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Lennar’s Co-CEO Rick Beckwitt Departs The Homebuilder – C-Suite Transitions

  • July 20, 2023

Welcome to edition 50 of C-Suite Transitions, a weekly series on InsideArbitrage that tracks appointments and departures at publicly traded companies during the prior week. We highlight five appointments and departures each week by picking the largest companies from the full list of management changes.

Sudden Departures

  1. HLIO: On July 18, 2023, Helios Technologies Chief Financial Officer Tricia L. Fulton notified the company of her decision to retire, effective August 8, 2023.
  2. FDX: On July 17, 2023, FedEx Corp announced Michael C. Lenz, the current CFO, will transition out of his role on July 31, 2023.
  3. ADES: On July 14, 2023, Advanced Emissions Solutions announced its President and Chief Executive Officer Greg Marken will step down effective July 17, 2023.
  4. YUMC: On July 13, 2023, Yum China Holdings Chief People Officer Aiken Yuen notified the company that he intends to step down effective August 1, 2023.
  5. EIG: On July 12, 2023 Employers Holdings Chief Information Officer Jeffrey C. Shaw experienced an involuntary termination.
  6. VSTM: On July 7, 2023, Verastem Chief Executive Officer Brian Stuglik notified the company of his decision to retire effective July 31, 2023.
  7. IRNT: On July 11, 2023, IronNet Chief Executive Officer General Keith Alexander informed the Board of his intention to resign effective immediately.
  8. TREE: On July 18, 2023, LendingTree announced Chief Operating Officer John David (J.D.) Moriarty will be terminated without cause, as of July 31, 2023.
  9. TPIC: On July 18, 2023, TPI Composites notified President and Chief Operating Officer – Wind Ramesh Gopalakrishnan, that his last day of employment with the company was July 18, 2023.
  10. IVAC: On July 12, 2023, Intevac Chief Financial Officer James Moniz informed the company of his decision to retire and resign effective August 4, 2023.
  11. NMTR: 9 Meters Biopharma announced Concurrent with the Bankruptcy Filing, on July 17, 2023, Bethany Sensenig, Interim Chief Executive Officer and Chief Financial Officer, tendered her resignation, effective July 17, 2023. As of July 17, 2023, the Company has no officers, consultants, or employees.
  12. BRBS: On July 12, 2023, Blue Ridge Bankshares President and Chief Executive Officer Brian K. Plum notified the Company of his resignation effective July 12, 2023
  13. LSF: On July 11, 2023, Laird Superfood Chief Commercial Officer Andy Judd notified the company of his resignation effective August 4, 2023.
  14. CATX: On July 10, 2023, Perspective Therapeutics terminated the employment of the company’s Chief Operating Officer Jennifer Streeter effective immediately.
  15. PRAA: On July 11, 2023, PRA Group Chief Risk and Compliance Officer Laura B. White notified the Company of her decision to resign from the Company effective on July 31, 2023.
  16. SGLY: On July 10, 2023, Singularity Future Technology terminated the employment of its Chief Operating Officer Shan Jing with cause effective immediately.
  17. VRME: On July 10, 2023, VerifyMe and President and Chief Operating Officer Keith Goldstein agreed that Mr. Goldstein would resign from his positions effective, July 31, 2023.

Lennar Corporation (LEN): $130.75

Lennar Corporation (LEN), a leading US home construction and real estate development company builds and sells a variety of residential properties, including single-family homes, townhomes, and condominiums. Lennar also offers financial services such as mortgage financing and title insurance. Additionally, the company has expanded into multifamily rental properties.

On July 14, 2023, Lennar Corporation announced that Rick Beckwitt Co-Chief Executive Officer and Co-President has decided to retire and resign as a member of the Board of Directors of the company, effective September 1, 2023.

Rick Beckwitt Co-CEO and Co-President

Rick Beckwitt Co-CEO and Co-PresidentRick Beckwitt decided to retire as Co-CEO and Co-President after a remarkable 17-year tenure with the company. Mr. Beckwitt joined Lennar in 2006 as Executive Vice President, playing a vital role in navigating the challenges posed by the housing and finance industry collapse during the Great Recession of 2008. He became President in April 2011 and was promoted to Chief Executive Officer in April 2018 and in 2020, he was joined by Jon Jaffe as Co-CEO and Co-President.

Mr. Beckwitt holds positions on the Board of Directors of Eagle Materials Inc. (EXP), a prominent manufacturer of construction products and building materials. He also serves on the Board of Directors of Five Point Holdings, LLC (FPH), the primary developer of mixed-use, master-planned communities in Coastal California.

