Financial Performance - In Q3 2023, the company achieved record home closing revenue of $1.6 billion from 3,638 homes, representing a year-over-year increase of 4.3% in volume and 2.6% in revenue[91]. - For the nine months ended September 30, 2023, home closing revenue increased by 4.5% to $4.4 billion, with a home closing volume of 10,025 units, up 4.8% year-over-year[92]. - Company-wide home closing gross profit for Q3 2023 was $429.6 million, with a gross margin of 26.7%, down from 28.7% in Q3 2022, attributed to increased buyer financing incentives and higher land development costs[120]. - The effective income tax rate for Q3 2023 was 22.4%, up from 20.3% in the previous year, impacting net earnings which decreased to $221.8 million from $262.5 million[91]. - Financial services profit for Q3 2023 was $5.7 million, an increase from $4.8 million in Q3 2022, driven by higher home closing volume[125]. Home Sales and Orders - Home orders for Q3 2023 increased by 50.4% year-over-year to 3,474, with a cancellation rate improving to 11% from 30% in Q3 2022[93]. - Total home orders for Q3 2023 reached $1.5 billion, a 53.5% increase from $974.3 million in Q3 2022, with homes ordered rising to 3,474 from 2,310[109]. - The average sales price (ASP) for homes ordered in Q3 2023 was $430.5 thousand, up 2.1% from $421.8 thousand in Q3 2022[109]. - The cancellation rate improved to 11% in Q3 2023 from 30% in Q3 2022, contributing to a 50.4% increase in home order volume[109][107]. Backlog and Inventory - The company ended Q3 2023 with a backlog of 3,608 homes valued at $1.6 billion, reflecting a decrease of 40.5% in units and 44.9% in value compared to the previous year[95]. - The backlog at the end of Q3 2023 was valued at $1.6 billion, down 44.9% from $2.8 billion at the end of Q3 2022, with homes in backlog decreasing to 3,608 from 6,064[105]. - The East Region's backlog at the end of Q3 2023 consisted of 1,473 homes valued at $608.6 million, down 44.9% from 2,671 homes valued at $1.1 billion in the prior year[116]. Regional Performance - The West Region saw home closing revenue of $606.8 million in Q3 2023, a 2.8% increase from $590.0 million in Q3 2022, with home orders up 116.0%[111]. - The Central Region's home order volume increased by 73.1% in Q3 2023, reaching 1,099 homes, while the cancellation rate dropped to 13% from 37%[113]. - The East Region closed 1,364 homes in Q3 2023, generating $550.8 million in revenue, a 14.9% increase from the prior year[115]. - For the nine months ended September 30, 2023, the East Region reported 3,827 home closings generating $1.5 billion in revenue, reflecting increases of 7.7% and 8.7% year-over-year, respectively[116]. Cost and Expenses - Home closing gross margin for Q3 2023 was 26.7%, down from 28.7% in Q3 2022, primarily due to increased incentives and higher land development costs[91]. - General and administrative expenses for Q3 2023 rose to $63.1 million, up $14.6 million from $48.4 million in 2022, reflecting higher compensation costs and increased spending on technology[127]. - The West Region's home closing gross margin for Q3 2023 was 23.3%, a decline of 330 basis points from 26.6% in the prior year, impacted by higher incentives and land development costs[122]. Cash Flow and Financing - As of September 30, 2023, the company reported net cash provided by operating activities of $460.1 million, a significant increase compared to a net cash used in operations of $169.8 million during the same period in 2022[142]. - The company utilized $34.7 million in investing activities during the nine months ended September 30, 2023, compared to $24.9 million in the same period of 2022, primarily for property and equipment purchases[143]. - Net cash used in financing activities totaled $238.2 million for the nine months ended September 30, 2023, which included $150.0 million for the partial redemption of 2025 Notes and $55.0 million in share repurchases[144]. - The company's debt-to-capital ratio improved to 18.5% as of September 30, 2023, down from 22.6% at the end of 2022[145]. Market Strategy and Outlook - The company aims to maintain at least a 5% market share in all markets and is focused on delivering affordable homes through simplified production processes[99]. - The company anticipates primary demand for funds over the next twelve months will be for home construction and land acquisition, supported by cash and cash equivalents on hand[135]. - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing[138]. - The company has no debt maturities until 2025, indicating a stable short-term liquidity position[138]. - The company’s operations are sensitive to interest rate changes, which could adversely affect revenue and borrowing costs[153].

