What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-01 compared with 2022-04-01 · 323 added, 157 removed, 298 unchanged (62% of the section changed)

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The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to:

an extended slowdown in the real estate markets in which we have significant homebuilding activity, including a slowdown in either the market for single family homes or the multifamily rental market;

changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit;

decreased demand for our homes or Multifamily rental properties;

the impact of inflation or a higher interest rate environment;

the potential negative impact to our business of the ongoing coronavirus (“COVID-19”) pandemic, the duration, impact and severity of which is highly uncertain;

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reductions in the market value of our investments in public companies;

an extended slowdown in the real estate markets across the nation, including a slowdown in either the market for single family homes or the multifamily rental market;

our inability to successfully execute our strategies, including our land lighter strategy and our strategy to monetize non-core assets;

changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit;

our inability to successfully execute our strategies, including our land lighter strategy and our strategy to monetize noncore assets;

our inability to acquire land at anticipated prices;

the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods;

decreased demand for our homes or Multifamily rental properties;

increased competition for home sales from other sellers of new and resale homes;

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government actions or other factors that might force us to terminate our program of repurchasing our stock;

a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets;

a decline in the

value of our land inventories and resulting write-downs of the carrying value of our real estate assets;

the failure of the participants in various joint ventures to honor their commitments;

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natural disasters and other unforeseen events for which our insurance does not provide adequate coverage;

new laws or regulatory changes that adversely affect the profitability of our businesses;

or regulatory changes that adversely affect the profitability of our businesses;

our inability to refinance our debt on terms that are as favorable as our current arrangements;

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We undertake no obligation, other than those imposed by securities laws, to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

The housing market remains strong in all of our major markets despite the geopolitical environment, rising interest rates and inflationary pressures.

Buyers are seeking shelter and protection against escalating housing costs as rents increase.

Owning a home with a fixed rate mortgage provides this protection.

Additionally, the home is increasingly the control center or hub of our homebuyers' lives.

While demand is strong, the supply of new and existing homes continues to be constrained.

Our ability to deliver homes has been tested by supply chain challenges for both land and construction related to materials and labor.

The time it takes us to build a home has increased by about eight weeks over the past year.

Also, the cost of building homes has been increasing.

To maintain our margins, we are not selling homes until we are ready to build them, so we can factor cost increases into the sale prices.

Although deliveries have been constrained by the supply chain disruption, efficiency in our operations continues to drive strong bottom-line improvement and increased returns.

The lengthening of time it takes us to build homes requires that we have more of our cash invested in construction in process.

We continue to strategically acquire land while increasing the homes we control through options.

We continue to make progress with our land-light strategy as our percentage of homesites controlled increased to 58% from 45% in the prior year, while our years’ supply of land owned stayed flat from the prior year at 3.4 years.

We are also continuing to pay down debt as it comes due with the next tranche maturing in November 2022.

We have also continued to repurchase our stock.

Our Board recently approved a $2 billion increase in our repurchase authorization.

In addition, we have made significant strategic investments through our LEN X platform in new technology companies that are working on innovations that will reshape the way our company and our industry operates.

They have led to changes in our core business that have reduced our SG&A expenses.

These investments are also the tip of the spear in implementing our industry leading sustainability initiatives from solar on the rooftop to microgrid technology across communities, and from water conservation to sustainable cement.

Our LEN X strategy is setting the course for Lennar's sustainable future.

Our income statement is impacted by unrealized mark-to-market gains and losses from LEN X investments in companies that have gone public, but these are non-monetary, unrealized gains and losses, and they do not reflect the state of the housing market or our operating performance.

We have also continued to work on the structural components and organization of our proposed spin-off company as we focus on our strategy of becoming a pure-play homebuilding company.

This SpinCo will be an asset light, asset management business that will have a limited balance sheet.

Many of the assets targeted for SpinCo will be acquired by investor funds it manages and will be monetized in the form of assets under management.

The three core verticals of SpinCo will be Multifamily, single family for rent and land strategies.

Each of these verticals already have raised third-party capital and have active asset managers.

The spin-off will enable us to generate higher returns on our assets and equity base.

We are extremely well-positioned financially, organizationally, and technologically to thrive and grow in this evolving housing market.

We expect our deliveries for the second quarter of 2022 will be in the range of 16,000 to 16,300 homes.

We expect to continue to produce strong gross margins for the second quarter of 2022 in the range of 28.0% to 28.25% and we expect our SG&A to be between 6.8% and 7.0% as we continue to focus on simplification, efficiencies and leveraging our overhead.

We expect our community count to build throughout the year and are projecting to end 2022 with a low double-digit increase in community count year-over-year.

We continue to see great land acquisition opportunities in our markets and are confident this pipeline will produce strong community count growth for the next several years.

As we look to the remainder of 2022, we expect our results to continue to strengthen throughout the year as our recently increased start pace results in more deliveries and as we use our size and scale and our builder of choice relationships to help us navigate some of the supply chain challenges.

Our second quarter results demonstrated strength and excellent performance throughout the quarter.

However, 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.

Despite the pause, demand remains reasonably strong as household formation has continued to rise and buyers still have down payments and are able to qualify for mortgages.

Buyers are seeking shelter and protection against inflationary pressures as scarcity of rentals drives rents higher.

Owning a home with a fixed rate mortgage provides protection against annual or biennial rent increases.

Although we have adjusted downward prices in some markets, even those prices remain higher than a year ago.

Supply remains limited across the country and the need for affordable workforce housing continues to be at crisis levels.

Production must catch up to the growing household numbers as production of dwellings over the past decade has lagged prior decades by as many as five million homes.

Although market conditions in some markets are no longer as positive as they had been, indicators that this would happen have been building since the Federal Reserve's tightening began.

