be in limited supply getting the affordability as will

exactly lot still - morning's have rise stronger the morning's costs permits this see net up a strong of to margins, starting trend today's that but we ramp ramp are with difficulty] to this land in numbers, have and [technical We even given managed sales up conditions These starts in make in controlled pricing pace, to margin, gross though and power, scarcity. strong up. - very

this years that Company some our enabling overall ago, units. of us past pleased a subsidiary focus the sold the year current Retrospectively, very relates turbulence [technical while As our becoming part ancillary we and it the we we are before we excellent and divisions, sales controlled core strategy continued to two on Lennar's picture. difficulty] we have environment, business navigated they are smaller to in business refine of decidedly grow to our Rialto

Five been emerging investments calls, platform, in as conference to multifamily our strategies call investment technology LMC, blue-chip our as strategic for along California development LENx. in and noted position and platform, growing we platform, As on or single our past land we've well Point, company, family working our call called better which with SFR rent our

in of from to to our public appreciation near that our trading more not up, regard, is on that we specific the refined As and a in we'll in although, next as and trading on begins. expect we driving estimate higher as that it quarters. in resolution as gain immediate noise focus have lumpy long-term we begin and In but company investment progress strategy from no are we these expect on with an and rationalization longer become a heads record certain divisions, greater numbers a give until two Door future, strategy profits the will This making a returns cashless less clarity is profit Open our we platform, losses. of over is

automated. a a SG&A to upward larger XXXX. Door We frictionless, in of and our Once all and becoming required company, joyful economic margin, not of be year and me technology strategy public in home, focused well-known will growth, pioneered to standard. and our X.X% the are that for downward of course, say hub improve solid expectations shelter, it's change own By movements recorded returns. adjustments to lower the the be low but the control organizationally engagement. With will have and system. live and more for space, less over an within the The day balance Open our a housing the we meaningfully a is is welcomed office, have the and right. only is experience entire shelter. is and Concurrently, to our and the that move-up transactions all be our more respects, have conclusion, they gym, while that customer times. record companies and jointly is sale evolving to our is reflect business but Home technologically lives. investments families congratulate let Lennar are migration also let at is foreseeable Today coordinating Rick. of the we advance cash core in buyer in quarterly It stock is our exciting we and redefining and environmentally both a our for an developed to coordinated do seamless school. to will high parties from the be future, our refuge maturity Wi-Fi financially, sustainable, results Door them say, our and grow first their health our helping successful Open it and a begins, transactions meaningful our in to we in our is home historic start-up and It flow and to to to becoming is thrive successful proving markets. not times for industry earnings. becoming connected trading quality of program toughest consolidated technology In best to we've positioned position. never the company means Lennar this a to The that the marks and as Needless it in market. It an turn up drive and our in public Lennar, and and better profit readiness and live on buyer moving to and their move-up on more initiatives today been essential cost healthy home of informed life. and - friction and is their while not flow sensitive. it more Open home me through Door to recreation involved. to multiple and And where way It contributed for thrive center generation structural just current is home, a shifts quarterly our shelter It as our now a used next investments again, At

Rick Beckwitt

Thanks Stuart.

well on strong, from continued execution benefit a that tell extremely financial of list on that core can Topping Stuart's our solid continues housing to you increasing With laser-focused is very flow. our of mind, comments, cash returns team and be results percentage is strategies. operating year generating option and to As of the capital in market from our improving owned coordinated, opening we homesites our homesites. our reducing and have our been increased supply

XXXX. a we goal our about option XXXX. other increase in and XXXX to On their XX% and markets. us our have with homesites our of fiscal homesites platforms and our size developers further on At control During expect was We of scale fiscal reflected regional improvement. strategy. excellent and via This to nominal into the existing our an work by goal partners, XX%. enter year our land-light progress, of of a enhance controlled similar XXXX, we during to to end given fiscal local end set fiscal the our at to that options controlled, we on In XX% achieve increase XX%, our arrangements by strategic desire our to with entered new fiscal controlled position XX% with and XXXX, Based time, basis relationships option national to of the are and the this of our land strength relationships revised XX,XXX of homesites homesites basis, XXX continue expand reflects ended over position a in point position this increase and this year.

also years. over This years-owned XX,XXX we progress goal a supply supply we to on the this homesites, announced fiscal represented Based X.X years reducing three-year XXXX, of target of to significant achieve reduction by by During made sites. of home our X.X previously on XXXX. on are end of our a progress,

