Welcome to Lennar's Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Alex Lumpkin for the reading of the forward-looking statement.

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 yesterday'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.

I would now like to introduce your host, Mr. Stuart Miller, Executive Chairman. Sir, you may begin.

Good morning, and thank you, everyone. So this morning, I'm here in Miami with Rick Beckwitt and Jon Jaffe, our Co-CEOs and Co-Presidents; Diane Bessette, our Chief Financial Officer; David Collins, our Controller and Vice President; Bruce Gross, CEO of Lennar Financial Services; and of course, Alex, who you just heard from. It's been a while since we've done an earnings call together, altogether, but we're all here and happy to be returning to normal. So, today's call is pretty straightforward, so we'll try to keep our remarks as brief as possible and leave time for your questions. I'm going to give a macro and strategic Lennar overview. Rick will talk about market strength, community count, and our growing single-family for rent strategy. And Jon will update our just-in-time land strategy, supply chain, production, and construction costs. As usual, Diane will give detailed financial information, highlights, and guidance, and then we'll attempt to answer as many questions as possible. Please limit questions to just one question per customer and one follow-up. So with that, let me start and I want to start my remarks today with a big shout-out to the entire Lennar operating team. There is simply no way to report our quarterly results without starting with the engine that produces those results. The market conditions have made these the best of times in the housing market. These times have their challenges as well. Performing in this best of times is hard grinding work that requires the coordination of a first-class, hands-on, and engaged management team working in close partnership with extraordinary associates who care deeply about our customers and our company and leave nothing on the field in achieving those results. I'd also like to give a [indiscernible] shout out to one person, in particular, and that is…

Thanks, Stuart. As you can tell from Stuart's opening comments, the housing market is very strong, our team is extremely well coordinated and our financial results continue to benefit from a solid execution of our core operating strategies. Key to that has been running a finely tuned homebuilding machine where we carefully match homebuilding production with sales on a community-by-community basis. In this environment, it makes no sense to sell too far out ahead because you lose your ability to offset potential pricing cost increases with sales price increases. In addition, in this appreciating market with slightly longer cycle times, we are strategically selling our homes later in the production cycle of the home to allow for further cost protection and sales price appreciation. Our first quarter results prove out the success of the strategy, as we achieved gross margin increases of 450 basis points year-over-year and 110 basis points sequentially. During the second quarter, we started 5.5 homes per community, which was a 90% increase from last year and a 20% increase sequentially. This production and margin-driven, sales-focused program will drive further margin improvement and increase deliveries in the back half of the year, given our ramp up in starts in the second quarter. In the second quarter, new orders, deliveries and gross margins were up strongly in each of our operating regions. In addition, we saw strength in all product categories from entry-level to move-up and in our active adult communities. The strength of the market was also reflected in a historically low cancellation rate, which was 8.6% in the quarter, down 1,020 basis points from last year and 100 basis points sequentially. This is additional evidence that our buyers have the required down payment and mortgage qualifications to purchase a new home. As we look across the…

Thank you, Rick. Today, I'm going to walk you through 2 topics: how we execute on our asset-light land strategy for a just-in-time delivery system of home sites and how we are managing the current unprecedented challenges of supply chain disruptions and labor shortages. As Stuart noted, Lennar has made significant strides in strengthening our balance sheet with improved cash flow generation, driven primarily by the reduction in land owned versus optioned in the years of land owned, which respectively stand at 50% option and 3.3 years. In the second quarter, we added about 38,000 home sites net to our controlled total and purchased about 21,500 home sites. We began our asset-light focus years ago, starting with several large regional land relationships who own and develop land on Lennar's behalf. We then created a strategic national process around our approach. The first critical step in formulating this approach was to separate land into 3 distinct risk categories. The first category is finished land that is ready for the construction of homes to be started. The second is land under development being readied for the first category is typically less than 4 to 5 years from being ready for construction starts. Land in the third category is beyond the 4 to 5-year period that may need some entitlement, significant planning and has not yet started development. After separating land into these 3 buckets, we then match the risk profile of each asset with the right source of risk-adjusted capital and expertise. The first category of land is carried on our balance sheet as it is the land under the homes we are building. This land has no risk to it, and our cash on hand or revolver are the lowest cost of capital for it. The second and third categories of…