Given the Federal Reserve's expressed commitment to combat inflation, we can expect continued market tightening until inflation subsides.

We are focused on making the changes that are necessary to stay ahead of the trend.

So far in June, new orders and traffic have weakened in many of our markets due to a rapid spike in mortgage rates and headwinds from negative economic headlines.

Many markets have also slowed because we have entered the seasonably slower part of the year.

To maintain sales momentum, we have offered mortgage buy down programs and increased sales incentives.

We have adjusted prices in various communities to the levels that are necessary to maintain reasonable sales volumes.

Our price reductions have led to sales upticks, which leads us to believe there is still underlying strength in the market.

With respect to our financial services business, the mortgage market has become extraordinarily competitive as refinancings have all but halted and sales of previously owned homes have declined.

As a result, margins on sales of mortgages into the secondary market have been decreasing.

Although deliveries have been constrained by supply chain disruptions and an increase in labor costs, for the first time since the supply disruptions began, we saw a flattening in cycle time - the time it takes us to build a home increased by only five days over the past four months.

This may signal that supply chain problems have peaked.

But it also is because we and our suppliers have become much better at managing supply problems.

The pace at which we are starting new homes has been constrained by delays in getting permits.

We are matching our sales to our starts, rather than trying to match our starts to what we can sell.

We continue to strategically acquire land, primarily through options.

This continues our land-light strategy as our percentage of homesites controlled increased by May 31, 2022 to 62% from 50% in the prior year, while our years’ supply of land owned decreased to 3.1 years as compared to 3.3 years last year.

We are also continuing to pay down debt as it comes due, with the next tranche maturing in November 2022, and we are continuing to repurchase our stock.

Our playbook going forward will be to use our dynamic pricing model week by week to price products to current market conditions in order to maximize pricing and margin while we maintain a carefully limited inventory level.

We continue to sell our homes later in the construction cycle to maximize prices and reduce the likelihood of costs increasing after we commit to sales prices.

We will continue to build and to adjust prices in order to fill the housing shortage and provide much-needed workforce housing across markets.

We will continue to work to improve our SG&A leverage and we expect to drive efficiencies through technology and process improvement to offset market adjustments.

We will continue to focus on cash flow and our bottom line to protect and enhance our already strong balance sheet.

Finally, we expect to conclude our long-planned spin-off by year end.

We have formed a company, named Quarterra Group, In.

(“Quarterra”), which will have three asset management verticals - multifamily residential, single family for rent and land banking and similar land finance strategies.

When it is spun off, Quarterra will remove $2.5 billion of assets from our balance sheet, without materially affecting our earnings.

We believe we are well positioned financially, organizationally and technologically to thrive in this evolving housing market.

We recognize that interest rates are rising and inflation continues to be a significant headwind.

It is difficult to provide the more targeted guidance that we typically offer given the uncertainty about market conditions, so we are providing broader than normal ranges in our guidance for our third quarter.

We expect our new orders for the third quarter of 2022 to be in the range of 16,000 to 18,000 homes, and we anticipate our third quarter deliveries to be in the range of 17,000 to 18,500 homes.

We expect gross margins to be in the range of 28.5% to 29.5, and we expect our SG&A as a percentage of home sale revenues to be between 6.0% and 6.5%.

We believe we are still on track to reach our goal of 2.75 years’ land owned and 65% homesites controlled by year-end.

As we look to the remainder of 2022, we recognize that there are challenges in the market to which we must pay careful attention.

But there are also opportunities.

We look forward to meeting the challenges and taking advantage of the opportunities to make Lennar an even stronger company in the future.

(1) Results of Operations

We historically have experienced, and expect to continue to experience, variability in quarterly results.

Our results of operations for the three months ended February 28, 2022 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three and six months ended May 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year.

However, a variety of factors can alter seasonal patterns.

Our net earnings attributable to Lennar were $503.6 million, or $1.69 per diluted share ($1.70 per basic share), in the first quarter of 2022, compared to net earnings attributable to Lennar of $1.0 billion, or $3.20 per diluted share ($3.20 per basic share), in the first quarter of 2021.

Results included unrealized mark-to-market losses of $395.2 million in the first quarter of 2022 and unrealized mark-to-market gains of $469.7 million in the first quarter of 2021 on our publicly traded technology investments.

Excluding unrealized mark-to-market gains and losses in both years, net earnings attributable to Lennar were $800.2 million or $2.70 per diluted share in the first quarter of 2022, compared to net earnings of $642.7 million, or $2.04 per diluted share, in the first quarter of 2021.

Our net earnings attributable to Lennar were $1.3 billion, or $4.49 per diluted share ($4.50 per basic share), in the second quarter of 2022, compared to net earnings attributable to Lennar of $831.4 million, or $2.65 per diluted share ($2.66 per basic share), in the second quarter of 2021.

Results included unrealized mark-to-market losses of $78 million in the second quarter of 2022 and unrealized mark-to-market gains of $272.6 million in the second quarter of 2021 on our publicly traded technology investments.

Excluding mark-to-market losses on technology investments in both years and a gain on the sale of our 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.

