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Item 2. Management’s Discussion and Analysis

2024-03-29 compared with 2023-09-29 · 195 added, 352 removed, 287 unchanged (66% of the section changed)

1 unchanged sentence

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 10-Q 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, 2023.

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.

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

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

Our primary focus is on cash flow.

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 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.

• 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.

• 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.

During the first quarter of fiscal 2024, we continued to execute our operating plan effectively, driving excellent operating results.

We have never been better positioned, from balance sheet to execution to operating strategy, to address market conditions as they unfold for the remainder of 2024 and beyond.

Overall, the macroeconomic environment remains relatively strong for new homebuilders.

There continues to be strong demand for housing, limited by the chronic housing shortage, which is particularly problematic for working-class families.

Demand from that group remains robust if homes can be built at an attainable price point.

Generally speaking, consumers are employed and are confident that they will remain employed and that their compensation is likely to rise.

This is most often the foundation of a strong housing market.

Along with supply shortage, the additional limiting factor remains affordability.

With higher interest rates and stubborn inflation, affordability continues to be tested as higher monthly payments make qualifying for a loan increasingly difficult.

Inflation-driven higher cost-of-living expenses have made saving for a down payment increasingly difficult, and higher prices have begun to lead to increased personal and credit card debt.

We have started to see early evidence of possible debt delinquency derailing some mortgage applications.

Homebuilders have been uniquely able to capture demand by using incentives, including interest rate buy-downs, closing cost pickups and price reductions, to unlock affordability restraints and enable purchasers to buy homes.

Against this backdrop, during our first quarter, we focused on, and were consistent in executing, our core operating strategy.

We continued to migrate to a pure play manufacturing model across each of our 40 homebuilding divisions in order to reduce production costs while generating consistent cash flow.

We are re-engineering our products for efficiency and volume in order to enhance our inventory turn and grow volume.

We have also continued to migrate to a land light balance sheet in order to drive total shareholder return, return on inventory and return on equity.

We are operating under a model where we are starting homes at a pace designed to generate growth while we maximize logistics and efficiencies in order to benefit from reduced construction costs.

Our trade partners are given visibility on our timing so they can be more efficient, and we pass their efficiencies on to our customers through more affordable products.

Our trade partners find that they have consistent work with our production strategy, which leads to higher productivity and, therefore, to cost savings.

We gain by driving volume when others pull back.

Our goal is even flow deliveries whereby starts continue to increase gradually quarter over quarter until we ultimately provide a consistent rate of deliveries throughout the year.

A consistent level of starts maximizes the efficiencies for our trade partners.

That in turn attracts a larger trade base and, together with a normalized supply chain, has reduced the cycle time for us to build a home.

Our average cycle time decreased in the first quarter by seven days from the fourth quarter of fiscal 2023 and was down 30% from the first quarter of fiscal 2023.

Driving our confidence to start homes at a pace that achieves maximum efficiency in the field is the Lennar machine.

This is a combined program of digital marketing, sales consultant engagement and dynamic pricing.

If we build a home, we sell that home.

We sell by digitally acquiring leads and referring the best of the leads to our sales professionals.

They nurture those leads while our dynamic pricing model helps tailor pricing in real time to meet the market in response to consumer desires, and market and competitive conditions.

The dynamically adjusted pricing, using incentives or price alterations, automatically adjusts our margins up or down while we maintain production and sales pace.

We recognize that the chronic housing shortage is a critical issue.

Working-class housing is essential to the effective working of our cities across the country.

We are working on using our strategies for production and cost efficiencies to build housing that is accessible to everyone.

Land and impact fees are getting more expensive and labor costs have been rising.

We can only reduce our costs by increasing productivity due to the efficiencies of our operations.

We are building more consistent core products that are carefully value-engineered, and we are using our start pace to engineer our production cycle, which enables us to reduce our cycle time and, working with our trade partners, to build efficiencies in logistics and in the way we run our community production.

We have intensified our focus on build-to-rent, both at community scale and in single-family-for-rent scattered home sale markets.