Well, thank you, Jon, and good morning, everyone. Although you've heard some of our financial results from Stuart, Rick and Jon, I'll begin by recapping certain Q2 2021 highlights and then providing detailed guidance for Q3 2021 and high-level guidance for fiscal year 2021. So starting with homebuilding. For the quarter, new orders totaled 17,157 homes, a 32% increase year-over-year. We ended the quarter with 24,741 homes in backlog with a dollar value of $11 billion and 1,225 active communities. Our cancellation rate was 8.6%. For the quarter, deliveries totaled 14,493 homes, up 14% year-over-year. Our gross margin was 26.1%, up 450 basis points from the prior year. This increase was primarily driven by a continued focus on maximizing sales price, while controlling cost increases, as Jon described. Additionally, our margins benefited by a 20 basis point decrease in interest expense as compared to the prior year as a result of our consistent focus on debt reduction. Our SG&A was 7.6%, an improvement of 70 basis points from the prior year. This decrease is primarily a result of our intense focus on incorporating technology to gain efficiencies across our homebuilding platform. So for the quarter, we generated a net margin of 18.5%, the highest quarter net margin of a repeat. Our financial services team also executed at high levels, reporting $121 million of operating earnings. Mortgage operating earnings increased to $92 million compared to $81 million in the prior year. Mortgage earnings benefited from an increase in secondary margins. Title operations -- Title operating earnings were $24 million compared to $76 million in the prior year. The prior year included a gain of $61 million on the deconsolidation of states title now called Doma. Excluding this gain, title earnings increased due to growth in both volume and the margins as…

Thank you. We will now begin the question-and-answer session of today's conference call. [Operator Instructions]. Our first question comes from Michael Rehaut from JPMorgan.

First question, I just wanted to hit on probably the #1 area of concern today, which is around demand trends. And I think there's been concerns specifically around the potential for demand slowing a little bit in the face of the extraordinary amount of home price appreciation that's occurred over the last several months. Stuart, you mentioned in your prepared remarks that you view that sales have been slowing more due to, in effect, production constraints and managing the sales pace. I was hoping for any sense of how you view demand as it progressed throughout the quarter, and what makes you comfortable around the idea that overall the demand backdrop remains not only robust, but it appears still well in excess of available supply.

So look, let me start with a notion, proposition that the market has been extremely, extremely hot. So, when you go from extremely, extremely hot to extremely hot, that's a step down that is really quite acceptable. It's actually a little bit better. And of course, as pricing goes up, people -- fewer people can afford. So, I would just say, Mike, that while the market might have a mild cooling, it is just from such a high level that demand is still well in excess of supply, and we see this on the ground at our Welcome Home centers on a regular basis, and this is not in any specific market. It really is across the country. So, when we look at the temperament, the tempo of sales in our Welcome Home centers, the traffic that's coming in, the discussions that we're having, we're still seeing very strong demand. We still see very limited supply, and we recognize that the country and the production of housing has been in deficit for the better part of a decade, and we can argue whether the deficit is one size or another. I think that there are a lot of competing views on that. But still, based on what we see in the market and the logic that we're applying to what we've seen over the past years and the appetite of the buying public, the millennials that still haven't come out of their parents' homes, we think there's a very, very strong demand profile that is out there for an extended period of time.

Yes. I guess I'd add to that, Michael, that if you look at the quarter, we sold 17,000-plus homes during the quarter, and the variability between the months was plus or minus 100 homes. So, we really see no impact associated with the cooling.

And again, for us, that ties into our match strategy of sales to production. We’re able to hit exactly that pace. As Stuart said, when you go from very, very hot to very hot, that's still well above the levels we were at a year ago, which were very strong.

