Lennar(LEN_B) - 2024 Q4 - Annual Report

Homebuilding Operations - Homebuilding operations generated $34 billion in revenues, accounting for approximately 96$423,000 in fiscal 2024, compared to $446,000 in fiscal 2023 and$480,000 in fiscal 2022[14] - 82% of total homesites were controlled through options with land banks, land sellers, and joint ventures at November 30, 2024, up from 76% at November 30, 2023[16] - The backlog dollar value including unconsolidated entities was $5.4 billion at November 30, 2024, down from$6.6 billion at November 30, 2023[25] - The cancellation rate was 14% in 2024, compared to 16% in 2023[24] - The company was actively building and marketing homes in 1,447 communities at November 30, 2024, up from 1,260 communities at November 30, 2023[17] - The company had about 2,900 completed unsold homes at November 30, 2024, compared to 1,200 at November 30, 2023[17] - The company's maximum recourse debt exposure related to Homebuilding unconsolidated joint ventures was $44.2 million at November 30, 2024, up from$42.1 million at November 30, 2023[26] - Homebuilding segment's cash and cash equivalents decreased to $4.66 billion in 2024 from$6.27 billion in 2023[334] - Homebuilding revenues grew to $33.91 billion in 2024, a 3.8$32.66 billion in 2023[343] - The company had 1,436 active communities as of November 30, 2024, up from 1,255 in 2023[364] - Homebuilding cash and cash equivalents included $265.6 million held in escrow for approximately two days as of November 30, 2024, down from$594.8 million in 2023[359] - Total assets for the Homebuilding segment were $35,594,469 thousand as of November 30, 2024[439] Financial Performance - Total revenues for 2024 increased to$35.44 billion, up 3.5% from $34.23 billion in 2023[343] - Net earnings attributable to Lennar remained stable at$3.93 billion in 2024 compared to $3.94 billion in 2023[343] - Total liabilities increased to$13.29 billion in 2024 from $12.53 billion in 2023, driven by higher accounts payable and liabilities related to consolidated inventory[339] - Retained earnings grew significantly to$25.75 billion in 2024, up 15.1% from $22.37 billion in 2023[346] - Total stockholders' equity increased to$27.87 billion in 2024, a 4.9% rise from $26.58 billion in 2023[346] - Basic earnings per share increased to$14.31 in 2024 from $13.73 in 2023[343] - Total comprehensive income attributable to Lennar was$3.94 billion in 2024, slightly down from $3.94 billion in 2023[343] - Cash dividends for Class A common stock increased to$2.00 per share in 2024 from $1.50 per share in 2023[346] - Total equity rose to$28.02 billion in 2024, up 4.9% from $26.70 billion in 2023[346] - Net earnings for 2024 were$3.97 billion, slightly higher than 2023's $3.96 billion but lower than 2022's$4.65 billion[348] - Net cash provided by operating activities in 2024 was $2.40 billion, a significant decrease from 2023's$5.18 billion and 2022's $3.27 billion[348] - Cash and cash equivalents and restricted cash at the end of 2024 were$4.99 billion, down from $6.57 billion in 2023 and$4.82 billion in 2022[350] - Net cash used in financing activities increased to $3.68 billion in 2024, compared to$3.25 billion in 2023 and $1.28 billion in 2022[350] - Accounts receivable increased to$901.3 million in 2024 from $640.3 million in 2023[362] - Net additions to operating properties and equipment were$171.5 million in 2024, higher than $99.8 million in 2023 and$57.2 million in 2022[348] - The company's net deferred tax assets were $272.4 million in 2024, down from$326.5 million in 2023, with a valuation allowance of $2.6 million and$2.3 million, respectively[405] - Warranty reserves increased to $446.2 million in 2024 from$414.8 million in 2023, with adjustments to pre-existing warranties primarily related to specific claims in certain homebuilding communities[407] - The company's self-insurance reserve, net of expected recoveries, increased to $277.4 million in 2024 from$245.8 million in 2023[408] - The company repurchased 11.9 million Class A shares and 1.6 million Class B shares in 2024, with a total purchase price of $1.9 billion and$243.9 million, respectively[417] - The company's 401(k) Plan contributions increased to $69.7 million in 2024 from$53.4 million in 2023[419] - Compensation expense related to the company's share-based awards was $176.7 million in 2024, up from$160.7 million in 2023[420] Financial Services - Lennar originated approximately 54,600 residential mortgage loans totaling $19.8 billion in fiscal year 2024, up from 47,000 loans totaling$17.4 billion in fiscal year 2023[32] - Lennar locked interest rates on approximately 54,200 residential mortgage loans totaling $19.5 billion in fiscal year 2024, compared to 46,600 loans totaling$17.2 billion in fiscal year 2023[32] - Residential financial services compete with national, regional, and local mortgage lenders, focusing on interest rates and loan product features[54] - The company uses mortgage-backed securities, option contracts, and investor commitments to hedge against interest rate fluctuations in its Financial Services operations[315] - The company employs derivative financial instruments, including interest rate swap futures, to mitigate interest rate risk associated with loans held-for-sale[317] - As of November 30, 2024, the company's fixed-rate loans held-for-investment total $58.6 million with an average interest rate of 4.5$2.3 million with an average interest rate of 4.8%[321] - Financial Services' notes and other debts payable include $1.8 billion in variable-rate debt with an average interest rate of 6.2$16,714 thousand, compared to $17,598 thousand in 2023[426] - Loans held-for-investment are carried at principal amounts outstanding, net of unamortized discounts and allowance for credit losses[427] - Derivative financial instruments are used to hedge against fluctuations in mortgage-related interest rates[429] - Loans held-for-sale by LMF Commercial are recorded at fair value, with changes reflected in Financial Services revenues[431] - Total liabilities for the Financial Services segment were$2,140,708 thousand as of November 30, 2024[439] - Financial Services segment revenues grew to $1.11 billion in 2024, a 13.6$976.86 million in 2023[443] - Financial Services operating earnings for 2022 included a $35.5 million one-time