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Item 2. Management’s Discussion and Analysis

2023-06-30 compared with 2023-04-04 · 315 added, 198 removed, 305 unchanged (63% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K, for our fiscal year ended November 30, 2022.

Some of the statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will” or other words of similar meaning.

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 investigations 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.

These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.

The forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions.

We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements.

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

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

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

decreased demand for our homes or Multifamily rental properties;

the impact of inflation or a higher interest rate environment;

the 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 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;

cost increases related to real estate taxes and insurance;

reduced availability or increased cost of mortgage financing for homebuyers;

increased interest rates or increased competition in the mortgage industry;

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

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

our inability to acquire land at anticipated prices;

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

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

our inability to pay down debt;

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

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

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

difficulty obtaining land-use entitlements or construction financing;

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

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

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.

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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Quarterly Report on Form 10Q and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2022.

In these challenging market conditions, the Lennar team has remained focused on production and pace, cash flow, inventory turns and return on capital, which have produced solid results for the second quarter.

As a result, we ended the second quarter with stronger-than-expected revenues and deliveries, strong profitability and cash flow, a fortified balance sheet, strong liquidity and low leverage.

These results are consistent with the stabilization that we have seen in the current economic environment, together with our adherence to our core operating strategies described below.

The economic environment for the homebuilding industry has stabilized as customers have adjusted to and accepted higher interest rates for longer terms, supply chain disruptions have normalized, inventories have remained low, and the supply of housing across the country has continued to be very limited.

While persistent inflation remains, the steep interest rate hikes which began in 2022 have given way to moderated and measured rate movements, allowing the market to adjust in an orderly fashion.

Strong demand for housing, which had previously been curtailed by price and affordability challenges, has returned while the housing market has adjusted prices, incentives, including rate buy-downs, and production costs to facilitate homebuying by customers.

Although interest rates and affordability have been the primary headwinds to demand, the housing supply shortage has kept inventory levels very low, which in turn has continued to drive customers to stretch their finances as incentives and price reductions have combined to increase affordability and drive demand.

The average sale price of homes has declined year over year through price reductions, together with the use of interest rate buy-downs and other incentives, and the average sales price sequentially has stabilized, as demand has returned.

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

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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 have remained steadfast in our adherence to the core strategies we adopted when the Fed began its tightening program and interest rates began to rise over a year ago.

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

We expect previously negotiated cost reductions to be reflected in our reported numbers in the back half of the year.

• We will continue to sharpen our attention on land and land acquisitions by relentlessly focusing on protecting cash and only purchasing land that delivers strong margins at today’s market pricing, thereby reducing land exposure.

We have made significant progress in reducing land held on our balance sheet, with 70% of our land controlled and 30% of our land owned at this time.

Like our trade partners, our land partners or sellers have become strategic partners in maintaining volume and increasing market share while concurrently helping to reduce cost.

• We will continue to 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 hard-wired.

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.

However, we believe if we continue to drive volume, we’ll be able to constrain increases and manage to attractive cost levels and net margins.

• We will continue to maintain tight inventory control.

We have recently significantly improved inventory control by focusing on selling homes in inventory and increasing our attention to, among other things, underperforming communities.

We are focused on clearing homes that are complete and closable, rather than selling homes that we intend to close many quarters in the 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.

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• 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.

We expect to continue to generate considerable earnings and cash flow which will give us the flexibility to retire debt and purchase stock opportunistically which will improve total shareholder returns and return on equity.

Despite the recent moderation in interest rates and a pause in the more aggressive interest rate hikes, significant inflation remains in the economy.

Market conditions have leveled and stabilized, at least for now, and we will continue to execute on our core strategies.

We are extremely well positioned to navigate the uncertainties of the current market.

We engaged the difficulties of the past year with a consistent strategy that promoted strong execution throughout the company.

When market conditions were difficult and uncertain, Lennar associates knew their mission.

Similarly, as the market has leveled, Lennar associates know their mission and exactly how to execute.

Accordingly, we will continue to provide broad ranges to give some boundaries for various components of our expected results for the third quarter of 2023 and full year 2023.

We expect our new orders for the third quarter of 2023 to be in the range of 18,000 and 19,000 homes.

