Stuart Miller
Executive Chairman at Lennar
Great. Good morning. Thank you and thank you all for joining this morning. I'm here in Miami joined by Jon Jaffe, our Co-CEO and President; 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 and we also have Rick Beckwitt Co-CEO and President on the line with us and he is joining us from Colorado. As usual, I'm going to give a macro and strategic Lennar overview after my introductory remarks. Rick is going to talk about market strength and land community count. John will update on supply chain production construction costs. And then as usual Diane will give detailed financial highlights and additional guidance and then we'll answer as many questions as we can and will limit to one question and one follow-up, please.
So let me begin and start by saying that we're quite pleased to announce another hard-fought and well-executed quarterly performance by the associates of Lennar. Our operating results reflect both the extraordinary focus and determination of Lennar's management and operating teams as well as the general strength in the housing market. As questions abound given geopolitical turmoil, inflationary pressures building both around the globe and domestically, and interest rates are rising the housing market remains very strong in all of our major markets. Demand trends remain strong as family formation continues to rise. As our team from around the country reviewed our weekly sales starts and closings on Monday for our regions and our divisions the unanimous view was that our sales pace ranged in each market from strong to very strong.
Buyers are seeking shelter and they are seeking shelter from inflationary pressures as scarce rentals see rents escalating and escalating housing costs can be controlled with an owned home with a fixed rate mortgage. While wages are going up so to are housing costs so with -- so with employment strong and home price as the price is rising it is best to fix these costs. Additionally, the home is ever more the control center or hub of our customers' lives and frankly geopolitical stress makes the security of home all that much more comforting. While demand is strong, supply is short and constrained.
The ability to actually build and deliver homes has been slowed by the supply chain that is all but broken by the workforce that is short in supply and the intense competition for scarce and title land assets. Therefore, the supply of homes has remained quite limited and is not prone to overbuilding. Accordingly, we're pleased to report operating performance that reflects the general strength in the housing market. Setting aside for the moment are non-cash mark-to-market gains last year and losses this year. Our operating performance is consistent and very strong. While deliveries increased 2% year-over-year to 12,538 homes. Our gross margin improved 190 basis points to 26.9% and our SG&A improved 90 basis points to 7.5%, which drove net margin to 19.4% and drove net earnings from operations to just over $800 million and almost 20% bottom line improvement from operations.
Although deliveries have been constrained by the supply chain disruption efficiency in our operations continues to drive strong bottom line improvement and very strong cash flow. Additionally, our Financial Services Group continues to perform exceptionally for the company adding $90 million of earnings, while supporting the closings of every possible home and making the closing process as Joyful as possible in the current very difficult environment. Our strong cash flow has been constructively deployed as our operations have been our primary focus.
First, with the lengthening of our cycle times by six to eight weeks over the past year, driven by supply chain disruption we have more capital invested in our inventory, as we are increasing starts and taking longer to deliver homes even as we are significantly reducing the amount of land held on our books. We are deploying more cash into shorter-term assets while generating cash from longer-term assets. Next, we're continuing to pay down debt as it comes due with the next tranche available for pay down in August, and that's $575 million that we expect to pay down from cash flow and of course, we have continued to repurchase stock with another 5.3 million shares purchased in the past quarter and another $2 billion authorized by our Board just yesterday.
With strong performance and cash flow, we have fortified our balance sheet with $1.4 billion of cash on book nothing drawn on our revolver and an 18.3 debt to total cap ratio as compared to 24% last year. We expect our results to continue to strengthen throughout the year as our already increased start pace results in more deliveries and as we use our size and scale and our Builder of Choice relationships to alleviate and resolve some of the supply chain friction. To that end, last quarter, I noted that, Jon. And Rick, our Co-CEOs have not chosen to sit idly in difficult times, but instead they went to the problem and visited each of our 38 divisions over six-week period.
Well, that was last quarter. Monitoring Jon and Rick came [Phonetic] this quarter I noted that on top of rig of regular in the field operations reviews a division offices they have jointly with Kemp Gillis our esteemed Head of offering[Phonetic] supply chain going to the problem and visited approximately 10 of our most strategic manufacturers at their offices to engage directly the problem solving process. This is just the beginning as many more trips or plan and the supply chain problem will find its way to becoming a supply chain opportunity. I'm betting on them time, focus, and attention problems are being solved and that is simply the Lennar way. Leadership matters.
So let me quickly turn back to the mark-to-market volatility that I mentioned earlier. Our total first quarter earnings in the first quarter were $503.6 million or $1.69 per diluted share, compared to first quarter 2021 earnings of $1 billion or $3.20 per diluted share. These numbers include our mark-to-market loss this quarter and gain last year at this time. Let's avoid confusion. We have made significant strategic investments in various new technology companies that are working to reshape various parts of our company and our industry. Some are disruptors and some are enhancers. All of them are core to the future of as well as the present of our core operating platform.
