Earnings Call
Lennar Corp /New/ (LEN)
Earnings Call Transcript - LEN Q2 2020
Operator, 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 would now like to turn the call over to Alex Lumpkin for the reading of the forward-looking statement.
Alex Lumpkin, Host
Thank you, and good morning. 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 inherently subject to risks 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 forward-looking statements. These factors include those described in this morning's press release and our SEC filings, including those under the caption Risk Factors contained in Lennar's Annual Report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.
Operator, Operator
I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman. Sir, you may begin.
Stuart Miller, Executive Chairman
Very good. Good morning, everyone, and thank you. This morning, I’m here in Miami once again with a scaled-down crew: Diane Bessette, our Chief Financial Officer; Dave Collins, our Controller, Bruce Gross, CEO of Lennar Financial Services and of course, Alex, who you just heard from. Rick Beckwitt, our Chief Executive Officer is in Colorado, and Jon Jaffe in California, our President. And they're on the line with us this morning and we are all appropriately socially spaced. And as much as we have a lot of information that we're going to try to cover in our opening remarks, we're going to return to our traditional format. I'll give an overview; Jon and Rick will give operational insight and Diane will give financial information highlights and some limited guidance, and then we will attempt to answer as many of your questions as possible. But as you consider framing your questions, first of all, please limit to one question and one follow-up. And remember that the national landscape continues to evolve, and the economy is still trying to reopen and normalize. In the current environment, there are still more guesses than there are clear answers. We will give you the guidance that we can but remember that we are all still trying to learn together as things unfold. So, let me begin. On March 27, a customer in Pennsylvania named Susan Pernice wrote us a most important and impactful letter. She said, 'Since Pennsylvania's Governor Wolf's decision to shut down new construction, we are set to be homeless on April 20th. We have a Lennar home that was expected to be delivered on that day, in Hidden Meadows in Pennsylvania. There is a pending agreement for the sale of my current home on that day as well.' She went on to say that this is all troublesome as I'm underemployed because of the shutdown, and I'm losing half my usual income. I'm asking you to please appeal Governor Wolf's decision on behalf of our family of six; to us, the delivery of our new home is life-sustaining. It is shelter for us, and it's imperative to our health and protection from COVID-19. This was the first of many letters to follow that detailed the dashed hopes and expectations of Lennar customers that fell victim to the interruptions caused by COVID-19 and the economic shutdown that caught many off guard. The letter from Ms. Pernice detailed for us that homebuilding was in fact an essential service at this critical time and that shelter for families was life-sustaining and critically important to the well-being of our communities. This was a very big and important change in our world and in the world of our customers, where families live and how families lived was essential. Having the space to 'stay-at-home' was essential. The safety and security of the family home in a welcome community was essential. And the timing, as the rental term was at an end or where the old home sold to someone else, or leaving roommates or temporary quarters, or the arrival in or transfer to a new city, the timing to move into the home being built was essential. To protect our business, we had already been making the case that homebuilding companies should be able to continue to build, but with Susan Pernice’s plea for help and many others that followed, it was now essential. The federal government, most states, and most municipalities across the country ultimately deemed housing an essential service and enabled home builders to continue building, selling and delivering homes to our customers. As an essential service, we kept our doors open and served communities across the country. Our second quarter started with great concern as the economy was shuttering and unemployment was starting to rise. The story of Ms. Pernice and the designation of homebuilding as an essential service sheds light on how the overall market conditions evolve to what we are experiencing right now. While the economy is still trying to reboot after shutdown, the homebuilding industry only stalled for mid-March through April and began its reboot earlier than most. Homes had to be completed and delivered, so people could stay at home in the shelters that they weren't expecting. Otherwise, they would be homeless. Keeping in step with this necessity, we focused on completing and delivering homes in backlog. But alongside those who needed their homes delivered, many more began to reconsider the essential and aspirational nature of shelter and desired to or needed to purchase and move. Yesterday's notion of a mobile society had its mobility taken away, people reconsidered. The all but certain migration to large congested cities as the preferred lifestyle was reversed; people reconsidered. Preference for transient, high-rise, shared amenity rentals, over stable, owned single-family homes with yards was reversed; people reconsidered. Second homes became a vital refuge and home offices with soundproofing and separation became the newest amenity. The market was quickly reconsidering its needs, wishes, and wants, and homebuilders have seen this narrative unfold in real time. Lennar’s second quarter numbers are strong and indicate a strong recovery to date. We ended the quarter with $517 million of net earnings or $1.65 per share, compared to $422 million and $1.30 per share last year, up 27% over last year. Our closings were flat over last year but would have been higher except for certain stalled markets and the initial shock from the shutdown. Our margins were up, but mostly represented sales that had taken place in the months before the shutdown. But what is more impressive is that our backlog margins are even higher, as sales have strengthened and momentum has built and time has passed. And our SG&A is impressively lower and reflects the many cost-reducing initiatives that we have implemented in prior calls. We are mindful, however, that one or two months in a row does not yet define a sustainable trend. Although the market currently feels very strong, we are in the early stages. We know that low interest rates and short supply are driving demand and pricing power. We also know the changing customer preferences are driving strong demand for new homes. Still, we are giving guidance today with some elements of caution. We know we are currently picking up demand that was postponed from a stalled selling season. And we don't know yet how high unemployment and an economy still wrestling to open will moderate this recovery in the future. Additionally, there has been disruption. When the economy shut down, we reacted and slowed land purchases, land development and starts. As sales started to recover, we restarted land development and starts. Accordingly, we will have somewhat fewer deliveries in the third and fourth quarters because of the mid-March through April stall. Nevertheless, we expect other metrics and company initiatives to continue to be very strong through the end of the year. This quarter showcased our company coming together to consider people first in all circumstances while at the same time operationally reengineering our business for the current environment, while we improved earnings, cash flows, and returns. Hard work and hard decisions to find new paths forward; technology and tenacity paved the path to new ways to construct our business. We've adjusted and changed the way we manage our business. As the management team, we learned to operate from outside the office while using technology to stay connected like never before. Although we have managed from a distance, through daily video meetings, our company leaders stayed close to operations across all 38 of our divisions and guided with consistent messaging and a very steady leadership hand. As a connected management team, our homebuilding and financial services teams utilized our significant investments and especially our head start in technology to incorporate social distancing, while enhancing our customers’ experiences as well as our operations and efficiency for the current environment and for the future as well. We focused on and reconfigured every facet of our business to adapt to the changed environment. We have changed and we have adjusted the plane, while it was still flying. Let me give you some detail on that. As part of our rapid migration toward technologies that enable communication and collaboration, Diane Bessette and Jeff McCall have accelerated our push to modernize our reporting structures, both for internal and external reporting. Data is being collected more effectively into a common data model, and that data is being turned into real-time information that is being standardized and consumed across the platform, creating efficiencies and cost reduction. Standardized reports are being discussed at daily management meetings as our management team is learning together how to use and get the most out of our enhanced technology. Note that our earnings call is taking place just 12 business days after the end of the quarter. We are using technology to better roll up revenues and access our cash. That's better and faster than we used to be, but Diane, it is not as fast and as efficient as we are going to be. Starting tomorrow, we are back to work looking forward, enhancing systems and building efficiencies