charge related to a litigation accrual increase[444] Multifamily Operations - Lennar's Multifamily business has developed 123 multifamily residential communities with approximately 37,100 rental units across 20 states as of November 30, 2024[41] - Lennar's Multifamily business has a pipeline of 57 potential future developments totaling approximately$6.5 billion in anticipated development costs[42] - Lennar recognized a net gain of $211.5 million from the sale of 33 LMV I rental operation projects in fiscal year 2024[44] - Multifamily property development faces competition for residents and capital raising, with additional competition for developable land[56] - Multifamily segment revenues decreased to$411.54 million in 2024, down 28.2% from $573.49 million in 2023[443] - Multifamily segment revenues for 2022 included$237.5 million from land sales to unconsolidated entities[443] Single-Family Rental Operations - Upward America, Lennar's single-family rental venture, purchased 4,697 homes for a total of $1.2 billion and disposed of 92 homes for$26.0 million as of November 30, 2024[48] - Single-family rental funds compete for residents, investors, and property acquisitions against other rental property holders and homebuyers[57] Strategic Investments and Spin-Offs - Lennar plans to spin off Millrose Properties Inc. with an expected total aggregate value of land assets between $5.0 billion and$6.0 billion, along with $1.0 billion in cash[27] - Lennar will distribute approximately 80$587.1 million as of November 30, 2024[38] - Lennar Other segment operating loss for 2024 included $25.2 million in mark-to-market unrealized gains and a$46.5 million one-time gain on technology investment sales[445] - Lennar Other segment operating loss for 2023 included $50.2 million in mark-to-market unrealized losses and a$65.0 million write-off of a non-public technology investment[447] - Lennar Other segment operating loss for 2022 included $655.1 million in mark-to-market unrealized losses on publicly traded technology investments[447] Environmental and Regulatory Factors - California Energy Commission mandates rooftop solar panels for most new homes, increasing construction costs[59] - Environmental laws may delay property development, incur compliance costs, and restrict building in sensitive areas[60] - Lennar integrates green features in homes, including low-VOC paint, WaterSense faucets, low-E windows, and Energy Star appliances[65] Debt and Interest Rates - Lennar's variable rate debt, such as unsecured revolving credit facilities, is affected by interest rate changes, impacting earnings and cash flows[314] - Lennar's fixed rate debt, like senior notes, is impacted by interest rate changes in terms of fair value but not earnings or cash flows[314] - Senior notes and other debts payable for the Homebuilding segment total$2.26 billion with an average interest rate of 4.8%[321] - Interest incurred by the company's homebuilding operations related to homebuilding debt decreased to $129.3 million in 2024 from$187.6 million in 2023[401] Inventory and Land Management - Consolidated inventory not owned increased to $4.08 billion in 2024 from$2.99 billion in 2023[334] - Investments in unconsolidated entities grew to $1.34 billion in 2024 from$1.14 billion in 2023[334] - The company estimates the fair value of its communities using a discounted cash flow model, with projected cash flows impacted by market supply and demand, sales pace, prices, and construction costs[366] - The company's homebuilding markets are unique, with cash flow assumptions including absorption pace, sales prices, and construction costs on a community basis[367] - The company analyzes historical absorption pace and sales prices, considering internal and external market studies to develop assumptions for its cash flow model[368] - The company adjusts historical information if it notices a variation from historical results over two fiscal quarters, considering it a trend[370] - The company's valuation adjustments for finished homes and construction in progress were $18.6 million in 2024 and$37.5 million in 2023[375] - The company's average selling price for communities with valuation adjustments ranged from $178,000 to$702,000 in 2024 and $179,000 to$850,000 in 2023[375] - The company's absorption rate per quarter for communities with valuation adjustments ranged from 6 to 15 homes in 2024 and 3 to 26 homes in 2023[375] - The company's consolidated inventory not owned increased by $1.1 billion in 2024 due to land bank option contracts and reclassifications[376] - The company had$3.5 billion of non-refundable option deposits and pre-acquisition costs related to homesites as of November 30, 2024[380] - The company wrote off $5.1 million and$19.9 million of deposit and pre-acquisition costs in 2024 and 2023, respectively[382] Operating Properties and Equipment - Operating properties and equipment increased to $516.2 million in 2024 from$404.8 million in 2023, with operating properties primarily including solar systems, rental operations, and commercial properties[394] - The Financial Services segment held investment securities classified as held-to-maturity totaling $135.6 million in 2024, down from$140.7 million in 2023, mainly consisting of CMBS, corporate debt, and U.S. government securities[397] - The Lennar Other segment had investments in equity securities recorded at fair value of $347.8 million in 2024, up from$297.2 million in 2023[398] Corporate and Unallocated Expenses - Corporate and unallocated expenses increased to $729.20 million in 2024, up 27.0$574.43 million in 2023[443] Advertising and Sales Incentives - Advertising costs increased to $190.9 million in 2024, up from$146.0 million in 2023 and $102.1 million in 2022[356] - Sales incentives offered to homebuyers averaged$48,800 per home in 2024, representing 10.3% of home sales revenues, up from $42,900 (8.8$17,300 (3.5%) in 2022[355] Employee and Compensation Data - Lennar employs 13,265 individuals as of November 30, 2024, with 10,653 in Homebuilding, 2,066 in Financial Services, and 546 in Multifamily operations[70] Revenue Recognition - Premiums on title policies are recognized as revenue on the effective date of the title policies[423] - Escrow fees and loan origination revenues are recognized upon the close of escrow[423]