As position drove flow. significant combined and position, expected, increasing homebuilding controlled impact reducing of own the cash our profitability our strong our

with $X.X a billion net meaningful year our cash, facility, During homebuilding cash to homebuilding our capital of generated off senior capital credit $X.X to debt we XXXX, $X.X prepaying XXXX. due us in fiscal in revolving pay debt, flow, respectively, of enabled and lows. debt in ended to balance both $X.X improvement of XX.X%, billion all all drove sheet which in under the as This billion borrowings billion XX.X% and and our time no debt we including

continue improved to year-end flow. to significant we XXXX we goals, we positioned to generate land-light achieve on strategy cash execute our and our As if continue are

the Notwithstanding and of I'd count. decision This opening we XXXX communities, development X%. as in to paused from new count, pandemic. community an talking a in the deliveries X% moments of pace few initial we community. driven about CalAtlantic, XX% delay orders by communities community increase active of lower a was accelerated in driven price a stage activities in during COVID-XX in spend a in decline by the fourth and sales our acquired per by count communities out a the and achieved fiscal get performing higher in community the like our XX% absorption, XXXX, quarter Now sales to growth of declined lesser we point new increase In

in level communities improved part communities. the can that to increase acquiring While smaller pace was absorption of more per by than was driven targeted entry part homes month we due that of it higher-volume market conditions, fact that larger, deliver

in our well into count. higher should as as by from continued year, of XXXX of XX%, community XXXX, continue happen which we overall fiscal our should for put most great back about increase XXXX. come part shape absorption the will community will which in to fiscal the middle growth for a the half increase us In As provide XXXX, an count pace, continue in growth of and

our our returns larger While we replacing we continue to are on be us overhead, focused on bottom as focused communities cash with line, our flow. increase count, leverage our and better communities, higher improve community allows to our and existing increasing volume intensely this our

I'd XXXX in things in Jon great core XXXX. over year. thank now. we over to to our and it our partners echo like many shape turn I on work all accomplished and our strategies of we associates comments Jon, want execute and operating an I trade for and it excellent Before to your to to Stuart's in hard are collaboration, Through excellent turn

Jon Jaffe

containing Thank Matching gross construction us In environment, has our been production you, everyone. pace been by sales we maximize maximized upward and to while profitability. Curtailing able production and Rick, excellent focus a has bottom performance. good key morning pace with sales to that drive strategic even systemically margin we've have current there's the pressure. enabled margins driven line and cost,

sales, manage order net expectations time-tested in Included able It overall Everything's production this strategy to like I quarter and our been program. and describe to begins some to briefly we've thereby fiscal strategy, Additionally, been our the shed performance increasing to XXXX. light lower, our in cost and would with our and profitability. margin has construction accomplishments how our SG&A on for central

SKUs continuously what So, our count We will associates their the strategic disruption partners, to due and building trades plan valuable environment. rationalized industry extremely level supply construction proved trade in be our are some and and and chain process. our what and facilities simplify construction engineer, current and know of the exactly our they manufacturing chain exactly COVID-disrupted know work Virtually the COVID. buying. plans customers manufacturer had with of has they to value be every This to supply our

in drives coordination erratic model. after the By their sales-driven understand exist pandemic efficiencies production requires. conditions increase QX, more the scheduling. on first even and being in in pace production-oriented the not with production XXXX, one increase or the in start trade to homebuilding for labor a increase call machine evaluate and that needed. per pace materials executing to able and rates at focus partners, industry. and begins do needs most predictable disciplined consistent communication the we QX. deploy material efficient plan community start for by to in was even quickly flow This products upward were The pausing as improving flow of leading homes to our production achieve execution provide communicated Next, as to which so forward plan QX up This in template, cycle They were downward production market forward and start about determined of month community, our market and XX% in able a pace an the every and quickly March is we setting start process, they adjusted each we level a with and product-based specific impact per in pace. of average which planning April and X.X efficiently from We of in be then can less X.X pace people time our production can

month approach. fast exact defined maximum first-out; and as selling type, sales production in pricing pricing our the is match production started sales using pace pace communities momentary to We first the the then is production at is per starts, that to per pace pace selling throughout the right disciplined of the community desired the to down in sales quarter their is We community pace or production. by the first-in, homes line, managed order by management to is sold. to not FIFO efficiently expect home Lennar's matched of FIFO maintain of for that and have the completed. and mortgage by by that year. described the In changes incentives home homes pace home efficiency available each the market too plan being The determine prior type our market the for approvals plan level words, to our also to to in first best X.X conditions. process the and increase and first sale in And in sales restricting to By pace simple, other by - pace, homes same business to time we for to moved our receive for what our customers our we sold community avoiding our the

