Meritage Homes reports fourth quarter 2024 results

January 29, 2025 16:30 ET | Source: Meritage Homes Corporation SCOTTSDALE, Ariz., Jan. 29, 2025 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, today announced fourth quarter and full year results for the periods ended December 31, 2024. Summary Operating Results (unaudited)(Dollars in thousands, except per share amounts) Three Months Ended December 31, Twelve Months Ended December 31, 2024 2023 % Chg 2024 2023 % ChgHomes closed (units) 4,044 3,951 2% 15,611 13,976 12%Home closing revenue$1,595,928 $1,641,523 (3)% $6,341,546 $6,056,784 5%Average sales price - closings$395 $415 (5)% $406 $433 (6)%Home orders (units) 3,304 2,892 14% 14,606 13,193 11%Home order value$1,320,447 $1,198,744 10% $5,950,708 $5,675,892 5%Average sales price - orders$400 $415 (4)% $407 $430 (5)%Ending backlog (units) 1,544 2,549 (39)%Ending backlog value $629,549 $1,088,137 (42)%Average sales price - backlog $408 $427 (4)%Earnings before income taxes$221,562 $258,869 (14)% $1,002,870 $949,430 6%Net earnings$172,649 $198,851 (13)% $786,186 $738,748 6%Diluted EPS$4.72 $5.38 (12)% $21.44 $19.93 8% MANAGEMENT COMMENTS"2024 was another record-setting year for Meritage as we began to roll out our new move-in ready strategy and were able to capitalize on continuing demand for affordable, immediately available homes. For the full year 2024, we generated our highest annual closing volume of 15,611 homes and, despite a pullback in average sales price, we achieved a company-high home closing revenue of $6.3 billion," said Steven J. Hilton, executive chairman of Meritage Homes. "This quarter, we experienced normal seasonality, but with our focus on affordability, we were still able to secure orders totaling 3,304 homes—an average monthly absorption pace of 3.9. With favorable demographics for our product offerings, an undersupply of homes at our price points and stability in the job market, we believe that we are well-positioned to capture demand in the spring selling season while continuing to grow our market share." "With over 50% of this quarter's closings sold during this quarter, our backlog conversion rate was a company-record 177%," added Phillippe Lord, chief executive officer of Meritage Homes. "Our 4,044 deliveries this quarter combined with home closing gross margin of 23.2% and SG&A leverage of 10.8% resulted in diluted EPS of $4.72. We increased our book value per share 12.9% year-over-year to $142.98 and generated a return on equity of 16.1% as of December 31, 2024."* “Our capital allocation in the fourth quarter of 2024 remained centered on investing in growth and returning cash to shareholders. Our land acquisition and development spend totaled $741.5 million this quarter, as we put approximately 14,400 net new lots under control, which included our acquisition of Elliott Homes. We also spent a combined $67.0 million on cash dividends and share repurchases," concluded Mr. Lord. "At December 31, 2024, our balance sheet remained strong, with ample liquidity and nothing drawn under our revolving credit facility. We ended the quarter with cash of $651.6 million and a net debt-to-capital ratio of 11.7%. Given our confidence in Meritage's long-term growth trajectory, we completed a two-for-one stock split after the quarter ended on January 2, 2025." FOURTH QUARTER RESULTS Orders of 3,304 for the fourth quarter of 2024 increased 14% year-over-year due to an 8% increase in average absorption pace to 3.9 per month from 3.6 per month in the fourth quarter of 2023 and a 5% increase in average communities. Fourth quarter 2024 average sales price ("ASP") on orders of $400,000 was down 4% from the fourth quarter of 2023 due to greater utilization of financing incentives as well as product and geographic mix shift. Entry-level represented 91% of fourth quarter 2024 sales orders, compared to 88% in the prior year.The 3% year-over-year decrease in home closing revenue to $1.6 billion for the fourth quarter of 2024 was primarily the result of a 5% lower ASP on closings due to greater utilization of financing incentives as well as product and geographic mix. The fourth