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 ...

Core Viewpoint - Meritage Homes Corporation reported third-quarter 2024 results with earnings and total closing revenues exceeding the Zacks Consensus Estimate, marking the seventh consecutive quarter of such performance, although both metrics declined year over year [1][3]. Financial Performance - 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 [3]. - Total revenues reached $1.6 billion, a decrease of 1.4% from $1.62 billion year over year [3]. - 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% [4]. Operational Highlights - The company closed 3,942 homes, an 8% increase from the previous year, with an average sales price (ASP) of $402,000, down 9% year over year [5]. - Total home orders increased by 1% to 3,512 homes, but in dollar terms, they decreased by 5% to $1.43 billion due to a 6% lower ASP of $406,000 [6]. - Entry-level buyers constituted 92% of sales orders, up from 88% in the previous year [7]. Strategic Initiatives - The company emphasized a strategic shift towards affordable, quick-turn homes, achieving a 145% backlog conversion and a 17.2% return on equity [2]. - Capital allocation focused on growth, with $659.4 million invested in land, acquiring 7,800 new lots, and returning $57.1 million to shareholders [2]. Margin and Cost Analysis - Adjusted home closing gross margin contracted by 190 basis points to 24.8%, influenced by increased lot costs and financing incentives [8]. - Selling, general and administrative expenses as a percentage of home closing revenues improved by 20 basis points to 9.9% due to lower performance-based compensation costs [9]. Balance Sheet and Cash Flow - Cash and cash equivalents at the end of the third quarter totaled $831.6 million, down from $921.2 million at the end of 2023 [9]. - Total debt to capital ratio increased to 20.7% from 17.9% at the end of 2023, while net debt to capital rose to 8.8% from 1.9% [10]. Shareholder Returns - The company paid quarterly cash dividends of 75 cents per share, totaling $27.1 million, and repurchased 151,220 shares for $30 million [11]. Future Guidance - For Q4 2024, Meritage Homes expects 3,750-3,950 closings, generating revenues between $1.5 billion and $1.59 billion, down from $1.64 billion reported a year ago [12]. - EPS is projected to be between $4.10 and $4.60, a decrease from $5.38 in the previous year [12].

Acquisition Details - Meritage Homes acquires Elliott Homes, a top five Gulf Coast homebuilder, marking its entry into the Gulf Coast markets [1][2] - The acquisition includes over 5,500 lots, with production operations expected to commence in existing entry-level communities by the end of the year [2] - The operations are anticipated to make a meaningful contribution to Meritage's performance in 2025 [2] Strategic Alignment and Leadership - The acquisition aligns with Meritage's strategy of building affordable entry-level homes and is the company's first acquisition since 2014 [3] - Phillippe Lord, CEO of Meritage Homes, highlights the acquisition as a strategic move to expand into desirable Gulf Coast markets [3] - Brandon Elliott, founder and CEO of Elliott Homes, expresses pride in his team's growth and looks forward to leveraging Meritage's national scale to deliver affordable, quality homes [3] Company Overview - Meritage Homes is the fifth-largest public homebuilder in the U.S., based on homes closed in 2023 [4] - The company operates in multiple states, including Arizona, California, Colorado, Utah, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee [4] - Meritage has delivered over 190,000 homes in its 38-year history and is recognized for energy-efficient homebuilding, having received multiple awards from the U.S. Environmental Protection Agency [5] Industry and Market Position - Meritage Homes specializes in energy-efficient and affordable entry-level and first move-up homes, catering to a broad market segment [4] - The company's reputation is built on distinctive style, quality construction, and award-winning customer experience [5] - The acquisition of Elliott Homes strengthens Meritage's presence in the Gulf Coast region, a highly desirable market for homebuilding [3]

