It has been about a month since the last earnings report for Meritage Homes (MTH) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Meritage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.Meritage Ho ...

Core Points - Meritage Homes Corporation has declared a quarterly dividend of $0.43 per share, payable on September 30, 2025, to shareholders of record as of September 16, 2025 [1] - The Board of Directors has approved a $500 million increase to the Company's share repurchase authorization [1] Company Overview - Meritage Homes is the fifth-largest public homebuilder in the U.S., based on homes closed in 2024, offering energy-efficient and affordable entry-level and first move-up homes [2] - The Company's operations span across multiple states including Arizona, California, Colorado, Utah, Tennessee, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, and South Carolina [2] Historical Performance and Recognition - Over its 40-year history, Meritage has delivered more than 200,000 homes and is known for its distinctive style, quality construction, and award-winning customer experience [3] - The Company is recognized as an industry leader in energy-efficient homebuilding, having received multiple awards from the U.S. Environmental Protection Agency, including the ENERGY STAR® Partner of the Year for Sustained Excellence Award [3]

Company Analysis - Meritage Homes Corporation (NYSE: MTH) has been downgraded to a hold rating due to weak demand and ineffective incentives [1] - The current risk-reward scenario for MTH is considered unattractive [1] Investment Approach - The investment strategy encompasses fundamental, technical, and momentum investing, leveraging the strengths of each approach [1] - The purpose of sharing insights on Seeking Alpha is to track investment performance and connect with like-minded investors [1]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements show increased assets and liabilities, but a decline in net earnings and diluted EPS, with cash flow from operations being a net use [Unaudited Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets increased to $7.76 billion by June 30, 2025, driven by cash and real estate, while liabilities also grew due to senior notes Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $930,463 | $651,555 | | Real estate | $5,963,674 | $5,728,775 | | **Total assets** | **$7,756,369** | **$7,162,654** | | **Liabilities** | | | | Senior and convertible senior notes, net | $1,801,609 | $1,306,535 | | **Total liabilities** | **$2,487,195** | **$2,021,081** | | **Total stockholders' equity** | **$5,269,174** | **$5,141,573** | [Unaudited Consolidated Income Statements](index=4&type=section&id=Unaudited%20Consolidated%20Income%20Statements) Both quarterly and year-to-date total closing revenue and net earnings declined significantly compared to the prior year Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total closing revenue | $1,623,986 | $1,693,738 | $2,981,511 | $3,162,139 | | Total closing gross profit | $340,609 | $439,506 | $639,424 | $817,471 | | Net earnings | $146,879 | $231,555 | $269,685 | $417,571 | | Diluted EPS | $2.04 | $3.15 | $3.73 | $5.68 | [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities used cash, while financing activities provided significant cash, primarily from new senior note issuance, leading to a net increase in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(28,875) | $(36,017) | | Net cash used in investing activities | $(21,610) | $(19,639) | | Net cash provided by financing activities | $329,393 | $127,350 | | **Net increase in cash** | **$278,908** | **$71,694** | | **Cash and cash equivalents, end of period** | **$930,463** | **$992,921** | [Notes to Unaudited Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Key notes include a stock split, segment realignment, new senior note issuance, share repurchases, dividend payments, and an increased effective tax rate - A **two-for-one stock split** was effective on January 2, 2025, with all share and per-share amounts retroactively adjusted[20](index=20&type=chunk) - Effective January 1, 2025, the Tennessee homebuilding operating segment was **reclassified** from the East to the Central reporting segment[21](index=21&type=chunk)[96](index=96&type=chunk) - In March 2025, the company issued **$500.0 million of 5.650% senior notes** due 2035[64](index=64&type=chunk) - The **effective tax rate increased to 23.6%** from 21.4% due to fewer homes qualifying for energy-efficient tax credits[87](index=87&type=chunk) - Subsequent to quarter end, the company **extended its credit facility's maturity date to July 9, 2030**[111](index=111&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses navigating challenging market conditions with a focus on affordable homes and incentives, leading to increased closings but reduced revenue and compressed gross margins [Overview and Outlook](index=28&type=section&id=Overview%20and%20Outlook) The company navigated challenging Q2 2025 market conditions by focusing on affordable, move-in ready homes and incentives, despite elevated land costs - The company faced a tough macroeconomic backdrop in Q2 2025, including **elevated