Right. No, that all makes sense. Secondly, I think perhaps the other key area of debate out there right now is around the sustainability of gross margins. And with the success that you've highlighted this year in terms of managing sales pace and opportunistically improving margin, and obviously a part of that is to cover cost inflation, but you've been able to do well in excess of that. It's interesting right now that the gross margins you're projecting for '21 are in excess of the prior peak margins in 2005. Interestingly, you're on track to have revenue -- homebuilding revenue more than double 2005. And so, you'd think that there are scale benefits certainly associated with that, but I was wondering if you could give any perhaps thoughts on how you think about gross margins going forward over the next couple of years? Obviously, I'm not asking for guidance for '22, but just more broadly when you think about the gross margin levels that you're generating for this year, what might be the puts and takes outside of sales incentives, which are hard to predict, how you see gross margins, let's say, this cycle and perhaps over the next couple of years versus the last cycle?

So look, let's take out just the volume component of improvement in margin. I mean, if you look at the composition of our margin, it is a combination of a lot more efficiency in the way that we're managing our company, the technologies that we're engaging in and incorporating into the way that we're running our business; the efficiency of our land program, just-in-time delivery of land; and frankly, the emergent inventory management component of our single-family for rent. There are tremendous efficiencies that we are embedding in the core operation of our business, and we think that these are becoming more and more important. The way that we're managing our supply chain is a matter of absolute efficiencies being brought into the way that we're operating our business. And you're going to see that we, as a company and hopefully as an industry, are recasting the cost structure all the way from hard cost, labor materials, to the softer costs around SG&A. We are rewiring the way that this business operates to the benefit of a lower cost structure and an opportunity to maintain good margins and still bring affordability to the housing market. And I think that, that's been an extreme part of our program. I do want to highlight that additionally, wind at our backs is our reduced debt level. As we bring debt down, we have less capital costs, and that's continuing to help our margin picture, and we expect to continue to bring that debt level down. So, all of the components, from technology, the way we run our business, debt levels, the way that we're just in -- we're becoming more of a just-in-time program, I think is a protective coating around margins for the future, and we're pretty optimistic about where we're going.

I'll only add that as I’ve noted in my comments with a focus on purchasing, we’ve brought our direct cost down to 41.3% -- sorry, 40.1% of our revenues, and so if you look at that ratio, we've got a lot of room to go before the lines cross between revenues going off and cost to be able to maintain our margins.

And I guess the final point I'd make is if you look at what we're building today compared to that 2005, 2006 timeframe, our homes are so much more value-engineered and efficient to build. So, the cost structure associated with the production of those homes is significantly different than the last cycle.

Our next question comes from Stephen Kim from Evercore ISI.

I'm going to just say that I think people would really love to hear a little bit about the SpinCo and particularly, what you think the book value reduction would be when you spun it off. I think you talked about the assets, but the book value, I think, would be important. But my questions are going to focus on the core homebuilding business. In this environment where you're deliberately, in some cases, holding back sales to age your work in process inventory, it seems like the best indication of future sales isn't actually the number of homes you're selling today, but how many homes you're building. And given that, I noticed that your starts in 2Q were up about 28% from 1Q. The nation's starts were only up 7% sequentially, not seasonally adjusted. So clearly, you're gaining a lot of share. You've started -- I think the actual number was like over 20,000 units in the quarter. And I would think your production capability should increase from here because your community count is increasing. So my question is basically, is it reasonable to think that before too long, your closings should be able to exceed 20,000 units in a quarter?

Well, let me give a couple of corrective pieces. First of all, Steve, most importantly, we never deliver units. It's always homes at Lennar. So we've just got to get that one right. Number two, on SpinCo, when we talk about a spin in terms of dollars, we're talking about book value. So when you asked -- I think that when you asked the question, which we won't hold that as one of your questions about SpinCo and the impact to book, it is a direct 1:1 dollar. It's a book dollar amount. Is that clear?

Right. Yes. Thank you.

