[Part I. Financial Information](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2024 unaudited financials show total assets at **$6.49 billion**, net earnings at **$186.0 million**, and operating cash flow at **$81.9 million** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$6,489,305** | **$6,353,134** | | Cash and cash equivalents | $905,298 | $921,227 | | Real estate | $4,914,512 | $4,721,291 | | **Total Liabilities** | **$1,768,732** | **$1,741,234** | | Senior notes, net | $994,966 | $994,689 | | **Total Stockholders' Equity** | **$4,720,573** | **$4,611,900** | Consolidated Income Statement Highlights (in thousands, except per share) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total closing revenue | $1,468,401 | $1,279,308 | | Total closing gross profit | $377,965 | $283,901 | | **Net earnings** | **$186,016** | **$131,301** | | Diluted EPS | $5.06 | $3.54 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,930 | $124,472 | | Net cash used in investing activities | ($7,765) | ($8,728) | | Net cash used in financing activities | ($90,094) | ($20,095) | | **Net (decrease)/increase in cash** | **($15,929)** | **$95,649** | [Notes to Unaudited Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, real estate assets, debt, and segment performance, confirming debt compliance and no significant accounting changes - The company designs and builds single-family homes in ten states across three regions (West, Central, East) and operates a financial services segment offering title, mortgage, and insurance services[18](index=18&type=chunk) Real Estate Inventory Composition (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Homes under contract under construction | $858,943 | $704,206 | | Unsold homes, completed and under construction | $1,304,633 | $1,260,855 | | Model homes | $118,958 | $118,252 | | Finished home sites and sites under development | $2,631,978 | $2,637,978 | | **Total** | **$4,914,512** | **$4,721,291** | Lots Under Option or Contract (as of March 31, 2024) | Contract Type | Number of Lots | Purchase Price (in thousands) | | :--- | :--- | :--- | | Committed (non-refundable deposits) | 20,653 | $1,042,376 | | Uncommitted (refundable deposits) | 34,722 | $1,513,780 | | **Total** | **55,375** | **$2,556,156** | Segment Revenue and Operating Income (in thousands) | Segment | Q1 2024 Revenue | Q1 2024 Operating Income | | :--- | :--- | :--- | | West | $515,632 | $71,264 | | Central | $427,565 | $73,103 | | East | $525,204 | $94,277 | | **Total Homebuilding** | **$1,468,401** | **$238,644** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported strong Q1 2024 new home demand, record orders, **16.2%** revenue growth to **$1.5 billion**, and improved gross margin to **25.8%** [Overview and Outlook](index=22&type=section&id=Overview%20and%20Outlook) Q1 2024 housing demand was strong across demographics, with the company's spec building strategy improving affordability and production efficiency - Strong demand for new homes in Q1 2024 was driven by demographic life events (Millennials, Gen Z, Baby Boomers) and a shortage of existing housing supply[88](index=88&type=chunk) - The company's spec building strategy provides quick move-in inventory, which is a highly desirable characteristic for its customers[88](index=88&type=chunk) - Supply chain disruptions have eased, leading to significant year-over-year improvements in production costs and cycle times in Q1 2024 compared to Q1 2023[89](index=89&type=chunk) [Home Closing Revenue, Home Orders and Order Backlog](index=24&type=section&id=Home%20Closing%20Revenue%2C%20Home%20Orders%20and%20Order%20Backlog) Q1 2024 home closing revenue rose **16.2%** to **$1.47 billion**, with record **3,991** orders, and backlog decreased **22.7%** Home Closing Revenue Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Dollars (thousands) | $1,466,096 | $1,261,923 | 16.2% | | Homes closed | 3,507 | 2,897 | 21.1% | | Average sales price (thousands) | $418.0 | $435.6 | (4.0)% | Home Orders Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Dollars (thousands) | $1,631,195 | $1,506,893 | 8.2% | | Homes ordered | 3,991 | 3,487 | 14.5% | | Average sales price (thousands) | $408.7 | $432.1 | (5.4)% | - The cancellation rate improved significantly to **8%** in Q1 2024 from **15%** in Q1 2023, indicating strong buyer sentiment[91](index=91&type=chunk)[99](index=99&type=chunk) [Operating Results](index=26&type=section&id=Operating%20Results) Q1 2024 home closing gross margin improved **340 bps** to **25.8%** across all regions, with financial services reporting a **$0.7 million** loss Home Closing Gross Profit by Region (Q1 2024 vs Q1 2023) | Region | Q1 2024 Margin | Q1 2023 Margin | Basis Point Change | | :--- | :--- | :--- | :--- | | **Total** | **25.8%** | **22.4%** | **+340 bps** | | West | 22.3% | 17.8% | +450 bps | | Central | 27.3% | 24.9% | +240 bps | | East | 28.0% | 24.5% | +350 bps | - The financial services segment reported a loss of **$0.7 million** in Q1 2024, compared to a **$2.9 million** profit in Q1 2023, primarily due to a **$5.8 million** charge for unused prepaid interest rate forward commitments[113](index=113&type=chunk) SG&A Expenses as a Percentage of Home Closing Revenue | Expense Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Commissions and other sales costs | 6.9% | 6.6% | | General and administrative expenses | 3.5% | 3.8% | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$905.3 million** cash and **$765.3 million** credit availability, a **17.5%** debt-to-capital ratio - Primary uses of cash include land acquisition, home construction, operating expenses, share repurchases, and dividends. The company expects to meet short-term liquidity needs through cash on hand and operating cash flows[119](index=119&type=chunk)[121](index=121&type=chunk) Key Leverage Ratios | Ratio | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Debt-to-capital | 17.5% | 17.9% | | Net debt-to-capital | 2.0% | 1.9% | - In Q1 2024, the company paid **$27.2 million** in dividends (**$0.75** per share) and repurchased **$55.9 million** of its shares[131](index=131&type=chunk)[135](index=135&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with **$1.0 billion** in fixed-rate debt mitigating some long-term exposure - The company's operations are sensitive to interest rates, as increases can adversely affect housing demand and the ability of homebuyers to secure financing[142](index=142&type=chunk) - The company's fixed-rate debt consists primarily of **$1.0 billion** in senior notes, which limits the impact of interest rate changes on existing long-term debt[141](index=141&type=chunk) - The company does not utilize derivative interest rate swap financial instruments for trading or speculative purposes[142](index=142&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[143](index=143&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[145](index=145&type=chunk) [Part II. Other Information](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, with management believing pending matters will not materially impact financial condition - The company is involved in routine legal and regulatory proceedings, such as construction defect claims, which are considered incidental to its business[82](index=82&type=chunk) - Management believes that no pending legal or warranty matters as of March 31, 2024, would have a material adverse impact, and reserves are deemed sufficient[82](index=82&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes in the company's risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[148](index=148&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **362,419** shares in Q1 2024, with **$129.1 million** remaining available under its authorized stock repurchase program Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2024 | 35,250 | $168.30 | | Feb 2024 | 327,169 | $152.83 | | Mar 2024 | 0 | N/A | | **Total** | **362,419** | **N/A** | - As of March 31, 2024, **$129.1 million** was still available for share repurchases under the authorized program[149](index=149&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the first quarter of 2024[151](index=151&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all Form 10-Q exhibits, including CEO/CFO certifications and financial statements in Inline XBRL format - The report includes CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350[152](index=152&type=chunk) - Financial statements and notes were formatted in Inline XBRL (Extensible Business Reporting Language) as part of the filing[152](index=152&type=chunk)

Financial Data and Key Metrics Changes - Meritage Homes reported home closing revenue of $1.5 billion for Q1 2024, reflecting a 21% increase in home closing volume year-over-year, partially offset by a 4% decrease in average selling price (ASP) [20][37] - The company achieved a gross margin of 25.8%, an increase of 340 basis points from 22.4% in the prior year [21][37] - Book value per share increased by 17% year-over-year to $129.98, with a return on equity of 18% [8] Business Line Data and Key Metrics Changes - Entry-level homes accounted for over 90% of total order volume, with an ASP of $409,000, down 5% from the prior year [13] - The company had approximately 6,000 spec homes in inventory as of March 31, 2024, up 54% from about 3,900 specs a year earlier [46] - 93% of home closings in Q1 2024 came from previously started inventory, up from 87% in the prior year [17] Market Data and Key Metrics Changes - The West region had an average absorption pace of 4.8 net sales per month, compared to 4.5 last year, with significant sales momentum regained in Arizona and Colorado [15] - The Central region, particularly Texas, had the highest regional average absorption pace of 5.2 sales per month, driven by economic growth [44] - The East