Meritage Homes(US:MTH)2023-11-01 19:34Financial Data and Key Metrics Changes - The diluted EPS for Q3 2023 was $5.98, reflecting a 16% year-over-year decline, with a book value per share of $121.29, up 20% year-over-year [145] - The ending backlog at September 30, 2023, totaled approximately 3,600 homes, down from about 6,100 in the prior year [134] - The company expects Q4 2023 diluted EPS to range from $4.84 to $5.43, with home closing revenue projected between $1.45 billion and $1.53 billion [153] Business Line Data and Key Metrics Changes - Sales orders for Q3 2023 were 3,474 homes, with 88% of the volume coming from entry-level homes, representing a 50% year-over-year increase [13] - The average selling price (ASP) on orders this quarter was $430,000, up 2% from the prior year [9] - The average absorption pace for the West region was 3.6 per month, compared to 1.5 per month for the same period in 2022, indicating a significant improvement [4] Market Data and Key Metrics Changes - The average community count was 282, down 3% year-over-year and down 1% sequentially from Q2 2023 [132] - The Central region had the highest absorption pace of 4.5 per month, compared to 2.7 last year, driven by job growth and in-migration [14] - The cancellation rate for the quarter was 11%, below historical averages, indicating strong demand [13] Company Strategy and Development Direction - The company plans to replenish its spec inventory by starting around 4,000 homes to ensure sufficient move-in ready inventory for the 2024 spring selling season [11] - The strategy of "pace over price" has led to improved sales across all geographies [14] - The company aims to grow its community count by 10% to 15% annually, with a target of exceeding 300 communities [140][147] Management's Comments on Operating Environment and Future Outlook - Management noted that the home buyer environment is impacted by elevated mortgage rates, which have increased to nearly 8% [2] - The company expects Q4 demand to remain steady, although traditional seasonal patterns are anticipated to return [9] - Management expressed optimism about the spring selling season based on current demand trends [40] Other Important Information - The company has been recognized for its corporate citizenship and sustainability efforts, receiving multiple awards [137] - The company plans to spend over $2 billion on land acquisition and development in the coming years [147] - The company redeemed $150 million of its senior notes due 2025, maintaining a strong balance sheet [148] Q&A Session Summary Question: What is the average rate customers are getting through your finance company? - The average rate is about 3%, with some markets like Texas slightly above that [20] Question: What is the expected growth for community count next year? - Growth is expected to be predominantly driven by community count, with a focus on maintaining absorption rates [22][27] Question: Can you break down the cost components between land, labor, and materials? - Costs have been stable year-over-year, with higher land costs impacting margins as new communities are opened [37] Question: What are the key constraints preventing a return to pre-pandemic levels? - Constraints include municipal delays and slow land development processes [73] Question: How do you expect SG&A to trend in the coming quarters? - SG&A is expected to move to high single digits over time, but will see some incremental overhead in the short term due to community count growth [76]