rather than still working on reporting last quarter a week later. We also changed our home selling process. While Rick will give additional color on current market conditions and our results shortly, in marketing and sales, we advanced and enhanced our digital marketing platform to enable engagement with our customers any way they choose. Through our website, customers now have the choice to deal with us in one of four ways: Number one; working traditionally by visiting a Welcome Home Center and interacting with one of our professional new home consultants; or number two, working with our new home consultants to a re-imagined, fully digital experience that has been designed for the current environment; or number three, interacting digitally and viewing product on their computer at home using three-dimensional pictorial tours of models that are complete; or soon, a Modsy three-dimensional tour of homes that are designed but not yet built for models; or number four, they can take a do-it-yourself, self-guided tour of our existing models, all alone and on their own. We rewired every one of our model homes across the country, over a two-week period, to enable our customers to get a code to access digital entry of our models on their own for self-guided tours, no contacts, no risk and all alone they can interact with Lennar digitally or through phone or FaceTime, review products, visit models, sign a contract, and send a deposit, all digitally. Our digital experience is getting better and better and will continue to improve quickly, now that we have our associates and our customers accustomed to these tools. Customers are finding new ways to purchase and we're finding new ways to joyfully engage with our customers. In fact, just looking at self-guided tours for the first two weeks of June over May, we have seen an increase of 20% in self-guided tours alone. As an example of our digital engagement, take a look at our website today; we are seeing more and more that our customers want to find a home with a home office, not just a repurposed bedroom, but they want an office that's at home, but feels separate and quiet. It's apart from the barking dogs and the daily activities of the household, but it is at home. We've redesigned our next-gen home products, the home within a home concept that we are now offering as a home office within a home. It's part of the home, but separate. It's attached, but insulated for soundproofing. We don't have a model yet to show, but we have a Modsy three-dimensional design to explore. Modsy is one of our portfolio investment companies that we believe is best-of-breed in creating three-dimensional renderings that look and feel real when we don't have the real thing to show. We are working with Modsy to improve our ability to demonstrate the dreams that we have not yet been able to build. We are, we can, and we will ramp up our digital abilities and help our customers dream with us as we create the home of their future. Applying for a mortgage and closing a home has never been easier at Lennar also. We have accelerated our digital platform to accommodate customers’ desires to close on their new home, but to close without health risk or social contacts. Our mortgage application and approval process has never been easier or more digital. With our Blend enabled application, another portfolio company, and many detailed digital improvements designed in-house in loan officer engagement and loan processing, our customer experience is improving every quarter. The forms are simpler, the information is entered once and the updates to information are automated. Our customers are happier, our associates are more effective, and our costs are coming down. In title and escrow, we are now closing homes with little or no contact as well, with an increased focus on the health and safety of both our associates and our customers. We have increased the number of digital closings with digital document signing and where possible digital notarization. We are also implementing a virtual new home orientation process, so our homebuyers can walk and view their completed home via FaceTime. We can even give keys to the front door digitally with a code for self-access while we leave the sanitized keys in the kitchen. Where we must physically notarize documents, which is still required in some states, we created an express drive-thru closing program. All paperwork is signed digitally before arrival and our customers can finalize closing their home with a notarization from their car in just 15 minutes. Lennar Financial Services just keeps getting better with faster, more frictionless service for our customers, easier engagement for our associates, and more profitability for the Company. This quarter, LFS contributed $151 million to the Company, while $61 million of that related to a deferred profit attributable to the deconsolidation of the sale of our retail title business over a year ago. Approximately $90 million of the contribution is attributable to efficient operations and market conditions. This is a record quarter for LFS as they continue to lead the way for the Company on innovation and enhanced customer experience. We are also building homes differently and Jon will give some more color here as well. Construction is finally turning digital as we have turned our sites to using technology to centrally schedule construction at the division level. Over the past month, we've been rolling out a technology-oriented scheduling program to create efficiencies across our production platform. This will enhance even flow execution, give greater predictability to our trade partners relative to scheduling and logistics, and it will ultimately reduce construction costs as well. The need for effective and efficient communication over the past month has enabled us to advance the education and rewiring of our field operation as we and our trade partners struggle to keep job sites open and jobs filled. Most of our construction sites have been active and fully functional to date, and we have not yet seen a significant impact on our trades or our supply chain. We are very focused on the health and safety of our trades and have established clear protocols with this in mind. We have been in constant communication with our trade partners to help them implement their safety standards and understand the steps we are taking. We have begun using FaceTime and other technologies to facilitate inspections, and we suspended all non-emergency customer care to protect our associates, customers, and trade partners and use a DIY, do-it-yourself model to help customers help themselves where possible. Although it's awkward and difficult to talk about operational and financial results and successes in the wake of a quarter that has been defined by health fears, economic shutdown, job loss, personal struggles, and social injustice, we are proud to say that we have managed with a steady hand with constructive and measured leadership and with focus on how we can be a constructive force at a difficult time. On reflection, I can say with conviction that we have done well while we have also done good. While the second quarter has been a quarter of tremendous success for Lennar, sadly, as the quarter ended and health crisis began to subside, social justice became a dominant and critical concern, both nationally and at Lennar. Our leadership team and our associates locked arms across the Company and stood tall to lean in and enhance and expand our already central focus on inclusion and diversity across the country. Like many across the country, we focused on the senseless killing of George Floyd as a call to action to be better than this and to commit to be an ever better version of ourselves. While our Lennar Charitable Foundation gave generously, notably in honor of our fallen associate, Pete Anderson for homelessness, our Chief Human Resources Officer, Andrew Davis, led focused discussion and engagement to match strategies to improve. This work and vow continues. As we look ahead, we remain proud of Lennar's continued and consistent commitment to do well and to do good as we lead with a people-first focus. With a strong balance sheet and a strong social and moral commitment, we are confident that we will emerge from today's distress even better and stronger than before. Accordingly, while the somewhat unpredictable environment in our country will evolve over time, we believe that we will be very well positioned through hard work, focused leadership and innovative technologies to offset future headwinds and drive our business to new heights. And by the way, remember Susan Pernice, who I mentioned and quoted in the beginning. While Governor Wolf was one of the very few who did not lift restrictions on homebuilding during the stay-at-home order, we were able with the assistance from the borough or municipality, to complete Ms. Pernice’s home. She and her family of six moved into their home on April 29th. She and her family were able to delay the closing of their home once we gave them an updated completion date. Today, she and her family are part of the Lennar family, and we're proud that we were able to assist. And with affection and appreciation for the Lennar associates, who answered her plea, she sends her regards to them and everyone listening today. We're very proud of the quick actions that we've taken to carefully manage our business through these difficult times. I would like to personally thank all Lennar associates across our platform for their commitment, for their trust, and for their dedication during this very difficult time. I also want to thank our trade partners who have worked collaboratively with us to ensure not only a safe and healthy home, but a quality and affordable home. And finally, I want to thank Ms. Pernice and all of our customers for understanding that we are working hard for them to adjust, to learn and to evolve so that we can safely deliver the home of their dreams. So, with that, let me turn it over to Rick.