We believe we can, and should, build additional production for professionally owned housing, but professional owners need cost efficiencies in today’s interest rate environment to make their rents attainable for families who aspire to a single-family lifestyle, but can’t yet afford a down payment or qualify for a mortgage.

We don’t believe that professional investors compete with primary homeowners when they purchase homes for rental.

Rather, we think those investors are filling a critical need for underserved families who seek to bridge their lifestyle while they build a down payment and credit score to ultimately achieve home ownership.

We are also building our multifamily product through off-balance sheet entities.

We are refining our land strategy to dovetail with our production orientation.

We are focusing on a just-in-time delivery program for land, just as we do for lumber, appliances and other products that are part of a home.

We accomplish this both by negotiating option deals with landowners and developers and by using structured land bank strategies, often with entities that deploy private equity capital.

Our land light strategy has generated consistent cash flow through the ups and downs of interest rate changes and has enhanced our balance sheet and our liquidity, even after we redeemed several billion dollars of debt, and repurchased a substantial amount of our stock, over the past years.

In the first quarter of fiscal 2024, we increased our dividend to $2.00 per share per year and our Board authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5 billion in value of our outstanding Class A or Class B common stock.

Our land light strategy has benefitted strongly from land banking arrangements.

We have concerns about the durability of these arrangements.

Availability of private equity participation in our land banking arrangements depends upon market conditions and can change significantly and quickly.

Accordingly, we are considering a strategic spinoff that would provide a durable land strategy.

By spinning off our own excess land in a taxable spinoff, we can create a permanent capital vehicle that will develop homesites and give us options to acquire them.

Such a spinoff would distribute capital to our stockholders, reduce the inventory on our books, and provide permanent dependable capital for future land acquisitions.

We view the first quarter of fiscal 2024 as a strategic and operational success for our company.

While market conditions remain challenging, demand is strong and there is a chronic housing supply shortage that needs to be filled.

We will continue to drive production to meet that shortage.

Also, if the Federal Reserve begins to cut interest rates, we believe that pent-up demand will be activated, and we will be well-positioned and well-prepared to take advantage of it.

Perhaps most importantly, our very strong balance sheet affords us the ability to consider and execute upon thoughtful innovation for the future.

We have the luxury of being able to continue to execute our strategic operating plan while we return capital to our stockholders through dividends and stock buybacks and also pursue a strategic distribution to our stockholders.

We are anticipating 19,000 to 19,500 closings in the second quarter of 2024 with a margin of approximately 22.5%.

We expect to deliver 80,000 homes this year with a little over a 23% margin.

We also expect to repurchase in excess of $2 billion of our stock in fiscal 2024.

(1) Results of Operations

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

Our results of operations for the three and nine months ended August 31, 2023 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three months ended February 29, 2024 are not necessarily indicative of the results to be expected for the full year.

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

However, a variety of factors can alter seasonal patterns.

Our net earnings attributable to Lennar were $1.1 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.

Our net earnings attributable to Lennar were $719.3 million, or $2.57 per diluted share, in the first quarter of 2024, compared to net earnings attributable to Lennar of $596.5 million, or $2.06 per diluted share, in the first quarter of 2023.

Financial information relating to our operations was as follows:

Three Months Ended August 31, 2023

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

Sales of homes $ 8,285,873 — — — — 8,285,873

Sales of land 20,430 — — — — 20,430

Other revenues 12,312 266,206 137,394 7,388 — 423,300

Total revenues 8,318,615 266,206 137,394 7,388 — 8,729,603

Costs and expenses:

Costs of homes sold 6,261,578 — — — — 6,261,578

Costs of land sold 18,720 — — — — 18,720

Selling, general and administrative expenses 582,765 — — — — 582,765

Other costs and expenses — 117,211 139,759 6,155 — 263,125

Total costs and expenses 6,863,063 117,211 139,759 6,155 — 7,126,188

Equity in loss from unconsolidated entities (4,016) — (6,922) (13,051) — (23,989)

