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Item 2. Management’s Discussion and Analysis

2023-09-29 compared with 2023-06-30 · 232 added, 213 removed, 407 unchanged (52% of the section changed)

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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.

In these current market conditions, the Lennar team has remained focused on balancing and maintaining production and sales pace, reducing cycle time and increasing cash flow, improving inventory turn and driving strong bottom line earnings, which have produced solid results for the quarter.

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

Our third quarter results reflect consistent adherence to the core operating strategies that we have described in prior quarters against the backdrop of an evolving economic environment and a constructively configured housing landscape.

The economic environment for the homebuilding industry has stabilized relative to the aggressive interest rate climb that defined the environment in 2022.

We have entered a phase of more measured adjustments to curtail inflation while the Fed reduces its balance sheet and engages other mechanisms to reduce capital in the market.

Although persistent inflation remains, aggressive interest rate hikes which began in 2022 have given way to moderated and measured rate movements, allowing the market to adjust in a more orderly fashion.

While the Fed is working to reduce overall capital levels, the elimination of sharp turns and aggressive moves is generally conducive to consumers gaining access to sufficient capital for their necessities, including housing.

Against that backdrop, the current housing market is generally defined by a low supply of, and strong demand for, affordable products.

Consumers have adjusted to and accepted higher interest rates for longer terms and are willing to purchase or rent what they can afford.

Strong demand for housing has returned within the limits of affordability.

The market has attracted consumers by adjusting prices, increasing incentives and driving down production costs to facilitate homebuying by customers, and customers have responded, with the understanding that the cost of housing will likely continue to be higher.

Although declining year-over-year through price reductions, together with the use of interest rate buy-downs and other incentives, the average sales price of homes has now stabilized with not much change sequentially.

Concurrently, multifamily supply is increasing, and in some geographies, we have seen excess supply, which is moderating rental rates.

As such, we do not expect a significant decrease or increase in rents.

Overall, we believe that the housing market has leveled, and while net average sales prices are lower, cancellations have been normalizing and margins have stabilized, as cost reductions in value engineering provide an offset to the price reductions.

In addition, we believe that the new supply of homes will be limited as developed land is also in short supply and increasingly more expensive to develop.

This is expected to continue to limit available inventory and maintain the imbalance between supply and demand.

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 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 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.

Against this backdrop, we have remained focused on our core strategies that are driving our company forward.

• Focus on Production and Volume to Drive Efficiency, Cash Flow and Margins - We will continue to remain production and volume-focused, with a primary focus on driving production efficiency, higher inventory turns, higher cash flow and strong margins, while focusing on return on assets.

At the same time, we will continue to keep production pace and sales pace closely matched using our digital marketing and Dynamic Pricing Model.

• Work Side-by-Side with Our Trade Partners on Costs and Cost Structure - We will continue to work side-by-side with our trade partners to maintain our now properly configured cost structure relative to the current sale price environment while we continue to reduce cycle time to pre-supply chain crisis levels.

We have held costs down as the market has stabilized, as reflected in our margin improvement and in the number of homes that were construction-ready and available for delivery in the third quarter.

• Sharpen Attention on Land and Land Bank Strategies - We will continue to sharpen our attention on land and land acquisitions, as well as land and land bank strategies.

We have made significant progress in reducing land held on our balance sheet, which now stands at 1.5 years owned and 73% controlled homesites.

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 costs.

• Manage Operating Costs and Reduce S,G&A Expense - 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 have seen upward pressure on some of our sales, marketing and realtor costs in order to find purchasers and drive new sales.

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.

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

• Maintain Tight Inventory Control - 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 and products and plans that are not selling as expected.

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

We have significantly reduced cycle time and expect to continue to bring down our cycle time down to pre-pandemic levels.

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.

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.

• Focus on Cash Flow and Bottom Line to Enhance our Balance Sheet - We will continue to focus on our cash flow and bottom line to protect and enhance our already strong balance sheet.

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

In summary, the housing market has continued to be defined by housing shortage and generally strong demand that is prepared to transact.

Accordingly, we executed on our core strategies against the economic and industry backdrop.

Given consistent execution, we are extremely well positioned for continued success as strong demand for affordable offerings continues to exceed the current short supply.

Knowing what to do and executing our plan has driven this quarter's success and ensures consistent success for the foreseeable future.