We expect our deliveries for the third quarter to be between 17,750 and 18,250 homes with a gross margin between 23.5% and 24.0%.

We expect our S,G&A expenses as a percentage of home sale revenues to be between 6.7% and 6.8% but that percentage will adjust based on deliveries and homebuilding revenue.

We expect our third quarter ending community count to be flat with our second quarter, although we expect solid year-over-year growth in this measure by the end of fiscal 2023.

Our third quarter average sales price should be consistent with the second quarter.

Additionally, we are targeting delivery volume for the full year 2023 to be between 68,000 and 70,000 homes as we drive volume 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 months ended February 28, 2023 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three and six months ended May 31, 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 $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.

Our net earnings attributable to Lennar were $872 million, or $3.01 per diluted share, in the second quarter of 2023, compared to net earnings attributable to Lennar of $1.3 billion, or $4.49 per diluted share, in the second quarter of 2022.

Excluding mark-to-market gains (losses) on technology investments in both years, second quarter net earnings attributable to Lennar in 2023 were $852 million or $2.94 per diluted share, compared to second quarter net earnings attributable to Lennar in 2022 of $1.4 billion or $4.69 per diluted share.

Financial information relating to our operations was as follows:

Three Months Ended February 28, 2023

Three Months Ended May 31, 2023

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

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Total costs and expenses 6,438,957 110,380 154,354 6,795 — 6,710,486

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

Equity in loss from unconsolidated entities (12,279) — (5,926) (31,550) — (49,755)

Other income (expense), net and other gains (losses) (4,372) — 374 (5,962) — (9,960)

Lennar Other unrealized gains from technology investments — — 25,497 — 25,497

Operating earnings (loss) $ 1,214,409 112,599 (8,162) (18,399) — 1,300,447

Corporate general and administrative expenses — — — — 124,752 124,752

Charitable foundation contribution — — — — 17,074 17,074

Earnings (loss) before income taxes $ 1,214,409 112,599 (8,162) (18,399) (141,826) 1,158,621

Three Months Ended May 31, 2022

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

Sales of homes $ 7,963,683 — — — — 7,963,683

Sales of land 7,524 — — — — 7,524

Other revenues 6,775 200,166 176,021 4,527 — 387,489

Total revenues 7,977,982 200,166 176,021 4,527 — 8,358,696

Costs and expenses:

Costs of homes sold 5,610,783 — — — — 5,610,783

Costs of land sold 7,815 — — — — 7,815

Selling, general and administrative expenses 486,555 — — — — 486,555

Other costs and expenses — 96,231 175,152 8,236 — 279,619

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

Equity in earnings (loss) from unconsolidated entities 4,862 — (202) (16,467) — (11,807)

Other income (expense), net and other gains (losses) 2,720 — 1 (10,283) — (7,562)

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

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

Three Months Ended February 28, 2022

Six Months Ended May 31, 2023

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

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Total costs and expenses 11,713,671 214,624 303,310 13,271 — 12,244,876

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

Homebuilding other expense, net (171) — — — — (171)

Equity in loss from unconsolidated entities (9,093) — (22,409) (49,440) (80,942)

Other income (expense), net and other gains (losses) 17,690 — 689 (5,019) 13,360

Lennar Other unrealized gains from technology investments — — — 1,543 1,543

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Earnings (loss) before income taxes $ 2,121,248 191,336 (29,763) (58,156) (281,591) 1,943,074

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.

Six Months Ended May 31, 2022

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

Sales of homes $ 13,685,440 — — — — 13,685,440

Sales of land 31,491 — — — — 31,491

Other revenues (1) 13,256 376,867 443,380 11,778 — 845,281

Total revenues 13,730,187 376,867 443,380 11,778 — 14,562,212

Homebuilding costs and expenses:

Costs of homes sold 9,795,647 — — — — 9,795,647

Costs of land sold 36,371 — — — — 36,371

Selling, general and administrative 915,033 — — — — 915,033

Other costs and expenses — 182,141 438,889 13,643 — 634,673

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

Equity in earnings (loss) from unconsolidated entities 4,576 — 1,566 (27,701) — (21,559)

Other income (expense), net and other gains (losses) 2,549 — 38 (8,857) — (6,270)

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

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

Corporate general and administrative expenses — — — — 218,868 218,868

Charitable foundation contribution — — — — 29,087 29,087

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

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

Three Months Ended May 31, 2023 versus Three Months Ended May 31, 2022

Revenues from home sales decreased 4% in the second quarter of 2023 to $7.6 billion from $8.0 billion in the second quarter of 2022.