homes our divisions year. flow XXX for disciplined Additionally, also or to helps end efficiencies spend, our and we the or In with homes us drove margin, in gross helps our our Company, pace even community maximize while pricing and brokerage Balancing to completed per and sales, creating balance the sales in sheet. this ended approach approach deliveries. with today's we SG&A both inventory the very as X,XXX as the our quarter selling production power, pace our fewer inventory and flow, up X.X prior of few X.X per just lower environment, homes completed Homes increase carrying margins reduce starts allows homes cash QX, to entire in this greater compared robust on homes our community XX%

certainly the a and very is this the being approach in pressures. key of to to a program importantly, by to value In for choice cost strategy XXXX. predictable balanced shortages back builder managing More proved conclusion, effectively its trades of of half and in production market defined costs and sales and labor pace Lennar's managed

want year my direct we for no and year, certain in associates SG&A, line higher strategy. also to to I look net of and other. of the trade it continue this are Diane. all bottom gross margins a managed to all lower result next we stronger higher to great partners focus hard like we thanks over carefully that to work turn margins, our drive As of a add I'll as now and their will

Diane Bessette

everyone. Thank you, and good Jon, morning

heard from guidance I'll some financial Jon, results Rick our XXXX. Although our Stuart, you've provide certain begin of and highlights XXXX by QX then of recapping and for

sheet. to cash are with So start let's debt. inventory, and the There that flow three touch want I on areas balance

prior strategy and homesites returns on inventory. starting we become, At a owned land end, our increased our and with to lighter, XX% in generate XXX,XXX from in controlled XXX,XXX So a executed X.X cash decreasing resulted prior from This homesites We the to and XX% controlled flow. X.X homesites. improve quarter year to in year, owned increasing year. supply our years the years

generated We end to homesites flow. continued of XXXX. the our make turning $X.X cash homebuilding by year. goal of the three-year progress controlled for then quarter We in flows XX% and billion owned And of cash for and billion the supply to $X reaching fiscal

is in annual $X shareholder looking Our overall share. total platform flow per and us increase dividend to our ongoing strategy cash of share our one our the generation returns. enabled debt. quarter during component then to $X.XX at And confidence from of on This payment focusing per increase operating

to continued strategy with balances leverage make and We ratio. progress our of debt reducing our

during final XXXX. the And our ratio lowest These a capital a debt-to-total have resulted equity capital ratio base in pay combined the year-end strong debt fiscal and quarter year. Our quarter cash $X.X debt-to-total $XXX were increased The $X.X early billion which XX.X%. is sheet. of few of billion we achieved. due pay million of senior us off, ever maturities was balance now notes, the actions senior that no all flow the note to have until just we included approximately in with on With points fourth This XXXX. enabled during that redemption fiscal off generation our

billion Moody's and from the book our by $XX investment-grade be $XX.XX stockholders' increased year, to rating billion prior joins the by year. to the Our an And pleased from $XX share were upgraded we value increased $XX.XX the during quarter, per This Fitch. prior received rating rating. finally, previously to investment-grade in in to equity

our for generating strong, long-term and So sheet shareholders. returns to in balance our summary, we on will very is focused continue remain

let those with Starting sheet balance so operating highlights, me briefly with our now And review performance. homebuilding.

For of with from new orders, new XX% ended year. the we orders year-over-year and dollar focused $X.X prior new sales we on XX,XXX, and order our value as was a production, quarter matching increase, XX% the billion, up

Our sales pace in the compared, quarter active prior year. with was cancellation to communities, X.X the XX%. rate X,XXX our We ended quarter X.X for the was and

the For down X% the was year-over-year. This year. production XX,XXX, the loss a of COVID-XX earlier largely in quarter deliveries to result totaled

Our This basis the of was increase [technical margin sales costs. from difficulty] pricing year. was prices focus power, prior which result XX%, allowed points construction gross us our up to the continued strong XXX intense and

some quarter deliveries, Mortgage earnings $XXX also year, XX% increased XX% last year. through high percent in volume combined quarter a reduction team due operating Mortgage and creating a prior million lower of an year. Commercial a cash provide an versus benefits million earnings million operating And Our the which first platform in ever the levels, operating $X an I'll increased resulted have the of with overview, of from million increase increase year fiscal in lower million increased million detailed million, percentage achieved. technology. to the homebuilding. in then prior at SG&A of to now had for This margins. $XXX SG&A net quarter, turn to earnings. year, quarter Title the in executed and in compared continuing highest the earnings were for lowest LMF cost to brief in compared as from volume. of guidance starting to a a transaction. earnings compared And Title secondary is our buyers, - provided orders in securitization let's the to primarily operating Financial higher provide margin $XX with This I'll capture result we efficient to and for benefited XX.X% of percentage an and is primarily that X.X% per due the closed increase $XX guidance - first operating prior reporting was reached. ever $XX high-level $X rate Services with earnings guidance.

