Financial Performance - Home closing volume decreased by 6.5% to 3,685 homes in Q3 2025, down from 3,942 homes in Q3 2024, contributing to a revenue decline of 11.8% to $1.4 billion[127] - Average sales price (ASP) for closings fell by 5.6% to $379.7 thousand in Q3 2025, compared to $402.3 thousand in Q3 2024, impacting gross margin which declined by 570 basis points to 19.1%[127] - Home closing gross profit decreased to $267.0 million in Q3 2025 from $392.6 million in Q3 2024, reflecting increased costs and lower sales prices[127] - Total home closing revenue for Q3 2025 was $1.4 billion, an 11.8% decrease from $1.6 billion in Q3 2024[142] - For the nine months ended September 30, 2025, net income was $369.0 million, down from $613.5 million in the same period of 2024, reflecting lower revenue and profitability[129] Home Orders and Backlog - Home orders increased by 3.5% to 3,636 in Q3 2025, driven by a 14.3% rise in average active communities, although the order pace decreased to 3.8 net homes per month[130] - The cancellation rate rose to 11% in Q3 2025 from 10% in Q3 2024, with a backlog of 1,699 homes valued at $670.0 million, down 25.6% year-over-year[130] - Home order volume for Q3 2025 increased by 3.5% to 3,636 homes compared to 3,512 homes in Q3 2024[142] - The order backlog at September 30, 2025 was valued at $670.0 million, down 28.1% from $931.7 million at September 30, 2024[139] - Homes in backlog decreased by 25.6% to 1,699 units at September 30, 2025, compared to 2,284 units at the same date in 2024[139] Regional Performance - The West Region saw a 29.2% decrease in home closing revenue to $420.7 million in Q3 2025, down from $594.5 million in Q3 2024[144] - The Central Region's home order volume increased by 8.9% to 1,289 homes in Q3 2025, while home closing revenue decreased by 8.6% to $443.1 million[146] - The East Region's home order volume increased by 17.4% to 1,480 homes in Q3 2025, despite a decrease in ASP by 6.9%[142] - In the East Region, home closings increased by 12.1% to 1,542 homes, generating $535.6 million in revenue, compared to $506.5 million in the prior year[149] - The East Region's cancellation rate increased to 12% from 10% in the prior year, but remains below the historical company average[149] Cost and Expenses - Commissions and other sales costs increased by $1.8 million to $99.7 million, representing 7.1% of home closing revenue for the three months ended September 30, 2025, up 90 basis points from the prior year[164] - General and administrative expenses decreased by $7.4 million to $51.8 million for the three months ended September 30, 2025, maintaining a percentage of home closing revenue at 3.7%[165] - Other income, net, was $8.1 million for the three months ended September 30, 2025, down from $10.7 million in the prior year, primarily due to lower interest income on cash balances[167] Tax and Financial Ratios - The effective income tax rate increased to 22.6% in Q3 2025 from 21.6% in Q3 2024, due to fewer homes qualifying for energy tax credits[127] - The debt-to-capital ratio stood at 25.7% at the end of Q3 2025, indicating a strong balance sheet after issuing $500.0 million in senior notes[133] - The net debt-to-capital ratio was 17.2% as of September 30, 2025, compared to 11.7% at the end of 2024[185] - The leverage ratio stood at 15.6% as of September 30, 2025, well below the maximum covenant limit of 60%[189] Cash Flow and Financing - Net cash used in operating activities for the nine months ended September 30, 2025, was $125.4 million, compared to $128.0 million in the prior year[181] - Net cash provided by financing activities totaled $243.8 million for the nine months ended September 30, 2025, primarily from the issuance of $492.1 million in Senior Notes[183] - As of September 30, 2025, the company had $728.9 million in cash and cash equivalents and $825.9 million available under the Credit Facility, totaling approximately $1.6 billion in available capacity[172] Strategic Goals and Market Position - The company aims to maintain a top 5 market position and is focused on increasing homeowner satisfaction through energy-efficient homes and improved buying experiences[133] - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing[177] - The Board of Directors approved a quarterly cash dividend of $0.43 per share for Q3 2025, compared to $0.375 per share in Q3 2024, totaling $1.29 per share for the nine months ended September 30, 2025, versus $1.125 per share in the same period of 2024[186]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [18][24] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][24] - Adjusted diluted EPS for Q3 2025 was $1.55, compared to $2.67 in Q3 2024, marking a 48% year-over-year decrease [24][25] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, despite a 7% decrease in average absorption pace [4][13] - The cancellation rate was 11%, lower than the historical average, attributed to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211%, with more than 60% of orders closing in the same quarter [6][16] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [15] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives [14] - The company moderated starts to approximately 3,000 homes, a 19% decrease year-over-year, to align with softer demand [16] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [5][9] - A 100% spec strategy allows flexibility to adjust starts based on real-time local demand, with a goal of maintaining a four to six months' supply of specs [10][12] - The company reduced land acquisitions by 70% year-over-year, indicating a strategic shift to optimize asset management [11] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence remains low, impacting demand despite recent Fed rate cuts and lower mortgage rates [8][9] - The long-term outlook for the housing market is optimistic due to favorable demographic trends and an undersupply of affordable homes [9] - Management anticipates that the incentive burden will taper off as market conditions stabilize, allowing for improved margins in the future [9][22] Other Important Information - The company returned $85 million to shareholders in Q3 2025, an increase from $57 million in Q3 2024, and repurchased over 772,000 shares for $55 million [27][28] - The balance sheet remains healthy with cash of $729 million and a net debt-to-capital ratio of 17.2% [26] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged that while ROE compression is influenced by market conditions, there are opportunities to optimize inventory turnover and cash generation moving forward [34][36] Question: Community count growth outlook in 2026 - Management indicated that new communities would not significantly impact margins but would help leverage