Lennar Reports Second Quarter 2022 Results

2022 Second Quarter Highlights - comparisons to the prior year quarter

• Net earnings per diluted share increased 69% to $4.49
• Increased 59% to $4.69, excluding mark-to-market losses on technology investments in both years and the gain on the sale of the Company's residential solar business in the prior year
• Net earnings increased 59% to $1.3 billion
• Increased 49% to $1.4 billion, excluding mark-to-market losses on technology investments in both years and the gain on the sale of the Company's residential solar business in the prior year
• Deliveries increased 14% to 16,549 homes
• New orders increased 4% to 17,792 homes; new orders dollar value increased 20% to $9.1 billion
• Backlog increased 16% to 28,624 homes; backlog dollar value increased 33% to $14.7 billion
• Total revenues increased 30% to $8.4 billion
• Homebuilding operating earnings increased to $1.9 billion, compared to operating earnings of $1.1 billion
• Gross margin on home sales improved 340 basis points ("bps") to 29.5%
• S,G&A expenses as a % of revenues from home sales improved 150 bps to 6.1%
• Net margin on home sales improved 490 bps to 23.4%
• Financial Services operating earnings of $103.9 million, compared to operating earnings of $121.3 million
• Multifamily operating earnings of $0.7 million, compared to operating earnings of $22.4 million
• Lennar Other operating loss of $108.4 million, compared to operating loss of $54.1 million
• Homebuilding cash and cash equivalents of $1.3 billion
• Controlled homesites increased to 62%, compared to 50%
• No borrowings under the Company's $2.575 billion revolving credit facility
• Homebuilding debt to total capital improved to 17.7%, compared to 23.1%
• Repurchased 4.1 million shares of Lennar common stock for $320.6 million

MIAMI, June 21, 2022 /PRNewswire/ -- Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's leading homebuilders, today reported results for its second quarter ended May 31, 2022. Second quarter net earnings attributable to Lennar in 2022 were $1.3 billion, or $4.49 per diluted share, compared to second quarter net earnings attributable to Lennar in 2021 of $831.4 million, or $2.65 per diluted share. Excluding mark-to-market losses on technology investments in both years and a gain on the sale of the Company's residential solar business in the prior year, second quarter net earnings attributable to Lennar in 2022 were $1.4 billion, or $4.69 per diluted share, compared to second quarter net earnings attributable to Lennar in 2021 of $923.6 million, or $2.95 per diluted share.

Stuart Miller, Executive Chairman of Lennar, said, "At this complicated moment in the market, we are pleased to report second quarter earnings of $1.3 billion, or $4.49 per diluted share, compared to $831.4 million, or $2.65 per diluted share for the second quarter last year. While our new orders grew 4% compared to last year's second quarter, we achieved a homebuilding gross margin of 29.5% and homebuilding S,G&A of 6.1%, leading to a 23.4% net margin, even as materials costs and wages have increased. Our home deliveries were 16,549 and above the high end of our guidance given at the beginning of the quarter." 

"While our second quarter results demonstrate strength and excellent performance throughout the quarter, the weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider. We began to see these effects after quarter end."  

"The Fed's stated determination to curtail inflation through interest rate increases and quantitative tightening have begun to have the desired effect of slowing sales in some markets and stalling price increases across the country. While we believe that there remains a significant shortage of dwellings, and especially workforce housing, in the United States, the relationship between price and interest rates is going through a rebalance."  

"Accordingly, we are laser focused on traffic, affordability, the quality of our backlog, along with cancellation rates and completed, unsold inventory levels which, to date, are both at low levels. Additionally, we are focused on balance sheet strength as we ended the quarter with $1.3 billion in cash, no borrowings on our $2.6 billion revolver and homebuilding debt to capital of 17.7%. Our balance sheet has never been in a stronger position than it is today." 

Rick Beckwitt, Co-Chief Executive Officer and Co-President of Lennar, said, "During the second quarter, we continued to make progress on our land light strategy. This was evidenced by our controlled homesite percentage increasing to 62% from 50% year over year. This progress contributed to a return on equity of 21.4%, a 260 basis point improvement over last year's second quarter." 

Jon Jaffe, Co-Chief Executive Officer and Co-President of Lennar, said, "During the quarter, our homebuilding machine continued to be intensely focused on production. Our cycle time during the quarter increased only slightly sequentially so it appears that the well documented supply chain issues have started to subside. Our quarterly starts and sales pace remained strong at 6.2 homes and 5.0 homes per community, respectively, in the second quarter."

