Lennar Reports Third Quarter EPS of $2.12

MIAMI, Sept. 14, 2020 /PRNewswire/ --

• Net earnings of $666.4 million, or $2.12 per diluted share, compared to net earnings of $513.4 million, or $1.59 per diluted share ? up 30% and 33%, respectively
• Deliveries of 13,842 homes ? up 2%
• New orders of 15,564 homes ? up 16%; new orders dollar value of $6.3 billion ? up 20%
• Backlog of 19,697 homes ? up 4%; backlog dollar value of $7.9 billion ? up 4%
• Revenues of $5.9 billion ? consistent with prior year
• Homebuilding operating margins of $832.0 million, compared to $657.1 million
• Gross margin on home sales of 23.1%, compared to 20.4%
• S,G&A expenses as a % of revenues from home sales of 8.0%, compared to 8.3%
• Operating margin on home sales of 15.1%, compared to 12.0%
• Financial Services operating earnings of $135.1 million, compared to $74.7 million
• Multifamily operating loss of $5.1 million, compared to operating earnings of $10.2 million
• Lennar Other operating earnings of $8.0 million, compared to $15.8 million
• Homebuilding cash and cash equivalents of $2.0 billion
• No borrowings under the Company's $2.4 billion revolving credit facility
• Paid down approximately $400 million of debt during the quarter
• Homebuilding debt to total capital of 29.5%, compared to 37.1%

Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's leading homebuilders, today reported results for its third quarter ended August 31, 2020. Third quarter net earnings attributable to Lennar in 2020 were $666.4 million, or $2.12 per diluted share, compared to third quarter net earnings attributable to Lennar in 2019 of $513.4 million, or $1.59 per diluted share.

Stuart Miller, Executive Chairman of Lennar, said, "We are pleased to announce our results for the third quarter where we achieved net earnings of $666.4 million, or $2.12 per diluted share, compared to $513.4 million, or $1.59 per diluted share in the prior year. Our third quarter results benefited from robust market conditions combined with the solid execution of our homebuilding and financial services businesses. Fundamentals in the housing market continued to remain strong supported by record low interest rates and a continued undersupply of new and existing inventory. The housing market continued its strong rebound from the significantly weaker sales environment earlier in the year as a result of COVID-19."

Mr. Miller continued, "During the quarter, we used the strength of the homebuilding market to accelerate starts to catch up on production lost earlier in the year. We carefully matched new orders and starts, with a continued focus on cash management which has led to greater returns. In the third quarter, new orders and starts were up 16% and 17%, respectively, over last year. As expected, our new home deliveries, limited by the production pause in the second quarter, increased only 2% over last year, but our gross margin climbed to 23.1%, a 270 basis point increase over the prior year, and our net margin reached an all-time, third quarter high of 15.1%. Additionally, we paid off approximately $400 million of debt during the quarter, had no borrowings under our $2.4 billion revolving credit facility and ended the quarter with $2.0 billion in cash and homebuilding debt to capital ratio of 29.5%, an all-time low."

"Balancing the early year pause with currently robust market conditions, we expect fourth quarter closings of 15,500 - 16,000 homes with gross margins in the 23.25% - 23.5% range. Given strong demand and limited new and existing home inventory, we expect home sales to remain strong for the foreseeable future. As we maintain a balance between sales and deliveries, we expect fourth quarter sales between 13,800 and 14,300 homes."

Rick Beckwitt, Chief Executive Officer of Lennar, said, "New home sales strengthened across the country in all of our major markets during the third quarter. Our sales pace was 4.2 homes per community in the third quarter, compared to 3.4 in the prior year. Our laser-focus on improving our SG&A leverage combined with the benefits of our technology efforts resulted in an SG&A percentage of 8.0%, an all-time, third quarter low. In addition, our financial services business again performed extremely well with third quarter earnings of $135.1 million, an all-time, third quarter high."

