Earnings Performance and Estimates - Meritage Homes has consistently beaten earnings estimates, with an average surprise of 13.77% over the last two quarters [1] - For the most recent quarter, Meritage reported earnings of $2.67 per share, beating the estimate of $2.53 per share by 5.53% [4] - In the previous quarter, the company reported $3.16 per share, surpassing the consensus estimate of $2.59 per share by 22.01% [4] Earnings ESP and Zacks Rank - Stocks with a positive Earnings ESP and a Zacks Rank 3 (Hold) or better have a 70% chance of producing a positive earnings surprise [2] - Meritage currently has an Earnings ESP of +81.61%, indicating analysts are bullish on its earnings prospects [8] - The combination of a positive Earnings ESP and a Zacks Rank 3 suggests another earnings beat is likely for Meritage [8] Analyst Estimates and Predictive Power - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the former being more accurate due to recent analyst revisions [5] - Recent estimates for Meritage have been moving higher, further supporting the likelihood of an earnings beat [7] - A negative Earnings ESP does not necessarily indicate an earnings miss but reduces the predictive power of the metric [3]

Core Insights - Meritage Homes Corporation, the fifth-largest public homebuilder in the U.S., has made significant contributions to community initiatives in 2024, totaling $3.3 million [1][4] - The company’s philanthropic efforts include donations to combat food insecurity, support education, assist military families, and improve affordable housing [1][4] Philanthropic Contributions - Meritage donated $1.5 million through its philanthropic foundation, Meritage Cares, focusing on various community support initiatives [1] - The company contributed nearly $1.8 million to K-12 education opportunities in Arizona, Florida, and Georgia [1] Specific Initiatives - **Education and Career Development**: Funded $425,000 for scholarships at Historically Black Colleges and Universities and Hispanic Serving Institutions, and supported organizations in real estate and homebuilding [4] - **Tree Planting Programs**: Donated $300,000 to the Arbor Day Foundation for tree planting and water conservation efforts [4] - **Food Insecurity**: Contributed over $190,000 to food banks and shelters, with employees packing 370,000 meal kits for hurricane victims [4] - **Military Families**: Built and donated two mortgage-free homes to military families, totaling 20 homes donated through the program [4] - **Affordable Housing**: Provided over $40,000 to the Arizona Housing Fund to support permanent housing for the homeless [4] Company Overview - Meritage Homes has delivered over 190,000 homes in its 38-year history and is recognized for its energy-efficient and affordable housing solutions [5][6] - The company operates across multiple states, including Arizona, California, Texas, and Florida, and is a leader in energy-efficient homebuilding [5][6]

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]

Core Points - Meritage Homes Corporation, the fifth largest public homebuilder in the U.S., will release its fourth quarter 2024 results on January 29, 2025, after market close [1] - A conference call to discuss the results is scheduled for January 30, 2025, at 8:00 a.m. Mountain Standard Time [1] Company Overview - Meritage Homes is recognized as the fifth-largest public homebuilder in the U.S. based on homes closed in 2023, offering energy-efficient and affordable entry-level and first move-up homes [3] - The company's operations cover multiple states including Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee [3] - Over its 38-year history, Meritage has delivered more than 190,000 homes and is known for its distinctive style, quality construction, and award-winning customer experience [4] - The company is a leader in energy-efficient homebuilding, having received multiple awards from the U.S. Environmental Protection Agency, including the ENERGY STAR® Partner of the Year for Sustained Excellence Award [4]

Core Viewpoint - Meritage Homes reported third-quarter 2024 results with earnings and total closing revenues exceeding estimates but showing a year-over-year decline, marking the seventh consecutive quarter of such performance [2][3]. Earnings & Revenue Discussion - Earnings per share (EPS) was $5.34, surpassing the Zacks Consensus Estimate by 5.7%, but down 11% from $5.98 in the same quarter last year [4]. - Total revenues reached $1.6 billion, a decrease of 1.4% from $1.62 billion year-over-year [4]. Segment Discussion - Total closing revenues were $1.588 billion, down 2% from the prior year but exceeding the consensus estimate of $1.57 billion by 0.7% [5]. - Home closing revenues under the Homebuilding segment were $1.586 billion, also down 2% year-over-year due to a lower average sales price (ASP) [5]. - The company closed 3,942 homes, an 8% increase from the previous year, while the ASP declined 9% to $402,000 [6]. Orders and Backlog - Total home orders increased by 1% year-over-year to 3,512 homes, but the dollar value of home orders decreased by 5% to $1.43 billion [7]. - The backlog at quarter-end totaled 2,284 units, down 37% year-over-year, with a backlog value decrease of 40% to $931.7 million [8]. Margins and Expenses - Adjusted home closing gross margin contracted by 190 basis points to 24.8%, influenced by increased lot costs and financing incentives [9]. - Selling, general and administrative expenses improved to 9.9% of home closing revenues, a 20 basis point improvement from the prior year [10]. Financial Services - Revenues from the Financial Services segment rose 32% year-over-year to $8.1 million [11]. Balance Sheet - Cash and cash equivalents at the end of Q3 totaled $831.6 million, down from $921.2 million at the end of 2023 [13]. - The company owned or controlled approximately 74,800 lots, an increase from about 60,700 lots a year ago [13]. Q4 2024 Guidance - Meritage Homes anticipates 3,750-3,950 closings for the year, generating revenues between $1.5 billion and $1.59 billion, down from $1.64 billion reported last year [15]. - Expected home closing gross margin is projected to be in the range of 22.5-23.5%, with EPS anticipated between $4.10 and $4.60 [16]. Industry Performance - Meritage is part of the Zacks Building Products - Home Builders industry, where PulteGroup reported revenues of $4.48 billion, reflecting an 11.8% year-over-year increase [20].

