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Meritage Homes(MTH) - 2023 Q1 - Quarterly Report

Financial Performance - In Q1 2023, the company achieved home closing revenue of $1.3 billion on 2,897 homes, a 1.3% increase from $1.2 billion on 2,858 homes in Q1 2022[87]. - The gross margin for home closings declined by 790 basis points to 22.4%, resulting in a gross profit of $282.5 million, down from $377.6 million in Q1 2022[87]. - The company reported financial services profit of $2.9 million for Q1 2023, down from $3.3 million in the prior year[109]. - Operating cash flow for Q1 2023 was $124.5 million, a significant increase from $12.2 million in Q1 2022, driven by net earnings of $131.3 million[125]. - Commissions and other sales costs increased to $82.8 million, representing 6.6% of home closing revenue, up from 5.3% in the previous year[110]. - General and administrative expenses rose to $47.5 million, accounting for 3.8% of home closing revenue, an increase from 3.2% in Q1 2022[111]. Home Orders and Backlog - Home orders totaled 3,487, a 10.0% decrease year-over-year, with a cancellation rate improving to 15% from 39% in Q4 2022[88]. - The company ended Q1 2023 with a backlog of 3,922 homes valued at $1.8 billion, representing a 41.4% decrease in units and a 42.0% decrease in value from March 31, 2022[88]. - Homes ordered in Q1 2023 totaled 3,487, down by 387 units or 10.0% from 3,874 in Q1 2022[96]. - The order backlog as of March 31, 2023, was $1,763,832, down $1,275,095 or 42.0% from $3,038,927 in the previous year[98]. - Homes in backlog decreased to 3,922, a reduction of 2,773 homes or 41.4% compared to 6,695 homes in Q1 2022[98]. - The total cancellation rate increased to 15% in Q1 2023, up from 10% in Q1 2022[97]. Sales Performance - The average sales price (ASP) for home closings was flat at $435.6 thousand, while ASP on orders decreased by 5.3%[87][88]. - The average sales price for homes in Q1 2023 was $432.1, a decline of $24.2 or 5.3% from $456.3 in Q1 2022[96]. - The average sales price in the East Region increased by 2.9% to $427.9 in Q1 2023, compared to $415.9 in Q1 2022[98]. - The average sales price in the West Region decreased by 6.8% to $492.5 in Q1 2023, down from $528.6 in Q1 2022[98]. Regional Performance - The West Region saw a 9.1% decrease in home closing volume to 785 homes, with revenue down 9.9% to $417.3 million[100]. - The Central Region experienced a 20.0% increase in volume to 1,048 homes, resulting in a 22.2% increase in revenue to $424.9 million[101]. - The East Region closed 1,064 homes for $419.7 million, a 3.3% decrease in revenue despite a 1.9% increase in ASP[102]. - The Central Region's backlog decreased by 56.9% to $419,822 in Q1 2023, down from $973,828 in Q1 2022[98]. Operational Efficiency - The construction cycle time improved by approximately one week compared to the same period last year, despite ongoing labor and supply chain challenges[86]. - Active communities increased to 278 in Q1 2023, compared to 268 in Q1 2022, reflecting a growth of 3.7%[97]. Financial Position and Strategy - The company maintains a debt-to-capital ratio of 22.1% and a net debt-to-capital ratio of 4.5% as of the end of Q1 2023[93]. - The company plans to fund its material cash requirements primarily through cash flows generated by operations, with potential additional debt or equity financing if necessary[121]. - As of March 31, 2023, the debt-to-capital ratio was 22.1%, slightly down from 22.6% at the end of 2022[128]. - The net debt-to-capital ratio improved to 4.5% as of March 31, 2023, compared to 6.8% at the end of 2022[128]. - The leverage ratio was reported at 3.8%, well below the maximum covenant limit of 60%[130]. - The interest coverage ratio stood at 21.33, significantly above the required minimum of 1.50[130]. Recognition and Future Plans - The company was awarded the 2023 ENERGY STAR® Partner of the Year for Sustained Excellence, marking its tenth recognition since 2013[91]. - The company plans to leverage technological solutions and expand its energy efficiency program to enhance market differentiation[93]. - Seasonal variations in home sales are expected, with higher sales typically occurring in the first half of the fiscal year, impacting working capital needs[131].