Earnings call transcript Q3 2022

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Operator

Welcome to Lennar’s Third 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

only future represent the on inherently statements that to results. and Because estimates conference any assurance have date to matters occurred, are not forward-looking subject intended Lennar’s and give this these not as call uncertainties. statements Forward-looking of are risks to statements yet actual to relate

Risk Many cause on statements. SEC. obligation Annual in factors our activities results materially SEC and and Factors assumes those that forward-looking filings, could and affect future yesterday’s factors contained the These Lennar’s statements. Form with the most to results including Report may in recently Please filed note from forward-looking update or actual release described activities any no Lennar in caption include results anticipated Lennar’s press to those XX-K the under differ

Operator

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

Stuart Miller

us. morning, joining Thanks for good. Good Very everyone.

This Collins, morning, Vice participating and Controller Miami for I'm from; heard and Bessette, be remotely by and you are Beckwitt, Jon Co-Presidents President; the the who course, just our of Alex, and but on will Officer; they Financial Jaffe here our Chief Co-CEOs Q&A. also, Diane Rick in David joined our line

And modeling. the assist thinking some financial in one detailed a can. costs, strategic answer questions as overview update going As as for will will around and plan. give usual, chain, country. to markets I'm we'll quarter and our usual and usual, my please supply to Lennar to about the boundaries introductory question, on strategy, will follow-up. going macro a then, many limit we highlight one Rick as construction talk fourth give as go-forward give After rough Diane remarks, is to land And and Jon

to saying by evolving Lennar conditions. that in for third start has turned and excellent begin me our an team continues the the once let So, enhance again, positioning which result, market quarter

third basis-point XX.X%, our Throughout flow, and supply $X.XX compared last XX.X%. deliveries our continued already net as with bottom-line strong of over workforce a margin and manage to cash, strong very still to continued continued revolver to constrained or ratio our to quarter last continue replacement, billion the $X.XX of fortify improvement as XX,XXX our the earnings After flow ended quarter, senior the operation refine homes total paying and and gross over billion drawn These cash nothing margin down of and million SG&A drive debt chain we $XXX with we've a driving efficient per With balance we X.X% earnings XXX delivered we without to with for of strong XX.X% $X.X year. XX% year. of capitalization sheet. maturing cash diluted to a debt share, on bottom-line of

retirement of conditions, repurchase chose early in As quarter, debt. careful matter capital current this a we favor allocation not given to stock market of of

the continue closings conditions. we to well-prepared strong As performance, drive handle current to are we and market

is now use to economy, and mortgage doubling housing addition of the certainly and considerably reaction on months continued housing affordability. to rate the Home In been more payment market The impacted now aggressive reduction in to by but the market very constraints supply housing effect having production, rapid past is housing its and Fed’s inflation. expected, doubling curtail has response than at therefore, the the happening for-sale limited that has and finds interest of is workforce once adjusting. now to to itself, as of the slowing building forefront well-documented of tool the of too again over weaken, desired Fed's chain the and late, monthly market. in all rates inflation costs the The the

The led of very pullback simple interest very is a rate movements housing were always to and part rate having the sudden by suddenness sudden of the causing by a interest the Part the demand. monthly in is sense pullback psychology driven boat. that and pullback affordability, sticker hike, quickly, driven shock adjusted or and aggressive and the of either payment missed of has

together yesterday determination even more additional do articulated chair's more, Fed to suggests points lie Fed of funds of challenges ahead. increase XX the The with basis rate that an

There's with shelter is While monthly demand still rates intersects to housing where has still produce cooled at price pricing an levels, for a interest exists, demand affordable There current once high shortage very payment. the rise. country, formation has inventory to exposure there's overhangs inventory foreclosures limited still and continued household and especially speculators. across workforce little like to very and traditional housing

keep on still rentals purchase, are who rents buyers shelter demand Additionally, and those scarce as rentals seeking and would otherwise inflationary from higher. pressures from drive increased

still for up, bring is And to be us and assurance and is continue while the there. reconciliation, housing give term we prices demand long fundamentals strong. down prospects As term that incentives short there these medium

adjusted remains as down-payments Demand jobs as and prices as buyers reasonably strong and still well rates, drop or third qualify. we and have must sales higher would scores attractive prices said at through With downward exactly Accordingly, have used can price sales have quarter. incentives be credit market quarter, managed the off. we we as to pace and the last our find carefully adjusted just

goal pace, as an levels, have are last on that not start we pricing sales find our feel it different, our we attract XX% down matching Each will that attention a our but with pace from slightly and and pace certain pricing levels lagged our we our science, is as is art near the finding accelerate that sales future. year's management's market efforts demand. of focused in Although our have and much

we've seen minutes, country. review in what In of Rick that our a the give more will overall markets comprehensive a to more across detailed a going snapshot few give is market

laser we Along with production price costs are also bringing down on well. as bringing home sales focused down,

working to working. have together keep our the to and of are machine network with We trade work changed we that to the has recognize vast partners world all

