Earnings call transcript: Lennar Q2 2025 misses EPS but beats revenue

Lennar Corporation reported its second-quarter 2025 earnings, revealing a slight miss on earnings per share (EPS) but exceeding revenue expectations. The company reported an EPS of $1.90, falling short of the forecasted $1.94, marking a surprise of -2.06%. However, Lennar surpassed revenue forecasts, achieving $8.38 billion compared to the anticipated $8.18 billion, a surprise of 2.44%. Despite the EPS miss, Lennar’s stock saw positive movement in premarket trading, rising 3.38% to $113.19, following a previous close of $109.49. According to InvestingPro analysis, Lennar maintains a strong financial health score of 2.99 (GOOD), with particularly robust cash flow metrics.

Key Takeaways

• Lennar’s revenue exceeded expectations by $200 million.
• The company’s stock rose 3.38% in premarket trading.
• Sales incentives increased to 13.3%, reflecting market challenges.
• Lennar is enhancing its technology and operational efficiency.
• The company maintains a strong liquidity position with $5.4 billion.

Company Performance

Lennar’s performance in Q2 2025 demonstrated resilience amid challenging market conditions, including higher mortgage rates and reduced consumer confidence. The company started 24,200 homes and delivered over 20,000, with sales reaching 22,601 homes. This performance underscores Lennar’s strategic focus on entry-level and move-up products, despite the broader housing market’s affordability constraints. Trading at a P/E ratio of 7.54x, significantly below industry averages, InvestingPro analysis indicates the stock may be undervalued. The company’s strong market position is further supported by its impressive 48-year track record of consistent dividend payments.

Financial Highlights

• Revenue: $8.38 billion, up from the forecast of $8.18 billion.
• Earnings per share: $1.90, below the forecast of $1.94.
• Gross margin: 18%, excluding purchase accounting.
• Liquidity: $5.4 billion, with $1.2 billion in cash.

Earnings vs. Forecast

Lennar’s EPS of $1.90 fell short of the $1.94 forecast, representing a negative surprise of 2.06%. In contrast, revenue surpassed expectations by 2.44%, reaching $8.38 billion against the forecasted $8.18 billion. This mixed performance highlights the company’s ability to generate higher sales despite pressure on profit margins.

Market Reaction

Following the earnings announcement, Lennar’s stock price increased by 3.38% in premarket trading, reaching $113.19. This positive movement suggests investor confidence in the company’s revenue growth and strategic initiatives, despite the EPS miss. The stock’s recent performance remains within its 52-week range, with a high of $186.23 and a low of $98.42. InvestingPro reveals several additional bullish indicators for Lennar, including its strong balance sheet with more cash than debt and high shareholder yield. Subscribers can access 8 more exclusive ProTips and comprehensive financial metrics through the Pro Research Report.

Outlook & Guidance

Looking ahead to Q3 2025, Lennar expects to receive new orders for 22,000 to 23,000 homes and deliver a similar number. The average sales price is projected between $380,000 and $385,000, with a gross margin of approximately 18%. The company anticipates an EPS range of $2.00 to $2.20, reflecting cautious optimism amid ongoing market challenges.

Executive Commentary

Stuart Miller, Executive Chairman, emphasized the company’s focus on technology integration, stating, "We are laser-focused on injecting technology-assisted solutions into our platform." Co-CEO John Jaffe noted, "The demand is there. It is just challenging," highlighting the current market dynamics. Miller also expressed confidence in Lennar’s national footprint, stating, "We are well prepared with a strong and growing national footprint."

Risks and Challenges

• Higher mortgage rates continue to pressure affordability.
• Consumer confidence remains subdued, affecting demand.
• Supply chain issues could impact construction timelines.
• Rising sales incentives may pressure profit margins.
• Macroeconomic uncertainties could affect housing market stability.

Q&A

During the earnings call, analysts inquired about consumer credit quality and price elasticity across different markets. Lennar’s management detailed their technology investment strategy and addressed increases in selling, general, and administrative expenses (SG&A). The company also clarified the composition of its gross margin, providing insights into its financial strategy.

Full transcript - Lennar Corporation (LEN) Q2 2025:

Conference Operator: Welcome to Lennar’s Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the presentation, we will conduct a question and answer session.

Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to David Collins for the reading of the forward looking statement.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Thank you, and good morning, everyone. Today’s conference call may include forward looking statements, including statements regarding Lennar’s business, financial condition, results of operations, cash flows, strategies and prospects. Forward looking statements represent only Lennar’s estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward looking statements relate to matters that have not yet occurred, these statements are

John Jaffe, Co-CEO and President, Lennar: inherently subject to risks

Stuart Miller, Executive Chairman and Co-CEO, Lennar: and uncertainties. Many factors could affect future results and may cause Lennar’s actual activities or results to differ materially from the activities and results anticipated in the forward looking statements. These factors include those described in our earnings release and our SEC filings, including those under the caption Risk Factors contained in Lennar’s Annual Report on Form 10 ks most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward looking statements.

Conference Operator: I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman and Co CEO. Sir, you may begin.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Good morning, everybody, and thank you for joining us today. I’m in Miami, today together with John Jaffe, our Co CEO and President Diane Dessette, our Chief Financial Officer David Collins, who you just heard from, our Controller and Vice President Fred Rothman, our chief operating officer Bruce Gross, our CEO of Lennar Financial Services Mark Sistana, our general counsel and a few others as well. As usual, I’m going to give a macro and strategic overview of the company. After my introductory remarks, John is gonna give an operational overview, updating construction costs, cycle time, and some other items. And as usual, Diane is gonna give a detailed financial highlight along with some guidance for our third quarter of two thousand twenty five.

And then, of course, we’ll take questions, in our question and answer period. As usual, I’d like to ask that you please limit yourself to one question and one follow-up so that we can accommodate as many as possible. So let me begin. We’re very pleased to review our February results against the continuing backdrop of a challenging economic environment for the housing market. In the second quarter, we remained focused on our stated strategy by driving volume and growth, matching production and sales pace, using margin reduction to enable affordability and sell and deliver homes to avoid building excess inventory.