quarter 2024 closing volume totaled 4,044 units, which was 2% higher than prior year. Entry-level represented 91% of fourth quarter 2024 home closings, compared to 86% in the prior year.Home closing gross margin of 23.2% in the fourth quarter of 2024 was down 200 bps from 25.2% in the fourth quarter of 2023 as a result of greater utilization of financing incentives and higher lot costs, which were partially offset by lower direct costs per square foot and improved cycle times.Selling, general and administrative expenses ("SG&A") as a percentage of home closing revenue was 10.8% for the fourth quarter of 2024 compared to 10.7% for the fourth quarter of 2023. As we moved into the tougher selling environment, commission rates in the fourth quarter of 2024 increased.The fourth quarter effective income tax rate was 22.1% in 2024, compared to 23.2% in 2023. The Company's tax rates in both periods benefited from earned eligible energy tax credits on qualifying homes under the Inflation Reduction Act ("IRA").Net earnings were $172.6 million ($4.72 per diluted share) for the fourth quarter of 2024, a 13% decrease from $198.9 million ($5.38 per diluted share) for the fourth quarter of 2023. Lower home closing revenue and lower margins led to a 12% year-over-year decrease in earnings per diluted share. YEAR TO DATE RESULTS Total sales orders of 14,606 homes for full year 2024 increased 11% over prior year due to an 8% year-over-year increase in average absorption pace to 4.3 per month in 2024 and a 1% increase in average community count.Home closing revenue increased 5% for full year 2024 to $6.3 billion due to a 12% increase in home closing volume year-over-year partially offset by a 6% decline in ASPs on closings.Full year 2024 home closing gross margin of 24.9% was slightly up from 24.8% for full year 2023, due to lower direct costs per square foot and improved cycle time, which were partially offset by greater utilization of financing incentives and higher lot costs.SG&A as a percentage of home closing revenue of 10.1% was slightly lower year-over-year from 10.2% in 2023. Commissions were higher year-over-year as a result of tougher selling conditions in 2024.For the full year 2024, the Company recognized a loss on early extinguishment of debt of $0.6 million in connection with the $250.0 million redemption of its remaining 6.00% senior notes due 2025 (the "2025 Notes"). The Company recognized a loss on early extinguishment of debt of $0.9 million in 2023 in connection with the $150.0 million partial redemption of the 2025 Notes.The effective tax rate for full year 2024 was 21.6%, compared to 22.2% for full year 2023. The Company's tax rates in both periods benefited from earned eligible energy tax credits on qualifying homes under the IRA.Net earnings were $786.2 million ($21.44 per diluted share) for full year 2024, a 6% increase from $738.7 million ($19.93 per diluted share) for full year 2023, primarily reflecting higher home closing revenue and slightly lower overhead costs in 2024. BALANCE SHEET & LIQUIDITY On October 29, 2024, the Company completed the acquisition of the assets of private builder Elliott Homes ("Elliott"), which built entry-level homes in Mississippi, Alabama and the Florida panhandle. Approximately 5,500 lots were included in the acquisition.Cash and cash equivalents at December 31, 2024 totaled $651.6 million, compared to $921.2 million at December 31, 2023, as we increased our investments in real estate and also completed the Elliott acquisition in the fourth quarter of 2024.Land acquisition and development spend totaled $741.5 million for the fourth quarter of 2024, compared to $653.5 million for the fourth quarter of 2023. The 2024 spend included the Elliott acquisition. Full year 2024 land spend was $2.5 billion compared to $1.9 billion in the prior year.Approximately 85,600 total lots were owned or controlled as of December 31, 2024, which included the approximately 5,500 lots from the Elliott acquisition. This was a 33% increase from approximately 64,300 total lots as of December 31, 2023. Approximately 14,400 net new lots were added in the fourth quarter of 