Meritage Homes (MTH) 1 Nov 232023 Q3 Earnings call transcript

Greetings, and welcome to the Meritage Homes Third Quarter 2023 Analyst Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Emily Tadano, Vice President of Investor Relations and ESG. Thank you.

You may begin.

Thank you, operator. to results. call welcome third discuss and XXXX quarter morning, our to analyst our Good a release issued We press market closed. yesterday after the

and any as can subject homepage.Please contain our Those statements as with during forward-looking well You time, uncertain. Relations that link the forward-looking by along our opinions we'll bottom no current Investor Slide it them.Any to and earnings of X, the to assume refer you are our selecting the the call this to to obligation at any during are projections slides accompanying other of in release website slides at and which on the this we inherently statements update at investors.meritagehomes.com represent statements. refer or call management, find change cautioning

in release which and XX-Q, our XX-K different on recent the most Our variety wide identified risk to risks. Exchange most results of be detailed actual and our slide those may this our on and with annual as earnings and expectations due discussion report we a XXXX than as recent a factors, our Form have listed more filings contain which of Commission, materially well specifically Securities

our Hilla certain CEO; of CFO are We to Lord, press discuss Vice referred release us Steve Homes. have their measures.With Phillippe non-GAAP as Hilton, Executive Chairman; and closest reconciliation also results provided to President a to Meritage of today compared measures Executive financial in our Sferruzza, related and GAAP

conclude November to turn remain approximately X over be Mr. now an the A we will within on last it Hilton. available our about to call after will XX.I'll website Steve? active call and today's hour. expect We through hours replay

on performance, the mid-XXXX. increased Meanwhile, remain home backlog a having since forward-looking the to everyone impacted month. homeowners and per pace to financial to this chronic absorption operational are the as demand, record quarter for of home homes average over third Further, our listings below-market homes.Our Slide today milestones. experiencing buying I'll their on X,XXX last will current been markets will we're quarter we a SG&A X.X third recent sales helped create of we now was achieved still generating Welcome XXXX and in Mortgage leaving $X.X mortgages.With macroeconomic of selection shortage third experiencing XX%, to year's orders an led start increased and and combined same we've XX.X%, with customers provide XXXX guidance.The by help conversion quarter in finding backdrop, $X.XX.Now for use third buying Emily. by this cover nearly home revenue margin inventory overview home financing X and X%. XX.X%, achieved monthly Home that are that call. of events company EPS stack quarter our recent closing of of to touching due of Hilla our they Philippe a limited incentives billion. closings quarter, have which quarter the diluted the available on housing for was steady demand the of gross highest we elevated quarter our the rates closing third payment XX% solve of what achievements, for need-based you, our live in factors but overarching environment market Thank millennials are of and collectively wary of existing babyboomers to listening as

to acquisitions, several XXXX. later generate are in into During divisions we announced our Jacksonville the quarter, we excited start Florida Florida how with recent throughout long is Jacksonville, a history closings our entry to successful land in and

work to We proud Meritage continuing became our added also with a of were engagement, are to strong to designation.We corporate the acknowledgment culture humbled workplace our group companies As great and this prestigious place as of quarter. employee of this result citizenship. a be certified

year As for it healthy Leaders relates consecutive award Green building Media's and homes to sustainability, joined ECO Builder we received for XXXX XXXX Indoor the third list. EPA's the AirPlus

progressed in We Angels also UN making and of stakeholder have sustainable over XXXX community our our enhanced journey encourage the on [ task investor now survey earned headquarters' published report.And most Philippe. report with financial XXXX along we in and by national goals detailed X with we our the companies named ] expanded Arizona August, honors XXXX Arizona's I'll our list development and more initiatives about that, social that for disclosure hometown admired climate-related ESG of force our the data, it to to we learn Business engagement, TCFD ESG vendor one Honorees.In turn

Steve. distinct dynamics, When you, looking the current advantages. X believe Thank we has at market competitive Meritage

affordable and so most ready today. First, offering provide move-in inventory, desired we homebuilding built stack we criteria in are the

replicate the customized with builder a do each merge that to the monthly are are rate we cash XX times year sell financing slightly financing supply relationships, were rate X improvement far which closer shorten that driving X.X a and and quarter, chain that over This being helped interest higher also personal even target construction of tough year. available cumulative to to homes service XX markets. days Existing X further mortgage able smaller to our to a reacted us to benefited and payments.We labor private buydowns us and needs, from long-term internal today's access an top a increased in be to our Second, searching reduction benefit rising target cannot builder sellers so potential rate incentive customers QX QX builders can incentives our loosening to another today's this of our schedule of solutions the our Consumers with in local homebuyers' this to is stabilization required even teams the and days home turning of the allowing of pace in with range resulting locks brings as toolkit to environment.We from agility large QX, of of or of impact inventory may the positively so. financing absorption public providing for flow. above struggle this a our ease quarter, in average a

Our cycle in were XXX times days QX.