While our margin and earnings have been adjusting and of course falling in order to accommodate the realities of the housing market conditions, we remain focused on volume and even flow production to enable re rationalize cost structure and overhead in order to find a floor and rebuild margin even as the overall housing market continues to soften. We expected that the new normal of higher interest rates for longer would mean lower margins for longer as we drove affordability. We knew that we and the industry were initially going to have to bring down the price of homes we build through incentives and mortgage buy downs to meet affordability and normalize the supply and demand balance. We also knew that to rationalize margin from average sales price would only be a we would only be able to rebuild margin from a more efficient cost base. We believe that we have gotten ahead of these market realities, and we are building what what will become a stronger margin driving platform by using volume to enable us to drive costs down across our platform.

We know this takes time, but we also know it will help build a healthier housing market and position Lennar for bottom line growth even as the market remains soft. Admittedly, we haven’t gotten there yet, but we believe that we’re getting very close to the bottom and the time when we will build back margin from a lower cost structure, and I’ll explain that in more detail shortly. First, I’ll discuss the market environment, then review our strategy, then relate strategy to our reported numbers and expectations for the near future. Let me start with a macro view of the housing market. Consistent with last quarter’s earnings call, the macro economy remains challenging as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global.

Across the housing landscape, actionable demand has been diminished by both affordability and consumer confidence and therefore has continued to soften. At the same time, supply remains constrained by years of underproduction. New construction has slowed as builders have pulled back on production due to mixed demand signals, exacerbating the chronic supply shortage that derived from the great recession and its aftermath. Additionally, restrictive land permitting along with higher impact fees remain supply constraints while labor and material costs, lumber is in particular heavy, are generally increasing. Accordingly, given short supply, home prices remain high with median sales hovering around $400,000 in many markets.

Demand, however, is still high as people want and need homes. Millennials are hitting the prime buying age and are realizing the benefit and perhaps imperative of homeownership. But affordability and waning confidence around buying now are sending confusing signals. I certainly don’t wanna overstate the negative as the market is definitely not crashing, but it just continues to cool. Inventory is up slightly from last year’s lower levels, but still relatively limited.

It’s just that the housing market right now is driven by supply and demand that can’t be properly aligned. This is a difficult cycle as low supply fuels high prices and high prices lock out many of our buyers. Mayors and governors around the country continue to decry the housing shortage and point to affordability or attainability as a priority concern. As a case in point, I and many other home building leaders last week heard from governor Cox of Utah explain that there’s a significant housing shortage in his state, and they simply need more supply. In fact, they are running a need more supply publicity campaign in the state.

He noted that the American dream is homeownership, and his state has a 350,000 home deficit that is maintaining prices at an unaffordably high level. He emphatically argued that they need more starter homes in the state that are affordable to those who are just beginning their careers and their families. He describes how he and his state are making noteworthy efforts to eliminate or modify restrictions in zoning and timeliness in order to attract more supply, which will help narrow the supply gap and help align supply and demand. This is a common refrain. The post pandemic days of strong actionable demand driven by low interest rates are behind us.

Initially, many in the housing market held on to the hope that higher interest rates were temporary, expecting inflation to subside and rates to drift back to lower levels. However, this expectation has not materialized. Looking ahead, there’s little evidence to support expectations of materially lower interest rates in the near term. As a result, elevated interest rates have solidified as the new normal. The environment is about recognizing that short supply is keeping prices higher and that only lower prices enabled by lower cost structures will define affordability.

This trend has started with reducing margins and using incentives to enable affordability, but looking ahead, it is much more about transitioning to lower cost structures. Against this backdrop, let me turn to Lennar’s operating strategy. Our strategy is and has remained very clear. First, operationally, we are building and delivering consistent volume by meeting the market at affordability, and using volume we and using volume, we push efficiencies through our platform. And second, financially, we are focused on driving an efficient asset light, land light balance sheet to effectively hold and develop our land assets and to build cash flow.

As I said earlier, we are not there yet, but we are certain that we are finding a floor with margin and getting close to building it back even in a softer housing market environment. As the current market soft softness unfolded, we focused on consistent volume by matching our production pace with our sales pace. Although some have questioned why we have maintained volume rather than protect our margin, we are very clear and steadfast on our strategy. Historically, we protected margin as market conditions stalled, and we generally led the way in protecting short term profitability. But we learned through those times that once we step backwards and lose momentum, it becomes increasingly more and more difficult to restart and recapture volume.

The machine slows and does not restart easily. We have concluded that by maintaining volume, we can create new efficiencies and new solutions that are durable for the future and will result in meaningful long term efficiencies in our cost structure. When we stop and pull back, the restart is difficult and expensive, but even worse, we end up coming back as the exact same company we were before with no significant changes for the future. Today at Lennar, we are laser focused on injecting technology assisted solutions into our platform with the expectation that we become meaningfully different and decidedly better. We believe that with volume, we can design and engage real change that will produce significant recurring returns for years to come.

It really comes down to using hard times to push, to force, and accomplish hard things, and this is exactly what we’re doing. As many know, we have spent considerable time working with, investing in, and exploring technology, And the general business community is consumed with the possibilities and opportunities enabled by modern technology. We think about the extraordinary companies that remade their business by incorporating technology solutions into an older platform like Walmart or Home Depot. They invested heavily in their technology enabled solutions and cemented themselves as industry leaders. We believe in the virtues of technology solutions and the value and efficiency it can bring.

We clearly believe that technology, properly configured, can enhance productivity. Today’s technologies can and will combine with extraordinary management teams to bring efficiencies that have never been seen before. We believe that productivity and efficiency can be enhanced by orders of magnitude when technology assistance solutions intersect with company wide adoption. We have learned that modern technology is not plug and play. In order to get excellent product development and achieve adoption, it requires substantial monetary investment, management time, and widespread engagement.