Jon Jaffe, President of Lennar, said, "We continued to make significant progress towards becoming a land lighter company by improving our controlled percentage of total homesites by 500 basis points to 35% at the end of the third quarter from 30% in the third quarter last year, while reducing our years owned supply of homesites to 3.8 years from 4.4 at the end of last year's third quarter. Additionally, our intense focus on construction costs helped drive margin, despite our average sales price on homes delivered remaining flat. We continue to be focused on mitigating the impact of limited availability of labor and materials in certain of our markets."

Mr. Miller concluded, "The housing market has proven to be resilient in the current environment and we expect it to continue to be a significant driver in the recovery of the overall economy. With an excellent balance sheet, strong cash flow generation and continued execution of our core operating strategies, we expect to end 2020 with another very strong quarter and be extremely well positioned for an even stronger 2021."

RESULTS OF OPERATIONS

THREE MONTHS ENDED AUGUST 31, 2020 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 2019

Homebuilding

Revenues from home sales increased 3% in the third quarter of 2020 to $5.5 billion from $5.3 billion in the third quarter of 2019. Revenues were higher primarily due to a 2% increase in the number of home deliveries, excluding unconsolidated entities, and a 1% increase in the average sales price of homes delivered. New home deliveries, excluding unconsolidated entities, increased to 13,809 homes in the third quarter of 2020 from 13,513 homes in the third quarter of 2019. The average sales price of homes delivered was $396,000 in the third quarter of 2020, compared to $394,000 in the third quarter of 2019.

Gross margin on home sales were $1.3 billion, or 23.1%, in the third quarter of 2020, compared to $1.1 billion, or 20.4%, in the third quarter of 2019. The gross margin percentage on home sales increased primarily due to the Company's focus on reducing construction costs.

Selling, general and administrative expenses were $435.9 million in the third quarter of 2020, compared to $444.7 million in the third quarter of 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.0% in the third quarter of 2020, from 8.3% in the third quarter of 2019 as the Company focused on improving its leverage combined with the benefits of the Company's technology efforts.

Financial Services

Operating earnings for the Financial Services segment were $135.1 million in the third quarter of 2020, compared to $74.7 million ($78.8 million net of noncontrolling interests) in the third quarter of 2019. Operating earnings increased due to an improvement in the mortgage business as a result of an increase in volume and margin. Additionally, operating earnings of the Company's title business increased primarily due to an increase in volume.

Other Ancillary Businesses

Operating loss for the Multifamily segment was $5.1 million in the third quarter of 2020, compared to operating earnings of $10.2 million ($10.5 million net of noncontrolling interests) in the third quarter of 2019, which included the sale of an operating property. Operating earnings for the Lennar Other segment were $8.0 million in the third quarter of 2020, compared to $15.8 million ($15.9 million net of noncontrolling interests) in the third quarter of 2019.

RESULTS OF OPERATIONS

NINE MONTHS ENDED AUGUST 31, 2020 COMPARED TO
NINE MONTHS ENDED AUGUST 31, 2019

Homebuilding

Revenues from home sales increased 3% in the nine months ended August 31, 2020 to $14.5 billion from $14.1 billion in the nine months ended August 31, 2019. Revenues were higher primarily due to a 5% increase in the number of home deliveries, excluding unconsolidated entities. New home deliveries, excluding unconsolidated entities, increased to 36,775 homes in the nine months ended August 31, 2020 from 35,021 homes in the nine months ended August 31, 2019. The average sales price of homes delivered was $395,000 in the nine months ended August 31, 2020, compared to $403,000 in the nine months ended August 31, 2019. The decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix due to COVID-19 stay-at-home orders in certain higher priced markets.