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

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

Corporate general and administrative expenses — — — — 114,144 114,144

Charitable foundation contribution — — — — 18,559 18,559

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

Three Months Ended August 31, 2022

Three Months Ended February 29, 2024

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

9 unchanged sentences

Total costs and expenses 5,977,536 118,424 132,667 9,088 — 6,237,715

Equity in earnings (loss) from unconsolidated entities (14,652) — 20,863 (19,521) — (13,310)

Equity in earnings (losses) from unconsolidated entities 13,302 — (12,606) (31,241) — (30,545)

Other income (expense), net and other gains (losses) 62,039 — (43) 3,376 — 65,372

4 unchanged sentences

Earnings (loss) before income taxes $ 1,028,796 131,296 (15,639) (39,548) (174,119) 930,786

Nine Months Ended August 31, 2023

Three Months Ended February 28, 2023

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

9 unchanged sentences

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

Equity in loss from unconsolidated entities (13,109) — (29,331) (62,491) (104,931)

Equity in earnings (losses) from unconsolidated entities 3,186 — (16,483) (17,890) — (31,187)

Other income (expense), net and other gains (losses) 22,062 — 315 943 — 23,320

4 unchanged sentences

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

Nine Months Ended August 31, 2022

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

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

Sales of land 63,888 — — — — 63,888

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

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

Homebuilding costs and expenses:

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

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

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

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

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

Equity in earnings (loss) from unconsolidated entities (10,076) — 22,429 (47,224) — (34,871)

Other income (expense), net and other gains (losses) (4,334) — 39 (21,269) — (25,564)

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

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

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

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

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

(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 $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 $8.7 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 $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.

Three Months Ended February 29, 2024 versus Three Months Ended February 28, 2023

Revenues from home sales increased 13% in the first quarter of 2024 to $6.9 billion from $6.1 billion in the first quarter of 2023.

Revenues were higher primarily due to a 23% increase in the number of home deliveries, partially offset by an 8% decrease in the average sales price of homes delivered.

New home deliveries increased to 16,798 homes in the first quarter of 2024 from 13,659 homes in the first quarter of 2023.

The average sales price of homes delivered was $413,000 in the first quarter of 2024, compared to $448,000 in the first quarter of 2023.

The decrease in average sales price of homes delivered in the first quarter of 2024 compared to the same period last year was primarily due to pricing to market through an increased use of incentives and product mix.

Gross margins on home sales were $1.5 billion, or 21.8%, in the first quarter of 2024, compared to $1.3 billion, or 21.2%, in the first quarter of 2023.

During the first quarter of 2024, gross margins increased because of a decrease in costs per square

foot as we continued to focus on construction cost savings, which was partially offset by a decrease in average sales price and an increase in land costs.

Selling, general and administrative expenses were $568.0 million in the first quarter of 2024, compared to $449.8 million in the first quarter of 2023.

As a percentage of revenues from home sales, selling, general and administrative expenses increased to 8.2% in the first quarter of 2024, from 7.4% in the first quarter of 2023, primarily due to an increase in the use of brokers due to current market conditions and an increase in digital marketing and advertising costs to generate more direct sales.

During the three months ended February 29, 2024, our homebuilding operating earnings included $58 million of interest income due to an increase in cash balances and higher interest rates.

Operating earnings for the Financial Services segment were $130.6 million in the first quarter of 2024, compared to $78.2 million in the first quarter of 2023.

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, and higher lock volume because of increased capture rate and Lennar deliveries.

There was also an increase in profitability from our title business due to higher volume and productivity as a result of continued implementation of technology initiatives.

Operating loss for the Multifamily segment was $15.5 million in the first quarter of 2024, compared to operating loss of $21.6 million in the first quarter of 2023.

Operating loss for the Lennar Other segment was $39.5 million in the first quarter of 2024, compared to an operating loss of $41.2 million in the first quarter of 2023.

In the first quarter of 2024 and 2023, we had tax provisions of $210.9 million and $185.1 million, respectively, which resulted in an overall effective income tax rate of 22.7% and 23.7%, respectively.

In the first quarter of 2024, our overall effective income tax rate was lower than last year, primarily due to excess tax benefits from share-based compensation.