Financial Data and Key Metrics Changes - The diluted EPS for Q3 2023 was $5.98, reflecting a 16% year-over-year decline, with a book value per share of $121.29, up 20% year-over-year [145] - The ending backlog at September 30, 2023, totaled approximately 3,600 homes, down from about 6,100 in the prior year [134] - The company expects Q4 2023 diluted EPS to range from $4.84 to $5.43, with home closing revenue projected between $1.45 billion and $1.53 billion [153] Business Line Data and Key Metrics Changes - Sales orders for Q3 2023 were 3,474 homes, with 88% of the volume coming from entry-level homes, representing a 50% year-over-year increase [13] - The average selling price (ASP) on orders this quarter was $430,000, up 2% from the prior year [9] - The average absorption pace for the West region was 3.6 per month, compared to 1.5 per month for the same period in 2022, indicating a significant improvement [4] Market Data and Key Metrics Changes - The average community count was 282, down 3% year-over-year and down 1% sequentially from Q2 2023 [132] - The Central region had the highest absorption pace of 4.5 per month, compared to 2.7 last year, driven by job growth and in-migration [14] - The cancellation rate for the quarter was 11%, below historical averages, indicating strong demand [13] Company Strategy and Development Direction - The company plans to replenish its spec inventory by starting around 4,000 homes to ensure sufficient move-in ready inventory for the 2024 spring selling season [11] - The strategy of "pace over price" has led to improved sales across all geographies [14] - The company aims to grow its community count by 10% to 15% annually, with a target of exceeding 300 communities [140][147] Management's Comments on Operating Environment and Future Outlook - Management noted that the home buyer environment is impacted by elevated mortgage rates, which have increased to nearly 8% [2] - The company expects Q4 demand to remain steady, although traditional seasonal patterns are anticipated to return [9] - Management expressed optimism about the spring selling season based on current demand trends [40] Other Important Information - The company has been recognized for its corporate citizenship and sustainability efforts, receiving multiple awards [137] - The company plans to spend over $2 billion on land acquisition and development in the coming years [147] - The company redeemed $150 million of its senior notes due 2025, maintaining a strong balance sheet [148] Q&A Session Summary Question: What is the average rate customers are getting through your finance company? - The average rate is about 3%, with some markets like Texas slightly above that [20] Question: What is the expected growth for community count next year? - Growth is expected to be predominantly driven by community count, with a focus on maintaining absorption rates [22][27] Question: Can you break down the cost components between land, labor, and materials? - Costs have been stable year-over-year, with higher land costs impacting margins as new communities are opened [37] Question: What are the key constraints preventing a return to pre-pandemic levels? - Constraints include municipal delays and slow land development processes [73] Question: How do you expect SG&A to trend in the coming quarters? - SG&A is expected to move to high single digits over time, but will see some incremental overhead in the short term due to community count growth [76]

Financial Performance - Home closings increased by 4% to 3,638 in 3Q23 compared to 3,487 in 3Q22[30] - Home closing revenue increased by 3% to $1.61 billion in 3Q23 compared to $1.569 billion in 3Q22[30] - Home closing gross margin decreased by 200 bps to 26.7% in 3Q23 compared to 28.7% in 3Q22[30] - Net earnings decreased by 16% to $222 million in 3Q23 compared to $262 million in 3Q22[30] - Diluted EPS decreased by 16% to $5.98 in 3Q23 compared to $7.10 in 3Q22[30] Sales and Orders - Net sales orders increased 50% year-over-year[10] - Total orders increased to 3,474 in 3Q23[11] - Entry-level homes accounted for 88% of total orders in 3Q23[13] - Absorption per month increased by 52% year-over-year to 4.1 in 3Q23[12] Land and Capital - Land spend totaled $537 million in 3Q23, with a year-to-date spend of $1.3 billion[33] - The company repurchased over 319,000 shares for $45 million in 3Q23[33] - The company redeemed $150 million of 6.00% senior notes due in 2025[33] - Total lots controlled were 60,662, with a supply of 4.2 years[34]

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; expectations about our future results, including but not limited to, our full year and 3Q23 projected home closings, home closing revenue, home closing gross margins, effective tax rate and diluted earnings per share. These risks and uncertainties include, but are not ...