In fact, extraordinary by hosted current this critical division work led two-day last that focused drive by to to conditions. will Gillis, chain attention costs, group and find market supply night leaders our returned convened was attack trade conference and initiative. Lennar Rick to together from Kemp purchasing partners Jon continued and a and leadership adjust on efficiencies I

have different And sized deal sales and deals land In in the properly as home market as to be current will to Accordingly, time, well. to every that pipeline new will reviewing we land conditions. land recalibrates, re-underwriting the prices. the adjust are market costs pricing will have our

is Overall, the adjustments. And we as the market and can choose all getting been changing while are of to has we trends these necessary the against the ahead it making see reality fight trends, are them. by that we

our Last simple going forward. playbook strategy we laid quarter, out

a add items. and to keep review this it and me strategy. focused Let few going simple and to We're core here

quarter, First, to I and homes, sell market said, as to to conditions, adjust going continue maintain last pricing we're volume. reasonable

discussed over shortage a have past housing have have country. strong that the -- we a We we across that the years

needed build to workforce fill even We order as much shortfall in adjust provide and that will prices housing. continue to

current declining, carefully market As we and dynamic maximize limited week-by-week past, very market the in whether margin model a or while have improving in pricing level. product to noted employ conditions is to pricing maintain we we our times to order the and many price inventory

the we to responsive. continue is be moves, that As market how will

well. work Second, we current structure cost going as conditions partners, as to to are market trade said, I've with to our our right-size

have sharpened and will land our we Third, acquisitions. attention on

are communities. We extremely being new land on selective and acquisitions new

deal every repurchasing current micromanaged our compete pipeline, maximize we being to in shareholder seek own re-underwritten market Capital and re-underwriting are We land have and as and in stock allocation as against re-reviewed value total land invested our return. dollar conditions. is must every we to

doing In our continue sync by SG&A. on we improve reducing selling and of will to focusing business with homes, cost

quarter-over-quarter leverage We where have our SG&A offset adjustments country. the efficiencies process improvement improvement over drive team to we seen to we the while market years, possible across past and management technology extraordinary and our expect through in

control. inventory tight maintain will we Next,

levels up expanded time. aware XX% This of our mostly dysfunction, are inventory cycle a is that We and year-over-year. function are growth, chain supply increase

normal, cycle in to future. shrink zero sizable flow the As our generate reduced should cash our and revert and should to growth rate is inventory our times

Our commitment create we ensure not standing sales that will pace to place. inventory will in its

bottom year-end. date could will push listed we'll on and cash so, our Next, and balance sheet. line flow questions month protect or very the by awaited be conclude to Quarterra extraordinary spin-off soon. with to we finally, our long-planned final will continue SEC Recent back-and-forth the already but enhance focus And a and by

of new to the call management a we Of to company further have the financial Stay detail course, elements introduce the comprehensive spin, to tuned. prior and team the overview company. and conference will

the verticals company, As that homebuilding a asset on books. sell previously dollars have under billions homes market the we will and of we that company value. delight of build shareholder we refine spin simple finalize to three will maximize into along with Lennar drive assets and be our public spin customers we pure-play and our a company with management continued mature Lennar's held of mandate to a management while

sheet. Quarterra, will of asset-light spin Q, will management have have as business balance before, that the -- asset and new limited stock will will final company, trade an our The under be symbol noted a

have our in future. We for the confidence as our are its for second great is and very excited about Quarterra the history, we prospects for this spin prospects

let adjusting shifting are a conclude to new while So, higher at prepared. the environment, and Lennar interest that market me by is we saying rate

have navigated here We before, and have been we adversity.

to have the and member We way. what team to do do Lennar management that knows in how aligned Every fully is a coordinated seasoned exactly and working a team it. of

succeed We to and are organizationally and conditions. in thrive positioned these technologically financially, to well extremely

that and market some to are recognize Fed parts a the be the adjustments. determined -- that threat We also how will important of to are we to to slowing. rates and this We time. those adjust inflation these we rising, legitimate to But and making curtail continues market is inflation, know changes, take know interest the economy are

market we challenges better must remainder ever that we drive into meet will to will look to the we expect we an there in we future. recognize challenges continue opportunity that Lennar regard, As carefully that to the and of and maximize XXXX, are adjust the

me let to Rick. over that, With turn

Rick Beckwitt

Thanks, Stuart.

in volatile housing mortgage to and and can continued increases reacting As Stuart's homebuyer market, rates, affordability inflation comments, market has which a impacted been overall tell all confidence. stock significant you of has the from opening

markets, prices regain some While adjust we continue in to areas, we've had challenging to our strong to and incentives momentum. increase more have sales

sentiment. sales the of product-specific of understanding detailed for homes traffic has our buyer community-by-community as been homes each accordingly. and community price strategy quickly required inventory and market trends, as price on a financing basis clearing our possible a to has Our find programs This pricing, and levels,

quarter, XX% sales by third year on year-over-year lower a new the orders count. our the During X% declined community prior from

While quarter, per and our markets. our sales executed cancellation rate the community sales we and as sequentially our sales month picked increased pace during successfully up more strategy each more in pricing and incentives orders

put respectively incentives in some June, and achieve X.X lowered many communities. To on X.X, sales was per August we quarter. for community color Difficulty] pace new price this, the July and To our in order our sales this, sales and base X.X, [Technical increased

basis, a August sales new Based new and declined June adjustments, order community. quarter sales strategy combined produced in during XX%, up varied and slightly historical average. company-wide order the pricing by second from our to year. which offset our enough our but cancellations sales cancellation price significantly is to sequentially incentives on X% in from company-wide these increased net X% rate On market X% quarter was quarter was the the from gross as above This new X.X% third prior

gives sheet where We focus, market machine guidance continued successfully It has sales, our September. generate sales starts cash we going. maintain our fourth balance keep work reflects new fundamentally orders to believe this strategy the strategy price in and can in pricing quarter. us that in flow our Our confidence for homebuilding to first

where pricing now three have have perform adjustments I'd regain and we the additional markets regained market markets categories: markets have update to well; the sales an that found into They pricing that and absorption like to country. three, price really our one, targeted across to adjusted fall on our markets base. continued momentum; may require and give successfully you incentives, two, some

and Florida, third continue San Southwest Palm markets September, are inventory are local Maryland, Virginia, the in perform markets Indianapolis had These and and many Jersey, strong benefiting to growth in-migration. so economy, X are have Atlantic, During far we extremely from employment well. from Florida, a New These and that low benefiting Southeast quarter Diego. Charlotte,

buydown mortgage to and maintain programs strong, continued to sales had have have markets these While we be normalized offer incentives momentum. to

these basis. price in on markets targeted limited a communities Some have required adjustments

