Meritage Homes(US:MTH)2022-10-28 20:45Financial Performance - The company achieved a record home closing revenue of $1.6 billion for Q3 2022, a 25.4% increase from $1.3 billion in Q3 2021, driven by a 12.1% increase in volume and an 11.9% increase in average sales price (ASP) to $450,000[89]. - Year-to-date net income for the nine months ended September 30, 2022, was $729.8 million, compared to $500.0 million for the same period in 2021, reflecting a significant increase in profitability[90]. - Home Closing Revenue for the nine months ended September 30, 2022, was $4,223,435, an increase of $627,375 or 17.4% compared to $3,596,060 in 2021[100]. - Home closing gross profit for Q3 2022 was $450.6 million, a 21.2% increase from $371.7 million in Q3 2021[120]. - Financial services profit for Q3 2022 was $4.8 million, up from $4.2 million in Q3 2021, attributed to a higher number of closings[125]. Home Orders and Sales - Home orders for Q3 2022 were 2,310, down 32.9% year-over-year, with a cancellation rate of 30%, compared to 10% in the prior year, indicating increased buyer uncertainty[91]. - Homes ordered decreased to 2,310, down by 1,131 homes or 32.9% compared to 3,441 in the previous year[101]. - Total home orders for the nine months ended September 30, 2022, amounted to $4,551,894, representing a 4.9% increase from $4,337,753 in 2021[102]. - Homes ordered decreased to 9,951 in 2022 from 10,441 in 2021, reflecting a decline of 4.7%[102]. - Cancellation rates for the three months ended September 30, 2022, rose to 30% compared to 10% in 2021[105]. Average Sales Price - The average sales price for home orders decreased by 2.5% year-over-year to $450,000, largely due to increased incentives and a shift towards more affordable products[92]. - Average sales price rose to $441.5, reflecting an increase of $53.8 or 13.9% from $387.7 in 2021[100]. - The average sales price increased by 10.1% to $457.4 in 2022 from $415.5 in 2021[102]. - Average sales price (ASP) on closings increased by 11.9% year-over-year, contributing to improved revenue despite lower order volumes[107]. Backlog and Inventory - The company ended Q3 2022 with a backlog of 6,064 homes valued at $2.8 billion, representing a 3.9% increase in units and a 10.6% increase in value compared to the previous year[92]. - The backlog increased to 6,064 homes valued at $2.8 billion, up from 5,838 homes valued at $2.6 billion year-over-year[108]. Regional Performance - In the West Region, home orders dropped to $241,098, down by $329,831 or 57.8% from $570,929 in the previous year[101]. - The Central Region saw home orders decrease to $253,321, a decline of $174,368 or 40.8% compared to $427,689 in 2021[101]. - The East Region saw a 47.7% increase in home closing revenue to $1.1 billion, with 2,671 homes in backlog valued at $1.1 billion, a 40.5% increase from the prior year[115]. - The West Region experienced a 15.7% decrease in backlog value to $0.9 billion, with a cancellation rate of 43%[109]. - The Central Region's home closing revenue increased by 30.4% to $499.7 million, despite a 40.7% decline in order volume due to a 37% cancellation rate[111]. Costs and Margins - The gross margin for home closings declined by 100 basis points to 28.7%, resulting in a gross profit of $450.6 million, up from $371.7 million in Q3 2021[89]. - Home closing gross margin decreased by 100 basis points to 28.7% in Q3 2022 compared to 29.7% in Q3 2021, primarily due to rising direct costs and increased sales incentives[120]. - The West Region's home closing gross margin decreased by 170 basis points to 26.6% in Q3 2022, while year-to-date gross margin improved by 280 basis points to 29.2%[122]. - The Central Region had the highest home closing gross margin at 30.1% in Q3 2022, down 200 basis points from the prior year due to increased sales incentives and direct costs[123]. - The East Region's gross margin improved by 90 basis points to 29.9% in Q3 2022, with a year-to-date increase of 430 basis points to 30.6%[124]. Cash Flow and Debt Management - The company maintains a debt-to-capital ratio of 23.9% and a net debt-to-capital ratio of 18.9% as of the end of Q3 2022, indicating a strong balance sheet[95]. - The company has no debt maturities until 2025, with plans to fund contractual obligations primarily through cash flows generated by operations[138]. - As of September 30, 2022, the debt-to-capital ratio was 23.9%, down from 27.6% as of December 31, 2021, indicating improved capital structure[146]. - The net debt-to-capital ratio increased to 18.9% as of September 30, 2022, compared to 15.1% at the end of 2021, reflecting a rise in net debt[146]. - The company has never declared cash dividends and plans to utilize cash for liquidity management and community growth[147]. Strategic Focus - The company plans to focus on growing market share and improving the home buying experience through innovation and simplification of processes[95]. - The company continues to invest in energy-efficient product offerings and automation to differentiate its brand in the competitive new home market[94]. - The average number of actively selling communities increased by 16.5% year-over-year, ending the quarter with 275 communities[107].