Meritage Homes(US:MTH)2023-07-28 20:26Financial Performance - Second quarter 2023 home closing revenue reached $1.5 billion on 3,490 homes, a 9.5% increase from $1.4 billion on 3,221 homes in Q2 2022[92] - The company achieved a home closing gross margin of 24.4% in Q2 2023, down from 31.6% in Q2 2022, attributed to increased incentives[92] - For the six months ended June 30, 2023, home closing revenue totaled $2.8 billion, up 5.7% from $2.7 billion in the prior year[107] - The company's gross profit for Q2 2023 was $377.0 million, with a margin of 24.4%, down from 31.6% in Q2 2022 due to increased sales incentives and elevated costs[119] - Other income for Q2 2023 was $12.9 million, compared to a net expense of $0.5 million in Q2 2022, driven by higher interest earned on cash balances[129] Home Orders and Backlog - Home orders for Q2 2023 totaled 3,340, an 11.3% decrease year-over-year, with home order value declining 18.5% to $1.5 billion[94] - The company ended Q2 2023 with a backlog of 3,772 homes valued at $1.7 billion, representing decreases of 47.9% and 50.9% year-over-year[95] - Total home orders for Q2 2023 decreased by 11.3% to 3,340 homes compared to 3,767 homes in Q2 2022, with a total order value of $1.5 billion, down 18.5% year-over-year[106] - The order backlog at June 30, 2023, was valued at $1.7 billion, down 50.9% from $3.4 billion at June 30, 2022, with homes in backlog decreasing by 47.9% to 3,772 units[102] Sales and Pricing - Average sales price (ASP) on closings improved by 1.1% to $442.1 thousand despite increased incentives, driven by a favorable mix of closings in higher-priced markets[92] - The average sales price (ASP) for homes ordered in Q2 2023 was $441.5 thousand, a decrease of 8.1% from $480.5 thousand in Q2 2022[106] - The West Region reported home closing revenue of $519.2 million for Q2 2023, up 6.8% from $486.1 million in Q2 2022, despite a decrease in ASP on closings[108] - The Central Region saw a 4.4% increase in home closings to 1,094 homes in Q2 2023, with revenue rising 8.2% to $456.8 million[110] Cancellation and Construction - The cancellation rate returned to a normalized 12% in Q2 2023, down from 15% in Q1 2023 and 13% in Q2 2022[94] - The cancellation rate for Q2 2023 was 12%, slightly improved from 13% in Q2 2022, aligning with historical averages[106][104] - Construction cycle time was reduced by over three weeks for new home starts in Q2 2023 compared to Q1 2023, nearing historical averages[91] Financial Services - Financial services reported a loss of $2.6 million in Q2 2023, compared to a profit of $4.1 million in Q2 2022, primarily due to $7.9 million in charges for expired interest rate locks[92] - Financial services reported a loss of $2.6 million in Q2 2023, primarily due to $7.9 million in charges related to unused prepaid interest rate locks[124] Tax and Expenses - The effective income tax rate decreased to 22.0% in Q2 2023 from 24.6% in 2022, benefiting from energy tax credits under the Inflation Reduction Act[92] - The effective tax rate decreased to 22.0% in Q2 2023 from 24.6% in Q2 2022, reflecting energy-efficient homes tax credits introduced in 2022[130] - Commissions and other sales costs increased to $95.8 million in Q2 2023, representing 6.2% of home closing revenue, up from 4.9% in the prior year[126] - General and administrative expenses for Q2 2023 were $52.1 million, maintaining 3.4% of home closing revenue, consistent with the previous year[127] Cash Flow and Liquidity - Net cash provided by operating activities for the six months ended June 30, 2023, totaled $355.9 million, compared to a net cash used in operations of $206.8 million for the same period in 2022[141] - The company expects to meet short-term liquidity requirements primarily through cash and cash equivalents on hand and net cash flows from operations[134] - Net cash used in financing activities for the six months ended June 30, 2023, was $32.1 million, significantly lower than $121.1 million for the same period in 2022[143] Debt and Capital - As of June 30, 2023, the debt-to-capital ratio was 21.4%, down from 22.6% as of December 31, 2022[144] - The company had no debt maturities until 2025, with maximum exposure to loss on purchase agreements generally limited to non-refundable deposits[137] - The minimum tangible net worth requirement under the Credit Facility is $2.8 billion, with the actual net worth reported at $4.25 billion as of June 30, 2023[147] - The leverage ratio as of June 30, 2023, was reported at (0.1)%, indicating compliance with the maximum leverage covenant of 60%[148] Dividends - The company paid a quarterly cash dividend of $0.27 per share during the three months ended June 30, 2023, totaling $0.54 per share for the six months ended June 30, 2023[145]