As we look ahead to a successful fourth quarter and into 2024, we are positioned for and expect to see much of the same as we go forward.

We will continue to provide limited guidance to give some boundaries for various components of our expected results for the fourth quarter and full year 2023.

We expect our new orders for the fourth quarter of 2023 to be in the range of 16,200 and 17,200 homes.

We expect our deliveries for the fourth quarter to be between 21,500 and 22,500 homes with a gross margin between 24.4% and 24.6%.

We expect our S,G&A expenses as a percentage of home sale revenues to be between 6.7% and 6.9% as we continue to focus on maintaining sales and production paces.

We expect our fourth quarter ending community count to increase mid-single digits year-over-year.

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

Additionally, we are targeting delivery volume for the full year 2023 to be between 70,800 and 71,800 homes which is an increase of 7% to 8% year-over-year.

(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 six months ended May 31, 2023 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three and nine months ended August 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 $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.

Our net earnings attributable to Lennar were $1.1 billion, or $3.87 per diluted share, in the third quarter of 2023, compared to net earnings attributable to Lennar of $1.5 billion, or $5.03 per diluted share, in the third quarter of 2022.

Results for the third quarter of 2023 included unrealized mark-to-market losses of $15.7 million on our publicly traded technology investments.

Results for the third quarter of 2022 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 and a $53.6 million benefit in income taxes primarily related to the resolution of an uncertain state tax position.

Excluding mark-to-market losses on technology investments in both years and one-time items in the prior year, third quarter net earnings attributable to Lennar in 2023 were $1.1 billion or $3.91 per diluted share, compared to third quarter net earnings attributable to Lennar in 2022 of $1.5 billion or $5.18 per diluted share.

Financial information relating to our operations was as follows:

Three Months Ended May 31, 2023

Three Months Ended August 31, 2023

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

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Other income (expense), net and other gains (losses) 42,284 — 554 1,313 — 44,151

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

Lennar Other unrealized losses from technology investments — — — (15,713) — (15,713)

Operating earnings (loss) $ 1,493,820 148,995 (8,733) (26,218) — 1,607,864

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Earnings (loss) before income taxes $ 1,493,820 148,995 (8,733) (26,218) (132,703) 1,475,161

Three Months Ended May 31, 2022

Three Months Ended August 31, 2022

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

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Earnings (loss) before income taxes $ 1,963,224 63,348 48,487 (117,980) (132,805) 1,824,274

Six Months Ended May 31, 2023

Nine Months Ended August 31, 2023

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

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Other income (expense), net and other gains (losses) 59,974 — 1,243 (3,706) 57,511

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

Lennar Other unrealized losses from technology investments — — — (14,170) (14,170)

Operating earnings (loss) $ 3,615,068 340,331 (38,496) (84,374) — 3,832,529

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Earnings (loss) before income taxes $ 3,615,068 340,331 (38,496) (84,374) (414,294) 3,418,235

Six Months Ended May 31, 2022

Nine Months Ended August 31, 2022

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

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

(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.

(1) During the three and nine months ended August 31, 2022, other revenues in our Multifamily segment included land sales to unconsolidated entities of $62.2 million and $210.0 million, respectively .

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

Revenues from home sales decreased 2% in the third quarter of 2023 to $8.3 billion from $8.4 billion in the third quarter of 2022.

Revenues were lower primarily due to a 9% decrease in average sales price of home deliveries, partially offset by an 8% increase in the number of home deliveries.

New home deliveries increased to 18,559 homes in the third quarter of 2023 from 17,248 homes in the third quarter of 2022.

The average sales price of homes delivered was $448,000 in the third quarter of 2023, compared to $491,000 in the third quarter of 2022.

The decrease in average sales price of homes delivered in the third 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 $2.0 billion, or 24.4%, in the third quarter of 2023, compared to $2.5 billion, or 29.2%, in the third quarter of 2022.

During the third quarter of 2023, gross margins decreased because revenues per square foot decreased year over year as we priced homes to market, which was partially offset by a decrease in costs per square foot due to lower material costs.

In addition, land costs increased year over year.

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.

Selling, general and administrative expenses were $582.8 million in the third quarter of 2023, compared to $485.9 million in the third quarter of 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 7.0% in the third quarter of 2023, from 5.8% in the third quarter of 2022, primarily due to an increase in the use of brokers due to current market conditions.