Okay. Yes. And then as it relates to our starts, our starts I think are not 19.5, over 20. But I'll let Jon and Rick address the question.

Look, we've been very laser focused on our even flow production and just gradually ramping that up to the increased start level that you noted. And that ultimately does flow through. As I noted, we're seeing about a 2-week cycle time delay. So it's not going to perfectly flow through, but we should see in subsequent quarters, our deliveries matching that start pace.

Yes, and just to further what Jon said, we purposely did start a higher number of homes in the last quarter because we've seen demand. And so if you look at it from a start sales differential, it was about 2,500 more homes started than sold, but we could have sold all of those homes. We're just choosing to sell them later in the construction cycle in order to maximize margin and to take advantage of a more finally tuned delivery cycle.

Yes, absolutely. Makes sense. Very sensible strategy, I would say. The second question relates to home prices. I think the most striking development across the market has been this massive surge in home prices, not just that you're experiencing, but across the market. According to some measures, resale pricing is up 25% year-over-year. When people hear this, and they instinctively think it's a setup for home prices to fall in the future, which, by the way, would set off a pretty bad chain of events if it happened, our own view is that the price jump is a correction rather than an overshoot. It's the result of years of undersupply and pent-up demand and not just low interest rates. And so it makes it very different from like '05, like when demand was very speculative and supply wasn't constrained. But I think people would really like to hear from you how you see the longer-term outlook for pricing. Are we seeing a blow off peak like what happened recently to lumber futures or something? Or have we found a new level of home price that can be resilient in the face of potentially higher rates?

Look, from everything that we're seeing in the field, I think that we're just hitting a new level. I think I wouldn't have thought of it as a correction, but the way that you've said it, I think that, that makes sense. I think that home prices are and have reached a point and are continuing to grow, by the way. This is not -- this hasn't slowed. But the home prices have clear -- are reaching a point where it is kind of a correction to a higher price level. I think it's stagnated for a very long period of time as we went through the underproduction years and maybe the mortgage market kind of disabled the production and the demand for homes or certainly early after the downturn. But you have this really interesting time where, not only has the mortgage market normalized, and I think normalized in a very credible way, very protective of that mortgage market, but you also have this really interesting demand coming from single-family for rent. And there's some questions around single-family for rent in interesting ways, but single-family for rent is enabling a single-family lifestyle to a broader range of people who cannot necessarily acquire the down payment or meet the metrics that are needed to qualify for a mortgage, but certainly have the ability to afford the rent on a single-family lifestyle. And this notion that the way that people live, the housing that is available to a broader range of people is -- its very predictive of outcomes for families is a really important component that's emergent. And the enablement of the single-family for rent business is just enabling homes available to a broader range, a bigger part of the population, and I think this is a greater good. And we believe, and I think Rick daylighted it and highlighted it very well, we believe that when we're providing more workforce housing, we're expanding the amount of demand that's out there. And yes, we're driving costs up or the price of housing up a little bit. That is driving the cost of housing up because there's more demand and less supply. But at the same time, it's asking the industry to provide more and provide more accessibility to more people. I think that's a generally great impact for the industry.

Yes, I agree. The stepping stone there or the single-family for rent is really an important development.

Our next question comes from Alan Ratner from Zelman.

Actually, it's Ivy Zelman. So maybe, Stuart, just to clarify. So maybe, Jon, you said that you're purposely starting more so you can sell later in the process. But your guidance for sales for next quarter, just to be clear, it remains. The gap is still there prevalent. So does that just mean that you're going to hold those? Or you just don't want to guide to the full production capacity that you can, in fact, produce?

We think that's accurate guidance, Ivy, based on us very methodically scheduling when we're going to sell a home. It's not the same in all markets. It's later in some markets than others, but it's a very carefully, very meticulous plan not to sell out ahead of ourselves.