San include where regain Houston, these we reflect markets’ Nashville, These Chicago Colorado, Carolinas, two Coastal sales Atlanta, markets, pickup to Empire, Orlando more Antonio, are we Phoenix, Tucson, Raleigh, of the Portland. Vegas, slowed, Coastal significant a and adjustments and markets. California, which Central category Tampa, Carolinas, momentum, Inland Each in have and cancellations. Coastal made Seattle saw Sacramento, Jacksonville, Our markets Valley, Dallas, Bay traffic Las Area, and XX has

is each regain While we've inventory incentives increased more had base aggressive sales limited markets, financing these price in and/or momentum. to programs, of offer to reductions

avoid has in avoid proactive very a to often each each allowed and pricing community has with and pricing adjusted believe we on finished in specific not inventory. us cases, homes are varied This In basis to Size has week our and of being We cancellations, homes -- on have been community-by-community the our each building limited some sell week. reactive. to backlog. adjustments homes we

are share. outselling the our are We competition increasing and market

Category reflect significant include market Boise Utah. Austin, X softening Reno, and markets, and more correction, X Pensacola, These area, the Metro which Philly Minnesota, are markets.

the varied has work has to price many of cases required on traffic buy. new incentives It a fear be not an are us to to these buyers backlog elevated markets, somewhat, is the aggressive This many also cancellations. markets cancellations. While a purchase dynamics we decision, is pricing sales time are to focused that led of make to and level base sales sales that time significantly, more cancellations. mix to in these slowed required with buydowns. to prevent have generates now which are offset establishing taking significant prices individual and need of has gross that and hit In adjustments, bottom, mortgage convinced There drivers has

to solid community-by-community we'll make these There's in I'm each quarter. these market specifics community. the inventory, we in We're of margins limited track to should progress a progress still not fourth confident able some basis. solution. to fine-tuned adjustments the to made and gross markets have be shortly. make a Everything get of we've to needs that the on markets we one-size-fits-all While need these in markets, on be completed unsold so fortunate and

to I are making decisions hope Markets keep a markets and you across every sales country of activity going. gives we're better adjustments our very the our remain picture strategic this and what fluid, we and doing day. proactive

a team market We address to future management are quickly. changes as committed any

our As market. balance our to we've to said in and starts the homes past, we're sheet going pace our keep is our homebuilding machine This focus. going, maintain price

during I over rapidly successfully to work partners strategies. our all Before endless associates like and dedication it thank their turn trade to hard our of I'd to these times execute and for operating changing Jon,

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

Jon Jaffe

Rick. Thanks,

additional a of on and thoughts discuss laying will morning, start the status update just I This through. our give land inventory supply management that few Rick by you I'd sales walked out the to on detail like our and strategy, focus, chain. an the

was daily about of process community. values to clearing the quarter prices find individual adjusting this in all home market each discussed, As

homes, X.X and be noted, for comes sales As and gap weeks other discovery, is proposition adjustments, the through as sales adjustments and further once by often value must discovered. make starts pricing takes pricing value This from is market starts new words, is market the found our that were be respectively. and ongoing. pace time pace to homes value process necessary the several a proposition that it quarter consumer. the experiences to a Finding and takes perceived In between the pace X.X

adjustments, for August. broader of our decision-making, through prices pace pricing finding sales communities, improved went clearing in of entire informed our to month the this our across process the enabled which platform leading we As

even as As to starts us community the Stuart noted, tool allowing us by building pace excess our and them our by pricing gives help pace moves model associated This our understand operators without sales use visibility inventory the plan, pricing dynamic of construction up through and to timing process. maintain inventory. it into

homes homes the or completed community. just Our inventory quarter XXX over X.X was position end unsold per at the of

want to Next, in third quarter. focus our I discuss land the

on focused our in of our forward those expected, only underwriting. attention a Based we underwriting. we our starts in on in land confident with move intense As every the where updating reassessing deals XXXX with financial we were lot and on along deal review, pipeline also updated

deals existing either All Most of projected timing we or we proceed. on quickly land and on relationships takedowns. came underwriting, still did the with are restructured was deals not from These delayed, structured the margins. land be takedowns in we the had other healthy updated closed starting strong the our would deals quarter where based quarterly its homes

on percentage third end quarter, focus up controlled our by land-light increasing of XX% site last strategy to our from year. intensified Our the home evidenced at the XX% was

sites in We end the quarter, reduced and of sequentially, years quarter XX% also reduced XX,XXX, from X.X the the of third And purchased sites we further home number the at home last and to the of about to year. down respectively. years year-over-year XX% owned third X.X down years

extreme Lennar's on Stuart significant a discussed. model deal-by-deal the focus sheet, the review of lighter to improvement drove disciplined and Our adherence as land balance in strength our