Additionally, it needs a lot of volume to run through the system for development and for AP testing. These solutions are very hard to create and heat and even harder to incorporate into an organization that is accustomed to old ways and old habits. But we are certain that the returns on investment will be significant in both cost savings and efficiency in the way that we acquire and interact with our customer. This is why we are driving volume and focused on using that volume to enable unique Lennar technology enabled solutions. I’ll review some examples shortly.

But first, let me briefly reflect on our second core strategy of driving an efficient asset light, land light balance sheet to efficiently hold and develop our land assets and build cash flow. As I noted last quarter, the Millrose spin was a critical part of our asset light, land light strategy, but there is more to accomplish. The land strategy also benefits from our volume as greater predictable volume enables greater certainty for the capital market and will help build a more capital efficient market for this very important part of our business. We’re continuing to drive certainty with volume for our land bank partners, and this will help ensure stability and dependability. In turn, that dependability will translate into certainty and predictability for Lennar.

Additionally, this part of our strategy also benefits from our technology enabled solutions work as a technology based administration system will enable efficient efficiency at many level levels, and I will further address this shortly as well. So now let me turn to our results. As I noted earlier, we’re quite pleased with the success embedded in our second quarter results and accomplishments. In very complicated market conditions, Lennar associates have been executing our strategy while learning and developing new technologies for our future. This is hard work, and I thank them all for their amazing contribution to that future.

In our second quarter, we started over 24,000 homes making up for last quarter’s shortfall. We delivered over 20,000 homes and sold 22,601 homes. As mortgage interest rates moved higher for longer and consumer confidence declined, we continued to drive volume with our starts while we incentivized sales to enable affordability. As a result, during the second quarter, sales incentives rose again to 13.3%, reducing our gross margin to 18% excluding purchase accounting as expected on a lower than expected average sales price. By that I mean the partners who put in the roads, water, and sewer on each tract of land that we develop.

They too are dependent on consistent volume to ensure that their investment in heavy equipment is continuously working. Idle equipment costs money with no income. Our focus on volume enables us to have conversations and build relationships that were impossible when the market was heated and strong. Given those initiatives, we look ahead to the third quarter of twenty five. We expect that our margin will come in at approximately 18%, of course, depending on market conditions.

We expect to sell between 45,000 homes and deliver between 45,000 homes. We expect our average sales price to be between 380,000 and 385,000 as we expect to continue to see pricing pressure on homes that will be sold during the quarter. Nevertheless, we are focused on driving sales and closings and driving strong current cash flow even at reduced profitability. We are focused on maintaining properly sized inventory within our two homes completed and sold per community level per month. No.

No. That’s overall. So that if market conditions stabilize or improve, we will benefit. And if the market conditions soften, we are prepared. We expect our overhead in the third quarter to continue to run on the high side at between 88.2% as we continue to invest in and evolve various Lennar technology assisted solutions that will define our future.

These initiatives have been and will continue to add s g and a as well as corporate g and a for some time to come as they represent a significant investment in our differentiated future. Let me give you some examples. You might remember the program that we once described as the Lennar machine. The machine, which is overseen by Ori Klein, Jeff Moses, and Ben Lott, and they do an amazing job, it was and still is our primary digital marketing and customer acquisition product, and it has become central to our overall marketing and sales efforts. It operates on a Salesforce backbone, which ingests data from across the Lennar sales landscape.

The machine’s components have become native to the Lennar way of selling. We have invested heavily in the future of this high technology program, which is designed to reduce our customer acquisition costs, both internal and external, and manage the dynamic pricing of our homes. Perhaps most importantly, we are working closely with executives at Salesforce as well as our advisors at McKinsey to evolve and design a Lennar agent force that will be able to quickly engage with customers in coordination with our sales team as well as independently in off hours. Our development of this tool requires significant data flow and is another reason that we maintained our volume to continue to build our digital marketing and customer acquisition program. Another example is in the land arena.

We are at the front end of developing a technology driven land management system in cooperation with the team at Palantir. Our Lennar interface with Palantir is Yan Lu, who is driving that innovation. As we developed our Essential Housing and Millrose business engagement, we knew that asset light and land light wasn’t enough. Off balance sheet acquired land with just in time delivery of home sites can potentially harbor inefficiencies. The day to day administration from purchasing land to the development of that land and to the delivery of developed home sites is being crafted with a state of the art, high technology enabled program.

This system will help manage every part of the land and land capital relationship and journey. Of course, in order to execute, it requires money, overhead, executive management time and attention, and substantial volume running through the system that will enable this system to properly evolve. Finally, in July, we will execute, wish us luck, the two year transition of our ERP system to JD Edwards e one system. This has been a massive undertaking by the extraordinary Lennar professionals, excuse me, professionals in our IT group that was led by Scott Spradley until his retirement a few weeks ago, and to be transitioned by his leadership, Thor, Lee, and Jason. You guys know who you are, who are ready to complete this rather complex feat.

Although this is really considered just a technical transition, it will enable our combined team of the IT leadership group and Diane Bissette, our chief financial officer, to begin on modernization of our entire financial platform from the main office to the field. Many of you might have noticed that we at Lennar get prepared fairly quickly to report earnings. The reality is that we close our books within three days of quarter end. We have a full numbers package three days later, and we have a complete forecast three days after that. The good news is that we could report earnings on the tenth day after the quarter end.

The bad news is that this extraordinary time frame is handled with limited automation that has been limited by our old school ERP. David Collins really leads this effort. Our financial team does an exceptional job, but they will be truly supercharged and capable of much more as we get these processes automated, and we will. So in conclusion, let me say that while this has been a constructive quarter for Lennar, and while the short term road ahead might seem choppy, we are very optimistic about our future. We are well aware that our numbers this quarter aren’t where we would like them to be, but neither is the market.