Okay. Just wanted to make sure. So let me go to a higher-level question, Stuart, for you. Recognizing that we are seeing inflation -- robust inflation across the entire ecosystem, including home prices that Steve Kim just addressed and as well as rent inflation, especially single-family rent inflation that I think Invitation Homes and American Homes rent actually at NAREIT, so that they were raising a new move-in up 14%, 17%. We've got home prices in places like Austin, up 25%. Do you not think that there's going to be some type of affordability for both asset classes that wages are certainly not increasing at those levels? Where is the ceiling where it's no longer affordable for a renter or for a home buyer?

Well, look, I don't think that there's math that can tell us where there might be a ceiling. And it seems to us that wages are increasing and home or the cost of home -- I don't even want to say ownership of the cost of living is going up at the same time, and that defines the inflationary environment. But where do you find affordability? I think, Rick, again, did a really interesting job of laying out that the single-family-for-rent world is kind of an equalizer in that field. And the program that we're really working on is saying, "Okay, so housing affordability might be out of the reach of some people. How do we bring it in the reach through a rental program? And then how do we start to build a rental program that provides upward mobility so that, that renter can start to become an owner earning the credentials to get there?" When you can make single-family lifestyle available to our workforce, and that workforce starts with a rental and can earn into owning it, it just creates a stepping stone, and it enables that workforce to afford that higher-priced home. Now where is the top? It's certainly going to plateau at some point. But the question is, where is that moment? We're not sure right now. We're going to walk that walk together.

Ivy, also remember from a macro view that today, the home is the hub of people's life, very different than it was in the past. So it's not just where they live. It's where they work. It's where they educate. It's where they recreate. And post pandemic, that's still going to be the case for the large part, and therefore, people view the home as more valuable and will put a larger portion of their income towards that more important asset in the home.

No, that's helpful. And just to clarify, because we've seen a lot of the single-family rental production that's now being leased up, it's comparable on a square-footage basis, if not higher, to a monthly payment as a for sale. So are you suggesting that your workforce housing that you're providing on the single-family rental space is going to be below the monthly payment because of the -- obviously, costs are monthly, the consumer thinks of it as a monthly payment. Because we're seeing it not only in line apples-to-apples, but even at a premium. So are you taking a different strategy than your competitors?

Our strategy is to provide single-family home ownership for workforce housing for people that can afford to rent and qualify for that housing. So if you look at comparable rents in the neighboring areas, it's stacking right on top of what comparable rents are. And most of the issues are, Ivy, is these people don't have the down payment that's required to afford to buy a home. It's not that they can't pay the mortgage payment, they just can't qualify in other ways.

And so our focus is on a monthly payment that's very similar to the -- what a mortgage payment be, but, as Rick highlighted, without the down payment.

Our next question comes from Susan Maklari from Goldman Sachs.

My first question is, you talked about the focus that you have on ROEs and improving that. And when we think back to the last housing cycle, your ROEs were at least in the mid-20s, maybe even the high 20s in our model, and granted there's changes in the business today relative to them. But back then, it was more of an output of what was going on in the housing market. When you think about the focus that you have today on expanding those ROEs and all the different elements of the business that are coming together, where do you think your returns can get to this time? And how do we think about that path relative to the past?

Well, look, I think that one of the limiting factors is the fact that the equity is growing at a sizable clip. That's a positive, but a limiting factor relative to ROE. At the end of the day, we continue to see growth in our earnings and therefore, growth in our returns limited by the fact that the equity is growing at a pretty sizable clip. I think you have to think in terms of as we move forward with our spin, it also helps to define the efficiency and the effectiveness of the way that we're running our business in our core homebuilding business, where we're able to focus an equity base that is just geared towards the homebuilding business. I think you'll see that return kind of revert back to some of the ROEs that define the industry at an earlier time. So it's a combination of things, but the efficiency that we're injecting in our business is going to continue to grow our returns, which will be even further enhanced by the separating of logical businesses to where they can operate most effectively.