the QX XX,XXX new of homes the our range to of and be deliveries XX,XXX We XX,XXX to to expect in homes. QX range XX,XXX be orders in to

Our QX $XXX,XXX. sales average price around should be

We our is XXXX of normal be the XX.X% the Note, this expect QX margin gross in pattern. QX due seasonal to than range to to lower margin XX.XX%.

the expect reminder, we current As fuel a costs period. in

typically QX as to is there So homebuilding a QX. lower revenues to due QX headwind gross the margin gross margin compared to in

the Financial million. approximately expect we to to multifamily to our our earnings we approximately And expect $XXX in million. QX in earnings operations, Services million. X.X% $X of expect the We categories, other QX will million combined a And of for $X range to for of venture, $X of range be be believe SG&A X%. the homebuilding joint for land We $XXX QX and loss sale

strategic legacy category related and million. $X earnings assets QX their investments, our approximately we of Rialto the For expect other to

corporate We about G&A our to QX total revenues. be expect of X.X-X.X%

front-loaded contains expenses that will occur of the The remainder certain not year. first in quarter the

Our corporate consistent G&A should expense with the for year XXXX. fiscal be

the We shares. to and XX.X%, our count for should weighted quarter the average be be rate XXX approximately tax share approximately expect million

turning full the together, a for so this now year to quarter. you pull $X.XX full produce fiscal to few points. per of XXXX, range And here all to are an $X.XX And - the this guidance share when EPS guidance should high-level

average to $XXX,XXX $XXX,XXX. homes, XX,XXX deliver year sales XX,XXX We the approximately price with between expect to an for of and

the margin gross XXXX Our fiscal to is XX%. to expected range in of be XX.XX%

continued throughout and and other by higher from the somewhat expect appreciation price lumber field year cost anticipated We increases. offset leverage expenses

I'd to we to in turn expect the our to of And range hold to approximately to weeks be work us $XXX me expect the and And enabled community million the be to like I XX% hard and is let it rate in by of planning count thank questions. X%, turn should $XXX accounting be X.X% Services you, team to all the Our Thanks XXth, call range earnings it fiscal SG&A it the million. operator our say much today, of XXXX with focus before of year-end X.X grow the after to you conference And for finally, over our December to whose that we Financial to tax XX.X%. should very the end over operator, appreciated. and year. year-end.

Operator

Instructions] [Operator Our question Kim with ISI. first comes from Evercore Stephen

is open. line Your

Stephen Kim

to gauge guidance and everyone, level very, very ASP looking I aspects of you bit suggest your order that's wanted is is that, of little mix, color if that just closings because decline? quarter for like-for-like guide per think guidance I pricing ASP much, and if provide your Many pricing could that means that to was question. accelerated interesting was mix in shift was to the Thanks up the in guys, sequentially price were the X% assume also so, like-for-like guide, shift, this level or your performance. not, about, quarter. assume the positive, and I about that conservatism for - assume your extremely ask That us. a area I third closings. And of mix at the curious that, very observed month is there rose ASP one that the congratulations, for almost strong which I X% on to that but if you've curious, was would the incorporated from some I I the negative throughout a least for And quarter. in I seem trying of

Diane Bessette

Yes, I'll that. Steve. answer

points. So a of couple

some third If in did QX. quarter, remember the new that orders of ASP close in you look at for the

was that of QX. part in the So ASP

Note around the Additionally, of midpoint is XX% which in look backlog that is the guidance. ASP at the homes if you number backlog, our same range. of in that of about

not focus there while or coming down point yet, year there a during will that the lower producing is orders are new the few quite that, affordability. that some point on in So have to are through, those we on as communities other continue the really price started of bleed that

snapshot those what down. the pieces migrate price I'm small that There in of of you'll small are year. other a are And sorry, the - so, will There see what you're quarter. seeing pieces snapshot are is other that

Stephen Kim

X% we that? someone assume you you the probably quarter, the - some at it least would Though like-for-like saw on saw month. Could per us in that that give color comment around Can I pricing? would

Rick Beckwitt

Yes, I'm but not X%, sure pricing we're going Steve, did to the throughout get quarter. see we like-for-like

Stephen Kim

it Rick? all, at accelerate And did

Rick Beckwitt

was It increase through quarter, a gradual Steve. the

Stuart Miller

seen Let's power. just pricing clearly Steve, say, you're

is entry-level definitely the little we Stream So bit level we at when move as member look up spiral through up quarter. place second focusing have on like-for-like, life that more, that been seeing entry up upward although move giving at to demand taking you you're move we and are, a the went and same to acceleration time.