And this is a tough time to be spending heavily on innovation, but we are. This has been an important quarter for Lennar, and we couldn’t and we couldn’t be prouder of the work and dedication of our extraordinary associates who work together to make it all happen. Together, we have upgraded the financial and operating platforms as we drove production and sales. We are well prepared with a strong and growing national footprint, growing community count, and growing volume. We have continued to drive production to meet the housing shortage that we all know persists across our markets.

And we have driven growth, production, and volume volume, we have positioned our company to evolve and create efficiencies and technology that will make us a better company and built for the future. Perhaps most importantly, our strong balance sheet and even stronger land banking relations, and soon our technology enabled solutions will afford us flexibility and advantaged opportunity to consider execute on strategic growth for our future as well. In that regard, we will focus on our manufacturing model and continue to use our land partnerships to grow with a focus on high returns on capital and equity. Lennar is extremely well positioned for the future and we look forward to keeping you up to date on our progress.

John Jaffe, Co-CEO and President, Lennar: And with that, let me turn over to John. Thank you and good morning everyone. Stuart has described in detail the why and how behind our strategy of being a consistent, high volume, technology enabled home building manufacturer and our commitment to execute that strategy. We strongly believe this strategy will produce greater efficiencies and drive down costs throughout our platform. I’ll further review this as I discuss our performance on sales pace, cost and cycle time reductions and the execution of our asset light land strategy for the second quarter.

Our sales pace for the second quarter was 4.7 homes per community per month, in line with our sales plan. The well documented softness of the spring selling season showed the impact of affordability challenges driven by higher interest rates and elevated home prices along with the uncertainty associated with the macro environment. As the market softened, we leaned into our people and processes to find market and maintain sales pace. This involves the rigor of a daily review of marketing and sales data to make needed adjustments. Based on real time analysis of traffic, sales, sales pace and inventory, we will either make no adjustments to prices, increase incentives or decrease incentives.

This is powered by some of the technology that Stuart referenced, as we’ve added new automated pricing capabilities to the Lennar machine. This particular technology analyzes all of this marketing and sales data and provides pricing recommendations. It is in its early stages, but we’re encouraged thus far. We continuously make pricing adjustments with the goal of ending the week with both the targeted number of sales and with a focus on selling our completed or soon to be completed inventory. If any community falls short of these goals in any given week, the analysis of the data provides us with course correcting actions.

By adhering to this discipline, we ended the quarter well positioned with an average of under two unsold completed homes per community. All of the markets we operate in experienced some level of softening. Even in our strongest performing markets, buyers needed the assistance of incentives. Incentives will vary across the different markets, but primarily in the form of assistance with mortgage rate buy downs. The markets that experienced more challenging conditions during the quarter were the Pacific Northwest markets of Seattle and Portland, the Northern California markets of the Bay Area and Sacramento, the Southwestern markets of Phoenix, Las Vegas and Colorado, and some Eastern markets such as Raleigh, Atlanta and Jacksonville.

These markets experienced sensitivity to higher home prices and or the macro impact on the technology workforce. Turning to the production side of operations, as Stuart highlighted, achieving construction efficiencies is the goal of our production first strategy. Our start pace in the second quarter was 5.1 homes per community per month, providing meaningful volumes to the supply chain, which is critical to accomplishing our mission of lowering cost and cycle times. Achieving these goals is measured by reducing cost across our entire platform. The proper execution of this strategy will deliver savings in direct construction, land development, land acquisition, indirect costs and SG and A.

Volume and importantly consistent even flow volume along with efficient to build plans and digitally enabled scheduling and quality control processes all drive cost savings. Our commitment to this consistent volume means our trades can drive down their own cost structure as well as work successfully on lower margins, allowing us to stabilize and ultimately grow our margins. The cost reduction discussions with our supply chain are grounded in both the recognition that our consistent volume and market conditions require a recalibration of cost. Direct construction costs in the second quarter were lower sequentially by 1.5% from Q1 and on a year over year basis by 3.5% to our lowest direct construction costs since Q3 of twenty twenty one. This trend will continue into our third and fourth quarters.

Another benchmark of efficiency is our cycle time. Our second quarter cycle time decreased by five days sequentially from Q1, down to one hundred and thirty two calendar days on average for single family detached homes. This is an eighteen day or 12% decrease year over year and is lower than pre pandemic cycle times. We expect to see continued improvement in cycle time as well throughout our third and fourth quarters. Our operating strategy is also resulting in reductions in land development costs and in restructuring land acquisitions.

As Stuart noted, our consistent volume comes into play as it provides consistent and predictable work for land development contractors who depend on utilization of heavy equipment. Similarly, the consistent and dependable takedown of land in a slowing macro environment allows for the proper alignment of timing of land closings and a recalibration of the purchase price of land. With respect to the question regarding tariffs, consistent with our commentary last quarter, we have had no impact to date to our costs from tariffs. We work closely with the supply chain to prepare for alternative sourcing if it becomes necessary as well as the expectation that our trade partners will work with us to mitigate and offset cost impacts should they present themselves. Stuart addressed and Diane will provide further details, we continue to execute on our asset light strategy.

We ended the quarter with our supply of owned homesites improving to zero point one years, down from one point two years a year ago and control home site percentage increasing to 98% from 79% a year ago. During the quarter, land banks acquired on our behalf about 17,000 home sites for about $1,400,000,000 and a commitment of about $2,100,000,000 in land development. We purchased during the quarter from our various land bank partners, almost 22,000 finished homesites for about $2,700,000,000 The cost and processes in and around land banking provide another area for efficiencies as Stuart discussed. Our focus on the coordination between land sellers and land banks of just in time land acquisitions with the commencement of land development, our consistent volume provides the opportunity for processes and technologies that will lead to cost reductions. These improvements and execution of all of our operating strategies enable capital and production efficiencies leading to improved inventory churn, which now stands at 1.8% versus 1.6% last year, a 13% improvement.

