Meritage Homes(US:MTH)2022-07-29 17:03Revenue and Sales Performance - Total home closing revenue for Q2 2022 was $1.4 billion, an 11.4% increase from $1.3 billion in Q2 2021, driven by a 13.2% increase in average sales price (ASP) to $437.4 thousand[96]. - Home closing gross margin improved by 430 basis points to 31.6%, resulting in a gross profit of $444.7 million compared to $345.3 million in Q2 2021[96]. - Home orders reached a record 3,767 in Q2 2022, a 6.4% increase from 3,542 in Q2 2021, with home order value increasing by 20.7% year-over-year to $1.8 billion[97]. - The company ended Q2 2022 with a backlog of 7,241 homes valued at $3.4 billion, representing a 31.4% increase in units and a 48.4% increase in value compared to June 30, 2021[98]. - Total revenue for the quarter reached $444.62 million, an increase of $30.78 million or 3.2% compared to the previous quarter[104]. - The company reported a total of 583,263 dollars in sales, with a 4.0% increase from the previous quarter[104]. - Total home orders increased to $1,809,870, a 20.7% increase from $1,499,672 in the previous year[105]. - Homes ordered increased to 7,641, up by 641 homes or 9.2% from 7,000 in the previous year[106]. Average Sales Price Trends - Average sales price for homes closed was $380.4 thousand, reflecting a 4.8% increase from the prior quarter[104]. - Average sales price in California was $370.13 thousand, down by $9.09 thousand or 2.5% from the previous quarter[104]. - Average sales price in Colorado was $415.25 thousand, a decrease of $3.78 thousand or 2.4% compared to the last quarter[104]. - Average sales price in Texas was $722.22 thousand, showing a 6.6% increase from the previous quarter[104]. - Average sales price in Georgia was $611.76 thousand, with a 7.0% increase from the previous quarter[104]. - Average sales price in North Carolina was $822.85 thousand, reflecting an 8.1% increase compared to the last quarter[104]. - Average sales price in South Carolina was $560.55 thousand, an increase of $28.02 thousand or 5.3% from the previous quarter[104]. - The average sales price across all regions was $461.0 thousand, reflecting a 5.1% increase from the previous quarter[104]. - The average sales price rose to $468.2 thousand, reflecting an increase of $61.2 thousand or 15.0% compared to $407.0 thousand in 2021[106]. Market Dynamics and Order Trends - Order cancellation rates increased to 13% in Q2 2022, up from 8% in the prior year, indicating a softening market[97]. - The average orders pace decreased to 4.4 per month in Q2 2022, down from 5.5 in Q2 2021, reflecting a shift in market dynamics[111]. - The East Region's order volume increased by 64.2% year-over-year, with backlog value rising to $1.1 billion, a 64.2% increase[110]. - The East Region achieved the highest gross margin improvement of 550 basis points to 32.0% in Q2 2022, compared to 26.5% in the prior year[126]. Financial Performance and Expenses - Earnings before income taxes improved by $116.0 million, or 54%, year-over-year to $331.7 million for Q2 2022[96]. - Net earnings for Q2 2022 were $250.1 million, compared to $167.4 million in Q2 2021, reflecting a higher effective income tax rate of 24.6%[96]. - General and administrative expenses increased by $4.8 million, or 11.1%, due to higher headcount and travel expenses, but remained consistent as a percentage of revenue[96]. - Financial services profit decreased to $4.1 million in Q2 2022 from $4.6 million in Q2 2021, and to $7.4 million for the six months ended June 30, 2022, down from $8.4 million in the prior year[129]. - Commissions and other sales costs decreased to $69.4 million in Q2 2022, representing 4.9% of home closing revenue, down from 5.8% in the prior year[130]. - The effective tax rate increased to 24.6% for Q2 2022, up from 22.4% in Q2 2021, due to the expiration of certain tax credits[135]. Cash Flow and Capital Management - Net cash used in operating activities for the six months ended June 30, 2022, totaled $206.8 million, compared to $143.5 million for the same period in 2021[145]. - Operating cash flows in the first half of 2022 benefited from net earnings of $467.3 million and an increase in accounts payable and accrued liabilities of $113.4 million[145]. - Net cash used in investing activities during the first half of 2022 was $18.3 million, primarily due to property and equipment purchases of $12.9 million and investments in unconsolidated entities of $5.7 million[146]. - Net cash used in financing activities for the six months ended June 30, 2022, was $121.1 million, primarily reflecting $109.3 million in share repurchases[148]. - As of June 30, 2022, the debt-to-capital ratio was 25.3%, down from 27.6% as of December 31, 2021[149]. - The net debt-to-capital ratio as of June 30, 2022, was 20.6%, compared to 15.1% as of December 31, 2021[149]. - The company has no debt maturities until 2025, with significant cash requirements for land acquisition, home construction, and operating expenses[141]. - The company expects to meet short-term liquidity needs primarily through cash and cash equivalents on hand and net cash flows from operations[138]. - The company plans to utilize cash to manage liquidity and grow community count, with no cash dividends declared historically[149]. - The company was in compliance with all Credit Facility covenants as of June 30, 2022, including a minimum tangible net worth of $3.37 billion and a leverage ratio of 19.7%[152].