2024, which compared to over 7,600 net new lots in the fourth quarter of 2023.Fourth quarter 2024 ending community count was 292, which compared to 278 ending communities at September 30, 2024 and 270 at December 31, 2023.Debt-to-capital and net debt-to-capital ratios were 20.6% and 11.7%, respectively as of December 31, 2024, compared to 17.9% and 1.9%, respectively as of December 31, 2023.The Company declared and paid quarterly cash dividends of $0.75 per share totaling $27.0 million in the fourth quarter of 2024, up from $0.27 per share totaling $9.8 million in the fourth quarter of 2023. Full year dividends paid were $108.6 million and $39.5 million in 2024 and 2023, respectively.During the fourth quarter of 2024, the Company repurchased 218,616 shares of stock, or 0.6% of shares outstanding at the beginning of the quarter, for $40.0 million, which compared to 24,869 shares of stock repurchased in the fourth quarter of 2023 for $4.1 million. For full year 2024, the Company repurchased 732,255 shares of stock, or 2.0% of shares outstanding at the beginning of the year, for a total of $125.9 million, which compared to 437,882 shares of stock repurchased in full year 2023 for $59.1 million. During the fourth quarter of 2024, the Board approved an additional $250.0 million to the authorized share repurchase program, and as of December 31, 2024, $309.1 million remained available to repurchase under the program.Subsequent to the fourth quarter of 2024, we completed a two-for-one stock split of Meritage's common stock in the form of a stock dividend on January 2, 2025. GUIDANCE The Company is providing the following updated guidance for full year 2025, based on current market conditions: Full Year 2025Home closing volume 16,250-16,750 unitsHome closing revenue $6.6-6.9 billion CONFERENCE CALLManagement will host a conference call to discuss its fourth quarter 2024 results at 8:00 a.m. Mountain Standard Time (10:00 a.m. Eastern Standard Time) on Thursday, January 30, 2025. To listen, please go to Meritage's Investor Relations page for the live webcast or dial in to 1-877-407-6951 US toll free or 1-412-902-0046. A replay will be available on the Investor Relations page. * The Company's return on equity is calculated as net earnings for the trailing twelve months divided by average total stockholders' equity for the trailing five quarters. The Company's book value per share is calculated as total stockholders' equity as of the last day of the period divided by the shares outstanding as of the last day of the period. Meritage Homes Corporation and SubsidiariesConsolidated Income Statements(In thousands, except per share data)(unaudited) Three Months Ended December 31, 2024 2023 Change $ Change %Homebuilding: Home closing revenue $1,595,928 $1,641,523 $(45,595) (3)% Land closing revenue 17,356 11,682 5,674 49% Total closing revenue 1,613,284 1,653,205 (39,921) (2)% Cost of home closings (1,226,114) (1,228,426) 2,312 —% Cost of land closings (14,026) (9,104) (4,922) 54% Total cost of closings (1,240,140) (1,237,530) (2,610) —% Home closing gross profit 369,814 413,097 (43,283) (10)% Land closing gross profit 3,330 2,578 752 29% Total closing gross profit 373,144 415,675 (42,531) (10)%Financial Services: Revenue 8,429 7,200 1,229 17% Expense (4,024) (3,218) (806) 25% Earnings from financial services unconsolidated entities and other, net 2,757 2,418 339 14% Financial services profit 7,162 6,400 762 12%Commissions and other sales costs (104,956) (107,145) 2,189 (2)%General and administrative expenses (67,742) (68,972) 1,230 (2)%Interest expense — — — —%Other income, net 13,954 12,911 1,043 8%Earnings before income taxes 221,562 258,869 (37,307) (14)%Provision for income taxes (48,913) (60,018) 11,105 (19)%Net earnings$172,649 $198,851 $(26,202) (13)% Earnings per common share: Basic Change $ or shares Change % Earnings per common share $4.78 $5.46 $(0.68) (12)% Weighted average shares outstanding 36,094 36,446 (352) (1)% Diluted Earnings per common share $4.72 $5.38 $(0.66) (12)% Weighted average shares outstanding 36,562 36,947 (385) (1)% Meritage Homes Corporation and SubsidiariesConsolidated Income