What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-04 compared with 2022-10-04 · 190 added, 345 removed, 313 unchanged (63% of the section changed)

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Forward-looking statements contained herein may include opinions or beliefs regarding market conditions and similar matters.

In many instances, those opinions and beliefs are based upon general observations by members of our management, anecdotal evidence and our experience in the conduct of our businesses, without specific investigation or analyses.

Therefore, while they reflect our view of the industries and markets in which we are involved, they should not be viewed as reflecting verifiable views or views that are necessarily shared by all who are involved in those industries or markets.

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the effect of increased interest rates with regard to borrowings by the funds we manage on the willingness of those funds to invest in new projects;

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

the effects of public health issues such as a major epidemic or pandemic that could have a negative impact on the economy and on our businesses;

the duration, impact and severity of which is highly uncertain;

supply shortages and increased costs related to construction materials and labor;

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new laws 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;

and changes in accounting conventions that adversely affect our reported earnings.

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

Please see our Form 10-K for the fiscal year ended November 30, 2022 and our other filings with the SEC for a further discussion of these and other risks and uncertainties which could affect our future results.

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.

We had excellent third quarter results as we continued to drive strong closings and performance, which continues to enhance our positioning in evolving market conditions.

In addition to the well documented supply chain constraints and limited workforce slowing production, housing has now been considerably impacted by the more than doubling of mortgage rates over the past months, and therefore, the increase in monthly payment costs and reduction of affordability.

The housing market has continued to weaken, as expected, in response to the Federal Reserve’s very rapid and aggressive reaction to inflation.

Homebuilding finds itself, once again, at the forefront of all that is happening in the economy, and the Federal Reserve’s use of its interest rate tool to curtail inflation is having the desired effect on the “for sale” housing market.

While the housing market is now adjusting, the Federal Reserve Chair’s recent increases in the fed funds rate, together with an articulated determination to do more, suggests even more challenges ahead.

While demand has cooled high pricing levels, there is still a housing shortage across the country, especially work force housing, and household formation has continued to rise.

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

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.

During the third quarter and early September, we had nine markets that continued to perform well, 22 markets where we have made significant price adjustments to regain sales momentum and seven markets which reflect a more significant market softening and correction.

We saw a three-day reduction in cycle time, the time it takes us to build a home, in the third quarter from the second quarter.

Although this is minor, it shows that we and our suppliers are making progress controlling supply issues.

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

We expect to start seeing an easing in labor as the overall industry reduces the level of construction starts.

We continue to strategically acquire land, primarily through options.

This continues our land-light strategy as our percentage of homesites controlled increased by August 31, 2022 to 63% from 53% in the prior year, while our years’ supply of land owned decreased to 2.9 years as compared to 3.3 years in the prior year.

We continued to pay down debt without replacement.

As a matter of careful capital allocation this quarter, given the current market conditions, we chose not to repurchase stock in favor of early retirement of debt, however we expect to continue to repurchase stock in the future as opportunities present themselves.

We are focused on our strategy going forward:

• We have adjusted prices in various communities to levels that should/are intended to enable us to maintain reasonable volume.

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

• We are working with our trade partners to right size our cost structure to current market conditions.

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

We have re-reviewed and re-underwritten land purchases in our pipeline to reflect current market conditions.

• In sync with selling homes, we will continue to improve our cost of doing business by focusing on and reducing SG&A expenses as a percentage of home sale revenues.

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

In these extraordinarily difficult and volatile market conditions, the Lennar team has focused on our strategies, and we have executed with precision.

We ended the first quarter with stronger-than-expected revenues and deliveries, strong profitability and cash flow, a fortified balance sheet and strong liquidity.

Very limited new home inventory exists, existing home supply has fallen as existing homeowners hold on to extremely low mortgage rates, and multifamily production is very limited.

This, combined with the chronic housing production shortfall over the past decade, leaves the industry in what we believe will be a fairly short duration correction without an inventory overhang to resolve.

The homebuilding industry has been experiencing strong headwinds and equally strong tailwinds.

The headwinds have been defined by Federal Reserve-driven interest rate increases to combat high inflation.

The tailwinds have been defined by housing shortages across the country resulting from production deficits over the past decade.

While potential homebuyers remain challenged by affordability concerns, they are adjusting to higher interest rates and opting to purchase their homes.

The housing supply shortage, especially workforce housing, continues to drive customers to stretch their wallet as incentives and price reductions have worked to meet purchasers halfway.

We believe the housing market is beginning to find a point of stabilization and customers, both primary and institutional, are coming to grips with the new normal of higher but acceptable interest rates.

We are seeing the kind of volatility that our core operating strategy has been built to endure.

With volume and production as constants, we use margin as our volatility shock absorber.

If market conditions deteriorate, we compromise margin through price reductions and increased incentives, but we generate strong cash flow.

If conditions improve, we improve margins and bottom line while also generating strong cash flow.

Our primary focus is on cash flow.

We have remained steadfast in our adherence to the six core strategies we adopted when the Fed began its tightening program approximately one year ago and we have added a seventh core strategy .

• We will continue to utilize our Dynamic Pricing Model in conjunction with our digital marketing platform to focus on selling homes at market-clearing prices and drive volume while building at a consistent pace to meet the needs of a supply-constrained housing market.

• We will work side-by-side with our trade partners to right-size our construction costs to current market conditions, while we re-establish cycle time at pre-supply chain crisis levels.

We expect recently negotiated cost reductions to be reflected in our reported numbers in the back half of the year as cost reductions will improve lagging margins.

• We will continue to sharpen our attention on land and land acquisitions by relentlessly focusing on protecting cash and only purchasing land that delivers the next strong margin at today’s market pricing.

We recognized early on that land would be expensive relative to reduced prices, and therefore, we reconsidered every land deal in our pipeline very early on and either walked from deposits or renegotiated terms and price to today’s market standards.

• We will manage our operating costs and reduce our S,G&A expense so that even at lower gross margins, we will drive a strong net margin.