Core Points - Meritage Homes Corporation has declared a two-for-one stock split in the form of a stock dividend, effective for stockholders of record on December 31, 2024, with trading on a split-adjusted basis starting January 3, 2025 [1] Company Overview - Meritage Homes is the fifth-largest public homebuilder in the U.S., based on homes closed in 2023, offering energy-efficient and affordable entry-level and first move-up homes across multiple states [2] - The company has delivered over 190,000 homes in its 38-year history, known for distinctive style, quality construction, and award-winning customer experience [3]

Core Points - Meritage Homes Corporation declared a quarterly dividend of $0.75 per share, payable on December 31, 2024, to shareholders of record as of December 17, 2024 [1] - The Board of Directors approved a $250 million increase to the Company's share repurchase authorization, bringing the total authorized share repurchase program to $334 million as of November 21, 2024 [2] - Meritage is the fifth-largest public homebuilder in the U.S., offering energy-efficient and affordable homes across multiple states [3] - The Company has delivered over 190,000 homes in its 38-year history and is recognized for its quality construction and customer experience [4]

Home Closing Performance - Home closing units volume increased by 8.4% to 3,942 homes in Q3 2024 compared to 3,638 homes in Q3 2023[108] - Home closing revenue decreased by 1.5% to $1.6 billion in Q3 2024, primarily due to a 9.1% decrease in average sales price (ASP) to $402.3 thousand[108] - Home closing gross margin for Q3 2024 was 24.8%, a decrease of 190 basis points from 26.7% in Q3 2023, resulting in a gross profit of $392.6 million[108] - Home orders for Q3 2024 were 3,512, slightly up from 3,474 in the prior year, with a home order value of $1.4 billion, down 4.7% year-over-year[110] - Total home orders for the three months ended September 30, 2024, were $1.4 billion, a decrease of 4.7% from $1.5 billion in the same period of 2023[130] - Home order volume for the nine months ended September 30, 2024, was 11,302, an increase of 9.7% from 10,301 in the prior year[131] Backlog and Cancellation Rates - The cancellation rate improved to 10% in Q3 2024 from 11% in Q3 2023[112] - The company ended Q3 2024 with a backlog of 2,284 homes valued at $0.9 billion, a decrease of 36.7% from the previous year[113] - The backlog at September 30, 2024, was valued at $931.7 million, down 40.2% from $1.6 billion at the same time in 2023[126] - Homes in backlog decreased by 36.7% to 2,284 units at September 30, 2024, compared to 3,608 units in 2023[126] - The year-to-date cancellation rate improved to 10% from 14% in the prior year period[133] - The East Region's cancellation rate dropped to 8% from 11% in the prior year[138] Financial Performance - Net income for the nine months ended September 30, 2024, was $613.5 million, up from $539.9 million in the same period of 2023, reflecting a 13.7% increase[109] - For the nine months ended September 30, 2024, home closing revenue reached $1.7 billion, a 12.3% increase driven by an 18.4% rise in home closing volume[133] - Financial services profit for Q3 2024 was $3.1 million, a decrease of $2.6 million from $5.7 million in the same prior year period[146] - The Central Region closed 1,174 homes in Q3 2024, a 6.5% increase, but home closing revenue decreased by 7.9% to $416.8 million due to a 13.6% drop in ASP[136] - The East Region saw a 16.6% increase in home closing volume and an 11.2% increase in revenue, closing 4,462 homes for $1.7 billion in revenue for the nine months ended September 30, 2024[138] Sales and Marketing Expenses - Commissions and other sales costs decreased by $1.2 million to $97.9 million for the three months ended September 30, 2024, representing 6.2% of home closing revenue[147] - General and administrative expenses for the three months ended September 30, 2024, were $59.2 million, a decrease of $3.9 million from the prior year, improving to 3.7% of home closing revenue[148] Tax and Debt Management - The effective income tax rate for Q3 2024 was 21.6%, benefiting from energy tax credits under the Inflation Reduction Act[108] - The effective tax rate was 21.6% for the three months ended September 30, 2024, compared to 22.4% for the same period in 2023[153] - The company maintains a debt-to-capital ratio of 20.7% and a net debt-to-capital ratio of 8.8% as of Q3 2024[115] - The debt-to-capital ratio increased to 20.7% as of September 30, 2024, compared to 17.9% at the end of 2023[165] - Net debt increased to $482.7 million as of September 30, 2024, from $86.99 million at the end of 2023[165] Cash Flow and Capital Management - Net cash used in operating activities totaled $128.0 million for the nine months ended September 30, 2024, compared to net cash provided of $460.1 million for the same period in 2023[161] - Net cash provided by financing activities was $69.8 million for the nine months ended September 30, 2024, compared to net cash used of $238.2 million in the prior year[163] - Total capital increased to $6.34 billion as of September 30, 2024, from $5.62 billion at the end of 2023[165] - The company has a minimum tangible net worth requirement of $3.3 billion, with an actual net worth of $4.98 billion as of September 30, 2024[169] Regional Performance - The West Region generated $594.5 million in home closing revenue for Q3 2024, a decrease of 2.0% from $606.8 million in Q3 2023[132] - The average sales price in the West Region decreased by 5.9% year-over-year due to a shift towards more entry-level homes[132] - The West Region ended Q3 2024 with 598 homes in backlog valued at $286.3 million, down from 1,179 units valued at $579.8 million at September 30, 2023[133] Other Financial Metrics - Other income, net, was $10.7 million for the three months ended September 30, 2024, down from $13.3 million in the prior year period[150] - Seasonal variations in quarterly operating results are expected, with higher orders typically in the first half of the fiscal year[170] - The company is in compliance with all Credit Facility covenants as of September 30, 2024[168] - The company has $1.3 billion in fixed rate debt, primarily consisting of senior and convertible senior notes, which do not expose it to interest rate risk[172] - The Credit Facility is subject to interest rate changes based on SOFR or Prime rates[172] - Recent accounting pronouncements are discussed in the unaudited consolidated financial statements[171]