Mr. Miller concluded, "We recognize that current attempts at guidance are tantamount to 'guessing' and not 'guiding.' Therefore, for our third quarter, we will give broad boundaries for deliveries between 17,000 to 18,500 homes and boundaries for gross margins between 28.5% – 29.5%. For the full year, we will leave our delivery expectations at approximately 68,000 homes and, at this time, will not provide updated guidance for other items. Recognizing that the Fed's actions are still quite fluid and responsive to inflation data, the housing market will rebalance supply and demand, and interest rates and purchase price as market conditions evolve. Nevertheless, at Lennar, we are operating from a position of strength, enabling us to continue to execute on our core strategies."  

RESULTS OF OPERATIONS

THREE MONTHS ENDED MAY 31, 2022 COMPARED TO
THREE MONTHS ENDED MAY 31, 2021 

Homebuilding

Revenues from home sales increased 33% in the second quarter of 2022 to $8.0 billion from $6.0 billion in the second quarter of 2021. Revenues were higher primarily due to a 14% increase in the number of home deliveries to 16,549 homes from 14,493 homes and a 17% increase in the average sales price to $483,000 from $414,000.

Gross margin on home sales were $2.4 billion, or 29.5%, in the second quarter of 2022, compared to $1.6 billion, or 26.1%, in the second quarter of 2021. During the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of the Company's focus on reducing debt.

Selling, general and administrative expenses were $486.6 million in the second quarter of 2022, compared to $455.2 million in the second quarter of 2021. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.1% in the second quarter of 2022, from 7.6% in the second quarter of 2021. This was the lowest percentage for a second quarter in the Company's history primarily due to a decrease in broker commissions and the benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $103.9 million in the second quarter of 2022, compared to $121.3 million in the second quarter of 2021. The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume and an increase in profit per order in the title business.

Other Ancillary Businesses

Operating earnings for the Multifamily segment were $0.7 million in the second quarter of 2022, compared to $22.4 million in the second quarter of 2021. Operating loss for the Lennar Other segment was $108.4 million in the second quarter of 2022, compared to $54.1 million in the second quarter of 2021. Lennar Other operating loss in the second quarter of 2022 was primarily due to mark-to-market losses on the Company's publicly traded technology investments. Lennar Other operating loss in the second quarter of 2021 was primarily due to mark-to-market losses on the Company's publicly traded technology investments, partially offset by the gain on the sale of the Company's residential solar business.

RESULTS OF OPERATIONS

SIX MONTHS ENDED MAY 31, 2022 COMPARED TO
SIX MONTHS ENDED MAY 31, 2021 

Homebuilding

Revenues from home sales increased 26% in the six months ended May 31, 2022 to $13.7 billion from $10.9 billion in the six months ended May 31, 2021. Revenues were higher primarily due to a 9% increase in the number of home deliveries to 29,087 from 26,807 and a 16% increase in the average sales price to $472,000 from $406,000.

Gross margin on home sales were $3.9 billion, or 28.4%, in the six months ended May 31, 2022, compared to $2.8 billion, or 25.6%, in the six months ended May 31, 2021. During the six months ended May 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs. Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of the Company's focus on reducing debt.

Selling, general and administrative expenses were $915.0 million in the six months ended May 31, 2022, compared to $865.4 million in the six months ended May 31, 2021. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.7% in the six months ended May 31, 2022, from 8.0% in the six months ended May 31, 2021. The improvement was primarily due to a decrease in broker commissions and the benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $194.7 million in the six months ended May 31, 2022, compared to $267.5 million in the six months ended May 31, 2021. The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume.

Other Ancillary Businesses

Operating earnings for the Multifamily segment were $6.1 million in the six months ended May 31, 2022, compared to $21.5 million in the six months ended May 31, 2021. Operating loss for the Lennar Other segment was $511.6 million in the six months ended May 31, 2022, compared to operating earnings of $417.2 million in the six months ended May 31, 2021. Lennar Other operating loss for the six months ended May 31, 2022 was primarily due to mark-to-market losses on the Company's publicly traded technology investments. Lennar Other operating earnings for the six months ended May 31, 2021 was primarily due to mark-to-market unrealized gains on the Company's publicly traded technology investments and the gain on the sale of the Company's residential solar business.