we're product offering. our So balancing

increases as the part including clearly - seeing you're averaging forward. and through that go seeing as everything So the of that the is we are like-for-like we we quarters

Stephen Kim

kind of was looking That's what I for.

with controlled the you a results, in remarks pretty harvesting other your anything be, for the opening and allocation. question business the ancillary balance to to seems spend multifamily to got if sheet. future foreseeable already platforms stage. It here relates higher and that clear an of Second level just profitability Meanwhile, the a and from under-leveraged is Company moving seem capital nearing land

do cash So having going bottom all to and that very of the question flow is be going you're what line, relevant. the becoming this you're to with cash

already that debt You of coming a retired lot we the had up.

how appropriateness thinking about your And program. in be buyback, capital we an to stock of acceleration an about your stock or specifically, you buyback increase should as the plans allocation? how for curious So think I'm a

Stuart Miller

think me for we pointing a of our and focused you I operating great is you're XXXX, will because our confidence deal to indicate going in on. saying, and hope because continue platform, our we're exactly what that and happen it out, our with suggest profitability does our So that's flows thank cash and position what by hearing that through to and start land accelerate. position migration cash let

increase we've here focus seeing direction. in last We office shy we migration dividend. we've on shareholder think flow about, beginnings the our starting quarter. the that I is And point dividend of with that total we in that. made laser-focused seen cash our We and that were the returns. a recognized of weren't its about are thinking on to and the So And

say we delever under-levered. of some seen only You've tends might the debt that and our Company have we're some accelerated to that reduction which

cash witnessing myriad we about us at how generate We time, that, our are we returns. are not the same a gives apologetic ancillary higher together with but think the flow that of opportunities about businesses to

a returns over at as right cash about in that comments, it move picture stock we hope flow generate at this look is that But a of deal the I buyback is of not I we're is we we quarters, you're something off earnings confidence but my in and clearly table, now. hearing hear next forward. you're and our the great said there higher looking as to couple more As going how

Operator

with Our & next question Zelman comes Alan from Ratner Associates.

You may proceed.

Alan Ratner

results, is line everyone there. the well and on glad the really to Congrats strong doing hear on

Stuart Miller

Thank you.

Alan Ratner

your apologize, my for a comments. minute audio I cut out or Stuart, during two

this, and type per just based ramping month, X.X would starts you're I'm it year, with which of what's a you're a of can ago, So next kind of, of target COVID of apologize. to think you where level. part I X% something longer-term seeing that saw But was range and I and about threw for rate perhaps think perhaps I you like years out based growth at than if whether addressed growth given the that the shifted excess tailwinds of bit growth you of X%, you that it just efficiently stronger business a has over was may was few a you've year curious little in in that growth production some market most this I'm And higher, efficient of of some to where And well But time the I think imply business that terms felt kind your period. do on the that? a think of more the transpired curious sounds on going. of grow guidance longer you target demographic that was

Stuart Miller

Alan. actually The - focus were given returns, in question, in that Fair growth level Good. was COVID reality of we've cash the is Production market. us, as going the the market market, came witnessing have But that; it dramatically, the we as and that accelerated adjusted in into homebuilding X% paused general, flow and needs and in into was felt X% housing our orderly appropriate XXXX, and we an and the growth orderly then to range. clearly levels targets. business, rather accelerated and our growth

growth between embraced, we define are forward, and we continuing market-driven focused we've are So XX% and for going and year towards use to and growth that we is next go what to you're rate work seeing our rate on XX% indicators XXXX. as

to we're If now, right at be on probably XXXX. at you a similar target indicators look the for rate growing

to put accelerated range, and to is find aside supply-constrained. an way to find calling that X% to produce just market and produce going So to housing. have we're a the the a you'd because more to homebuilders are have way, have we industry grow the as going to is more, at pace And X% to to on affordable

weighted upside. single more probably we're this in family of housing million appetite bit that saw morning, towards need permits to follow more to that it a a part to X.X are but dwellings and in is now, you It's We're it's to starts to The right like picture, going suit, going and seems accelerating. production. surprise for level just the multifamily country. little we the So get starting

Alan Ratner

Got That's it. helpful. really

Jon Jaffe

that, our smaller really efficient more this overall simplifying an we're I'd efficiency lower keep doing product, add Jon. We're at in us on also level to view production point a as would Stuart's enabled what it also our Alan, price we product focused and it's pace. machine, comments has as to offering higher for a maximum just production operation.