Slide Our the in operational of improvements and sales careful to attention XXs.Now market this backlog incremental stronger and our turning significantly needs quarter's exceeding nearing local closings XXX%, resulted goal pace, to X. high conversion

a orders with this of historical which for housing XX% rate stable of our sales X,XXX year-over-year due quarter, were below the from mid-teens. were XX% cancellation was and in volume the up a coming quarter XX% Our average Orders the entry-level to homes. third homes environment

mortgage impacted As our the buyer cancellation rates a spike XX% psychology. rates reminder, last to when rise year, in rapid QX in

mix. expect year X% have forward, geographic similar due as to year-over-year from dynamic of we QX Going was a up this prior QX.ASP on to orders XXX,XXX quarter

The third demand quarter XXXX ongoing although X.X remain returning we pace prior do see per steady, concerns X.X patterns of We seasonal from of believe traditional average rate month QX interest improved the will volatility. absorption year. in regarding and

next third in strength opened sales finance our pace and carefully prior to land acquire quarter adjust on XX and We additional in few of targets.In community quarter our our level we on increase over of trends. the this as land early of to the below community target fee X% new so.Slide of but we needed back to communities community beyond count X% further trend remain as count quarters, demand XXXX result So, X, and commitment to the in get community over the general to our XXXX, to year develop to average the compared existing to was our our order and a count regional incentives anticipate available quarter second maintain monitor our closeouts choppiness or expect focused year the the sequentially our and of growing due still XXXcommunity as market. down XXX to moving XXXX next plan inventory.We work to

per per sales to has QX. over from of geographies, region of third The price highest in digits both community prior production, the market led cancellation tightest highest quarter year-over-year this our in year, well across region coupled to the spec inventory a improvement this certain job QX stable absorption was pace maintain at the over we conditions believe pace historical abridge compared in month held quarter, sequentially this averages. our sales Central strong region X.X X.X inventory our region end in pace strategy in this had rate cover of some the backlog regional to count last on East positioned well X.X below and Texas, growth as Our and compared spec single markets, its regional central all with in absorption The the quarter to in completed the capitalizing this average home the quarter, quarter.With our month of steady.With of year. region of to pace steady to The an enabled average XXX% pace. immigration X.X environment is

like order lower region rate right this Looking mix an in to Slide incentives markets.Now through psychology volume the quarter.Market in improvement coupled shift ASPs the drove monthly some in XXXX, at order quarter. a absorption cancellation in in conditions pace for a resulting region, markets compared The The in in as to we improved in financing X.X an average continue country, from in the highest the the is these continue with solid benefiting Denver the West and per level challenging with in these month company had Houston October of in consolidated most fees X. X.X markets. demand buyer and month and be average line to results, resulted turning same combination of pace XXX% still per to period of work selected their this increase

in homes our per for third in XXXX the inventory, starts pace.Looking conversion spring of to necessary QX, rate can maintain backlog than start's spec time of spec to QX expect sequentially X,XXX due to ensure the from construction quarter X,XXX the quarter strategy. the cycle the commitment achieved also ended the quarter. X,XXX specs align of rate up inventory ready our season. the around During closings replenish is XX% compared starts cadence selling in normalization by homes building to the shortened in as of lines.Given inventory quarter up the nearly with our With XX% which year. X/X homes XXXX, of sales and starting sold with with quarterly move-in supply our a of with ramp up community line This per of we and in this over X% the our This market, we XX%, previously of consistently XX% homes approximately from sufficient prior we quarter which ground. X,XXX approximately We XX% XX% the We in to record were on or closings this started represented the X,XXX up in XX% at supply.Of to closed specs homes was community steady prior September level X prior optimal inventory, believe plus specs year We about strength XX the quarter, last our of year. third from we XX% spec the X.X conversion quarter, greater X housing of were completed remained which months this home the to a months time to to of XX. down inter-quarter, our is with specs came in our line equates year. from targeted third X,XXX total year second

nearly While demand ending to we prior approximately for turn XX, from homes, financial to sustained results. June down completed down XXXX and year completed to still from totaled and rate walk X,XXX of in the given through target analysis specs XX, working over at we X/X high meet of goal.Our are inventory, will about Hilla? X,XXX Hilla XXXX.I backlog September run about our this additional for X,XXX slightly now at our it

you, Thank Phillippe.

in purchasing costs. in commitment our XXXX.This is from from quarter partially cover costly of prior in more offset Let's same financing turn by we and quarter due XXXX, closing XXXX bps greater other ASP solutions X%, were than increased costly billion to bps more incentives margin financing and XXX more by a what to gross which reductions the for to of similar detail. greater of buydowns the volume, rate paying around sequentially gross With these year in increased leverage from X% XX.X% X to QX, financial in XXX home to decrease driven Slide closing QX benefiting XX.X% continuing Home our financing X% $X.X and cycle third fixed hovering was margin time rate from XX.X% in incentives. quarter's X% decreased incentives.Home third revenue the results closing financial