The Beckwitt Separation Agreement will become effective on July 31, 2023, if it is not revoked by Mr. Beckwitt in writing on or before July 21, 2023. The Separation Agreement provides for a payment of $20.24 million, less all applicable withholdings and deductions.

Lennar Corporation appointed Executive Chairman Stuart Miller who has worked with the company for 40 years, as a Co-Chief Executive Officer of the company to succeed Mr. Beckwitt, effective September 1, 2023. Jon Jaffe, currently a Co-Chief Executive Officer and Co-President of the company, will continue as the company’s President and Co-Chief Executive Officer, effective September 1, 2023.

Source: Freddie Mac

Mortgage rates reached their highest level during the last 7 months when rates surpassed 7%. Despite this, home prices continue to remain persistently high, primarily due to limited inventory. Homeowners that are locked into low mortgage rates, often as low as 3%, are less inclined to sell.

Home Builder Confidence Index Sees Modest Increase

The NAHB/Wells Fargo Housing Market Index (HMI) is a monthly survey that gauges the outlook of National Association of Home Builders (NAHB) members, providing valuable insights into the single-family housing market. The survey assesses the participants’ perception of market conditions for the current and future sales of new homes, as well as the level of prospective buyer traffic.

NAHB/Wells Fargo National HMI – History
   (Seasonally Adjusted)
YearJanFebMarAprMayJunJulAugSepOctNovDec
2000696864636358596060626357
2001525860595859575955464855
2002585862616161615563616263
2003626356556063656767696869
2004686666696968677067697071
2005706970677072706765686157
2006575654514642393330313333
2007353936333028242220191918
20081920202019181616171499
2009899141615171819171716
2010151715192216141313151616
2011161617161613151514171921
2012252828242829353740414547
2013474644414451565857545457
2014564646464549535559545858
2015575552565460606161656260
2016615858585860585965636369
2017676571686966646764686974
2018727170687068686767686056
2019586262636664656768717176
2020757472303758727883859086
2021838482838381807576808384
2022838179776967554946383331
202335424445505556

Source: National Association of Home Builders

A reading above 50 indicates a favorable outlook on home sales and below that threshold indicates a negative outlook. During the great recession in 2008-09, it had fallen to single digits. Last year again we started seeing a clear downtrend in the index. The index started rebounding earlier this year, entering positive territory in June for the first time in almost a year.

In June, single-family production declined due to increased construction costs and higher mortgage rates, resulting in reduced home-building activity. This, in turn, worsened affordability conditions for potential home buyers. Overall, housing starts decreased by 8% in June to a seasonally adjusted annual rate of 1.43 million units, as reported by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The number of single-family units under construction has decreased by 17% compared to the previous year, totaling 688,000. In contrast, the number of apartments under construction has reached a high of 994,000, marking the highest count since May 1973. On a regional and year-to-date basis, combined single-family and multifamily starts have declined by 13.9% in the Northeast, 19.4% in the Midwest, 11.5% in the South, and 21% in the West.

In June, overall permits decreased by 3.7% to a 1.44 million unit annualized rate. Single-family permits increased by 2.2% to 922,000 units, but are down 21.5% year-to-date. Multifamily permits declined by 12.8% to an annualized pace of 518,000 units, the lowest since October 2020. Regionally, permits are lower year-to-date by 23.4% in the Northeast, 20.8% in the Midwest, 16.2% in the South, and 23.6% in the West.

In July, builder confidence increased as low existing inventory fueled demand for new homes, despite challenges such as rising mortgage rates, higher construction costs, and limited lot availability in the industry. The July HMI survey indicated that despite the presence of higher interest rates, builders have reduced their reliance on sales incentives due to a more stable market and limited availability of resale inventory options. In July, only 22% of builders reported price cuts, showing a decline from 25% in June and 27% in May.

This renewed confidence in the index is reflected in the prices of homebuilder, some of which like Lennar are up 65% over the last year.

Second Quarter 2023 (Press Release)

In reference to Lennar’s earnings for the second quarter of 2023, Mr. Miller stated that the company observed a continued trend of the housing market stabilizing and rebounding following the Federal Reserve’s aggressive interest rate hikes.

“As consumers have come to accept a ‘new normal’ range for interest rates, demand has accelerated, leaving the market to reconcile the chronic supply shortage derived from over a decade of production deficits.”