Now, the supply to state I'd chain. current turn like the of to

material presenting with favorable still continued time shortages. ongoing cycle while results quarter third from some Our dealing certain disruptions

it Although from cycle in a QX that it's minor, in was significant we time still QX. reduction achieved three-day

material third delivery our third related quarter such second equipment XX% cycle to as multimeter Additionally, the time The was over the the quarter. pad-mounted switchgear, to markets in boxes in electrical disruption the transformers. primary quarter of experienced compared of XX% reductions and in

moves levels half stages high volume the industry-wide as various deliveries of for construction. Construction labor remains of very through tight second

of This in some with easing easing in trades to first construction level finished We first occur the starts. quarter expect fourth should industry front-end as in overall labor seeing reduces quarter with start the the and the to start trades.

our expected, spiked that lumber as increased third in from QX increases As quarter closings. flowed in quarter cost our third through

also increases total and labor cost a direct other costs X% saw in XX% QX We in resulting sequentially year-over-year, in construction material increase of closings, and respectively. and

reminder, earlier through the a benefited prices and the our cost XXXX. of in As saw of half materially the lumber the quarter will starts year flow first in in deliveries in the third we drop

I'll And you. to it Thank over now turn Diane.

Diane Bessette

good Thank and you, morning, Jon, everyone.

a our provided great and regarding So Jon Stuart, have deal performance. color of Rick homebuilding

So a segments of balance business guidance. and our on minutes therefore, other few going and sheet I'm the QX turn results our spend to then to

So, Financial starting Services. with

quarter, For of our third the recording million, of the accrual. litigation team Financial $XX operating earnings Services produced a excluding onetime

million And $XX $XX the year. mortgage the details, our at then million in earnings was compared looking operating to prior

indicated market purchase we've the extraordinarily mortgage As be for to continues business. several quarters, competitive for

secondary a This offset earnings commitments. was by lock have result, decrease rate been As margins decreasing. in increase in interest partially an

million $XX of Total were the transaction. revenue result million to operating an earnings year. $XX volumes higher prior increased earnings in primarily per compared and a as in Final increase

to Our customers. each Financial quarter every to to and the Services homebuilder team assist our service to our divisions occasion properly rise continues

to turning Lennar Other segment. the then And

investments, million. quarter, third mark-to-market Other result the noncash technology primarily our of our the of Lennar was This publicly For traded operating $XXX loss which segment totaled loss on $XX had million. an loss a

fluctuate required to valuation market our As from we to we have technology investments before, that many will and are of that traded, publicly mentioned quarter-to-quarter. mark are

both, customers' our significant technology platform partnerships operational Financial efficiencies and homebuilding experience. provide improve our However, and greatly these for we believe Services

cash sheet. on looking at our and pricing by on us we The preserving $X.X provided This us balance balance liquidity. we and as our sheet quarter billion no end quickly, this we ended that total monitoring then of $X.X quarter, $X.X credit homebuilding carefully on of you've with space reviewing the borrowings on purchases. by potential managing as stock heard heard is our billion and market, you generating result, cash And of revolving say, laser-focused land a billion all our focused of to focused We cash facility. were mention

for lighter. becoming prior of translates X.X progress home from XX% land owned During control, and an XXX,XXX we XXX,XXX quarter of a into X.X an sites year. home from total This sites improvement the sites the in we quarter, home of home years continued XX% the sites sites. home and in XXX,XXX years improvement our At prior controlled owned, end, year

portfolio important, market grow home though, our of provides believe share. a position strong this Most with sites to to us competitive we continue

maturities sheet were of $XXX in continue million we that this XXXX. due in and November we our balance as senior year, delever have we Additionally, to of additional repaid fiscal notes no

repaid of capital improvement debt an an strong savings we senior last A at paydown the brought $X.X notes to senior XX% generation end, to the ratio our ever, million. $XXX interest year. almost continued lowest from with which In several continued of and notes associated billion homebuilding of total down annual XX.X% years, in is of prior earnings quarter our have

Our stockholders' billion. increased to equity $XX

Our per book increased share $XX. value almost to

on return was inventory Our and equity XX%. was on return XX.X%, our

Finally, received upgrade an we from the Moody's quarter. during

investment-grade rating our increased Moody's to three rating an continue credit BaaX agencies. to very in all Our greatly BaaX. confidence have be appreciate from was company to We from pleased and

In summary, leverage confidence strength liquidity and provide this uncertain sheet, flexibility our balance financial us low significant to navigate market. and with strong of the

With I'd to that guidance. brief turn to like overview,

in historically Stuart market it As the to given targeted conditions. uncertainty we have difficult that continues the be provide provided, guidance mentioned, to

providing So, components. boundaries are give for each we as did quarter, last of broad some very we ranges the to

new with let's So, start orders.

