2020 Forward-Looking Statements This presentation includes - - PowerPoint PPT Presentation

2020

Lennar Overview

Second Quarter 2020

This presentation includes “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward- looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in our Securities and Exchange Commission filings, including those under the caption “Risk Factors” in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements, except as required by federal securities laws. This presentation includes macro-economic and market share information that was obtained from independent sources. While we believe those sources are reliable and we have no reason to think that the information we have included in not accurate, we were not involved in developing the information that was

• btained from independent sources, and do not have the ability to confirm its accuracy. Therefore, we cannot

be responsible for the accuracy of information we obtained from independent sources.

Forward-Looking Statements

2

On balance, as strong as pre-crisis and any peer

Macro Overview

4

Source: Housing starts from US Census Bureau (March 2020) and analyst estimates (June 2020); Proj. household formations: Joint Center for Housing Studies of 1.2M 2018-28 (June 2019), Moody’s Mark Zandi 1.6M needed vs. 1.3M supplied (March 2018) Note: Excludes manufactured housing

Macro Overview: Production deficit of homes, both for-sale and for-rent

813 1,151 1,309 1,132 888 892 1,162 1,451 1,433 1,194 852 705 663 1,068 1,084 1,072 1,180 1,146 1,081 1,003 895 840 1,030 1,126 1,198 1,076 1,161 1,134 1,271 1,303 1,231 1,273 1,359 1,499 1,611 1,716 1,465 1,046 622 445 471 431 535 618 648 715 782 849 876 888 895 910 970 621 901 1,047 913 450 268 375 536 587 551 440 379 400 636 665 669 626 474 407 373 298 174 170 162 259 278 316 340 346 339 338 330 347 349 345 352 336 309 284 109 116 178 245 307 355 397 392 354 374 402 365 340 310

250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20P '21P '22P

Total Housing Starts (000's)

Starts SF Starts MF Pent-up Demand

Production Deficit

Normal Production Housing Depression

Annual Housing Demand

• Proj. Annual Housing Demand (000's)

Household Formations 1,200 - 1,300 Obsolescence 200 - 400 Second Homes 100 - 200 1,500 - 1,900

Millennial generation driving significant increase in peak household formation years (Ages 35-44)

Macro Overview: Demographic trends and inventory levels

5

Months supply of new residential sales remains below long-term averages

Source: U.S. Bureau of the Census Source: U.S. Bureau of the Census and U.S. Department of Housing and Urban Development, latest reading as of May 2020

5.6

3 4 5 6 7 8 9 10 11 12 13 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

50 Year Average Months Supply: 6.2

36,000 38,000 40,000 42,000 44,000 46,000 48,000 50,000 '90 '92 '94 96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24 '26 '28 '30 U.S. Population Age 35-44 (thousands)

Macro Overview: COVID placing a spotlight on the home

6

Fears from COVID a driver for new home purchases in the suburbs near-term

• Home = safety, office, children’s school, gym
• Urban density vs suburban living
• Predicting moving trends due to COVID:
• Buyers will emerge from isolation looking for a housing upgrade. While COVID-

related job losses may render roughly 10% of households financially unable to trade- up, we think that nearly everyone else will have a renewed desire to improve their

• nest. – Evercore ISI
• We believe it is possible that people will rethink where they choose to live and frankly

the proximity of their living space to others. This should expedite the transition of the Millennial generation and other potential first-time homebuyers into suburban, entry- level, single-family homes and Baby Boomers into move-down homes away from

• metros. – Bank of America
• “When Workers Can Live Anywhere, Many Ask: Why Do I Live Here? - Coronavirus

prompts Americans to reassess the need to reside near hot job markets” – WSJ

Longer-term trends will continue to support the industry well after a vaccine is available

• Prior to COVID the Millennial generation was already making the move from dense

cities to the suburbs as they were getting married and having children. This has accelerated that existing trend.

• Companies and associates who previously were focused on creating collaborative in-

person spaces have found that working from home does not impede the ability for work effectively

• Cost efficiencies will be found through working from home that companies will keep
• New homes can be reconfigured to provide home offices unlike existing homes
• How to think about future land underwriting without needing to factor in commute

times?

Strategic Overview

Strategic Overview: Investible through the cycle

Grow topline mid-single digit percent

• Moderate growth rate reduces stress on the platform and allows for higher hurdles when it comes to:
• New land purchases – underwriting can be more stringent
• Hiring new associates – focus on keeping A-players and hiring high quality associates
• Continued Builder of Choice to the trades – providing consistent work with reasonable timeframes

Combined scale and focus on technology leading to efficiencies and growth in net margins

• Continue to maintain or increase market share leading to cost and production efficiencies
• Utilize existing and invest / work with emerging technologies to improve customer relations and

experience, while decreasing cost structure

• HB SG&A reduction of ~200 bps over the next 5 years

Generate cash flow through strong profitability and land lighter strategy

• Increased controlled position and decreased years of land owned leading to reduced capital tied up in

inventory at any given moment

• Reduced inventory and greater flexibility with land options reduces risk in the business

Use cash flow to delever balance sheet and return to shareholders

• Smart capital allocation will enhance returns, creating greater balance sheet efficiency
• Debt reduction leads back to supporting margins through reduced interest expense

Strategies ultimately will reduce impact from industry cyclicality and expand valuation multiples

8

Product diversification – FY 2019

9

Strategic Overview: Product and geographic diversification

Geographic diversification with scale: Top 3 builder in 33 of our largest markets