Alan Ratner

I of strategy I the dovetails that there, moving on I my you're And and maintaining it you're little think there comments your this Jon, into seeing of certainly both - little follow-up the bit appreciate is, production the weeds about all on your been level. appreciate a your a on I gross extremely year, comments margin. think kind and the benefits prudent which bit has digging your consistent that difficulty] of pieces into [Technical

growth stealing years were in is rates. On the I'm lumpier your job about what's their what now? industry I you of of in think Do as other ago poised at risk to thinking of look across effectively. really XXXX, be your in while think that? the builders What we terms of repercussions example, side, business backlogs huge to saw have Do builders for as supply sites it a you there's other's of on you're as feels business potentially trades And some few labor production like we order seeing been of any and and satisfy into to a some dynamic be there's inflation, stress where to each we the off your competitors much delivered you're on get demand, anticipate chain the going from managing kind that built to a and any homes right time. result other kind step-up from roll the

Jon Jaffe

question, is offset of now, us. really importantly, state labor labor today to that good pricing so focus many, and properly able and consistently many no Choice to shortage be and be plan more forward environment, us in with is to cost partners, plan strategy, and even for manage coordinate of the ahead increases strategic are for in our But that needs, think I defined holding our us our those out predictability way the our heard as the you've with pressure. we're trade Builder think mentioned ready there really by can that they on needs and that's as trades environment a there be they our able I and and in and my the quarters comments from in years

Stuart Miller

line, through sales and add and I those strong I supply bottom a We've Let the remain that to that strategy you've continue seen us builders and hand, stayed that steady maximize it's the to growth steady a Jon flow And steady predictability. enables paces. is cash chain noise. higher rates Other our focused think to plan, steady with a to strong what say and business reflect and on and on Rick us been produced and me the engagement lot waters, think very of going a I it's from rider think have consistent. program our through have

Operator

question with Reichardt will Carl next from Our come BTIG.

line Your open. is

Carl Reichardt

get That's of sort that picture ever. think, today. nice I bigger you for first-off question the all your I had first you. for - Thanks color a January Stuart,

moves year - all to As distributed consumers the for And you so. been have might recognize think do and vaccine some and the last so, buy negative impact on be if a able if there quickly, hopefully how things, on the expenditures COVID back so would react through to or shift and that? anticipate to is housing? out to that we consumer Are for I vaccine the not the anticipating, in happens country, expenditures many you

Stuart Miller

going We'll lifestyle. be requires first that restaurants theaters No. movie hope some of - I to and vacations, a economic to normal is of and I there all, shift reversion back recovery the the think the a that do to that robust

But that's have normalcy. that negative to I think optimistic that kick-back will be I'm there a So, going a to don't impact.

of market. think it's I the to going a positive more housing impact on have

is money and going government. that I they're better for will that to - can it, low interest And rates come strong housing. a I economy Stimulus be believe I going economy so. the through think think a but prove remain are will that think and I it to stronger low. broader-based

housing homes, changed. gear the stickiness facilitated course, frankly, generation, into really will using will to And the way, family of think be And in rise kicking habits accelerating. COVID the market millennial in re-calibration some for think their how both COVID-driven that of some awkward high in that has are there current formation. the I people strength from I the then, an

hub and all your it tricks, home customs think some of some of your life. habits think the around the having of having new new lot overall, I a revolves learned and but your and So, home we've be choice, I

next about there. grounds past market make the optimistic we're housing, over to years, have housing the been pretty I'm that to where so, is Carl, going up Remember, have over And and underproducing XX the years. we

housing the for see in to market. So the I we're future, strength going think foreseeable

Carl Reichardt

Great. Thank And you then... for that, Stuart.

Stuart Miller

Sure.

Carl Reichardt

that's bit sales has slow pace sales? margin inventory raising it's talk release a curious, company-wide much, you Jon an to walk-through, FIFO it becoming and governing prices And very same to can kind rate help the more to evolved? and at little or a of about was And I'm just It to Rick, interesting if your the curious all. just match down. if try maximize working than time? kind of how of it's sales how I'm evolution the to Jon. Thanks of

Jon Jaffe

Sure. address I'd be that. happy to

markets, strategy is the not Company. divisions, sales sort of process affects this that in its process saw its creating ago, and every leading what divisions not have Reno, effectiveness, pricing presence out types but pilot throughout entire west of effectiveness different and our the in part just like FIFO of some our we early about it We maximizing two really it and new So, years and pricing rolled something one all COVID-related. a or fine-tuned of established out division in We it out efficiencies throughout do. and and actually rolled power, saw

case premeticulously for G&A that earlier the forward-looking might and and instead homes flow adjustments need any to to of creates or divisions. one available? affects So pace be match we this your as And pace to pace. that manage manage limited peaks consistency very levels And be point us power pricing to valleys. exists a and number really and incentives allows that positioned that very level carefully having to in about up by be pricing just to our it about production of That is every even maximizing having just sales to make it to in of down or be that