They have been informed change in the core that have reduced SG&A and production costs. These cost reductions have made the investment in the companies and LENX strategy extremely valuable in creating long-term shareholder value. These investments are also the tip of the spear in identifying and engaging our substantial industry-leading sustainability initiatives from solar on the rooftop to micro-grid technology across a community from water conservation to sustainable cement our LENX strategy is setting the course from Lennar's sustainable future. A number of our LENX investments have matured and become public companies and their short-term market price movements are volatile and that volatility runs through our earnings.
On the one hand this causes some confusion on both the upside and the downside. For example, in Q1 '21, we reported a $470 million mark to market profit and in Q1 of '22 this quarter, we reported $395 million mark-to-market loss. On the other hand, these investments have been stepping stones to our higher gross margins, as well as our never been lower SG&A at 7.5% in the first quarter which is now the lowest we have ever seen in the first quarter. These are non-monetary and non-operational, profits and losses and they really do not reflect the state of the housing market or the operating performance of the company within that market.
With that said, we choose not to sell the ownership in these companies just because they go public instead we are strategically engaged in the businesses, because in the businesses of these companies and because we are very enthusiastic about the future of these businesses and our LENX strategy and of course you can expect to hear a lot more about this part of our business in the future. Now, finally, let me talk briefly an update our progress on SpinCo and our focus on becoming a pure-play homebuilding company.
As noted last quarter, we filed our private letter ruling with the IRS. Since then we've taken the next step with SpinCo and filed our confidential Form 10 filing in February, so we can control the timing of the spin. We have received, since then our first round of comments from the SEC. We have also initiated the process with the NYSE, to have the shares of SpinCo listed. Nevertheless, given the choppiness of the capital markets and the work that is still being completed we're pushing our expectations for the actual execution to the third or fourth quarter of this year. We have noted before that Spin Company we'll be an asset-light asset management business that will have a limited balance sheet. Many of the assets targeted for SpinCo will be either part of the limited balance sheet of SpinCo or are currently being monetized in the form of assets under management that will be housed within the private equity verticals of SpinCo or they're being resolved and monetized in other ways.
Additionally, while we -- while we are taking more time to execute the spin, we continue to migrate assets from the Lennar balance sheet into the assets under management that will comprise SpinCo. Therefore, we are growing the management fees and returns that will define the value of the spin company. This monetization has been and will be completed over the next year or so and the cash proceeds will be deployed in Lennar to fortify the balance sheet and/or to continue to buy-back stock on an opportunistic basis. As a reminder, our three core verticals of SpinCo have been identified and business plan and are already growing AUM and fee generation.
They are multifamily, single family for rent, and land strategies. Each of these verticals already have raised and are continuing to grow third-party capital and our active asset managers. LMC, our multifamily platform had almost $10 billion of AUM at the end of 2021 and as of the end of our first quarter had approximately $10.7 billion of gross capital under management and is very close to our first closing for our third fund. LSFR our single-family for rent platform has grown from approximately $1.2 billion of assets deployed at the end of '21 to approximately $1.9 billion deployed as of the end of our first quarter and our land strategies platform, which is still being refined for SpinCo expects to have $4 to $5 billion of assets under management at the time of the spin.
As I've noted in the past, the remaining Lennar Corporation will drive higher returns on our assets and equity base and the spend will not result in the material reduction of either our bottom line or our earnings per share. So let me wrap up and conclude by saying that we are extremely well-positioned financially, organizationally, and technologically to thrive and grow in this evolving housing market. As I said earlier, we expect our results to strengthen throughout 2022. We are picking up steam and we are picking up confidence. We recognize that interest rates are rising and inflation is a legitimate threat. We also know the difficulties in the supply chain present challenges for Lennar and for the industry and that land and labor are in short supply. But we also recognize that the economy remains strong with wages rising and the housing -- and housing is in short supply across the country. Strategically, we remain focused on orderly targeted growth with our sales pace tightly matched with our pace of production.
We focus on gross margin by selling in step with production while controlling costs and reducing our SG&A and therefore maximizing our net -- our net margin. As we look to the remainder of 2022 we expect continued strength in the market and double-digit growth for the -- for the company. As noted in our press release, we are projecting -- projecting 16,000 to 16,300 deliveries in the second quarter at 28% to 28.25% margin and we are now projecting 68,000 deliveries for year-end at 27.25% to 28% margin for the year. At this pace, we will have a very strong bottom line and a very strong cash flow with the projected spin-off in the second half of the year and Lennar we'll have another record year. So with that let me turn it over to Rick.