Revenues were lower primarily due to a 7% decrease in average sales price of home deliveries, partially offset by a 3% increase in the number of home deliveries.

New home deliveries increased to 17,074 homes in the second quarter of 2023 from 16,549 homes second quarter of 2022.

The average sales price of homes delivered was $449,000 in the second quarter of 2023, compared to $483,000 in the second quarter of 2022.

The decrease in average sales price of homes delivered in the second quarter of 2023 compared to the same period last year was primarily due to pricing to market and product mix.

Gross margins on home sales were $1.7 billion, or 22.5%, in the second quarter of 2023, compared to $2.4 billion, or 29.5%, in the second quarter of 2022.

During the second quarter of 2023, gross margin decreased because revenues per square foot decreased year over year as we priced homes to market and 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.

Selling, general and administrative expenses were $510.7 million in the second quarter of 2023, compared to $486.6 million in the second quarter of 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 6.7% in the second quarter of 2023, from 6.1% in the second quarter of 2022, primarily due to an increase in the use of brokers in current market conditions.

During the three months ended May 31, 2023, our homebuilding operating earnings included an impairment of $36.8 million of an investment in a joint venture partially offset by $33.9 million of interest income due to the increase in our cash balances and higher interest rates.

Operating earnings for the Financial Services segment were $112.1 million, net of noncontrolling interests, in the second quarter of 2023, compared to $103.6 million in the second quarter of 2022.

The increase in operating earnings was primarily due to a higher profit per locked loan in our mortgage business as a result of higher margins, partially offset by lower lock volume.

There was also an increase in profitability in our title business primarily due to benefits of our technology efforts.

Operating loss for the Multifamily segment was $8.1 million in the second quarter of 2023, compared to operating earnings of $0.7 million in the second quarter of 2022.

Operating loss for the Lennar Other segment was $18.4 million in the second quarter of 2023, compared to operating loss of $108.4 million in the second quarter of 2022.

Lennar Other operating loss in the second quarter of 2023 was primarily related to operating losses from certain strategic investments, partially offset by the result of mark-to-market gains on our publicly traded technology investments.

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

Six Months Ended May 31, 2023 versus Six Months Ended May 31, 2022

Revenues from home sales were $13.7 billion in both the six months ended May 31, 2023 and 2022.

Revenues were flat primarily because a 6% increase in the number of home deliveries was offset by a 5% decrease in average sales price of homes delivered.

New home deliveries increased to 30,733 homes in the six months ended May 31, 2023 from 29,087 homes in the six months ended May 31, 2022.

The average sales price of homes delivered was $449,000 in the six months ended May 31, 2023, compared to $472,000 in the six months ended May 31, 2022.

The decrease in average sales price of homes delivered in the six months ended May 31, 2023 compared to the same period last year was primarily due to pricing to market and product mix.

Gross margins on home sales were $3.0 billion, or 21.9%, in the six months ended May 31, 2023, compared to $3.9 billion, or 28.4%, in the six months ended May 31, 2022.

During the six months ended May 31, 2023, gross margin decreased because revenues per square foot decreased year over year as we priced homes to market and 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 $960.5 million in the six months ended May 31, 2023, compared to $915.0 million in the six months ended May 31, 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 7.0% in the six months ended May 31, 2023, from 6.7% in the six months ended May 31, 2022.

During the six months ended May 31, 2023, our homebuilding operating earnings included an impairment of $36.8 million of an investment in a joint venture partially offset by $33.9 million of interest income due to an increase in cash balances and higher interest rates.

Operating earnings for the Financial Services segment were $191.3 million in the six months ended May 31, 2023, compared to $194.7 million in the six months ended May 31, 2022.

Operating loss for the Multifamily segment was $29.8 million in the six months ended May 31, 2023, compared to operating earnings of $6.1 million in the six months ended May 31, 2022.