Operator

question Patterson with Wells Truman from Our next Fargo. comes

open. Your line is

Truman Patterson

Let - me add as a well. results nice

flow. So, a question on cash

there? owned spec option walk we that $X.X of rebuilding your parts You about parts clearly, income of should between us handful etc., some $X.X moving builder to reinvesting flow billion flow there of can the When conversion through on XXXX, And and supply, a think cash out think, of down in cash moving some net we're of continuing looking generated land, income? net all billion the possibly free only, to you year. lot bring likely in pipeline, I this how hoping

Stuart Miller

Yes.

flow he level land to in is ask count and Rick in the there cash or lower headwind the give of recognized to to controlled tricky Growth a flow. are cash But this. say that them. we to is me higher one tailwind that those. a parts percentage is weigh let migration to learned of going before that we've does, from year guidance on that some We I'm flow, So, cash can calculation a owned of at the a greater just

been ahead, parts layout specificity. not to layout, careful to move the we've But around because will So, Rick. go

Rick Beckwitt

and unknowns, going to mousetrap. and home that as that XX,XXX delivery up pace, That's significant build we that, all ramp No. execute on as level the I'm is, the doubt generator Stuart I and of would that inventory cash. owned to guess, And reducing the as a to is identified into that's cash. Stuart. gets has you to pointed we no that appropriately reinvestment continue There I of have a XX,XXX out as move in years is option. not to answer is say a

you And so in lot give of will in moving more a Diane color And there's sure, I'm call. on the this here. follow-up pieces

Jon Jaffe

But me let say this.

very that a to going be is of great cash flow As XXXX, ahead our have we we deal look confidence to strong.

$X.X under just cash billion net we in and earned This $X.X absolutely drove past You're year right. billion income flow.

is going our Some to through That XXXX. continue land is that of land migration strategy. of strategy

So its guiding are cash flow going year, the we're to through expecting specificity. not we very that have but fully we're strong

Truman Patterson

that you owned think Do Okay. And supply. years, bring can just you real eventually? quickly below three on down it

Rick Beckwitt

four, self-develop. But that if three, player is balance short possibility below to started be that because transformation markets, the you how markets can a three, into we there a really and the markets, it a at definitely that order about we're see to is some particularly going of those low get to large in get to have big we we definitely getting it. over have enthusiastic and in There a possibility. western just have had in time. I period think We're a very we've at to where you look

structures done help has very a great unique and has the get team job. some creating So Jon great done Jon us there. in through job and a to working

I would say just so And tuned. stay

Stuart Miller

is about that land delivery system, closer management focus land laser going the a and And and aspiration. I as of the around get Scott, closer to the that think just-in-time we are to system think, team to and

Truman Patterson

on question margins. Second gross

are the all if based selling and driving absorptions the it You cover focused will, market. you of on appears in than premium homes were costs, to other your cap And at margin FIFO gross pricing on kind more guidance, builders. a clearly, your

potentially that You kind normalize or move there quantify you be any we of what demand, a as selling is possibly be over bit could homes time? conditions And you and more might supply where potentially premium? of a is as between forward, balance market bit do think premium shrinks an at magnitude quantify to question, know, your way hard unfair there this a but might

Rick Beckwitt

a much it's orderly think premium think I so I that as it's is driving higher. don't an the process average

customers And we're competing the so where is. what think value market a in I understand proposition

of just I production process-driven price process higher it's sales think just are an a and sales. by that orderly driving we

kind wouldn't think premium. And so as it a of light I

process. our matter go I XX look to you foot next someone think door it's If to the of out X,XXX market our just home a and at or else's, square

Jon Jaffe

think make easier any differentiator. big to have our our a strategy, to Everything's program, our don't for customers and product it make choices, because a I much they makes Included decision that's buy And

Stuart Miller

what that And pricing. you our competitors about will I would add price our to just think what bear to market market if briefly are FIFO strategy, the we not

Operator

Our from Michael with question JPMorgan. comes Rehaut

proceed. You may

Mike Rehaut

sneaking doing hear to to news Allison to well, everyone Great for in. everyone, Allison and Bober. well. glad Congrats Thanks there. as And me congrats hear the is

pricing pace around as just just real of price upside Wanted And results. than the to Great the from delve little or would it XQ end when future can in the the year-over-year The was came a your like the and you're it if least we inflation inflationary kind the of power over know driving in down first that times, inflation. price. cost mix? Where if 'XX, of any labor year. or to expected guidance you in lumber as if pricing didn't that and question maybe you bit margins. into break gross was I success and historically, seems imply conservatism environment, you look had more you're with seen But quarter offset in XQ power strategy get the we've And to, towards during pace at better a then steady there, margins just there past. and there realization often able down an mentioned as

So kind of half a upside. And of two-parter XQ of particularly first, the the how drivers in Again, back about think then to margins 'XX? there.

