Lennar Corporation (LEN) Earnings Call Transcript & Summary

Good day, and welcome to Lennar Corporation's 2020 Annual Meeting of Stockholders. I would now like to turn the conference over to Stuart Miller, Executive Chairman of Lennar Corporation. Please go ahead.

Good morning, everyone, and welcome to Lennar Corporation's 2020 Annual Meeting of Stockholders. I'm Stuart Miller, Executive Chairman of Lennar Corporation; and it's my pleasure to welcome you here today for this meeting and to introduce Sid Lapidus, Lead Director of the Board of Directors of Lennar Corporation.

Thank you, Stuart. I'm Sid Lapidus, Lead Director of the Board, and I will be presiding at this virtual meeting. I now call the meeting to order, and I would like to introduce the other members of the Board at today's meeting. First, Stuart Miller, you've just heard from. Next, Rick Beckwitt, Chief Executive Officer of Lennar; Irving Bolotin, Former Senior Vice President of Lennar; Steve Gerard, Chairman and Former Chief Executive of CBIZ, Inc.; Tig Gilliam, Chief Executive Officer of NES Global Talent; Sherrill Hudson, Former Chairman and Chief Executive Officer of TECO Energy, Inc.; Jon Jaffe, President of Lennar Corp.; Teri McClure, Former Chief Human Resources Officer and Senior Vice President, Labor of UPS; Armando Olivera, Former Chief Executive Officer of Florida Power & Light, Jeff Sonnenfeld, the Lester Crown Professor in the Practice of Management for the Yale School of Management; and Scott Stowell, Former Executive Chairman of the Board of Directors of CalAtlantic Group. I would now like to introduce the officers of the company; Diane Bessette, Vice President, Chief Financial Officer and Treasurer; Mark Sustana, Vice President, General Counsel and Secretary; David Collins, Controller; and Jeff McCall, Executive Vice President. Also in attendance is Eric Rubin of Deloitte & Touche LLP, our independent registered public accounting firm; and Peter Descovich of Broadridge, who is with us today, who will serve as inspector of elections. We will conduct the business portion of our meeting first then answer questions at the end of the meeting. Only validated stockholders may ask questions in the designated field on the web portal. Please limit yourself to one question. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. If a question posed was not otherwise answered, such matters may be raised separately after the annual meeting by contacting Investor Relations as set forth in the Investor Relations section of our company's website. Please note that the meeting is being recorded. However, no one attending via the webcast or telephone is permitted to use any audio recording device. Thank you for that. The Board of Directors fixed February 10, 2020, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that the notice of this meeting, the proxy statement and form of proxy were mailed on February 26, 2020, to all holders of record of the company's Class A and B common stock as of the close of business on February 10, 2020. In addition, an affidavit has been delivered attesting to the fact that a proxy statement supplement regarding the change to a virtual meeting was mailed on March 24, 2020, to all holders of record of the company's Class A and Class B common stock as of the close of business on February 10, 2020. The company and the inspector of elections, each has certified -- has a certified list of the holders of record of the Class A and B common stock of the company as of the close of business on February 10, 2020. We have been informed by Mr. Descovich that the necessary quorum is present in person or by proxy and have been presented a certificate evidencing that fact. Now I will present the matters to be voted upon. Please note that we will give stockholders an opportunity to comment on the proposals themselves after all proposals have been presented. Proposal 1, the election of Directors. As set forth in the proxy statement, the Board of Directors in accordance with the recommendation of our Nominating and Corporate Governance Committee has designated the following: Rick Beckwitt, Irving Bolotin, Steven Gerard, Tig Gilliam, Sherrill Hudson, Jon Jaffe, Teri McClure, Stuart Miller, Armando Olivera, Jeffrey Sonnenfeld and Scott Stowell and myself as nominees for Director, each to serve terms that will expire at the company's 2021 Annual Meeting of Stockholders. Information concerning the principal occupation of each of the nominees for Director as well as their service to the company and other matters regarding them are contained in the proxy statement. Proposal 2 is the advisory vote on executive compensation. As set forth in the proxy statement, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires that the stockholders have an advisory vote on executive compensation at least once every 3 years. Lennar holds an advisory vote on executive compensation every year. The advisory vote is not binding on the company. However, if the vote indicates a stockholder concern, the Board and the Compensation Committee will consider it in setting executive compensation for next year. Proposal 3 is the ratification of Deloitte & Touche as the company's independent registered public accounting firm. As set forth in the proxy statement, the Audit committee has selected Deloitte & Touche as the company's independent registered public accounting firm for the fiscal year ending November 30, 2020, and has decided to ask the company's stockholders to ratify that selection. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the web portals.

And Sid, we'll wait just a minute to see if any comments show up. But as of now, there are no comments.