We have been improving our S,G&A leverage over the past years quarter-by-quarter to new record lows and many of those changes, though not all, are hardwired.

Nevertheless, as average sales prices come down, the percentages won't hold without corresponding additional cuts.

We also know that in more difficult times, there will be upward pressure on some of our sales, marketing and realtor costs in order to find purchasers and drive new sales.

• We will maintain tight inventory control.

As our growth rate is reduced and as cycle times revert to normal our inventory should shrink, which will generate sizable cash flow.

Our commitment to match production to sales pace should ensure that we will not create standing inventory.

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

• In order to carry out our long-planned spin-off, we have formed a company to which we will transfer our subsidiaries that are engaged primarily in creating vehicles for investing in real estate related assets and we are well along the path that will enable us to distribute the stock of that company to our stockholders.

While the market is shifting and adjusting to a new, higher interest rate environment, we believe we are well positioned financially, organizationally and technologically to succeed in these conditions.

We recognize that inflation continues to be a legitimate threat and important parts of the economy are slowing.

We know that the Federal Reserve is determined to curtail inflation, and this will take some time.

But we also believe we know how to adjust as the market changes, and we are making those adjustments.

It continues to be difficult to provide the targeted guidance about our expected future performance that we historically offer given the uncertainty about market conditions, so we are providing very broad ranges to give some boundaries for each of the components of our fourth quarter.

We expect our new orders for the fourth quarter of 2022 to be in the range of 14,000 to 15,500 homes, and we anticipate our fourth quarter deliveries to be in the range of 20,000 to 21,000 homes.

expect gross margins to be in the range of 26.0% to 27.0%, and we expect our SG&A as a percentage of home sale revenues to be between 5.7% and 5.9%.

We expect our fourth quarter ending community count to increase about 5% from the end of the third quarter, and we expect a further increase in 2023, although there are many factors that could cause the expected increase in community count not to occur.

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

We expect that we will meet the challenges and that we will continue to adjust to maximize opportunity and drive us into an ever better future.

Inventory has remained flat as opposed to being lower year-over-year as one might expect, because of expanded cycle time due to the supply chain disruption.

We expect to bring down our cycle time over the next few quarters.

This will free up a significant amount of cash that currently is tied up in the increased inventory dollars related to homes under construction.

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

Although bottom line profitability will be compressed year-over-year as prices and margins are impacted in a correcting market, our balance sheet and our cash position will continue to improve.

This will give us the flexibility to be opportunistic as market conditions stabilize as well as to undertake stock repurchases and debt reductions that improve total shareholder returns and return on equity.

• We have added an additional core strategy since last quarter-end.

This is the strategy of continuous improvement throughout the company.

We have created continuous improvement metrics for every leader in our company with a direct tie to performance measurement and bonus structure.

We believe focusing on continuous improvement as a core strategy will help us continue to reach higher and drive harder to be the best version of ourselves.

We believe 2023 is going to be complicated and volatile as the Federal Reserve and Federal Government try to minimize the consequences of aggressive interest rate hikes.

There is no way to anticipate with certainty what comes next, however, we have a plan to navigate the uncertainties of 2023 with a focus on maintaining volume, maximizing margin, managing inventories, driving cash flow, managing land ownership and land spend and further enhancing our balance sheet in spite of the challenging market conditions.

While we're prepared for volatility and adversity along the way, we will focus on our core operating strategies as the way to perform as expected.

Accordingly, we are not providing the targeted guidance about our future performance that we provided in the past.

Instead, we are providing broad ranges to give some boundaries for various components of our expected results for the second quarter of 2023 and full year 2023.

We expect our new orders for the second quarter of 2023 to be in the range of 16,000 and 17,000.

We expect our second quarter deliveries to be between 15,000 and 16,000 homes with a gross margin between 21.0% and 21.5%.

We expect our S,G&A expenses as a percentage of home sale revenues will be between 7.2% and 7.4% but that percentage will adjust based on deliveries and homebuilding revenue.

We expect our second quarter ending community count to be flat to slightly up year over year as we walked away from deals that would have produced new active communities, but no longer meet our margin expectations under current market conditions.

Our second quarter average sales price should be in the range of $435,000 to $445,000 as we continue to price to market.

Additionally, we are targeting delivery volume for the full year 2023 to be between 62,000 and 66,000 homes as we drive volume, pick up market share and build margins back up through reconciliation of construction and land costs while carefully managing S,G&A expenses.

(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 and nine months ended August 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three months ended February 28, 2023 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 $1.5 billion, or $5.03 per diluted share ($5.04 per basic share), in the third quarter of 2022, compared to net earnings attributable to Lennar of $1.4 billion, or $4.52 per diluted share ($4.52 per basic share), in the third quarter of 2021.

Results included unrealized mark-to-market losses of $85.8 million, a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment in the third quarter of 2022 and a $53.6 million benefit in income taxes primarily related to the resolution of an uncertain state tax position.

Results for the third quarter of 2021 included unrealized mark-to-market gains of $493.7 million on our publicly traded technology investments.

Excluding mark-to-market gains and losses on our publicly traded technology investments in both years and one-time items in the current year, the third quarter net earnings attributable to Lennar in 2022 were $1.5 billion, or $5.18 per diluted share, compared to the third quarter net earnings attributable to Lennar in 2021 of $1.0 billion, or $3.27 per diluted share.

Our net earnings attributable to Lennar were $596.5 million, or $2.06 per diluted share, in the first quarter of 2023, compared to net earnings attributable to Lennar of $503.6 million, or $1.69 per diluted share, in the first quarter of 2022.

Excluding mark-to-market losses on technology investments in both years, first quarter net earnings attributable to Lennar in 2023 were $614.8 million or $2.12 per diluted share, compared to first quarter net earnings attributable to Lennar in 2022 of $800.2 million or $2.70 per diluted share.