Company Performance - Meritage Homes reported quarterly earnings of $5.34 per share, exceeding the Zacks Consensus Estimate of $5.05 per share, but down from $5.98 per share a year ago, representing an earnings surprise of 5.74% [1] - The company posted revenues of $1.59 billion for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.65%, although this is a slight decrease from year-ago revenues of $1.61 billion [2] - Over the last four quarters, Meritage has consistently surpassed consensus EPS estimates [2] Stock Outlook - Meritage shares have increased by approximately 5.9% since the beginning of the year, while the S&P 500 has gained 22.1% [3] - The current consensus EPS estimate for the upcoming quarter is $4.70 on revenues of $1.56 billion, and for the current fiscal year, it is $21.09 on revenues of $6.3 billion [7] - The estimate revisions trend for Meritage is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Building Products - Home Builders industry, to which Meritage belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Meritage Homes reported a third quarter 2024 home closing volume of 3,942 units, an 8% increase year-over-year, with a record backlog conversion rate of 145%[1][3] - Home closing revenue for Q3 2024 was $1.6 billion, a 2% decrease from Q3 2023, attributed to a 9% decline in average sales price (ASP) on closings[2][5] - The average sales price for home closings in Q3 2024 was $402,000, down 9% from $443,000 in Q3 2023, with entry-level homes representing 93% of sales[2][4] - Net earnings for Q3 2024 were $196 million, or $5.34 per diluted share, reflecting a 12% decrease from $221.8 million, or $5.98 per diluted share, in Q3 2023[2][10] - Home closing revenue for Q3 2024 was $1,585,784, a decrease of 2% from $1,610,317 in Q3 2023[29] - Total closing revenue for Q3 2024 was $1,588,449, down 2% from $1,613,100 in Q3 2023[29] - Net earnings for Q3 2024 were $195,966, a decrease of 12% compared to $221,760 in Q3 2023[29] - Home closing gross profit for Q3 2024 was $392,565, down 9% from $429,575 in Q3 2023[29] - Total closing gross profit for Q3 2024 was $393,245, a decrease of 9% from $429,823 in Q3 2023[29] - Home closing revenue for the nine months ended September 30, 2024, was $4,745,618, an increase of 7% from $4,415,261 in the same period of 2023[31] - Net earnings for the nine months ended September 30, 2024, increased to $613,537, compared to $539,897 for the same period in 2023, representing a growth of approximately 13.6%[35] Operational Metrics - The company’s gross margin for home closings in Q3 2024 was 24.8%, a decrease of 190 basis points from 26.7% in the prior year due to higher lot costs and increased financing incentives[2][6] - For the first nine months of 2024, total sales orders increased by 10%, driven by a 10% increase in average absorption pace compared to the same period in 2023[11] - The company plans to close between 3,750 and 3,950 units in Q4 2024, with expected revenue of $1.50 to $1.59 billion and a gross margin of 22.5% to 23.5%[25] - The total order backlog as of September 30, 2024, was 2,284 homes valued at $931,656, compared to 3,608 homes valued at $1,558,637 in the same period of 2023, indicating a significant decrease in backlog value of approximately 40.1%[38] - Homes ordered in the three months ended September 30, 2024, totaled 3,512, valued at $1,425,610, compared to 3,474 homes valued at $1,495,542 in the same period of 2023, reflecting a decrease in value of approximately 4.7%[37] - Total homes closed in the three months ended September 30, 2024, reached 3,942, with a total value of $1,585,784, compared to 3,638 homes valued at $1,610,317 in the same period of 2023, indicating a decrease in value of about 1.5%[37] Financial Position - The company’s cash and cash equivalents at September 30, 2024, totaled $831.6 million, down from $921.2 million at December 31, 2023[20] - Total assets as of September 30, 2024, were $7,103,452, up from $6,353,134 at the end of 2023[32] - Total stockholders' equity increased to $5,029,790 as of September 30, 2024, compared to $4,611,900 at the end of 2023[33] - The debt-to-capital ratio increased to 20.7% as of September 30, 2024, up from 17.9% as of December 31, 2023[42] - The company reported a net cash used in operating activities of $(128,013) for the nine months ended September 30, 2024, compared to $460,092 for the same period in 2023[35] Market and Strategic Insights - The company is focused on offering entry-level and first move-up homes as part of its market strategy[47] - The company has 278 active communities as of September 30, 2024, compared to 272 active communities at the end of 2023, showing a slight increase[39] - The company has delivered over 190,000 homes in its 38-year history, emphasizing its reputation for quality construction and customer experience[45] - Meritage Homes Corporation is the fifth-largest public homebuilder in the U.S., with operations across multiple states including Arizona, California, and Texas[44] Risks and Challenges - The company faces significant uncertainties and risks that may lead to fluctuations in stock and note prices, including interest rate increases and mortgage availability issues[47] - Inflation in material costs for community development and home construction is a concern, potentially impacting profit margins[47] - The company is experiencing challenges related to supply chain and labor constraints, which could affect operational efficiency[47] - Cancellation rates and slow absorption rates are potential risks that may adversely impact sales performance[47] - The company has limited geographic diversification, which may expose it to regional market fluctuations[47] - There are concerns regarding the availability and cost of finished lots and undeveloped land, which could hinder growth[47] - Potential disruptions from epidemics or pandemics could impact business operations and sales[49] - The company is subject to various regulatory compliance requirements that may affect its financial services operations[47] - Key personnel loss and information technology failures pose risks to the company's operational stability[47]