region experienced a year-over-year growth in average absorption pace from 3.8 to 4.7 net sales per month [45] Company Strategy and Development Direction - The company is focused on increasing its community count and expects to end 2024 with mid to high-single digit growth, with greater projected growth in 2025 [14] - Meritage is implementing a move-in ready strategy to satisfy homebuyers' desire for quick closing times, which has helped improve market share [8][11] - The company plans to utilize off-balance sheet financing to control more land and increase its supply of lots beyond what its balance sheet can absorb [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current market conditions and anticipates continued strong demand for affordable housing, particularly from millennials and Gen Z [7][8] - The company expects ASP for the rest of the year to remain consistent, with potential reductions from geographic mix and new entry-level communities [50] - Management noted that the effective income tax rate for Q1 2024 was 20.5%, benefiting from energy tax credits [79] Other Important Information - Meritage received the President's Volunteer Service Award for its commitment to community service, packaging nearly 260,000 meals to fight childhood hunger [9] - The company has a formal share repurchase plan with a minimum buyback commitment of $15 million each quarter, and it repurchased an additional $41 million in Q1 2024 [27] Q&A Session Summary Question: What is the outlook for gross margins given the current market conditions? - Management indicated that while incentives remain elevated, they expect to maintain lower costs for rate locks due to quicker sales and closings [68][69] Question: How does the company view its backlog turnover ratio? - Management believes the current backlog turnover ratio of over 100% will be the new normal, supported by stable cycle times and production capacity [86] Question: What is the company's strategy regarding land acquisition? - Management confirmed that the timing of land deals is currently favorable, and they are on track to meet their land acquisition targets for 2025 and beyond [92][94] Question: Can you elaborate on the average buyer profile? - The average buyer has a FICO score near 740, with debt-to-income ratios around 41-42, indicating a stable buyer profile [55][140] Question: What are the expectations for ASP in the coming quarters? - Management stated that ASP guidance is influenced by the land being purchased, with a focus on producing more affordable homes while still taking pricing when the market allows [101][102]

Financial Performance - Home closing revenue increased by 16% year-over-year, reaching $1.466 billion in 1Q24 compared to $1.262 billion in 1Q23[15] - Home closing gross profit increased by 34% year-over-year, reaching $378 million in 1Q24 compared to $282 million in 1Q23[15] - Home closing gross margin improved by 340 bps to 25.8% in 1Q24 from 22.4% in 1Q23[15] - Net earnings increased by 42% year-over-year, reaching $186 million in 1Q24 compared to $131 million in 1Q23[15] - Diluted EPS increased by 43% year-over-year, reaching $5.06 in 1Q24 compared to $3.54 in 1Q23[15] Sales and Orders - Net sales orders increased by 14% year-over-year[6] - Total orders increased by 14% year-over-year, from 3,487 in 1Q23 to 3,991 in 1Q24[6] - ASP on orders decreased by 5% year-over-year to $409K[25] - Home closings increased by 21% to 3,507 units[38] Land and Development - Total lots controlled increased to 66,434 in 1Q24 from 60,942 in 1Q23[41] - The supply of lots is 4.6 years[41] - Capital spend totaled $514 million in 1Q24, with 84% allocated to land spend, 11% to share repurchases, and 5% to cash dividends[40] Community Count and Absorption - Average active communities decreased by 1% year-over-year[25] - Absorption per month increased by 17% year-over-year[25] - Entry-level homes accounted for 90% of the ending community count in 1Q24[6]

Meritage Homes Corporation’s (MTH) stock gained 12.7% in the after-hours trading session on Apr 24 after it reported impressive results for first-quarter 2024. Both earnings and total closing revenues surpassed the Zacks Consensus Estimate and increased on a year-over- year basis. The upside was backed by higher deliveries. Solid execution on its spec building and streamlined strategy helped it achieve yet another record backlog conversion rate of 138% and a return on equity of 18% during the quarter. Earni ...

Meritage Homes (MTH) reported $1.47 billion in revenue for the quarter ended March 2024, representing a year-over-year increase of 14.8%. EPS of $5.06 for the same period compares to $3.54 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $1.28 billion, representing a surprise of +14.54%. The company delivered an EPS surprise of +42.94%, with the consensus EPS estimate being $3.54.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall ...

[Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) Meritage Homes reported a strong first quarter for 2024, achieving record-high quarterly sales orders, a home closing gross margin of 25.8%, and a significant 43% year-over-year increase in diluted EPS to $5.06 - The company announced **record-high quarterly sales orders**, a home closing gross margin of **25.8%**, and a **43% increase in diluted EPS** for Q1 2024[3](index=3&type=chunk) Q1 2024 Summary Operating Results (vs. Q1 2023) | Indicator | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Homes closed (units) | 3,507 | 2,897 | 21% | | Home closing revenue | $1,466.1 million | $1,261.9 million | 16% | | Home orders (units) | 3,991 | 3,487 | 14% | | Home order value | $1,631.2 million | $1,506.9 million | 8% | | Ending backlog (units) | 3,033 | 3,922 | (23)% | | Ending backlog value | $1,244.3 million | $1,763.8 million | (29)% | | Net earnings | $186.0 million | $131.3 million | 42% | | Diluted EPS | $5.06 | $3.54 | 43% | [Management Commentary](index=2&type=section&id=MANAGEMENT%20COMMENTS) Management attributed the record-breaking quarter to strong market demand and a successful spec-building strategy, enabling a 138% backlog conversion rate while maintaining a strong balance sheet and returning capital to shareholders - Executive Chairman Steven J. Hilton noted that the company capitalized on strong market conditions and housing needs from various demographics, leading to the **highest quarterly sales orders**[7](index=7&type=chunk) - CEO Phillippe Lord highlighted the success of the spec building strategy, which resulted in a **record backlog conversion rate of 138%** and nearly **50% of deliveries coming from intra-quarter sales**[7](index=7&type=chunk) - In Q1 2024, the company spent **$430 million on land acquisition and development**, added nearly **6,300 net new lots**, and returned **$83 million to shareholders** via repurchases and dividends[7](index=7&type=chunk) [Detailed Quarterly Performance Analysis](index=2&type=section&id=Detailed%20Quarterly%20Performance%20Analysis) The company's Q1 2024 performance saw increased home orders and revenue, improved gross margin, and a strong financial position with significant cash and low leverage, supported by strategic land investments and capital returns [Operating Results](index=2&type=section&id=FIRST%20QUARTER%20RESULTS) Home orders grew 14% year-over-year to 3,991 units, driving a 16% rise in home closing revenue to $1.5 billion, with gross margin expanding to 25.8% and net earnings increasing 42% to $186.0 million - Home orders increased **14% year-over-year to 3,991**, primarily due to a **17% increase in average absorption pace to 4.9 per month**[9](index=9&type=chunk) - Home closing gross margin improved by **340 bps to 25.8%** from 22.4% in Q1 2023, due to reduced rate lock financing incentives and lower direct costs[9](index=9&type=chunk) - SG&A expenses were **10.4% of home closing revenue**, nearly flat compared to 10.3% in the prior year[11](index=11&type=chunk) - Net earnings rose **42% to $186.0 million** ($5.06 per diluted share) from $131.3 million ($3.54 per diluted share) in Q1 2023[11](index=11&type=chunk) [Balance Sheet, Liquidity, and Capital Allocation](index=3&type=section&id=BALANCE%20SHEET%20%26%20LIQUIDITY) The company ended Q1 2024 with strong liquidity, holding $905.3 million in cash and maintaining a low net debt-to-capital ratio of 2.0%, while investing $430.4 million in land and returning $83.1 million to shareholders - Ended Q1 2024 with **$905.3 million in cash and cash equivalents**[11](index=11&type=chunk) - Land acquisition and development spend totaled **$430.4 million**, a significant increase from $310.1 million in Q1 2023, with total lots owned or controlled growing to approximately **66,400**[11](index=11&type=chunk) - Debt-to-capital and net debt-to-capital ratios were **17.5% and 2.0%**, respectively, as of March 31, 2024[11](index=11&type=chunk) - Returned capital to shareholders by increasing the quarterly dividend to **$0.75 per share** and repurchasing **362,419 shares for $55.9 million**[11](index=11&type=chunk) [Full Year 2024 Guidance](index=4&type=section&id=GUIDANCE) Meritage Homes updated its full-year 2024 guidance, projecting home closings between 14,500 and 15,000 units, revenue of $6.0 to $6.2 billion, a gross margin of 24.5-25.0%, and diluted EPS of $19.20 to $20.70 Full Year 2024 Guidance | Metric | Full Year 2024 Projection | | :--- | :--- | | Home closing volume | 14,500-15,000 units | | Home closing revenue | $6.0-6.2 billion | | Home closing gross margin | 24.5-25.0% | | Effective tax rate | Approximately 22.5% | | Diluted EPS | $19.20-20.70 