fixed costs better [38][41] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions to exceed Q3 levels but anticipates an increase in starts aligned with community count growth [47][46] Question: Buyer psychology and market share - Management believes the ability to close within 60 days enhances their competitive position, potentially gaining market share from peers [78]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [18][24] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][24] - Adjusted diluted EPS for Q3 2025 was $1.55, while diluted EPS decreased 48% year-over-year to $1.39 from $2.67 in 2024 [24][25] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, despite a 7% decrease in average absorption pace [4][13] - The cancellation rate remained at 11%, lower than the historical average, due to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211% in Q3, with 3,685 home deliveries [6][16] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [15] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives and discounts [14] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [5][8] - A 100% spec strategy allows flexibility to adjust starts based on local demand, with a 19% year-over-year reduction in starts to align with market conditions [10][16] - The company aims to optimize its community count and land spend while maintaining a strong balance sheet, returning $85 million to shareholders in Q3 [12][26] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence has declined, impacting demand, but remains optimistic about long-term housing market trends due to favorable demographics and undersupply of affordable homes [8][9] - The company anticipates a steady community count from Q3 to Q4, with expectations for double-digit growth in community count for 2026 [14][30] - Management highlighted the importance of buyer psychology and the potential for rapid changes in the sales environment with improved consumer confidence [70][71] Other Important Information - The company reduced land acquisition by 70% year-over-year, acquiring about 5,800 fewer lots, while still achieving community count growth [11][29] - The balance sheet remains healthy with $729 million in cash and a net debt-to-capital ratio of 17.2% [26] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged the need to optimize inventory turnover and spec strategy, indicating potential for improved cash generation and returns as the strategy matures [34][35] Question: Community count growth outlook in 2026 - Management indicated that new communities would not significantly impact margins but would help leverage fixed costs better [38][39] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions to exceed Q3 levels, focusing instead on optimizing profitability rather than chasing volume [47][49] Question: Buyer psychology and market share - Management believes the ability to close within 60 days enhances their competitive position, potentially gaining market share from peers [78]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [19][25] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][20] - Adjusted diluted EPS for Q3 2025 was $1.55, while diluted EPS decreased 48% year-over-year to $1.39 from $2.67 in 2024 [25][26] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, although average absorption pace decreased by 7% [4][13] - The cancellation rate remained at 11%, lower than the historical average, due to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211% in Q3, with over 60% of orders closing within the quarter [5][17] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and the Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [16] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives and discounts [14] - The company moderated starts to approximately 3,000 homes, a 19% decrease year-over-year, to align with the softer demand environment [17] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [4][8] - A 100% spec strategy allows flexibility to adjust starts based on real-time local demand, with a goal to maintain a four to six months' supply of specs [10][12] - The company reduced land acquisition by 70% year-over-year, acquiring about 5,800 fewer lots, while still achieving community count growth [11][27] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence remains low, impacting demand despite favorable macroeconomic conditions like the Fed's rate cut [8][9] - The long-term outlook for the housing market is optimistic due to favorable demographic trends and an undersupply of affordable homes [9][10] - Management anticipates that the incentive burden will taper off as market conditions stabilize, allowing for improved margins in the future [9][23] Other Important Information - The company returned $85 million to shareholders in Q3 2025, an increase from $57 million in the same quarter of 2024 [28] - The balance sheet remains healthy with cash of $729 million and a net debt-to-capital ratio of 17.2% [27] - The company plans to maintain a steady community count from Q3 to Q4, projecting mid-double-digit year-over-year growth [14][31] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged that while ROE compression is influenced by market conditions, there are opportunities to optimize inventory turnover and improve cash generation [34][36] Question: Community count growth outlook in 2026 - New communities are expected to come on at margins similar to current levels, with no significant headwind or tailwind anticipated from community growth [39][40] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions per store to exceed Q3 levels, focusing instead on optimizing profitability rather than chasing volume [47][49] Question: Clarification on incentives and margin outlook - Management clarified that while margins are expected to decline slightly in Q4, they are focused on clearing older spec inventory to improve overall margin profiles [56][59] Question: Share repurchase strategy moving forward - Management indicated that the current share repurchase cadence is likely the floor, with potential for increased repurchases based on market conditions [62][63] Question: Consumer confidence and sales environment - Management believes that improvements in consumer confidence could lead to a quick change in the sales environment, allowing the company to capitalize on its move-in-ready inventory [66][68]

THIRD QUARTER 2025 ANALYST CONFERENCE CALL OCTOBER 29, 2025 Safe Harbor The information included in this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general and our future results including our fourth quarter 2025 projected home closing volume, home closing revenue, home closing gross margin, effective tax rate and diluted EPS. All historical 2024 share and per sh ...