Financial information relating to our operations was as follows:

Three Months Ended August 31, 2022

Three Months Ended February 28, 2023

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

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Total costs and expenses 5,274,714 104,244 148,956 6,476 — 5,534,390

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (14,652) — 20,864 (31,935) — (25,723)

Homebuilding other expense, net (6,883) — — — — (6,883)

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other expense, net, and other gain 3,186 — (16,168) (16,947) — (29,929)

Homebuilding other income, net 22,062 — — — — 22,062

Lennar Other unrealized losses from technology investments — — — (23,954) — (23,954)

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Earnings (loss) before income taxes $ 906,839 78,737 (21,601) (39,757) (139,765) 784,453

Three Months Ended August 31, 2021

Three Months Ended February 28, 2022

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

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Earnings (loss) before income taxes $ 1,109,850 90,791 5,427 (403,134) (126,199) 676,735

Nine Months Ended August 31, 2022

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

Sales of homes $ 22,124,565 — — — — 22,124,565

Sales of land 63,888 — — — — 63,888

Other revenues 21,230 578,945 686,436 21,579 — 1,308,190

Total revenues 22,209,683 578,945 686,436 21,579 — 23,496,643

Costs and expenses:

Costs of homes sold 15,769,536 — — — — 15,769,536

Costs of land sold 71,365 — — — — 71,365

Selling, general and administrative expenses 1,400,887 — — — — 1,400,887

Other costs and expenses — 320,871 654,322 23,650 — 998,843

Total costs and expenses 17,241,788 320,871 654,322 23,650 — 18,240,631

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (10,076) — 22,468 (68,493) — (56,101)

Homebuilding other expense, net (4,334) — — — — (4,334)

Lennar Other unrealized losses from technology investments — — — (558,974) — (558,974)

Operating earnings (loss) $ 4,953,485 258,074 54,582 (629,538) — 4,636,603

Corporate general and administrative expenses — — — — 334,425 334,425

Charitable foundation contribution — — — — 46,335 46,335

Earnings (loss) before income taxes $ 4,953,485 258,074 54,582 (629,538) (380,760) 4,255,843

Nine Months Ended August 31, 2021

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

Sales of homes $ 17,377,353 — — — — 17,377,353

Sales of land 131,483 — — — — 131,483

Other revenues 20,770 669,789 476,837 20,884 — 1,188,280

Total revenues 17,529,606 669,789 476,837 20,884 — 18,697,116

Homebuilding costs and expenses:

Costs of homes sold 12,820,638 — — — — 12,820,638

Costs of land sold 113,545 — — — — 113,545

Selling, general and administrative 1,319,116 — — — — 1,319,116

Other costs and expenses — 290,179 474,389 18,994 783,562

Total costs and expenses 14,253,299 290,179 474,389 18,994 — 15,036,861

Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (3,862) — 9,682 216,540 — 222,360

Homebuilding other income, net 3,043 — — — 3,043

Lennar Other unrealized gains from technology investments — — — 690,791 — 690,791

Operating earnings $ 3,275,488 379,610 12,130 909,221 — 4,576,449

Corporate general and administrative expenses — — — — 296,190 296,190

Charitable foundation contribution $ — — — — 42,006 42,006

Earnings (loss) before income taxes $ 3,275,488 379,610 12,130 909,221 (338,196) 4,238,253

(1) During the nine months ended August 31, 2021, our Lennar Other segment realized a gain of $153 million on the sale of our residential solar business.

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

Revenues from home sales increased 30% in the third quarter of 2022 to $8.4 billion from $6.5 billion in the third quarter of 2021.

Revenues were higher primarily due to a 13% increased in the number of home deliveries to 17,248 homes from 15,199 homes and a 15% increase in the average sales price to $491,000 from $428,000.

Gross margins on home sales were $2.5 billion, or 29.2%, in the third quarter of 2022, compared to $1.8 billion, or 27.3%, in the third quarter of 2021.

During the third quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials 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 $485.9 million in the third quarter of 2022, compared to $453.7 million in the third quarter of 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 5.8% in the third quarter of 2022, from 7.0% in the third quarter of 2021.

This was the lowest percentage for any 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 $63.0 million in the third quarter of 2022.

The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

We are appealing this judgment since we believe there were clear errors of law made by the trial court.

Excluding this one-time charge, operating earnings were $98.5 million, compared to operating earnings of $111.9 million in the third 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.

Operating earnings for our Multifamily segment were $48.5 million ($45.9 million net of noncontrolling interests) in the third quarter of 2022, compared to an operating loss of $9.4 million in the third quarter of 2021.

Operating loss for our Lennar Other segment was $118.0 million in the third quarter of 2022, compared to operating earnings of $492.0 million in the third quarter of 2021.

Lennar Other operating loss in the third quarter of 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating earnings in the third quarter of 2021 were primarily due to mark-to-market gains on our publicly traded technology investments.

For the three months ended August 31, 2022 and 2021, the Company had a tax provision of $351.6 million and $405.1 million, respectively, which resulted in an overall effective income tax rate of 19.3% and 22.4%, respectively.

The overall effective income tax rate was lower in the third quarter of 2022 primarily due to the resolution of an uncertain state tax position

and the retroactive reinstatement of the energy efficient home credits for 2022, resulting from the passage of the Inflation Reduction Act by Congress.

Nine Months Ended August 31, 2022 versus Nine Months Ended August 31, 2021

Revenues from home sales increased 27% in the nine months ended August 31, 2022 to $22.1 billion from $17.4 billion in the nine months ended August 31, 2021.

Revenues were higher primarily due to a 10% increase in the number of home deliveries to 46,335 from 42,006 and a 16% increase in the average sales price to $479,000 from $414,000.

Gross margins on home sales were $6.4 billion, or 28.7%, in the nine months ended August 31, 2022, compared to $4.6 billion, or 26.2%, in the nine months ended August 31, 2021.

