LEN-B

Management Statement and Operational Highlights

• Macro Overview: The housing market remained challenging with affordability concerns, low supply, and consumer confidence impacted by economic uncertainties and government shutdown. Lennar was well-positioned with strong market share in strategic markets, a lower cost structure, and efficient product offerings.
• Operational Metrics: In the fourth quarter, Lennar started 18,443 homes, delivered 23,034, and sold over 20,000. The company rebuilt with an asset-lighter inventory structure, reducing inventory from under $20 billion a year ago to under $12 billion. Construction costs were reduced by approximately 10% from 2023 to 2025, cycle time for detached single-family homes decreased to 127 days from 138 days, and inventory turn improved to 2.2x from 1.6x. The Millrose transaction was completed, resulting in a cashless repurchase of 8 million Lennar shares.
• Leadership Changes: Jon Jaffe retired, with Jim Parker and David Grove overseeing operations for different parts of the country, and Greg McGuff moving to a new role focusing on land banking.

Guidance

• Q1 2026: Expect to sell 18,000-19,000 homes, deliver 17,000-18,000 homes, with an average sales price of $365,000-$375,000 and gross margin of 15%-16%. Combined homebuilding, joint venture, land sales, etc., expected to have a loss of approximately $10 million. Financial Services earnings expected to be $105 million-$110 million. Multifamily earnings expected to be ~$20 million. Lennar Other expected to have a loss of ~$20 million. EPS range $0.80-$1.10 per share.
• Full Year 2026: Anticipate delivering approximately 85,000 homes.

Segment Performance

• Homebuilding: In the fourth quarter of 2025, Lennar started 18,443 homes, delivered 23,034 homes, and sold just over 20,000 homes. Community count grew to 1,708 communities, a 18% increase from the previous year. Gross margin was 17%, SG&A was 7.9%, resulting in a net margin of 9.1%. For the first quarter of 2026, the company expects to sell between 18,000 and 19,000 homes, deliver between 17,000 and 18,000 homes, with an average sales price between $365,000 and $375,000, and gross margin in the range of 15% to 16%.
• Financial Services: In the fourth quarter, Financial Services generated operating earnings of $133 million, within the guidance range of $130 million to $135 million. For the full year 2025, Financial Services contributed $610 million in earnings.

Risks

• Market Volatility: Housing market conditions are fluid, influenced by interest rates, consumer confidence, and government actions.
• Affordability Issues: Continued affordability constraints limited demand, impacting sales and margin.
• Government Shutdown Impact: Government shutdown eroded consumer confidence, affecting sales and market conditions.

Question and Answer

• Q: Alan Ratner on margin pressure and demand improvement A: Jon Jaffe noted the government shutdown impacted consumer confidence, and Stuart Miller said the government shutdown had a material effect on consumer psychology, expecting incentives to decrease as the government focuses on affordability.
• Q: John Lovallo on margin upside and community count A: Stuart Miller emphasized focus on volume and efficiency, expecting margin improvement as incentives decrease and the government activates affordability. Jon Jaffe highlighted operational efficiencies as structural.
• Q: Stephen Kim on government actions and margin A: Stuart Miller stated the government is focused on affordability, expecting margin growth as incentives decrease without needing to increase volume.
• Q: Mike Rehaut on supply vs margin A: Stuart Miller was committed to volume, noting market conditions are fluid, with the government shutdown and economic factors affecting margin expectations.
• Q: Susan Maklari on inventory turn and cash use A: Stuart Miller discussed inventory turn potential with core product and technology, and Diane Bessette said cash on the balance sheet depends on market conditions.