Okay. Let's wait 30 seconds or so. Maybe we'll make it a quick 30 seconds. Do I hear rumblings or perhaps a question?

Go ahead, Alex.

There's a question about how much each Director is being paid and that information is set forth in our proxy statement.

Thank you. Are there other questions? Hearing none, the polls are now open. Any stockholder who wants to vote at the meeting but hasn't yet done so or wishes to change a vote may do so through the web portal and following the instructions there. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote, do not need to take any further action. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls closed. Mr. Descovich, do we have preliminary voting results?

We do. Preliminary vote report shows that the nominees for election to the Board have been duly elected. The stockholders have approved the compensation of the company's named executive officers, and the stockholders ratified the selection of Deloitte as the company's independent registered public accounting firm.

Thank you. The company will be reporting the final vote results in a Form 10 -- in a From 8-K to be filed with the SEC within 4 business days. There being no further business to come before the meeting, I order this 2020 Annual Meeting of Stockholders adjourned. Now Stuart Miller, our Executive Chairman, will give us a brief presentation about the company. Stuart?

Yes. Thank you, Sid, and I'm going to keep my remarks very, very brief. I know that we have a Q&A opportunity for people to send in their questions, and we'll happily respond to those as they show up. Alex, here is going to make sure that we know the questions as they come in. Let me just say briefly that 2020 was an excellent year for the company. As we reported our 2020 year-end numbers, our revenues were up 8%, deliveries up 13%, new orders up 12% and we earned -- our net earnings were over $1.8 billion after tax. 2020 was a year of excellent positioning for the company as we stood with a solid balance sheet and solid earnings and business programming accomplished through the year. That success carried into our first quarter 2021 results, which we recently announced, wherein our deliveries were up 17%, new orders up 18% and revenues up 16% and our earnings and earnings per share beat expectations. Of course, with the advent of the current environment with -- that is defined by the country at large basically being shut down by the coronavirus as we look forward to a resolution to the current predicament that has the economy on hold, the questions that lead today are more about where are we going and what are the expectations for our company and for other companies across the landscape? As we've daylighted in our earnings call, guidance is suspended and suspended in large part because we can't see around the dark corners that exist in today's environment. We'll have to wait and see. We'll have to wait and see as the pandemic ultimately is resolved and as the economy starts to heal and come back. But with that said, our company has not sat idly. We have started engaging this new environment with a people-first focus. We've daylighted that on our earnings call, noting that as a company, we are focused on making sure that our people, our associates, our customers, our trade partners and our communities and their safety and their health and well-being is regarded first and foremost. We've started with a focus within our company of making sure that where we are working, we have safe environments; where we can, we work from home; where we can, we work under safety-first protocols that are carefully crafted and governed by a newly acquired Chief Medical Officer, Pascal Goldschmidt, who is helping us navigate these very turbulent waters. We have focused on revamping our business. With people-first in mind, we have focused on sales programs that are digitally oriented, where people can engage with our company without having to leave the safety of their home or engage face-to-face with sales or production people, but instead can transact with our company as they seek to find their home, which offers safety and protection, but enabling them to purchase without an interpersonal engagement. Our construction sites, which are, in many instances, being essential services, continue to operate but with new protocols, so that 6-foot distancing and proper engagement on the construction site is adhered to carefully protecting both individuals and their community at large. And of course, from a balance sheet standpoint and a company safety standpoint, we are focused on liquidity, making sure that land purchases are postponed and paused just as the economy at large is, and making sure that cash inflows and cash outflows fortify our balance sheet and hold our company in good stead for the future. We are sure that there will be brighter days ahead. Those brighter days will reflect the way that a company has navigated through difficult times and comes out the other side. With the people-first approach and operations recast for a modern day, we're confident that as we navigate through the year 2020, we are sure that our company will come out the other side, fortified, well positioned and with a full complement of associates that have weathered this storm quite well. So with that, let me ask, Alex, do we have questions from the shareholders?

Yes. We have a couple of questions. One is, how much is the compensation of our named executive officers, which stockholders can look at our proxy statement for that. And another is, what is your earnings projection for this year taking into account the pandemic?

Right. So once again, I think that you can refer to our 10-Q that recently came out wherein we -- our 10-K.

You can look at the 8-K from last week, which will have the outlook section.

Right. So look at the 8-K that has our outlook section, which basically details our view on where the company is going and how the market is evolving. I will say that trying to make projections right now is almost impossible. I think that's the case for most industries and certainly is the case for the homebuilding industry. We will have to see how current market conditions play out and how ultimately the market begins to heal. Thank you for the question.

Right. Those are all of our questions.

Very good. And now we would like to open things -- we opened up for stockholder questions. And with that said, let me turn it back to you.

I'd just like to thank everybody for attending our 2020 Annual Meeting of Stockholders. And we hope to address you again, and we will next year. Thank you very much for joining us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.