Meritage Homes(US:MTH)2024-02-14 21:15Financial Performance - In 2023, the company repurchased 437,882 shares for $59.1 million and paid dividends totaling $39.5 million, ending the year with cash and cash equivalents of $921.2 million, up from $861.6 million in 2022[31]. - The debt-to-capital ratio improved to 17.9% at December 31, 2023, down from 22.6% in 2022, while the net debt-to-capital ratio decreased to 1.9% from 6.8%[31]. - As of December 31, 2023, the company has $1.0 billion in fixed-rate senior notes, with no outstanding borrowings under its Credit Facility[219]. - The average interest rate for the company's long-term debt obligations is 1.492% as of December 31, 2023[220]. - The company had $40.0 million in borrowings and repayments under the Credit Facility during the year ended December 31, 2022, with no borrowings in 2021 or 2023[219]. Land Acquisition and Development - The company invested approximately $1.9 billion in land acquisition and development, securing about 16,000 net new lots, a significant increase from 2,000 net new lots in 2022[32]. - As of December 31, 2023, the company had 64,313 lots under control, compared to 63,182 in 2022, maintaining a 4.6-year supply of lots based on 2023 closings[32]. - Approximately 72% of the controlled lots were owned by the company at the end of 2023, slightly down from 73% in 2022[32]. - The company had 18,019 lots under committed purchase or option contracts with a total purchase price of approximately $914.1 million, secured by $97.8 million in cash deposits[39]. - The company has two active land development joint ventures and one mortgage business joint venture to manage risk and expand market opportunities[49]. Home Sales and Construction - The company closed 13,976 homes in 2023 and started construction on 14,524 homes during the same period[32]. - As of December 31, 2023, the backlog decreased by 23.5% to 2,549 units from 3,332 units at the same date in 2022, with a 28.6% decrease in backlog value to $1.1 billion from $1.5 billion[53]. - Approximately 97% of the 2,549 homes in backlog were under construction as of December 31, 2023[51]. - At December 31, 2023, 81% of the total unsold homes in inventory were under construction, while 19% were completed[52]. - The spec inventory per active community increased to 21.8 or 5,877 units as of December 31, 2023, compared to 18.0 or 4,891 units as of December 31, 2022[51]. Marketing and Sales Strategy - The marketing strategy includes a focus on digital media campaigns and the use of model homes to demonstrate the advantages of the company's designs and features[45]. - The company had approximately 492 full-time sales and marketing personnel at the end of 2023, ensuring extensive knowledge of homes and energy-efficient features among the sales force[47]. - The company provides various sales incentives to attract buyers, including mortgage-related incentives and price concessions, depending on economic conditions[1]. - The company has implemented extensive digital tools, including virtual tours and a chatbot, to enhance the homebuying experience[1]. Workforce and Diversity - The company employed approximately 910 full-time construction and warranty employees as of December 31, 2023[41]. - As of December 31, 2023, the company employed 1,838 full-time employees, with 41% being female and 27% minorities, reflecting its commitment to diversity and inclusion[69]. Economic and Market Conditions - The company experienced unprecedented demand through mid-2022, which was impacted by supply chain constraints and rising interest rates[71]. - A significant increase in mortgage interest rates may negatively affect homebuyers' ability to secure financing, impacting the company's revenue and gross margins[221]. - The company’s operations are sensitive to interest rate changes, which could increase variable rate borrowing costs on its Credit Facility[221]. - Historical seasonality in home sales is expected to continue, although it may be affected by short-term volatility in the homebuilding industry[71]. - The company has experienced historical cycles that returned in the latter half of 2022, indicating a potential stabilization in the market[71]. Warranty and Risk Management - The company has established warranty reserves ranging from 0.1% to 0.5% of a home's sale price to cover future structural warranty costs[58]. - The company typically sells more homes in the first half of the fiscal year, leading to increased working capital requirements in the second and third quarters[71]. - The company does not intend to enter into derivative interest rate swap financial instruments for trading or speculative purposes[221].