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2024, showing a 42% increase in net earnings to $186.0 million, total assets of $6.5 billion, and $81.9 million in cash from operations [Consolidated Income Statement](index=5&type=section&id=Consolidated%20Income%20Statements) For Q1 2024, home closing revenue increased 16% to $1.47 billion, driving a 34% rise in gross profit to $378.0 million, with net earnings growing 42% to $186.0 million and diluted EPS up 43% to $5.06 Q1 2024 Income Statement Highlights (in thousands) | Line Item | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Home closing revenue | $1,466,096 thousand | $1,261,923 thousand | 16% | | Total closing gross profit | $377,965 thousand | $283,901 thousand | 33% | | Earnings before income taxes | $234,015 thousand | $165,303 thousand | 42% | | Net earnings | $186,016 thousand | $131,301 thousand | 42% | Q1 2024 Earnings Per Share | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Basic EPS | $5.12 | $3.58 | 43% | | Diluted EPS | $5.06 | $3.54 | 43% | [Consolidated Balance Sheet](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2024, Meritage Homes reported total assets of $6.49 billion, including $905.3 million in cash and $4.91 billion in real estate, with total liabilities at $1.77 billion and stockholders' equity at $4.72 billion Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $905,298 thousand | $921,227 thousand | | Real estate | $4,914,512 thousand | $4,721,291 thousand | | **Total assets** | **$6,489,305 thousand** | **$6,353,134 thousand** | | Total liabilities | $1,768,732 thousand | $1,741,234 thousand | | Total stockholders' equity | $4,720,573 thousand | $4,611,900 thousand | | **Total liabilities and stockholders' equity** | **$6,489,305 thousand** | **$6,353,134 thousand** | [Consolidated Statement of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2024, the company generated $81.9 million in cash from operations, but net cash used in financing activities, primarily share repurchases and dividends, led to a $15.9 million net decrease in cash for the quarter Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,930 thousand | $124,472 thousand | | Net cash used in investing activities | ($7,765) thousand | ($8,728) thousand | | Net cash used in financing activities | ($90,094) thousand | ($20,095) thousand | | **Net (decrease)/increase in cash** | **($15,929) thousand** | **$95,649 thousand** | [Segment and Supplemental Data](index=8&type=section&id=Segment%20and%20Supplemental%20Data) This section details operational metrics by region, showing the East Region's strong performance in homes closed and ordered, and provides a reconciliation of the company's low 2.0% net debt-to-capital ratio [Segment Operating Data](index=8&type=section&id=Operating%20Data) In Q1 2024, the East Region led in homes closed and ordered, while the Central Region showed strong order growth, with total active communities remaining stable year-over-year Q1 2024 Homes Closed by Region | Region | Homes Closed | Value (in thousands) | | :--- | :--- | :--- | | West | 1,014 | $515,632 thousand | | Central | 1,167 | $427,565 thousand | | East | 1,326 | $522,899 thousand | | **Total** | **3,507** | **$1,466,096 thousand** | Q1 2024 Homes Ordered by Region | Region | Homes Ordered | Value (in thousands) | | :--- | :--- | :--- | | West | 1,170 | $580,805 thousand | | Central | 1,310 | $482,183 thousand | | East | 1,511 | $568,207 thousand | | **Total** | **3,991** | **$1,631,195 thousand** | [Supplemental and Non-GAAP Information](index=9&type=section&id=Supplemental%20and%20Non-GAAP%20information) This section reconciles the non-GAAP net debt-to-capital ratio, showing a GAAP debt-to-capital ratio of 17.5% and a net debt-to-capital ratio of 2.0% as of March 31, 2024, reflecting the company's low net leverage Debt-to-Capital Ratios Reconciliation (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Debt | $1,001,570 thousand | $1,008,215 thousand | | Total Stockholders' Equity | $4,720,573 thousand | $4,611,900 thousand | | **Total Capital** | **$5,722,143 thousand** | **$5,620,115 thousand** | | **Debt-to-capital** | **17.5%** | **17.9%** | | Less: Cash | ($905,298) thousand | ($921,227) thousand | | **Net Debt** | **$96,272 thousand** | **$86,988 thousand** | | **Net debt-to-capital (Non-GAAP)** | **2.0%** | **1.9%** | [Corporate Profile and Forward-Looking Statements](index=10&type=section&id=About%20Meritage%20Homes%20Corporation) Meritage Homes, the fifth-largest public homebuilder in the U.S., specializes in energy-efficient homes across ten states, with the report including a standard disclaimer on forward-looking statements and associated market risks - Meritage Homes is the **fifth-largest public homebuilder in the U.S.** (based on 2023 homes closed) and specializes in energy-efficient and affordable homes[31](index=31&type=chunk) - The company is an **eleven-time recipient of the EPA's ENERGY STAR® Partner of the Year for Sustained Excellence Award**, highlighting its leadership in energy-efficient homebuilding[32](index=32&type=chunk) - The press release contains forward-looking statements regarding 2024 guidance, which are subject to risks including interest rate increases, inflation, cancellation rates, and supply chain constraints[33](index=33&type=chunk)[34](index=34&type=chunk)

