Core Viewpoint - Meritage Homes Corporation (MTH) reported mixed first-quarter 2025 results, with earnings missing estimates while total closing revenues exceeded expectations for the tenth consecutive quarter [1][3]. Company Performance - MTH sold nearly 3,900 homes in Q1 2025, despite challenges in the housing market, attributed to favorable demographics and a shortage of affordable homes [2]. - Earnings per share (EPS) was $1.69, missing the Zacks Consensus Estimate of $1.71, and down 33% from $2.53 in the prior year [3]. - Total revenues amounted to $1.36 billion, an 8% decline from $1.47 billion year-over-year [3]. Revenue Breakdown - Total Closing Revenues were $1.36 billion, down 8% from the previous year but exceeding the consensus estimate of $1.33 billion by 1.5% [4]. - Home closing revenues were $1.34 billion, also down 8% year-over-year, while land closing revenues surged 569% to $15.4 million [4]. Home Sales and Orders - Home closings totaled 3,416 units, a 3% decrease from the prior year, with an average selling price (ASP) of $402,000, down 2% [5]. - Total home orders fell 3% to 3,876 homes, with a dollar value decrease of 4% to $1.56 billion [6]. - The backlog at quarter-end was 2,004 units, down 34% year-over-year, with a value decrease of 35% to $812.4 million [6]. Margin and Expenses - Home closing gross margin contracted by 380 basis points to 22%, primarily due to financing incentives and rising lot costs [7]. - Selling, general and administrative expenses as a percentage of home closing revenues increased by 90 basis points to 11.3% [8]. Financial Position - As of March 31, 2025, cash and cash equivalents were $1.01 billion, up from $651.6 million at the end of 2024 [9]. - Total debt to capital ratio increased to 26.1% from 20.6% at the end of 2024 [10]. - Net cash used by operating activities was $42.6 million, compared to $81.9 million provided in the previous year [10]. Shareholder Returns and Guidance - MTH paid $31 million in dividends and repurchased 605,316 shares for $45 million during the quarter [11]. - The company expects to close between 16,250 and 16,750 homes in 2025, projecting revenues between $6.6 billion and $6.9 billion [12].

Financial Data and Key Metrics Changes - Normalized FFO for Q4 2024 was $0.24 per share, up 4% from $0.23 in Q4 2023. For the full year, normalized FFO was $0.93 per share, an 8% increase from $0.86 in 2023 [6][20] - Rental and related income for Q4 2024 increased by 8% to $53.3 million from $49.2 million in Q4 2023. For the full year, it rose 9% to $207 million from $189.7 million in 2023 [20][21] - Community NOI for Q4 2024 was $31.1 million, an increase of 8% from $28.7 million in Q4 2023, and for the full year, it increased by 10% to $119.7 million from $108.4 million in 2023 [21][22] Business Line Data and Key Metrics Changes - Same property income increased by 8% in Q4 and 9% for the year, with same property NOI growth of 8% for Q4 and 10% for the year [10][22] - The rental home program added 565 homes in 2024, bringing the total to 10,300 rental homes, with a 94% occupancy rate [12][20] - The sales division achieved gross sales of $33.5 million in 2024, an 8% increase from $31.2 million in 2023, with a gross sales margin of 35% [13] Market Data and Key Metrics Changes - The company anticipates further occupancy growth and 5% rent increases across the portfolio in 2025 [11] - The acquisition pipeline includes four communities under contract, with a total purchase price of $39.1 million [15][33] - The company ended 2024 with $99.7 million in cash and cash equivalents, and $260 million available on its credit facility [22] Company Strategy and Development Direction - The company aims to balance growth with earnings accretion, focusing on value-add strategies to improve occupancy and revenue [9][10] - There is a strong emphasis on providing affordable housing solutions, with plans to develop and rehabilitate older communities [28][30] - The company is optimistic about acquiring communities at more reasonable prices due to the prolonged high interest rate environment [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving similar or improved same property operating results in 2025 [11] - The company is well-positioned to execute on acquisition opportunities as they arise, with a strong balance sheet supporting growth [19][30] - Management highlighted the importance of long-term patient capital to upgrade existing communities and increase development pace [30] Other Important Information - The company has a history of increasing dividends, with a 19% increase since 2020 [18] - The total market capitalization at year-end was approximately $2.5 billion, a 23% increase from the previous year [24] Q&A Session Summary Question: Can you provide more details on the four acquisitions under contract? - The four communities under contract include two in New Jersey and two in Maryland, with a total of 266 sites, all 100% occupied. The purchase price is $24.6 million for the New Jersey properties [32][33] Question: What interest rates should be expected for refinancing with Fannie Mae? - The company anticipates refinancing at rates between 5.5% and 5.75% [38] Question: What factors influenced the G&A increase in Q4? - G&A increased primarily due to additional bonuses accrued for strong operating results, with an overall increase of about 8% [41][42] Question: What are the key factors for the high end of the 2025 guidance range? - The main factors are home sales and acquisitions, with expectations of exceeding the four acquisitions discussed [46][47] Question: What is the expected average price per rental home being purchased? - The average price for rental homes is around $60,000 to $65,000, with setup costs bringing the total to approximately $70,000 to $75,000 [56] Question: How does the company view the potential for increased home sales with changes in financing laws? - Management believes that potential changes in financing laws could significantly increase home sales, as many renters may wish to transition to ownership [80]