In our third quarter, we will continue to focus on meeting our planned sales pace while intensifying our efforts to reduce costs and maximize efficiencies across our operating platform. I want to thank all of our Lennar associates for their hard work, focus and dedication for the work accomplished in our second quarter and for the hard work that lies in front of us. And now I’ll turn it over to Diane.

Diane Dessette, Chief Financial Officer, Lennar: Thank you, John, and good morning, everyone. Stuart and John have provided a great deal of color regarding our operating performance, so therefore, I’m going to spend a few minutes on the results of our financial services operations, summarize our balance sheet highlights and then provide estimates for the third quarter. So starting services. For the second quarter, our financial services team had operating earnings of $157,000,000 The strong earnings were primarily from our mortgage business and were driven by a higher profit per loan as a result of higher secondary margins and also due to a higher capture rate. The financial services team is is is intensely dedicated to providing a great customer experience for each home buyer and has created true partnerships with our homebuilding team to best accomplish that goal.

Our LFS teams together with our homebuilding divisions are truly one Lennar. Turning to our balance sheet. This quarter once again, we were highly focused on generating cash by pricing homes to market conditions. The result of these actions was that we ended the quarter with $1,200,000,000 of cash and $5,400,000,000 of total liquidity. We are now positioned as a land like, thus lower risk manufacturing homebuilder.

Our year’s supply of owned homesites was zero point one years, as John noted, and our homesites control percentage was 98%. We ended the quarter owning 12,000 homesites and controlling 520,000 homesites for a total of 532,000 homesites. We believe this portfolio of homesites provides us with a strong competitive position to continue to grow market share and scale in a capital efficient way. With our focus on returns, we are pleased that our inventory turn increased to 1.8 times with a solid return on inventory of 27%. As we stated in the past, we balanced margins and asset turnover as both contribute to higher returns.

During the quarter, we started approximately 24,200 homes and ended the quarter with approximately 42,400 homes in inventory. This inventory number includes 2,900 homes that were completed unsold, which as noted is under two homes per community and continues to be within historical range. Turning to our debt position, we opportunistically raised $700,000,000 in senior notes at 5.2% due in July 2030. We primarily used the proceeds to pay off $500,000,000 of senior notes that we matured in May. As a result, our homebuilding debt to total capital was 11% at quarter end.

Our next debt maturity of $400,000,000 is not due until June of twenty twenty six. Consistent with our commitment to increasing shareholder returns, we repurchased $4,700,000 of our outstanding shares for $517,000,000 and we paid dividends totaling $134,000,000 Our stockholders’ equity was just under $23,000,000,000 and our book value per share was about $87 In summary, the strength of our balance sheet provides us with confidence and financial flexibility as we progress through the balance of 2025. With that brief overview, I’d like to turn to Q3 and provide some guidance estimates. Starting with new orders, we expect Q3 new orders to be in the range of 22,000 to 23,000 homes as we match production and sales price. We anticipate our Q3 deliveries to also be in the range of 22,000 to 23,000 homes with a continued focus on turning inventory into cash.

Our Q3 average sales price on those deliveries should be about 3 and 80,000 to 385,000 and gross margin should approximately 18% as we continue to price to market and use incentives to enable our customers to attain affordable homes. Our SG and A percentage should be in the range of 8% to 8.2%, impacted by our continued investment in technology solutions. All of these metrics, of course, are dependent on market conditions. For the combined homebuilding joint venture land sales and other categories, we expect a loss of about $25,000,000 We anticipate our financial services earnings to be approximately 175,000,000 to $180,000,000 For our multifamily business, we expect a loss of about $40,000,000 as we continue to strategically monetize assets to generate higher returns. Then turning to Lennar Other, we expect a loss of $35,000,000 excluding the impact of potential mark to market adjustments to our public technology investments.

Our q three corporate g and a should be about 1.8% of total revenues, and our foundation contribution should be based on a thousand dollars per home delivered. We expect our Q3 tax rate to be approximately 25.3%, and the weighted average share count should be approximately two fifty seven million shares. And so on a combined basis, these estimates should produce an EPS range of approximately $2 to $2.20 per share for the quarter. In conclusion, I, like Stuart and John, would like to say thank you to the financial teams in our division and in our corporate office. You bring an incredible amount of dedication to the table each and every day, and it is greatly appreciated.

With that, let me turn it over to the operator.

Conference Operator: Thank you. We will now begin the question and answer session of today’s conference call. We ask that you limit your questions to one question and one follow-up question until all questions have been answered. If you would like to ask a question, please unmute your phone, press star one and record your name clearly when prompted. If you need to withdraw your question, you may use star two.

Again, that is star one to ask a And our first question will come from Alan Ratner from Zelman and Associates. Please go ahead.

Alan Ratner, Analyst, Zelman and Associates: Hey, good morning. Thank you for all the details so far. Very helpful. Lot to touch on here, but I think first, maybe if we could just chat a little bit about the consumer and what you’re seeing there. I know, Stuart, you went into a lot of detail about the overall demand environment.

But we’ve been getting a lot of questions, hearing a lot of concerns, reading headlines about just the overall quality of the consumer today and some headlines about student loans, for example, that’s beginning to impact some credit scores and just overall kind of stretched kind of quality there. So have you seen any dramatic shifts, you know, year to date in terms of credit quality or just the overall, ability for consumers to purchase homes? Or has this been kind of just a slow, steady grind over the last few years given affordability constraints?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Look, I’m just gonna say generally, I’m only gonna turn it over to Bruce for a second. But just generally speaking, the market has definitely softened or continued to soften. New normal interest rates are higher, but more importantly, consumer confidence has started to wane a little bit. In our last earnings call, I did talk about the fact that we are seeing higher debt levels in some of our loan applications, and that too is starting to weigh in on the market. Bruce, maybe you could give some more color.

