Lennar 10-Q 2025-02-28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2025

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ To _______

Commission File Number: 1-11749

Lennar Corporation

(Exact name of registrant as specified in its charter)

5505 Waterford District Drive, Miami, Florida 33126

(Address of principal executive offices) (Zip Code)

(305) 559-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Common stock outstanding as of February 28, 2025:

Class A 232,184,470

Class B 31,609,709

Part I. Financial Information

Lennar Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

(1)Under certain provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidations (“ASC 810”), the Company is required to separately disclose on its condensed consolidated balance sheets the assets owned by consolidated variable interest entities (“VIEs”) and liabilities of consolidated VIEs as to which neither Lennar Corporation, nor any of its subsidiaries, has any obligations.

As of February 28, 2025, total assets include $3.0 billion related to consolidated VIEs of which $72.3 million is included in Homebuilding cash and cash equivalents, $4.4 million in Homebuilding receivables, net, $5.6 million in Homebuilding finished homes and construction in progress, $342.4 million in Homebuilding land and land under development, $2.5 billion in Homebuilding consolidated inventory not owned, $67.7 million in Homebuilding deposits and pre-acquisition costs on real estate, $0.3 million in Homebuilding investments in unconsolidated entities, $11.7 million in Homebuilding other assets and $35.5 million in Multifamily assets.

As of November 30, 2024, total assets include $3.7 billion related to consolidated VIEs of which $67.0 million is included in Homebuilding cash and cash equivalents, $6.0 million in Homebuilding receivables, net, $9.7 million in Homebuilding finished homes and construction in progress, $602.9 million in Homebuilding land and land under development, $2.8 billion in Homebuilding consolidated inventory not owned, $71.8 million in Homebuilding deposits and pre-acquisition costs on real estate, $0.3 million in Homebuilding investments in unconsolidated entities, $42.3 million in Homebuilding other assets and $33.9 million in Multifamily assets.

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

(In thousands, except share amounts)

(Unaudited)

(2)As of February 28, 2025, total liabilities include $2.4 billion related to consolidated VIEs as to which there was no recourse against the Company, of which $67.8 million is included in Homebuilding accounts payable, $2.3 billion in Homebuilding liabilities related to consolidated inventory not owned, $6.0 million in Homebuilding senior notes and other debt payable, $0.8 million in Homebuilding other liabilities, and $1.0 million in Multifamily liabilities.

As of November 30, 2024, total liabilities include $2.7 billion related to consolidated VIEs as to which there was no recourse against the Company, of which $67.3 million is included in Homebuilding accounts payable, $2.6 billion in Homebuilding liabilities related to consolidated inventory not owned, $6.0 million in Homebuilding senior notes and other debts payable, net, $45.8 million in Homebuilding other liabilities, and $1.0 million in Multifamily liabilities.

See accompanying notes to condensed consolidated financial statements.

Lennar Corporation and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2024.

Outlook

Our first quarter results were achieved against the backdrop of a challenging macroeconomic environment for the housing market. We adhered to our strategy and focus on driving consistent volume and growth by matching sales and production pace and using our margin as our shock absorber. Mortgage interest rates have remained higher for longer than we expected, which has left the overall housing market weaker for longer than expected. There remains a housing deficit and actionable demand is limited by affordability and credit, which remain challenged by limited funds for a down payment as well as insufficient homebuyer income to meet qualification requirements for mortgages. Even where household income indicates an approvable mortgage qualification, elevated personal debt levels have often presented an impediment to mortgage access. Until recently, consumers have been generally confident that they will remain employed and that their compensation is secure. However, more recently, even that security has been called into question. While there continues to be a considerable number of customers looking at homes, the urgency to purchase homes remains tepid.

Against this backdrop, our strategy has remained clear. Operationally, it is to build and deliver consistent volume to maximize efficiencies, while financially, it is to drive our asset-light, land-light focus to build cash flow. Now that we have completed our Millrose spin-off, we have intensified our focus on each. We have two focuses in our operating strategy.

First, we focus on maintaining a consistent volume of production and matching our sales pace to our production pace. This allows us to maximize efficiencies in construction costs, and cycle time, in S,G&A expenses and in all elements of marketing and sales. It also delivers a consistent and even-flow volume to our trade partners so they can be more efficient and deliver cost savings to us. By matching our sales pace and our production pace, we avoid building up inventory of finished homes or developed homesites, which efficiently converts production to cash.

Our second focus is our asset-light configuration. The Millrose spin-off completed the backbone of that effort. With Millrose operational, we have a strong complement of land bank partners that undertake land acquisition and land development and provide just-in-time delivery of finished homesites that enables us to act almost entirely as a manufacturer of homes. As with all of our trade partners, our land partners will benefit from our consistent and predictable volume, which will be reflected in reduced costs to us.