During the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials 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 $1.4 billion in the nine months ended August 31, 2022, compared to $1.3 billion in the nine months ended August 31, 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.3% in the nine months ended August 31, 2022, from 7.6% in the nine months ended August 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 $257.1 million in the nine months ended August 31, 2022.

The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

Excluding this one-time charge, operating earnings were $292.6 million, compared to operating earnings of $379.3 million in the nine months ended August 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 $54.6 million ($52.0 million net of noncontrolling interests) in the nine months ended August 31, 2022, compared to $12.1 million in the nine months ended August 31, 2021.

Operating loss for our Lennar Other segment was $629.5 million in the nine months ended August 31, 2022, compared to operating earnings of $909.2 million in the nine months ended August 31, 2021.

Lennar Other operating loss for the nine months ended August 31, 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating earnings for the nine months ended August 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 nine months ended August 31, 2022 and 2021, we had a tax provision of $951.3 million and $975.4 million, respectively, which resulted in an overall effective income tax rate of 22.4% and 23.1%, respectively.

The overall effective income tax rate was lower during the nine months ended August 31, 2022 primarily due to the resolution of an uncertain state tax position.

Three Months Ended February 28, 2023 versus Three Months Ended February 28, 2022

Revenues from home sales increased 7% in the first quarter of 2023 to $6.1 billion from $5.7 billion in the first quarter of 2022.

Revenues were higher primarily due to a 9% increase in the number of home deliveries to 13,659 homes from 12,538 homes in the first quarter of 2022.

The average sales price of homes delivered was $448,000 in the first quarter of 2023, compared to $457,000 in the first quarter of 2022.

The decrease in average sales price of homes delivered in the first quarter of 2023 compared to the same period last year was primarily due to pricing to market and product mix as a larger percentage of deliveries occurred in our Texas segment.

Gross margins on home sales were $1.3 billion, or 21.2%, in the first quarter of 2023, compared to $1.5 billion, or 26.9%, in the first quarter of 2022.

During the first quarter of 2023, gross margin decreased because revenues per square foot were flat year over year as we priced homes to market while costs per square foot increased primarily due to higher materials and labor costs.

In addition, land costs increased year over year.

Selling, general and administrative expenses were $449.8 million in the first quarter of 2023, compared to $428.5 million in the first quarter of 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 7.4% in the first quarter of 2023, from 7.5% in the first quarter of 2022 as we focused on improving our leverage combined with the benefits of our technology efforts.

Operating earnings for our Financial Services segment were $78.7 million ($78.2 million net of noncontrolling interests) in the first quarter of 2023, compared to $90.5 million, in the first quarter of 2022.

The decrease in operating earnings was primarily due to a lower profit per loan in our mortgage business as a result of lower lock volume.

Operating loss for our Multifamily segment was $21.6 million in the first quarter of 2023, compared to operating earnings of $5.4 million in the first quarter of 2022.

Operating loss for our Lennar Other segment was $39.8 million ($41.2 million net of noncontrolling interests) in the first quarter of 2023, compared to operating loss of $403.1 million in the first quarter of 2022.

Lennar Other operating loss in the first quarter of both 2023 and 2022 was primarily due to unrealized mark-to-market losses on our publicly traded technology investments.

For the three months ended February 28, 2023 and 2022, we had a tax provision of $185.1 million and $167.4 million, respectively, which resulted in an overall effective income tax rate of 23.7% and 25.0%, respectively.

In the three months ended February 28, 2023, our overall effective income tax rate was lower than last year primarily due to the reinstatement of the new energy efficient home credit as a result of the enactment of the Inflation Reduction Act during the third quarter of 2022.

Homebuilding Segments

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

At February 28, 2023, 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 August 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)

East $ 2,521,247 1,722,167 31.7 % 642,974 (1,618) 879 505 (259) 642,482

Central 1,566,610 1,191,833 23.9 % 271,939 625 429 215 (856) 272,351

Texas 1,138,901 789,121 30.7 % 279,148 105 342 — (781) 278,814

West 3,208,713 2,262,658 29.5 % 790,072 (1,709) 1,036 2,137 (3,093) 788,443

Other (2) 3,654 8,110 (121.9) % (4,751) — 5,288 (17,509) (1,894) (18,866)

$ 8,439,125 5,973,889 29.2 % 1,979,382 (2,597) 7,974 (14,652) (6,883) 1,963,224

Three Months Ended August 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 $ 1,655,301 1,174,592 29.0 % 350,305 3,147 1,867 3,493 (1,917) 356,895

Central 1,262,540 974,843 22.8 % 196,103 95 589 526 (84) 197,229

Texas 818,869 570,228 30.4 % 184,267 1,835 365 7 (466) 186,008

West 2,764,857 2,004,108 27.5 % 603,721 600 1,600 4,263 (1,369) 608,815

Other (2) 4,141 8,632 (108.5) % (14,807) — 3,325 (5,898) (1,734) (19,114)

$ 6,505,708 4,732,403 27.3 % 1,319,589 5,677 7,746 2,391 (5,570) 1,329,833

Nine Months Ended August 31, 2022

Three Months Ended February 28, 2023

Gross Margins Operating Earnings (Loss)

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$ 6,093,827 4,802,843 21.2 % 841,190 (12,359) 52,760 3,186 22,062 906,839

Nine Months Ended August 31, 2021

Three Months Ended February 28, 2022

Gross Margins Operating Earnings (Loss)

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Average Sales Price

August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021

East 5,647 4,568 $ 2,538,479 1,660,357 $ 450,000 363,000

Central 3,501 3,211 1,566,610 1,262,540 447,000 393,000

Texas 3,447 2,747 1,138,901 818,869 330,000 298,000

West 4,649 4,669 3,208,713 2,764,856 690,000 592,000

Other 4 4 3,655 4,141 914,000 1,035,000

Total 17,248 15,199 $ 8,456,358 6,510,763 $ 491,000 428,000

Of the total homes delivered listed above, 46 homes with a dollar value of $17.2 million and an average sales price of $375,000 represent home deliveries from unconsolidated entities for the three months ended August 31, 2022, compared to 15 home deliveries with a dollar value of $5.1 million and an average sales price of $337,000 for the three months ended August 31, 2021.