Okay. That's helpful. My follow-up question is on lumber. Obviously, we've seen that come down in the last week or so. You talked about the benefits that you expect to see from that in the back half of the year. But can you talk to what you're seeing out there in terms of the lumber market? How sustainable do you feel like this pullback is? And how are you kind of planning for cost as we think about the future quarters and going into '22?

With respect to lumber, I don't think anyone felt at the high level that it was at most sustainable and it was sort of the perfect storm. We've seen, I think, at the beginning stages of the pullback in lumber costs, a pullback in demand from the big box retailers as the do-it-yourself market postponed projects for 2 reasons. One is for post-pandemic, they're spending money and their time elsewhere and they didn't want to pay that high cost. So there's been a pullback on demand on the lumber supply chain, which has started to bring costs down from those unsustainable levels. So as we think about it, every 10% reduction in random lengths equates to about -- plus or minus $1,700 of our average size home. And for OSB, about the same, about another $1,700 per home. So as you see it drop from the level of higher $1,500, we'd expect probably our August starts to see a benefit of $200,000 to $300,000 board feet in random lengths. OSB less than that does not start coming down yet, but it should follow suit.

Our next question comes from Truman Patterson from Wolfe Research.

So I wanted to follow up a little bit but ask about affordability in a little different way. So very, very strong gross margins, strong pricing. Fourth quarter gross margin suggests that you all are more than covering peak lumber costs, right? And now we've seen lumber roll over. So that likely will be able to offset some of these other cost pressures that are picking up. So if inflation aggregated kind of levels off in the back half of the year, especially as you all are opening more communities, just want to understand your philosophy on pricing. Are you all looking to step off the gas to maintain affordability if rates begin to rise? Or is it truly pricing to the market really without regard for potential rate hikes?

So Truman, the first thing I want to say is thank you for acknowledging our Everything's Included quarter. We were all touched by that.

Thank you.

Yes. So look, your question is to throw back to discussions that we've had many times over quarters in the past. It's been less of a discussion point as the market has evolved more recently, but we're very, very focused on our pricing to meet market conditions. And our dynamic pricing model is all about measuring where the market is and going to the pricing at where the market is currently. So the answer is, as prices might fluctuate, as price increases perhaps moderate or plateau, our dynamic pricing model is very much focused on getting us to the exact pricing to reach our deliveries commensurate with where our production has been. So the answer is you can very much expect that our pricing will moderate, as the market moderates or accelerate as the market accelerates, can be very tuned into market conditions.

Yes. And this is so consistent with everything we've talked about really for the last 3 or 4 years. We've been matching sales with production. And we -- Jon and I tinker with where we'll sell during the production cycle based on that fundamental demand in the marketplace. So it's a very precise production-driven sales program.

And we haven't talked about our dynamic pricing program for a while, but it's just become kind of part of the fabric of the way we operate, and it's getting better and better with each passing quarter. It's just not top of discussion right now.

Okay. Okay. And then Diane, this might be one for you. But $2.6 billion in cash on the balance sheet, we're expecting a lot of free cash flow in the back half of the year, next year, well over $2 billion plus, right? A couple-part question. One, what cash balance do you feel comfortable maintaining? And then how should we really think about share repurchases going forward, either a quantitative discussion. Is it programmatic, opportunistic, especially in regard with the equities pulling back recently.

Yes. I think, Truman, that we saw we jumped back into the market again this quarter with 1 million shares. And I guess my thinking is that it's probably a little bit of both programmatic as well as opportunistic. And on that, I mean, I think buying some level of shares every quarter is the right answer. However, I think we should also be opportunistic. So as there are dips in the stock, then we can take advantage of those dips because we have the cash to do so. So I think just having a consistent program is, first and foremost, the most important thing, but you'll find that we'll be opportunistic within each quarter to take advantage of whatever the market might bring to us.

Yes. But let me just say that with that said, Truman, you bring up the fact that we have a lot of cash on the book right now and are likely to generate more in the back half of the year, isn't it great? I mean we've been laser-focused on cash flow.

Yes.