QX. new to QX We anticipate to XX,XXX, from orders of to of be XX,XXX QX be increase our expect our count we and We in XX,XXX deliveries the about to X% the range will homes. expect QX in community range ending XX,XXX

sales average $XXX,XXX. in of the should to Our $XXX,XXX price range be

to price range Our and in turn is X.X% and the gross generate we and X.X% XX% between cash. continue of as inventory to market, our our margin XX%, to SG&A

approximately combined million. joint including and non-controlling loss other $XX interest, land of expect a categories, the venture, sale homebuilding For we

business to in anticipate for of $XX QX We continues competition to Financial increase. as million earnings for be purchased million range Services will our the $XX market

Lennar a for for the of Other million. our of expect We million we about $XX loss to expect multifamily category, business. $XX $XX And million earnings

since at not any our that of potential our does adjustments adjustment guidance to investments technology end mark-to-market by determined their prices This be the will stock include quarter.

of We be G&A total expect and be home on based delivery. X.X% $X,XXX to will revenue, our foundation charitable about per our QX contribution corporate

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

put this you quarter. guidance the this when produce all approximately together, EPS for so, should an $X.XX share $X.XX of And fourth to range per

And with over turn me that, let it operator. the to

Operator

[Operator Thank go with Patterson you. Instructions] you Truman ahead, sir. Research, may Wolfe

Truman Patterson

morning, everyone. questions. Thanks Hey. for taking my Good

So, the you think have all the you been good intended and the really volumes, down pretty is environment. open result to about that drive orders the fact XX% to a level throttle incentive I current in

hoping So cetera? function was there can your they Was a the looked X% there? overwhelming base cuts, fell understand All of et how some or four XX% ASP of lower. shift just regions majority, mix decline like much it us order product I'm price in ticked that help sequentially. incentives, you was

Stuart Miller

in locations. ahead. take I'm of to Why play cop don't here remote we a role are Rick traffic Go that? going because let I

So Rick. go ahead,

Rick Beckwitt

as mentioned a about I priced the that there was was So quarter. X.X% in incentive in my commentary,

was change during mix the closed amount with slight of that as a Some price quarter. more a entry-level base homes of we significant a adjustment

Truman Patterson

Okay. Perfect.

deal every pipeline, shift you're partners improve been underwriting couple land the increased now All past pretty standards. working captures portfolio. It's over reassessed the And base in And and of So, you Thanks your both, have all that of to incentive that option your right. level a price X.X% your for you with the and increase that. rapid cuts. years. XX% you mentioned

you you pace? us you've discuss quantify the understand what be help with to been help walking the might I option or of work quarter. Could an any to deals away able you willingness Could you if risk? just at partners all? list actually might lot noticed chance the your portion us on accelerated And from deals of declined controlled be your in watch at

Stuart Miller

process broad got is on about. that. There of So, buckets couple a me let to -- give a are there thought think you

that home even we into margin been to shorter-term attractive market working working have that in we and current continue the generating that valuable production of own home assets deals putting sites that on an -- through those in, Some be we're conditions. sites we're

will In re-underwriting That's those of communities. have on but we onetime, an the pipeline, the of one in conditions. given basis, -- movements build land not a to generate going margin. every through are still We on through generally and work just in back deals our is pretty shorter-term and continue will attractive deal regular we they that doing the benefits market

meet program the the past so, attractive land under benefit cost. to away on longer deals the is going no couple longer we go our underwriting of from to will we We're not ability have an And years. And have over is criteria. your and underwriting forward just that bear, to land that way have criteria we comes the that no walk the given the at answer migrated that we've contract meet question where we walk programs that that or that the to away

the those back we'll past don't, underwriting meet that there don't, So, the of stringent fall over that this criteria that and day. walked another and filter, quarter, we've deals away and come and are deals out

in just something over this it, home from away Is that XX,XXX sites quarter. of past walked the probably we've So, nature Diane?

Diane Bessette

Yes.

Stuart Miller

want weigh in Rick, to do And Yes. on Jon, that? you

Jon Jaffe

alternative extremely would that relationships combined timing, I adjust are that a land strong to just starts to question, partners. And pace. the asset. with, turning just we acceptable quickly doesn't into the the is very we're if us appropriate that very for are solution constant work to just add either Stuart of we acquiring we have And And described, analysis to relative to restructure, refresh them with with as margins. finding very lot change with a fit current so able your it keeps that land criteria,

Operator

go Susan Maklari may from ahead. Sachs, Goldman you

Susan Maklari

position in you some past is, My talked your about today the the that to generate you're areas the do over eventual talk we ground, you focused about the question on of And as see and mean the on to first lot where investing think really about we business order recovery, things business changes you to changing generation. ability market think to time? overall can that in, for the Lennar What going cash moderating, as relative cash Stuart, the that and a cycle? will for in

Stuart Miller

the will if question. Lennar, mud those positions has through to we conditions. land And at current to continue short-term gotten in basically stuck look land Historically, from the us assets longer-term as the really asset market composition slow. the many over Great as of have assets, builders, we've that you our produce of migrated we market converted have because the away those turn

assets those are condition. land assets so current market we'll given with And and repriced, the that replace --

So going specifically more are structural in downtime. There homebuilders that's industry things that in very to a generative. cash broadly against I in of is number Lennar be think change that a work the and

long-term them that's of land, One mitigated. been and is

The the say homebuilding land you're cash and one second the users company, growth. a bricks ground growing is to is buying big growth sticks We're and putting the of accommodate thing more when I'd component. in constantly

As you migrate in or cash a to generative. that itself a slower growth is growth level zero level,

we've cash land use cash derived That about a buildup both is from time has added very and flow supply the cycle relative times. then the XX% environment, with. the more So no-growth normalized chain position impairment to now, one positive, migration dealing that component been inventory short-term to anomalous is plus that

to added find months that we've going an industry noted months cycle our is two way of we've to average. that's resolution. its And before, time. As to X-month ultimately think about I kind And X generally

should will a a couple at of take of back this production. that normalized place place generating go our see a years, the normalization, it forward. winds back next but tailwinds, take terms in generate be And should of as might also we in have reversion cash we cash as We might over time cycle kind year, to