Statements(In thousands, except per share data)(unaudited) Twelve Months Ended December 31, 2024 2023 Change $ Change %Homebuilding: Home closing revenue $6,341,546 $6,056,784 $284,762 5% Land closing revenue 22,326 56,229 (33,903) (60)% Total closing revenue 6,363,872 6,113,013 250,859 4% Cost of home closings (4,761,703) (4,554,671) (207,032) 5% Cost of land closings (18,309) (51,786) 33,477 (65)% Total cost of closings (4,780,012) (4,606,457) (173,555) 4% Home closing gross profit 1,579,843 1,502,113 77,730 5% Land closing gross profit 4,017 4,443 (426) (10)% Total closing gross profit 1,583,860 1,506,556 77,304 5%Financial Services: Revenue 31,163 25,250 5,913 23% Expense (14,657) (12,128) (2,529) 21% Loss from financial services unconsolidated entities and other, net (2,096) (656) (1,440) 220% Financial services profit 14,410 12,466 1,944 16%Commissions and other sales costs (409,069) (384,911) (24,158) 6%General and administrative expenses (230,856) (231,722) 866 —%Interest expense — — — —%Other income, net 45,156 47,948 (2,792) (6)%Loss on early extinguishment of debt (631) (907) 276 (30)%Earnings before income taxes 1,002,870 949,430 53,440 6%Provision for income taxes (216,684) (210,682) (6,002) 3%Net earnings$786,186 $738,748 $47,438 6% Earnings per common share: Basic Change $ or shares Change % Earnings per common share $21.70 $20.17 $1.53 8% Weighted average shares outstanding 36,238 36,619 (381) (1)% Diluted Earnings per common share $21.44 $19.93 $1.51 8% Weighted average shares outstanding 36,666 37,069 (403) (1)% Meritage Homes Corporation and Subsidiaries Consolidated Balance Sheets(Dollars in thousands)(unaudited) December 31, 2024 December 31, 2023Assets: Cash and cash equivalents $651,555 $921,227Other receivables 256,282 266,972Real estate (1) 5,728,775 4,721,291Deposits on real estate under option or contract 192,405 111,364Investments in unconsolidated entities 28,735 17,170Property and equipment, net 47,285 48,953Deferred tax assets, net 54,524 47,573Prepaids, other assets and goodwill 203,093 218,584 Total assets $7,162,654 $6,353,134Liabilities: Accounts payable $212,477 $271,650Accrued liabilities 452,213 424,764Home sale deposits 20,513 36,605Loans payable and other borrowings 29,343 13,526Senior and convertible senior notes, net 1,306,535 994,689 Total liabilities 2,021,081 1,741,234Stockholders' Equity: Preferred stock — —Common stock, par value $0.01. Authorized 125,000,000 shares; 35,960,986 and 36,425,037 shares issued and outstanding at December 31, 2024 and 2023, respectively 360 364Additional paid-in capital 143,036 290,955Retained earnings 4,998,177 4,320,581 Total stockholders’ equity 5,141,573 4,611,900 Total liabilities and stockholders’ equity $7,162,654 $6,353,134(1) Real estate – Allocated costs: Homes under contract under construction 525,271 $704,206Unsold homes, completed and under construction 1,730,636 1,260,855Model homes 119,732 118,252Finished home sites and home sites under development 3,353,136 2,637,978 Total real estate $5,728,775 $4,721,291 Meritage Homes Corporation and SubsidiariesConsolidated Statements of Cash Flows (In thousands) (unaudited) Twelve Months Ended December 31, 2024 2023 Cash flows from operating activities: Net earnings $786,186 $738,748 Adjustments to reconcile net earnings to net cash (used in)/provided by operating activities: Depreciation and amortization 25,959 25,334 Stock-based compensation 25,809 22,511 Loss on early extinguishment of debt 631 907 Equity in earnings from unconsolidated entities (9,225) (6,371)Distribution of earnings from unconsolidated entities 7,461 6,792 Other 14,460 4,115 Changes in assets and liabilities: Increase in real estate (979,254) (357,408)(Increase)/decrease in deposits on real estate under option or contract (81,354) (36,140)Decrease/(increase) in receivables, prepaids and other assets 39,776 (64,169)(Decrease)/increase in accounts payable and accrued liabilities (41,933) 22,609 Decrease in home sale deposits (16,092) (1,356)Net cash (used in)/provided by operating activities (227,576) 355,572 Cash flows from investing activities: Investments in unconsolidated entities (18,545) (5,991)Distributions of capital from unconsolidated entities 2,867 137 Purchases of property and equipment (28,658) (38,192)Proceeds from sales of property and equipment 262 423 Maturities/sales of investments and securities 750 750 Payments to purchase investments and securities (750) (750)Net cash used in investing activities (44,074) (43,623)Cash flows from financing activities: Repayment of loans payable and other borrowings (8,933) (2,798)Repayment of senior notes (250,695) (150,884)Proceeds from issuance of convertible senior notes 575,000 — Payment of debt issuance costs (17,082) — Purchase of capped calls related to issuance of convertible senior notes (61,790) — Dividends paid (108,590) (39,534)Repurchase of shares (125,932) (59,067)Net cash provided by/(used in) financing activities 1,978 (252,283)Net (decrease)/increase in cash and cash equivalents (269,672) 59,666 Cash and cash equivalents, beginning of period 921,227 861,561 Cash and cash equivalents, end of period $651,555 $921,227 Meritage Homes Corporation and SubsidiariesOperating Data(Dollars in thousands)(Unaudited) We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity. Our three reportable homebuilding segments are as follows: West: Arizona, California, Colorado, and UtahCentral: TexasEast: Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee Three months ended December 31, 2024 2023 Homes Value Homes ValueHomes Closed: West Region 1,027 $490,898 1,155 $563,723Central Region 1,228 436,006 1,242 464,571East Region 1,789 669,024 1,554 613,229Total 4,044 $1,595,928 3,951 $1,641,523 Homes Ordered: West Region 864 $425,038 722 $373,941Central Region 1,067 378,358 1,054 392,421East Region 1,373 517,051 1,116 432,382Total 3,304 $1,320,447 2,892 $1,198,744 Twelve months ended December 31, 2024 2023 Homes Value Homes ValueHomes Closed: West Region 4,526 $2,223,876 4,109 $2,107,095Central Region 4,834 1,739,553 4,486 1,798,939East Region 6,251 2,378,117 5,381 2,150,750Total 15,611 $6,341,546 13,976 $6,056,784 Homes Ordered: West Region 4,215 $2,084,168 3,983 $2,046,251Central Region 4,508 1,626,919 4,291 1,678,484East Region 5,883 2,239,621 4,919 1,951,157Total 14,606 $5,950,708 13,193 $5,675,892 Order Backlog: West Region 435 $214,360 746 $379,785Central Region 442 159,546 768 289,375East Region 667 255,643 1,035 418,977Total 1,544 $629,549 2,549 $1,088,137 Three months ended December 31, Twelve Months Ended December 31, 2024 2023 2024 2023 Ending Average Ending Average Ending Average Ending AverageActive Communities: West Region 91 88.5 78 81.0 91 84.6 78 90.0Central Region 79 75.5 88 85.0 79 79.0 88 83.0East Region 122 121.0 104 105.0 122 116.8 104 103.4Total 292 285.0 270 271.0 292 280.4 270 276.4 Meritage Homes Corporation and SubsidiariesSupplemental and Non-GAAP information(Unaudited) Supplemental Information (In thousands): Three Months Ended December 31, Twelve Months Ended December 31, 2024 2023 2024 2023 Depreciation and amortization $6,601 $7,758 $25,959 $25,334 Summary of Capitalized Interest: Capitalized interest, beginning of period $53,732 $58,476 $54,516 $60,169 Interest incurred 12,713 12,845 52,717 57,759 Interest expensed — — — — Interest amortized to cost of home and land closings (12,767) (16,805) (53,555) (63,412)Capitalized interest, end of period $53,678 $54,516 $53,678 $54,516 Reconciliation of Non-GAAP Information (In thousands): Debt-to-Capital Ratios December 31, 2024 December 31, 2023Senior and convertible senior notes, net, loans payable and other borrowings $1,335,878 $1,008,215 Stockholders' equity 5,141,573 4,611,900 Total capital $6,477,451 $5,620,115 Debt-to-capital 20.6% 17.9% Senior and convertible senior notes, net, loans payable and other borrowings $1,335,878 $1,008,215 Less: cash and cash equivalents (651,555) (921,227)Net debt $684,323 $86,988 Stockholders’ equity 5,141,573 4,611,900 Total net capital $5,825,896 $4,698,888 Net debt-to-capital (1) 11.7% 1.9% (1)Net debt-to-capital reflects certain adjustments to the debt-to-capital ratio and is defined as net debt (debt less cash and cash equivalents) divided by total capital (net debt plus stockholders' equity). Net