Nine Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

August 31, August 31, August 31,

February 28, February 28, February 28,

2023 2022 2023 2022 2023 2022

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Total 13,659 12,538 $ 6,125,500 5,731,138 $ 448,000 457,000

Of the total homes delivered listed above, 115 homes with a dollar value of $42.4 million and an average sales price of $368,000 represent home deliveries from unconsolidated entities for the nine months ended August 31, 2022, compared to 58 home deliveries with a dollar value of $18.7 million and an average sales price of $322,000 for the nine months ended August 31, 2021.

Of the total homes delivered listed above, 63 homes with a dollar value of $31.7 million and an average sales price of $503,000 represent home deliveries from unconsolidated entities for the three months ended February 28, 2023, compared to 25 home deliveries with a dollar value of $9.4 million and an average sales price of $375,000 for the three months ended February 28, 2022.

Sales Incentives (1):

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as a % of Revenue

August 31, August 31,

2022 2021 2022 2021

East $ 8,300 8,700 1.8 % 2.3 %

Central 7,500 6,600 1.6 % 1.7 %

Texas 19,200 9,200 5.5 % 3.0 %

West 15,600 5,100 2.2 % 0.8 %

Other 86,900 121,000 8.7 % 10.5 %

Total $ 12,300 7,300 2.5 % 1.7 %

Nine Months Ended

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenue

August 31, August 31,

February 28, February 28,

2023 2022 2023 2022

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Average Sales Price

August 31, August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021 2022 2021

East 328 329 5,675 5,308 $ 2,514,776 2,100,466 $ 443,000 396,000

Central 296 281 3,033 3,189 1,348,226 1,352,814 445,000 424,000

Texas 217 233 2,577 3,203 776,156 988,644 301,000 309,000

West 345 350 3,077 4,571 2,015,897 3,006,501 655,000 658,000

Other 3 3 4 6 2,668 5,974 667,000 996,000

Total 1,189 1,196 14,366 16,277 $ 6,657,723 7,454,399 $ 463,000 458,000

Of the total homes listed above, 79 homes with a dollar value of $39.4 million and an average sales price of $499,000 represent homes in seven active communities from unconsolidated entities for the three months ended August 31, 2022, compared to 35 homes with a dollar value of $13.1 million and an average sales price of $375,000 in four active communities for the three months ended August 31, 2021.

Nine Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

August 31, August 31, August 31,

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

2023 2022 2023 2022 2023 2022 2023 2022

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Total 1,217 1,204 14,194 15,747 $ 6,413,462 7,797,539 $ 452,000 495,000

Of the total new orders listed above, 183 homes with a dollar value of $87.5 million and an average sales price of $478,000 represent new orders from unconsolidated entities for the nine months ended August 31, 2022, compared to 102 new orders with a dollar value of $36.7 million and an average sales price of $359,000 for the nine months ended August 31, 2021.

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

Of the total homes listed above, 97 homes with a dollar value of $38.3 million and an average sales price of $394,000 represent homes in seven active communities from unconsolidated entities for the three months ended February 28, 2023, compared to 44 homes with a dollar value of $17.3 million and an average sales price of $393,000 in four active communities for the three months ended February 28, 2022.

(2) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three months ended February 28, 2023 and 2022.

We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

2022 2021 2022 2021

Three Months Ended

East 23 % 7 %

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Average Sales Price

August 31, August 31, August 31,

February 28, February 28, February 28,

2023 2022 2023 2022 2023 2022

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Total 19,403 27,335 $ 9,028,442 13,560,611 $ 465,000 496,000

Of the total homes in backlog listed above, 147 homes with a backlog dollar value of $73.8 million and an average sales price of $502,000 represent the backlog from unconsolidated entities at August 31, 2022, compared to 82 homes with a backlog dollar value of $29.5 million and an average sales price of $359,000 at August 31, 2021.

During the nine months ended August 31, 2022, we acquired 340 homes and 53 homes in backlog in the East and Central Homebuilding segments, respectively.

Of the total homes in backlog listed above, 200 homes with a backlog dollar value of $84.4 million and an average sales price of $422,000 represent the backlog from unconsolidated entities at February 28, 2023, compared to 98 homes with a backlog dollar value of $36.6 million and an average sales price of $373,000 at February 28, 2022.

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

Homebuilding East:

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment 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 due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third 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 materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

Homebuilding Central:

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia, Illinois and Maryland, 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 due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Georgia, Illinois and Maryland 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 price appreciation year over year.

In the third 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 materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

Homebuilding Texas:

Revenues from home sales increased in the third quarter of 2022 compared to the third 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 due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials 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 third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the average sales price of homes delivered in all the states in the segment which was offset by a slight decrease in the number of home deliveries in Arizona, California, Nevada and Utah.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Arizona, California, 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 price appreciation year over year.

In the third 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 materials and labor costs.

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

Nine Months Ended August 31, 2022 versus Nine Months Ended August 31, 2021

Three Months Ended February 28, 2023 versus Three Months Ended February 28, 2022

Homebuilding East:

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

Revenues from home sales increased in the first quarter of 2023 compared to the first quarter of 2022, 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 in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

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

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

The increase in the average sales price of homes delivered was primarily due to product mix.

In the first quarter of 2023, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs, thus gross margin percentage of home deliveries decreased year over year.

Homebuilding Central:

Revenues from home sales increased in the nine months ended August 31, 2022 compared to the nine months ended August 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 in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per

active community.

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 price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

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

Revenues from home sales decreased in the first quarter of 2023 compared to the first quarter of 2022, primarily due to a decrease in the number of home deliveries in all the states in the segment except in Illinois, Indiana, North Carolina and Tennessee while the average sales price of homes delivered increased in all the states in the segment except in North Carolina and Virginia.