Operating earnings for the Financial Services segment were $149.0 million ($148.3 million net of noncontrolling interests) in the third quarter of 2023, compared to $63.0 million in the third quarter of 2022.

In 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 $98.5 million in the third quarter of 2022.

The increase in operating earnings in 2023 was primarily due to a higher profit per locked loan in our mortgage business as a result of higher margins, and higher lock volume because of an increased capture rate.

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.

Operating loss for the Multifamily segment was $8.7 million in the third quarter of 2023, compared to operating earnings of $48.5 million ($45.9 million net of noncontrolling interests) in the third quarter of 2022.

Operating loss for the Lennar Other segment was $26.2 million in the third quarter of 2023, compared to operating loss of $118.0 million in the third quarter of 2022.

Lennar Other operating loss in the third quarter of 2023 was due to operating losses from certain strategic investments and mark-to-market losses on our publicly traded technology investments.

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

Nine Months Ended August 31, 2023 versus Nine Months Ended August 31, 2022

Revenues from home sales were $22.0 billion and $22.1 billion in the nine months ended August 31, 2023 and 2022, respectively.

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

New home deliveries increased to 49,292 homes in the nine months ended August 31, 2023 from 46,335 homes in the nine months ended August 31, 2022.

The average sales price of homes delivered was $448,000 in the nine months ended August 31, 2023, compared to $479,000 in the nine months ended August 31, 2022.

The decrease in average sales price of homes delivered in the nine months ended August 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 $5.0 billion, or 22.9%, in the nine months ended August 31, 2023, compared to $6.4 billion, or 28.7%, in the nine months ended August 31, 2022.

During the nine months ended August 31, 2023, gross margins 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 material 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.

Selling, general and administrative expenses were $1.5 billion in the nine months ended August 31, 2023, compared to $1.4 billion in the nine months ended August 31, 2022.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 7.0% in the nine months ended August 31, 2023, from 6.3% in the nine months ended August 31, 2022, primarily due to an increase in the use of brokers due to current market conditions.

During the nine months ended August 31, 2023, our homebuilding operating earnings included $102.7 million of interest income due to an increase in cash balances and higher interest rates, which was partially offset by an impairment of $36.8 million of an investment in a joint venture.

Operating earnings for the Financial Services segment were $340.3 million ($338.7 million net of noncontrolling interests) in the nine months ended August 31, 2023, compared to $257.1 million in the nine months ended August 31, 2022.

In 2022, 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 in the third quarter of 2022.

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 $38.5 million ($38.4 million net of noncontrolling interests) in the nine months ended August 31, 2023, compared to operating earnings of $54.6 million ($52.0 million net of noncontrolling interests) in the nine months ended August 31, 2022.

Operating loss for the Lennar Other segment was $85.8 million in the nine months ended August 31, 2023, compared to operating loss of $629.5 million in the nine months ended August 31, 2022.

Lennar Other operating loss in the nine months ended August 31, 2023 was primarily related to operating losses from certain strategic

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

For the nine months ended August 31, 2023 and 2022, we had tax provisions of $824.2 million and $951.3 million, respectively, which resulted in overall effective income tax rates of 24.2% and 22.4%, respectively.

In the nine months ended August 31, 2023, our overall effective income tax rate was higher than last year, primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the new energy efficient home credit, both during the third quarter of 2022.

Homebuilding Segments

At May 31, 2023, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

At August 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 May 31, 2023

Three Months Ended August 31, 2023

Gross Margins Operating Earnings (Loss)

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$ 8,285,873 6,261,578 24.4 % 1,441,530 1,710 12,312 (4,016) 42,284 1,493,820

Three Months Ended May 31, 2022

Three Months Ended August 31, 2022

Gross Margins Operating Earnings (Loss)

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

Six Months Ended May 31, 2023

Nine Months Ended August 31, 2023

Gross Margins Operating Earnings (Loss)

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$ 22,016,279 16,980,746 22.9 % 3,492,274 (6,267) 82,196 (13,109) 59,974 3,615,068

Six Months Ended May 31, 2022

Nine Months Ended August 31, 2022

Gross Margins Operating Earnings (Loss)

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

(2) Negative gross and net margins were due to period costs and impairments in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.

(2) Negative gross and net margins were due to period costs and/or impairments in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.