Gross margin on home sales were $3.2 billion, or 21.8%, in the nine months ended August 31, 2020, compared to $2.9 billion or 20.2%, in the nine months ended August 31, 2019. The gross margin percentage on home sales increased primarily due to the Company's continued focus on reducing construction costs. Loss on land sales in the nine months ended August 31, 2020 was $21.9 million, primarily due to a write-off of costs in the second quarter of 2020 as a result of Lennar not moving forward with a naval base development in Concord, California, northeast of San Francisco. Gross margin on land sales were $14.9 million in the nine months ended August 31, 2019.

Selling, general and administrative expenses were $1.2 billion in both the nine months ended August 31, 2020 and 2019. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 8.4% in the nine months ended August 31, 2020, from 8.7% in the nine months ended August 31, 2019.

Financial Services

Operating earnings for the Financial Services segment were $329.7 million ($343.8 million net of noncontrolling interests) in the nine months ended August 31, 2020, compared to $149.9 million ($163.0 million net of noncontrolling interests) in the nine months ended August 31, 2019. Operating earnings increased due to an improvement in the mortgage and title businesses as a result of an increase in volume and margin, as well as reductions in loan origination costs. Additionally, in the second quarter of 2020, the Financial Services segment recorded a $61.4 million gain on the deconsolidation of a previously consolidated entity.

Other Ancillary Businesses

Operating loss for the Multifamily segment was $4.0 million in the nine months ended August 31, 2020, compared to operating earnings of $12.7 million ($13.4 million net of noncontrolling interests) in the nine months ended August 31, 2019. Operating loss for the Lennar Other segment was $9.1 million in the nine months ended August 31, 2020, compared to operating earnings of $20.7 million ($21.2 million net of noncontrolling interests) in the nine months ended August 31, 2019.

Tax Rate

For the nine months ended August 31, 2020 and 2019, the Company had a tax provision of $382.5 million and $374.7 million, respectively, which resulted in an overall effective income tax rate of 19.5% and 24.2%, respectively. The reduction in the overall effective income tax rate is primarily due to the extension of the new energy efficient home tax credit during the first quarter of 2020.

Liquidity

At August 31, 2020, the Company had $2.0 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under its $2.4 billion revolving credit facility, thereby providing $4.4 billion of available capacity.

Fourth Quarter 2020 Guidance

The following are the Company's expected results of its homebuilding and financial services activities during the fourth quarter of fiscal year 2020:

About Lennar
Lennar Corporation, founded in 1954, is one of the nation's leading builders of quality homes for all generations. Lennar builds affordable, move-up and active adult homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title and closing services primarily for buyers of Lennar's homes and, through LMF Commercial, originates mortgage loans secured primarily by commercial real estate properties throughout the United States. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties. LEN^X, formerly known as Lennar Ventures, drives the Lennar's technology, innovation and strategic investments. For more information about Lennar, please visit www.lennar.com.

Note Regarding Forward-Looking Statements: Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, including statements relating to the homebuilding market and other markets in which we participate. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those anticipated by the forward-looking statements. Important factors that could cause such differences include the potential negative impact to our business of the ongoing coronavirus (COVID-19) pandemic, the duration, impact and severity of which is highly uncertain; slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; increases in operating costs, including costs related to construction materials, labor, real estate taxes and insurance, which exceed our ability to increase prices, both in our Homebuilding and Multifamily businesses; reduced availability of mortgage financing or increased interest rates; decreased demand for our homes or Multifamily rental apartments; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies, including our land lighter strategy; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; unfavorable losses in legal proceedings; conditions in the capital, credit and financial markets; changes in laws, regulations or the regulatory environment affecting our business, and the risks described in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended November 30, 2019. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

A conference call to discuss the Company's third quarter earnings will be held at 11:00 a.m. Eastern Time on Tuesday, September 15, 2020. The call will be broadcast live on the Internet and can be accessed through the Company's website at www.lennar.com. If you are unable to participate in the conference call, the call will be archived at www.lennar.com for 90 days. A replay of the conference call will also be available later that day by calling 203-369-3064 and entering 5723593 as the confirmation number.

SOURCE Lennar Corporation