Rick Beckwitt, CEO
Thanks, Stuart. We began our second quarter with a robust housing market and strong economic indicators. The combination of low mortgage rates and a limited number of homes contributed to our ongoing sales momentum and pricing advantage. However, this shifted in the latter part of March through April as the nation faced the challenges brought on by COVID-19. While residential construction was classified as an essential service in most of our regions, the abrupt halt of economic activity nationwide had a negative effect on our business. Due to the pandemic, our sales orders dropped sharply in late March and continued to decline through April. Despite a solid start in March, new orders for that month were down 10% compared to the previous year. April represented the lowest point of the second quarter, with orders decreasing by 29% year-over-year and our cancellation rate peaking at 23%. Nevertheless, our team excelled in selling homes through appointments, self-guided tours, and virtual tours. We also prioritized controlling sales prices and managing backlog expectations, which positively impacted our gross margins in the second quarter and will continue to do so in the latter half of the year. In May, we experienced a surge of new homebuyers looking to capitalize on exceptionally low mortgage rates and move away from apartments in densely populated areas, as well as from homes shared with family and friends during the pandemic. We also noticed an increase in interest from individuals wanting to purchase a new, safe, and clean home instead of an existing one. In May, our new orders rose each week and were up 7% compared to the previous year. Our cancellation rate in May decreased to 18% from the 23% peak in April. Importantly, our sales increase was largely achieved while raising prices and reducing incentives throughout May. We usually refrain from commenting on sales activity outside the reporting quarter, but due to the shifting market dynamics, I will share some insights regarding June. In the first two weeks of June, our new orders increased by 20% compared to the same period last year. We believe part of this growth was due to the recovery of sales lost during this year’s spring selling season, and we anticipate a return to typical seasonal patterns as we progress through the remainder of our fiscal year. Acknowledging the risks associated with high unemployment rates and the recent uptick in COVID cases, we do not expect this level of activity to persist in the next two quarters. However, if this pace continues, we plan to carefully align sales with prudent and consistent price increases to further enhance our gross margins. Additionally, we are aware that our sales activity over the next two quarters may be somewhat limited due to fewer community openings, as we have scaled back development activities to conserve cash in the second quarter and several municipalities have closed their offices, resulting in the suspension of permits and approvals necessary to launch development and sales. Currently, our community count has decreased by 6% year-over-year. I would now like to provide some context on our markets across the country. They can be grouped into three categories: First, markets that have not been significantly affected by the pandemic; Second, markets that were impacted but have recovered or are well on their way to recovery; and Third, markets that were affected but where recovery is still lagging. Despite these categories, in all of our markets, we saw a sequential increase in sales activity from April to May and ongoing strength during the first two weeks of June. During our second quarter, we observed eight markets with little to no impact from the pandemic, including Jacksonville, Coastal Carolinas, Indianapolis, Maryland, Nashville, Dallas, San Antonio, and Utah. While most of these markets implemented stay-at-home orders, we gained considerable market share due to better performance as many builders in these areas halted operations. Additionally, these markets enjoyed low COVID-19 infection rates, leading to less disruption in business activities. Each of these markets also faced low inventory levels. Although traffic declined, conversion rates were exceptionally high as buyers were highly motivated to acquire a safe new home. In Dallas and San Antonio, two of our larger markets, we continued to benefit from our strategy of moving down the price curve and offering quick move-in homes. The second category includes 18 markets that were affected by the pandemic but have either recovered or are making progress toward recovery. In the East, these markets comprise New Jersey, North Carolina, Southeast and Southwest Florida, Tampa, Orlando, Chicago, Minnesota, Houston and Austin, Colorado, Arizona, the Inland Empire, San Diego, Central Valley, California, Sacramento, Reno, and the Pacific Northwest. Although we continued to sell homes and provided limited incentives in these markets, municipality shutdowns and diminished consumer confidence caused a significant drop in both traffic and sales from mid-March through April. However, each of these markets began to recover starting in the last week of April and have shown continued improvement through May and into June. In our larger Florida markets, demand surged in May and early June. Southeast Florida and Tampa experienced increased interest from renters and customers looking to transition from crowded areas to purchase detached single-family homes. Southwest Florida, a prominent second home market for active adults, saw heightened demand from customers relocating from COVID-impacted areas in the Northeast to safer markets in South Florida. Raleigh, Charlotte, and Atlanta faced initial struggles, but all these markets rebounded as business activities resumed in May. Each of these markets benefited from the return of cultural buyers looking for the safety of a new COVID-free home and also witnessed an upsurge in buyers from the Northeast. The Houston market surprised us the most. Although it was significantly affected between mid-March and mid-April, our sales recovered in May and June due to strong demand for entry-level homes, which outpaced declines in oil prices. While the region still faces high unemployment due to reduced oil and gas investment, we are well positioned as nearly 50% of our communities are priced below $300,000. The activity in Houston reflects the impressive diversification of its economy away from oil and gas. Austin was the slowest Texas market to recover, largely due to a stricter shutdown ordinance imposed by the city. Nonetheless, sales began to pick up in May and have increased in early June. The Austin economy remains strong, bolstered by over 7,200 technology companies driving job growth and demand. Moving to Colorado, the state is on the path to recovery. Although not fully recovered, the local economy is robust and diverse, with limited new home inventory and low resale listings. In May, our traffic increased and sales rebounded from April's lows, with June seeing a more significant uptick in both sales and pricing power. The Phoenix market began the pandemic as one of the strongest in the nation, and despite being affected, it has returned to form strongly. Our sales steadily improved through May and were particularly strong in early June, supported by a diverse product range including many lower-priced communities. The Pacific Northwest has shown good recovery. Even with the state shutdown and Washington halting construction temporarily, we managed to continue selling and closing homes. Demand significantly improved in May and has continued into June. In California, the Inland Empire stands out as the strongest market. While it experienced a downturn in April, it rebounded effectively in both May and June. The