Homebuilding Segments

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

At February 29, 2024, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

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

Selected Financial and Operational Data

Three Months Ended August 31, 2023

Gross Margins Operating Earnings (Loss)

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

East $ 2,397,446 1,677,337 30.0 % 528,089 21 3,353 5,699 16,538 553,700

Central 1,598,527 1,224,134 23.4 % 252,147 6 1,582 1,029 6,778 261,542

Texas 1,174,858 878,430 25.2 % 214,919 749 897 — 3,306 219,871

West 3,108,783 2,467,213 20.6 % 464,351 934 2,421 (90) 12,352 479,968

Other (2) 6,259 14,464 (131.1) % (17,976) — 4,059 (10,654) 3,310 (21,261)

$ 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 August 31, 2022

Gross Margins Operating Earnings (Loss)

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

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

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

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

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

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

Nine Months Ended August 31, 2023

Three Months Ended February 29, 2024

Gross Margins Operating Earnings (Loss)

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

East $ 1,907,670 1,382,768 27.5 % 345,715 5,263 2,386 7,097 16,420 376,881

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$ 6,901,781 5,395,532 21.8 % 938,262 6,735 8,458 13,302 62,039 1,028,796

Nine Months Ended August 31, 2022

Three Months Ended February 28, 2023

Gross Margins Operating Earnings (Loss)

East $ 1,680,272 1,194,254 28.9 % 348,196 (2,354) 19,804 3,248 29,538 398,432

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Summary of Homebuilding Data

Three Months Ended

First Quarter

2024 2023 2024 2023 2024 2023

Homes Dollar Value (In thousands)

Average Sales Price

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

East 4,724 3,855 $ 1,950,631 1,711,945 $ 413,000 444,000

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Total 16,798 13,659 $ 6,944,742 6,125,500 $ 413,000 448,000

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

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

East 15,272 14,927 $ 6,669,141 6,436,576 $ 437,000 431,000

Central 9,327 8,966 4,022,372 3,956,302 431,000 441,000

Texas 11,431 9,272 3,329,349 3,038,064 291,000 328,000

West 13,243 13,151 8,075,810 8,718,178 610,000 663,000

Other 19 19 14,824 17,816 780,000 938,000

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

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.

Of the total homes delivered listed above, 77 homes with a dollar value of $43.0 million and an average sales price of $558,000 represent home deliveries from unconsolidated entities for the three months ended February 29, 2024, compared to 63 home deliveries with a dollar value of $31.7 million and an average sales price of $503,000 for the three months ended February 28, 2023.

Sales Incentives (1):

Three Months Ended

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenue

August 31, August 31,

First Quarter

2024 2023 2024 2023

East $ 30,600 8,300 6.6 % 1.8 %

Central 27,200 7,500 6.1 % 1.6 %

Texas 49,300 19,200 14.7 % 5.5 %

West 39,200 15,600 6.0 % 2.2 %

Other 89,800 86,900 11.4 % 8.7 %

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

Nine Months Ended

Average Sales Incentives Per

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as a % of Revenue

August 31, August 31,

2023 2022 2023 2022

East $ 46,800 30,300 10.2 % 6.4 %

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New Orders (2):

Three Months Ended

Active Communities Homes Dollar Value (In thousands)

Average Sales Price

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

First Quarter

2024 2023 2024 2023 2024 2023 2024 2023

East 362 328 5,779 5,675 $ 2,398,206 2,514,776 $ 415,000 443,000

Central 277 296 4,003 3,033 1,669,911 1,348,226 417,000 445,000

Texas 235 217 4,730 2,577 1,302,268 776,156 275,000 301,000

West 375 345 5,140 3,077 3,261,380 2,015,897 635,000 655,000

Other 4 3 14 4 7,877 2,668 563,000 667,000

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, 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)

Active Communities Homes Dollar Value (In thousands)

Average Sales Price

August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022

East 304 317 4,526 3,841 $ 1,898,078 1,674,177 $ 419,000 436,000

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Total 1,227 1,217 18,176 14,194 $ 7,742,382 6,413,462 $ 426,000 452,000

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.