Susan Maklari

consumer to narrow the to into kind exist helpful focus key up, a then some following Okay. and a rise side sort to of you is able rates talk buyers That's obviously macro ability tensions house? color. affordability and operations very changes. and of time the what relative benefits of the cost that of on And needs the home Can the you're those get between underlying your drive that band the how as first to

Stuart Miller

to and speak Jon going I'm Rick listen, this. to have both Well,

a the light as three general what that partners of our recognizing and reconcile Let lines, home. me doing got our those to our the just partnership costs trade had the say came groups overview partners. field really with trade we've as our straight the of our among And partnership land partners. and and us left in affordability enable a the trade all to price as session the to as we partners to goes operating well along conversation two-day exists just that sales a market in find about is way That to to

with. more have interest that be dealing think be a everybody that It's there's to to going to interest in industry, that there's go the clear as recognizes that to increase be up. I going reconciliation across we're going cost rates rates

So, to the together that machine we've make Jon? Rick, structure got band cost to affordability. work, means that a and enables

Rick Beckwitt

executed you you on Stuart. of what a sales us impact, It's exactly during that the saw we It's and quarter. combination that having Yes. and said, margin the reducing prices

to our as partners time to cycle, a trade side. there of with made sharing. the up the and lot to needs both during and it's side cost work restructure Everyone discussed a partners We've on material money labor that the be

side adjustments through to the the addition, land in as some Stuart in land there's walked pricing. be And business, going of

to three sales the collective to that So, in of we strategy it's do keep the execute order momentum those the of going. all will

Jon Jaffe

where has value well engineering very we significant certain markets. as -- the carefully we thing during at the offering I customer match and highlighted, reality see more -- do into that some add only have introduce The to smaller, is look affordability Rick that right as we're would this efficient to time, can also find product to we perspective as product price is our our

price to curve we So move continue the where payment with mortgage intersects affordability meet prices. the and down home the place consumer and for

Stuart Miller

is the that the guess, I And line, situation. Yes. execution bottom is a alignment. of dynamic this part

land we've me, hear partners that partners has to to our that well Rick the and alignment You Lennar trade organization, work with Jon, at to done, got and as and conveyed be everybody is work. and to the

Operator

you ISI, may sir. Evercore with ahead, Kim Stephen go

Stephen Kim

then, just up about first your about me wrong. inventory, we're calculating And freeing I'm XX,XXX. from some perspective, a housekeeping Just cash. if from maybe you question Correct talked starts, probably

suppose times, times your that eventually a about was said growth. was moderating guess, you that cycle of XX%, the bricks I I inventory. and think I comment cycle sticks

ballpark? inventory, negative the is that I'm also billion thinking starts, I XX,XXX of thinking that bottom current line the your you're cash on the about cycle that's right then and time is Am inventory? burdening So, impact. $X.X that that the the that in saying in that's number So

Stuart Miller

dollars you kind is finger cycle tied that asked is. I it in but of to to has Steve. question of because what neighborhood. And been will tried out put up Diane that it, the the time So, that are tell amount haven't a way, we the significant figure increase. our It's that number that is on happy specificity able of you

Stephen Kim

Yes.

Diane Bessette

And are pretty this had good close, about Steve, starts quarter, you math. XX,XXX we so

Stephen Kim

you growth, And your But had assume further you that neighborhood comment you. of mentioned could the kind inventory in more I land to on then that Got stuff. is addition of that shrink $X.X billion also and to slower sort temporary. see number, that side growth due

I'm opportunity the term [Ph] on So, term, I'm wrong near longer that if thinking probably that. really on the the me So WIP. is correct --

ask wanted standing as comment I But to about inventory well. your

hit that finished you to on all completed right community that's pandemic X about You where -- now. per and specs I about typically X -- that or to more calculate times a Jon, X think, X times mentioned you way basis. XXX before the have that said, I than The finished

preferring what is they or seeing you? this fairly we've that Is you're quickly. for is wondering, the so, I'm true homes you? a into if more so, like that move actually this if new can XXX that desired And hearing that is been level normal preferring why folks new actually customers And for

there's about to and managing to in completion, change thinking number looking that wanted Just why near of if be your they customer reduce light in understand any preferences. might you specs as get

Stuart Miller

observation. good another it's So,

run half will bit than we little You're that level. to right, less you're basically we're inventory even our beyond a do per grow And our that. been about pre-pandemic. home absolutely And around more community. one go right. we We a We normalized of inventory might what envision has normal

in to point inventory that inventory the -- understand, want to low build we we people want the is production the not don't of everyone to level we're in up. And ground allowing raising and understand just we putting

and on is We disciplined making approach we're pricing sales have that every we're a sure our to it about, clearing day. all inventory. model what That's dynamic and

same to movement. instant But benefit having for an some your that is inventory a customers at standing the time, looking point

the add will Jon, to we that pandemic. It that? have more right bit level, you is have We in Rick, done now. grow but want a it have be on to able the to haven't will during way. we ground And -- inventory been little very-disciplined a practice best do than to to we'll

Jon Jaffe

themselves. I our in assessment numbers what is create a if especially operating strategy rate think is, today They buy exactly really for move-in. you for that quick covered And consumer can their of your the Stuart. changing environment right a and interest in and certainty desirability Stephen, the they rate lock

advantage. definitely that So, an is

to dynamic in Stuart as time. make homes sure are sold But we're pricing highlighted, very-focused, using our

will about we're fluctuate will focus. So, but our per that that time construction more range fall as deliver in one normalized they of come a time off them that's It to community from week. assembly the able customer. And time, in to to line, our