Financial Data and Key Metrics Changes - The company reported home closing revenue of $1.5 billion for Q2 2023, an increase of 10% year-over-year, driven by an 8% increase in home closing volume and a 1% increase in average selling prices (ASPs) [40][42] - The diluted EPS for Q2 2023 was $5.02, reflecting a 26% year-over-year decline, attributed to lower gross margins and increased overhead costs [16][42] - The effective income tax rate decreased to 22.0% in 2023 from 24.6% in 2022, benefiting from energy tax credits [16] Business Line Data and Key Metrics Changes - Sales orders for the quarter totaled 3,340 homes, with entry-level homes representing 85% of orders, down 11% year-over-year [11] - The backlog conversion rate improved significantly from 48% last year to 89% this quarter, indicating better sales performance [13] - The company ended the quarter with approximately 3,800 homes in backlog and nearly 4,500 spec homes in inventory, up 6% sequentially [17][45] Market Data and Key Metrics Changes - The West region had the lowest average absorption pace at 3.4 sales per month, while the Central region led with an average of 4.3 sales per month [7] - The East region showed strong demand with an average absorption pace of 4.1 sales per month, prompting the company to focus on replenishing inventory [7] - The company added over 2,800 net new lots during the quarter, maintaining a total of approximately 60,000 lots owned or controlled [18] Company Strategy and Development Direction - The company aims to maintain a high level of spec starts to ensure sufficient move-in ready inventory for the remainder of the year [38] - The strategy focuses on affordable entry-level homes, leveraging rate lock or buydown incentives to enhance backlog conversion and competitive advantage [35] - The company plans to accelerate land acquisition and development spending, projecting to exceed $2 billion in 2024 and beyond [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sales pace targets for the remainder of the year, citing a healthy market and strong demand for new homes [23][55] - The company anticipates a strong back half of the year, driven by improved inventory turns and pricing power [21] - Management noted that while incentives remain elevated, they are moderating from previous extremes, contributing to improved margins [40] Other Important Information - The company received a double upgrade to investment grade from S&P, reflecting a strong focus on maintaining a healthy balance sheet and liquidity [17] - The company returned $9.9 million to shareholders in the form of dividends and has $234 million available for share repurchases [43] Q&A Session Summary Question: Demand and Absorption Rates - Management indicated that the market remains healthy, with expectations for stable absorption rates despite potential seasonality [23][24] Question: Pricing Power and Backlog Turnover - Management confirmed that demand is consistent across their footprint, with expectations for meaningful community count growth in the future [26] Question: Gross Margins and Incentives - Management explained that the sequential increase in margins was due to reduced incentives and improved pricing power, with expectations for stable margins in the back half of the year [60][63] Question: Community Count and Future Growth - Management projected significant community count growth as land acquisition ramps up, with a focus on maintaining a strong pipeline for future developments [76] Question: Generational Wealth and Down Payment Assistance - Management noted an increase in down payment assistance, indicating that while generational wealth transfer is not directly observed, support for first-time buyers is evident [82]