John Jaffe, Co-CEO and President, Lennar: Sure. From a credit perspective, if you’re thinking about credit scores, it’s been very consistent. What we are seeing though is a little bit of a shift to more government loans, which helps with the ratios for some people that don’t qualify. So our government loans were up from 40% last year to about 48% in the second quarter of this year. So that’s the one noticeable difference.

You also brought up student loans, but people do have to qualify assuming the student debt. So we haven’t really seen any shift there with any changes with student loans at this point.

Alan Ratner, Analyst, Zelman and Associates: Great, and it’s great to hear your voice, Bruce. Hope you’ve been doing well. Second question on the just overall, I guess, price elasticity in the market. Stuart, obviously with the machine and your ability to flex incentives to maintain a targeted sales pace, impressive results there. I’m just curious across your portfolio, do you feel like there are any markets right now that don’t really have elasticity in demand, meaning incentives, it doesn’t really matter how high you take them, you’re struggling to achieve a certain targeted pace and as a result, you’ve dialed back the production?

Or would you say across the board there is a market clearing price, just a matter of finding what that level is to achieve the targeted absorption?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: So I’ll just say quickly and then turn over to John that, as you know, Alan, we are on top of these numbers, our divisions, our regions every day. And I would I would say that you do see somewhat of a rotation where, you know, one week it’s one market and one week it’s another where the question of elasticity is raised and challenged and it’s a real ebb and flow market out there that moves around. John? Yeah, would completely agree with that, Stuart. It’s nothing

John Jaffe, Co-CEO and President, Lennar: you can point to, Albert, to say this market is behaving consistently in a different direction. As I highlighted, some of the markets that are harder to find that pace. As I said, it’s in part driven by perhaps where pricing is and particularly tech workers who are foreign tech workers, uncertainty around that. So in combination, you tend to see a bigger impact, but that also tends to be very community specific and we make the adjustments. Great.

Thanks for the all the detail, guys. Appreciate it. You bet.

Conference Operator: Next we’ll go to the line of Stephen Kim from Evercore ISI. Please go ahead.

Stephen Kim, Analyst, Evercore ISI: Yeah. Thanks very much guys. Appreciate all the color as always. I guess last quarter we discussed your view that long term normalized operating margins before corporate expense were like in the mid to high teens and that you could be nimble in adjusting your operations to a lower level of volume if you needed to. You made clear today, again, you’re definitely committed to driving volume based efficiencies.

But based on the third quarter order guide, looks like maybe you are tweaking down volume a little bit. And your comments there, just in response to Alan, it sounds like maybe some markets where there’s an inelasticity of demand, you sort of may be tweaking volume down a bit. So I’m just wondering, first of all, to make sure that I heard that correctly, I also noticed you didn’t really give, I didn’t hear it at least a full year volume guide. So my question basically is could you talk a little bit about how you see the overall level of volume for on an annualized kind of basis? Has changed in the last few months?

And is there some sort of a metaphorical line in the sand for either volume or margins that is worth talking about, you know, in addition to the sort of the long term normalized level? Is there like a bottom line or a bottom or floor level that’s worth talking about?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: So that’s a number of questions in one, but let me clear up, Steve, that in my comments I did say that we are still expecting for the full year to hit the bottom of the range that we previously articulated of 86 to 88,000 homes. So we did detail that. I think that we’re remaining consistent, and we’re focusing on driving volume, but we’re not trying to break anything. This is a day by day kind of program of working with market conditions. And what we’re doing is adjusting pricing, using incentives to meet the market at affordability, and at the same time, we’re working with cost structure to say, okay, the market is going to be able to afford x.

Now we’ve gotta be able to build something that is market desirable at a cost structure that enables us to make a responsible margin. Is there a breaking point? I don’t think so, Steve. I think that we’re really focused on saying the market is gonna be where it’s gonna be, and that interest rates, the interest rate is part of the affordability program. We’re gonna have to find a way.

The challenge for the industry is going to be to find a way to build at cost structure and take inefficiencies out of our system, build that cost structure, housing that the market can afford. At the end of the day, this conundrum that you’ve got a supply shortage and demand challenged at the affordability level, I tried to really highlight that. It’s not something that we’ve really seen before. And so the market needs supply. It needs supply at a cost structure where we can make a margin and where the customer can afford.

And that’s what we’re driving towards with everything that we’re doing.

John Jaffe, Co-CEO and President, Lennar: I think you said it really well, Stuart. As I highlighted those markets that have some more challenges, Steve, it’s exactly as Stuart said, we are finding our way to a recalibrated cost structure to meet that demand. The demand is there. It is just challenge as we all know. So it’s up to us to do the hard work to figure out how to provide pricing for their homes that is actionable for those consumers.

Stephen Kim, Analyst, Evercore ISI: Yeah, and obviously a lot of that is just good old blocking and tackling and making sure you’re sharing the pain with all of your partners who are benefiting from your volume. But you also talked intriguingly, Stuart, at length about technology and the major productivity gains you anticipate from technology. And you made clear that you felt like you weren’t quite there yet. And so what I wanted to clarify is, is the gap, is it one of know how and time? Or do you think that you actually need to have a higher level of volume than you have today in order to capture and optimize those productivity gains?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: It’s a really important question. Let me first say, I think that we need volume, but I think that we have volume. So I’m not making arguments that we need more volume in order to run through. I think that we have that high level of volume that will enable us to learn. But what I did try to articulate is I don’t care if you look at the technology companies that are self made as technology companies like Amazon, like Meta, like Google.

If you look at those companies, the amount of money that they invested to become what they were and before they ever saw a dollar of profit was enormous. If you then back up and look at the companies like Home Depot and Walmart that on an old chassis, they put a brand new engine, to enable, them to be prepared for a digital future. The dollars that were invested by those companies was not just numbers of dollars, but it was management time. It was general overhead. It was focus and attention.