The Good Brigade/DigitalVision via Getty Images One of the things that I love most about home building companies is that they tend to provide plenty of financial metrics that show not only where they are today, but also where they seem to be headed. When you pair this up with economic data and make sure that you buy the stocks at a cheap enough price, upside is very difficult to avoid. One firm that I believe does offer some really great upside at this point in time is Meritage Homes (NYSE:MTH). Since initi ...

Wall Street expects a year-over-year increase in earnings on higher revenues when Meritage Homes (MTH) reports results for the quarter ended March 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on April 24, 2024, might help the stock move higher if these key numbers are better than exp ...

Financial Performance - In 2023, the company repurchased 437,882 shares for $59.1 million and paid dividends totaling $39.5 million, ending the year with cash and cash equivalents of $921.2 million, up from $861.6 million in 2022[31]. - The debt-to-capital ratio improved to 17.9% at December 31, 2023, down from 22.6% in 2022, while the net debt-to-capital ratio decreased to 1.9% from 6.8%[31]. - As of December 31, 2023, the company has $1.0 billion in fixed-rate senior notes, with no outstanding borrowings under its Credit Facility[219]. - The average interest rate for the company's long-term debt obligations is 1.492% as of December 31, 2023[220]. - The company had $40.0 million in borrowings and repayments under the Credit Facility during the year ended December 31, 2022, with no borrowings in 2021 or 2023[219]. Land Acquisition and Development - The company invested approximately $1.9 billion in land acquisition and development, securing about 16,000 net new lots, a significant increase from 2,000 net new lots in 2022[32]. - As of December 31, 2023, the company had 64,313 lots under control, compared to 63,182 in 2022, maintaining a 4.6-year supply of lots based on 2023 closings[32]. - Approximately 72% of the controlled lots were owned by the company at the end of 2023, slightly down from 73% in 2022[32]. - The company had 18,019 lots under committed purchase or option contracts with a total purchase price of approximately $914.1 million, secured by $97.8 million in cash deposits[39]. - The company has two active land development joint ventures and one mortgage business joint venture to manage risk and expand market opportunities[49]. Home Sales and Construction - The company closed 13,976 homes in 2023 and started construction on 14,524 homes during the same period[32]. - As of December 31, 2023, the backlog decreased by 23.5% to 2,549 units from 3,332 units at the same date in 2022, with a 28.6% decrease in backlog value to $1.1 billion from $1.5 billion[53]. - Approximately 97% of the 2,549 homes in backlog were under construction as of December 31, 2023[51]. - At December 31, 2023, 81% of the total unsold homes in inventory were under construction, while 19% were completed[52]. - The spec inventory per active community increased to 21.8 or 5,877 units as of December 31, 2023, compared to 18.0 or 4,891 units as of December 31, 2022[51]. Marketing and Sales Strategy - The marketing strategy includes a focus on digital media campaigns and the use of model homes to demonstrate the advantages of the company's designs and features[45]. - The company had approximately 492 full-time sales and marketing personnel at the end of 2023, ensuring extensive knowledge of homes and energy-efficient features among the sales force[47]. - The company provides various sales incentives to attract buyers, including mortgage-related incentives and price concessions, depending on economic conditions[1]. - The company has implemented extensive digital tools, including virtual tours and a chatbot, to enhance the homebuying experience[1]. Workforce and Diversity - The company employed approximately 910 full-time construction and warranty employees as of December 31, 2023[41]. - As of December 31, 2023, the company employed 1,838 full-time employees, with 41% being female and 27% minorities, reflecting