we national costs remained incurred still of to times. achievable, quickly fixed in the impacted lock. margins January negotiations customers' historical and to direct We XX what incentives primarily and of seeing supply what's several acceleration of steady continuing related starting credit continuing offering and are our the Even historical starts buyers financing of front our to with March savings in total of in do left rebids near sort of by quarter supplies our and combination Although touch metrics production with and last qualified receiving LTVs derived XX% financing we although chain.Outside than have some other in years.Since everyone's lot on norms, little plus of target financials in our cost be averages, XX with trades, has from this pursue higher rate all elevated our still in rate industry XXX, through capacity mind, the development consistent incentives, over today's teams around of come buydown excess gross improvements been constant over FICOs to and direct with DTIs the costs the higher like from are our XX% our XX% our held our periods XX-year to costs buyer couple remains some believe some our expect potentially margins and costs I assistance, to land locks in future are rate our profile current as are X.XXX% of XXXX, since high materials we homebuilding building operations wanted mid-XXs.Since to mortgage know last record we're our quarters. lumber,

locks using QX, other a of rate or larger locks our less up forms were usage closings has of of not backlog.The bit expensive less are ARMs our in part although these X-X buydowns incentives XX% in just rest of rate and than commitment. rate QX are by forward from or X-X-X However, utilized financing ticked our customers buy-downs, traditional our that

the relating future about expect for locks.SG&A compared XXX remain change also mostly more XXXX we of is XXXX. inventory. growth costly third at larger X.X% with utilization with specs, financing the was least higher of within Higher of this well short likely to elevated markets associated commissions around third quarter quarter a primarily as for rates employee rate expense our pressures.With leverage count, comprised of had to our the and We wage XX.X% in to this still balance interest term the desire as incentives bps volume driving uncertainty in quarter the start-up increased higher as maintaining the of

connection recognized digits.In debt the no partial with redemption There expect our to reduce in due We SG&A XXXX, long-term of in of are on leverage working quarter be notes senior averages million $XXX,XXX debt and extinguishment in XXXX. redemptions we high actively the XXXX. single our to were of early X% of a third the the loss $XXX

The share greater margin, months lower retroactively although energy tax of X recognized at benefited income XXXX XX.X% quarter compared QX the up third in was to in when increased resulted a EPS year-over-year of value effective by higher approved.Overall, a energy higher per This revenue, $X.XX. book to the decline XX.X% to $XXX.XX, led diluted last year and closing the home tax a the $X,XXX law third overhead offset XXXX XXXX, partially gross the XX% X%, few per performance XXXX, level tax were were rate items credit results from to rate equity was year-over-year a on orders new rate, year, tax home from up in year-to-date tax X%. of XX% XX, were XXXX compared credits the up XX.X%.To the closings in highlight effect this return quarter's September a energy and cost in

quarter's earnings billion. commissions, compensation SG&A to increased XX.X%, and a margin also XX% BBB- were Slide growth the wanted capital Fitch returning this home We in even a reading revenue X-pronged spend closing home last with incentives. more to our elevated to to grade active closing decline to turn revenue percentage a in as upgrade investment disciplined quarter rating. to shareholders.We as to to approach. to X, bps very comprehensive a we net share has both encompasses through $X.X our spend higher appreciate technology plan costly and management million.As $XXX.X S&P. primarily due and we we just gross from pursue by XX.X% capital was XXX approach that closing activities a a business of X% declined follow-up the home Our balance in X have to recognized us had financing We sheet agencies

on growth XXXX up prior accelerated our total land year a First, we $X.X development, and half that we sequentially.On and in our with our from expectation quarter replenish $XXX in spent year portfolio full XX% this a land latter million of land prior and as to of was we $X.X started internal billion, spend we the acquisitions basis, investment year-to-date north of acquisition spent which after up XXXX. XX% from short hiatus expect billion land

quarter. X the available uses, to balance we'll senior our quarter, of spent remained external cash acquisition of this XXXX, X,XXX owned year-to-date continue reset net by lots quarter. capital we million below to outstanding year.In in dividend prioritizing to last share and at intent shareholders, of to deals We've of XXX,XXX billion credit at cash or $XXX prioritize as cash compared flexible September our control supply debt-to-cap and annual putting $X reinvesting QX. shares beginning as we $X a million all notes plan of for of is at be on or XX, back shares all X% we repurchasing the have of nothing dividend X.X about total buying million picked internal we to stock cash also continue cash this X,XXX plus land land basis.Second, program of community the XXXX This in year, XX, do net Over our cash both and this equity. the of about million lots our million, authorization been opportunistic to September our flows using compared added this supply XXXX.The percent.We September over notes It up quarter. amount to returning control excess about $X.X XXXX our of lots under onwards, products. to at outstanding lots for or negative ample the and year. year also XXXX. under remain X.X% so high lots with X quarterly a and XX% of XX. flows cash our back the million September of far of to about which at have momentum $XX This the brings to spend year and of so.On given $XX next for spend returning implemented our total flows, XX generate X% to by is as lastly, to $XXX each in growth year our and September XX, operating end, communities, also entry-level dividends. ceiling continue new on intent plan shares maintained As XX,XXX grow cash the in we the our XX, new stock it count years, as million X,XXX we our common in we XX, quarter had $XXX paying debt-to-cap shareholders million when $XXX future facility, to due $X.XX positive on company development we XXXX, capital XXXX an QX and XX% of structured approximately quarter first represent equated repurchasing net XXs $XXX business our disciplined cash per we in redeemed on to and repurchases.This and our We lots on drawn and of than X.X the quarter billion the payment Slide and higher This Even to remains X,XXX as to generated liquidity share, sheet well slightly year. quarterly And we in under look started of

