Financial Performance - In 2024, the company repurchased 1,464,510 shares, representing 2.0% of the shares outstanding, for $125.9 million and paid dividends totaling $108.6 million[31]. - The inventory grew by 21.3% to $5.7 billion, while cash and cash equivalents decreased to $651.6 million from $921.2 million at the end of 2023[31]. - The debt-to-capital ratio increased to 20.6% from 17.9% in 2023, while the net debt-to-capital ratio rose to 11.7% from 1.9%[31]. - As of December 31, 2024, the backlog decreased by 39.4% to 1,544 units from 2,549 units at the end of 2023, with a 42.1% decrease in backlog value to $629.5 million from $1.1 billion[55]. - The company had $40.0 million in both borrowings and repayments under the Credit Facility during the year ended December 31, 2022[228]. Land Acquisition and Development - The company invested approximately $2.5 billion in land acquisition and development, securing about 37,000 net new lots, an increase from 16,000 in 2023[32]. - The company ended 2024 with 85,613 lots under control, up from 64,313 in 2023, with nearly all designated for entry-level communities[32]. - At December 31, 2024, the company had 53,335 owned lots and 32,278 lots under committed purchase or option contracts, totaling approximately $1.4 billion[39]. Construction and Sales - The company closed 15,611 homes and started construction on 15,824 homes during 2024[32]. - The spec inventory per active community increased to 24.1 or 7,029 units as of December 31, 2024, compared to 21.8 or 5,877 units as of December 31, 2023[53]. - At December 31, 2024, 100% of the 1,544 homes in backlog were under construction, indicating a strong commitment to fulfilling sales contracts[54]. - The company aims for a 100% spec home building strategy, which is reflected in the increase of spec inventory[53]. Customer Engagement and Marketing - The strategic shift in mid-2024 focused on real estate agents as the primary customer, supported by the Agents Rock Rewards program[46]. - The company aims to provide a simplified home buying process with pre-selected design combinations, appealing to first-time buyers[47]. - The company offers various sales incentives, including mortgage-related incentives, to attract buyers based on local market conditions[51]. - The company has implemented extensive online tools, including virtual tours and a dedicated Agent Portal, to enhance the customer experience[10]. Workforce and Company Culture - The company employs 1,898 full-time employees, with 473 in sales and marketing, indicating a robust workforce to support operations[73]. - The company was certified as a Great Place to Work® for the second consecutive year and named as Fortune's Best Workplaces for Construction[74]. - The company has a strategy to maintain good relationships with subcontractors and independent consultants[74]. Financial Instruments and Interest Rates - The company has $1.3 billion in aggregate principal amount of senior and convertible senior notes, all bearing fixed rates of interest[227]. - The weighted average interest rate for the senior and convertible senior notes is 3.236%[229]. - The fair value of fixed rate senior and convertible senior notes at December 31, 2024 is $1,284.4 million[229]. - The company’s operations are sensitive to interest rate changes, which may adversely affect revenue and gross margins[229]. - The company does not intend to enter into derivative interest rate swap financial instruments for trading or speculative purposes[229]. Warranty and Quality Control - The warranty reserves for future structural warranty costs are estimated to range between 0.1% to 0.5% of a home's sale price, reflecting a proactive approach to quality control[60]. Seasonal Trends - The company experienced seasonal variations in quarterly operating results, typically taking more orders in the first half of the fiscal year[75].