Financial information relating to our operations was as follows:

Three Months Ended February 28, 2022

Three Months Ended May 31, 2022

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Total costs and expenses 6,105,153 96,231 175,152 8,236 — 6,384,772

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (286) — 1,805 (9,808) — (8,289)

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) 4,862 — (201) (26,750) — (22,089)

Other income, net 2,720 — — — — 2,720

Lennar Other unrealized losses from technology investments — — — (77,965) — (77,965)

Operating earnings (loss) $ 1,880,411 103,935 668 (108,424) — 1,876,590

Corporate general and administrative expenses — — — — 105,207 105,207

Charitable foundation contribution — — — — 16,549 16,549

Earnings (loss) before income taxes $ 1,880,411 103,935 668 (108,424) (121,756) 1,754,834

Three Months Ended May 31, 2021

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

Sales of homes $ 5,980,731 — — — — 5,980,731

Sales of land 38,785 — — — — 38,785

Other revenues 8,525 218,747 177,473 5,984 — 410,729

Total revenues 6,028,041 218,747 177,473 5,984 — 6,430,245

Costs and expenses:

Costs of homes sold 4,421,373 — — — — 4,421,373

Costs of land sold 32,979 — — — — 32,979

Selling, general and administrative expenses 455,164 — — — — 455,164

Other costs and expenses — 97,427 168,930 5,732 — 272,089

Total costs and expenses 4,909,516 97,427 168,930 5,732 — 5,181,605

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (1,688) — 13,854 218,276 — 230,442

Other expense, net (4,362) — — — — (4,362)

Lennar Other unrealized loss from technology investments — — — (395,170) — (395,170)

Lennar Other unrealized losses from technology investments — — — (272,625) — (272,625)

Operating earnings (loss) $ 1,112,475 121,320 22,397 (54,097) — 1,202,095

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Earnings (loss) before income taxes $ 1,112,475 121,320 22,397 (54,097) (105,210) 1,096,885

(1) Other revenues in our Multifamily segment include land sales to unconsolidated entities of $131.6 million.

Three Months Ended February 28, 2021

(1) During the three months ended May 31, 2021, our Lennar Other segment realized a gain of $151.5 million on the sale of our residential solar business.

Six Months Ended May 31, 2022

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Total costs and expenses 10,747,051 182,141 438,889 13,643 — 11,381,724

Equity in loss from unconsolidated entities, Multifamily other gain and Lennar Other other expense, net (4,565) — (1,268) (1,047) — (6,880)

Other income, net 12,975 — — — — 12,975

Lennar Other unrealized gain from technology investments — — — 469,745 — 469,745

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) 4,576 — 1,604 (36,558) — (30,378)

Other expense, net 2,549 — — — — 2,549

Lennar Other unrealized losses from technology investments — — — (473,135) — (473,135)

Operating earnings (loss) $ 2,990,261 194,726 6,095 (511,558) — 2,679,524

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Earnings (loss) before income taxes $ 2,990,261 194,726 6,095 (511,558) (247,955) 2,431,569

Three Months Ended February 28, 2022 versus Three Months Ended February 28, 2021

Revenues from home sales increased 17% in the first quarter of 2022 to $5.7 billion from $4.9 billion in the first quarter of 2021.

(1) During the six months ended May 31, 2022 , Other revenues in our Multifamily segment included land sales to unconsolidated entities of $147.8 million.

Six Months Ended May 31, 2021

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

Sales of homes $ 10,871,645 — — — — 10,871,645

Sales of land 86,428 — — — — 86,428

Other revenues 13,024 462,816 308,916 12,884 — 797,640

Total revenues 10,971,097 462,816 308,916 12,884 — 11,755,713

Homebuilding costs and expenses:

Costs of homes sold 8,088,235 — — — — 8,088,235

Costs of land sold 74,167 — — — — 74,167

Selling, general and administrative 865,400 — — — — 865,400

Other costs and expenses — 195,289 299,979 9,984 505,252

Total costs and expenses 9,027,802 195,289 299,979 9,984 — 9,533,054

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (6,253) — 12,586 217,229 — 223,562

Other income, net 8,613 — — — 8,613

Lennar Other unrealized losses from technology investments — — — 197,120 — 197,120

Operating earnings $ 1,945,655 267,527 21,523 417,249 — 2,651,954

Corporate general and administrative expenses — — — — 201,248 201,248

Charitable foundation contribution $ — — — — 26,807 26,807

Earnings (loss) before income taxes $ 1,945,655 267,527 21,523 417,249 (228,055) 2,423,899

(1) During the six months ended May 31, 2021, our Lennar Other segment realized a gain of $151.5 million on the sale of our residential solar business.

Three Months Ended May 31, 2022 versus Three Months Ended May 31, 2021

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 $1.5 billion, or 26.9%, in the first quarter of 2022, compared to $1.2 billion, or 25.0%, in the first quarter of 2021.

During the first quarter of 2022, an increase in revenues per square foot was offset by an increase in

costs per square foot primarily due to higher lumber costs.

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 our focus on reducing debt.

Selling, general and administrative expenses were $428.5 million in the first quarter of 2022, compared to $410.2 million in the first quarter of 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.5% in the first quarter of 2022, from 8.4% in the first quarter of 2021.

This improvement was primarily due to a decrease in broker commissions and benefits of our technology efforts.

Operating earnings for our Financial Services segment were $90.8 million in the first quarter of 2022, compared to $146.2 million in the first quarter of 2021.

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market.

Operating earnings for our Multifamily segment were $5.4 million in the first quarter of 2022, compared to an operating loss of $0.9 million in the first quarter of 2021.

Operating loss for our Lennar Other segment was $403.1 million in the first quarter of 2022, compared to operating earnings of $471.3 million in the first quarter of 2021.

Lennar Other operating loss in the first quarter of 2022 and Lennar Other operating earnings in the first quarter of 2021 was due to unrealized mark-to-market losses and gains, respectively, on our publicly traded technology investments.

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 our history primarily due to a decrease in broker commissions and the benefits of our technology efforts.

Operating earnings for our 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 our title business.

Operating earnings for our 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 our 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 our publicly traded technology investments.