we're We that still also have diligence we're undergoing actively almost XX,XXX of additional pursuing. where due lots

and by pace X activity. to a have owned owned of prior ability finding of land meets underwrites our our hurdles ASPs always impeded total Our month option our that hurdles net been competitive, current In was margin in XX% but inventory return we year, XX, Land that lot at inventory IRR is land XX% lot direct XX% was to gross optioned. we per been recent flurry XXXX September the has today's sales and acquisition XX% source not assuming our and successful dirt and had the position. a costs.About and

we're book, carry While create don't land to a of for vehicle ways looking a target off our percentage lending. artificially specific always option financing we to

deal. to it for have lending retained We makes earnings. able specific Otherwise, growth fund our we've been a when through sense

more player land in the the intend as banking upgrades we the we for look and we haven't recent direct market in capital.While Slide balance we especially utilize land grow active investment markets light cheaper you and of good position we XX been in to guidance. frequently to to grade, look recently, land I'll near Our see to an to our shape, do is banking conditions future.Finally, sheet stabilizing, this our in leverage

home the spec projecting next based in home over that today.For to closing to the of XX% give us potential backlog in effective are $X.XX. in of total X,XXX ground we and X,XXX units, to $X.XX on and gross closing with to closings strategy, diluted tax approximate between about margin Our the XXXX, EPS and XX% quarter's specs units X,XXX another into $X.XX our times to range combined and X,XXX universe revenue QX of have closing rate be billion, started XX%, normalize, $X.XX cycle of visibility billion

in expect XXXX anticipate over we turn I'll our provide to digits year.With to Phillippe. next mid-to units the acceleration do back closing in we While it an high guidance single quarter, next that,

To financing achieved XX, demand pace by in on Hilla. near an and above offering remain believe absorption you, quarter goal. XXXX, incentives Thank housing average pace Slide the steady of future. focused the will summarize third on our internal We market we in just

with we financing Although volumes, the target.With normal near-term higher interest volatility homes. of in continue concerns, efficiencies incentives from will improved costs some and model of gained results. rate order of and believe pace turn of drive order proven seasonality pre-starting our to we adjusting entry-level business of our sales the our XXX% suite operational maintain to leverage financial fixed in We our better

inventory turn and on community the in that, with deliver faster choppiness count move-in we call we year next a the cycle believe we our approximately sales can our ready times, selling normalizing Operator? for inventory replenishing with sustainable to and demand.With to starts to year. the homes meet over season align homes spring now are instructions the with the long-term deliver a operator and pace X,XXX XX,XXX Even over turn XX,XXX our Q&A. We and this QX quarter anticipated Xx our XXXX will can growth.With several I drive the to quarters,

[Operator first Wolfe Truman Patterson Instructions] question with Research. from Our comes

down ASP guidance closings, First, clarity just the bit quarter X% wanted sequentially. about a fourth little of on

maybe bit see little to geographical mix a more incentives. that's if checking Just primarily shift,

color provide on that. you some if seeing Just can

demand it's bit where Phillippe. It's from Truman, geographical. of the some in expecting better strong Texas closing a coming Thanks, and really mostly we've seen times. cycle We're quite of

margin QX that of of in is it's a we playing are lot in guidance, lot a The incentives gross the QX. in are geographical. it incentives have So incremental not out

mix. mostly it's So

Okay. Got you.

the trying would West. Tucson recent West just that mentioned a imply and and Denver a bit through move, the clearly, more Philippe, I give of more you So orders And of a to of go understand, think perhaps little could rate the there. deceleration pressured. you kind being out if given bit markets little a color in I'm

X opening is contributing Yes. still part of footprint I north West month. said comments, our mean we geographical as our in of the sales per that's not the net

everywhere, the stronger got last we're California seen Tucson bit little But Phoenix. rise Southern are stretched And pressure. a But performance really a Colorado in few seeing with trying and affordability customers. things those of are versus with volatility the -- South doing Texas X, where demand. them largest over drag years. the most markets seeing in capture it's think in acquiring where rate versus X.X. and doing We're generally I prices interest to the it's West of and rates, over in issues we're the different the But the is the we've

Our with comes Evercore from next ISI. Stephen question Kim

the incentive company, I is was the as could on orders seeing that what now XQ in your to that And in could little is was what curious that say commentary color, you what Appreciate margins, the I'm growth particularly you you the you made. that XQ. more absorption? How returning customers from got? in stuff, move you in the count to longer-term I average My a relates XQ? And up all that's some of was referred normal rate seasonality community the of then normal like following use as would rate and was helpful. wondering they first us about specific. kind just XQ? be question if you're think seasonality curious tell if finance to it actually about What think coming average you I is on well, potentially comment you sort of that

Yes, the I'll let second answer Hilla part.

it I a like feels experienced first what would thing here, of just say lot The October is October, we're through we in September. kind and

that seasonality normal hard for to X to seasonality we're way exactly July sell X.X out, seasonality. mean I've that. I saying think our but sales X about X you not over That's net back the normal what business that's January we the as like revert is that we when feel February average we when say today, that September, we'll of through worked in. X expect October we're how to that experiencing all sales through sales, when maybe then generally been and to worked And but to long like. I'm last still then June business how are. kind our sales through to there's of term, time, we it's month. hasn't October net per has going holidays when X that traditionally to years, as X.X So, going think Stephen, It long look

let about long So I'll Hilla we and then term, that's the it question. think how answer incentive