Group 1 - The individual investor focuses on managing personal capital accumulated over the years, utilizing a diverse range of investment strategies including fundamental, technical, and momentum investing [1] - The investor aims to leverage the strengths of various investment approaches to refine their investment process [1] - The purpose of writing on Seeking Alpha is to track the performance of investment ideas and connect with like-minded investors [1]

Financial Data and Key Metrics Changes - In Q4 2024, Meritage Homes delivered 4,044 homes, achieving a home closing gross margin of 23.2% and a diluted EPS of $4.72, marking a 12% year-over-year decrease in diluted EPS from $5.38 in Q4 2023 [10][47] - The full-year 2024 home closing revenue reached $6.3 billion, a 5% increase from 2023, with a closing gross margin of 24.9%, slightly up from 24.8% in 2023 [11][48] - The company reported a book value per share of $143.98, reflecting a 21% compounded annual growth rate over three years [12] Business Line Data and Key Metrics Changes - Sales orders for Q4 2024 totaled 3,304 homes, with 91% from entry-level homes, up from 88% the previous year, and a cancellation rate of 10% [23] - The average sales price (ASP) for orders was $400,000, down 4% year-over-year due to increased financing incentives and a shift in product and geographic mix [24] - The ending community count increased to 292, a 5% rise from Q3 2024 and an 8% increase from Q4 2023 [25] Market Data and Key Metrics Changes - The average absorption pace improved across all regions, with the central region (Texas) showing the highest at 4.7% per month [27] - The East region had an average absorption pace of 3.8%, while the West region experienced a 10% year-over-year growth in absorption pace to 3.3% [29] - The company anticipates a double-digit year-over-year increase in community count by the end of 2025, driven by favorable demographics and undersupply of homes [30] Company Strategy and Development Direction - Meritage Homes is focused on increasing market share by delivering affordable, move-in ready homes, with a goal of 20,000 units by 2027 [26][60] - The company has expanded its operations into new markets, including Alabama, and is committed to maintaining a strong land position to support growth [19][58] - The company plans to utilize off-balance sheet land financing to enhance capital efficiency, particularly in California [118][126] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the spring selling season, despite a slower start in January, and believes they can achieve their full-year closing guidance [70] - The company is prepared to adjust incentives based on market conditions, with a focus on maintaining margins while achieving volume targets [78][80] - Management remains confident in the long-term growth trajectory, citing strong demand for affordable homes despite current economic challenges [60][134] Other Important Information - Meritage Homes has returned nearly $0.5 billion to shareholders through share buybacks and dividends since 2022 [15] - The company completed a 2-for-1 stock split on January 2, 2025, reflecting confidence in its long-term growth [55] - The effective income tax rate for Q4 2024 was 22.1%, down from 23.2% in Q4 2023, benefiting from energy tax credits [45] Q&A Session Summary Question: Drivers of gross margin trajectory and expectations for 2025 - Management indicated that gross margin is primarily influenced by incentives and that improvements could occur if demand increases and financing costs stabilize [66] Question: Ability to meet full-year closings guidance - Management expressed confidence in meeting guidance, citing current market conditions and inventory levels [71] Question: Strategy regarding volume and margin balance - Management stated they are willing to adjust margins based on market conditions, with a focus on achieving volume targets [78] Question: Community count growth and regional performance - Management noted that community count growth is expected to be steady, with a focus on the Southeast region [111] Question: Long-term land strategy and joint ventures - Management confirmed the initiation of a joint venture for land financing in California, aiming for increased capital efficiency [118][126]

FOURTH QUARTER 2024 ANALYST CONFERENCE CALL JANUARY 30, 2025 Safe Harbor The information included in this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general and our future results including our ability to increase our market share, full year 2025 projected home closing volume and home closing revenue, as well as first quarter 2025 projected home closing volume, h ...