mortgage rates** and **diminished consumer confidence**[116](index=116&type=chunk) - The company's strategy involves offering **affordable, move-in ready homes** with a 60-day closing commitment and using **financing incentives**[116](index=116&type=chunk) - **Elevated land costs** negatively impacted margins, partially offset by normalized construction cycle times and material costs[117](index=117&type=chunk) [Operating Results Analysis](index=31&type=section&id=Operating%20Results%20Analysis) Q2 2025 saw a decline in home closing revenue and gross margin despite increased closings, driven by lower average sales prices and higher incentives Q2 2025 vs Q2 2024 Operating Metrics | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Homes Closed | 4,170 | 4,118 | 1.3% | | Home Closing Revenue | $1,615.7M | $1,693.7M | (4.6)% | | Home Orders | 3,914 | 3,799 | 3.0% | | Home Closing Gross Margin | 21.1% | 25.9% | (480 bps) | | Cancellation Rate | 10% | 10% | 0% | - The backlog decreased **35.6% to 1,748 homes** due to a significantly higher **backlog conversion rate of 208%**[122](index=122&type=chunk)[131](index=131&type=chunk) - The decline in home closing gross margin was attributed to **increased financing incentives**, **higher lot costs**, and **$4.2 million in terminated land contract charges**[147](index=147&type=chunk) - Commissions and other sales costs increased to **6.7% of home closing revenue** due to higher broker rates and spec home maintenance costs[149](index=149&type=chunk)[151](index=151&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with $1.7 billion in available capacity, despite an increased debt-to-capital ratio, and remained in compliance with all debt covenants - At June 30, 2025, the company had approximately **$1.7 billion of total available liquidity**, including **$930.5 million in cash**[159](index=159&type=chunk) Capital Structure Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Debt-to-capital | 25.8% | 20.6% | | Net debt-to-capital (Non-GAAP) | 14.6% | 11.7% | - The company was in **compliance with all financial covenants**, maintaining a leverage ratio of **12.7%** against a requirement of less than 60%[174](index=174&type=chunk)[175](index=175&type=chunk) - During the first six months of 2025, the company paid **dividends totaling $0.86 per share**[173](index=173&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure, with fixed-rate notes mitigating financial statement risk, but variable-rate credit facility borrowings posing a risk - The company's primary market risk exposure is from **interest rates**[178](index=178&type=chunk) - All outstanding senior and convertible senior notes, totaling **$1.8 billion**, bear **fixed rates**, mitigating financial statement risk from interest rate changes[178](index=178&type=chunk) - The company's Credit Facility has **variable borrowing rates**, creating exposure to interest rate changes on outstanding balances[178](index=178&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's **disclosure controls and procedures were effective** at a reasonable assurance level as of June 30, 2025[179](index=179&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, with management believing potential losses are not material and existing reserves are sufficient - The company is involved in **routine legal proceedings**, with most exposure expected to be covered by subcontractor obligations and insurance[109](index=109&type=chunk) - Management believes no pending legal or warranty matters will have a **material adverse impact** beyond existing reserves as of June 30, 2025[109](index=109&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - There have been **no material changes** in the company's risk factors as previously disclosed in its Annual Report on Form 10-K[184](index=184&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 674,124 shares for $45.4 million during Q2 2025, with $219.1 million remaining available under the repurchase program Q2 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 145,965 | $67.88 | | May 2025 | 528,159 | $66.44 | | June 2025 | — | $— | | **Total Q2** | **674,124** | **N/A** | - As of June 30, 2025, **$219.1 million was available** for future repurchases under the authorized program[186](index=186&type=chunk) [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Executive officers adopted Rule 10b5-1 trading arrangements in Q2 2025 to cover taxes on equity award vesting in February 2026 - During Q2 2025, several executive officers, including the CEO and CFO, adopted **Rule 10b5-1 trading arrangements**[188](index=188&type=chunk) - The arrangements aim to sell shares to cover taxes due on **equity awards vesting in February 2026**[188](index=188&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2025, home closing revenue was $1.6 billion, a 5% decrease year-over-year despite a 1% increase in closing volume, primarily due to increased utilization of financing incentives [24] - Adjusted home closing gross margin was 21.4%, down from 25.9% in Q2 2024, reflecting higher lock costs and increased financing incentives [25][30] - Diluted EPS decreased by 35% year-over-year to $2.04 from $3.15 in Q2 2024 [30] Business Line Data and Key Metrics Changes - The company secured orders for 3,914 homes in Q2 2025, with an average absorption pace of 4.3 net sales per month [6][15] - Home deliveries totaled 4,170 homes, with backlog conversion exceeding 200% [7][21] - The cancellation rate remained at 10%, lower than historical averages, attributed to a 60-day closing commitment [15] Market Data and Key Metrics Changes - The Central Region had the highest average absorption pace of 5.2, followed by the East at 4.1 and the West at 3.9 [19] - Demand was strong in markets like Arizona, Dallas, Houston, and Southern California, while Florida and Colorado faced challenges due to increased existing inventory [19] Company Strategy and Development Direction - The company focuses on move-in ready inventory and financing incentives to enhance competitiveness in a challenging market [6][10] - An agile business model allows the company to optimize land strategy and community count, with a target of double-digit growth in community count by year-end [10][18] - The company is committed to maintaining a strong balance sheet while returning cash to shareholders through share buybacks and increased dividends [34][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that home buying demand has softened due to rising mortgage rates and consumer hesitancy, but remains optimistic about long-term industry trends [8][9] - The company expects a slower sales pace in Q3 due to seasonal trends but anticipates a pickup in demand in Q4 [18][106] - Management emphasized the importance of maintaining flexibility in operations and capital allocation to navigate economic transitions [39] Other Important Information - The company terminated approximately 1,800 land deals that no longer fit its criteria in Q2 2025 [13][36] - The effective income tax rate increased to 23.9% in Q2 2025, reflecting fewer homes qualifying for energy tax credits [30] Q&A Session Summary Question: Absorption rates on new communities - Management reported that absorption rates have trended well, achieving 4.3 net sales per month from newly opened communities [43] Question: Community count growth expectations - Management expects double-digit growth in community count by year-end, with a solid pipeline for 2026 [45][46] Question: Volume outlook for the remainder of the year - Management indicated that Q3 is expected to be one of the lowest volume quarters due to closed spring demand, but they have the inventory to achieve projected numbers if market conditions cooperate [54][55] Question: Cash capital allocation and share buybacks - Management is considering accelerating share buybacks due to reduced land spend, indicating a rebalancing of capital allocation [56][59] Question: Gross margin expectations - Management noted that Q3 gross margin is expected to decline due to lost leverage from lower volume, with potential recovery in Q4 depending on market conditions [80][82] Question: Land cost inflation and development costs - Management observed that the land market is slowing, with potential for cost savings from rebidding land development jobs, but significant reductions in land prices are not expected until 2026 [87][88]

Financial Data and Key Metrics Changes - In Q2 2025, home closing revenue was $1.6 billion, a 5% decrease year-over-year despite a 1% increase in closing volume, primarily due to increased financing incentives [22][30] - Adjusted home closing gross margin was 21.4%, down from 25.9% in Q2 2024, reflecting higher lock costs and increased use of financing incentives [22][27] - Diluted EPS decreased by 35% year-over-year to $2.04 from $3.15 in Q2 2024 [27][28] Business Line Data and Key Metrics Changes - The company secured orders for 3,914 homes in Q2 2025, with a strong average absorption pace of 4.3 net sales per month [5][13] - Home deliveries totaled 4,170 homes, with backlog conversion exceeding 200% [5][19] - The cancellation rate remained at 10%, lower than historical averages, attributed to a 60-day closing commitment [13][27] Market Data and Key Metrics Changes - The Central Region had the highest average absorption pace of 5.2, followed by the East at 4.1, and the West at 3.9 [17] - Demand was strong in markets like Arizona, Dallas, Houston, and Southern California, while Florida and Colorado faced challenges due to increased existing inventory [17][18] - The average selling price (ASP) on orders decreased by 5% year-over-year to $387,000 due to greater utilization of rate buy-down financing incentives [14][22] Company Strategy and Development Direction - The company focuses on move-in ready inventory and financing incentives to enhance competitiveness in a challenging market [5][8] - An agile business model allows the company to optimize operations and land strategy on a market-by-market basis [11][12] - The company aims for double-digit year-over-year growth in community count, with plans for further expansion in the second half of the year [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that home buying demand has softened due to increased mortgage rates and consumer hesitancy [6][27] - Despite current challenges, management remains optimistic