Lennar(LEN) - 2024 Q1 - Quarterly Results

First Quarter 2024 Highlights Lennar reported strong Q1 2024 results, marked by significant growth in key financial and operational metrics and a robust balance sheet Q1 2024 Key Performance Indicators (vs. Q1 2023) | Metric | Q1 2024 | Change vs. Q1 2023 | | :--- | :--- | :--- | | Net Earnings per Diluted Share | $2.57 | +25% | | Net Earnings | $719 million | +21% | | Total Revenues | $7.3 billion | +13% | | New Orders (Homes) | 18,176 | +28% | | Deliveries (Homes) | 16,798 | +23% | | Gross Margin on Home Sales | 21.8% | - | | Homebuilding Debt to Total Capital | 9.6% | - | - The company demonstrated strong capital management by repurchasing 3.4 million shares for $506 million and increasing its annual dividend to $2.00 per share from $1.50[2] - Lennar ended the quarter with a strong liquidity position, holding $5.0 billion in homebuilding cash and cash equivalents and having no outstanding borrowings under its $2.6 billion revolving credit facility[2] Management Commentary Management highlighted strategic focus on production pace, demand-driven market, improved operational efficiency, and advancement of the 'land light' strategy - The core operating strategy is to maintain a consistent production and sales pace, using dynamic pricing and incentives to adapt to interest rate changes and drive volume[5] - The company is advancing its 'land light' strategy, evidenced by the owned homesite supply decreasing to 1.3 years (from 1.9 years) and controlled homesites increasing to 77% (from 68%)[6] - Operational efficiency has improved significantly, with cycle time down 30% year-over-year to 154 days and inventory turn improving to 1.5 times[5] - Despite an 8% decrease in the average sales price per home delivered to $413,000, the homebuilding gross margin increased by 60 basis points to 21.8% due to cost management[5] Results of Operations Lennar's total revenues grew 13% to $7.3 billion, driven by strong Homebuilding and Financial Services performance, with improved ancillary segment results Segment Operating Earnings/Loss (Q1 2024 vs Q1 2023) | Segment | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Homebuilding | $1,028.8 | $906.8 | | Financial Services | $131.3 | $78.7 | | Multifamily | $(15.6) | $(21.6) | | Lennar Other | $(39.5) | $(39.8) | Homebuilding Homebuilding revenues increased 13% to $6.9 billion driven by higher deliveries, with improved gross margins despite lower average sales prices and increased SG&A Homebuilding Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues from Home Sales | $6.9 billion | $6.1 billion | | Home Deliveries | 16,798 | 13,659 | | Average Sales Price | $413,000 | $448,000 | | Gross Margin % | 21.8% | 21.2% | | SG&A as % of Revenue | 8.2% | 7.4% | Financial Services Financial Services operating earnings significantly increased to $131 million, driven by improved mortgage and title business profitability - Operating earnings for Financial Services increased by 67% to $131 million in Q1 2024 from $78 million in Q1 2023[9] - The earnings growth was primarily due to higher profit per locked loan, increased capture rate, and higher volume and productivity in the title business[9][11] Other Ancillary Businesses Operating losses in the Multifamily segment narrowed, while the Lennar Other segment's loss remained stable Operating Loss (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Loss | Q1 2023 Loss | | :--- | :--- | :--- | | Multifamily | $(16) million | $(22) million | | Lennar Other | $(40) million | $(41) million | Other Financial Items (Tax Rate, Share Repurchases, Liquidity) Lennar's effective tax rate decreased, while the company executed share repurchases and maintained a strong liquidity position - The effective income tax rate decreased to 22.7% from 23.7% in the prior year, primarily due to tax benefits from share-based compensation[13] - Repurchased 3.4 million shares for $506 million at an average price of $148.95 per share[14] - Total liquidity stood at approximately $7.6 billion, comprising $5.0 billion in cash and a fully undrawn $2.6 billion revolving credit facility[15] Business Outlook Lennar reiterates its full-year home delivery goal and provides specific guidance for Q2 2024 on new orders, deliveries, and gross margin - The company remains focused on its full-year goal of delivering 80,000 homes with a margin consistent with the prior year[6] Guidance for Second Quarter 2024 | Metric | Q2 2024 Guidance | | :--- | :--- | | New Orders | 20,900 - 21,300 | | Deliveries | 19,000 - 19,500 | | Average Sales Price | $420,000 - $425,000 | | Gross Margin % on Home Sales | ~22.5% | | S,G&A as a % of Home Sales | ~7.2% | | Financial Services Operating Earnings | $110 million - $115 million | Financial Statements and Supplemental Data This section presents detailed unaudited financial statements, including consolidated earnings, operational metrics, balance sheets, and capital structure data Selected Revenues and Operating Information Total revenues increased to $7.31 billion, with net earnings attributable to Lennar growing to $719.3 million, or $2.57 per diluted share Consolidated Earnings Summary (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $7,312,930 | $6,490,429 | | Earnings Before Income Taxes | $930,786 | $784,453 | | Net Earnings Attributable to Lennar | $719,334 | $596,534 | | Diluted Earnings Per Share | $2.57 | $2.06 | Deliveries, New Orders, and Backlog Home deliveries and new orders significantly increased year-over-year, while the backlog decreased due to strong conversion Key Operational Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Deliveries (Homes) | 16,798 | 13,659 | | New Orders (Homes) | 18,176 | 14,194 | | New Orders ($ Value) | $7.74 billion | $6.41 billion | | Backlog (Homes) | 16,270 | 19,403 | | Backlog ($ Value) | $7.43 billion | $9.03 billion | Condensed Consolidated Balance Sheets As of February 29, 2024, Lennar reported total assets of $39.0 billion, with a strong cash position and total equity of $26.8 billion Key Balance Sheet Items (as of Feb 29, 2024) | Category | Amount (in billions) | | :--- | :--- | | Assets | | | Cash and cash equivalents | $5.0 | | Inventory owned | $15.8 | | Total Assets | $39.0 | | Liabilities & Equity | | | Total Liabilities | $12.2 | | Total Stockholders' Equity | $26.6 | | Total Equity | $26.8 | Supplemental Data (Capital Structure) Lennar's capital structure remains strong, with a significantly improved homebuilding debt to total capital ratio and a net cash position Homebuilding Capital Structure | Metric | Feb 29, 2024 | Feb 28, 2023 | | :--- | :--- | :--- | | Homebuilding Debt | $2.83 billion | $4.03 billion | | Stockholders' Equity | $26.65 billion | $24.42 billion | | Debt to Total Capital | 9.6% | 14.2% | | Net Homebuilding Debt | $(2.12) billion | $(0.02) billion |