Rick Beckwitt

that, I sell Easiest extent pricing the to cash one, stage the we're Whether on that well, is cycle that The maximize and stage. very it going generation. to from focused as Stuart we've Steve, a as inventory, only production add have continued I'd a are the refine thing cash we're as But because standing to got to sale through going homes home of we've said inventory in we half that is mentioned to to generate to completed that. sell his the progresses to and it's comments home. or replace moving the strategy cash our quickly

Stuart Miller

go fight And there's earlier would a then, concept, temporary an comment, that yes, rate add a take. back we and one. to -- permanent Steve, an to to zero not just is condition, overshadowing or a don't to be overhang your want to But growth

in case. grow clearly and that's not the the strong are the going market to is and prospects comments, we're back noted us and my when So, I to, long-term tape good. for housing to as not try But the comes telling as

lean As the able very be position that well very with happens. conditions market to we'll turns into market a positioned to strong be cash as around, improving

Operator

Ratner Alan Zelman go is caller ahead, next from Associates. & Our Please sir.

Alan Ratner

you fund we're past And in primary business, in countercyclical more leaning a of in on just which heavily I'm if talked potential for in what is with perhaps kind maybe BFR that build a Stuart, being climate. slowdown with current first, is of and the among seeing curious rent you're appetite that obviously, guess, current I your could there, about directed the your talk the you. investors? to We've event whether today. bit the those demand, to investors a what and the current the clearly space relationship vehicle

Stuart Miller

and say the of part part SFR a by dominated to Rick I've participants. has more Great. the always and that going ask is going to market. meaningful continue I'm a the learned to in years the to grow first I'm jump be housing that of mom-and-pop for after. comment give a over I rent going been that to do single-family market believe

professionalized, the institutional come it as significant it's up, moderated. prices rates of and and part have But buyers back down more has are Now, have market that of interest pulled market. been as a has the part gone

very So, SFR of in question more and and become push it overall. business our sales part part will small still is the significant the have prices production of no a our And as that of a program recovery. I moderate,

and numbers in fill to want the you of thoughts some do there? Rick, So

Rick Beckwitt

of rates rents they'll SFR but players continuing as result, Yes. floating yields their in order they're -- that maintain. Stuart, use looking some a the underwrite are has that for. And as leverage in investment you get risen, get several to ultimately finance have Accordingly, to of down, they'll deals. mentioned, slowed their the and embedded as that's space

because that XXX as renting and our in it number. quarter. sales aren't a had in than bit in probably additional our sold X,XXX, a about about the the space were program investing the we that during was quarter. and are in to rental us For itself X,XXX that company, folks other was little It's underestimated communities But captured that SFR single-family we there some homes last more

Stuart Miller

say kind approach to ramping your the the are to and the we is add question, that program And up reality Quarterra our to that stepping a that program. fact of is percentage and just has market of and for me of very-disciplined our the what embedded reconcile Let SFR in I taken the part back -- waiting think, question itself.

selling So, own and might programs of our SFR contrary to outside more what to Lennar. have less to program probably other we're you thought,

Alan Ratner

helpful. guess, thank described. really kind of there. for you No, that's on you the disclosure very second I question just helpful. the cadence It's Okay. that And monthly

it's I that of think, the increase month too temporarily, August, given kind we pull price the X% in strongest in rates with saw the back see that not combined fact surprising to of reductions, obviously mortgage be quarter. incentives/base the

I'm of August. a kind similar the surprised I a think or of mentioned trajectory, of mortgage continued September I following mortgage since was reemergence end guess, increase given you the in rates that the which, little rates

price that seeing to move on of combat rates, rates? momentum incentives are that still or of increased kind higher even further we've more you continue reductions you the in or gotten have spite in seen So aggressive

Rick Beckwitt

Let me clarify something.

X% mix about QX, a probably that reduction base balance top So oriented with was our incentives the to point. for on lower the price of being were incentive X.X%. There about price was somewhat

been from we third From in slightly ticked were consistent into actually incentive just August. and [indiscernible], the slight we have in standpoint, we're move pricing -- As we fairly quarter with where up in a standpoint. an -- the

it sales net be than higher might mix. in That up was actual price is August. Our

on where were we of the rate, right quarter. we're from for cancellation And a top

with very -- are from consistent were and we're a August. So, pace we standpoint, we in where sales

haven't So, dramatic changes. seen any we

strategy. we I think what really this sales execution demonstrating fine-tuned is is our really

Alan Ratner

great hear. That's Got it. to

Stuart Miller

primary market, market, the the finding affordability. demand find demand are the but we are we and finding market as And there, primarily We needs the there's with buyers. out

what's So, happening. that's basically

Alan Ratner

as more It have could point, in as be aggressive side. been like sneak a pricing have on your Stuart, I sounds if competitors of bit that one reluctant you more. To many to the

out try builders doing the builders curious doing, are if in guys in more trying I'm or hold and there, other you to larger of margin clear strategies or the really possible as others find force and to to terms there right guys trying builders are presumably match kind on some you're doing? are as of a seeing divergence of of to So you now market one to long two as respond what late is

Stuart Miller

along going that than different There a that others that's reacting adds mixed bag. a builders a little the strategies. market builders. are have place. There some with of are it's of And of lot the Look, in differently the condition. that program we some The are that smaller have just -- builders are the larger to choppiness

what the the We and happening. saying keeps off making of and market are because buildups necessary. pricing to in exactly plays our you doing. see We cliff emphasize and the competitive they're know the price, wait hold tell the judgments to are dynamic we we market. of by market, can field, is competitors ultimately, what where inventory the out that migration falling and that's I that exactly see reconciliation. sell That's model happening divisions each into Each why to these what's us our tuned each All

that market what an This the it exists said really reacting well. competitive it. a science. is game knowing to Rick playing not art, each field are think I And we and is the in by