about long-term industry outlook due to favorable demographic trends [7][8] - The company is adjusting its capital allocation strategy to balance land spending and shareholder returns [30][32] Other Important Information - The company reduced land acquisition and development spending by 12% year-over-year to $509 million in Q2 2025 [30] - Share buybacks totaled $45 million in Q2 2025, with a commitment to continue repurchasing shares opportunistically [32][33] - The company maintained a healthy balance sheet with cash of $930 million and no drawn credit facility [29][30] Q&A Session Summary Question: Absorption rates on new communities - Management reported that absorption rates have trended well, with new communities meeting expectations [41] Question: Community count growth expectations - Management expects double-digit growth in community count, with a balanced flow between Q3 and Q4 [43][44] Question: Volume outlook for the remainder of the year - Management indicated that Q3 is expected to be one of the lowest volume quarters due to closed spring demand, but they have the inventory to achieve projected numbers [51] Question: Cash capital allocation and buyback acceleration - Management confirmed plans to accelerate share buybacks due to reduced land spending, balancing cash utilization for new specs [54][56] Question: Gross margin expectations - Management noted that the decline in gross margin is primarily due to lost leverage in Q3, with expectations for recovery in Q4 depending on market conditions [76][81]

Financial Performance - Home closing revenue decreased by 5% to $1616 million in 2Q25 compared to $1694 million in 2Q24[29] - Home closing gross profit decreased by 22% to $341 million in 2Q25 compared to $440 million in 2Q24[29] - Home closing gross margin decreased by 480 bps to 211% in 2Q25 compared to 259% in 2Q24[29] - Diluted EPS decreased by 35% to $204 in 2Q25 compared to $315 in 2Q24[29] Sales and Community - Net sales orders increased by 3% year-over-year[15] - The company achieved a 2Q25 average absorption pace of 43[20] - Ending community count at June 30 2025 was 312 the highest in company history[20] Land and Inventory - Total lots controlled were 81912[36] - The company reduced land spend to $509 million[42] - 2Q25 specs per community translates to 5 months supply in line with the company's 4-6 months target[27] Capital Allocation - The company returned $76 million of cash to shareholders in 2Q25[35] - Land spend accounted for 87% of the $585 million total capital allocation spend[34]

Core Viewpoint - Meritage Homes reported Q2 2025 earnings that exceeded analyst expectations, but both revenue and net earnings declined significantly year-over-year, indicating challenges in the housing sector despite operational progress [1][8]. Financial Performance - GAAP earnings per share (EPS) for Q2 2025 were $2.04, surpassing estimates of $1.97, but down 35.2% from $3.15 in Q2 2024 [2][8]. - Revenue reached $1.62 billion, exceeding the estimate of $1.58 billion, but decreased by 4.6% from $1.694 billion in the same quarter last year [2][8]. - Net earnings fell to $147 million, a 36.5% decline from $232 million in Q2 2024 [2][8]. - Home closing gross margin decreased to 21.1%, down from 25.9% in Q2 2024, reflecting increased costs and financing incentives [2][7]. Operational Highlights - The company delivered 4,170 homes in Q2 2025, a 1% increase from the previous year, but total revenue from closings dropped by 4% due to a 6% decline in average sales price (ASP) to $387,000 [5][6]. - New orders increased by 3% in units, but order value decreased by 2%, with ASP on orders falling by 5% [6]. - The number of homes in backlog fell by 36% to 1,748 units, with total backlog value down 37% to $695 million [6]. Business Strategy - Meritage Homes focuses on affordable, energy-efficient homes, utilizing a speculative building strategy to reduce sale-to-close times [3][4]. - Recent priorities include expanding community footprint, maintaining a robust land pipeline, and streamlining construction processes [4][10]. - The company aims to control costs and cycle times while responding to volatile mortgage rates and shifting consumer sentiment [4][14]. Market Position and Community Development - As of Q2 2025, Meritage operated 312 active communities, a 9% increase from the previous year, and controlled approximately 81,900 lots for future development [10]. - Land acquisition and development spending was reduced to $509 million, with a revised full-year target of $2.0 billion [10]. Liquidity and Capital Returns - The company maintained strong liquidity with $930 million in cash, supported by a $492 million senior note issuance [12]. - Capital returns to shareholders totaled $76 million, including $45 million in share repurchases and $31 million in dividends, with a 15% increase in quarterly dividends to $0.43 per share [12][17]. Future Outlook - Management reiterated its full-year 2025 outlook, focusing on community count growth and liquidity to support performance [16]. - Key areas of focus for investors include sustaining sales, growing the order book, and monitoring margin trends amid incentive spending [17].