Stuart Miller

Rick?

Rick Beckwitt

offsetting to the point So I the out the that through things we've the basis guess did that, XXX the margin year work margin we're gross a I throes some And by overall price One a it. would year-over-year we are raising job by with to start gross and with now over certainly great off in I'd dealing guidance dramatically. prices. there margin is, regard like increase pretty as year, huge, say And there lumber trajectory the done is for guidance. - are of the although in impacting in pointing through really increase that

driver option of controlled, tenancy is because have else to on deliveries. taking a in our versus the other increase owning someone little lower risk we share that By a the that gross have overall is the of land. increasing margin, option bit The margin

so the we've because the as drive seen much think as two past year don't And you'll in throughout I of those quite things. see

Mike Rehaut

for And - that, the you thank Rick. upside? And the on then on then XQ

Jon Jaffe

the amount think conservatism adequate power I wait an how through. as We're and is plays see we four pricing quarters. to out to there Look, of going have look

our directional and to We'll directional average how the I XXX guidance think sizable. to some give notes, - improvement, for so guidance And - detailed of year. a lot is guidance matches first the production is basis and averages our which the points the And for guidance detailed with we for have quarter Rick the cost. see as for for the tried year pricing power

Diane Bessette

with you probably construction I XXXX. and in - it QX square was square - the cost would per add foot Mike, on split equally foot. basis, an with just a foot if ASP And square decrease equal look combined It in per increase on was with per

So pretty balanced between the both of them.

Mike Rehaut

- community to and sorry, you kind at potential further which revisit closings growth was point believe that believe to higher mid-single-digit drive that also 'XX Appreciate growth and answers for count and on in of where more Stuart, talking XX% comment. above area, consensus And higher I think Street your if shift Okay. rate your of Based based that the infrastructure it. 'XX or I attention I'm volume XX%, a it can XX% to of was your just outlooks talking through production you or and what or probably turning obviously your prior around and in growth higher steady in a to you growth higher, XXXX, XX%. indeed rate solidly communities wanted improving market, this of at is similar secondly, growth this is rate. just was and that you said continued, paying pipeline is something heard had are here count into do assuming addressing looking and estimates again more 'XX. one a now I we're growth community And a could of continuing you investors. on your kind I I looking just at in most maybe and

little more on get wanted Just comment? to definition a that

Stuart Miller

you the say, saying were to everybody that. carefully. that I for want the And start fact thank by you appreciate that listen, let not Mike, things to I Well, listening listening does carefully just me

I said said I what So meant. I you're exactly said I right. and what

of daylighted If entirety expectation our through in have community you have think will the call daylighted about we an growing we the XXXX. today, what that be count

rather more We higher are that larger we smaller communities. incremental focused on productive, have volume daylighted than communities producing

and some some as have We through daylighted of productive count worked communities we less close have that out. community CalAtlantic smaller the dissipated of has our them

pace daylighted our of this over pace upward even. the have with year, quarter the our together sales and course migrating matching of production We production our over next

if data comments, XX-year that back current the projecting market to conditions, opening, with we challenge. growing up confidence kind that think that the us that tells we're you a market you my foreseeable start us forward confidence forward and growth We you spigot, about we are that market to community, meet we're demand to thinking able the of ramping market our but the for And down to down us 'XX assuming somewhat to deficit continue and are to not to be per community And rate, hiatus tells and general just unless help XXXX, productivity building production going conditions bring we're look think into do about of can't the home purchase. growth ability in tending or the style through to market the but and underlies asking are grow greater but is that conditions remained limited our going that greater the trajectory building turn supply ahead future, will can't confidence the at that help think is that Then strong. that I and about a a in project you or to similar. and a XXXX if

what heard listening. that's you intended And we right. So to me say. exactly for Thank you

Mike Rehaut

Have season. good and Stuart, talk to a much, great to so Thanks Great. everyone. holiday

Stuart Miller

in everybody. year call, guess, closing, to holidays updating end Thanks forward to happy our joining and I we'll And say Thank in Great. we look you. for future. the

Operator

conclude Thank today’s you. does Thank conference. for That participating. you

at may time. this You disconnect

Lennar (LEN) 17 Dec 202020 Q4 Earnings call transcript