Core Insights - Meritage Homes reported $1.42 billion in revenue for Q3 2025, a year-over-year decline of 10.9% and below the Zacks Consensus Estimate of $1.52 billion, resulting in a surprise of -6.85% [1] - The company's EPS for the quarter was $1.39, down from $2.67 a year ago, with an EPS surprise of -18.71% compared to the consensus estimate of $1.71 [1] Financial Performance Metrics - Total homes ordered were 3,636, slightly below the nine-analyst average estimate of 3,716 [4] - Average sales price for home closing revenue was $380.00, compared to the nine-analyst average estimate of $390.27 [4] - Order backlog totaled 1,699, exceeding the average estimate of 1,677 based on nine analysts [4] - Homes closed totaled 3,685, below the average estimate of 3,787 from nine analysts [4] - Order backlog average sales price was $394.00, lower than the $407.27 average estimate based on seven analysts [4] - Order backlog value was $670.01 million, compared to the estimated $724.95 million from six analysts [4] - Active communities at the end of the quarter totaled 334, above the average estimate of 316 from six analysts [4] - Average sales price for home orders was $389.00, compared to the five-analyst average estimate of $395.70 [4] - Total closing revenue from homebuilding was $1.42 billion, below the average estimate of $1.52 billion from ten analysts, representing a year-over-year change of -10.9% [4] - Home closing revenue was $1.4 billion, compared to the ten-analyst average estimate of $1.51 billion, reflecting a year-over-year change of -11.8% [4] - Land closing revenue was $16.07 million, significantly above the nine-analyst average estimate of $5.6 million, showing a year-over-year increase of +502.9% [4] - Financial services revenue was $8.46 million, slightly above the nine-analyst average estimate of $8.4 million, with a year-over-year change of +4.8% [4] Stock Performance - Meritage shares returned -1.8% over the past month, while the Zacks S&P 500 composite increased by +3.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Meritage Homes reported quarterly earnings of $1.39 per share, missing the Zacks Consensus Estimate of $1.71 per share, and showing a significant decline from $2.67 per share a year ago, indicating an earnings surprise of -18.71% [1][2] Financial Performance - The company posted revenues of $1.42 billion for the quarter ended September 2025, which was 6.85% below the Zacks Consensus Estimate and down from $1.59 billion in the same quarter last year [2] - Over the last four quarters, Meritage has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Meritage shares have declined approximately 7.2% since the beginning of the year, contrasting with the S&P 500's gain of 16.9% [3] - The current Zacks Rank for Meritage is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.80 on revenues of $1.6 billion, and for the current fiscal year, it is $7.26 on revenues of $6.1 billion [7] - The trend of earnings estimate revisions for Meritage was mixed ahead of the earnings release, which could change following the recent report [6] Industry Context - The Building Products - Home Builders industry, to which Meritage belongs, is currently ranked in the bottom 24% of over 250 Zacks industries, indicating potential challenges ahead [8] - Beazer Homes, another company in the same industry, is expected to report a significant decline in earnings, with a projected EPS of $0.80, reflecting a year-over-year change of -52.7% [9]

Financial Performance - Homes closed in Q3 2025 totaled 3,685 units, a 7% decrease from 3,942 units in Q3 2024[4] - Home closing revenue for Q3 2025 was $1.4 billion, down 12% from $1.6 billion in Q3 2024[4] - Average sales price for closings in Q3 2025 was $380,000, a 5% decrease from $402,000 in Q3 2024[4] - Net earnings for Q3 2025 were $99 million ($1.39 per diluted share), a 49% decrease from $196 million ($2.67 per diluted share) in Q3 2024[4] - Home closing gross margin for Q3 2025 was 19.1%, a decrease of 570 basis points from 24.8% in Q3 2024[4] - Total closing revenue for the nine months ended September 30, 2025, was $4,396,914, down 7% from $4,750,588 in 2024[19] - Net earnings for the three months ended September 30, 2025, were $99,297, a decline of 49% compared to $195,966 in 2024[17] - Earnings per common share for the three months ended September 30, 2025, were $1.40, down 48% from $2.70 in 2024[18] - Adjusted net earnings for the nine months ended September 30, 2025, were $384,223, a decrease from $616,413 in the same period of 