Summary of Homebuilding Data

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Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

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Total 18,559 17,248 $ 8,318,499 8,456,358 $ 448,000 491,000

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

Of the total homes delivered listed above, 66 homes with a dollar value of $32.6 million and an average sales price of $494,000 represent home deliveries from unconsolidated entities for the three months ended August 31, 2023, compared to 46 home deliveries with a dollar value of $17.2 million and an average sales price of $375,000 for the three months ended August 31, 2022.

Nine Months Ended

Homes Dollar Value (In thousands) Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 49,292 46,335 $ 22,111,496 22,166,936 $ 448,000 479,000

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.

Of the total homes delivered listed above, 201 homes with a dollar value of $95.2 million and an average sales price of $474,000 represent home deliveries from unconsolidated entities for the nine months ended August 31, 2023, compared to 115 home deliveries with a dollar value of $42.4 million and an average sales price of $368,000 for the nine months ended August 31, 2022.

Sales Incentives (1):

3 unchanged sentences

as a % of Revenue

May 31, May 31,

August 31, August 31,

2023 2022 2023 2022

5 unchanged sentences

Total $ 36,400 12,300 7.5 % 2.5 %

Six Months Ended

Nine Months Ended

Average Sales Incentives Per

1 unchanged sentence

as a % of Revenue

May 31, May 31,

August 31, August 31,

2023 2022 2023 2022

10 unchanged sentences

Average Sales Price

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

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

2023 2022 2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 1,253 1,189 19,666 14,366 $ 8,639,642 6,657,723 $ 439,000 463,000

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

Of the total homes listed above, 82 homes with a dollar value of $42.0 million and an average sales price of $512,000 represent homes in six active communities from unconsolidated entities for the three months ended August 31, 2023, compared to 79 homes with a dollar value of $39.4 million and an average sales price of $499,000 in seven active communities for the three months ended August 31, 2022.

Nine Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 51,745 47,905 $ 23,224,547 23,553,531 $ 449,000 492,000

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.

Of the total homes delivered listed above, 252 homes with a dollar value of $117.3 million and an average sales price of $465,000 represent home deliveries from unconsolidated entities for the nine months ended August 31, 2023, compared to 183 home deliveries with a dollar value of $87.5 million and an average sales price of $478,000 for the nine months ended August 31, 2022.

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

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

Three Months Ended Six Months Ended

May 31, May 31,

Three Months Ended Nine Months Ended

August 31, August 31,

2023 2022 2023 2022

7 unchanged sentences

Average Sales Price

May 31, May 31, May 31,

As of August 31, As of August 31, As of August 31,

2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total 21,321 25,734 $ 9,853,531 12,887,422 $ 462,000 501,000

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.

Of the total homes in backlog listed above, 217 homes with a backlog dollar value of $99.8 million and an average sales price of $460,000 represent the backlog from unconsolidated entities at August 31, 2023, compared to 147 homes with a backlog dollar value of $73.8 million and an average sales price of $502,000 at August 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 May 31, 2023 versus Three Months Ended May 31, 2022

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

Homebuilding East:

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 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.

Revenues from home sales decreased in the third quarter of 2023 compared to the third quarter of 2022, primarily due to a decrease in the number of home deliveries in Florida and New Jersey and a decrease in the average sales price of homes delivered in all the states in the segment except in New Jersey.

The decrease in the number of home deliveries in Florida and New Jersey was due to a decrease in deliveries per active community due to the timing of opening and closing of communities.

The increase in the number of home deliveries in Alabama, Pennsylvania and South Carolina 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 Alabama, Florida, Pennsylvania and South Carolina was primarily due to pricing to market and product mix.

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

In the third 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 material 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 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.

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

The increase in the number of home deliveries in Illinois, Indiana, Maryland, 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 in 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 decrease in the average sales price of homes delivered in Georgia, Indiana, Maryland, Minnesota, North Carolina and Virginia was primarily due to pricing to market and product mix.

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

In the third quarter of 2023, a decrease in revenues per square foot was partially offset by a decrease in costs per square foot, which 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 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.

Revenues from home sales increased in the third quarter of 2023 compared to the third 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 active communities.

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.

In addition, land costs increased year over year.

Homebuilding West:

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.

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

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

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

In addition, land costs increased year over year.