Operating loss for the Lennar Other segment was $58.2 million in the six months ended May 31, 2023, compared to operating loss of $511.6 million in the six months ended May 31, 2022.

Lennar Other operating loss in the six months ended May 31, 2023 was primarily related to operating losses from certain strategic investments.

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

For the six months ended May 31, 2023 and 2022, we had a tax provision of $466.0 million and $599.7 million, respectively, which resulted in an overall effective income tax rate of 24.1% and 24.7%, respectively.

In the six months ended May 31, 2023, our overall effective income tax rate was lower than last year primarily due to the reinstatement of the new energy efficient homes credit as a result of the enactment of the Inflation Reduction Act during the third quarter of 2022.

Homebuilding Segments

At February 28, 2023, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

At May 31, 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 February 28, 2023

Three Months Ended May 31, 2023

Gross Margins Operating Earnings (Loss)

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$ 7,636,579 5,916,325 22.5 % 1,209,554 4,382 17,124 (12,279) (4,372) 1,214,409

Three Months Ended February 28, 2022

Three Months Ended May 31, 2022

Gross Margins Operating Earnings (Loss)

($ in thousands) Sales of Homes Revenue Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins on Sales of Land Other Revenue Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net 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 $ 2,209,967 1,510,758 31.6 % 546,589 (619) 1,195 (659) 7,313 553,819

4 unchanged sentences

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

Six Months Ended May 31, 2023

Gross Margins Operating Earnings (Loss)

East $ 4,176,479 2,970,129 28.9 % 882,462 (1,830) 24,293 6,358 18,836 930,119

Central 2,423,845 1,922,951 20.7 % 306,832 6,665 21,681 (227) 10,647 345,598

Texas 2,154,490 1,708,077 20.7 % 297,967 (733) 5,163 — 5,963 308,360

West 4,967,027 4,105,946 17.3 % 571,791 (12,079) 10,485 1,662 14,113 585,972

Other (2) 8,565 12,065 (40.9) % (8,308) — 8,262 (16,886) (31,869) (48,801)

$ 13,730,406 10,719,168 21.9 % 2,050,744 (7,977) 69,884 (9,093) 17,690 2,121,248

Six Months Ended May 31, 2022

Gross Margins Operating Earnings (Loss)

East $ 3,872,958 2,687,311 30.6 % 898,143 (6,293) 1,992 (2,017) 13,989 905,814

Central 2,389,693 1,852,445 22.5 % 357,268 1,619 460 431 (905) 358,873

Texas 1,899,163 1,321,703 30.4 % 442,875 2,871 497 — (2,074) 444,169

West 5,509,465 3,918,290 28.9 % 1,290,864 (984) 1,559 2,707 (4,849) 1,289,297

Other (2) 14,161 15,898 (12.3) % (14,390) (2,093) 8,748 3,455 (3,612) (7,892)

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

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

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Average Sales Price

February 28, February 28, February 28,

May 31, May 31, May 31,

2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 17,074 16,549 $ 7,667,497 7,979,441 $ 449,000 483,000

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.

Of the total homes delivered listed above, 72 homes with a dollar value of $30.9 million and an average sales price of $429,000 represent home deliveries from unconsolidated entities for the three months ended May 31, 2023, compared to 44 home deliveries with a dollar value of $15.8 million and an average sales price of $358,000 for the three months ended May 31, 2022.

Six Months Ended

Homes Dollar Value (In thousands) Average Sales Price

May 31, May 31, May 31,

2023 2022 2023 2022 2023 2022

East 9,667 9,280 $ 4,239,069 3,898,097 $ 439,000 420,000

Central 5,520 5,465 2,423,845 2,389,692 439,000 437,000

Texas 7,329 5,825 2,154,490 1,899,163 294,000 326,000

West 8,207 8,502 4,967,027 5,509,465 605,000 648,000

Other 10 15 8,566 14,161 857,000 944,000

Total 30,733 29,087 $ 13,792,997 13,710,578 $ 449,000 472,000

Of the total homes delivered listed above, 135 homes with a dollar value of $62.6 million and an average sales price of $464,000 represent home deliveries from unconsolidated entities for the six months ended May 31, 2023, compared to 69 home deliveries with a dollar value of $25.1 million and an average sales price of $364,000 for the six months ended May 31, 2022.