Inland Empire has consistently been an affordable option compared to coastal regions. With low mortgage rates, buyers have returned to the market, predominantly consisting of renters and frontline workers responding to the pandemic. The third category includes four markets that were heavily impacted by the pandemic and where recovery is lagging behind the rest of the U.S. These markets are the Bay Area, Orange County, California, Las Vegas, and Orlando. The Bay Area was one of the first regions affected by COVID-19, experiencing aggressive government shutdowns that brought the market to a standstill. Consumer confidence plummeted, and demand decreased sharply. While the lower-priced single-family segment has shown signs of recovery, the higher density, higher-priced attached segment still requires traction. Orange County, California, was one of the weakest markets prior to the pandemic and continues to lag behind others in recovery. The combination of diminished demand from Chinese buyers and government shutdowns deeply impacted this market. Although sales more than doubled from April to May, further stabilization is still required. Las Vegas saw significant fallout from the closure of casinos and a major decline in tourism, with unemployment peaking at 30%. While much of this is temporary and furloughed job loss, the reopening of casinos is essential for the market to normalize. Despite this, we encountered a rebound in both traffic and sales during May and the early part of June. Orlando is gradually recovering. The local economy slowed down drastically due to the cessation of international travel, fewer domestic flights, and the closures of theme parks. Sales fell sharply in April, but we have observed a resurgence in May and June. With the recent and planned reopening of theme parks, we are optimistic that this market will quickly regain demand. I hope this provides clarity on our positioning across local markets. While we do have a few lagging markets, the majority have rebounded. From a broader perspective, the market remains strong with limited inventory and pent-up demand, bolstered by low mortgage rates. In this context, we have been focused on balancing sales pace and pricing. While our sales pace has increased, we have remained cautious about raising prices, decreasing incentives, and reducing our brokerage spends. Given the low mortgage rates, the impact of our price increases on affordability has been minimal, providing us with a solid opportunity to enhance gross margins in the upcoming quarters. I will now hand it over to Jon.
Jon Jaffe, President
Thank you, Rick. Today, I’ll start with a discussion of our land and balance sheet strategies, beginning with a look at the actions we took during the second quarter in response to the COVID-19 pandemic. As Stuart mentioned, we paused our land purchases, land development activity and home starts. We used our daily management call to quickly implement this strategy across all of our divisions. We were able to pause all of the land acquisitions that we wanted to. And due to the strength of relationships with our land sellers, we did not walk away from any deposits or lose any deals. What we did was to pause takedowns for 60 to 90 days in order to give us time to understand the impact of the pandemic and the associated government shutdown. At the same time, we also slowed our land development spend. This was done on a community-by-community basis by determining in real-time the market demand for each community and the economic logic associated with stopping and restarting. We also looked at our planned starts, again, evaluating each community’s market demand if the particular home was in backlog and the mortgage status, if it was sold or if the home was unsold. We paused about 4,100 starts in the quarter or 27% of what was planned. Given this pause in land spend and fewer starts in our second quarter, results for our land and cash positions were temporarily altered by the actions we took. We ended the quarter with 3.9 years of land owned compared to 4.5 years in Q2 of 2019 and with an increased percentage of homesites option of 32%, up from 25% last year. The combination of slowing our land spend in the quarter, strong closings, and executing on our strategy of building strategic relationships to option homesites resulted in significant cash flow generation, as we ended the quarter with $1.4 billion of cash on the balance sheet and zero borrowed against our revolver. Additionally, we repaid $300 million of senior notes and ended the quarter with total debt to capitalization of 31.2% versus 38.3% the prior year. Despite the daily intensity it took to manage through the challenges of the pandemic, we still maintained our focus on becoming a land-light company and are on track to migrate both our supply of land owned down to 3 years from the current 3.9 years and to control 50% of our homesites through options as compared to the current 32% by the end of fiscal 2021. We continue to work on and develop additional strategic relationships that are designed to facilitate our reaching these goals. Just as effectively as we paused, as we saw markets recover, we have recommenced land acquisition, land development, and home starts. We are confident we will have the homesites necessary to start and deliver the homes we are projecting in our guidance. Now, I’ll turn to our direct construction costs and the value of our Builder of Choice program with our trade partners. Simply put, our approach has been to understand what drives efficiencies from our trade partners’ perspective that we can work openly with them to lower costs without hurting their margins. But let me be clear, this work is anything but simple. It’s beyond the rolling up of our sleeves to do the hard work required. It’s about building trust. It’s all about our trade partners trusting that we will change the way we manage our business for their benefit, and we will do what we say we’re going to do. This takes commitment from them and us, and it takes time. Once this trust is established, it allows us to work together with our trade partners to remove cost from the supply chain. A good example of this is our intense focus on even-flow production. Using technology, our field is connected in real-time with our office and in turn, our office with our trade partners. This connectivity enables construction to be on schedule and for schedules to be reliable. The predictability this provides our trade partners allows them to eliminate overtime, which can save as much as $500 per home. This focus produced the fifth straight quarter where direct construction cost as a percent of revenues fell. In Q2, costs were at 44.5% of revenues, a 50 and 200 basis-point improvement sequentially and year-over-year respectively. This 200 basis-point improvement in cost as a percent of revenue resulted from the combination of pricing power and lower cost and was the driver of our gross margin improvement of 150 basis points, which more than offset the increased cost of land and fees. In our second quarter, our cost per square foot was down 130 basis points sequentially and 240 basis points year-over-year. The cumulative effect of our strategic trade partner collaborations on removing cost from the supply chain, ongoing value engineering workshops which are now done virtually, and a strong purchasing organization led by Paul Dodge and Kemp Gillis have led us to continuously lower costs, which we believe will be sustainable given the buy-in from our trade partners and our Builder of Choice model. I would like to highlight that these cost efficiencies have been achieved in an environment of increased labor costs due to the labor shortage combined with the shift in product to smaller-lower priced homes. The math of smaller square footage