Sure.

we've because XX-ish had you it, little higher think a percent mortgage the rate we're offering kind that, in incentive about than capture So, if our incentives. It's of obviously, the always question, company. around

having take we're higher a So rate.

kind of that numbers right mid-XXs. going maybe in. around closed all We're QX. our And buyer our buyers, out out we're get here the QX majority here about now to get are that pool, XX seeing closed X% than right higher bps what's is scheduled So to or of in of as which to

marketplace. So the we're there both the seeing material, are increase, that below significantly rates in not is a slight and XX% although

that's Yes. No really yes, helpful, That's well. doubt. super -- as encouraging

next It was if of they be I right like might coming you that year-over-year of just had ] jury that said case could sales that what as basis in I the all revenues? represent down seeing you seems few the is think point light the revenue percentage of your buyer home X for Bernard the curious years. level seconds XXX this actual know in change. what to remind -- commissions took I commissions of us about it. question Second But percentage it the at [ points what was now? like of you on a your

a market. traditionally, about is today's for a tool. This X% This selling marketing tool us. it's in is obviously, So

are It's bit with little particularly co-broke. about a some it's markets, So, that touch XX% Texas, between is of X, most maybe trying at in X. our then X markets not the somewhere our community-by-community sometimes We're a homes sold quarters. and of X, to XX% market-by-market, rate And decision. participation north running but are

Okay.

Like was So change? within the that rate XXX point what what though year-over-year SG&A? actual actual was the number basis

paying say definitely detail, the would we're into of very is we get that around commissions I in we to I but X%. don't probably were that X% XXXX, can probably were what we're now time. running think going And low. in level at say X% I to

from with comes next question JPMorgan. Our Rehaut Mike

expect to if count count. up I an on this missed could expect I you was single where that know I to of I year. growth appreciate of of be mid- out a sense talking kind the about if give high community kind of you update, digits. I us you community to if it, 'XX, look kind forward predominantly gave driven curious closings by finish apologize don't you if And

We didn't for give any guidance year. this out

count comments, we that community in into going we think the expect it's year quarter, XXXX. As choppier the our said we do we but growth also said half in to next be for next of back

better generally expecting absorption from we're going store rates We're So, not are at. X per target. where they're hitting to increase our

next there guess year. I It's the throughout count back So community the right? mostly half in answer, lies growth of XXXX,

is more all guidance I sooner changes before secondly, fair gross else say given obviously the rapid gross that I absorbing more for equal, conditions around numbers current is your guess impacting I incentives I appreciate of perhaps margin clarify on XQ XQ in think and that, that's model and Philippe. talking Great. answer our gross incentives that guidance the and current than buydowns market largely reflects to industry the spec around just this point? more the of expensive with rate later, guess how margins. your kind at the recent reflection Okay. margin it the to in

Yes. Our journey. them the We've those homes locked -- fair we that get through need those of are right? XXX% quarter That's to, in to it's rate sold. folks most guidance, XXX% at the homeowner fourth mean, accurate, I

in fourth utilizing it's captured quarter acquire we're guide So what to our those customers.

question next from comes UBS. Our with John Lovallo

Maybe sort what little similar the that costs in on year-over-year break of they side, a just think this help out quarter. there between saw a us on group? all you and year-over-year mentioned within Or offsets cost labor relatively third Can some maybe land, you materials? the basis? for you were stable Were I bit

Yes.

would say about -- year-over-year? I talking So you're

Yes.

what also offsets we've relatively land -- higher Labor costs it's been shared stable other costs. flowing But stable in open higher higher there give again, development part. of has the don't stable. cost We are in certainly, cost, out land have we course, new of components, it's the stable places, direct basis up of obviously done but those are, all that's so So labor Most or costs through higher land as for our land communities but detail lumber, level most year-over-year. some at between but costs vertical costs.

high in context and in single-digit about growth. look and could new And home are the you that of that That's consumer overall mid- on outlook next general then the thinking maybe then closing of the of overall? the year what health economy Okay. growth and just to How like, for the sales helpful. terms industry

Yes.

mid-single heard I expecting what the backdrop folks from kind and that of think about the market the low generally, they're talk think digits. of macro used we've home up, given level, locked the I read being

that's So right about we us. for think

as growth the market have in the as land We from to that here. place long regress achieve doesn't

current we that. the feel able QX what this share think in feeling about what market to be guidance, We we we're to October. do conditions, we're that able market our if So, what that the we're increasing is will confident market know accomplish and in and today, in

to as to to to to I continuation or if rate commitment sure would community get telegraph, want the commitment hit count say make based. locks, absorption number. our also, read making of through mostly we're you the right, It's Phillippe mentioned a a pace that our to

to that that affordability committed us affordable steady to the comes organically in or to for rate, we're current down making making that So to we're question come the whether at helping solving the price from rates sure coming the in absorption we're order band. down. sure the home rates We're hold committed