2024, with diluted earnings per share dropping to $5.13 from $8.36[37] Orders and Backlog - Home orders increased by 4% year-over-year to 3,636 units in Q3 2025, with a home order value of $1.4 billion[4] - Ending backlog units decreased by 26% year-over-year to 1,699 units, with a backlog value of $670 million, down 28%[4] - Homes ordered in Q3 2025 totaled 3,636 with a value of $1,415,089, compared to 3,512 homes ordered valued at $1,425,610 in Q3 2024, indicating a slight increase of 3.5% in homes ordered but a decrease of 0.7% in total value[28] - The order backlog as of September 30, 2025, was 1,699 homes valued at $670,007, down from 2,284 homes valued at $931,656 as of September 30, 2024, reflecting a decrease of 25.6% in homes and 28.1% in value[30] Shareholder Returns - The company returned $85 million to shareholders through dividends and share repurchases in Q3 2025, totaling nearly $237 million year-to-date[7] Cash and Assets - Cash and cash equivalents at September 30, 2025, totaled $729 million, reflecting an increase from $652 million at December 31, 2024[12] - Total assets as of September 30, 2025, were $7,758,510, an increase from $7,162,654 as of December 31, 2024[23] - Cash and cash equivalents rose to $728,937 as of September 30, 2025, compared to $651,555 at the end of 2024[23] Operational Metrics - The company reported a total cost of closings of $1,148,254 for the three months ended September 30, 2025, a decrease of 4% from $1,195,204 in 2024[17] - The company experienced a significant increase in land closing revenue, which rose by 503% to $16,068 for the three months ended September 30, 2025, from $2,665 in 2024[17] - The total number of active communities as of September 30, 2025, was 334, an increase from 278 in the same period of 2024, showing a growth in operational capacity[30] Debt and Financing - The debt-to-capital ratio increased to 25.7% as of September 30, 2025, compared to 20.6% at the end of 2024, indicating a rise in leverage[37] - Capitalized interest at the end of Q3 2025 was $71,201, up from $53,731 at the end of Q3 2024, indicating increased financing costs associated with homebuilding[32] Tax and Effective Rate - The company reported an effective income tax rate of 22.6% for Q3 2025, slightly higher than the 21.6% reported in Q3 2024[37] Company Overview - Meritage Homes Corporation is the fifth-largest public homebuilder in the U.S., focusing on energy-efficient and affordable homes across multiple states[39]

Core Insights - Meritage Homes Corporation reported a challenging third quarter for 2025, with significant declines in home closing revenue and net earnings compared to the previous year [4][6][10]. Financial Performance - Homes closed in Q3 2025 totaled 3,685 units, a decrease of 7% from 3,942 units in Q3 2024 [2]. - Home closing revenue for Q3 2025 was $1.4 billion, down 12% from $1.6 billion in Q3 2024 [2][6]. - The average sales price for homes closed in Q3 2025 was $380,000, a 5% decrease from $402,000 in Q3 2024 [2][6]. - Net earnings for Q3 2025 were $99 million ($1.39 per diluted share), a 49% decrease from $196 million ($2.67 per diluted share) in Q3 2024 [2][8]. - For the first nine months of 2025, net earnings were $369 million ($5.13 per diluted share), down 40% from $614 million ($8.36 per diluted share) in the same period of 2024 [2][8]. Operational Highlights - The company ended Q3 2025 with a backlog of 1,699 homes, a decrease of 26% from 2,284 homes at the end of Q3 2024 [2][6]. - The average sales price of homes in backlog was $394,000, down 3% from $408,000 in Q3 2024 [2][6]. - The company achieved a backlog conversion rate of 211%, with nearly 60% of Q3 closings coming from intra-quarter sales [5]. Strategic Initiatives - Meritage Homes increased its community count to 334, a 20% year-over-year increase, indicating a focus on expanding its market presence [4][10]. - The company returned $85 million to shareholders through cash dividends and share repurchases in Q3 2025, totaling nearly $237 million for the first nine months of the year [5][11]. - Land acquisition and development spending was reduced to $528 million in Q3 2025, down from $617 million in Q3 2024, reflecting a strategic response to market conditions [11]. Guidance and Outlook - For Q4 2025, the company expects home closing volume between 3,800 and 4,000 units, with revenue projected at $1.46 to $1.54 billion [10]. - The anticipated home closing gross margin for Q4 2025 is between 19% and 20% [10].

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