and lower average sales price normally increases both costs as a percentage of revenues and cost per square foot. However, with our focus of working collaboratively with our trade partners to remove costs from the supply chain, we've accomplished lowering both of these cost metrics. With respect to labor shortage, I want to note that the homebuilding industry, through the leading builders of America, is initiating a program to attract those who have been displaced by the pandemic. The program will offer training for positions with the trade, presenting the opportunity for an easing of the labor constraint. Accordingly, as this occurs, the cost of labor should ease as well. As all these efforts take costs out of the supply chain, they are critical to be able to build homes that consumers can afford. With respect to the impact of the pandemic, what happened throughout the quarter demonstrated the strength of our trade partner relationships. There are four areas where this working relationship is evident. First is the work we did to help our trade partners navigate the CARES Act. The act pay revisions for Paycheck Protection Program loans that have the potential of keeping many of our trade partners and their associates afloat. Unfortunately, the language in the legislation was very confusing, and nobody really knew what to do. So, Lennar took action. Led by our Vice President of Tax, Mike Petrolino along with the help of senior partners at Deloitte, we quickly put together an overview of the act for the benefit of trade partners. And on Sunday, March 29, just one and a half days after the act was signed into law, we held two conference calls with over 5,000 of our trade partners in attendance. We spent the day walking them through the act and answering their questions. Next, with our commitment to the safety of our associates, customers, and trade partners on our communities. We paused our warranty work as it was not safe to be sending workers into our homes. We then repositioned our customer care associates to be COVID-19 safety officers on all of our job sites. Working with our Chief Medical Officer, Dr. Pascal, we produced safety guidelines and checklists to ensure everyone's safety while construction continues. This was critical to ensure the treatment of housing as essential. In fact, we surveyed our trade and found that statistically they contracted the COVID-19 virus at a much lower rate than the general population. We provided this information to various state and local agencies as they evaluated the issue, allowing home construction to continue. Through these efforts and more, we fulfilled our commitment to keep our associates, customers, and trade partners safe while continuing to deliver homes to eagerly awaiting families. Thirdly, we worked closely with our trade partners to help us where they could to temporarily reduce costs to make sure we could continue to sell homes as the pandemic took hold and the economy went into shutdown mode. Our trade partners stepped up allowing us to aggressively buy down interest rates, which helps jumpstart our sales. Finally, with the help of our trade partners and the focused work of our national purchasing team, we navigated the various pandemic-related supply chain disruptions, both in China and then in Mexico. For each manufacturer, we classified the risk level, regularly monitored their current inventories, developed plan Bs and Cs, and provided home- and community-level forecasting to give a detailed view of our needs. The primary disruptions occurred in Mexican factories impacting cabinets, door hardware, appliances, and interiors. We successfully managed through all these disruptions to avoid any delays. As of today, all of our manufacturers are open and with improving capacity. I want to take this opportunity to personally thank all of our trade partners and the Lennar team for working so effectively through this crisis. Together, we’re able to navigate this unprecedented time and deliver homes, essential homes to families across America. Now, I'd like to turn it over to Diane.
Diane Bessette, CFO
Thank you, Jon, and good morning to everyone. I'd like to spend just a few minutes reviewing the highlights from our second quarter. For many decades, we have operated with a balance sheet first philosophy and a strong focus on liquidity. And so for today, that's where I'd like to start. As noted, with our laser focus on generating cash and preserving cash, we ended the quarter with $1.4 billion of cash and no borrowings outstanding on our $2.45 billion revolving credit facility, thereby providing total liquidity of $3.85 billion. At quarter end, our homebuilding debt to total capital ratio was 31.2% versus 38.3% in the prior year. This is the lowest debt to total capital ratio since Q1 of 2007. As we look at the balance of the year, we have a very manageable level of debt maturities with only $300 million due in November after having repaid $300 million in May. In the last two years, we have repaid $2.5 billion of senior notes from cash flow generated from operations. Our stockholders' equity increased to $17 billion and our book value per share was $52.98. And so, with those balance sheet highlights, let me briefly review our operating performance. Stuart, Rick, and Jon provided most of the details. So, here's a quick summary of the highlights. The new orders, we ended the quarter down 10%. Our sales pace was 3.5% for the quarter compared to 3.7% in the prior year. Our cancellation rate was 19% compared to 15% in the prior year. For the quarter, deliveries were relatively flat year-over-year as we remained intensely focused on cash generation. Our gross margin was 21.6%, as Jon mentioned, primarily as a result of our focus on construction costs, and our SG&A was 8.3% as a result of creating an efficient platform. The 8.3% is the lowest second quarter SG&A percentage we've ever achieved. And our financial services team also executed at high levels. Mortgage operating earnings increased to $81 million compared to $43 million in the prior year. During the quarter, we sold our legacy servicing portfolio for a gain of $5 million and eliminated potential future liabilities. Additionally, mortgage earnings primarily benefited from a higher capture rate, 82% versus 75% last year; a lower percentage of cash buyers during the quarter; a higher percentage of locks on deliveries that will occur in Q3 as a result of record-low interest rates; and a continued decrease in loan origination costs. Title operating earnings were $17 million compared to $15 million in the prior year. Title earnings increased due to an increase in profit per closed order, which was driven by cost reductions. LMF Commercial had an operating loss of $6 million compared to operating earnings of $6 million the prior year, primarily as a result of the COVID-19 effects on the capital market. However, during the quarter, we were pleased to be part of one securitization though at a lower than normal margin, but still positive. Additionally, during the quarter, we deconsolidated our retail title business; the process required us to perform a fair market value analysis of our interest, which resulted in a $61 million gain. And two other final items. In the category of land sales, we recorded a $23 million write-off of costs related to the Concord naval base located northeast of San Francisco since we are not moving forward with this development. In the category of Lennar Other, we recorded a $25 million charge, which was our share of a valuation adjustment related to the Rialto legacy funds. This adjustment was primarily a result of the disruption in the capital markets as a result of the COVID-19 environment. So with that quick summary, let me provide you with detailed guidance for Q3 and high-level guidance for our core