we -- going I did be what after season pretty on to based spring mean after the seeing the experiencing is demand today. there we're the obviously, in QX, optimistic that we're selling

from Our & Alan Ratner with Zelman next Associates. comes question

the the start to there starts to running I that ultimately know match Philippe, you on at been the you've recently sense. pace hotter a is first But side. question goal indicate pace. start on sale, which makes certainly

last widen further pace. started quarter, in you like XX% fourth if to than And start gap in more a written contracts that sounds going X,XXX it the potentially maintain You've about X quarters. you've homes is the

take I'm high initial that you your what So growth, run get commentary still quite on single-digit to to mid-to doesn't trying if 'XX a figure I out, X,XXX quarterly rate. unit

we what your that mid-X,XXX is start converge longer-term should more this might something see and in target? pace Or be the actually level? So orders at an point that, inflated with

we to next of on still to We're getting in, in to our of of move that there, having I days, our days. XX our are into are XX and days the X/X XX, inventory like Alan, community. ready catching think know, by X/X finished, want or homes we're the up, X/X then you have we XXX but homes homes ready move that

community-by-community we're a more on Certain there they're but So, higher communities seeing absorptions. have not basis. maybe

So, getting us be, this to to want yet. about for we really catching up is the not We're and where there especially spring.

think -- closer. have contracted, times a lot we as cycle I we're getting

up starts catching to we of we start now. really kind move to do right marry feel up to -- going marrying I like see XXXX. some with sales that have as you're still so But And into up

Got it.

that. appreciate Okay. I

get incentives to characterize needed the you I'm off rate and something versus at you and your on Xs an actually rate buyer in one they fence the perhaps meaning the rate resell it Second, to offering, perhaps qualify a to they convince about homes the a more that for or of think buydown get something is qualify, the a buydown buy is X% to would curious the when that dynamic, can't need X% buyer mortgage? Or necessary you're home? qualify actually to as them

we're here, answer I business. hate community-by-community to Again mean Yes, Phillippe. I a Alan. phone in but the

to certain get would a net those communities, nicer appliance In in communities, say need per of of sales we other bit or discount. or in of locks X achieve cabinets folks price and package base rate that's qualified. move-in-ready and I just our little more it's month, replacement So, to markets a a

differently. it So, on everyone market to need the is differently using depending it community. We

increase, community-by-community quarters and were people than qualified in obviously, rates generalities. it's answer But more as X ago. of much that we So, we're very But get it's hard maybe it to buyer-by-buyer. to question to using continue still

only right? for in a the The would it's customer that that. all add thing is I communities, So, critical marketing is tool, looking it's

understand what that to today benefits door. an So, versus it's that and think Once through there, critical in of the to to as their them is, have advertise we financing need one they're solution. get but of walk advertising critical the it's another solution can I kind

rate Texas, in the South. But we market, locks the we to or I just more need like or for West those of in Florida example, described than probably when the the people in do West, qualify

Carl with Our next question from BTIG. comes Reichardt

option Hilla, more. you about talked utilize on basis land something about sort is go-forward you of a banking thinking might

So as what's good is it has as I balance in the sheet changed there? mean a been. shape

been You've for a long time. self-developing

on interested that switch time. just your over I'm in sort so, making of thinking And

X I say the for our would big would changes be future growth. expectation maybe

it's I fairly think robust.

going that third-party still to at we're if -- and sure using to even of supplement pace sheet, make course, faster also an we but to want we financing. So, can own grow continue use our we're balance

costs for and and land development lines extending that perspective. burden time it's your that every are really and item stabilization development carry lines over kind the other conditions can difficult, we're land we of The the has cost pausing outside You're the right? model paying extended market. of the understand and a banking mentioned bust is we so of the control.So, that to remarks the market on stabilize banking last prepared attaches made years of time to from math, the couple The in on the actual our land lot waiting

lot close the for feeling where confident in very allows I time lines and us margin So, in a deal of budgets capacity leverage on we're both for sense think a it. point the land to makes the where tool It now that development. we're on the the to

you great appreciate I then quarter repurchase think, answer. stock. And a That's that. million, purchased this I $XX

of up on and sort that You've been time. down over

a cash more generation expect guess volatile reinvestment With that than one capital the the continue to Meritage? more to periods of not model more so expectation your more generating on basis, now the do the where consistent part in you're you'd repurchases a past. permanent is cash plan going that and Is towards shifting share to are for be my

return about system been we I is. the it more on shareholders. of value orders. diluting shareholder share way very put top business than about our to a great our even grow we've not programmatic I revenue the been count to out as as with in line think, through ability Recently, Yes, and out we've growth market generate it growth balances community and mean share it's more our long in, programmatic always taking

And book. for when responsible to our is So, just is when it our seems book, strategy we the below our book worth know to buy price it's a thing part we above key shareholders. our below the stock at trading back when especially our like returning capital of do land land

to we So continue do that.

next question Sachs. Goldman comes with Maklari from Susan Our

are key cadence the I any that the the out there back quarter. you constraints were where the down? at about continue think kind that construction before we Can which you pandemic? And to thoughts a bit can during about to the to on come preventing commentary, talked the going that that during that continuing improve times of still perhaps from talk are