Sales Incentives (1):

3 unchanged sentences

as a % of Revenue

February 28, February 28,

May 31, May 31,

2023 2022 2023 2022

5 unchanged sentences

Total $ 41,000 7,200 8.4 % 1.5 %

Six Months Ended

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenue

May 31, May 31,

2023 2022 2023 2022

East $ 31,500 6,100 6.7 % 1.4 %

Central 32,700 6,000 6.9 % 1.4 %

Texas 62,200 12,800 17.5 % 3.8 %

West 54,700 7,300 8.3 % 1.1 %

Other 100,200 95,200 10.5 % 9.2 %

Total $ 45,300 7,800 9.2 % 1.6 %

(1) Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

3 unchanged sentences

Average Sales Price

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

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

2023 2022 2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 1,263 1,225 17,885 17,792 $ 8,171,444 9,098,269 $ 457,000 511,000

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.

Of the total homes listed above, 73 homes with a dollar value of $37.0 million and an average sales price of $507,000 represent homes in seven active communities from unconsolidated entities for the three months ended May 31, 2023, compared to 60 homes with a dollar value of $30.8 million and an average sales price of $514,000 in seven active communities for the three months ended May 31, 2022.

Six Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

2023 2022 2023 2022 2023 2022

East 9,761 10,883 $ 4,208,450 4,886,826 $ 431,000 449,000

Central 5,923 6,688 2,509,528 3,065,492 424,000 458,000

Texas 6,874 6,141 1,959,213 2,111,048 285,000 344,000

West 9,510 9,812 5,898,485 6,818,611 620,000 695,000

Other 11 15 9,229 13,831 839,000 922,000

Total 32,079 33,539 $ 14,584,905 16,895,808 $ 455,000 504,000

Of the total homes delivered listed above, 170 homes with a dollar value of $75.2 million and an average sales price of $443,000 represent home deliveries from unconsolidated entities for the six months ended May 31, 2023, compared to 104 home deliveries with a dollar value of $48.2 million and an average sales price of $463,000 for the six months ended May 31, 2022.

(2) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and six months ended May 31, 2023 and 2022.

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

Three Months Ended

Three Months Ended Six Months Ended

May 31, May 31,

2023 2022 2023 2022

East 13 % 7 % 18 % 7 %

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Average Sales Price

February 28, February 28, February 28,

May 31, May 31, May 31,

2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 20,214 28,624 $ 9,532,388 14,689,964 $ 472,000 513,000

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.

Of the total homes in backlog listed above, 201 homes with a backlog dollar value of $90.4 million and an average sales price of $450,000 represent the backlog from unconsolidated entities at May 31, 2023, compared to 114 homes with a backlog dollar value of $51.7 million and an average sales price of $453,000 at May 31, 2022.

Backlog represents the number of homes under sales contracts.

3 unchanged sentences

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

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

Three Months Ended May 31, 2023 versus Three Months Ended May 31, 2022

Homebuilding East:

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.

Revenues from home sales increased in the second quarter of 2023 compared to the second 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 South Carolina and an increase in the average sales price of homes delivered in all the states in the segment except in Alabama.

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 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.

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

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

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

In the second quarter of 2023, an increase in revenues per square foot was more than 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.

In addition, land costs increased year over year.

Homebuilding Central:

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.

Revenues from home sales increased in the second quarter of 2023 compared to the second quarter of 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia, Maryland, Tennessee and Virginia while the average sales price of homes delivered decreased in all the states in the segment except in Georgia, Illinois, Indiana, Maryland and Tennessee.

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

The decrease in the number of home deliveries in other states of the segment was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.

The increase in the average sales price of homes delivered in Georgia, Illinois, Indiana, Maryland, and Tennessee 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.

In the second 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.

In addition, land costs remained relatively flat 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.

Revenues from home sales increased in the second quarter of 2023 compared to the second 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 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.

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

In addition, land costs remained relatively flat year over year.

Homebuilding West:

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.