operations in Q4. So, starting with Q3 and homebuilding. We expect new orders between 12,800 and 13,000. We expect to deliver between 13,200 and 13,400 homes. Our average sales price should be in the range of $380,000 to $385,000 as we continue to move down the price curve. We expect to continue to maintain our gross margins in the range of 21.5% to 21.75%, and our SG&A should be in the range of 8.3% to 8.5%. And for the combined homebuilding joint ventures, land sales, and other categories, we expect a loss of approximately $20 million to $30 million due to the current delay of land sales activities. Turning to our ancillary businesses. We believe our financial services earnings will be approximately $70 million, based on more normalized metrics in the third quarter. For our multifamily segment, we expect a loss of approximately $5 million. And for the Lennar Other category, we expect to be about breakeven. We expect corporate G&A to be about $90 million for the quarter. We expect our tax rate to be approximately 23.1%, and the average share count should be approximately 309 million shares. This guidance should produce an EPS range of $1.46 to $1.59. And now, let me provide a few high-level estimates for Q4 for homebuilding and financial services. For homebuilding, we expect new orders between 12,000 and 12,250. We expect to deliver between 14,300 and 14,600 homes. Our Q4 volume will be impacted, as we mentioned, by the slowdown in starts during our second quarter. Our average sales price should be in the range of $380,000, and we expect our gross margin to be in the range of 21.75% to 22% and our SG&A around 8%. And for financial services, we believe we will have operating earnings of about $60 million. We hope you find this guidance helpful. And with that, let's turn it over to the operator.
Operator, Operator
Our first question is from Stephen Kim from Evercore ISI. Your line is open.
Stephen Kim, Analyst
Thank you very much, everyone. We appreciate the strong results and the prompt disclosure you've provided. My first question is about the margin; you gave strong margin guidance. However, I’m surprised to see that your orders for the third and fourth quarters are expected to decline year-over-year. I know you addressed this to some extent and mentioned concerns about a second wave and the lower community count. I’m trying to understand how much of the second wave concerns are factored into your outlook. If these concerns do not materialize, do you see the possibility of order growth remaining in double digits like it was in June, or do you believe that the supply constraints and community count shortfalls will continue to pressure your order growth, leading you to increase prices more aggressively?
Stuart Miller, Executive Chairman
Thank you, Steve. Firstly, I want to acknowledge that we've shared a considerable amount of information in our opening remarks. We will extend the Q&A session a bit longer. I appreciate the question. Rick highlighted that our sales as we entered June have increased by over 20%. We're not providing specific figures as we prefer to stay cautious, but the market is robust. Conversations with our divisions nationwide indicate that they are experiencing significant activity. It's challenging to discern the extent to which this is a push forward into the traditional second-quarter selling season, or represents a shift in how people live and their preferences, and how sustainable that will be. Our guidance reflects a clear awareness of the strong market, and yes, we believe it can remain strong moving forward. There are supply constraints, interest rates are low and likely to remain so for some time. The economy is searching for recovery, and with the reduction in unemployment rates, there is reason to be hopeful. I believe the strength of the housing market will aid in job creation, assisting those who may have lost jobs more permanently. We have reasons to be optimistic about stronger sales. We will aim to find a balance between pricing and pace as we navigate through the third quarter and into the fourth. However, we also incorporate some caution in our projections because we are still assessing how the economy will recover from its disruptions and how jobs will return. There is ongoing social unrest that raises uncertainties. Thus, while there is potential for upside in our sales figures, we also recognize the need for caution, and we are striving to balance these factors as we prepare our guidance for the future.
Jon Jaffe, President
And Steve, it's Jon. Let's remember, as I said, we intentionally pulled back on about 4,100 starts, and we're going to manage carefully not to be selling too far forward into the future. And so, we’re going to control the sales pace, even though the market might allow us to sell at a faster pace, we're going to make sure that we match to our production pace.
Stephen Kim, Analyst
Yes, especially in a rising price environment, it doesn't make much sense to sell too far in advance. This cautious approach is appreciated and reasonable. Regarding your second question, many societal changes are happening more quickly than we've seen before, and many of these changes seem to positively impact your business and homebuilding overall, such as the preference for suburban over urban living, the demand for home offices, recreational spaces, and outdoor living. I would like your thoughts on what is driving these changes and how permanent they might be, particularly whether they will last long enough for you to make investments that will be beneficial over several years instead of just months. I'm considering factors like social distancing, how long do you think it will influence people's housing preferences? Additionally, concerns about urban safety and the rise in remote work are relevant here. Which of these trends do you believe will be temporary, and which ones are likely to persist, providing you with an opportunity to invest? Are you currently making those investments?
Stuart Miller, Executive Chairman
So let me just give a quick response and ask Rick to chime in, in a second. But look, there is no way in the middle of crisis to figure out what's going to be short term and what's going to be long term, and we're going to feel our way through this. There are certain elements that are clearly going to be with us for a very long period of time, and that is the migration to technologies that we are all learning to use, that are enhancing the customer experience as I detailed in my portion. But relative to the trends of migrating from cities to suburban, mobility and that having been put on pause and some of the other questions out there, how long term they're going to be, we're going to have to wait and see. Some of the elements like work-from-home and having an office at home, we think that these are going to have some stickiness. So, Rick, why don't you weigh in on that?
Rick Beckwitt, CEO
Yes, I agree with Stuart. We're going to have to see how things evolve. But we do have some trends that are really positive. Going into this, we had the millennial population that was going through wanting to move to the suburbs, having babies and things like that. On top of this, we've seen a mass flight from highly populated areas where people just really don't want to be confined in small spaces. So we are really positioned well and have been investing in opportunities and contracting for land to take advantage of this. One of the most interesting dynamics that we're looking at is, with the dramatic fall in oil prices, people have the ability, if they need to commute, to commute at much more affordable levels. But many times now, since you can work at home, you don't need to drive anywhere. So, that really opens up a vast amount of opportunities for us as we look down the road.