We're really getting weeks to were We probably pre-pandemic. we where have back a of to close more couple opportunity.

in we're We we framing those same and figure with the We'll back way things. get frontend current happening in turn to down really a to we're much business right may of there. try our market constraints year get can house types the weeks builders putting with never what see. pleased homes, the X pre-pandemic that's think But term. continue ones, in with can of -- those all can be our Xx we're But accomplished. think out We'll the now. again, more get But there's We levels. all to back increase the cycle seeing if our we've especially foundations, turn on I mostly business, the we times. I what so near to our right starts starting are only the now going the and that more extra

a increased that little to question response labor Phillippe mentioned a labor true perspective, has maybe from bit. a in cost very prior capacity is but the of It's stable.

improvements marketplace definitely we're So same in the peers. our seeing as the

Yes.

of you expect you than kind bit for Okay. SG&A that But the I That's time. over then higher you the And SG&A, single-digit to high think, helpful a range to quarter, also we came mentioned that getting color. in we move where talked the year? to how to Any keys seasonally then And end about about? the should over as that were. that on just thoughts target we be of the just thinking sort time,

So rebalance. work starts those that through, flows. on now, side, But see we've from just start coming communities as is over -- the I with you're digit to that and time, that commitment think a although our land quarter the through we're the through Once coming to development, once made we high-growth the and we're number acquisition incremental high lag quarters overhead right couple to community we until of it's to generate right in going a have some the period revenue cash see to single next that again look count right the increase the communities pipeline. couple you're under of going those

comes question from Joe Deutsche Ahlersmeyer next with Bank. Our

community to the count about wanted I talk again.

of what absorption to get feel before. increased And of online you're are you're counts even the achieve that, on about in path when sellout you better online. outlook using people different the recently? how you're risk of probably talk for you're talked that specific bring from was thinking bringing incentives the Given kind next XXX visibility you XXX better to before I'm as the that community to then spend there's a and XXX you just of looking more communities be positioned, largely, when you your if less to at about then on year growth targeting and to up side might and you've can depends about how a than COVID land we Because and here beyond maybe about it where just may past, able

through puts curious just could you the talk if So and takes there.

Yes.

were communities, you And to were X when we're we the sales assumption it's something answered XXX going but net time X. kind do do going per X question, I your now of our to is month. we said do we in last think or to going

demand land look we've like, of closeout the So, are of assumption. and the in off we understand invested that the build what to and sort appropriately to going scenarios

under if So, that I don't XX of next those don't growth out we're that Obviously, environment lot to type predict think and XX, the count we better not a community a year. on ever have for working with get that, X development, we we under we a months land month can visibility have communities. growth

being is and today. actively on everything think I So, developed worked

to hasn't delays, development, we So, very, -- communities, that land municipal up gotten have visibility.Even though moving any very still easier municipal slowly. it open it's

at better it's long we've cycles able our to open longer And getting in built to how forecast. I to think be business. understanding going those predict up our communities we're into

I pretty components, X next those think going with feel good So, we about do what we're to year.

in assuming XXX. And that. think shifting side, look just today? some headwinds like price thinking what buyers look that is we get ASP mix, to than less then a of out how might what either the mix stable, when just segment kind the the you're of appreciate of should ahead, year potential of all primarily mix then year? mix have Is going they sort I ASP like, your when And the geographic have could be it XMU next do even the at but to other mix peers about great. called That's headwind about on you

it still prepared that. is of feeling Yes, to and There's XXXX of mix we're think our parts pieces yet. uncomfortable what it guidance moving with a into I give is. relates lot out not to kind as But

XX% really we're value-oriented ASP comfortable frankly, or home XX% nice many because of XMU about to to of out and at closer XX% think those built level there's home.So too this And we're migrating really just because our I mix, to be a around. we and closer going just are entry-level XX% guiding XMU. but moving not that's kind things point still entry

with McCanless Jay from Securities. comes question next Wedbush Our

the you be costs land about question talked starting half thinking first Or of is going to I through. of community Is that that ramp? to 'XX, given work had, think for all should gross margin more going we to when about be higher you for is the something XXXX? second So count

of mentioned started. gross say. our already would land composition already QX. current kind higher It's I sequential, that That's of Philippe of costs margin is part our in

change composition communities material higher our going it's more land of land portion to development become a our it's portfolio, until over, entire As that basis. to be going

if probably think I assumption. you're So, I the slow basis of now modeling, growth a would 'XX say, and land from safe until end is

talk you what price of now XQ And writing? those about 'XX? are in Okay. for seeing or average the dollars percentage terms And of then what home either you're orders you in incentives, could were

give numbers out don't in actually inventory. We spec market We that way.