Earnings and Revenue Performance - Earnings per share (EPS) of $4.72 beat the Zacks Consensus Estimate by 113.6% but declined 12% year over year from $5.38 [4] - Total revenues of $1.62 billion decreased 2.3% year over year from $1.66 billion [4] - Total closing revenues of $1.61 billion declined 2% year over year but exceeded the consensus estimate of $1.57 billion by 2.8% [5] - Home closing revenues under the Homebuilding segment fell 3% year over year to $1.595 billion due to lower average sales prices (ASPs) [5] - Land closing revenues increased 49% year over year to $17.4 million [5] Operational Metrics - Homes closed increased 2% year over year to 4,044 units, with ASPs declining 5% to $395,000 [6] - Total home orders rose 14% year over year to 3,304 homes, with dollar value increasing 10% to $1.32 billion [7] - Entry-level buyers accounted for 91% of sales orders, up from 88% in the prior-year period [8] - Backlog units decreased 39% year over year to 1,544, with backlog value down 42% to $629.5 million [8] - Average absorption pace improved 8% year over year to 3.9 homes per month [7] Margins and Expenses - Home closing gross margin contracted 200 basis points (bps) to 23.2%, driven by higher lot costs and financing incentives [9] - Selling, general, and administrative expenses as a percentage of home closing revenues increased 10 bps to 10.8% [10] - Financial Services segment revenues grew 17% year over year to $8.4 million [10] Full-Year 2024 Highlights - Total revenues for 2024 increased 4.2% year over year to $6.4 billion [12] - EPS rose 8% year over year to $21.44 [12] - Homes delivered increased 12% to 15,611, with ASPs declining 6% to $406,000 [12] - Gross margins improved 10 bps to 24.9% [12] Financial Position - Cash and cash equivalents decreased to $651.6 million from $921.2 million at the end of 2023 [13] - Total lots owned or controlled increased to 65,600, including 5,500 from the Elliott Homes acquisition [13] - Total debt to capital rose to 20.6% from 17.9% at the end of 2023, while net debt to capital increased to 11.7% from 1.9% [13] - Net cash used by operating activities was $227.6 million, compared to $355.6 million provided in 2023 [14] - The company paid $108.6 million in dividends and repurchased 732,255 shares for $125.9 million [14] 2025 Guidance - The company expects to close between 16,250 and 16,750 homes, up from 15,611 in 2024 [15] - Revenue is projected to be between $6.6 billion and $6.9 billion, reflecting continued demand for affordable housing [15] Peer Performance - D R Horton reported Q1 fiscal 2025 earnings and revenues beating estimates but declining year over year [16] - D R Horton leveraged mortgage rate buydowns and smaller floor plans to address affordability challenges [17] - KB Home posted strong Q4 2024 results, with revenues and earnings surpassing expectations and increasing year over year [18] - KB Home's strategy focused on faster build times and strong homeownership demand despite mortgage rate pressures [19] - NVR reported Q4 2024 earnings and Homebuilding revenues exceeding estimates, with both metrics increasing year over year [20] - NVR saw strong growth in settlements despite a decline in new orders [21]

Financial Performance - Revenue for Q4 2024 was $1.61 billion, a 2.4% decrease year-over-year [1] - EPS for Q4 2024 was $4.72, a significant increase from $2.69 in the year-ago quarter [1] - Revenue exceeded the Zacks Consensus Estimate by 2.80%, with EPS surpassing estimates by 113.57% [1] Key Metrics Analysis - Home Closing Revenue - Average sales price was $395, slightly below the 10-analyst average estimate of $402.77 [4] - Homes closed totaled 4,044, exceeding the 10-analyst average estimate of 3,885 [4] - Homes ordered were 3,304, slightly below the 10-analyst average estimate of 3,352 [4] - Order Backlog was 1,544, below the nine-analyst average estimate of 1,759 [4] - Active Communities - Ending - Total was 292, below the eight-analyst average estimate of 303 [4] - Order Backlog - Average sales price was $408, slightly above the eight-analyst average estimate of $406 [4] - Order Backlog Value was $629.55 million, below the seven-analyst average estimate of $708.57 million [4] - Homes Ordered Value was $1.32 billion, slightly below the six-analyst average estimate of $1.35 billion [4] Revenue Breakdown - Total closing revenue (Homebuilding) was $1.61 billion, exceeding the 11-analyst average estimate of $1.57 billion, with a year-over-year change of -2.4% [4] - Home closing revenue was $1.60 billion, exceeding the 11-analyst average estimate of $1.56 billion, with a year-over-year change of -2.8% [4] - Land closing revenue was $17.36 million, significantly above the 10-analyst average estimate of $6.15 million, with a year-over-year change of +48.6% [4] - Financial Services revenue was $8.43 million, above the 10-analyst average estimate of $7.43 million, with a year-over-year change of +17.1% [4] Stock Performance - Shares of Meritage returned +5.2% over the past month, outperforming the Zacks S&P 500 composite's +1.7% change [3] - The stock currently has a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Company Performance - Meritage Homes reported quarterly earnings of $4.72 per share, significantly exceeding the Zacks Consensus Estimate of $2.21 per share, and up from $2.69 per share a year