Financial Performance - Second quarter 2023 home closing revenue reached $1.5 billion on 3,490 homes, a 9.5% increase from $1.4 billion on 3,221 homes in Q2 2022[92] - The company achieved a home closing gross margin of 24.4% in Q2 2023, down from 31.6% in Q2 2022, attributed to increased incentives[92] - For the six months ended June 30, 2023, home closing revenue totaled $2.8 billion, up 5.7% from $2.7 billion in the prior year[107] - The company's gross profit for Q2 2023 was $377.0 million, with a margin of 24.4%, down from 31.6% in Q2 2022 due to increased sales incentives and elevated costs[119] - Other income for Q2 2023 was $12.9 million, compared to a net expense of $0.5 million in Q2 2022, driven by higher interest earned on cash balances[129] Home Orders and Backlog - Home orders for Q2 2023 totaled 3,340, an 11.3% decrease year-over-year, with home order value declining 18.5% to $1.5 billion[94] - The company ended Q2 2023 with a backlog of 3,772 homes valued at $1.7 billion, representing decreases of 47.9% and 50.9% year-over-year[95] - Total home orders for Q2 2023 decreased by 11.3% to 3,340 homes compared to 3,767 homes in Q2 2022, with a total order value of $1.5 billion, down 18.5% year-over-year[106] - The order backlog at June 30, 2023, was valued at $1.7 billion, down 50.9% from $3.4 billion at June 30, 2022, with homes in backlog decreasing by 47.9% to 3,772 units[102] Sales and Pricing - Average sales price (ASP) on closings improved by 1.1% to $442.1 thousand despite increased incentives, driven by a favorable mix of closings in higher-priced markets[92] - The average sales price (ASP) for homes ordered in Q2 2023 was $441.5 thousand, a decrease of 8.1% from $480.5 thousand in Q2 2022[106] - The West Region reported home closing revenue of $519.2 million for Q2 2023, up 6.8% from $486.1 million in Q2 2022, despite a decrease in ASP on closings[108] - The Central Region saw a 4.4% increase in home closings to 1,094 homes in Q2 2023, with revenue rising 8.2% to $456.8 million[110] Cancellation and Construction - The cancellation rate returned to a normalized 12% in Q2 2023, down from 15% in Q1 2023 and 13% in Q2 2022[94] - The cancellation rate for Q2 2023 was 12%, slightly improved from 13% in Q2 2022, aligning with historical averages[106][104] - Construction cycle time was reduced by over three weeks for new home starts in Q2 2023 compared to Q1 2023, nearing historical averages[91] Financial Services - Financial services reported a loss of $2.6 million in Q2 2023, compared to a profit of $4.1 million in Q2 2022, primarily due to $7.9 million in charges for expired interest rate locks[92] - Financial services reported a loss of $2.6 million in Q2 2023, primarily due to $7.9 million in charges related to unused prepaid interest rate locks[124] Tax and Expenses - The effective income tax rate decreased to 22.0% in Q2 2023 from 24.6% in 2022, benefiting from energy tax credits under the Inflation Reduction Act[92] - The effective tax rate decreased to 22.0% in Q2 2023 from 24.6% in Q2 2022, reflecting energy-efficient homes tax credits introduced in 2022[130] - Commissions and other sales costs increased to $95.8 million in Q2 2023, representing 6.2% of home closing revenue, up from 4.9% in the prior year[126] - General and administrative expenses for Q2 2023 were $52.1 million, maintaining 3.4% of home closing revenue, consistent with the previous year[127] Cash Flow and Liquidity - Net cash provided by operating activities for the six months ended June 30, 2023, totaled $355.9 million, compared to a net cash used in operations of $206.8 million for the same period in 2022[141] - The company expects to meet short-term liquidity requirements primarily through cash and cash equivalents on hand and net cash flows from operations[134] - Net cash used in financing activities for the six months ended June 30, 2023, was $32.1 million, significantly lower than $121.1 million for the same period in 2022[143] Debt and Capital - As of June 30, 2023, the debt-to-capital ratio was 21.4%, down from 22.6% as of December 31, 2022[144] - The company had no debt maturities until 2025, with maximum exposure to loss on purchase agreements generally limited to non-refundable deposits[137] - The minimum tangible net worth requirement under the Credit Facility is $2.8 billion, with the actual net worth reported at $4.25 billion as of June 30, 2023[147] - The leverage ratio as of June 30, 2023, was reported at (0.1)%, indicating compliance with the maximum leverage covenant of 60%[148] Dividends - The company paid a quarterly cash dividend of $0.27 per share during the three months ended June 30, 2023, totaling $0.54 per share for the six months ended June 30, 2023[145]