QX, QX externally. incremental we are out, not in So, primarily incentives the something the guidance decline we the give that components It's I although we're visible that really mentioned not think margin between that expecting. and that's

but we going is quarter-over-quarter, be details. change to what provide see So the you don't can

question next Alex Housing Our Center. from comes Barron Research with

hoping was household guys client some FICO, down like average I of you things. of your type on average in payment, what looks average statistics average could of types provide terms those income,

information little in a prepared had we So remarks. the

first I monthly too much right is decade right package changed. and Honestly, not mid-XXs, held over XXX around on not any if That's much DTI, we track XX, hovering month. right should for customer entry average the in level the last XX, We're by decade. changed steady. XX, -- above, the has last up. in so around it's the given is time right maybe too FICO it saying Our of the move has this below an depending or LTV kind

with can house that getting of customers. So, we're fairly into. definitely profile credit comfortable the they're afford the our They

the about income? Okay. average What

see metric provide data we back on that. no if and if we check We'll not, believe not for that's we're in to But baselines. to new provide call the that go don't going that's because context provide. stats I there's the historical a

or of in versus, in do quarter a ago? -- what of about in backlog X ASP or How closing percentage your incentives, represent say, they terms either today Okay.

think are as I a as question. don't information on amount provide We listed answered this a a our We dollar just either we completed So since sell homes percentage or incentives spec inventory. home.

that price some of start XX% is we XX% price to to break our provide and incentives. to say components an those a financing will that disadvantage out the So customers sort using to market don't are want ourselves. competitive we all-in of But

costly it's we the So, XX% we financing expect from guidance the utilization gave represents to XX.X% as the in margin material the fairly expensive, more the increase, QX that And the trend And to to we've of incentive we continue. QX. incentives a amount. which expect reflection more change that to we mentioned, that XX% in of That's to usage. earned primarily QX a the incremental

Rahmani question next Our from comes with KBW. Jade

preferring? a down is buyers to basis Just are you on buy XXX the of through can points And follow-up the buydown customers the term benefit question. most common in limit mortgage pass option terms on full Is that that?

or lot the get incentives, Average pretty X/X assistance buyer, they're It first. the than is to apply depends entire of a else. willing an third also on to where right? their with payment X-X just folks question looking most assistance or X, in doesn't of first home the in years. on to ARMs, your it marketing to honest. need X-X-X financing that. but year. with We're heavily folks this is type extra something for and a for American and A can lot more the comfortable X ARM impressive. need you incentive common buydown, money be That the They They're stay of second the are take I'll year take

education I'm we're forgot sorry, the front, to question. traction I we're of So on part first and that the increase seeing the some trying there.

XXX basis points.

our peers forward commitment points, builders for mentioned have that of for purchasing limit. are is well. basis of are are basis but it's an I call couple actually XXX their That large buyer you XXX on that outside of this doing actually a home, that most that as incentive the if the think points,

in excess that incentive an an XXX provide opportunity there's So, to of that's bps.

market, Which have the existing is governor. that they another advantage over home which

the impact? mentioned does XXX incremental going basis XX.X%, the [ points reflect points, from to XXX that that ] basis of So margin the you impact roughly XX.X%

financing No, using usage that's change QX incentives incremental QX, the from of more incremental financing more costly to That's incentives of or right? the just or them. change folks

maybe builders XXX. doing why is commitment. we not forward XXX. you're I exceeding a buyer the attractive There's That's Everyone the at XXX. are So need the the think lock to that's on to no buying focus that rate

XXX. than QX in excess use mentioned, as So of that our But amount less XX% that percentage. is in of we actually closings

So, XXX I the think that than we broadly available. it of that's should think more

Partners. Ken Our from with Research next comes Zener question Seaport

of I couple special but It appreciate incentive details the is builders on confusing, of A sauce a there. the kind questions structure. seems here. want

correct, First, for the I'm the doing is right, but ASP math price am think down your going getting guidance? I fourth I in the -- the quarter,

Yes.

talk price. Because has incentives something of It regional you and -- just seems one fine. the a guess I I heard to and guys -- Can gross then more before -- obviously, to bit with or much did question. my little the you do mean reset? have that's terms haven't I there you is I discuss in that that

Yes.

as said opening my the prices not largely as and mix. it's cutting our comments in today's question, I first We're in well As market.

So you incentives the of locks there. more driving what's some QX our decline ASP geographical a the closings lot the there's said. some We're communities entry-level here mix. and getting rate We're out is But of QX country. as doing primarily, in across over

big I like mean, quarter-to-quarter. I related was seems a quarter-to-quarter mean, it seems it only, big closeout mix a -- shift a It right? big... like there Is --

more But... get like. you if We details, you can certainly

time. want to right. one that just I right. focused all be more All on That's

focusing not we're pace. glad I'm question. monthly main my here's look, So on

things talk did it's seems you It mentioned like You Could are to given the concept. have -- gross have going swing believe now, pace margins you your margin your correct? a I to X I that more of XX%, that gross around. hear target, stabilizing. normalized you Is

Yes.

through, that XX% our over gross normal. we flowing buying is XX% land underwrite land, can cetera, have of but much if what I higher because et things our that over think XX% you've somewhere when direct between feel margins margins cetera. we we time, and Obviously, is like, we're new to to historically, markets today cheap are cetera, strong, than outlook kind time are et et XX% long-term heard

your clarity going perspective, capital to because that And Right. that I in of terms target of into a would. it implies what from appreciate X kind on I'm tie return if you

very So operator. thank you much,

think in appreciate and time. call look the was everyone I and organization, next on to being all our talking Thank that our Appreciate interest to last today. questions We you forward the you. we question.

call. today's Thank a good you. may This concludes disconnect. parties All Have day.