LENNAR CORP /NEW/

Lennar Corporation is one of the largest homebuilders in the United States by deliveries, revenues and net earnings, an originator of residential and commercial mortgage loans, a provider of title insurance and closing services and a developer of multifamily rental properties. The company also sponsors and manages funds and joint ventures engaged in development and ownership of multifamily rental properties and a fund engaged in ownership of single-family rental properties, and has investments in companies applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry. The homebuilding operations are the most substantial part of the business, generating $32 billion ¹ in revenues, or approximately 94% ² of consolidated revenues, in fiscal 2025.

The residential homebuilding industry is highly competitive, and Lennar competes for homebuyers with numerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. The company competes for homebuyers on the basis of location, price, reputation for customer satisfaction, amenities, design, quality and financing. Lennar believes it is competitive primarily due to its Everything's Included marketing program, innovative home designs such as Next Gen homes, inclusion of built-in Wi-Fi and solar power systems, consumer insight capabilities, financial position, access to land, pricing to current market conditions, cost efficiencies through national purchasing programs, quality construction and home warranty programs, size and scale in leading markets, use of digital channels, utilization of the Lennar machine, and strategic investments in technology initiatives through LEN X investments.

The company generates revenue primarily through the construction and sale of single-family attached and detached homes, the purchase, development and sale of residential land, and the origination of residential and commercial mortgage loans, title insurance and closing services. Revenue from home sales is recognized at the time of closing when title and possession transfer to the homebuyer, and sales incentives are reflected as a reduction of home sales revenues. The company's performance obligation to deliver the agreed-upon home is generally satisfied in less than one year from the original contract date. The homebuilding operations generated $32 billion ³ in revenues, or approximately 94% ⁴ of consolidated revenues, in fiscal 2025.

The Homebuilding segment includes the construction and sale of single-family attached and detached homes as well as the purchase, development and sale of residential land. New home deliveries, including deliveries from unconsolidated entities, were 82,583 ⁵ in fiscal 2025, compared to 80,210 ⁶ in fiscal 2024. The average sales price of a Lennar home, excluding deliveries from unconsolidated entities, was $391,000 ⁷ in fiscal 2025, compared to $423,000 ⁸ in fiscal 2024. The company primarily sells homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers. At November 30, 2025, the company was actively building and marketing homes in 1,708 ⁹ communities, including nine communities being constructed by unconsolidated entities. The Financial Services segment originates conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other residential mortgage products primarily to buyers of Lennar homes. In fiscal year 2025, financial services subsidiaries provided loans to 84% ¹⁰ of Lennar homebuyers who obtained mortgage financing in areas where services were offered. During fiscal year 2025, the segment originated approximately 55,900 ¹¹ residential mortgage loans totaling $20.0 billion ¹², compared to 54,600 ¹³ residential mortgage loans totaling $19.8 billion ¹⁴ during fiscal year 2024. The Multifamily segment has been engaged in the development of multifamily communities since 2011 and now manages, and owns interests in, longer-duration funds that build multifamily communities with the intention of retaining them as rental income-generating assets. From inception through November 30, 2025, the Multifamily business has capitalized and developed 128 ¹⁵ multifamily residential communities with approximately 39,300 ¹⁶ rental units across 20 ¹⁷ states. The Lennar Other segment includes fund investments retained subsequent to the sale of the Rialto investment and asset management platform as well as strategic investments in various types of technology and other companies. At November 30, 2025, the book value of the investment in strategic technology investments was $581.8 million ¹⁸.

In February 2025, Lennar completed the taxable spin-off of Millrose Properties, Inc. from Lennar through a distribution of approximately 80% ¹⁹ of Millrose's common stock to its stockholders. In connection with the Millrose Spin-Off, Lennar contributed to Millrose $5.6 billion ²⁰ in land assets and cash of $1.0 billion ²¹, which included $584 million ²² of cash deposits related to option contracts. In November 2025, Lennar completed the disposition of approximately 20% ²³ of Millrose's total outstanding shares through an exchange offer, which resulted in Lennar acquiring 8,049,594 ²⁴ shares of Lennar Class A common stock in exchange for 33,298,754 ²⁵ shares of Millrose Class A common stock. In February 2025, Lennar acquired Rausch Coleman Homes, a residential homebuilder, expanding its homebuilding operations into several new markets. In May 2025, Lennar entered into a new unsecured delayed draw term loan facility with total borrowing availability up to $1.7 billion ²⁶. In July 2025, the total commitment under the Delayed Draw Term Loan Facility was increased by $100 million ²⁷, thereby increasing the borrowing available capacity to $1.7 billion ²⁸. In November 2025, Lennar amended and restated the credit agreement governing its unsecured revolving credit facility, which had total maximum borrowings capacity of $3.5 billion ²⁹. During fiscal 2025, Lennar repurchased 13,202,936 ³⁰ shares of Class A common stock for $1,624,220,000 ³¹ and 851,386 ³² shares of Class B common stock for $101,779,000 ³³. In January 2024, the Board authorized an increase to the stock repurchase program to enable repurchases of up to an additional $5.0 billion ³⁴ in value of outstanding Class A or Class B common stock.