The company reported:

  • Net earnings of $872 million
  • Deliveries of 17,074 homes
  • New orders of 17,885 homes with a dollar value of $8.2 billion
  • Backlog of 20,214 homes with a dollar value of $9.5 billion
  • Total revenues of $8.0 billion
  • Homebuilding operating earnings of $1.2 billion
  • Gross margin on home sales of 22.5%
  • The net margin on home sales of 15.8%
  • Financial Services operating earnings of $112 million
  • Multifamily operating loss of $8 million

Six Months Ended May 31, 2023, Compared To Six Months Ended May 31, 2022

  • Revenues from home sales were $13.7 billion in both the six months ended May 31, 2023, and 2022. Revenues were flat primarily because a 6% increase in the number of home deliveries was offset by a 5% decrease in the average sales price of homes delivered. New home deliveries increased to 30,733 homes in the six months ended May 31, 2023 from 29,087 homes in the six months ended May 31, 2022.
  • Gross margins on home sales were $3.0 billion, or 21.9%, in the six months ended May 31, 2023, compared to $3.9 billion, or 28.4%, in the six months ended May 31, 2022.  Selling, general and administrative expenses were $960 million in the six months ended May 31, 2023, compared to $915 million in the six months ended May 31, 2022
  • Other Ancillary Businesses: Operating loss for the Multifamily segment was $30 million in the six months ended May 31, 2023, compared to operating earnings of $6 million in the six months ended May 31, 2022

Share Repurchases

In the second quarter of 2023, the company repurchased 2 million shares of its common stock at an average price of $103.91, totaling $208 million. In the six months ending May 31, 2023, the company repurchased a total of 4 million shares for $397 million, with an average share price of $99.25.

Debt Repurchases

In the three months ending May 31, 2023, the company repurchased Senior Notes due in fiscal 2024, amounting to an aggregate principal of $158 million.

Liquidity

As of May 31, 2023, the company held $4.0 billion in cash and cash equivalents, and there were no outstanding borrowings under its $2.6 billion revolving credit facility. This indicates an available capacity of approximately $6.6 billion.

Conclusion

Lennar shares are up 65% over the past 12 months and currently trade at an all-time high.

Due to the prevailing high-interest rates, homeowners are refraining from selling their properties. The prospect of moving into a more expensive home with increased financial responsibilities, particularly at higher interest rates, poses a significant challenge. However, life must go on and over time, the tight inventory situation will likely unwind.

I believe Lennar and other homebuilders are going to face challenging headwinds in the near future if interest rates remain at these levels. Mr. Beckwitt’s departure at this juncture makes a lot of sense.

Appointments 

1. Fedex Corp (FDX): $260.26

On July 17, 2023, the Board of Directors of FedEx Corporation appointed John W. Dietrich as Chief Financial Officer–Elect of FedEx effective July 17, 2023, and Chief Financial Officer of FedEx effective August 1, 2023.

MarketCap: $65.80BAvg. Daily Volume (30 days): 2,699,965Revenue (TTM): $90.16B
Net Income Margin (TTM): 4.41%ROE (TTM): 15.57%Net Debt: $31.51B
P/E: 16.92Forward P/E: 14.90EV/EBIDTA (TTM): 9.17
P/S (TTM): 0.74P/B (TTM): 2.5252 Week Range: $139.40 – $265.60

2. Avantor Inc. (AVTR): $21.83

On July 13, 2023, Avantor, announced the appointment of R. Brent Jones as Chief Financial Officer, effective as of August 7, 2023.

MarketCap: $14.18BAvg. Daily Volume (30 days): 4,578,026Revenue (TTM): $7.34B
Net Income Margin (TTM): 8.41%ROE (TTM): 13.21%Net Debt: $5.74B
P/E: 23.06Forward P/E: 16.31EV/EBIDTA (TTM): 13.60
P/S (TTM): 1.94P/B (TTM): 2.8452 Week Range: $17.91 – $32.77

3. PTC Therapeutics (PTCT): $40.02

On July 13, 2023, the Board of Directors of PTC Therapeutics appointed Pierre Gravier as Chief Financial Officer, effective as of July 13, 2023.

MarketCap: $2.93BAvg. Daily Volume (30 days): 701,489Revenue (TTM): $770.45M
Net Income Margin (TTM): -74.15%ROE (TTM): 208.43%Net Debt: $1.17B
P/E: -5.00Forward P/E: N/AEV/EBIDTA (TTM): -13.13
P/S (TTM): 3.71P/B (TTM): N/A52 Week Range: $33.25 – $59.84

4. Ultragenyx Pharmaceutical (RARE): $43.57

On July 12, 2023, Ultragenyx Pharmaceutical announced that Howard Horn has been appointed as the Company’s Chief Financial Officer effective as of October 16, 2023.