Ivy Zelman, Analyst
Good morning. I apologize for being disconnected from the call and missing much of the initial comments. First, I want to acknowledge and commend you all for successfully navigating these challenging times and achieving such impressive financial results. It's truly remarkable, and we should all recognize it. Moving forward, it’s hard for me to ask questions without repeating what you’ve already discussed. You provide a unique perspective with your multi-family business. We've heard from publicly traded REITs that there isn’t a significant movement from urban areas to the suburbs; their turnover rates are slightly elevated but remain low overall. This makes it challenging to align what we're hearing about the desire to move from densely populated urban areas for more space, safety, and the amenities that have become vital for comfortable living, especially with record-low mortgage rates. Can you share some insights or data on these trends? I know builders are seeing strong demand, which contradicts our expectations given the current unemployment situation. They say nothing has fundamentally changed; people are buying for the same reasons, but it’s accelerating. There’s a noticeable increase in renters transitioning to homeowners. Could you help us understand the dynamics, perhaps comparing entry-level buyers with those moving up? Are people leaving New York City for larger homes? Are there differences in product categories? I’ll pause here, as I can go on, and I don't want to overwhelm you with too many questions at once.
Stuart Miller, Executive Chairman
I understand that we started with lengthy introductions, and you continued with that. Your next question will have to be more concise. To clarify, there isn't just one story; there are multiple narratives unfolding. For instance, I spoke today with Carlos Gonzalez from our Southeast Florida division, who shared that recently, 31% of his sales have originated from the City of Miami to its suburbs, indicating a trend of migration. We're beginning to gather empirical evidence that these trends, like the shift from rental communities to single-family homes or even single-family rentals, are real and emerging. While we don't yet have sufficient data to draw firm conclusions, we expect to gain more insights over time. However, it's important to recognize that we are still uncertain about how durable these changes will be, and we have to be cautious. There are various stories developing, and perhaps Jon and Rick can provide their perspectives as well.
Jon Jaffe, President
I would add that I think we're seeing more people move out of apartments into new homes versus existing homes. So I think it makes sense to me that, on the multi-family side, they are not seeing a rapid spike in their turnover. But it doesn't take many basis points of market shift from existing to new to really impact the demand for us, and I think we're definitely seeing that because in all our divisions, as Stuart noted, with Southeast Florida, we're seeing a pickup in sales of people coming directly out of apartments.
Rick Beckwitt, CEO
And Ivy, one other point you’ve seen in how you're tracking the better run in higher Class A REITs is in our multi-family business; our occupancy really hasn't changed much. We have people paying rent and really didn't have a big dip in any of that. And what we've seen as we've really drilled down is it's coming from the non-Class A lower-quality apartments, or people don't want to live there anymore. In the higher Class A that have good amenities, there's people that want to live there. But we're seeing a mass exodus from the lower-quality non-amenitized apartments across the U.S.
Ivy Zelman, Analyst
From the perspective of affordability, builders are currently capitalizing on their strong position by increasing prices, and mortgage rates have significantly decreased compared to last year. However, is there a level of concern regarding the favorable affordability for Class B tenants that may be leading to this exodus? What impact will this have on rents and demand if homebuilders continue to raise prices? Thank you, that's all I have.
Rick Beckwitt, CEO
I think we're just going to have to monitor how things change in the economy. We're seeing a lot of dual-income folks coming to our communities where with mortgage rates as low as they are, small price changes, even incremental within a couple of months, really don't move the needle that much. But it's an interesting phenomenon right now.
Stuart Miller, Executive Chairman
Yes, I believe an important consideration is how the employment data evolves. When thinking long-term, we need to assess how receptive the market will be to the ongoing migrations. It appears that employment will recover to some degree, though it likely won't return to 3.5%. There will be some disruptions, but many people are finding they have the means to afford housing. Accumulating down payments has been particularly challenging, but since individuals have been staying home for extended periods without dining out or attending movies, their ability to save has actually led to an increase in available deposit money. All these factors are interconnected, and we will observe how they unfold over time. This is partly why we've adopted a conservative approach to our projections, as we understand we need to wait and assess these issues. Now, onto the next question?
Operator, Operator
Next, we have Truman Patterson from Wells Fargo. Your line is open.
Truman Patterson, Analyst
Hi, good morning, everyone, and thank you for all the detail. Really appreciate it. Let me also throw on great results. So, following up on Ivy's question, one of the big questions in the market clearly is how sustainable the demand is and whether this rebound is being driven by that pent-up demand potentially, which could trail off. So a couple of questions that I'm hoping you can give us a little bit of color on. One, what portion of your sales today are being driven by, we'll call it, pre-COVID traffic from the first half of March and before? And then, the second part, for sustainability, any idea of what portion of your entry-level purchasers are using government stimulus checks as down payments? A family of four essentially just got a $3,400 check from the government, which can usually go a long way toward a down payment. Any idea or any way you can help us with either of those questions, I'd appreciate it.
Stuart Miller, Executive Chairman
Jon, Rick?
Jon Jaffe, President
I think with respect to your last question, Truman, as you think about qualification requirements to purchase a home, the people that we're seeing buying our homes today for the most part are not relying on the government assistance checks. They are employed and secure enough to purchase and close. They have job security. So, we're really not seeing that. Stuart said a moment ago, we have talked about a production deficit. We have been underproducing homes, dwellings from multi-family, rental, all the way through to single-family, suburban. Across the board, the country has been underproducing homes for a very long time, for certainly the past 10 years.
Stuart Miller, Executive Chairman
And that underproduction means we have short supply against strong demand, pent-up demand, stalled demand, and this is likely to be with us for some period of time. We do not have an overstated inventory to absorb that demand. So we're likely to see an undersupply meeting with a strong demand for some period of time.
Truman Patterson, Analyst
Okay, thank you for that. If I could just parse the data a little bit further, really kind of micro near-term trends, what was the back half of May's year-over-year growth rate? And with June trending up over 20% year-over-year, could you maybe discuss the gross order improvement? Is this to an extent being driven by a massive decline in the cancellation rate?
Rick Beckwitt, CEO
So the cancellation rate really has come down, as I highlighted. And we also pointed out that through the month of May, each week picked up in activity. So the last week of May was stronger than the first week of May. And then, really going back over the last six weeks, in each of those weeks, we sold north of 1,000 homes, increasing during that time period. So we did see the market solidify. That continued into June. And the market has got a good solid footing right now.