Tax Rate

For the six months ended May 31, 2022 and 2021, the Company had a tax provision of $599.7 million and $570.2 million, respectively, which resulted in an overall effective income tax rate of 24.7% and 23.7%, respectively. The overall effective income tax rate was higher in 2022 primarily due to the expiration of the new energy efficient home tax credit.

Share Repurchases

During the second quarter of 2022, the Company repurchased 4.1 million shares of its common stock for $320.6 million at an average per share price of $78.20. For the six months ended May 31, 2022, the Company repurchased a total of 9.4 million shares of its common stock for $846.9 million at an average share price of $90.40.

Credit Facility

In May 2022, the Company amended the credit agreement governing its unsecured revolving credit facility (the "Credit Facility") to increase the commitments from $2.5 billion to $2.575 billion and extend the maturity to May 2027, except with regard to $350 million which matures in April 2024. The Credit Facility has a $425 million accordion feature, subject to additional commitments, thus the maximum borrowings are $3.0 billion.

Liquidity

At May 31, 2022, the Company had $1.3 billion of Homebuilding cash and cash equivalents and no borrowings under its $2.575 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

Guidance

The following are the Company's expected results of its homebuilding and financial services activities for the third quarter of 2022:

About Lennar

Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. Lennar builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. LEN^X drives Lennar's technology, innovation and strategic investments. For more information about Lennar, please visit www.lennar.com.

Note Regarding Forward-Looking Statements: Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, including statements relating to the homebuilding market and other markets in which we participate. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. Important factors that could cause such differences include the potential negative impact to our business of the ongoing coronavirus (COVID-19) pandemic; slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; supply shortages and increased costs related to construction materials, including lumber, and labor; cost increases related to real estate taxes and insurance; increased cost of mortgage financing for homebuyers, increased interest rates or increased competition in the mortgage industry; reductions in the market value of the Company's investments in public companies; decreased demand for our homes or Multifamily rental apartments; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies and our planned spin-off of certain businesses; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; possible unfavorable losses in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the risks described in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended November 30, 2021. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

A conference call to discuss the Company's second quarter earnings will be held at 11:00 a.m. Eastern Time on Tuesday, June 21, 2022. The call will be broadcast live on the Internet and can be accessed through the Company's website at investors.lennar.com. If you are unable to participate in the conference call, the call will be archived at investors.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-0110 and entering 5723593 as the confirmation number.

Lennar's reportable homebuilding segments and all other homebuilding operations not required to be reported separately have divisions located in:

East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina
Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia
Texas: Texas
West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington
Other: Urban divisions

Of the total homes delivered listed above, 44 homes with a dollar value of $15.8 million and an average sales price of $358,000 represent home deliveries from unconsolidated entities for the three months ended May 31, 2022, compared to 31 home deliveries with a dollar value of $9.9 million and an average sales price of $319,000 for the three months ended May 31, 2021.

Of the total homes listed above, 60 homes with a dollar value of $30.8 million and an average sales price of $514,000 represent homes in seven active communities from unconsolidated entities for the three months ended May 31, 2022, compared to 32 homes with a dollar value of $9.9 million and an average sales price of $373,000 in four active communities for the three months ended May 31, 2021.

Of the total homes delivered listed above, 69 homes with a dollar value of $25.1 million and an average sales price of $364,000 represent home deliveries from unconsolidated entities for the six months ended May 31, 2022, compared to 43 home deliveries with a dollar value of $13.6 million and an average sales price of $316,000 for the six months ended May 31, 2021.

Of the total new orders listed above, 104 homes with a dollar value of $48.2 million and an average sales price of $463,000 represent new orders from unconsolidated entities for the six months ended May 31, 2022, compared to 67 new orders with a dollar value of $23.5 million and an average sales price of $351,000 for the six months ended May 31, 2021.

Of the total homes in backlog listed above, 114 homes with a backlog dollar value of $51.7 million and an average sales price of $453,000 represent the backlog from unconsolidated entities at May 31, 2022, compared to 62 homes with a backlog dollar value of $21.4 million and an average sales price of $345,000 at May 31, 2021. During the six months ended May 31, 2022, the Company acquired 347 homes and 54 homes in backlog in the East and Central Homebuilding segment, respectively.

Contact:
Allison Bober
Investor Relations
Lennar Corporation
(305) 485-2038

SOURCE Lennar Corporation