Revenues from home sales decreased in the second quarter of 2023 compared to the second quarter of 2022, primarily due to a decrease in the number of home deliveries in all the states in the segment except in Arizona, Idaho and Oregon and a decrease in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries in Arizona, Idaho and Oregon was primarily due to an increase in the number of deliveries per active community.

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

In addition, land costs increased year over year.

Six Months Ended May 31, 2023 versus Six Months Ended May 31, 2022

Homebuilding East:

Revenues from home sales increased in the six months ended May 31, 2023 compared to the six months ended May 31, 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in New Jersey and South Carolina 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 New Jersey and South Carolina was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.

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

In the six months ended May 31, 2023, an increase in

revenues per square foot was more than 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.

In addition, land costs increased year over year.

Homebuilding Central:

Revenues from home sales increased in the six months ended May 31, 2023 compared to the six months ended May 31, 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia, Maryland, Minnesota, Tennessee and Virginia and an increase in the average sales price of homes delivered in all the states in the segment except in Minnesota, North Carolina and Virginia.

The increase in the number of home deliveries in Illinois, Indiana and North Carolina 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 Georgia, Illinois, Indiana, Maryland, Tennessee 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.

In the six months ended May 31, 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.

In addition, land costs remained relatively flat year over year.

Homebuilding Texas:

Revenues from home sales increased in the six months ended May 31, 2023, compared to the six months ended May 31, 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 decrease in the average sales price of homes delivered was primarily due to pricing to market.

In addition, land costs remained relatively flat year over year.

Homebuilding West:

Revenues from home sales decreased in the six months ended May 31, 2023 compared to the six months ended May 31, 2022, primarily due to a decrease in the number of home deliveries in all the states in the segment except in Arizona, Idaho, Nevada and Oregon and a decrease in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries in Arizona, Idaho, Nevada and Oregon was primarily due to an increase in the number of deliveries per active community.

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

In addition, land costs increased year over year.

Financial Services Segment

4 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

May 31, May 31,

(Dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

Number of title and closing service transactions 17,600 17,400 31,900 31,100

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.

At May 31, 2023 and November 30, 2022, the carrying value of Financial Services' commercial mortgage-backed securities was $141.4 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.

4 unchanged sentences

Balance Sheets

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

(In thousands) May 31, 2023 November 30, 2022

Multifamily investments in unconsolidated entities $ 629,649 648,126

2 unchanged sentences

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

At February 28, 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.

At May 31, 2023 and November 30, 2022, we had $791.4 million and $788.5 million, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $292.1 million and $316.5 million, respectively.

The investments in equity securities of Blend Labs, Inc.

4 unchanged sentences

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

("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 (loss) from mark-to-market adjustments on our technology investments:

Three Months Ended

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

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

Three Months Ended Six Months Ended

May 31, May 31,

(In thousands) 2023 2022 2023 2022

5 unchanged sentences

Sunnova (NOVA) 233 106 (24,233) (74,935)

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

Lennar Other unrealized gains (losses) from technology investments $ 25,497 (77,965) 1,543 (473,135)

(2) Financial Condition and Capital Resources

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.

At May 31, 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 May 31, 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 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.

At May 31, 2023, we had $4.0 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing approximately $6.6 billion of available capacity.

Operating Cash Flow Activities

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.

During the six months ended May 31, 2023 and 2022, cash provided by operating activities totaled $1.6 billion and $53 million, respectively.

During the six months ended May 31, 2023, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $578 million primarily related to the sale of loans originated by our Financial Services segment and a decrease in receivables of $436 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 a decrease in accounts payable and other liabilities of $991 million, primarily due to the payment of income taxes.

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

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

Investing Cash Flow Activities

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.

During the six months ended May 31, 2023 and 2022, cash used in investing activities totaled $81 million and $65 million, respectively.

During the six months ended May 31, 2023, our cash used in investing activities was primarily due to cash contributions of $108 million to unconsolidated entities, which included (1) $54 million to Homebuilding unconsolidated entities, (2) $40 million to Lennar other unconsolidated entities and (3) $14 million to Multifamily unconsolidated entities.

This was partially offset by distributions of capital from unconsolidated entities of $46 million, which primarily included (1) $33 million from Homebuilding unconsolidated entities, and (2) $13 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.