Truman Patterson, Analyst
Okay. Is there any way to parse out the back half of May's growth rate and that can rate versus how June's growth rate is trending?
Rick Beckwitt, CEO
We really haven't talked about June's growth rate, but that has come down. And I just want to be very careful to not give too many micro statistics associated with the business. The trend line was consistent throughout the month, increasing week-to-week and continuing into June.
Stuart Miller, Executive Chairman
Okay. Thanks for joining us.
Operator, Operator
Next question? And we'll probably cut it at that point. Two more questions. Okay, go ahead. Thank you. Our next question is from Michael Rehaut from J.P. Morgan. Your line is open.
Michael Rehaut, Analyst
Thank you very much, and I appreciate all the detail and thoughtfulness in your comments. I wanted to follow up on the order guidance. Stuart mentioned there's a degree of conservatism in the outlook, which makes sense, along with considerations regarding community count being affected by land spending and other constraints. I would like to understand your thoughts on community count, particularly in terms of the trajectory that ended the quarter at 1,245. How do you envision that number by year-end? Additionally, are you factoring in a margin of error? From a conservative perspective, are you assuming a reduction, perhaps around 10%, to quantify that conservatism?
Stuart Miller, Executive Chairman
Well, before I let Rick answer that question, let me just say that community count, we have all learned together, is one of the most difficult numbers to project. It moves around a lot. And in the context of the environment that we've been working in with municipality offices shutting down, being less available, getting fewer permits out of them for land development, it becomes even more difficult. So I'll let Rick take it from there.
Rick Beckwitt, CEO
We anticipate a slight decline in our community count in Q3, followed by stabilization in Q4. Looking ahead to 2021, we are hopeful that we will achieve approximately a 5% increase in community count for the year. However, it has proven challenging to launch new communities as towns and municipalities reopen and begin issuing permits.
Michael Rehaut, Analyst
Thank you. I assume when you mention a slight dip, you are referring to the levels from the second quarter. My second question circles back to the various efficiency initiatives you have implemented for some time, both in construction and in SG&A. I understand there are likely many initiatives in both areas, which might be difficult to quantify. However, I would appreciate any thoughts on how these initiatives might impact margins over the next few years, particularly regarding the growth from construction initiatives and the cost-reduction efforts in SG&A. If you could provide any kind of directional guidance on how we should view these factors in relation to the growth and SG&A metrics, that would be helpful.
Stuart Miller, Executive Chairman
Our focus has been on all areas of technology across our platform due to its direct impact on reducing costs. This includes construction costs, labor expenses, internal efficiencies, and how we report our numbers, as well as our customer interactions. Our initiative aims to ensure we can provide affordable housing, which means not all improvements will directly translate to margin. However, this will help maintain affordable home prices moving forward. While there's no straightforward correlation to our margins since some benefits will go to our customers, we do expect our margins to improve. We are already seeing some of this improvement, driven by factors like pricing power and reduced incentives or realtor cooperation. All aspects of our business are working to lower costs. In response to your question, we anticipate seeing a 100 to 200 basis point improvement over the next couple of years. These are our goals; we view them more as internal benchmarks than formal guidance. Nonetheless, we are observing positive changes in our cost structure.
Michael Rehaut, Analyst
Great, thank you.
Stuart Miller, Executive Chairman
You're welcome. Last question.
Operator, Operator
Thank you. And our last question is from Mike Dahl from RBC Capital Markets. Your line is open.
Michael Dahl, Analyst
All right. Thanks for squeezing me in. Stuart, actually just a couple of follow-ups on some of the internal initiatives, I guess specifically, first on the virtual sales shift, and in addition to an enhanced customer experience, it sounds like some nice financial benefits. But within those comments around the margin, can you help us understand what percentage or any metrics around what portion of your sales force has effectively shifted to more of the virtual new home coordinators versus in-community salespeople?
Stuart Miller, Executive Chairman
The shift today has been fairly mild. People are still learning to properly use and engage the digital technologies, and that learning curve takes some time to implement and to perfect. But as we perfect that, we're going to see a greater number of both our customers enjoying the digital engagement and the autonomy, as well as our new home consultants and what we call our Internet new home consultants, or ISCs, really being able to work with those tools and be far more effective and efficient. This is a migration that's going to take place over the next quarters and years. And I think we'll be better equipped to answer as we develop additional experience. But I will say that the way I think about this is, we've had probably a year or two of change management get incorporated over just the past three months as we've reeducated or educated our new home consultants and our customer base that these tools exist and are quite beneficial.
Jon Jaffe, President
And I would just add that I agree with Stuart, but really 100% of our new home consultants and Internet sales consultants are using our virtual tools today. It's really a question of them becoming experts at it and getting really comfortable with it. We've launched a series of training programs that we take our associates through to how to sell virtually, and it's rapidly accelerating. But it is change management and it will continue to improve.
Michael Dahl, Analyst
Thanks for that. I have a follow-up question regarding internal initiatives, specifically about build cycles. You mentioned some centralized scheduling, and I wanted to know if you could provide some details on how much your build cycle had widened or lengthened during the peak of the issues in March or April. Additionally, are you tracking any metrics related to these initiatives that indicate how many days you believe you could reduce from the build cycle through these efficiencies and digital tools?
Jon Jaffe, President
We are observing a consistent decline both year-over-year and sequentially in our build cycle time. For instance, this quarter compared to last year shows a reduction of about 15 days in our cycle time. All aspects of efficiency, including our coordination with trades, a focus on flow, and the overall benefits in the current environment, are contributing to this improvement. Our Builder of Choice program has successfully attracted trades, ensuring we have the necessary workforce on-site as needed. We are committed to smoothing the process for them. I believe this trend will continue, resulting in further reductions in our build cycle time.
Stuart Miller, Executive Chairman
Rick, do you want to weigh in on that?
Rick Beckwitt, CEO
Going down.
Michael Dahl, Analyst
Great. Thank you.
Stuart Miller, Executive Chairman
You're welcome. So with that succinct answer, we'll end it there. I want to thank everybody for joining us and for enduring some rather long and windy opening remarks. I know it starts with me, but we felt that we wanted to share more information at what can be a confusing time and look forward to reporting in a more condensed way. Our third quarter is a few months from now. Thank you for joining.
Operator, Operator
Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.