I’m not sure that any of these companies did what they did in the context of a softening market. And so the coincidence of we didn’t start what we’re doing in a softer market, but we’re traversing a softer market as we are building these components that we think position our company to be very unusual within the industry. And it just takes time, it takes attention, it takes overhead to get the programs working well. But if I look back at the time that I said, we are developing the machine, and you should all come here and see what we’re doing, to today, the advances have been breathtaking. And they’re critically important.

The problem is, in a descending market, it’s hard to see what we’re actually doing. But our grasp on the numbers, moment by moment, day by day, of what’s coming through our system and how we’re set up for sales and how marketing is driving the sales component that we’re looking at. If I think about the response time and the quality of engagement with our digital customers, these things are, I’m going to say revolutionary in terms of what we’re used to as a company, and we’re learning every day. So we’re pretty enthusiastic about what we’re doing in these spaces, and we are engaging top flight professionals to work with us so that we’re learning the you know, we don’t know what we don’t know. We’re learning what we don’t know as we migrate forward.

It takes time. We’re not there yet. And we probably will never be there, but we’re getting closer, and we’re adding efficiencies to our program even as we build the systems. Sorry for the long winded answer.

Stephen Kim, Analyst, Evercore ISI: No, it’s great. Appreciate all the color, guys. Best of luck.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Thanks, Steve.

Conference Operator: Next we’ll go to the line of John Lovallo from UBS. Please go ahead.

John Lovallo, Analyst, UBS: Good morning guys. Thanks for taking my questions. The first one is I guess, I understand that you guys are working through some older land assets and you guys talked about the land management systems today that you’re developing. You’ve also been very clear about what you believe to be the benefits of the even flow model. But I guess what I’m curious about is what margins and returns are you putting capital to work at today?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Well, interesting question. Look, anything that we’re buying today is gonna come through the system maybe a year or two years from now. We are working through some older land assets. But even as we work through those land assets, we are reworking and focusing on the horizontal development costs associated with that. And that can be as expensive as the land asset itself.

As we look to put assets to work today, just remember that in a declining market, what we might underwrite today might still move around. John, how would you handle that?

John Jaffe, Co-CEO and President, Lennar: Well, it will vary by market obviously, but I would say we’re trying to adhere to finding our way to around a 20% gross margin as we do our underwriting with the expectation as you heard from Stuart and myself of recalibrating driving down our cost structure as a buffer against

Stuart Miller, Executive Chairman and Co-CEO, Lennar: the market conditions. But just remember that because our land assets are generally much shorter term than they ever were historically, We are running through over shorter periods of time those land assets and reloading with newly configured land assets on a regular basis. And that rotation means that we might suffer from some lower margins for a period of time, but over time, there will be a turnaround. Home prices presumably will start to migrate up, and that notion will turn on itself where margins will be improved. Fred, do you want

Diane Dessette, Chief Financial Officer, Lennar: to add to that at all?

John Jaffe, Co-CEO and President, Lennar: I think we’re also exhibiting quite a bit of patience as we look at deals today and being very selective as

Stuart Miller, Executive Chairman and Co-CEO, Lennar: we fine tune our negotiating skills again and bring back the lessons that we’ve learned over the many years at Lennar to buy land at the right price and most importantly right now on the right terms. So we’re not taking down large tracks. We’re buying just in time and we’re being very selective in what market we’re pursuing. Great point because we’ve spent a lot of time with this. When you go from strong market conditions and maybe even overheated market conditions, the ability to negotiate and to really make sure that the terms, conditions, and pricing are right really becomes almost impossible.

When you then migrate to slower conditions that we’re in right now, we have to reeducate ourselves and start incorporating some of those old skills that are critically important. And that’s exactly what we’ve been doing.

John Jaffe, Co-CEO and President, Lennar: That’s why I mentioned my comments are just at the shorter term, but also at a high volume. We generate cash flow for land sellers in a market that the macro conditions are slowing down. And so it’s a very different environment today than what we’ve been through for the past few years.

John Lovallo, Analyst, UBS: Okay. Yeah, that’s helpful color. And it looks like homebuilding cash flow from ops was about $1,000,000,000 outflow in the second quarter and what’s typically a positive quarter. Can you can you provide any color around the moving pieces there?

Diane Dessette, Chief Financial Officer, Lennar: Yeah. Sure. I think, what you’re seeing, Don, is just the, impact of the lower average sales price for a variety of reasons and also just some lingering remnants of the Mill Road spin off. The cash flow is really most dependent on our ASP and the margin, the bottom line margin. And you’ve

Stuart Miller, Executive Chairman and Co-CEO, Lennar: seen that there was a bit

Diane Dessette, Chief Financial Officer, Lennar: of challenge in the second quarter.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Look, in the context of our Mill Road spin off, which is still fresh, and some of the ins and outs that derive from that, We’re still going through some of those reconciliations, and you’re seeing our numbers move around. It’ll probably be another quarter of that, but we’re really migrating to a strong cash flow environment. Yeah, continuous cash flow.

Diane Dessette, Chief Financial Officer, Lennar: I think that’s really important. As we’re turning the assets, it’s one of the most important components of cash flow. So the nominal amount moves around a little bit, but consistent cash flow is definitely our goal.

John Jaffe, Co-CEO and President, Lennar: Okay. Thank you, guys. Thank you.

Conference Operator: Next, we’ll go to the line of Susan McClary from Goldman Sachs. Please go ahead.

Susan McClary, Analyst, Goldman Sachs: Thank you. Good morning, everyone. Or good afternoon now, I guess, I should say. My question is on the core product. Can you talk a bit about where you are in terms of integrating that into the business?

How that perhaps benefited the improvement in inventory turns that you saw this quarter? And how we should think about the path to you really sort of fully integrating that into the strategy?

John Jaffe, Co-CEO and President, Lennar: This is in our Sean, our core product continues to be rolled out across our divisions. It now represents about a third of our starts. And just by way of example, it is more efficient from a cost and cycle time perspective. So we expect actually about almost a twenty day improvement cycle time between non core to core product as it is designed and engineered maximize efficiency of both the build process and the cost to build. And so we’re seeing continued improvement and it just takes some time to roll out across all of our product portfolio.