its commitment to diversity and inclusion[69]. Economic and Market Conditions - The company experienced unprecedented demand through mid-2022, which was impacted by supply chain constraints and rising interest rates[71]. - A significant increase in mortgage interest rates may negatively affect homebuyers' ability to secure financing, impacting the company's revenue and gross margins[221]. - The company’s operations are sensitive to interest rate changes, which could increase variable rate borrowing costs on its Credit Facility[221]. - Historical seasonality in home sales is expected to continue, although it may be affected by short-term volatility in the homebuilding industry[71]. - The company has experienced historical cycles that returned in the latter half of 2022, indicating a potential stabilization in the market[71]. Warranty and Risk Management - The company has established warranty reserves ranging from 0.1% to 0.5% of a home's sale price to cover future structural warranty costs[58]. - The company typically sells more homes in the first half of the fiscal year, leading to increased working capital requirements in the second and third quarters[71]. - The company does not intend to enter into derivative interest rate swap financial instruments for trading or speculative purposes[221].

Financial Data and Key Metrics Changes - Home closing gross margin for Q4 2023 was 25.2%, with diluted EPS of $5.38, reflecting a 24% year-over-year decline [10][53] - Book value per share increased by 17% year-over-year to $126.61, with a return on equity of 17% for the full year 2023 [10] - Fourth quarter 2023 home closing revenue was $1.6 billion, a 13% decrease in home closing volume and a 5% decrease in average selling prices (ASPs) compared to the prior year [24][53] Business Line Data and Key Metrics Changes - Average sales price (ASP) on orders for Q4 2023 was $415,000, up 6% from the prior year, with a cancellation rate of 13% [14] - The company opened 28 new communities in Q4 2023 and 111 new communities throughout the year, achieving a backlog conversion rate of 110% [16][21] - The average absorption pace improved to 3.6 homes per month in Q4 2023, up from 2.2 in the prior year [14] Market Data and Key Metrics Changes - The Central region had the highest average absorption pace of 4.1 homes per month, compared to 2.6 last year, while the East region had the lowest cancellation rate [17][19] - The West region's average absorption pace increased to 3.0 homes per month, an 88% increase from the prior year [44] - The company is focusing on high-growth, lower ASP markets in the East region, which is expected to generate a greater share of business [19] Company Strategy and Development Direction - The company aims to grow its community count mid to high-single digits year-over-year by the end of 2024, with a focus on affordable entry-level homes [42][59] - A disciplined capital allocation strategy is in place, with $654 million spent on land acquisition and development in Q4 2023, the highest quarterly spend ever [28][30] - The company plans to leverage land banking relationships to support growth while maintaining liquidity [58][113] Management's Comments on Operating Environment and Future Outlook - Management noted that home buying demand remained healthy as mortgage rates fell below 7% in December, with expectations for rates to stabilize or decrease further in 2024 [34][36] - The company anticipates a reduction in ASP to the low $400,000 range in 2024, aligning with long-term business objectives [59] - Management expressed confidence in the spring selling season, citing a strong start in January and positive buyer sentiment [87] Other Important Information - The company received recognition for its DE&I efforts and was listed among the Best Companies to Work For [37] - The effective income tax rate for Q4 2023 was 23.2%, slightly down from 23.3% in 2022 [53] - The company plans to reset the 2024 quarterly cash dividend amount, with $185 million remaining under the buyback authorization program [56][81] Q&A Session Summary Question: What is embedded in the 2024 gross margin guidance? - Management indicated that the guidance reflects new land coming online at a higher basis and does not assume a pullback in incentives yet [63] Question: How will SG&A expenses trend in 2024? - Management expects SG&A to decrease, driven by restructuring performance-based compensation and controlling discretionary spending [66][79] Question: What are the expectations for cash flow and buyback programs? - The company plans to maintain its share repurchase strategy while increasing land acquisition spending, with a focus on balancing growth and shareholder returns [92][113]