Of the total homes listed above, 46 homes with a dollar value of $25.2 million and an average sales price of $548,000 represent homes in six active communities from unconsolidated entities for the three months ended February 29, 2024, compared to 97 homes with a dollar value of $38.3 million and an average sales price of $394,000 in seven active communities for the three months ended February 28, 2023.

(2) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three months ended February 29, 2024 and February 28, 2023.

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

Three Months Ended Nine Months Ended

August 31, August 31,

2023 2022 2023 2022

First Quarter

East 16 % 24 %

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Total 14 % 22 %

First Quarter

2024 2023 2024 2023 2024 2023

Homes Dollar Value (In thousands)

Average Sales Price

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

2023 2022 2023 2022 2023 2022

East 6,382 8,147 $ 2,656,497 3,544,939 $ 416,000 435,000

4 unchanged sentences

Total 16,270 19,403 $ 7,432,118 9,028,442 $ 457,000 465,000

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.

Of the total homes in backlog listed above, 116 homes with a backlog dollar value of $57.5 million and an average sales price of $495,000 represent the backlog from unconsolidated entities at February 29, 2024, compared to 200 homes with a backlog dollar value of $84.4 million and an average sales price of $422,000 at February 28, 2023.

Backlog represents the number of homes under sales contracts.

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

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

Three Months Ended February 29, 2024 versus Three Months Ended February 28, 2023

Homebuilding East:

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.

Revenues from home sales increased in the first quarter of 2024 compared to the first quarter of 2023, primarily due to an increase in the number of home deliveries in all the states in the segment, which was partially offset by a decrease in the average sales price of homes delivered in all the states in the segment except in New Jersey.

The increase in the number of home deliveries in Alabama, Florida, New Jersey and Pennsylvania 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 and Pennsylvania was primarily due to pricing to market through an increased use of incentives 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 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 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 increased year over year.

Homebuilding West:

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.

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

Homebuilding East:

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 the first quarter of 2024, 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 increased year over year.

Homebuilding Central:

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.

Revenues from home sales increased in the first quarter of 2024 compared to the first quarter of 2023, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia 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.

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

The decrease in the number of home deliveries in Georgia 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.

The decrease in the average sales price of homes delivered in Georgia, Indiana, Maryland, Minnesota, North Carolina, South Carolina, Tennessee and Virginia was primarily due to pricing to market through an increased use of incentives and product mix.

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

In the first quarter of 2024, a decrease in revenues per square foot was partially offset by a decrease in costs per square foot.

Overall, gross margin percentage of home deliveries remained flat while land costs increased year over year.

Homebuilding Texas:

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 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.

Revenues from home sales increased in the first quarter of 2024 compared to the first quarter of 2023, 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 through an increased use of incentives.

In the first quarter of 2024, a decrease in revenues per square foot was more than offset by a decrease in costs per square foot.

Overall, gross margin percentage of home deliveries increased while land costs increased year over year.

Homebuilding West:

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 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.

In addition, land costs increased year over year.

The increase in the number of home deliveries in Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington 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 in Arizona, Colorado, Idaho, Utah and Washington was primarily due to pricing to market through an increased use of incentives and product mix.

The increase in the average sales price of homes delivered in California, Nevada and Oregon was primarily due to product mix.

In the first quarter of 2024, revenues per square foot increased and costs per square foot decreased.

Overall, gross margin percentage of home deliveries increased while 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 Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2023 2022 2023 2022

Three Months Ended

(Dollars in thousands) February 29, 2024 February 28, 2023

Dollar value of mortgages originated $ 4,111,000 3,154,000

2 unchanged sentences

Number of title and closing service transactions 17,800 14,200

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.

At February 29, 2024 and November 30, 2023, the carrying value of Financial Services' commercial mortgage-backed securities was $139.7 million and $140.7 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) August 31, 2023 November 30, 2022

(In thousands) February 29, 2024 November 30, 2023

Multifamily investments in unconsolidated entities $ 586,438 599,852

Lennar's net investment in Multifamily 1,121,372 1,095,218

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 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.