ago, representing an earnings surprise of 113.57% [1] - The company achieved revenues of $1.61 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.80%, although this is a slight decrease from year-ago revenues of $1.65 billion [2] - Over the last four quarters, Meritage has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Outlook - The immediate price movement of Meritage shares will largely depend on management's commentary during the earnings call, with shares having increased by about 5.2% since the beginning of the year, compared to the S&P 500's gain of 3.2% [3] - Current consensus EPS estimate for the upcoming quarter is $1.90 on revenues of $1.33 billion, and for the current fiscal year, it is $10.52 on revenues of $6.84 billion [7] Industry Context - The Building Products - Home Builders industry, to which Meritage belongs, is currently ranked in the bottom 14% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Meritage's stock may be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Home Closings and Revenue - In Q4 2024, Meritage Homes closed 4,044 homes, a 2% increase from 3,951 homes in Q4 2023, while full year closings reached 15,611 homes, up 12% year-over-year[4] - Home closing revenue for Q4 2024 was $1.6 billion, a 3% decrease from $1.64 billion in Q4 2023, with full year revenue at $6.34 billion, reflecting a 5% increase from $6.06 billion in 2023[4] - The average sales price for home closings in Q4 2024 was $395,000, down 5% from $415,000 in Q4 2023, while the full year average sales price decreased by 6% to $406,000[4] - Home orders in Q4 2024 totaled 3,304 units, a 14% increase year-over-year, with a total of 14,606 orders for the full year, up 11% from 2023[4] - In Q4 2024, the total homes closed reached 4,044 with a total value of $1,595,928, compared to 3,951 homes closed valued at $1,641,520 in Q4 2023, reflecting a 2.3% increase in homes closed but a 2.8% decrease in total value[25] - For the twelve months ended December 31, 2024, homes closed totaled 15,611 with a value of $6,341,546, up from 13,976 homes closed valued at $6,056,784 in 2023, indicating an increase of 11.7% in homes closed and 4.7% in total value[25] Financial Performance - Net earnings for Q4 2024 were $172.6 million, a 13% decrease from $198.9 million in Q4 2023, resulting in diluted EPS of $4.72, down 12% from $5.38[4] - Net earnings for the twelve months ended December 31, 2024, rose by 6% to $786,186 compared to $738,748 in 2023[18] - Earnings per common share for 2024 was $21.70, an increase of 8% from $20.17 in 2023[19] - Financial services revenue increased by 23% to $31,163 in 2024 from $25,250 in 2023[18] - The company reported a total cost of closings of $4,780,012 for the twelve months ended December 31, 2024, an increase of 4% from $4,606,457 in 2023[18] - The company experienced a gross profit margin of 25% on home closings for the twelve months ended December 31, 2024[18] Backlog and Orders - The ending backlog for Q4 2024 was 1,544 units, a 39% decrease from 2,549 units in Q4 2023, with a backlog value of $629.5 million, down 42% from $1.09 billion[4] - Homes ordered in Q4 2024 totaled 3,304 with a value of $1,320,447, compared to 2,892 homes ordered valued at $1,198,740 in Q4 2023, representing a 14.2% increase in homes ordered and a 10.1% increase in value[25] - The order backlog as of December 31, 2024, was 1,544 homes valued at $629,549, down from 2,549 homes valued at $1,088,137 in 2023, indicating a 39.4% decrease in backlog homes and a 42.1% decrease in value[25] Land Acquisition and Development - The company’s land acquisition and development spend in Q4 2024 was $741.5 million, compared to $653.5 million in Q4 2023, with a total of $2.5 billion spent for the full year[11] - Meritage Homes completed the acquisition of Elliott Homes, adding approximately 5,500 lots, contributing to a total of 85,600 lots owned or controlled as of December 31, 2024, a 33% increase from 64,300 lots in 2023[11] Dividends and Share Repurchase - The company declared a quarterly cash dividend of $0.75 per share in Q4 2024, totaling $27 million, up from $0.27 per share in Q4 2023, with full year dividends of $108.6 million[11] - The company repurchased shares worth $125,932 during the twelve months ended December 31, 2024[23] Assets and Liabilities - Total assets as of December 31, 2024, were $7,162,654, up from $6,353,134 in 2023[21] - Cash and cash equivalents decreased to $651,555 as of December 31, 2024, from $921,227 in 2023[21] - The company reported a debt-to-capital ratio of 20.6% as of December 31, 2024, compared to 17.9% in 2023, reflecting an increase in leverage[30] Community and Market Position - Active communities increased to 292 in Q4 2024 from 270 in Q4 2023, showing a growth of 8.1% year-over-year[26] - The average active communities for the twelve months ended December 31, 2024, was 280.4, compared to 276.4 in 2023, indicating a slight increase of 1.4%[26] - Meritage Homes Corporation is the fifth-largest public homebuilder in the U.S., focusing on energy-efficient and affordable homes across multiple states[32] - The company has delivered nearly 200,000 homes in its 39-year history, emphasizing its commitment to quality construction and customer experience[33]