debt-to-capital is considered a non-GAAP financial measure and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operating results and may be helpful in comparing the Company with other companies in the homebuilding industry to the extent they provide similar information. We encourage investors to understand the methods used by other companies in the homebuilding industry to calculate non-GAAP financial measures and any adjustments thereto before comparing to our non-GAAP financial measures. ABOUT MERITAGE HOMES CORPORATION Meritage is the fifth-largest public homebuilder in the United States, based on homes closed in 2023. The Company offers energy-efficient and affordable entry-level and first move-up homes. Operations span across Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee. Meritage has delivered almost 200,000 homes in its 39-year history, and has a reputation for its distinctive style, quality construction, and award-winning customer experience. The Company is an industry leader in energy-efficient homebuilding, an eleven-time recipient of the U.S. Environmental Protection Agency’s (EPA) ENERGY STAR® Partner of the Year for Sustained Excellence Award and Residential New Construction Market Leader Award, as well as a four-time recipient of the EPA's Indoor airPLUS Leader Award. For more information, visit www.meritagehomes.com. The information included in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general and our future results including our ability to increase our market share and our full year 2025 projected home closing volume and home closing revenue. Such statements are based on the current beliefs and expectations of Company management and current market conditions, which are subject to significant uncertainties and fluctuations. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, except as required by law, to update or revise any forward-looking statements to reflect future events or changes in these expectations. Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. These risks and uncertainties include, but are not limited to, the following: increases in interest rates or decreases in mortgage availability, and the cost and use of rate locks and buy-downs; the cost of materials used to develop communities and construct homes; cancellation rates; supply chain and labor constraints; the ability of our potential buyers to sell their existing homes; our ability to acquire and develop lots may be negatively impacted if we are unable to obtain performance and surety bonds; the adverse effect of slow absorption rates; legislation related to tariffs; impairments of our real estate inventory; competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our exposure to counterparty risk with respect to our capped calls; our ability to obtain financing if our credit ratings are downgraded; our exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; a change to the feasibility of projects under option or contract that could result in the write-down or write-off of earnest money or option deposits; our limited geographic diversification; shortages in the availability and cost of subcontract labor; the replication of our energy-efficient technologies by our competitors; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure of our employees and representatives to comply with laws and regulations; our compliance with government regulations; liabilities or restrictions resulting from regulations applicable to our financial services operations; negative publicity that affects our reputation; potential disruptions to our business by an epidemic or pandemic, and measures that federal, state and local governments and/or health authorities implement to address it; and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2023 and our Form 10-Q for subsequent quarters under the caption "Risk Factors," which can be found on our website at https://investors.meritagehomes.com. Contacts: Emily Tadano, VP Investor Relations and ESG (480) 515-8979 (office) investors@meritagehomes.com

Meritage Homes reports fourth quarter 2024 results

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