Lennar Other operating loss in the second quarter of 2021 was primarily due to mark-to-market losses on our publicly traded technology investments, partially offset by the gain on the sale of our residential solar business.

Six Months Ended May 31, 2022 versus Six Months Ended May 31, 2021

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 our 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 our technology efforts.

Operating earnings for our 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.

Operating earnings for our 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 our 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 our 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 our publicly traded technology investments and the gain on the sale of our residential solar business.

For the six months ended May 31, 2022 and 2021, we 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.

Homebuilding Segments

At February 28, 2022, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

At May 31, 2022, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:

Selected Financial and Operational Data

Three Months Ended February 28, 2022

Three Months Ended May 31, 2022

Gross Margins Operating Earnings (Loss)

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$ 7,963,683 5,610,783 29.5 % 1,866,345 (291) 6,775 4,862 2,720 1,880,411

Three Months Ended February 28, 2021

Three Months Ended May 31, 2021

Gross Margins Operating Earnings (Loss)

($ in thousands) Sales of Homes Revenue Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins on Sales of Land Other Revenue Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

East $ 1,551,030 1,115,010 28.1 % 307,978 1,335 1,768 (59) (1,195) 309,827

Central 1,093,190 846,427 22.6 % 157,429 774 579 317 (51) 159,048

Texas 790,391 551,067 30.3 % 173,803 1,837 562 387 (532) 176,057

West 2,543,263 1,893,148 25.6 % 491,223 1,860 1,311 (921) (662) 492,811

Other (2) 2,857 15,721 (450.3) % (26,239) — 4,305 (1,412) (1,922) (25,268)

$ 5,980,731 4,421,373 26.1 % 1,104,194 5,806 8,525 (1,688) (4,362) 1,112,475

Six Months Ended May 31, 2022

Gross Margins Operating Earnings (Loss)

($ in thousands) Sales of Homes Revenue Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins (Loss) on Sales of Land Other Revenue Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss)

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$ 13,685,440 9,795,647 28.4 % 2,974,760 (4,880) 13,256 4,576 2,549 2,990,261

Six Months Ended May 31, 2021

Gross Margins Operating Earnings (Loss)

East $ 2,898,641 2,103,873 27.4 % 549,512 6,411 3,186 (551) 13,352 571,910

Central 2,019,628 1,559,973 22.8 % 289,528 751 984 415 (607) 291,071

Texas 1,426,801 1,002,264 29.8 % 302,964 2,871 820 541 (1,496) 305,700

West 4,520,071 3,400,875 24.8 % 809,213 2,228 2,361 41 674 814,517

Other (2) 6,504 21,250 (226.7) % (33,207) — 5,673 (6,699) (3,310) (37,543)

$ 10,871,645 8,088,235 25.6 % 1,918,010 12,261 13,024 (6,253) 8,613 1,945,655

(1) Net margins on sales of homes include selling, general and administrative expenses.

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Average Sales Price

February 28, February 28, February 28,

May 31, May 31, May 31,

2022 2021 2022 2021 2022 2021

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Total 16,549 14,493 $ 7,979,441 5,990,635 $ 483,000 414,000

Of the total homes delivered listed above, 25 homes with a dollar value of $9.4 million and an average sales price of $375,000 represent home deliveries from unconsolidated entities for the three months ended February 28, 2022, compared to 12 home deliveries with a dollar value of $3.7 million and an average sales price of $308,000 for the three months ended February 28, 2021.

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.

Six Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

2022 2021 2022 2021 2022 2021

East 9,280 8,400 $ 3,898,097 2,912,235 $ 420,000 347,000

Central 5,465 5,180 2,389,692 2,019,628 437,000 390,000

Texas 5,825 5,096 1,899,163 1,426,802 326,000 280,000

West 8,502 8,124 5,509,465 4,520,071 648,000 556,000

Other 15 7 14,161 6,504 944,000 929,000

Total 29,087 26,807 $ 13,710,578 10,885,240 $ 472,000 406,000

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.

New Orders (1):

2 unchanged sentences

Average Sales Price

February 28, February 28, February 28, February 28,

May 31, May 31, May 31, May 31,

2022 2021 2022 2021 2022 2021 2022 2021

5 unchanged sentences

Total 1,225 1,225 17,792 17,157 $ 9,098,269 7,565,387 $ 511,000 441,000

Of the total homes listed above, 44 homes with a dollar value of $17.3 million and an average sales price of $393,000 represent homes in five active communities from unconsolidated entities for the three months ended February 28, 2022, compared to 35 homes with a dollar value of $11.6 million and an average sales price of $332,000 in four active communities for the three months ended February 28, 2021.

(1) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three months ended February 28, 2022 and 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.

Six Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

February 28, February 28, February 28,

May 31, May 31, May 31,

2022 2021 2022 2021 2022 2021

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Total 33,539 32,727 $ 16,895,808 14,106,664 $ 504,000 431,000

Of the total homes in backlog listed above, 98 homes with a backlog dollar value of $36.6 million and an average sales price of $373,000 represent the backlog from unconsolidated entities at February 28, 2022, compared to 61 homes with a backlog dollar value of $19.4 million and an average sales price of $318,000 at February 28, 2021.

During the three months ended February 28, 2022, we acquired 355 homes in backlog in the East Homebuilding segment.

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.

(1) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and six months ended May 31, 2022 and 2021.

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

2022 2021 2022 2021 2022 2021

East 9,882 7,778 $ 4,566,295 3,086,740 $ 462,000 397,000

Central 6,381 5,933 3,010,596 2,475,900 472,000 417,000

Texas 4,582 3,752 1,665,155 1,209,965 363,000 322,000

West 7,775 7,275 5,444,307 4,258,324 700,000 585,000

Other 4 3 3,611 3,465 903,000 1,155,000

Total 28,624 24,741 $ 14,689,964 11,034,394 $ 513,000 446,000

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, we acquired 347 homes and 54 homes in backlog in the East and Central Homebuilding segment, respectively.

