Lennar Corporation Q4 FY2024 earnings call

• Fourth quarter was tough due to rising interest rates impacting affordability, leading to missed new order and margin targets. - Currently focusing on maintaining sales volume despite margin pressure, with expectations to sell and deliver 17,000 - 17,500 homes in Q1 2025 with margins between 19% and 19.25%. - Progressing towards an asset-light operational setup, shifting to a land-light manufacturing model. - Details of Millrose Properties spin-off: receives $5.2B undeveloped land, $1B cash from Lenard, and $900M land assets via Rausch Coleman acquisition. - Q4 operating results showed strategic consistency despite challenges, with housing starts, home closings, and community count increases. - Cycle time decreased by two days sequentially, and costs were reduced by 2% year-over-year.

In the fourth quarter, Lenard faced challenges with interest rates climbing. New orders were 95 short of the expected 19,000, and gross margin was 22.1% vs. the anticipated 22.5%. Volume details included launching around 18,500 starts, closing over 22,000 homes, and increasing the community count from 1,283 to 1,447. Sales incentives in Q4 rose to 10.8%, cycle time was reduced, and inventory churn was at 1.6.

• For Q1 2025, expect to sell and deliver 17,000 - 17,500 homes with margins 19% - 19.25%. - Anticipate delivering 86,000 - 88,000 homes in 2025, an 8% - 10% increase from 2024. - First-quarter orders forecast 17,500 - 18,000 homes, deliveries 17,000 - 17,500, average sales price ~$410k - $415k, SG&A expenses 8.7% - 8.8%, financial service earnings breakeven, multifamily sector loss $10M, secondary implies $20M loss, EPS between $1.60 - $1.80.

• Risks include interest rate fluctuations affecting affordability and consumer confidence. - Elevated construction costs and localized land restrictions limiting supply. - Potential impact of immigration and tariffs, though not expected to have major immediate impact.

Q: Alan Ratner asked about the combination of factors affecting the consumer and the pace versus price strategy.

A: Stuart Miller responded that it's a mix of factors such as difficulty in accumulating a down payment, interest rate fluctuations causing hesitation, seasonality, and the need to navigate incentives, rate buy-downs, and price reductions. On the pace versus price strategy, Lenard will adapt to market conditions, maintaining volume while moderating incentives and margins as needed to achieve targeted volume.