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

Nine Months Ended August 31, 2023 versus Nine Months Ended August 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.

Revenues from home sales increased in the nine months ended August 31, 2023 compared to the nine months ended August 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 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 in Alabama, Florida, Pennsylvania and South Carolina was primarily due to an increase in the number of active communities.

The decrease in the number of home deliveries in New Jersey 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 Florida, New Jersey, Pennsylvania and South Carolina 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 nine months ended August 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.

Revenues from home sales increased in the nine months ended August 31, 2023 compared to the nine months ended August 31, 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia, Tennessee and Virginia, which was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in Illinois, Indiana, Maryland and Tennessee.

The increase in the number of home deliveries in Illinois, Indiana, Maryland, Minnesota and North Carolina 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 Georgia, Minnesota, North Carolina and Virginia was primarily due to pricing to market and product mix.

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

In the nine months ended August 31, 2023, a decrease in revenues per square foot and an increase in costs per square foot 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.

Revenues from home sales increased in the nine months ended August 31, 2023, compared to the nine months ended August 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 active communities and 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.

In the nine months ended August 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 increased 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.

Revenues from home sales decreased in the nine months ended August 31, 2023 compared to the nine months ended August 31, 2022, primarily due to a decrease in the average sales price of homes delivered in all the states in the segment, which was partially offset by an increase in the number of home deliveries in all the states in the segment except in California, Colorado, Utah and Washington.

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

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.

5 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 Six Months Ended

May 31, May 31,

Three Months Ended Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2023 2022 2023 2022

3 unchanged sentences

Number of title and closing service transactions 18,900 17,500 50,800 48,500

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.

At August 31, 2023 and November 30, 2022, the carrying value of Financial Services' commercial mortgage-backed securities was $141.0 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) May 31, 2023 November 30, 2022

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

Multifamily investments in unconsolidated entities $ 623,269 648,126

Lennar's net investment in Multifamily 1,056,365 935,961

Statement of Operations Three Months Ended Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2023 2022 2023 2022

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

Lennar's share of gains on the sale of operating properties/investments $ — 19,730 — 19,730

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 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.

At August 31, 2023 and November 30, 2022, we had $773.6 million and $788.5 million, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $288.5 million and $316.5 million, respectively.

The investments in equity securities of Blend Labs, Inc.

6 unchanged sentences

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,

Three Months Ended Nine Months Ended

August 31, August 31,

(In thousands) 2023 2022 2023 2022

5 unchanged sentences

Sunnova (NOVA) (20,773) 25,289 (45,006) (49,646)

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

Lennar Other unrealized losses from technology investments $ (15,713) (85,839) (14,170) (558,974)

(2) Financial Condition and Capital Resources

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.

At August 31, 2023, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $4.1 billion, compared to $4.8 billion at November 30, 2022 and $1.6 billion at August 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 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.

At August 31, 2023, we had $3.9 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing approximately $6.5 billion of available capacity.

Operating Cash Flow Activities

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.

During the nine months ended August 31, 2023 and 2022, cash provided by operating activities totaled $2.6 billion and $551 million, respectively.

During the nine months ended August 31, 2023, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $434 million primarily related to the sale of loans originated by our Financial Services segment and a decrease in receivables of $168 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 $882 million, primarily due to the payment of income taxes and an increase in other assets of $101 million.

During the nine months ended August 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 $579 million, a decrease in loans held-for-sale of $319 million primarily related to the sale of loans originated by our Financial Services segment, and an increase in accounts payable and other liabilities of $181 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.

Investing Cash Flow Activities

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 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.

During the nine months ended August 31, 2023 and 2022, cash used in investing activities totaled $115 million and $131 million, respectively.

During the nine months ended August 31, 2023, our cash used in investing activities was primarily due to cash contributions of $153 million to unconsolidated entities, which included (1) $75 million to Homebuilding unconsolidated entities, (2) $58 million to Lennar other unconsolidated entities and (3) $20 million to Multifamily unconsolidated entities.

This was partially offset by distributions of capital from unconsolidated entities of $70 million, which primarily included (1) $48 million from Homebuilding unconsolidated entities, (2) $21 million from our Lennar Other unconsolidated entities, and (3) $1 million from Multifamily entities.