Our Lennar Other segment includes fund investments we retained subsequent to our sale of the Rialto investment and asset management platform, as well as strategic investments in technology companies that are looking to improve the homebuilding and financial services industries to better serve homebuyers and homeowners and increase efficiencies.

At February 29, 2024 and November 30, 2023, we had $749.9 million and $657.9 million, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $289.7 million and $276.2 million, respectively.

The investments in equity securities of Blend Labs, Inc.

(“Blend Labs”), Hippo Holdings, Inc.

("Hippo"), Opendoor, Inc.

(“Hippo”), Opendoor Technologies, Inc.

(“Opendoor”), SmartRent, Inc.

2 unchanged sentences

(“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 Nine Months Ended

August 31, August 31,

(In thousands) 2023 2022 2023 2022

All the investments are accounted for as investments in equity securities which are held at fair value and the changes in fair values are recognized through earnings.

Details of these investments are included within Note 2 of the Notes to Condensed Consolidated Financial Statements.

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

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023

Blend Labs (BLND) $ 2,936 586

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(2) Financial Condition and Capital Resources

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.

At February 29, 2024, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $5.3 billion, compared to $6.6 billion at November 30, 2023 and $4.3 billion at February 28, 2023.

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

At August 31, 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.

At February 29, 2024, we had $5.0 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing approximately $7.6 billion of available capacity.

Operating Cash Flow Activities

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.

During the three months ended February 29, 2024 and 2023, cash provided by operating activities totaled $367.9 million and $978 million, respectively.

During the three months ended February 29, 2024, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $54 million primarily related to the sale of loans originated by our Financial Services segment and a decrease in receivables of $379 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 $285 million, an increase in deposits and pre-acquisition costs on real estate of $411 million as we increased the percentage of controlled homesites, and a decrease in accounts payable and other liabilities of $326 million.

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 $156 million and a decrease in accounts payable and other liabilities of $691 million.

Investing Cash Flow Activities

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.

During the three months ended February 29, 2024 and 2023, cash used in investing activities totaled $148 million and $36 million, respectively.

During the three months ended February 29, 2024, our cash used in investing activities was primarily due to cash contributions of $118 million to unconsolidated entities, which included (1) $56 million to Homebuilding unconsolidated entities, (2) $54 million to Lennar other unconsolidated entities and (3) $7 million to Multifamily unconsolidated entities.

This was partially offset by distributions of capital from unconsolidated entities of $35 million, which primarily included (1) $23 million from Homebuilding unconsolidated entities, (2) $8 million from our Lennar Other unconsolidated entities and (3) $4 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.

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

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

Financing Cash Flow Activities

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;

During both the three months ended February 29, 2024 and three months ended February 28, 2023, cash used in financing activities totaled $1.5 billion, respectively.

During the three months ended February 29, 2024, cash used in financing activities was primarily due to (1) $600 million of net repayments under our Financial Services' warehouse facilities;

(2) $595 million in repurchases of our common stock, which included $512 million of repurchases under our repurchase program and $84 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;

(3) $139 million of dividend payments;

and (4) $185 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks.

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;

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

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

and (4) $330 million of dividend payments.

These were partially offset by $328 million of net proceeds from liabilities related to consolidated inventory not owned due to activity with land banks.

(3) $108 million of dividend payments;

and (4) $108 million of net payments from liabilities related to consolidated inventory not owned due to activity with land banks.

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

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

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

(Dollars in thousands) February 29, 2024 November 30, 2023 February 28, 2023

Homebuilding debt $ 2,830,332 2,816,482 4,033,335

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

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.

At February 29, 2024, Homebuilding debt to total capital was consistent with November 30, 2023, and was lower compared to February 28, 2023, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in Homebuilding debt due to debt paydowns, partially offset by share repurchases.