The decrease in the number of home deliveries in Georgia, Maryland, Minnesota 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 number of home deliveries in Illinois, Indiana, North Carolina and Tennessee was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered in all the states in the segment except in North Carolina and Virginia was primarily due to product mix.

The decrease in the average sales price of homes delivered in North Carolina and Virginia was primarily due to pricing to market and product mix.

In the first quarter of 2023, a slight increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs, thus gross margin percentage of home deliveries decreased year over year.

Homebuilding Texas:

Revenues from home sales increased in the first quarter of 2023 compared to the first quarter of 2022, primarily due to an increase in the number of home deliveries which was partially offset by a decrease in the average sales price of homes delivered.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

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

The decrease in the average sales price of homes delivered was primarily due to pricing to

In the first quarter of 2023, a decrease in revenues per square foot and an increase in costs per square foot primarily due to higher materials and labor costs, resulted in a decrease in gross margin percentage of home deliveries.

Homebuilding West:

Revenues from home sales increased in the nine months ended August 31, 2022 compared to the nine months ended August 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 increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

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 price appreciation year over year.

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

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

Revenues from home sales increased in the first quarter of 2023 compared to the first quarter of 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Utah, which was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in Utah and Washington.

The increase in the number of home deliveries in all the states in the segment except in Utah was primarily due to an increase in the number of deliveries per active community.

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 in Utah and Washington was primarily due to product mix.

The decrease in the average sales price of homes delivered in other states of the segment was primarily due to pricing to market and product mix.

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 Nine Months Ended

August 31, August 31,

Three Months Ended

(Dollars in thousands) 2023 2022

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Number of title and closing service transactions 14,200 13,700

At August 31, 2022 and November 30, 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $151.0 million and $157.8 million, respectively.

At February 28, 2023 and November 30, 2022, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $141.9 million and $143.3 million, respectively.

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

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

The following tables provide information related to our investment in the Multifamily segment:

The following table provides information related to our investment in the Multifamily segment:

Balance Sheets

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

(In thousands) February 28, 2023 November 30, 2022

Multifamily investments in unconsolidated entities $ 635,499 648,126

Lennar's net investment in Multifamily 975,420 935,961

Statement of Operations Three Months Ended Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2022 2021 2022 2021

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

Lennar's share of gains on the sale of operating properties/investments $ 19,730 — 19,730 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 August 31, 2022 and November 30, 2021, we had $917.7 million and $1.5 billion, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $342.6 million and $346.3 million, respectively.

At February 28, 2023 and November 30, 2022, we had $790.9 million and $788.5 million, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $315.6 million and $316.5 million, respectively.

The investments in equity securities of Blend Labs, Inc.

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("Sunnova") are carried at market and will therefore change depending on the market 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 Nine Months Ended

August 31, August 31,

The following is a detail of Lennar Other unrealized gains (loss) from mark-to-market adjustments on our technology investments:

Three Months Ended

(In thousands) 2023 2022

Blend Labs (BLND) mark-to-market $ (518) 6,852 (21,510) 6,852

Hippo (HIPO) mark-to-market (32,933) 324,855 (195,336) 324,855

Opendoor (OPEN) mark-to-market (54,391) 37,301 (218,751) 272,756

SmartRent (SMRT) mark-to-market (23,118) 100,793 (71,431) 100,793

Sonder (SOND) mark-to-market (168) — (2,300) —

Sunnova (NOVA) mark-to-market 25,289 23,870 (49,646) (14,465)

Lennar Other unrealized gains (losses) from technology investments $ (85,839) 493,671 (558,974) 690,791

Blend Labs (BLND) $ 586 (7,442)

Hippo (HIPO) 6,632 (124,457)

Opendoor (OPEN) (7,691) (143,361)

SmartRent (SMRT) 1,305 (44,363)

Sonder (SOND) (320) (506)

Sunnova (NOVA) (24,466) (75,041)

Lennar Other unrealized losses from technology investments (23,954) (395,170)

(2) Financial Condition and Capital Resources

At August 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 August 31, 2021.

At February 28, 2023, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $4.3 billion, compared to $4.8 billion at November 30, 2022 and $1.6 billion at February 28, 2022.

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 August 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.

At February 28, 2023, we had $4.1 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing approximately $6.7 billion of available capacity.

Operating Cash Flow Activities

During the nine months ended August 31, 2022 and 2021, cash provided by operating activities totaled $551.5 million and $1.3 billion, respectively.

During the nine months ended August 31, 2022, cash provided by operating activities was impacted primarily by our net earnings, excluding Lennar Other unrealized mark-to-market losses on our publicly traded technology investments and other gain (loss) totaling $578.7 million, a decrease in loans held-for-sale of $319.0 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $180.9 million.

This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $3.9 billion and an increase in receivables of $164.4 million primarily related to an increase in Financial Services receivables, net, which are loans sold to investors for which we have not yet been paid.

During the nine months ended August 31, 2021, cash provided by operating activities was impacted primarily by our net earnings, net of Lennar Other unrealized mark-to-market gains on our publicly traded technology investments and other gain (loss) of $848.5 million primarily due to mark-to-market gains on strategic investments that went public during the nine months ended August 31, 2021, (Blend Labs, Hippo, Opendoor, SmartRent and Sunnova) and the sale of our solar business to Sunnova.

In addition there was a decrease in loans held-for-sale of $209.3 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $514.0 million, and a decrease in receivables of $131.3 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $2.3 billion.

During the three months ended February 28, 2023 and 2022, cash provided by (used in) operating activities totaled $978 million and ($72) million, respectively.

During the three months ended February 28, 2023, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $512 million primarily related to the sale of loans originated by our Financial Services segment and a decrease in receivables of $603 million primarily related to a decrease in Financial Services receivables, net, which are loans sold to investors for which we have not yet been paid.

This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $178 million and a decrease in accounts payable and other liabilities of $691 million.