分组1 - Meritage Homes reported quarterly earnings of $2.04 per share, exceeding the Zacks Consensus Estimate of $1.99 per share, but down from $3.15 per share a year ago, representing an earnings surprise of +2.51% [1] - The company achieved revenues of $1.62 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.10%, although this is a decrease from year-ago revenues of $1.69 billion [2] - Over the last four quarters, Meritage has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] 分组2 - The stock has underperformed the market, losing about 2% since the beginning of the year compared to the S&P 500's gain of 7.3% [3] - The current consensus EPS estimate for the coming quarter is $2.13 on revenues of $1.71 billion, and for the current fiscal year, it is $8.17 on revenues of $6.58 billion [7] - The Zacks Industry Rank for Building Products - Home Builders is currently in the bottom 21% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

[Financial Highlights](index=1&type=section&id=Summary%20Operating%20Results) Meritage Homes reported its second quarter 2025 results, showing a mixed performance, with home orders and closings seeing slight unit increases, while revenue and profitability declined year-over-year, as home closing revenue fell 5% to $1.62 billion and net earnings dropped 37% to $146.9 million, resulting in a diluted EPS of $2.04, down 35% from the prior year Q2 2025 Key Financial Metrics (YoY) | | Three Months Ended June 30, | | | | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **% Chg** | | Homes closed (units) | 4,170 | 4,118 | 1% | | Home closing revenue (in thousands) | $1,615,709 | $1,693,738 | (5)% | | Home orders (units) | 3,914 | 3,799 | 3% | | Net earnings (in thousands) | $146,879 | $231,555 | (37)% | | Diluted EPS | $2.04 | $3.15 | (35)% | [Management Commentary](index=2&type=section&id=MANAGEMENT%20COMMENTS) Management highlighted a solid performance despite challenging market conditions, attributing it to their go-to-market strategy of move-in ready inventory, emphasizing strong operational execution with a 208% backlog conversion rate, strategically reducing land spend, increasing cash returns to shareholders through dividends and buybacks, and maintaining a strong liquidity position with $930 million in cash and a net debt-to-capital ratio of 14.6% - The company's strategy focuses on move-in ready inventory to remain competitive and grow market share amid high mortgage rates and weak consumer confidence[6](index=6&type=chunk) - Capital allocation strategy has been adjusted, with the full-year land acquisition and development spend target reduced from **$2.5 billion** to approximately **$2.0 billion**[6](index=6&type=chunk) - The company increased its return of cash to shareholders, spending **$76 million** in Q2 2025 on dividends and share repurchases, which tripled the quarterly buyback commitment[6](index=6&type=chunk) - The company maintained a strong liquidity position with **$930 million** in cash and a net debt-to-capital ratio of **14.6%** as of June 30, 2025[6](index=6&type=chunk) [Operating and Financial Review](index=2&type=section&id=Operating%20and%20Financial%20Review) The financial review details performance for the second quarter and first half of 2025, highlighting pressure on revenue and gross margins due to increased financing incentives and higher costs, significant year-over-year declines in net earnings and EPS for both periods, and a strong balance sheet with increased cash reserves, a higher lot count, and active capital return programs [Second Quarter 2025 Results](index=2&type=section&id=SECOND%20QUARTER%20RESULTS) In Q2 2025, home orders increased 3% YoY to 3,914 units, driven by a 7% increase in community count, but home closing revenue fell 5% to $1.6 billion due to a 6% decrease in Average Sales Price (ASP) to $387,000, largely from higher financing incentives, while home closing gross margin compressed by 480 bps to 21.1%, impacted by incentives, higher lot costs, and land deal termination charges, consequently decreasing net earnings by 37% to $147 million Q2 2025 Performance vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Home Orders (units) | 3,914 | 3,799 | +3% | | Home Closing Revenue (in billions) | $1.6 | $1.7 | -5% | | ASP on Closings | $387,000 | $411,000 | -6% | | Home Closing Gross Margin | 21.1% | 