To date, tariffs have had no impact on our costs. However, we have recently been discussing the potential impact of tariffs with our supply chain, including working on alternative sourcing strategies and preparing our trade partners to absorb potential increases in their costs due to tariffs. Similarly, to date we have encountered no labor disruptions due to immigration enforcement policies.

In summary, the housing market has softened as affordability and consumer confidence have limited actionable demand. Incentives have been increasing, and net housing prices seem to be moderating. At very least, housing will not be contributing to inflationary pressures, and while demand is constrained, supply is equally limited.

We expect to sell in the second quarter of 2025 between 22,500 and 23,500 homes and to deliver between 19,500 and 20,500 homes. We expect our margin to be approximately 18%, depending on market conditions. We are focused on driving sales and closings to create strong cash flow, even at reduced profitability, while maintaining properly sized inventory levels, so that as market conditions stabilize or improve, we will benefit from normalized margins across our volume.

While the short-term road ahead may still seem choppy, we are optimistic about the longer-term outlook. We have continued to drive production to meet the housing shortage that we know persists across the markets. As and when homebuyer interest normalizes, we believe pent-up demand will be activated and our margins will quickly recover. As we complete our asset-light transformation, we expect to continue to generate cash flow which we can return to stockholders through dividends and stock buybacks, while continuing to pursue strategic growth.

(1) Results of Operations

Overview

We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three months ended February 28, 2025 are not necessarily indicative of the results to be expected for the full year. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year. However, a variety of factors can alter seasonal patterns.

Our net earnings attributable to Lennar were $519.5 million, or $1.96 per diluted share, in the first quarter of 2025, compared to net earnings attributable to Lennar of $719.3 million, or $2.57 per diluted share, in the first quarter of 2024. Excluding mark-to-market losses on technology investments, first quarter net earnings attributable to Lennar in 2025 were $566.7 million, or $2.14 per diluted share, compared to first quarter net earnings attributable to Lennar in 2024 were $723.3 million or $2.58 per diluted share.

Financial information relating to our operations was as follows:

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We are exposed to market risks related to fluctuations in interest rates on our investments, debt obligations, loans held-for-sale and loans held-for-investment. We utilize forward commitments and option contracts to mitigate the risks associated with our mortgage loan portfolio. Since November 30, 2024, there have been no material changes in market risk exposures associated with interest rate risk.

As of February 28, 2025, we had no outstanding borrowings under our Credit Facility.

As of February 28, 2025, our borrowings under Financial Services' warehouse repurchase facilities totaled $1.2 billion under residential facilities and $37.5 million under LMF Commercial facilities.

Information Regarding Interest Rate Sensitivity

Principal (Notional) Amount by

Expected Maturity and Average Interest Rate

February 28, 2025

For additional information regarding our market risk refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended November 30, 2024.

Our Executive Chairman and Co-Chief Executive Officer, our Co-Chief Executive Officer and President (together, “Co-CEOs”) and our Chief Financial Officer (“CFO”) participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their participation in that evaluation, our Co-CEOs and CFO concluded that our disclosure controls and procedures were effective as of February 28, 2025 to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed in our reports filed or furnished under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including both of our Co-CEOs and our CFO, as appropriate, to allow timely decisions regarding required disclosures.

Both of our Co-CEOs and our CFO also participated in an evaluation by our management of any changes in our internal control over financial reporting that occurred during the quarter ended February 28, 2025. That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are party to various claims and lawsuits relating to homes we sold which arise in the ordinary course of business, but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We are a plaintiff in a number of cases in which we seek contribution from our subcontractors for home repair costs. The costs incurred by us in construction defect lawsuits may be offset by warranty reserves, our third-party insurers, subcontractor insurers or indemnity contributions from subcontractors. From time to time, we are also a party to lawsuits involving purchases and sales of real property. These lawsuits often include claims regarding representations and warranties made in connection with the transfer of the property and disputes regarding the obligation to purchase or sell the property. From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle all of the foregoing matters before they reach litigation for amounts that are not material to us.

We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business or financial position. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.

Our business is subject to a variety of risks and uncertainties. These risks are described elsewhere in this Quarterly Report on Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations above, or in our other filings with the SEC, including Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended November 30, 2024. There have been no material changes in our risk factors from those disclosed in those reports, other than the impact of inflation, increased interest rates, possible effects of tariffs and increased enforcement of restrictions on immigration, which are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our repurchases of common stock during the three months ended February 28, 2025:

(1)Includes shares of Class A common stock withheld by us to cover withholding taxes due, at the election of certain holders of nonvested shares, with market value approximating the amount of withholding taxes due.

(2)In January 2024, our Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5 billion in value of our outstanding Class A or Class B common stock. Repurchases are authorized to be made in open-market or private transactions. The repurchase authorization has no expiration date.

Items 3 - 4. Not Applicable

During the period covered by this Quarterly Report on Form 10-Q, no director or executive officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

• Management contract or compensatory plan or arrangement.

** Filed herewith.

*** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.