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, excluding Lennar Other unrealized mark-to-market loss of $395 million on our publicly traded 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.

Investing Cash Flow Activities

During the nine months ended August 31, 2022 and 2021, cash used in investing activities totaled $131.5 million and $131.2 million, respectively.

During the nine months ended August 31, 2022, our cash used in investing activities was primarily due to cash contributions of $396.7 million to unconsolidated entities, which included (1) $276.3 million to Homebuilding unconsolidated entities (2) $100.7 million to Lennar Other unconsolidated entities and (3) $19.8 million to Multifamily unconsolidated entities.

In addition, we had $93.8 million of purchases of investment securities related to strategic technology investments included in the Lennar Other segment.

During the three months ended February 28, 2023 and 2022, cash used in investing activities totaled $36 million and $20 million, respectively.

During the three months ended February 28, 2023, our cash used in investing activities was primarily due to cash contributions of $57 million to unconsolidated entities, which included (1) $25 million to Homebuilding unconsolidated entities, (2) $25 million to Lennar other unconsolidated entities and (3) $7 million to Multifamily unconsolidated entities.

This was partially offset by distributions of capital from unconsolidated entities of $24 million, which primarily included (1) $17 million from Homebuilding unconsolidated entities, and (2) $7 million from our Lennar Other unconsolidated entities.

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 our publicly traded technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $174 million, which primarily included (1) $119 million from Multifamily unconsolidated entities, (2) $17 million from Homebuilding unconsolidated entities, and (3) $38 million from our Lennar Other unconsolidated entities.

During the nine months ended August 31, 2021, our cash used in investing activities was primarily due to cash contributions of $354.6 million to unconsolidated entities, which included (1) $164.0 million to Homebuilding unconsolidated entities, (2) $66.8 million to Multifamily unconsolidated entities, and (3) $123.8 million to the strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $292.5 million, which primarily included (1) $159.3 million from Homebuilding unconsolidated entities, (2) $107.2 million from Multifamily unconsolidated entities, and (3) $26.0 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment .

Financing Cash Flow Activities

During the nine months ended August 31, 2022 and 2021, cash used in financing activities totaled $1.8 billion and $1.3 billion, respectively.

During the nine months ended August 31, 2022, cash used in financing activities was primarily due to (1) the early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $238.1 million of net repayments under our Financial Services' warehouse facilities;

During the three months ended February 28, 2023 and 2022, cash used in financing activities totaled $1.5 billion and $1.3 billion, respectively.

During the three months ended February 28, 2023, cash used in financing activities was primarily due to (1) $963 million of net repayments under our Financial Services' warehouse facilities;

(2) $258 million of repurchases of our common stock, which included $191 million of repurchases under our repurchase program and $67 million of repurchases related to our equity compensation plan;

(3) $108 million of dividend payments;

and (5) $108 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks.

During the three months ended February 28, 2022, cash used in financing activities was primarily due to (1) $528.7 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

(2) $581.3 million of repurchases of our common stock, which included $526.4 million of repurchases under our repurchase program and $54.9 million of repurchases related to our equity compensation plan;

and (3) $110 million of dividend payments.

These were partially offset by $33 million of net proceeds from liabilities related to consolidated inventory not owned due to activity with land banks.

During the nine months ended August 31, 2021, cash used in financing activities was primarily impacted by (1) $357.5 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

(2) the redemption of $300 million aggregate principal amount of our senior notes;

(3) $234 million of dividend payments;

and (4) repurchases of our common stock for $452.5 million, which included $388.0 million of repurchases under our repurchase program and $64.6 million of repurchases related to our equity compensation plan.

These were partially offset by $441.2 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) August 31, 2022 November 30, 2021 August 31, 2021

(Dollars in thousands) February 28, 2023 November 30, 2022 February 28, 2022

Homebuilding debt $ 4,033,335 4,047,294 4,639,222

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

At August 31, 2022, Homebuilding debt to total capital was lower compared to both November 30, 2021 and August 31, 2021, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to

debt paydowns, partially offset by share repurchases.

At February 28, 2023, Homebuilding debt to total capital was lower compared to both November 30, 2022 and February 28, 2022, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to debt paydowns, 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.

These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of

homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.

These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.

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.

Subject to market conditions, we intend to spin off our Multifamily and single family home for rent asset management businesses, together with some investment assets, by transferring them to a newly formed subsidiary, Quarterra Group, Inc.

("Quarterra"), and distributing the stock of that subsidiary to our stockholders.

That will make us more of a pure homebuilding and financial services company.

At this time, we have deferred this transaction due to current market conditions.

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:

Nine Months Ended

Three Months Ended

(Dollars in thousands) 2023 2022

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Interest incurred $ 49,577 59,933

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") which increased 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 maximum available borrowings on our unsecured revolving credit facility (the "Credit Facility") were as follows:

(In thousands) February 28, 2023

Commitment - maturing in April 2024 $ 350,000

Commitment - maturing in May 2027 2,225,000

Total commitment $ 2,575,000

Accordion feature 425,000

Total maximum borrowings capacity $ 3,000,000

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.

The maturity, debt covenants and details of the Credit Facility are unchanged from the disclosure in the Company's Financial Condition and Capital Resources section in its Form 10-K for the year ended November 30, 2022.

In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.

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 August 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 August 31, 2022:

We believe we were in compliance with our debt covenants as of February 28, 2023.

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 February 28, 2023:

(Dollars in thousands) Covenant Level Level Achieved as of

August 31, 2022

February 28, 2023

Minimum net worth test $ 12,314,416 18,093,690

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

The LMF Commercial facilities finance LMF Commercial loan origination and securitization activities and were secured by up to an 80% interest in the originated commercial loans financed.

The LMF Commercial facilities finance LMF Commercial loan origination and securitization activities and were secured by up to 80% interests in the originated commercial loans financed.

These facilities and the related borrowings and collateral are detailed in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Changes in Capital Structure

In October 2021, the Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to the lesser of an additional $1 billion in value, or 25 million in shares, of our outstanding Class A or Class B common stock.