Financial Performance - In Q1 2023, the company achieved home closing revenue of $1.3 billion on 2,897 homes, a 1.3% increase from $1.2 billion on 2,858 homes in Q1 2022[87]. - The gross margin for home closings declined by 790 basis points to 22.4%, resulting in a gross profit of $282.5 million, down from $377.6 million in Q1 2022[87]. - The company reported financial services profit of $2.9 million for Q1 2023, down from $3.3 million in the prior year[109]. - Operating cash flow for Q1 2023 was $124.5 million, a significant increase from $12.2 million in Q1 2022, driven by net earnings of $131.3 million[125]. - Commissions and other sales costs increased to $82.8 million, representing 6.6% of home closing revenue, up from 5.3% in the previous year[110]. - General and administrative expenses rose to $47.5 million, accounting for 3.8% of home closing revenue, an increase from 3.2% in Q1 2022[111]. Home Orders and Backlog - Home orders totaled 3,487, a 10.0% decrease year-over-year, with a cancellation rate improving to 15% from 39% in Q4 2022[88]. - The company ended Q1 2023 with a backlog of 3,922 homes valued at $1.8 billion, representing a 41.4% decrease in units and a 42.0% decrease in value from March 31, 2022[88]. - Homes ordered in Q1 2023 totaled 3,487, down by 387 units or 10.0% from 3,874 in Q1 2022[96]. - The order backlog as of March 31, 2023, was $1,763,832, down $1,275,095 or 42.0% from $3,038,927 in the previous year[98]. - Homes in backlog decreased to 3,922, a reduction of 2,773 homes or 41.4% compared to 6,695 homes in Q1 2022[98]. - The total cancellation rate increased to 15% in Q1 2023, up from 10% in Q1 2022[97]. Sales Performance - The average sales price (ASP) for home closings was flat at $435.6 thousand, while ASP on orders decreased by 5.3%[87][88]. - The average sales price for homes in Q1 2023 was $432.1, a decline of $24.2 or 5.3% from $456.3 in Q1 2022[96]. - The average sales price in the East Region increased by 2.9% to $427.9 in Q1 2023, compared to $415.9 in Q1 2022[98]. - The average sales price in the West Region decreased by 6.8% to $492.5 in Q1 2023, down from $528.6 in Q1 2022[98]. Regional Performance - The West Region saw a 9.1% decrease in home closing volume to 785 homes, with revenue down 9.9% to $417.3 million[100]. - The Central Region experienced a 20.0% increase in volume to 1,048 homes, resulting in a 22.2% increase in revenue to $424.9 million[101]. - The East Region closed 1,064 homes for $419.7 million, a 3.3% decrease in revenue despite a 1.9% increase in ASP[102]. - The Central Region's backlog decreased by 56.9% to $419,822 in Q1 2023, down from $973,828 in Q1 2022[98]. Operational Efficiency - The construction cycle time improved by approximately one week compared to the same period last year, despite ongoing labor and supply chain challenges[86]. - Active communities increased to 278 in Q1 2023, compared to 268 in Q1 2022, reflecting a growth of 3.7%[97]. Financial Position and Strategy - The company maintains a debt-to-capital ratio of 22.1% and a net debt-to-capital ratio of 4.5% as of the end of Q1 2023[93]. - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing if necessary[121]. - As of March 31, 2023, the debt-to-capital ratio was 22.1%, slightly down from 22.6% at the end of 2022[128]. - The net debt-to-capital ratio improved to 4.5% as of March 31, 2023, compared to 6.8% at the end of 2022[128]. - The leverage ratio was reported at 3.8%, well below the maximum covenant limit of 60%[130]. - The interest coverage ratio stood at 21.33, significantly above the required minimum of 1.50[130]. Recognition and Future Plans - The company was awarded the 2023 ENERGY STAR® Partner of the Year for Sustained Excellence, marking its tenth recognition since 2013[91]. - The company plans to leverage technological solutions and expand its energy efficiency program to enhance market differentiation[93]. - Seasonal variations in home sales are expected, with higher sales typically occurring in the first half of the fiscal year, impacting working capital needs[131].