Net earnings attributable to Lennar were $2.1 billion ³⁵, or $7.98 ³⁶ per diluted and basic share for the year ended November 30, 2025, compared to $3.9 billion ³⁷, or $14.31 ³⁸ per diluted and basic share for the year ended November 30, 2024. Revenues from home sales decreased 5% ³⁹ in fiscal 2025 to $32.1 billion ⁴⁰ from $33.8 billion ⁴¹ in fiscal 2024, primarily due to an 8% ⁴² decrease in the average sales price of homes delivered, partially offset by a 3% ⁴³ increase in the number of home deliveries. Gross margins on home sales were $5.7 billion ⁴⁴, or 17.7% ⁴⁵, in fiscal 2025, compared to $7.5 billion ⁴⁶, or 22.3% ⁴⁷, in fiscal 2024. Selling, general and administrative expenses were $2.7 billion ⁴⁸ in fiscal 2025, compared to $2.5 billion ⁴⁹ in fiscal 2024. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 8.3% ⁵⁰ in fiscal 2025, from 7.3% ⁵¹ in fiscal 2024. Cash provided by operating activities totaled $217 million ⁵² in fiscal 2025, compared to $2.4 billion ⁵³ in fiscal 2024. At November 30, 2025, Lennar had cash and cash equivalents and restricted cash of $3.8 billion ⁵⁴, compared to $5.0 billion ⁵⁵ at November 30, 2024.

Management expects that margins will remain under pressure in the first quarter of 2026 and sales and closings will be seasonally light. Management expects margins in the first quarter of 2026 will be between 15% ⁵⁶ and 16% ⁵⁷, depending on market conditions. Management expects that in the first quarter of fiscal 2026, Lennar will sell between 18,000 ⁵⁸ and 19,000 ⁵⁹ homes and deliver between 17,000 ⁶⁰ and 18,000 ⁶¹ homes at an average sales price of between $365,000 ⁶² and $375,000 ⁶³. Management expects to deliver approximately 85,000 ⁶⁴ homes in the full 2026 fiscal year.

Lennar is focused on its land-light strategy, having spun off a significant portion of its land assets to Millrose in February 2025 to accelerate its longstanding strategy of becoming a pure-play, asset-light, new home manufacturing company. At November 30, 2025, 98% ⁶⁵ of total homesites were controlled through options with land banks, land sellers and joint ventures compared to 82% ⁶⁶ at November 30, 2024. The company is also focused on its technology initiatives, which management states have made the company faster and better in the way it engages with customers, and are helping absorb price reductions required to maintain desired volume levels, offering the likelihood of substantially increasing profit levels when market conditions return to normal.

Management expects that margins will remain under pressure in the first quarter of 2026, with margins expected to be between 15% ⁶⁷ and 16% ⁶⁸, depending on market conditions. The company has a lower cost structure, efficient product offerings and a strong market position that management expects to accommodate pent-up demand as rates moderate and confidence ultimately returns. Management states that the strategy has positioned the company for strong cash flow, higher returns on equity and capital, and stronger bottom line growth in the future.

Lennar is focused on increasing efficiencies in its building process and reducing selling, general and administrative expenses by using technology and innovative strategies to reduce customer acquisition costs. The company's construction playbook has three primary areas of focus: lowering construction costs, reducing cycle time and achieving even flow production. Management states that the company has materially reduced inventory, construction costs, and cycle times, and has increased, and will continue to increase, inventory turn. The company is determined to build more with less capital deployed so that as margins begin to grow, returns on capital and equity will grow faster.