Financial Data and Key Metrics Changes - In Q3 2024, Meritage Homes reported home closing revenue of $1.6 billion, a 2% year-over-year decrease, with an 8% increase in home closing volumes offset by a 9% decrease in average selling price (ASP) [33][34] - The diluted EPS for Q3 2024 was $5.34, down 11% from $5.98 in Q3 2023 [39] - Book value per share increased by 15% year-over-year to $139.2, with a return on equity of 17.2% [11] Business Line Data and Key Metrics Changes - Q3 2024 orders totaled 3,512 homes, with 92% of the volume from entry-level homes, reflecting a 1% year-over-year increase [16] - The cancellation rate for the quarter was 10%, below the historical average in the mid-teens [16] - The average community count was 278, with 20 new communities brought online in Q3 2024, totaling 90 year-to-date [18] Market Data and Key Metrics Changes - The central region, primarily Texas, had the highest average absorption pace of 4.6 homes per month, exceeding the minimum target of 125% for backlog conversion [20] - The West region saw a year-over-year growth in average absorption pace to 4.2 homes per month, up from 3.6 in Q3 2023 [21] - The East region maintained an average absorption pace of 3.8 net sales per month, consistent with traditional seasonality [24] Company Strategy and Development Direction - The company is focusing on affordable, move-in ready homes, which has resonated well with home buyers, leading to strong order volumes [9] - The acquisition of Elliott Homes is expected to enhance market presence in the Gulf Coast, with plans to generate significant volume from this new division starting in 2025 [15] - The strategic evolution aims to bring homes to near completion before sales to align with existing resale timelines, targeting entry-level and first move-up homes [25][26] Management's Comments on Operating Environment and Future Outlook - Management noted that despite a volatile mortgage rate environment, demand remains steady, with expectations of lower rates in the coming quarters [55] - The company anticipates that the combination of favorable demographics and an undersupply of homes will support continued growth in market share [54] - Management expressed confidence in the ability to maintain sales pace through financial incentives, including rate buydowns, to address affordability for buyers [32] Other Important Information - Meritage Homes received the EPA's 2024 Indoor AirPLUS Leader Award for the fourth consecutive year, recognizing its commitment to healthier indoor environments [12] - The company has been recognized as a Great Place to Work for two consecutive years and made the Fortune Best Workplaces in Construction list [13] - The company plans to continue its capital allocation strategy focused on organic growth and shareholder returns, with a projected land spend of $2 billion to $2.5 billion for 2024 [43][44] Q&A Session Summary Question: What are the long-term targets for backlog turns and specs per community? - Management indicated a target backlog conversion rate of over 125%, with current performance around 145% [58][60] Question: Can you provide details on the Elliott acquisition and its impact? - The acquisition did not include any VIP, and the company expects to start units in Q4, benefiting from closings by the end of Q1 2025 [64][66] Question: How do you expect margins to normalize in Q4? - Management anticipates a sequential decline in margins due to increased incentives, but long-term targets remain intact [70][74] Question: How has demand responded to recent rate changes? - Demand was elastic to rates, with September seeing increased orders due to rate declines, but moderation was noted in October as rates rose [96][98] Question: What is the availability of finished lots across the footprint? - The availability of finished lots has decreased over the last decade, with competition for existing lots remaining high [84][86]

HOMES® LIFE. BUILT BETTER: THIRD QUARTER 2024 ANALYST CONFERENCE CALL OCTOBER 30, 2024 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 and full year 2024 and third quarter 2024 projected home closing volume, home closing revenue, home closing ...