Core Viewpoint - Meritage Homes Corporation reported a record-setting year in 2024, achieving the highest annual closing volume and home closing revenue despite a decline in average sales prices. The company is well-positioned to capture demand in the upcoming spring selling season due to favorable demographics and an undersupply of homes at their price points [4][10]. Financial Performance - In Q4 2024, homes closed increased by 2% year-over-year to 4,044 units, while home closing revenue decreased by 3% to $1.6 billion. The average sales price for closings fell by 5% to $395,000 [2][9]. - For the full year 2024, home closing revenue rose by 5% to $6.3 billion, driven by a 12% increase in home closing volume to 15,611 units, despite a 6% decline in average sales prices [2][5]. - Net earnings for Q4 2024 were $172.6 million, a 13% decrease from the previous year, resulting in diluted EPS of $4.72, down 12% year-over-year. However, full year net earnings increased by 6% to $786.2 million, with diluted EPS rising to $21.44 [2][9][10]. Orders and Backlog - Home orders in Q4 2024 increased by 14% year-over-year to 3,304 units, with an average monthly absorption pace of 3.9 homes. The total home orders for the full year reached 14,606, an 11% increase from 2023 [5][6]. - The ending backlog decreased by 39% to 1,544 units, with a backlog value of $629.5 million, down 42% from the previous year [2][5]. Cost and Margins - The home closing gross margin for Q4 2024 was 23.2%, down from 25.2% in Q4 2023, attributed to higher lot costs and increased financing incentives [9][10]. - Selling, general and administrative expenses as a percentage of home closing revenue were 10.8% for Q4 2024, slightly up from 10.7% in the previous year [9]. Capital Allocation and Liquidity - The company invested $741.5 million in land acquisition and development in Q4 2024, including the acquisition of Elliott Homes, and ended the year with cash of $651.6 million [4][13]. - Meritage Homes declared and paid quarterly cash dividends of $0.75 per share in Q4 2024, totaling $27 million, an increase from $0.27 per share in the same quarter of 2023 [13][10]. Guidance - For full year 2025, the company projects home closing volume between 16,250 and 16,750 units and home closing revenue of $6.6 to $6.9 billion [10].

Earnings Report and Estimates - Meritage Homes Corporation (MTH) is scheduled to report Q4 2024 results on Jan 29, after market close [1] - The Zacks Consensus Estimate for Q4 2024 EPS decreased to $2.25 from $2.27 in the past 30 days, indicating a 16.4% YoY decrease from $2.69 [3] - The consensus mark for revenues is pegged at $1.57 billion, indicating a 5.1% YoY decrease [3] Quarterly Performance and Factors - Total closing revenues decreased 2% YoY in the last reported quarter [2] - Q4 earnings and revenues are expected to decrease YoY due to affordability pressures and increased use of incentives [4] - The company expects home closings to be in the range of 3,750-3,950 units, down from 3,951 units a year ago [5] - Home closing revenues are anticipated to be in the $1.5-$1.59 billion range, down from $1.64 billion YoY [5] Segment-wise Performance - Homebuilding segment, which contributed 99.6% to total revenues in 2023, is predicted to drop 5.3% YoY to $1.57 billion [7] - Financial services revenues, which contributed 0.4% to total revenues in 2023, are expected to increase 8.8% YoY to $7.8 million [7] Margins and Incentives - Gross margins are forecasted to be in the range of 22.5% to 23.5%, down from Q3's 24.8% and the prior year's 25.2% [8] - Increased use of financing incentives, including rate buydowns, has weighed on the company's ASP [8] Backlogs and Home Orders - Home orders are expected to grow 24% to 3,587 units in Q4 2024 [9] - Total backlog is expected to decline 22% to 1,988 units, with the total backlog value decreasing 25% YoY to $816.2 million [9] Integration and Market Focus - Meritage Homes is integrating Elliott Homes, a private builder with a strong presence in the Gulf Coast markets [5] - The company's focus on the entry-level market, which remains structurally undersupplied, should continue to provide a steady stream of buyers [4] Earnings ESP and Zacks Rank - MTH has an Earnings ESP of -1.27% and a Zacks Rank 3, indicating no predicted earnings beat for the quarter [10] Other Companies in the Sector - Weyerhaeuser (WY) has an Earnings ESP of +1.01% and a Zacks Rank of 1, with expected Q4 2024 earnings to decrease 56.3% [11] - Sterling Infrastructure, Inc. (STRL) has an Earnings ESP of +2.99% and a Zacks Rank of 3, with expected Q4 2024 earnings to increase 3.1% [12] - PulteGroup, Inc. (PHM) has an Earnings ESP of +2.36% and a Zacks Rank of 3, with expected Q4 2024 earnings to decrease 2.1% [13]