Meritage Homes(US:MTH)2025-10-31 20:31Financial Performance - Home closing volume decreased by 6.5% to 3,685 homes in Q3 2025, down from 3,942 homes in Q3 2024, contributing to a revenue decline of 11.8% to $1.4 billion[127] - Average sales price (ASP) for closings fell by 5.6% to $379.7 thousand in Q3 2025, compared to $402.3 thousand in Q3 2024, impacting gross margin which declined by 570 basis points to 19.1%[127] - Home closing gross profit decreased to $267.0 million in Q3 2025 from $392.6 million in Q3 2024, reflecting increased costs and lower sales prices[127] - Total home closing revenue for Q3 2025 was $1.4 billion, an 11.8% decrease from $1.6 billion in Q3 2024[142] - For the nine months ended September 30, 2025, net income was $369.0 million, down from $613.5 million in the same period of 2024, reflecting lower revenue and profitability[129] Home Orders and Backlog - Home orders increased by 3.5% to 3,636 in Q3 2025, driven by a 14.3% rise in average active communities, although the order pace decreased to 3.8 net homes per month[130] - The cancellation rate rose to 11% in Q3 2025 from 10% in Q3 2024, with a backlog of 1,699 homes valued at $670.0 million, down 25.6% year-over-year[130] - Home order volume for Q3 2025 increased by 3.5% to 3,636 homes compared to 3,512 homes in Q3 2024[142] - The order backlog at September 30, 2025 was valued at $670.0 million, down 28.1% from $931.7 million at September 30, 2024[139] - Homes in backlog decreased by 25.6% to 1,699 units at September 30, 2025, compared to 2,284 units at the same date in 2024[139] Regional Performance - The West Region saw a 29.2% decrease in home closing revenue to $420.7 million in Q3 2025, down from $594.5 million in Q3 2024[144] - The Central Region's home order volume increased by 8.9% to 1,289 homes in Q3 2025, while home closing revenue decreased by 8.6% to $443.1 million[146] - The East Region's home order volume increased by 17.4% to 1,480 homes in Q3 2025, despite a decrease in ASP by 6.9%[142] - In the East Region, home closings increased by 12.1% to 1,542 homes, generating $535.6 million in revenue, compared to $506.5 million in the prior year[149] - The East Region's cancellation rate increased to 12% from 10% in the prior year, but remains below the historical company average[149] Cost and Expenses - Commissions and other sales costs increased by $1.8 million to $99.7 million, representing 7.1% of home closing revenue for the three months ended September 30, 2025, up 90 basis points from the prior year[164] - General and administrative expenses decreased by $7.4 million to $51.8 million for the three months ended September 30, 2025, maintaining a percentage of home closing revenue at 3.7%[165] - Other income, net, was $8.1 million for the three months ended September 30, 2025, down from $10.7 million in the prior year, primarily due to lower interest income on cash balances[167] Tax and Financial Ratios - The effective income tax rate increased to 22.6% in Q3 2025 from 21.6% in Q3 2024, due to fewer homes qualifying for energy tax credits[127] - The debt-to-capital ratio stood at 25.7% at the end of Q3 2025, indicating a strong balance sheet after issuing $500.0 million in senior notes[133] - The net debt-to-capital ratio was 17.2% as of September 30, 2025, compared to 11.7% at the end of 2024[185] - The leverage ratio stood at 15.6% as of September 30, 2025, well below the maximum covenant limit of 60%[189] Cash Flow and Financing - Net cash used in operating activities for the nine months ended September 30, 2025, was $125.4 million, compared to $128.0 million in the prior year[181] - Net cash provided by financing activities totaled $243.8 million for the nine months ended September 30, 2025, primarily from the issuance of $492.1 million in Senior Notes[183] - As of September 30, 2025, the company had $728.9 million in cash and cash equivalents and $825.9 million available under the Credit Facility, totaling approximately $1.6 billion in available capacity[172] Strategic Goals and Market Position - The company aims to maintain a top 5 market position and is focused on increasing homeowner satisfaction through energy-efficient homes and improved buying experiences[133] - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing[177] - The Board of Directors approved a quarterly cash dividend of $0.43 per share for Q3 2025, compared to $0.375 per share in Q3 2024, totaling $1.29 per share for the nine months ended September 30, 2025, versus $1.125 per share in the same period of 2024[186]