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

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

These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock, strategic transactions to accelerate our land light strategy 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 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 play homebuilding 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:

Nine Months Ended

(Dollars in thousands) 2023 2022

Three Months Ended

(Dollars in thousands) February 29, 2024 February 28, 2023

Homebuilding average debt outstanding $ 2,839,363 $ 4,054,756

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Interest incurred $ 36,511 49,577

The maximum available borrowings on our unsecured revolving credit facility (the "Credit Facility") were as follows:

(In thousands) August 31, 2023

The maximum available borrowings on our Credit Facility were as follows:

(In thousands) February 29, 2024

Commitments - maturing in April 2024 $ 350,000

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

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

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

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

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

We believe we were in compliance with our debt covenants as of February 29, 2024.

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 29, 2024:

(Dollars in thousands) Covenant Level Level Achieved as of

August 31, 2023

February 29, 2024

Minimum net worth test $ 13,533,319 20,018,096

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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 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.

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.

In January 2024, our Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5 billion in value of our outstanding Class A or Class B common stock.

Repurchases are authorized to be made in open-market or private transactions.

The repurchase authorization has no expiration date.

The details of our Class A and Class B common stock repurchases under the authorized repurchase program for the three months ended February 29, 2024 and February 28, 2023 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the three months ended February 29, 2024, treasury shares increased by 3.6 million shares primarily due to our repurchase of 3.4 million shares of Class A and Class B common stock through our stock repurchase program.

On February 7, 2024, we paid a quarterly cash dividend of $0.50 per share on both of our Class A and Class B common stock to holders of record at the close of business on January 24, 2024, as declared by our Board of Directors on January 9, 2024.

We approved and paid cash dividends of $0.375 per share for each of the four quarters of 2023 on both our Class A and Class B common stock.

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

Included in the following tables as part of "Obligors" together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at August 31, 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 February 29, 2024 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements.

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

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

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at August 31, 2023 is included in the following tables.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at February 29, 2024 is included in the following tables.

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

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

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

(In thousands) February 29, 2024 November 30, 2023

Due from non-guarantor subsidiaries $ 22,861,257 22,020,227

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Total liabilities 9,581,215 9,181,456

Nine Months Ended

(In thousands) August 31, 2023

Three Months Ended

(In thousands) February 29, 2024

Total revenues $ 6,858,418

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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 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.

We believe that substantially all of the joint ventures were in compliance with applicable debt covenants at February 29, 2024.

Homebuilding:

Investments in Unconsolidated Entities

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.

As of February 29, 2024, we had equity investments in 47 active Homebuilding and land unconsolidated entities (of which 5 had recourse debt, 15 had non-recourse debt and 27 had no debt) and 48 active Homebuilding and land unconsolidated entities at November 30, 2023.

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

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

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

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of August 31, 2023.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities (“JVs”) debt as per current debt arrangements as of February 29, 2024.

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 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.

At February 29, 2024, Multifamily had equity investments in 21 active unconsolidated entities that are engaged in multifamily residential developments (of which 18 had non-recourse debt and 3 had no debt) and 22 active unconsolidated entities at November 30, 2023.

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 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.

Details of each as of and during the three months ended February 29, 2024 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 29, 2024.

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

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Investments in Unconsolidated Entities

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

As part of the sale of the Rialto investment and asset management platform, we retained the right 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 equity in earnings (loss) in the condensed consolidated statement of operations.

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 investment in the Rialto funds totaled $142.2 million and $148.7 million as of February 29, 2024 and November 30, 2023, respectively.

As of February 29, 2024 and November 30, 2023, we had strategic technology investments in unconsolidated entities of $147.5 million and $127.5 million, respectively, accounted for under the equity method of accounting.

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.

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

Option Contracts

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.

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

Since fiscal year 2020, we have been increasing the percentage of our total homesites that we control through option contracts rather than own.

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):

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

February 29, 2024 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 84,250 20,868 105,118

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% of total homesites 77% 23%

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

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

East 74,797 28,376 103,173

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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 $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.

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, 2023, except for a decrease of $600 million in borrowings under the Financial Services' warehouse repurchase facilities.

(3) Recently Adopted Accounting Pronouncements

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(4) Critical Accounting Policies

We believe that there have been no significant changes to our critical accounting policies during the nine months ended August 31, 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.

There have been no significant changes to our critical accounting policies during the three months ended February 29, 2024 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, 2023.

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