MarketCap: $3.13BAvg. Daily Volume (30 days): 527,686Revenue (TTM): $383.89M
Net Income Margin (TTM): -187.31%ROE (TTM): -141.42%Net Cash: $600.75M
P/E: -4.31Forward P/E: N/AEV/EBIDTA (TTM): -3.78
P/S (TTM): 8.08P/B (TTM): 14.2052 Week Range: $33.36 – $56.42

5. Intapp  (INTA): $41.19

On July 11, 2023, the Board of Directors appointed David Morton to serve as Chief Financial Officer of the company, effective August 7, 2023.

MarketCap: $2.77BAvg. Daily Volume (30 days): 515,788Revenue (TTM): $331.78M
Net Income Margin (TTM): -23.97%ROE (TTM): -30.46%Net Debt: $36.99M
P/E: -32.62Forward P/E: 208.33EV/EBIDTA (TTM): -43.47
P/S (TTM): 7.82P/B (TTM): 10.4452 Week Range: $13.54 – $50.46

Departures

1.  Helios Technologies (HLIO): $64.15

On July 18, 2023, Tricia L. Fulton Chief Financial Officer of Helios Technologies notified the company of her decision to retire, effective August 8, 2023.

MarketCap: $2.11BAvg. Daily Volume (30 days): 117,969Revenue (TTM): $858.10M
Net Income Margin (TTM): 9.53%ROE (TTM): 10.59%Net Debt: $508.1M
P/E: 25.82Forward P/E: N/AEV/EBIDTA (TTM): 14.98
P/S (TTM): 2.46P/B (TTM): 2.6152 Week Range: $47.97 – $72.42

2. FedEx Corp (FDX): $260.26

On July 17, 2023, FedEx announced that Michael C. Lenz, the current CFO, will transition out of his role on July 31, 2023, and continue as a senior advisor until December 31, 2023, to ensure a smooth transition.

MarketCap: $65.80BAvg. Daily Volume (30 days): 2,699,965Revenue (TTM): $90.16B
Net Income Margin (TTM): 4.41%ROE (TTM): 15.57%Net Debt: $31.51B
P/E: 16.92Forward P/E: 14.90EV/EBIDTA (TTM): 9.17
P/S (TTM): 0.74P/B (TTM): 2.5252 Week Range: $139.40 – $265.60

3. Alignment Healthcare (ALHC): $5.63

On July 11, 2023, Mr. Richard Cross General Counsel informed the company that he plans to retire from his position effective as of September 1, 2023.

MarketCap: $1.06BAvg. Daily Volume (30 days):  917,477Revenue (TTM): $1.53B
Net Income Margin (TTM): -9.56%ROE (TTM): -56.53%Net Debt: $325.24M
P/E: -7.03Forward P/E:  N/AEV/EBIDTA (TTM): -7.92
P/S (TTM): 0.67P/B (TTM): 4.7652 Week Range: $4.88 – $19.17

4. Intapp (INTA): $41.19

On July 11, 2023, Stephen Robertson, the Chief Financial Officer of Intapp informed the company of his retirement in 2024, and that he will resign from his role as Chief Financial Officer effective August 7, 2023.

MarketCap: $2.77BAvg. Daily Volume (30 days): 515,788Revenue (TTM): $331.78M
Net Income Margin (TTM): -23.97%ROE (TTM): -30.46%Net Debt: $36.99M
P/E: -32.62Forward P/E: 208.33EV/EBIDTA (TTM): -43.47
P/S (TTM): 7.82P/B (TTM): 10.4452 Week Range: $13.54 – $50.46

5. Energy Fuels (UUUU): $6.29

On July 14, 2023, Energy Fuels announced John L. Uhrie departed from Energy Fuels and ceased to be Chief Operating Officer effective July 14, 2023

MarketCap: $1.00BAvg. Daily Volume (30 days): 1,321,259Revenue (TTM): $29.19M
Net Income Margin (TTM): 236.87%ROE (TTM): 21.37%Net Cash: $106.95M
P/E: 14.55Forward P/E: N/AEV/EBIDTA (TTM): -29.56
P/S (TTM): 34.35P/B (TTM): 2.8252 Week Range: $4.85 – $8.24

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