Backlog represents the number of homes under sales contracts.

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We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.

Three Months Ended February 28, 2022 versus Three Months Ended February 28, 2021

Three Months Ended May 31, 2022 versus Three Months Ended May 31, 2021

Homebuilding East:

Revenues from home sales increased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Florida and an increase in the average sales price of homes delivered in all the states of the segment.

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in New Jersey and an increase in the average sales price of homes delivered in all the states of the segment.

The increase in the number of home deliveries was primarily driven by an increase in the number of active communities.

The decrease in the number of home deliveries in Florida was primarily due to a decrease in the number of active communities due to the timing of opening and closing of communities as a result of supply chain disruptions.

The decrease in the number of home deliveries in New Jersey was primarily due to a decrease in the number of active communities due to the timing of opening and

closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Gross margin percentage on home deliveries in the first quarter of 2022 increased compared to the same period last year primarily due to price appreciation as the increase in revenues per square foot of homes delivered outpaced the increase in costs per square foot .

In the second quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat .

Homebuilding Central:

Revenues from home sales increased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina, and an increase in the average sales price of homes delivered in all the states of the segment.

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia, and an increase in the average sales price of homes delivered in all the states in the segment except in Georgia, Maryland and Tennessee.

The increase in the number of home deliveries was primarily driven by an increase in active communities.

The decrease in the number of home deliveries in North Carolina was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The decrease in the number of home deliveries in North Carolina and Virginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Gross margin percentage on home deliveries in the first quarter of 2022 decreased compared to the same period last year primarily due to the increase in costs per square foot of homes delivered outpacing the increase in revenues per square foot driven by higher lumber costs.

The decrease in the average sales price of homes delivered in Georgia, Maryland and Tennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

In 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 margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Homebuilding Texas:

Revenues from home sales increased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered.

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered.

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

Gross margin percentage on home deliveries in the first quarter of 2022 decreased compared to the same period last year primarily due to the increase in costs per square foot in homes delivered outpacing the increase in revenues per square foot driven by higher lumber costs and a change in product mix .

In 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 margin percentage on home deliveries improved year over year as land costs remained relatively flat .

Homebuilding West:

Revenues from home sales increased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to an increase in the average sales price of homes delivered in all the states of the segment, partially offset by a decrease in the number of home deliveries in the segment, primarily in Arizona, Colorado and Nevada.

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Utah, and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The decrease in the number of home deliveries in Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

The decrease in the number of home deliveries in Arizona, Colorado, and Nevada was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

In 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 margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Six Months Ended May 31, 2022 versus Six Months Ended May 31, 2021

Homebuilding East:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries and an increase the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily driven by an increase in the number of active communities.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the six months ended May 31, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Homebuilding Central:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia, and an increase in the average sales price of homes delivered in all the states of the segment except in Georgia and Tennessee.

The increase in the number of home deliveries was primarily driven by an increase in active communities.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

The decrease in the average sales price of homes delivered in Georgia and Tennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

In the six months ended May 31, 2022, an increase in revenues per square foot was less than offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries was slightly down year over year while land costs remained relatively flat.

Homebuilding Texas:

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The increase in the average sales price of homes delivered was primarily due

to favorable market conditions.

In 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 margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Homebuilding West:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Arizona, Nevada and Utah, and an increase in the average sales price of homes delivered in all the states in the segment.

The decrease in the number of home deliveries in Arizona, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In 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 margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Financial Services Segment

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The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment:

Three Months Ended

Three Months Ended Six Months Ended

May 31, May 31,

(Dollars in thousands) 2022 2021 2022 2021

3 unchanged sentences

Number of title and closing service transactions 17,400 17,100 31,100 32,100

At February 28, 2022 and November 30, 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $156.6 million and $157.8 million, respectively.

At May 31, 2022 and November 30, 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $155.8 million and $157.8 million, respectively.

Details of these securities and related debt are within Note 2 of the Notes to Condensed Consolidated Financial Statements.

Multifamily Segment

We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties.

We have been actively involved, primarily through unconsolidated funds and joint ventures, in the development, construction and property management of multifamily rental properties.

Our Multifamily segment focuses on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S.

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Balance Sheets

(In thousands) February 28, 2022 November 30, 2021

(In thousands) May 31, 2022 November 30, 2021

Multifamily investments in unconsolidated entities $ 638,559 654,029

Lennar's net investment in Multifamily 934,022 976,676

Statement of Operations Three Months Ended Six Months Ended

May 31, May 31,

(Dollars in thousands) 2022 2021 2022 2021

Number of operating properties/investments sold through joint ventures — 1 — 1

Lennar's share of gains on the sale of operating properties/investments $ — 14,784 — 14,784

Lennar Other Segment

Lennar Other primarily includes strategic investments in technology companies, primarily managed by our LEN X subsidiary, and fund interests we retained when we sold the Rialto Capital Management ( "Rialto") asset and investment management platform in 2018.

At February 28, 2022 and November 30, 2021, we had $1.1 billion and $1.5 billion, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $333.8 million and $346.3 million, respectively.

The investments in equity securities of Opendoor Technologies, Inc.

("Opendoor"), Hippo Holdings, Inc.

("Hippo"), Sunnova ("NOVA"), SmartRent, Inc.

("SmartRent"), Blend Labs, Inc.

("Blend") and Sonder ("SOND") are held at market and will therefore change depending on the value of our share holdings in those entities on the last day of each quarter.