And it's really starting to show just how our focus has consistently rippled through our numbers. I think the one thing I want to add to Diane's comments, you might expect a more bold statement about stock buyback, and we don't really give color as to where we're going on that as we look ahead. But the thing to also keep in mind is that we're also working with the composition and the size of our spin, and we're laser-focused on the spin-off. And we want to make sure that our balance sheet properly supports the extent of what we want to do because we're not just going to -- it's not just about building an ever better Lennar homebuilding and financial services group. It's also -- and which historically, when we spun LNR back off in the '90s, we've built a great company, a durable, sustainable company, and we expect to do the exact same thing with the spun company here. And we're enthusiastic about presenting more in the future on that, but our balance sheet, our cash position and the size and scope of the spin, all work together. So I'd say just bear with us a little bit as we put these pieces together because it all ties together with our stock buyback program.

Okay. Is there a certain cash balance that you want to maintain to support the core homebuilding operations?

The way we think about cash is more.

Yes.

We're not going to limit cash flow, and we're -- listen, to that point, don't think that a 50-50 land-owned versus controlled program is where it ends. We hit our goal early, and we're still focused on migrating forward. Jon's articulation of our land strategy and the waterfall of short-term, medium-term, long-term land and the way that we're configuring to maximize cost of capital and where we put land and how we generate cash flow is something that we work on, Rick, Jon and myself work on every day. So cash flow continues to be a focal point of this company.

Yes. And Truman, just to add also, as I mentioned, alongside also with the continued debt focus. So you see us reaching into 2022 with those debt maturities, pulling them forward and really getting some positive impact to our margin as we have done that.

And so for punctuation at the end of your question, I want to say again, thank you for the Everything's Included call out.

And our last question comes from Jade Rahmani from KBW.

I appreciate the chance to ask question. I just wanted to ask at a high level, to what extent do you think Lennar in particular, but also the major production builders are in control of their own destiny? You mentioned various factors, including the land strategy, relationships with suppliers. So to some extent, since new home sales are only about 10% of total aggregate home sales, you can tailor the product to the market. Just overall question, do you think that the company is a price taker, a price giver. And overall, how would you respond to that question?

Well, it's great that we're going to get to metaphysics in the call today. But I guess I'd always say, Jade, that we're always a little bit of both. The fact of the matter is market conditions dictate a portion of what defines what we're able to do, but also our ability to work and act within market conditions is in part a driver of how we perform and how our product is received and the pricing that we get for that. So I would say there isn't a binary answer to the question of whether we're a price taker or a price maker. I think in every market condition, there is a dynamic that is, in part, given to us and, in part, maximized by us. And in that regard, I've tried to be very clear in my comments, and I think Rick and Jon as well and Diane have all daylighted that we're sitting in the midst of market conditions that are very strong. And those market conditions are moving around a little bit, but very, very strong short supply, long demand. And that's the market that is given to us. But within the condition of that market, we're probably reporting our numbers saying that we have maximized the market that's in front of us. We've made strategic moves that has enabled us to navigate these waters as well as can be. And we think we've done a really good job, and we think that we can continue to get better and better being posed, at the same time, a price taker and a price maker navigating interesting waters. So that's how I'd answer that. I don't know.

Yes. To give a little bit additional perspective, it varies dramatically by market. We have some markets where we're 30% to 40% of the share of the market. And in those markets, we have the ability to control things a little bit more, and we're setting the cadence in that market. In markets where a smaller percentage, we're really pricing to market as we've done in for really the last several years. So it really varies across the board depending on the market.

So why don't we go ahead and end it there? And let me say just kind of as a last word, I want to apologize. We tried to keep our remarks brief. We didn't do a very good job of that, but I hope we gave you a lot of detail. We know we didn't leave a lot of time for Q&A. That's why we went over a bit, but we think it's important to get as many questions as we can. And of course, we'll speak to many of you offline. Thank you for joining us today, and we look forward to reporting on our progress as we go forward. Thank you.

Thank you all for participating in today's conference. You may disconnect your lines, and enjoy the rest of your day.