Operator

UBS, ahead, John go sir. you Lovallo may with

John Lovallo

my questions, taking for guys. you Thank

is, XQ points base XQ? And How how of much you much operating leverage? the XXX us other about How is basis sort reductions? offset of It's is is just on gross from typical price incentives, midpoint. at first an margin to one much walk in The seasonal the the can rising costs? help sequential

Stuart Miller

that? you don't take why Rick,

Rick Beckwitt

Yes.

price that mix. XX%, say putting half was probably and So, base incentives. cost probably cost would aside, sales was XX% it balance and some I of the of was Jon? reductions, it

Jon Jaffe

right. I think that's

that. coming the and quarter be the second cost peak will we've end at quarter. prior lumber work as first calls, that And into the quarter As on our down about of half the through the construction very fourth fourth the highest and talked will start

you pace. clearly, adjust to we're to driver biggest keep said, our And So, doing to makes what sense market Rick. the sales that what is

Stuart Miller

Yes.

me Let incentives as cancellation. that to as to our add well to and customers just have into to managing adjust, sometimes in yesterday's recognizing sales want that backlog. we're and base turn price also pricing backlog, to We go our also prices that don't and we a say management, as addition back

some there's administration that well. as And of so,

quarter the It's a as walk from And margins. lot what sales to new third just parts are. quarter not of so, as in linear the fourth moving

John Lovallo

guys. And switching Okay. Quarterra. gears Thank then, That's maybe you. helpful, to

management third-party were for quarter. that think, commitments has asset to I capital And strategies? the land committed equity has business, how Third-party to? grown much $X last What the billion been

Stuart Miller

really I so those table. on bit something we're We're disclose do as comprehensive this restricted pieces to getting ready at can't out, more numbers a those to put as haven't can point. known numbers let And we're really those of and put We conference the to a what together all public. and actually to numbers going be we putting go call

tuned. stay So, I again, say it

Operator

Mike from Morgan, Rehaut you go JP may ahead. sir,

Mike Rehaut

ended first you not at for think guidance August around you the giving fourth and this reason totally And about for we incentive the Just get sense point at 'XX. look X.X% I think appreciate quarter. quarter quarter, for average and a or gross directionally the you're obviously, fiscal at wanted But, maybe the good least margins a past to we for as two, as X%.

margins additional XXX again, about good point -- hard a to working there constant? another costs, gross is bps know held bps talking starting that about But that quarter first doing you're think currently I what we So, well. on you're you're understandably variables also if other just between costs the and holding things held key and kind 'XX difference of XXX as and

Stuart Miller

are for that We best to given So I modeling. this the the many the think there Mike, give we fourth decidedly boundaries because the help for is some not can we guidance is answer recognize so have way moving me to say quarter best parts. to do

as complicated it we even more go out the first to that quarter. -- gets I think there

going there's a simply we're moving into So, around. wade lot those not because to waters

a to of listened sat out on yesterday week just Powell living his helps and we forward, recognize we're that week. quarter. As of environment we're focused quarter by by that us month, change And a that's in thinking to for month things way Chair lot kind dynamic lay the going it by

team look management to the and revealing together market coordinate, marketplace, is at patterns find other and day to the are that alignment different. gets to Our in each themselves real-time every

So, first really right we're I guess, to long-winded and in that's a big quarter on excuse, but not going numbers weigh our now.

Mike Rehaut

the risk how at be to 'XX? answer, sequential to might looking should similarly, of community Obviously, but end another in guess, I this that. some growth directionally, think we appreciate to about I hard you're year, XQ. XQ count question Okay. that asking with

year? about any such is delays the moderation Given sense if so, how can and sales But obviously, the growth impact should degree openings. pace, in of magnitude? rate we think of of next And

Stuart Miller

going to amount considerable in I'm Rick thought. a because this is this of that topic. to given We've a question. turn his favorite on Great second

to Rick, which to on reconciliation count into that. for now, enable we in think can't comparable there's thinking you going could to that But it that? land pricing, that some find have about are right I But going growth next we're to us we will year. wait community market will add be rightsize prove opportunities current see and to conditions. but

Rick Beckwitt

appropriate count it's and at they whether the the is development -- development has communities, get whether existing your it's timing, impacted third-party or sales pace and your tricky community it Well, internal so because by developers time. communities done

our may it to that opportunities as sites right good we some but said, underwriting probably walk for an low believe happens away as read a today, what look in we add increase. home standpoint our will XXXX, skewed market land here deals by may from be that will tough looks could single-digit, finished community. builders because up. Sitting slightly But Stuart other a us low-cost community increase to of in from And have structure, it's because find that now, the single-digit count

Stuart Miller

up thank that's this -- everyone there These Thank tricky right. it a I to want We'll for management been joining is before. you, Mike. are All there. been seasoned team times, but here wrap us.

have a We plan, game strategy.

you, going quarter. and You the back that end can look certainty we're Thank we everyone. forward get to that adhering fourth of to to strategy with be as to expect reporting the

Operator

call. Thank you. conference today's This concludes

may ahead disconnect and time. go You this at

Lennar (LEN) 22 Sep 222022 Q3 Earnings call transcript