As a result of prior authorizations being almost exhausted, in March 2022, our Board of Directors approved an additional authorization for us to repurchase up to the lesser of $2 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock.

In March 2022, our Board of Directors approved an authorization for us to repurchase up to the lesser of $2 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock.

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 and nine months ended August 31, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the nine months ended August 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.

During the nine months ended August 31, 2022, 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 nine months ended August 31, 2021, treasury shares increased due to our repurchase of 4.8 million shares of Class A and Class B common stock primarily due to our repurchase of 4.0 million shares of Class A and Class B common stock through our stock repurchase program.

On September 28, 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 October 27, 2022 to holders of record at the close of business on October 13, 2022 .

On July 21, 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 July 7, 2022, as declared by our Board of Directors on June 22, 2022.

This authorization was in addition to what was remaining of the October 2021 stock repurchase program.

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three months ended February 28, 2023 and 2022 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the three months ended February 28, 2023, treasury shares increased 2.7 million shares primarily due to our repurchase of 2.0 million shares of Class A and Class B common stock through our stock repurchase program.

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

On February 10, 2023, 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, 2023, as declared by our Board of Directors on January 12, 2023.

We approved and paid cash dividends of $0.375 per share for each of the four quarters of 2022 on both our Class A and Class B common stock.

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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 August 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.

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, 2023 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 August 31, 2022 is included in the following tables.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at February 28, 2023 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) August 31, 2022 November 30, 2021

(In thousands) February 28, 2023 November 30, 2022

Due from non-guarantor subsidiaries $ 18,605,868 17,959,091

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Total liabilities 9,839,178 10,455,359

Nine Months Ended

(In thousands) August 31, 2022

Three Months Ended

(In thousands) February 28, 2023

Total revenues $ 6,070,975

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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 August 31, 2022.

We believe all of the joint ventures were in compliance with applicable debt covenants at February 28, 2023.

Homebuilding:

Investments in Unconsolidated Entities

As of August 31, 2022, we had equity investments in 47 active homebuilding and land unconsolidated entities (of which 2 had recourse debt, 14 had non-recourse debt and 31 had no debt) compared to 41 active homebuilding and land unconsolidated entities at November 30, 2021.

As of February 28, 2023, we had equity investments in 48 active homebuilding and land unconsolidated entities (of which 4 had recourse debt, 15 had non-recourse debt and 29 had no debt) compared to 48 active homebuilding and land unconsolidated entities at November 30, 2022.

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.

Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures.

The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or

could not obtain access on as favorable terms, without the participation of a strategic partner.

The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner.

Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners.

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Joint ventures with strategic partners have allowed us to combine our homebuilding expertise with the specific expertise (e.g.

commercial or infill experience) of our partners.

commercial or

infill experience) of our partners.

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 August 31, 2022.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of February 28, 2023.

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

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(In thousands) Total JV Debt 2023 2024 2025 Thereafter Other

Debt without recourse to Lennar $ 1,227,241 55,983 115,345 374,095 681,818 —

Bank debt without recourse to Lennar $ 1,390,220 156,069 393,883 726,236 114,032 —

Land seller and other debt without recourse to Lennar 10,442 — — — 10,442 —

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Investments in Unconsolidated Entities

At August 31, 2022, Multifamily had equity investments in 24 active unconsolidated entities that are engaged in multifamily residential developments (of which 14 had non-recourse debt and 10 had no debt), compared to 17 active unconsolidated entities at November 30, 2021.

At February 28, 2023, Multifamily had equity investments in 23 active unconsolidated entities that are engaged in multifamily residential developments (of which 18 had non-recourse debt and 5 had no debt), compared to 23 active unconsolidated entities at November 30, 2022.

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

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Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners.

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 nine months ended August 31, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

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

The Multifamily segment includes LMV I, LMV II and Canada Pension Plan Investments 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, 2023 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of February 28, 2023.

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

As part of the sale of the Rialto investment and asset management platform in 2018, we retained our ability to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds.

As part of the sale of the Rialto investment and asset management platform in 2018, we retained our ability to receive a portion of payments with regard to carried interests if certain funds meet specified performance thresholds.

We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests.

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

Our investment in the Rialto funds and investment vehicles totaled $193.8 million and $200.6 million as of August 31, 2022 and November 30, 2021, respectively.

As of August 31, 2022 and November 30, 2021, we had strategic technology investments in unconsolidated entities of $148.9 million and $145.6 million, respectively.

Our investment in the Rialto funds and investment vehicles totaled $177.7 million and $185.1 million as of February 28, 2023 and November 30, 2022, respectively.

As of February 28, 2023 and November 30, 2022, we had strategic technology investments in unconsolidated entities of $137.9 million and $131.5 million, respectively.

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

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We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.

The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") and unconsolidated JVs (i.e., controlled homesites):

August 31, 2022 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

The table below indicates the number of homesites owned (excluding homes in inventory) and homesites to which we had access through option contracts with third parties and unconsolidated JVs (i.e., controlled homesites):

February 28, 2023 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 85,271 38,542 123,813

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% of total homesites 68 % 32 %

August 31, 2021 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

February 28, 2022 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 97,731 46,949 144,680

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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, 2022.

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

There were no outstanding borrowings under our Credit Facility as of February 28, 2023.

(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 nine months ended August 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 nine months ended August 31, 2022, the following provides additional disclosures about our revenue recognition accounting policy.

Revenue Recognition

Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer.

We typically offer sales incentives to homebuyers that consist primarily of price discounts on individual homes, financing incentives and optional upgrades (such as upgraded appliances, cabinetry and flooring) without charge.

These incentives are accounted for as a reduction in the sales price of the homes.

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

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

See Note 1 of the Notes to Condensed Consolidated Financial Statements.

We believe that there have been no significant changes to our critical accounting policies during the three months ended February 28, 2023 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, 2022.

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