25.9% | -480 bps | | Adjusted Gross Margin* | 21.4% | 26.0% | -460 bps | | Net Earnings (in millions) | $147 | $232 | -37% | | Diluted EPS | $2.04 | $3.15 | -35% | - SG&A expenses as a percentage of home closing revenue rose to **10.2%** from **9.3%** in Q2 2024, driven by higher commissions, start-up costs, and increased spec inventory maintenance[9](index=9&type=chunk) [Year-to-Date 2025 Results](index=3&type=section&id=YEAR%20TO%20DATE%20RESULTS) For the first six months of 2025, total sales orders were flat year-over-year at 7,790 units, home closing revenue decreased 6% to $3.0 billion, driven by a 6% drop in ASP, and home closing gross margin fell 440 bps to 21.5% due to incentives and higher costs, resulting in net earnings declining 35% to $270 million, with diluted EPS at $3.73 H1 2025 Performance vs. H1 2024 | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Home Orders (units) | 7,790 | 7,790 | 0% | | Home Closing Revenue (in billions) | $3.0 | $3.2 | -6% | | Home Closing Gross Margin | 21.5% | 25.9% | -440 bps | | Net Earnings (in millions) | $270 | $418 | -35% | | Diluted EPS | $3.73 | $5.68 | -34% | - The effective income tax rate for the first half of 2025 increased to **23.6%** from **21.4%** in 2024, as fewer homes qualified for energy tax credits under the Inflation Reduction Act[9](index=9&type=chunk) [Balance Sheet & Liquidity](index=4&type=section&id=BALANCE%20SHEET%20%26%20LIQUIDITY) As of June 30, 2025, the company's balance sheet showed strong liquidity with cash and equivalents at $930 million, up from $652 million at year-end 2024, boosted by a senior notes issuance, while land acquisition and development spend was reduced to $509 million in Q2, and the company increased its lot inventory to approximately 81,900 lots, with debt-to-capital and net debt-to-capital ratios of 25.8% and 14.6%, respectively, and returned $76 million to shareholders in Q2 through dividends and share repurchases Key Balance Sheet & Liquidity Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents (in millions) | $930 | $652 | | Total Lots Owned/Controlled | ~81,900 | N/A | | Debt-to-capital | 25.8% | 20.6% | | Net debt-to-capital | 14.6% | 11.7% | - In Q2 2025, the company repurchased **674,124 shares** for **$45 million** and paid **$31 million** in dividends[11](index=11&type=chunk) - Subsequent to Q2 2025, the company refinanced its revolving credit facility, extending its maturity from **2029** to **2030**[11](index=11&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements provide a detailed view of the company's financial performance and position, with the Income Statement confirming the decline in revenue and net earnings, the Balance Sheet reflecting an increase in assets, primarily cash and real estate, and a rise in liabilities due to new debt issuance, and the Statement of Cash Flows showing cash generation from financing activities outpaced cash used in operations and investing, leading to a higher cash balance [Consolidated Income Statements](index=6&type=section&id=Consolidated%20Income%20Statements) For Q2 2025, total closing revenue decreased 4% to $1.62 billion, while total cost of closings increased 2%, leading to a 23% drop in total closing gross profit, with net earnings for the quarter at $146.9 million, a 37% decrease from $231.6 million in Q2 2024, and for the six months ended June 30, 2025, net earnings fell 35% to $269.7 million Q2 2025 Income Statement Highlights (in thousands) | | Three Months Ended June 30, | | | :--- | :--- | :--- | | | **2025** | **2024** | | Total closing revenue | $1,623,986 | $1,693,738 | | Total closing gross profit | $340,609 | $439,506 | | Earnings before income taxes | $193,060 | $297,361 | | Net earnings | $146,879 | $231,555 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $7.76 billion, an increase from $7.16 billion at the end of 2024, driven by a rise in cash to $930 million and real estate assets to $5.96 billion, while total liabilities increased to $2.49 billion from $2.02 billion, mainly due to an increase in senior notes, and total stockholders' equity grew to $5.27 billion Balance Sheet Highlights (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $930,463 | $651,555 | | Real estate | $5,963,674 | $5,728,775 | | Total assets | $7,756,369 | $7,162,654 | | **Liabilities & Equity** | | | | Senior and