During fiscal 2025, Lennar issued $700 million ⁶⁹ aggregate principal amount of 5.20% senior notes due 2030. In May 2025, Lennar entered into a new unsecured delayed draw term loan facility with an initial committed borrowing availability of approximately $1.6 billion ⁷⁰, which can be increased by an additional $500 million ⁷¹ via an accordion feature. In July 2025, the total commitment under the Delayed Draw Term Loan Facility was increased by $100 million ⁷², thereby increasing the borrowing available capacity to $1.7 billion ⁷³. At November 30, 2025, Lennar had outstanding borrowings of approximately $1.7 billion ⁷⁴ under the Delayed Draw Term Loan Facility. In January 2024, the Board authorized an increase to the stock repurchase program to enable repurchases of up to an additional $5.0 billion ⁷⁵ in value of outstanding Class A or Class B common stock. At November 30, 2025, Lennar had a remaining authorization to repurchase $1.7 billion ⁷⁶ in value of Class A or B common stock. During fiscal 2025, Lennar paid dividends of $520,959,000 ⁷⁷ to common stockholders. On January 21, 2026, the Board declared a quarterly cash dividend of $0.50 ⁷⁸ per share on both Class A and Class B common stock.

Management identified several headwinds and constraints. The housing market remains difficult, with margins under pressure as the company focuses on bringing affordable housing to an affordability-constrained consumer base. While mortgage rates drifted marginally lower in the fourth quarter, the customer response remained tepid, suggesting a combination of poor affordability and diminished consumer confidence continued to limit demand. The threat of a government shutdown and ultimate actual shutdown in October and November further eroded already weak consumer confidence. Cost inflation has had a significant impact on the lifestyle of the average American family, and concerns about job security have become increasingly prominent as advancements in modern technology and artificial intelligence raise important questions about the future of employment for the American workforce. Increased interest rates as compared to prior years have made homes less affordable to many prospective buyers and led the company to reduce prices and/or increase sales incentives in a number of communities to maintain sales pace.

Demand for homes is dependent on macroeconomic factors such as employment levels, inflation, interest rates, and consumer confidence, and currently, potential purchasers are being affected by inflation and continued high interest rates, tariffs and trade policy, all of which increase what homebuyers have to pay for new homes. The company's land-light strategy, which resulted in 98% ⁷⁹ of total homesites being controlled through options at November 30, 2025, exposes the company to risks if land banks, including Millrose, are unable or unwilling to satisfy their obligations, or if landowners refuse to honor options or contracts, which could delay or prevent homebuilding and deliveries. A significant portion of land inventory is held by land banks, and the majority of land banking arrangements are concentrated in a limited number of land banks, including Millrose, exposing the business to risks if a principal land bank faces financial difficulties or defaults on secured financing arrangements, potentially causing loss of access to homesites. The company has a substantial level of indebtedness, with outstanding senior notes totaling $2.1 billion ⁸⁰ at November 30, 2025, and during fiscal 2026 will have to replace or renew a total of $3.0 billion ⁸¹ of warehouse lines used by Financial Services as they mature, and if unable to do so on favorable terms, that could seriously impede the activities of the Financial Services segment.

Management's message to shareholders reflects a tone of cautious realism and strategic focus. The fourth quarter and year-end 2025 results reflect what is and continues to be a difficult housing market, with margin under pressure as the company focuses on bringing affordable housing to an affordability-constrained consumer base, though underlying demand is still strong while supply is short. Management states that during the past three years of difficult market conditions, the company has maintained volume, grown market share and re-engineered its operating platform for a better and more efficient future when the market normalizes. Management expects margins in the first quarter of 2026 will be between 15% ⁸² and 16% ⁸³, depending on market conditions, and expects to sell between 18,000 ⁸⁴ and 19,000 ⁸⁵ homes and deliver between 17,000 ⁸⁶ and 18,000 ⁸⁷ homes at an average sales price of between $365,000 ⁸⁸ and $375,000 ⁸⁹ in the first quarter of fiscal 2026. Management expects to deliver approximately 85,000 ⁹⁰ homes in the full 2026 fiscal year. The strategic priorities emphasized for the period ahead include maintaining focus on volume and even-flow production, continuing the land-light strategy to build more with less capital deployed, and leveraging technology initiatives to become faster and better in engaging with customers, with the goal of being the best manufacturing model possible.