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

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

1 unchanged sentence

Financing Cash Flow Activities

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;

During the six months ended May 31, 2023 and 2022, cash used in financing activities totaled $2.1 billion and $1.4 billion, respectively.

During the six months ended May 31, 2023, cash used in financing activities was primarily due to (1) $978 million of net repayments under our Financial Services' warehouse facilities;

(2) $465 million of repurchases of our common stock, which included $401 million of repurchases under our repurchase program and $64 million of repurchases related to our equity compensation plan;

(3) $158 million of repurchases of senior notes due in fiscal year 2024;

(4) $218 million of dividend payments;

and (5) $186 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;

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

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

3 unchanged sentences

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

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

(Dollars in thousands) May 31, 2023 November 30, 2022 May 31, 2022

Homebuilding debt $ 3,852,258 4,047,294 4,645,791

10 unchanged sentences

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

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.

At May 31, 2023, Homebuilding debt to total capital was lower compared to both November 30, 2022 and May 31, 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 and debt repurchases, 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.

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.

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.

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.

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

At this time, we have deferred this transaction due to 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:

Three Months Ended

Six Months Ended

(Dollars in thousands) 2023 2022

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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

(In thousands) May 31, 2023

Commitments - maturing in April 2024 $ 350,000

Commitments - maturing in May 2027 2,225,000

Total commitment $ 2,575,000

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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.

The Credit Facility 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 our Financial Condition and Capital Resources section in our Annual Report on Form 10-K for the fiscal year ended November 30, 2022.

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

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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 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:

We believe we were in compliance with our debt covenants as of May 31, 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 May 31, 2023:

(Dollars in thousands) Covenant Level Level Achieved as of

February 28, 2023

Minimum net worth test $ 12,853,382 18,674,331

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Financial Services Warehouse Facilities

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

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

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

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The repurchase authorization has no expiration date.

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.

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

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the six months ended May 31, 2023 and 2022 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the six months ended May 31, 2023, treasury shares increased by 4.7 million shares primarily due to our repurchase of 4.0 million shares of Class A and Class B common stock through our stock repurchase program.

During the six

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

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

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

On June 22, 2023, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock, payable on July 21, 2023 to holders of record at the close of business on July 7, 2023.

On May 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 April 26, 2023, as declared by our Board of Directors on April 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 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.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at May 31, 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 February 28, 2023 is included in the following tables.

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

(In thousands) May 31, 2023 November 30, 2022

Due from non-guarantor subsidiaries $ 19,612,429 17,959,091

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Total liabilities 9,485,998 10,455,359

Three Months Ended

(In thousands) February 28, 2023

Six Months Ended

(In thousands) May 31, 2023

Total revenues $ 13,665,442

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Off-Balance Sheet Arrangements

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

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

We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.

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

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

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

We believe all of the joint ventures were in compliance with applicable debt covenants at May 31, 2023.

Homebuilding:

Investments in Unconsolidated Entities

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.

As of May 31, 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) and 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.

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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 February 28, 2023.

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

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.

At May 31, 2023, Multifamily had equity investments in 23 active unconsolidated entities that are engaged in multifamily residential developments (of which 19 had non-recourse debt and 4 had no debt) and 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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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.

Details of each as of and during the six months ended May 31, 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 May 31, 2023.

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

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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 $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.

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 equity in earnings (loss) in the condensed consolidated statement of operations.

Our investment in the Rialto funds totaled $170.8 million and $185.1 million as of May 31, 2023 and November 30, 2022, respectively.

As of May 31, 2023 and November 30, 2022, we had strategic technology investments in unconsolidated entities of $121.3 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 (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)

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

May 31, 2023 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 88,396 34,718 123,114

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% of total homesites 70% 30%

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

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

East 109,986 40,905 150,891

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Contractual Obligations and Commercial Commitments

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 February 28, 2023.

(3) Recently Adopted Accounting Pronouncements

See Note 1 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Report for a discussion of recently adopted accounting pronouncements.

See Note 1 of the Notes to Condensed Consolidated Financial Statements included under Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting pronouncements.

(4) Critical Accounting Policies

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

We believe that there have been no significant changes to our critical accounting policies during the six months ended May 31, 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 fiscal 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