Core Insights - Meritage Homes Corporation reported third quarter results for 2024, showing a slight increase in home orders and a decrease in average sales price, reflecting a strategic pivot towards affordable homes [1][3][4] Summary of Operating Results - Homes closed in Q3 2024 totaled 3,942 units, an 8% increase from 3,638 units in Q3 2023 [2] - Home closing revenue decreased by 2% to $1.585 billion from $1.610 billion year-over-year [2] - Average sales price for closings fell by 9% to $402,000 compared to $443,000 in the previous year [2] - Home orders increased by 1% to 3,512 units from 3,474 units in Q3 2023 [2] - Home order value decreased by 5% to $1.426 billion from $1.496 billion year-over-year [2] Financial Performance - Net earnings for Q3 2024 were $196 million, down 12% from $222 million in Q3 2023, resulting in diluted EPS of $5.34, a decrease of 11% from $5.98 [2][9] - Earnings before income taxes were $250 million, a 13% decrease from $286 million in the prior year [2][9] - Home closing gross margin was 24.8%, down from 26.7% in Q3 2023, attributed to higher lot costs and increased financing incentives [6] Management Strategy - The company emphasized a shift towards affordable, quick-turning move-in ready homes, which contributed to achieving the highest third quarter closing volume [3] - Management noted that nearly 45% of this quarter's closings were also sold within the same quarter, leading to a record backlog conversion rate of 145% [3] Capital Allocation and Liquidity - Land acquisition and development spending totaled $659.4 million in Q3 2024, with nearly 7,800 net new lots acquired [3][18] - The company ended the quarter with cash of $831.6 million and a net debt-to-capital ratio of 8.8% [3][20] Year-to-Date Results - For the first nine months of 2024, total sales orders increased by 10%, driven by a 10% increase in average absorption pace [10] - Home closing revenue for the first nine months rose by 7% to $4.746 billion, reflecting a 15% increase in home closing volume [11] - Net earnings for the first nine months were $614 million, a 14% increase from $540 million in the same period of 2023 [17] Guidance - The company provided guidance for Q4 2024, projecting home closing volume between 3,750 and 3,950 units, with expected home closing revenue of $1.50 to $1.59 billion [22]

Core Points - Meritage Homes has appointed Erin Lantz as an independent director to its Board of Directors, effective October 14, 2024, increasing the board size to 11 directors [1] - The appointment reflects the company's commitment to board refreshment and diversity of thought [4] - The Board plans to consider Ms. Lantz for committee appointments in upcoming meetings [1] Company Background - Meritage Homes is the fifth-largest public homebuilder in the U.S., focusing on energy-efficient and affordable homes [10] - The company has delivered over 185,000 homes in its 38-year history and is recognized for quality construction and customer experience [11] Erin Lantz's Experience - Ms. Lantz has over 20 years of leadership experience in technology-related offerings, currently serving as Chief Revenue Officer for Ethos [2] - She has held significant positions at Zillow Group and Bank of America, bringing valuable insights to the board [2][3] - Her public company director experience includes roles at Blend Labs, TrueCar, and Washington Federal [3] Board Declassification Proposal - The Board has approved a proposal to declassify the Board of Directors, which will be presented to stockholders at the 2025 annual meeting [5] - This move is in response to stockholder feedback favoring annually elected boards for increased accountability [5] - The declassification aligns with the company's refreshment initiative to transition longer-tenured directors over time [5] Governance and Communication - The company plans to file a proxy statement with the SEC regarding the Declassification Proposal, urging stockholders to review the materials [6] - Key participants in the solicitation of proxies include the executive chairman and other directors [7][8]

For a few years now, I've been very interested in the homebuilding market. The idea that a return to low interest rates any positive impact that should have on housing demand, as well as the fact that the US has Crude Value Insights offers you an investing service and community focused on oil and natural gas. We focus on cash flow and the companies that generate it, leading to value and growth prospects with real potential. Subscribers get to use a 50+ stock model account, in-depth cash flow analyses of E&P ...

Have you been paying attention to shares of Meritage Homes (MTH) ? Shares have been on the move with the stock up 4.3% over the past month. The stock hit a new 52-week high of $211.01 in the previous session. Meritage Homes has gained 16.3% since the start of the year compared to the 21.2% move for the Zacks Construction sector and the 29.4% return for the Zacks Building Products - Home Builders industry. What's Driving the Outperformance? The stock has an impressive record of positive earnings surprises, a ...

SCOTTSDALE, Ariz., Sept. 18, 2024 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE: MTH), the fifth largest public homebuilder in the U.S., plans to release the Company's third quarter 2024 results on Tuesday, October 29, 2024 after the market closes. Management will host a conference call to discuss the results at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) on Wednesday, October 30, 2024. To listen, please go to Meritage's Investor Relations page for the live webcast or dial in to 1-877-407-6951 U ...