We started at a more entry level price sensitive product, knowing how important it is to deal with price sensitivity there. And now we are in the midst of designing product we’re rolling out for move up product and attach product like townhomes.

Susan McClary, Analyst, Goldman Sachs: Okay. That’s helpful. And then maybe looking out further with that, do you think you can eventually get to three times inventory turns? Or where can you get to with the turns? And what kind of an environment would you need to see that?

And how does that work into the cash generation of the business over time?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: You know, it’s, it’s interesting that you bring this up. We didn’t spend a lot time on core product today, but it is a core focus. And that’s exactly where our focus becomes. Now it’s gonna take us a little bit of time, but we’re definitely looking at a three times kind of turn as a North Star for the company, and maybe beyond that. We think that there are still a lot of levers to pull.

Our core product focus, something again is a drumbeat on a regular basis through our division, It will make a meaningful impact in our ability to improve our inventory turns. So we kind of adjusted our discussion today towards some other things. It’s a lot like the machine that we brought back up today. Two years ago, we were talking about it pretty regularly, and then we just went kind of quiet with it. The same thing with CORE.

It is happening every day in the company, but it’s not something that we need to talk about. You’ll hear more about it over time.

Susan McClary, Analyst, Goldman Sachs: Okay. Thank you for the color. Good luck with everything.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Okay. You bet. Why don’t we take our last question?

Conference Operator: And for the last question, we’ll go to the line of Michael Rehaut from JPMorgan. Please go ahead.

Michael Rehaut, Analyst, JPMorgan: Hi, thanks. Appreciate it. I guess good afternoon now, everyone.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: Thank you, Mike.

Michael Rehaut, Analyst, JPMorgan: Wanted to first dive in a little bit to the SG and A. You’ve kind of highlighted different drivers of the SG and A move year over year, quarter to quarter. And even in the press release, initially in the press release earlier on, the rise in SG and A was tied to a further investment and an engagement in future efficiencies. But later on in the press release, you said the rise was primarily due to less leverage due to lower revenues and an increase in marketing and selling expenses. So just wanted to dive in a little bit to that line item and understand when you talk about low eights and about up 100, 150 basis points roughly over the first half of this year versus last year, Is it more the investments that we’re talking about?

Or is it more due to the increase in marketing and selling and sales commissions and other marketing market related housing market related drivers?

Stuart Miller, Executive Chairman and Co-CEO, Lennar: So Mike, you’re right on. It’s really all of the above. The reduction in average sales price and in revenues, that’s just math. And we’re just pointing out the obvious math. But underlying our very, very strong and high SG and A levels, and corporate for matter, is the fact that we have running through those items some significant time, attention, investment, specific dollar outlays, but additionally, additional overhead people that are working on these programs that we think build lasting efficiencies.

We believe that the return on that investment is going to, in the rearview mirror, look very, very attractive. But as you’re building these models and programs, it’s very hard to be able to identify what that return is gonna be, but the investment is nonetheless still there and running through the system. And as I said and this is the tricky part is most companies that have rebuilt systems and spent significant dollars have done it in the context of fairly strong market conditions. And decidedly, right now, we are in an industry that is going through a bit of an industry recession. And therefore, I’d just say that it’s unusually high dollars spent on technology at a time when the market is pulling back.

So you do have some of that math issue as well.

Michael Rehaut, Analyst, JPMorgan: Okay. I appreciate that. And I guess, secondly, just on the gross margin, just want to understand kind of what’s in that. And when you give the guidance for next quarter, what is and not in that? So what I’m referring to specifically is, first of all, the Milrose dividend payments or option deposit payments, I think annualized of around $500,000,000 Is that full annualized impact at this point fully reflected in the 18% or is that something that might be a headwind for next year?

And secondly, when you give the 18% gross margin guidance, is that also inclusive of the 20 bps of purchase accounting?

Diane Dessette, Chief Financial Officer, Lennar: So, Mike, I’ll take that, the first one. So let’s talk about the purchase accounting. Pretty negligible for the third quarter, so I think you can kind of take that off the table. As far as the option maintenance fees, remember, since we started our land banking program, you know, four or five years ago, that’s been embedded in the cost. Now, of course, with the spin off of Millrose, there is that additional fee.

But, yes, it’s all included in the margin guidance that we give. And as Stuart and John have been, you know, really pointing out, all of the, pressures, whether it’s the market, option fees, really just keep us, incredibly focused on cost efficiencies to offset any of the negatives that are in the gross margin. So it’s really not just additional option fees. That’s one component. But all of the headwinds are why we’re so passionate about making sure that we’re focused on cost efficiencies.

Stuart Miller, Executive Chairman and Co-CEO, Lennar: I think that one of the things that we’ve done particularly well given our financial group and the integrity that is wrapped in that financial group, the looking forward and looking backwards is the same. It is consistent. The way that we look at margin is consistent. There are no moving pieces that are changing the way forward versus what we’re doing right now. It’s exactly consistent with what we’ve been doing.

So you’re really looking at apples for apples in the evaluation. And if you look at the way that we’re thinking about margin, again, we know the market is soft. We know the market is difficult. We are injecting some important savings or cost alterations in the negotiating that we’re bringing to whether it’s horizontal costs, vertical costs, or SG and A costs. We are working through how do we make an attractive or at least appropriate margin, given where market affordability is, the product that we have to build and building it on a more efficient basis and at a lower cost.

That’s what you’re seeing in our margin and that’s how we’re approaching the business. So with that, Mike, thank you and thank you everyone for joining. We look forward to coming back in third quarter reporting again. Have a nice day.

Conference Operator: That concludes Lennar’s second quarter earnings conference call. Thank you all for participating. You may disconnect your lines and please enjoy the rest of your day.

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