convertible senior notes, net | $1,801,609 | $1,306,535 | | Total liabilities | $2,487,195 | $2,021,081 | | Total stockholders' equity | $5,269,174 | $5,141,573 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, the company used $28.9 million in cash from operating activities, primarily due to an increase in real estate inventory, and investing activities used $21.6 million, while financing activities provided $329.4 million in cash, driven by $497.2 million in proceeds from issuing senior notes, which more than offset $90.0 million in share repurchases and $61.5 million in dividend payments, resulting in a net cash increase of $278.9 million Six Months Ended June 30, 2025 Cash Flow (in thousands) | | 2025 | | :--- | :--- | | Net cash used in operating activities | $(28,875) | | Net cash used in investing activities | $(21,610) | | Net cash provided by financing activities | $329,393 | | **Net increase in cash and cash equivalents** | **$278,908** | | Ending cash and cash equivalents | $930,463 | [Segment Operating Data](index=10&type=section&id=Operating%20Data) The company's operations are divided into West, Central, and East regions, with the East region being the strongest performer in Q2 2025, showing year-over-year increases in both homes closed (+15%) and homes ordered (+14%), while the Central region saw a modest 2% increase in orders, and the West region experienced declines in both closings and orders, with the overall ending community count growing 9% YoY to 312, and the Tennessee segment reclassified from East to Central effective January 1, 2025 Q2 2025 Homes Ordered by Region (YoY) | Region | Q2 2025 Homes Ordered | Q2 2024 Homes Ordered | % Change | | :--- | :--- | :--- | :--- | | West | 1,001 | 1,114 | (10)% | | Central | 1,298 | 1,274 | +2% | | East | 1,615 | 1,411 | +14% | | **Total** | **3,914** | **3,799** | **+3%** | Q2 2025 Homes Closed by Region (YoY) | Region | Q2 2025 Homes Closed | Q2 2024 Homes Closed | % Change | | :--- | :--- | :--- | :--- | | West | 1,165 | 1,265 | (8)% | | Central | 1,374 | 1,440 | (5)% | | East | 1,631 | 1,413 | +15% | | **Total** | **4,170** | **4,118** | **+1%** | - Total ending active communities increased **9%** year-over-year, from **287** in Q2 2024 to **312** in Q2 2025[30](index=30&type=chunk) [Supplemental and Non-GAAP Information](index=12&type=section&id=Supplement%20and%20Non-GAAP%20information) This section provides supplemental data, including details on capitalized interest, and reconciles GAAP to non-GAAP financial measures, with the key non-GAAP measure presented being the net debt-to-capital ratio, which stood at 14.6% at the end of Q2 2025, up from 11.7% at the end of 2024, and the company explains that this metric is useful for investors to understand its operating results and for comparison with industry peers Reconciliation of Net Debt-to-Capital | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt | $1,827,729 | $1,335,878 | | Less: Cash and cash equivalents | $(930,463) | $(651,555) | | Net Debt | $897,266 | $684,323 | | Stockholders' Equity | $5,269,174 | $5,141,573 | | **Net debt-to-capital** | **14.6%** | **11.7%** | - The company defines net debt-to-capital as net debt (total debt less cash) divided by total net capital (net debt plus stockholders' equity) and considers it a relevant non-GAAP measure for investors[34](index=34&type=chunk) [About Meritage Homes & Forward-Looking Statements](index=13&type=section&id=About%20Meritage%20Homes%20Corporation) Meritage Homes identifies itself as the fifth-largest public homebuilder in the U.S. based on 2024 closings, focusing on energy-efficient entry-level and first move-up homes, with a 40-year history and operations in 12 states, and the press release includes a standard forward-looking statements disclaimer, highlighting numerous risks such as interest rate changes, material costs, competition, and other market uncertainties that could affect future results - Meritage is the **fifth-largest** public homebuilder in the United States, based on homes closed in **2024**, and specializes in energy-efficient homes[35](index=35&type=chunk) - The company cautions that forward-looking statements are subject to significant risks and uncertainties, including interest rates, material costs, cancellation rates, and supply chain constraints[38](index=38&type=chunk)