Financial Data and Key Metrics Changes - In Q1 2023, the company achieved home closing revenue of $1.3 billion, slightly exceeding the prior year, with 2,897 homes closed, which was a 1% increase year-over-year [19][58] - The home closing gross margin for the quarter was 22.4%, down from 30.3% in the prior year, primarily due to price concessions and elevated direct costs [64][66] - The diluted EPS for Q1 2023 was $3.54, reflecting a 39% year-over-year decline [66] Business Line Data and Key Metrics Changes - Sales orders for Q1 2023 were 3,487 homes, up 93% sequentially from Q4 2022 but down 10% year-over-year [32] - Entry-level homes comprised 87% of orders, up from 83% in the prior year [32] - The cancellation rate for Q1 2023 was 15%, down from 39% in Q4 2022, aligning with historical averages [32] Market Data and Key Metrics Changes - The average absorption pace in Arizona was 5.2 homes per month, the highest, but it experienced the largest year-over-year decline in average selling prices (ASPs) [24] - The Central region, primarily Texas, had an absorption pace of 4.4 homes per month, showing improvement due to better availability of completed specs [24] - The East region's average absorption pace was 3.8 homes per month, with demand remaining strong despite lower supply of completed specs [34] Company Strategy and Development Direction - The company focuses on affordable entry-level homes and a spec building strategy, which has positioned it as a top five builder in the U.S. based on home closings in 2022 [20][31] - The company aims to maintain a sales pace of three to four net sales per month while managing incentives and pricing strategically [44][71] - The company is committed to reducing cycle times and improving backlog conversion rates, targeting an 80% conversion rate [36][62] Management's Comments on Operating Environment and Future Outlook - Management noted that the housing market remains undersupplied, which is expected to support long-term home buying demand [29] - The company anticipates that the pro-business environment and in-migration trends in Texas will positively impact future home buyer demand [34] - Management expressed optimism about achieving improved cycle times and backlog conversion rates in the latter half of the year [36][71] Other Important Information - The company ended Q1 2023 with nearly 3,900 spec homes in inventory, down 21% sequentially [35] - The company generated $96 million in free cash flow and had $957 million in cash at the end of the quarter, maintaining a strong liquidity position [40] - The company announced its inaugural quarterly cash dividend of $0.27 per share, totaling approximately $10 million for the quarter [67] Q&A Session Summary Question: What is the expected backlog turnover rate? - Management expects to sustain an 80% plus backlog conversion rate, contingent on supply chain stability [46] Question: When will starts match or exceed order pace? - Management anticipates that starts will begin to match sales in Q2 2023 [46] Question: What is the impact of cancellations on ASP? - Cancellations had a significant impact on ASP, with a portion of the ASP increase attributed to rate buydowns and pricing adjustments [74] Question: What are the expectations for SG&A expenses going forward? - SG&A expenses are expected to normalize as the company reduces advertising and commission costs [85] Question: How does the company view capital allocation? - The company is committed to returning capital to shareholders through dividends and share buybacks, reflecting a strong cash position [120]

Financial Performance - First quarter home closings and home closing revenue reached a record high[1] - First quarter 2023 home closing revenue was $1.2619 billion, a 1% increase year-over-year from $1.2455 billion[19] - First quarter 2023 net earnings were $131.3 million, a 40% decrease year-over-year[43] - First quarter 2023 diluted EPS was $3.54, a 39% decrease year-over-year[43] - First quarter 2023 home closing gross margin was 22.4%, a 790 bps decrease year-over-year[35] Balance Sheet and Capital Allocation - The company had $957 million in cash[2] - Land spend totaled $310 million[2] - Net debt was $194 million[21] - The company repurchased over 93,000 shares for $10 million[21] Land and Lots - Total lots controlled as of the end of the first quarter 2023 were 60,942, compared to 75,176 in the first quarter 2022[3] - 75% of lots controlled are owned, while 25% are optioned[3] Guidance - Second quarter 2023 home closings are projected to be 2,800-3,100[23] - Second quarter 2023 home closing revenue is projected to be $1.22-1.36 billion[23] - Second quarter 2023 home closing gross margin is expected to be around 22%[23]