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 million to Homebuilding unconsolidated entities, (2) $100.7 million to Lennar Other unconsolidated entities, and (3) $20 million to Multifamily unconsolidated entities.

In addition, we had $94 million of purchases of investment securities related to technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $332 million, which primarily included (1) $230 million from Multifamily unconsolidated entities, (2) $47 million from Homebuilding unconsolidated entities, and (3) $56 million from our Lennar Other unconsolidated entities.

Financing Cash Flow Activities

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;

During the nine months ended August 31, 2023 and 2022, cash used in financing activities totaled $3.2 billion and $1.8 billion, respectively.

During the nine months ended August 31, 2023, cash used in financing activities was primarily due to (1) $981 million of net repayments under our Financial Services' warehouse facilities;

(2) $842 million in repurchases of our common stock, which included $769 million of repurchases under our repurchase program and $72 million of repurchases related to our equity compensation plan;

(3) the early redemption of $425 million aggregate principal amount of our 5.875% senior notes due November 2024;

(4) $208 million of repurchases of our senior notes due in fiscal year 2024 (5) $325 million of dividend payments;

and (6) $256 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks.

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;

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 4.75% senior notes due November 2022;

(2) $238 million of net repayments under our Financial Services' warehouse facilities;

(3) $919 million of repurchases of our common stock, which included $847 million of repurchases under our repurchase program and $72 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) May 31, 2023 November 30, 2022 May 31, 2022

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

Homebuilding debt $ 3,320,119 4,047,294 4,057,496

10 unchanged sentences

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

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.

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

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.

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

That would make us more of a pure play homebuilding company.

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

1 unchanged sentence

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

Six Months Ended

Nine 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) May 31, 2023

(In thousands) August 31, 2023

Commitments - maturing in April 2024 $ 350,000

Commitments - maturing in May 2027 2,225,000

Total commitment $ 2,575,000

Total commitments $ 2,575,000

Accordion feature 425,000

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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 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:

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

(Dollars in thousands) Covenant Level Level Achieved as of

August 31, 2023

Minimum net worth test $ 13,024,540 19,231,774

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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 80% interests in the originated commercial loans financed.

The LMF Commercial warehouse 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.

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

During the nine months ended August 31, 2023, treasury shares increased by 7.8 million shares primarily due to our repurchase of 7.0 million shares of Class A and Class B common stock through our stock repurchase program.

During the nine months ended August 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.

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.

On September 27, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.375 per share on both its Class A and Class B common stock, payable on October 26, 2023 to holders of record at the close of business on October 12, 2023.

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

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 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.

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, 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 May 31, 2023 is included in the following tables.

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

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

Due from non-guarantor subsidiaries $ 20,808,708 17,959,091

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Total liabilities 9,370,601 10,455,359

Six Months Ended

(In thousands) May 31, 2023

Nine Months Ended

(In thousands) August 31, 2023

Total revenues $ 21,850,498

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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.

We believe that substantially all of the joint ventures were in compliance with applicable debt covenants at August 31, 2023, except for one joint venture that had an other-than-temporary impairment which is included in Note 8 of the Notes to Condensed Consolidated Financial Statements.

Homebuilding:

Investments in Unconsolidated Entities

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.

As of August 31, 2023, we had equity investments in 51 active homebuilding and land unconsolidated entities (of which 4 had recourse debt, 15 had non-recourse debt and 32 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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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 May 31, 2023.

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

At August 31, 2023, Multifamily had equity investments in 22 active unconsolidated entities that are engaged in multifamily residential developments (of which 19 had non-recourse debt and 3 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 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.

Details of each as of and during the nine months ended August 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 August 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.

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 investment in the Rialto funds totaled $162.8 million and $185.1 million as of August 31, 2023 and November 30, 2022, respectively.

As of August 31, 2023 and November 30, 2022, we had strategic technology investments in unconsolidated entities of $125.8 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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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)

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

East 94,607 31,534 126,141

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% of total homesites 73% 27%

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

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

East 104,754 39,994 144,748

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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, except for a decrease of $1.0 billion borrowings under the Financial Services' warehouse repurchase facilities.

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, except for a decrease of $979.0 million borrowings under the Financial Services' warehouse repurchase facilities and a decrease of $719.0 million in Homebuilding senior notes and other debts payable.

(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 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.

We believe that there have been no significant changes to our critical accounting policies during the nine months ended August 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