The following is a detail of Lennar Other unrealized gain (loss):

Three Months Ended

At May 31, 2022 and November 30, 2021, we had $1.0 billion and $1.5 billion, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $325.3 million and $346.3 million, respectively.

The investments in equity securities of Blend Labs, Inc.

("Blend Labs"), Hippo Holdings, Inc.

("Hippo"), Opendoor, Inc.

("Opendoor"), SmartRent, Inc.

("SmartRent"), Sonder Holdings, Inc.

("Sonder"), and Sunnova Energy International, Inc.

("Sunnova") are held at market and will therefore change depending on the value of our share holdings in those entities on the last day of each quarter.

The following is a detail of Lennar Other unrealized gains (losses) from technology investments:

Three Months Ended Six Months Ended

May 31, May 31,

(In thousands) 2022 2021 2022 2021

Opendoor (OPEN) mark to market $ (143,361) 469,745

Blend Labs (BLND) mark-to-market $ (13,550) — (20,992) —

Hippo (HIPO) mark-to-market (37,946) — (162,403) —

Sunnova (NOVA) mark to market (75,041) —

Opendoor (OPEN) mark-to-market (20,999) (234,290) (164,360) 235,455

SmartRent (SMRT) mark-to-market (3,950) — (48,313) —

Blend Labs (BLND) mark to market (7,442) —

Sonder (SOND) mark-to-market (1,626) — (2,132) —

$ (395,170) 469,745

Sunnova (NOVA) mark-to-market 106 (38,335) (74,935) (38,335)

Lennar Other unrealized gains (losses) from technology investments $ (77,965) (272,625) (473,135) 197,120

(2) Financial Condition and Capital Resources

At February 28, 2022, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $1.6 billion, compared to $3.0 billion at November 30, 2021 and $2.6 billion at February 28, 2021.

At May 31, 2022, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $1.6 billion, compared to $3.0 billion at November 30, 2021 and $2.8 billion at May 31, 2021.

We finance all of our activities, including homebuilding, financial services, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility").

At February 28, 2022, we had $1.4 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.5 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

At May 31, 2022, we had $1.3 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.575 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

Operating Cash Flow Activities

During the three months ended February 28, 2022 and 2021, cash (used in) provided by operating activities totaled ($72) million and $386 million, respectively.

During the three months ended February 28, 2022, cash used in operating activities was impacted primarily by an increase in inventories due to strategic land purchases, land development and construction costs of $1.9 billion and increase in other assets of $50 million.

This was partially offset by our net earnings, gross of Lennar Other unrealized mark-to-market loss of $395 million on strategic technology investments, a decrease in receivables of $381 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid.

In addition, there was a decrease in loans held-for-sale of $409 million primarily related to the sale of loans originated by our Financial Services segment and an increase in accounts payable and other liabilities of $96 million.

During the three months ended February 28, 2021, cash provided by operating activities was impacted primarily by our net earnings net of the unrealized mark-to-market gain of $470 million related to our Opendoor strategic investment, a decrease in loans held-for-sale of $361 million primarily related to the sale of loans originated by our Financial Services segment, partially offset by an increase in inventories due to strategic land purchases, and land development and construction costs of $862 million.

During the six months ended May 31, 2022 and 2021, cash provided by operating activities totaled $53 million and $718 million, respectively.

During the six months ended May 31, 2022, cash provided by operating activities was impacted primarily by our net earnings, gross of Lennar Other mark-to-market loss on our publicly trade technology investments and other loss of $483 million, a decrease in loans held-for-sale of $336 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $277 million and a decrease in receivables of $126 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid.

This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $3.1 billion.

During the six months ended May 31, 2021, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $444 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $185 million, and a decrease in receivables of $118 million, partially offset by an increase in inventories due to strategic land purchases, and land development and construction costs of $1.6 billion.

Investing Cash Flow Activities

During the three months ended February 28, 2022 and 2021, cash used in investing activities totaled $20 million and $93 million, respectively.

During the three months ended February 28, 2022, our cash used in investing activities was primarily due to cash contributions of $139 million to unconsolidated entities, which included (1) $98 million to Homebuilding unconsolidated entities (2) $37 million to Lennar Other unconsolidated entities and (3) $4 million to Multifamily unconsolidated entities.

In addition, we also had $71 million of purchases of investment securities related to strategic technology investments included in the Lennar Other segment.

During the six months ended May 31, 2022 and 2021, cash used in investing activities totaled $65 million and $50 million, respectively.

During the six months ended May 31, 2022, our cash used in investing activities was primarily due to cash contributions of $261 million to unconsolidated entities, which included (1) $197 million to Homebuilding unconsolidated entities (2) $53 million to Lennar Other unconsolidated entities and (3) $11 million to Multifamily unconsolidated entities.

In addition, we had $79 million of purchases of investment securities related to strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $239 million, which primarily included (1) $156 million from Multifamily unconsolidated entities, (2) $67 million from Homebuilding unconsolidated entities, and (3) $16 million from our Lennar Other unconsolidated entities.

During the three months ended February 28, 2021, our cash used in investing activities was primarily due to cash contributions of $224 million to unconsolidated entities, which included (1) $148 million to Homebuilding unconsolidated entities, (2) $38 million to Multifamily unconsolidated entities, and (3) $38 million to the strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $83 million, which primarily included (1) $53 million from Multifamily unconsolidated entities, (2) $20 million from Homebuilding unconsolidated entities;

and (3) $11 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment.

During the six months ended May 31, 2021, our cash used in investing activities was primarily due to cash contributions of $282 million to unconsolidated entities, which included (1) $178.6 million to Homebuilding unconsolidated entities, (2) $57.8 million to Multifamily unconsolidated entities, and (3) $45.8 million to the strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $231.5 million, which primarily included (1) $134.2 million from Homebuilding unconsolidated entities, (2) $80.1 million from Multifamily unconsolidated entities, and (3) $17.2 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment .

Financing Cash Flow Activities

During the three months ended February 28, 2022 and 2021, cash used in financing activities totaled $1.3 billion and $630 million, respectively.

During the three months ended February 28, 2022, cash used in financing activities was primarily due to (1) $529 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

During the six months ended May 31, 2022 and 2021, cash used in financing activities totaled $1.4 billion and $818 million, respectively.

During the six months ended May 31, 2022, cash used in financing activities was primarily due to (1) $404 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

(2) $906 million of repurchases of our common stock, which included $847 million of repurchases under our repurchase program and $58 million of repurchases related to our equity compensation plan;

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These were partially offset by $210 million of net proceeds from liabilities related to consolidated inventory not owned due to activity with land banks.

During the three months ended February 28, 2021, cash used in financing activities was primarily impacted by (1) $501 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

During the six months ended May 31, 2021, cash used in financing activities was primarily impacted by (1) $535.7 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

(2) $156.3 million of dividend payments;

and (3) $69 million of repurchases of our common stock, which included $43 million of repurchases under our repurchase program and $26 million of repurchases related to our equity compensation plan.

These were partially offset by $67 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to a land bank.

and (3) repurchases of our common stock for $173.6 million, which included $141.6 million of repurchases under our repurchase program and $32.1 million of repurchases related to our equity compensation plan.

These were partially offset by $301.9 million of proceeds from liabilities related to consolidated inventory not owned due to land sales to land banks.

Debt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding the leverage of our homebuilding operations.

Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows:

(Dollars in thousands) February 28, 2022 November 30, 2021 February 28, 2021

(Dollars in thousands) May 31, 2022 November 30, 2021 May 31, 2021

Homebuilding debt $ 4,645,791 4,652,338 5,894,342

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Rather, this non-GAAP financial measure should be used to supplement our GAAP results.

At February 28, 2022, Homebuilding debt to total capital was consistent compared to November 30, 2021.

At February 28, 2022, Homebuilding debt to total capital was lower compared to February 28, 2021, primarily as a result of a decrease in Homebuilding debt due to debt pay downs and an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

At May 31, 2022, Homebuilding debt to total capital was lower compared to November 30, 2021, primarily as a result of an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

At May 31, 2022, Homebuilding debt to total capital was lower compared to May 31, 2021, primarily as a result of a decrease in Homebuilding debt due to debt pay downs and an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings.

1 unchanged sentence

In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company.

We have announced an intention to spin-off to our stockholders our asset management businesses (Lennar Multifamily and Lennar Single Family Rental) and some of our other non-core assets.

We expect the spin-off to take place by the end of 2022.

Our Homebuilding senior notes and other debts payable as well as letters of credit and surety bonds are summarized within Note 7 of the Notes to Condensed Consolidated Financial Statements.

Our Homebuilding average debt outstanding and the average rates of interest was as follows:

Three Months Ended

Six Months Ended

(Dollars in thousands) 2022 2021

2 unchanged sentences

Interest incurred $ 121,732 142,517

As of February 28, 2022, we had a Credit Facility with potential borrowings of $2.5 billion maturing in 2024, that included a $300 million accordion feature, subject to additional commitments, thus the maximum potential borrowings could be $2.8 billion maturing in 2024.

The Credit Facility agreement (the "Credit Agreement") provides that up to $500 million in commitments may be used for letters of credit .

Under the Credit Agreement, we are subject to debt covenants.

The maturity, details and debt covenants of the Credit Facility are unchanged from the disclosure in the Financial Condition and Capital Resources section of our Form 10-K for the year ended November 30, 2021.

The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as of February 28, 2022:

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") to increase the commitment from $2.5 billion to $2.575 billion and extended the maturity to May 2027, except for $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.

The proceeds available under the Credit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes.

The credit agreement also provides that up to $500 million in commitments may be used for letters of credit.

Under our Credit Facility agreement, we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.

These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures.

We believe we were in compliance with our debt covenants as of May 31, 2022.

The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Facility agreement as of May 31, 2022:

(Dollars in thousands) Covenant Level Level Achieved as of

February 28, 2022

Minimum net worth test $ 10,919,391 15,123,049

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Financial Services Warehouse Facilities

Our Financial Services segment uses the residential facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected.

Our Financial Services segment uses the residential warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected.

The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature.

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The repurchase authorization has no expiration date.

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three months ended February 28, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the three months ended February 28, 2022, treasury stock increased due to our repurchase of 5.9 million shares of Class A and Class B common stock due primarily to our repurchase of 5.3 million shares of Class A and Class B common stock through our stock repurchase program.

During the three months ended February 28, 2021, treasury stock increased due to our repurchase of 0.8 million shares of Class A and Class B common stock due primarily to our repurchase of 0.5 million shares of Class A and Class B common stock through our stock repurchase program.

On February 10, 2022, we paid cash dividends of $0.375 per share on both our Class A and Class B common stock to holders of record at the close of business on January 27, 2022, as declared by our Board of Directors on January 12, 2022.

We approved and paid cash dividends of $0.250 per share for each of the four quarters of 2021 on both our Class A and Class B common stock.

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three and six months ended May 31, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the six months ended May 31, 2022, treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors.

The retirement of Class A and Class B common stock in treasury resulted in a reclass between treasury shares and additional paid-in capital within stockholders' equity.

This decrease in treasury shares was partially offset by our repurchase of 8.2 million and 1.1 million shares of Class A and Class B common stock, respectively, through our stock repurchase program.