#1 Market Share Positions

Phoenix Orlando Charlotte Tampa Las Vegas Raleigh Miami Riverside Los Angeles Minneapolis Chicago Sarasota Sacramento Portland

• Ft. Myers

Charleston San Francisco San Diego Naples Reno

#2 & #3 Market Share Positions

Dallas Houston Austin Washington DC San Antonio Denver Seattle Jacksonville Indianapolis Baltimore Myrtle Beach Atlanta Philadelphia

Source: Builderonline.com

AL AR CA CO CT FL GA ID IL IA KS LA ME MD MA MN MS MO MT NE NV NH NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT WA WV WI WY NJ VA MI DE AZ IN KY

9

• For Sale:
• Entry level: ~40%
• Move-up: ~50%
• 2nd move-up & active adult
• For Rent:
• >7,000 apartments operational and stabilized
• >12,000 apartments under construction or leasing
• Additional pipeline of future communities

FL 29% TX 16% CA 14%

Southwest 13% Carolinas 10% East 8% Midwest 7% WA/OR 3%

Deliveries of ~50,000

(10 markets) (11 markets) (5 markets)

Strategic Overview: Technology enabling a more efficient platform

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Land Process Construction Costs Even Flow Production Dynamic Pricing Digital Marketing Starts, Sales, Closings Focus Reports Customer Care

Monitoring direct material and labor costs with detail down to the SKU Owned/controlled pipeline, reflecting capital investment and community lifecycle Recently enhanced by new trade scheduling technology Focus on FIFO method, creating scarcity and leading to pricing power Tracking, evaluating and altering marketing to yield strong funnel of buyers Real‐time data used to proactively management the business Data with drill down ability to the homesite level Enhanced virtual platform for addressing customer needs efficiently

Strategic Overview: Technology taking the homebuyer journey digital

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Lennar.com Internet Sales Consultant Online scheduling tool Private self tours

• r virtual

tours Virtual

• rientation

Digital mortgage / close process Virtual customer care service

Drive-Thru Signing

• Reduce time signing notarized documents

Start of One Tap

• Salesforce invite to Blend digital app
• Customer info pre-filled in Blend

Frictionless App

• Paperless asset, income, employment verification
• Homeowner’s insurance selection through Hippo

Immediate Pre-Qualification

• BOT’s automate the pre-qualification process

and notifies NHC

ExpressClose From Home

• Electronically sign documents digitally

Leave with Keys, Not Paper

• Secure paperless portal

Strategic Overview: Financial Services tech-enabled process

12

SEAMLESS DIGITAL CUSTOMER EXPERIENCE HOMEBUILDING, MORTGAGE & TITLE DASHBOARDS

Strategic Overview: Sustainable business practices

• Inclusion of healthy, green

features in the homes we build

• Solar power

‒ 8,508 solar power home deliveries in fiscal 2019, 91%

• f which were on Lennar

homes ‒ 35,000+ solar power home deliveries since inception in 2013

• Low‐VOC paint
• WaterSense faucets
• Low‐E windows
• EnergyStar appliances
• Construction efficiencies focused
• n waste reduction
• Investment and partnership in

new technologies for further energy and water use reductions

• Community:
• The Lennar Foundation,

created 30 years ago, receives 1% of LEN’s after‐tax income each year. The Foundation focuses on supporting education, jobs training, medical research and supporting vulnerable groups

• Associates:
• We believe in having an

inclusive work environment where everyone has a sense of belonging.

• Safety and well‐being are also

pillars of our culture, supporting associates lives

• utside of work and providing

regulations that keep them safe while working

• Our Board is built on the

foundation of strong governance practices that promote integrity and accountability, and this guides our conduct and commitment to doing the right thing for the right reason

• Our governance practices include:
• Majority independent directors
• Strong independent Lead

Director

• Annual election of directors
• Stock ownership guidelines
• Active shareholder engagement
• Board oversight of risk

management and cybersecurity protection

• Executive compensation that is

aligned with stockholder interests

• Strong corporate controls

ENVIRONMENT SOCIAL GOVERNANCE

13

Financial Update

HB Operating Cash Flow HB Debt to Capital

Financial Update: Operating and credit metrics

15

Sales of Homes Revenue HB Operating Margin

Continued focus on strong profitability, cash flow generation and leverage reduction

($ millions)

Note: FY17 Debt excludes $1.2 billion issued in advance of CAA merger 2020G represents the mid-point of guidance

($ millions)

Note: FY18 margins exclude $415 million of CalAtlantic purchase accounting write-ups 2020G represents the mid-point of guidance

($420) $508 $982 $1,692 $1,482 2015 2016 2017 2018 2019 $8,336 $9,559 $11,035 $18,811 $20,560 $19,616 2015 2016 2017 2018 2019 2020G 14.1% 13.6% 12.9% 13.3% 12.3% 13.0% 2015 2016 2017 2018 2019 2020G 47.1% 39.4% 39.9% 36.9% 32.8% 2015 2016 2017 2018 2019 2020G

Note: 2020G represents the mid-point of guidance

On balance, as strong as pre-crisis and any peer

Conclusion

Conclusion: Strategies driving performance throughout the cycle

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Supportive short‐term and long‐term macro economic backdrop supported by production deficit, demographic trends and safety of homeownership Core homebuilding platform with intense technology and efficiency focus throughout the business Land and capital allocation strategies, supporting asset light balance sheet and producing robust cash flow Building a Company that is investible through the cycle