Financial Performance - Home closing revenue for 2022 reached $6.2 billion, a 21.8% increase year-over-year, driven by a 10.2% rise in closing volume and a 10.6% increase in average sales price [27][30]. - Net earnings increased by 34.5% to $992.2 million, with diluted EPS rising by 38.6% compared to the previous year [27][30]. - The gross margin on home closings improved to 28.6%, up 80 basis points from 27.8% in 2021, marking the highest full-year margin in company history [30]. - Earnings before income taxes increased by 35.0% to $1.3 billion in 2022, up from $954.8 million in 2021 [154]. - Home closing gross profit increased by $354.6 million to $1.8 billion in 2022, with a gross margin improvement to 28.6% [181]. - Financial services profit for 2022 was $18.3 million, a slight increase of $0.3 million compared to 2021, despite higher home closing volumes [186]. Sales and Orders - The company experienced a 14.8% reduction in order volume in the second half of 2022, leading to a 9.3% decrease in home order value compared to 2021 [30][29]. - The company experienced significant cancellations in the last half of 2022, attributed to economic uncertainty and rising interest rates, with expectations for cancellations to trend above normal in early 2023 [90]. - Homes in backlog decreased by 41.3% year-over-year, totaling 3,332 units valued at $1.5 billion as of December 31, 2022, down from 5,679 units valued at $2.5 billion in 2021 [153]. - The company experienced a 14.8% decline in order volume, with 11,759 orders in 2022 compared to 13,808 in 2021, attributed to decreased demand and a higher cancellation rate of 21.0% [153]. - Cancellation rates increased to 21.0% in 2022, compared to 10.2% in 2021, indicating a significant rise in cancellations [173]. Inventory and Land Acquisition - As of December 31, 2022, the company had cash and cash equivalents of $861.6 million, up from $618.3 million at the end of 2021, while inventory grew by 16.7% to $4.4 billion [31]. - In 2022, the company invested approximately $1.5 billion in land acquisition and development, securing about 2,000 net new lots, a significant decrease from 34,000 in 2021 [32]. - As of December 31, 2022, the company had 63,182 lots under control, down from 75,049 in 2021, maintaining a 4.5-year supply of lots based on 2022 closings [32]. - At the end of 2022, the company had 46,317 owned lots and 16,865 lots under committed purchase or option contracts, with a total purchase price of approximately $738.5 million [39]. Debt and Liquidity - The debt-to-capital ratio was 22.6% and the net debt-to-capital ratio was 6.8% at the end of 2022, compared to 27.6% and 15.1% respectively at the end of 2021 [31]. - As of December 31, 2022, the company had approximately $1.2 billion in indebtedness and $861.6 million in cash and cash equivalents [102]. - The company has $725.6 million available to be drawn under its credit facility, which may be necessary for working capital needs [102]. - The company's credit ratings were BB+, Ba1, and BB+ from Standard and Poor's, Moody's, and Fitch Ratings, respectively, as of December 31, 2022 [104]. Operational Challenges - The company experienced building material cost pressures and supply chain constraints throughout 2022, impacting construction timelines [45]. - Supply chain and labor constraints in 2021 and 2022 led to lengthened construction cycle times, with expectations for these conditions to persist at least through early 2023 [91]. - The company faced higher material and labor costs in recent months, negatively impacting profitability, although it has historically passed cost increases onto customers [87]. - The company experienced delays in construction schedules due to a limited pool of subcontract labor, impacting construction cycle times in 2021 and 2022 [112]. Market Conditions - In 2022, long-term interest rates increased significantly from historically low averages, impacting home sales and cash flow, with potential material effects on the business [84]. - Home prices declined in the latter half of 2022 due to rising interest rates, with expectations for this trend to continue into 2023 and potentially beyond, adversely affecting homebuilding volumes and cash flows [92]. - The company is subject to competitive pressures from national, regional, and local developers, with competition expected to intensify in the housing industry [97]. - The company’s operational success is dependent on the availability of lots and land that meet its investment criteria, which is influenced by external factors [107]. Strategic Initiatives - The company’s strategy includes a focus on affordable, quick move-in homes, with a goal of achieving a 100% speculative home building strategy for entry-level products [20][21]. - The company’s marketing strategy includes digital offerings such as virtual tours and a chatbot for customer support, enhancing the home buying experience [51]. - The company aims for a 100% spec home building strategy for entry-level products, with spec inventory per active community increasing to 18.0 units or 4,891 units as of December 31, 2022, compared to 12.3 units or 3,180 units a year prior [54]. - The company believes favorable homebuyer demographics support long-term demand for homes, despite current downward pressure on the housing market [151]. Environmental and Regulatory Factors - Meritage Homes has adopted an Environmental Responsibility Policy and issued its inaugural Task Force on Climate-Related Financial Disclosures report in 2022 [23]. - The company has received multiple awards for its commitment to energy efficiency, including the 2022 EPA's ENERGY STAR Partner of the Year for Sustained Excellence [24]. - California's updated building codes require all homes constructed with permits obtained in 2020 and beyond to have solar panels, which may increase future operating and compliance costs [123]. - The company anticipates that new building code requirements imposing stricter energy efficiency standards could significantly increase construction costs [124]. - The SEC's proposed climate-related disclosure rules could impose significant compliance costs if adopted, impacting the company's financial performance [125].