During the six months ended May 31, 2021, treasury shares increased due to our repurchase of 1.9 million shares of Class A and Class B common stock primarily due to our repurchase of 1.5 million shares of Class A and Class B common stock through our stock repurchase program.

On June 22, 2022, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock, payable on July 21, 2022 to holders of record at the close of business on July 7, 2022 .

On May 10, 2022, we paid cash dividends of $0.375 per share on both our Class A and Class B common stock to holders of record at the close of business on April 26, 2022, as declared by our Board of Directors on April 12, 2022.

We approved and paid cash dividends of $0.250 per share for each of the four quarters of 2021 on both its Class A and Class B common stock.

Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.

Supplemental Financial Information

Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all our senior notes.

Currently, certain of our 100% owned subsidiaries, which are primarily homebuilding subsidiaries, are guaranteeing all our senior notes.

The guarantees are full and unconditional.

The indentures governing our senior notes require that, if any of our 100% owned subsidiaries, other than our finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at February 28, 2022 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at May 31, 2022 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements.

The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation.

A subsidiary's guarantee of Lennar senior notes will be suspended at any time when it is not directly or indirectly guaranteeing at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at February 28, 2022 is included in the following tables.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at May 31, 2022 is included in the following tables.

Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligors' investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded.

Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed:

(In thousands) February 28, 2022 November 30, 2021

(In thousands) May 31, 2022 November 30, 2021

Due from non-guarantor subsidiaries $ 15,629,491 4,187,044

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Total liabilities 9,990,538 9,631,796

Three Months Ended

(In thousands) February 28, 2022

Six Months Ended

(In thousands) May 31, 2022

Total revenues $ 12,489,613

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Investments in Unconsolidated Entities

As of February 28, 2022, we had equity investments in 43 active homebuilding and land unconsolidated entities (of which three had recourse debt, 13 had non-recourse debt and 27 had no debt) compared to 41 active homebuilding and land unconsolidated entities at November 30, 2021.

As of May 31, 2022, we had equity investments in 47 active homebuilding and land unconsolidated entities (of which three had recourse debt, 14 had non-recourse debt and 30 had no debt) compared to 41 active homebuilding and land unconsolidated entities at November 30, 2021.

Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers.

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commercial or infill experience) of our partners.

Each joint venture is governed by an executive committee consisting of members from the

Each joint venture is governed by an executive committee consisting of members from the partners.

Details regarding these investments, balances and debt are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of February 28, 2022.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of May 31, 2022.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

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Investments in Unconsolidated Entities

At February 28, 2022, Multifamily had equity investments in 20 unconsolidated entities that are engaged in multifamily residential developments (of which 12 had non-recourse debt and eight had no debt), compared to 17 unconsolidated entities at November 30, 2021.

At May 31, 2022, Multifamily had equity investments in 19 unconsolidated entities that are engaged in multifamily residential developments (of which 12 had non-recourse debt and 7 had no debt), compared to 17 unconsolidated entities at November 30, 2021.

We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties.

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The Multifamily segment includes LMV I, LMV II and a new Multifamily Fund, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets.

Details of each as of and during the three months ended February 28, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

Details of each as of and during the six months ended May 31, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

We regularly monitor the results of both our Homebuilding and Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

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For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

We believe all of the joint ventures were in compliance with applicable debt covenants at February 28, 2022.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of February 28, 2022.

We believe all of the joint ventures were in compliance with applicable debt covenants at May 31, 2022.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of May 31, 2022.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

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These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues.

As of February 28, 2022 and November 30, 2021, we had strategic technology investments in unconsolidated entities of $140.2 million and $145.6 million, respectively.

Our investment in the Rialto funds and investment vehicles totaled $200.1 million and $200.6 million as of May 31, 2022 and November 30, 2021, respectively.

As of May 31, 2022 and November 30, 2021, we had strategic technology investments in unconsolidated entities of $123.7 million and $145.6 million, respectively.

Our strategic technology investments through LEN X business help to enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.

We own an approximately 40% interest in FivePoint Holdings, LLC., a NYSE listed company, and companies it manages, which own three large multi-use properties in California.

We manage, and have an investment in, Upward America Fund, which purchases single family homes and operates them as rental properties.

Option Contracts

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Controlled Homesites Years of

February 28, 2022 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

May 31, 2022 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

East 109,986 — 109,986 54,610 164,596

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Controlled Homesites Years of

February 28, 2021 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

May 31, 2021 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

East 55,537 5,750 61,287 55,218 116,505

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Our contractual obligations and commercial commitments have not changed materially from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

There were no outstanding borrowings under our Credit Facility as of February 28, 2022.

There were no outstanding borrowings under our Credit Facility as of May 31, 2022.

(3) Recently Adopted Accounting Pronouncements

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(4) Critical Accounting Policies

We believe that there have been no significant changes to our critical accounting policies during the three months ended February 28, 2022 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended November 30, 2021.

While our critical accounting policies have not changed in any significant way during the three months ended February 28, 2022, the following provides additional disclosures about our revenue recognition accounting policy.

We believe that there have been no significant changes to our critical accounting policies during the six months ended May 31, 2022 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended November 30, 2021.

While our critical accounting policies have not significantly changed during the six months ended May 31, 2022, the following provides additional disclosures about our revenue recognition accounting policy.

Revenue Recognition

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The optional upgrades may be the only sales incentive offered for a particular home, or they may be offered collectively with a discount on the base price of the home.

The cost we include for the optional upgrades is included in our cost of home sales.

The cost we include for the optional upgrades is included in our cost of home

Because the upgrades are provided without additional charge, no revenue is recognized related to the upgrade(s).

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis