Meritage Homes (MTH) 30 Oct 242024 Q3 Earnings call transcript

Greetings, and welcome to the Meritage Homes Third Quarter 2024 Analyst Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Emily Tadano, Vice President, Investor Relations and ESG. Please go ahead, Emily.

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

can homepage. our with during You Relations link by along we'll bottom Investor it to of the refer our selecting the the this at website slides on at investors.meritagehomes.com or call find

projections accompanying call as them. in other the Please refer you the are cautioning and well X, represent forward-looking inherently that our Those release uncertain. and statements to of as are and slides assume opinions to Slide statements contain statements. update during at no obligation forward-looking management, this to subject current earnings we any any Any which time, change

a identified Our which XX-Qs. in Exchange risk recent actual our with results listed be and our different subsequent most filings may as Securities XX-K Form to variety the we earnings wide factors, materially well have than and this due on XXXX on and slide of and Annual as Report specifically release expectations Commission, our

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

to turn over replay available on be it will our Hilton. today's expect A today. about to call I'll later hour. We Steve? now an last website Mr.

reflecting our pivot of the announced performance. acquisition Phillippe little and this of our on Thank Coast and will some then market third we're company provide the is you, call. news. highlight experiencing today on Gulf overview new how our morning our and I'll start quarter Emily. guidance. financial Hilla to And what will by more touching the forward-looking in Welcome everyone a listening quarterly cover a we information share recent strategic in about in

Ms. And of financial member, earlier we insights, the the Board family. newest of missed off and welcoming release that Meritage also to this anyone by kick Erin me We our services. Lantz, look for our process our month, Board declassification announced technology Directors. continuation of Let her in this our forward to particularly

proud align to governance them. our with corporate what shareholders to take to shareholders We us important continue to be initiatives are is able with on our have told that most --

strategy is ready to results. move-in another was turn we strong let's where Now Meritage, home QX our quarter our resonating focused affordable homes QX again demonstrated buyers. for with on that

August volume rates the Our contributed in outpaced to mortgage traditional all in and rate pullback and in July September order buydowns that slightly seasonality.

XXXX third of an homes, orders Our absorption X.X. achieved monthly and quarter average we X,XXX totaled

deliveries conversion home billion. Our this company of XXX% record of and quarter backlog X,XXX home closing $X.X revenue generated

our and our across quarter XX.X%, is Our momentum XX-day communities increasing the gross diluted closing which, behind conversion commitment SG&A driver with all rates. of of $X.XX. in backlog EPS X.X%, for Home was leverage combined resulted the closing gaining was margin

of XX% per we XX.X%. to return and $XXX.X September a XX, increased equity our of XXXX, generated share on value As book year-over-year

airPLUS indoor by promote received quality to for row some in air enhanced XXXX homes for the citizenship. corporate on environments airPLUS and are Now building Indoor indoor acknowledgment in protections. Slide that Award participating year a the program We more the X designed our fourth offering of healthier for recent Leader to and comfortable Indoor EPA's safer,

year. a our second earn were Work consecutive of employee workplace result certification for Great to engagement, the a As Place and to we culture honored

our In published as report, Companies August, annual Fortune also -- to related turn the which for efforts everyone for Arizona's Phillippe. our I'll initiatives. Admired financial more our about list, to over that, disclosures. it and climate-related sustainability read We in and now on and Women encompasses task list Workplaces ESG encourage Construction Workplaces progress We to XXXX. force And made Best we and Best know also social well Places XXXX Best it as Most fourth with

is acquisition that everyone. release This press is Gulf of first, prominent we address you, mind Thank in our announced operating for guessing the of of are Elliott as top I'll morning, completed builder we assets private Homes, Steve. a our acquisition panhandle we alignment Coast the toward Coast. fit the affordability the This Meritage first-time markets acquisition and on and XXXX product the a in given Florida first since our Mississippi, strength Gulf and marks strategic the for of and Alabama geared homebuyer. great the

the we working owner part Elliott underserved with of this in We Brandon the country. opportunities are be see to and excited

we the With in from lots, this XXXX and meaningful volume generate to division beyond. supply expect of over X,XXX new

Slide to X. turning Now

XXXX. for orders sales average volume with up X,XXX consistent absorption XXXX XX% coming X% were homes. the both of and were pace the entry-level from of third quarter homes, with third community periods both and relatively Our Orders slightly quarter count across year-over-year,

the rate below as year and ASP well mix incentive on this in historical was financing prior geographic remaining our $XXX,XXX shift from mid-teens. of increased X% cancellation was quarter's to as down XX%, average This product quarter due orders costs.

quarter, XXXX was openings XX, XX. XXX at our to ending compared count XXXX community and We total XX, XX XXX year-to-date communities online September June new Third XXX brought bringing XXXX. to this at quarter

timing into a expecting in higher early demand than anticipated community are some community the some resulted October. end the and closeouts, with openings we count, of to While quarter stronger slipped

approximately the a stores the With double-digit about XX, XXX XX,XXX increase acquisition, to and our December comfortably by years. we help further year-over-year goal us XXXX, achieve of Elliott XXXX at be end should in X unit

days of are so relatively remaining seeing hold far we line commentary final seeing we are volatile, October high-level are with in falling with in demand we in October, performance QX. on September. some provide what also rates Despite steady, fairly As I can the

approximately backlog region the quarterly last conversion level of quarters. average pace on has highest trends rate markets of our month regional XXX% market year-over-year that and region gain XXXX. share. allow XX% average X.X our of believe ] QX for With will our growth the spec in regional X. minimum the from West Slide pace in X of in this largest price region, the inventory central continue points to absorption average us quarter third to product Texas the The per completed target month had to in we exceeded and Moving The comprised an per X.X to absorption experienced X.X [

We at attractive in markets, are to price strength with points. the largest see of Arizona, continuing X products our right

results, region dive wanted into and recent East from the to I Hurricane Milton. Before the devastation on comment Helene I

power storm hearts Our go to and damage outages Florida and the out were impacted by in who those Carolinas.

for. employees and that accounted all are safe our We are happy report to of

anticipate of September were In communities for power to we not October we as early affected, potential While damage were [ interim delays. facilitate in trade to diverted closings availability labor sales materially minor far, some and our in customers the the and the dislocation hurricane. outages sales recover minor some is gas the hurricane to ] short-term month some We so temporary unable had construction as and from have outages caused several repairs our have of days. impact

believe submarkets equilibrium return to forta the sales we of competition do with before this stage average some homes with balanced on We start East seasonality attractive. had the resale. homes line we was to return in home to entry-level and inventory. in completion targeted ] existing process of an we and [ we as historical even our our are segments future, month, our It listings our sales that experiencing product markets quarter that net of more levels to to per bring the inventory. region In from a of mind a already increase with expectation can traditional line be to time closer remains first the so expect versus in X.X absorption as retail undersupplied near closing a our pace the third move-up in new continues existing market similar markets of increased Overall, embarked with resale strategic meet to evolution retail home the XXXX,

existing to competitive have can advantage sellers, related offer financing we affordability, a as unlike home also We incentives.

pool continue share of as the home effectively resell in potential grow market. allows we homebuyer help market the confident inventory are to us target to even that inventory, our competing existing largest will We the strategy by reenters us believe our piece which this

Now at We quarter approximate last our specs closings, orders September as targeted conversion XX, in believe view backbone under new we when of we the rate, inventory specs about level aggregate the and With nearly into the for our the know levels X,XXX units as homes ] are of started XXXX We in year. quarter right strategy. and will X. Slide of move the backlog first [ backlog third our to XXXX. weeks X,XXX our optimal we intra-quarter our X of high closings we turning X the look at to become

and sequentially average X,XXX Although ready in with spec our up specs as inventory nearly meet seasonality. and with as specs build XX-day inventory starts closing quarter right pace our X% months homes targeted commitment. start from XXXX, sales X,XXX XX down per X our this as XX, we XX% year-over-year volume XX, X of XX% have pace about mature This we We in September QX, traditional community was more had the to represented our September specs was XXXX. applied of line to to from up ensure our

as our move year. our from in XX, inventory, XXXX. home XX, ready September of of closings intentionally at also approximately quarter, X,XXX from quarter, prior the as XXXX, XX XX, XX% to homes to in September first previously since our closings completed started new of X,XXX this XX% sold as total quarter time Of XX% XX% [ this within backlog target are continues were of we of nearly came ] X/X September up decline early of XXXX specs from the about homes. the With

are within this once expect we continually stabilize in to delivering We communities. our XX all homes trend of days

volatile through to to want over mortgage I going do it address of Q&A mortgage Hilla, turn most X October. the I which of topics, to the continued likely environment, as Before is rates be what elevate is have rate to

XXXX. the been in the it same as is has commentary of since COVID Our start early

quickly We are an interprets adjust and cues accordingly. market agile organization that

as for profits and long incentives, to into deemed we helpful pace. the spot sales in payment. growth, With at target effectively to homebuilder in our on monthly expansion generating commitment our they maintain the share. solve did point including demand look for focus that and believe U.S., top as our affordable right market our as We move to buyers outsized the are financial X X and to sales undersupplied Our for ago buydowns homes offer be has gaining strong in and to have delivering tool is ready are homes a cost price payments continue us will rate years we the while allowed quick-turning

the solid. necessitating that term, While of of influx remain we near we [ continuation do buying expect for to of also be elevated Hilla demand buydowns, with the I'll to believe will home ] consistent rate our heavier and Gen Hilla? rates Zers turn the results. market, over now it to through financial and usage the interest entering walk millennials

Thank you, Phillippe.

and more being billion QX our this Let's due in quarter, results decrease product was mix. volumes closing turn with home X a ASP to on geographic higher cover Slide X% in by and revenue decrease, generated closings of year-over-year We closing $X.X fully a offset X% to detail. X% home which

ASP of XXX year in from XX.X% closing XX.X% utilization year. the of quarter quarter to reflected Home XXXX financing Third prior both higher prior of bps XXXX third the QX. compared decreased in incentives margin closing from gross sequentially and also

costs reflected times. as closing slightly offset which fixed anticipated, lower were XXXX financing partially utilization by leverage higher on and costs all cycle cost of and incentives on home margin increased revenue, direct of lower the shorter lower Our lot

Our times from around to days. X cycle about improved calendar QX to QX days XXX

] disruptions to in We times our the quarter, impacted are would certain cycle country. remained that turn consistent back year. Labor cycle during the of but aftermath may some mentioned, availability to parts X given trade allow of which to about Phillippe capacity of calendar QX temporary the be hurricanes WIP related the times us XXX a inventory our nearly time, to day target [

our per the each supply basis chains. since team, foot result volume a national We vendors costs which of our increased us reduce of QX streamlined discounts have capture been as on able purchasing square allow those capacity and a operations, efforts to dedicated general from in direct by last to quarter year our

XXXX. On reflect about per foot margins lower versus this cost X% a our year-over-year quarter basis, square

development commented several have above while we still increases land As over on past, the cost the has quarters. levels, in been stabilizing last historical

will As go-forward a already less from be have so lot and over our beyond. majority the land, impact reminder, higher we turned costs pre-COVID from XXXX material communities the of in

performance-based the percentage due improved from It's home as that primarily again. revenue a total in were a revenue this third commissions to of of XXXX X.X% year-over-year costs. note of flat to XX.X% as closing lower SG&A home of third quarter quarter quarter, XXXX closing compensation important percentage

Specifically, the same to as community, participation QX the ] external to co-broke with and relationship despite engaged the us. for hoc relationships remain commission deepen differentiator rates as proving reduce [ broker need We for a higher were be our ad which and our XXXX our bonuses excited is strategic incentives.

rest expect home as the commissions of year. closing remain for We relatively of a the percentage to revenue steady

$X Services quarter profit in related unit our of million of a had revenue XXXX, overhead The profit included of For of third guidance to in as Financial are quarter lock to the continue the year we reach milestone. $X.X of the grow existing our first Longer we platform in XX,XXX SG&A XX% home SG&A -- million XXXX. we rate our Services full term, such quarter write-offs. leverage of write-offs under. markets costs $X.X million closing XXXX targeting no forecast or of to of and The third Financial X.X% online percentage

tax The from quarter was under this benefited credits third Inflation effective rate XX.X% XXXX. periods XX.X% the third the homes Both tax to qualifying on compared year income quarter's Act. Reduction energy for of

closing XX% to gross in year-over-year XXXX. led third EPS Overall, revenue diluted home lower from to XXXX quarter $X.XX and in the decrease $X.XX an profit

X% months in exceeded digits results, a ready On delivering year closing and gross $X.X home Closings home of in on We year-over-year our as margin billion. markets last closing and been to affordable, basis, our homes. we these to to X.X%. XX%, Looking to an attribute from home by first XX.X% move-in focus our improvement X,XXX quarters, units. and successes volatile hit reductions, we've our over at revenue cycle were increased able X as XX scale conversion proud year-to-date accomplish bps percentage of SG&A triple for what of closing to our order or had strategic quick XX% XXXX times cost and up are backlog just a improved the all revenue in and a improved

million EPS. All targets far every $XX.XX in, net long-term increase in or year, earnings this so to generating our we exceeded diluted a on metric XX% $XXX.X of

credit cover Before I balance to the QX metrics. we our move sheet, on to want XXXX customers'

historical As XX, the profile averages, and relatively remained mid-XXs. in the our DTIs buyer with FICO with our expected, XXXs, consistent scores XX around in LTVs still

had incentives, about closings with XX% QX sort is company of number As of mortgage home rate. financing that in capture our consistent some our

X. On to Slide

is returns on Our value. enhance both and shareholder allocation growth capital shareholder organic to focused

by continued business basis, $X.X we quarter, development, XX% land up totaled on our spend in accelerate spending and a to $XXX has was billion. year. about year-to-date the from which This investment land On prior acquisition million our

continue annual spend to We be billion and for similar. are billion $X spend our land expect to year $X.X on to XXXX track of full go-forward

basis the of a $X.XX XXXX totaled dividend per cash in tripled in year-to-date we quarterly basis. this on $XX.X dividend quarter a cash As million our to share third per on year-over-year from nearly share $X.XX year million $XX.X XXXX, in and our

buybacks, XX, repurchasing in We of million our shares date X.X% million XXXX. $XX of at catch million QX our million our program To repurchased on spent shares quarter quarter. on remain available at $XX have end. per $XX.X outstanding we in share plan XXXX, systematic up authorization of under December to $XX.X

control quarter, third we public net alike communities. portfolio, future new Slide and land under to been were to this XX. growing lots estimated lots an market are under XXXX, and secure nearly constrained Even has of builders able new XX representing X,XXX we In land quarter private net X,XXX put the though as Turning put the their control. approximately

costs. today's find land the although make able to standards, pencil tight, are geographies underwriting with continue ASPs We competition still assuming we our and and our to in deals is

As transaction numbers. October, Phillippe lots not are yet reflected incremental mentioned in closed earlier, Elliott since Homes in our both our

year September line lots, in our X XX, about a years. XX,XXX a to supply, X X.X target equating of with total we to controlled As XXXX, under of of

XX,XXX We the of at undergoing also had diligence the that still were nearly lots quarter. end third

cash remains actively accelerate growth us in to high, position sheet. to sheet balance portfolio are land sourcing allow land we While off-balance our our without financing our overtaxing

view sheet to continue growth our vehicle financing off-balance We as for a incremental XX,XXX work towards unit as milestone. we

additional where fixed our compared improved and To in generate the September off-book option our we position. owned, XX% had leverage lot will optioned closings a communities to June at from We which and deliver SG&A. help supplemental year, owned XX% of inventory lot XX% About these XX, option was XX% offset gross of XX% of at prior margin gross costs XXXX both was XX, margin and owned total lots and will headwind a land, XXXX. inventory XX%

Before methodology. end quarter. closing. markets in moment we are shift, time extent, lines and high accelerated model somewhat full a ability backlog our backlog so greater beyond interest fairly variability our EPS the share sold take to With Coupled all to our and revenue our in quarters doesn't with strategic our current a not yet on offered closings, and our guidance, Historically, our financing several even to have that of had we were would visibility volatility results we any reflect homes is a that incentives, margin, and margins at rate like our limited describe in quarter EPS, known. in the to guidance quarter's production

closings, range. the a that ] with of of is fairly [ homes to the mix will such change wide ability associated control in and our desired profitability and on focusing do our we strategy over result While price volume sales believe

the closing cause year to subsequent performance. will quarter, revenue provide guide and ranges financial Slide for And we XX closing that, our I'll continued units uncertainties regular tax revenue, margin, home around rates, units, closing including with will full this avoid for quarter, to for that may where we guidance. starting our only EPS and to guidance to continue our Therefore, revisions you direct

volume under reminder, peak sales means time, new our QX. to stronger the a As are which strategy, from conversion converting our in closing real quarterly shifts backlog closings that away

billion, margin QX today's rate $X.X range light diluted X,XXX projecting home X,XXX following In in $X.XX. $X.XX and XX.X% total units, and closing of tax revenue we're gross of XX.X% about to between and effective conditions, of closing home to for closings $X.XX to EPS the market XXXX: of of XX.X% billion the

year full of For With XXXX, revenue, units billion include it XXXX $X.X our year to anticipating both and of home XXXX the at guidance. the in we're year-over-year to This implies XX,XXX midpoint to of which XX,XXX Elliott I'll Homes acquisition. closings double-digit growth closing Phillippe. full over back a that, QX $X.X and billion turn

XX, Slide Hilla. solid closing maintain you, performance pace homes, summarize our and on helps elevated drove turning, Thank margins. our in evolution in gross us resulting quarter strength absorption strategic our third financial To home demonstrated quick 'XX ready that move-in

market us be will share. will homebuyer turn will choppy, on call demand the Q&A. Although for remains combination growing operator favorable Operator? constructive undersupply term, an the that, and of demographics of instructions of to With for expectation lower enable believe quarters homes the that the the the short next market we ongoing now rate I mortgage to the several and over our over rates and keep

from Kim ISI. Evercore coming Instructions] Stephen first from today question Our [Operator is

changed I have backlog Yes. Appreciate the greater or than the over remember XX%. so. a but a equation. production with do could start side turn a of Yes, you basically you color. I'll to the when lot here, hesitant year really the of just were things last I mean, time all think questions

guiding looks maybe double fourth high it at the that quarter. even into like end your Now you're -- in to

a I bit per to wanted of about targets long-term backlog So number little talk community. turns, are your what to you for specs

and modeling wanted time forward? how lower? So run thinking target was would look what think know your that go to -- the understand historical XXX backlog turns going I business that whether your could about days. spec how for levels like to just you're and I shared cycle you're you to that, anticipating basically going your your you're

operating study we Yes. took later that time, homes the we that Thanks, closer earlier guarantee Stephen. we specifically were Appreciate the targets few holding say But also targeted the backlog over customers. XXX% recently we do questions. last year, quarters. out process the our that XX-day long-term during I obviously, sales under conversion. XXX% sort of a move-in going for indicated With we change, to team shift to this that a business been would to our the to in have

But to going So this. think where end are we're still probably evaluating is we're I we up. where

something targeting So this XXX% north at point. we're of

impacted that by can be Obviously, cycle time.

times little about more, assets get Our to times and X where like we to We that almost days. which that -- help get We're year. cycle turning us a where bit at are think down we're about XXX% would XXX helpful we be, a can us backlog be conversion number. we're will

like we're And the of we considering X community. inventory number XXX% per then our backlog. there. We want of X converting of to we're feel spec much the finally, Again, pretty months specs

those in So time we be restarting converting single every X/X intra should those. quarter of

our right then have ready, to right So our specs in and specs X/X of behind specs our we that behind always X/X of like X/X have move of that.

quarter If stabilize, basis. pretty I obviously allows as I of to much about carry can to cycle improve is we we're pretty us times less range the there. continue on times within our think would cycle go-forward think targets we're a to say because and can going this so. our the we specs But much where long-term do be

XQ mean What do you quarter, mean you Okay. you this Phillippe, mean XQ? or

QX. QX.

you. Got

Our QX results.

we're guidance, something guiding QX relatively look similar. to you As at our

can annualized run kind I an a but of the higher, lot Except heard rate. Terms on you kind backlog? of XXX%, for your be on

that's So great.

Okay.

that Elliott I land. acquisition you well. ask the be approach and But wanted I to Second there's ask market particular, let the others know mean, about a eagerly I'll about to be your to and of in questions of question, both, lot to as conditions and listening going that. I I'll all

color first the more around that of for So the And modeling provide a nature? you acquired, for Elliott? the purchase the sorry, need you us things backlog to necessary Hilla, backlog us thing, may then could in out past some working was round something if of hinted I structure maybe any there the had you about of on kind different had like the kind thinking land, if had evolved I a the think have closings, curious But sense some accounting, you land update we there? or -- or your Give that.

it. Got

a acquire So little color ]. Elliott. on just of WIP [ any bit did We not

the So we purchase have will for write-down WIP. have no you adjustments in price material that

We are QX, shortly. we're starting going be to so we're in going starting to units units be I know QX. in

benefit to expect end closings QX. those towards the of We from

team, you able supply tail net current start of transactions. accretive, impact you to start look and it We with the assets dilutive, deal started There's see our not the coming X- margin a to newly carry be or margins a of the in which X-year -- and land for that is be And bit on a again, be no to win-win will were acquired we should bit So WIP, all lots. is of margin. at performance Elliott acquired little all here. maybe acquired, see strike to the unusual longer to a little we of going to in north assets will assets the to a the

the lots take say rate. by run wouldn't it annual X divide I the and X,XXX and So that's

bit of a that of to but not be little south something going materially that. it's But south

trend Gulf -- long-term for new our Coast Gulf that's Coast So the the division.

keep to far be here As internally sheet to our going it. as land, next we'll promising X in finalized that It's the we off-balance something X discuss that's days.

us structure, call. about sheet material will fairly January be on be should something earnings off-balance our hearing disclosing we from You the

just But Or it's until We going next go the effect to So it effect be few go it will XQ? won't know meaning into into January? until it in actually finalized about won't in days? XQ?

be incremental It's XQ. numbers. it part go will XQ to going into Yes, growth. of an will effect It our be in

So it's X. that's on to going day not something happen

So of the QX. relationship start begin will the in

numbers, it in and will will You evidence see QX that. it beyond of our grow then

you. Got

Well, more Okay. about Great. forward that. hearing looking to

is today Ratner Next Associates. question coming & Zelman from from Alan

nice detail the and all for a quarter. Thanks in job the

First on margin. gross question

the range You you your margins that a of know to guys moving to time, know a lot a your XX.X% pretty based your incentives I big there's on normalize expect to for I as associated pieces basis. of of some about like expectation COGS. this kind And to know been obviously upcoming quarter. fixed there's have on closer quarterly play get costs XX.X%. that I well. it XQ part transparent that At same looks with guide pretty within

might is So I'm you below a basis XXX that possibility, range? incentive of just the much anticipate points levels? through that is How bit little mix? that near there roughly the at least much higher guide you a pressure parse margin? is term, for curious if in of can dip of And should we sequential How kind if of on incentives elevated, remain normalized

thanks So the for question, Alan.

long-term of of to heavy to the when quarters ago what right that a think seeing the guided think anticipated level we we're now. I don't be, range couple I was thought quite going incentives you we

volume, also I Fed have the released of expected from did rates as already, the results you've a incentive our peers heard think people opposite that than of announcement. little after what it's several expected. bit been the heavier Interest

the a the higher current anticipated decline of our The quarter even reflect for is QX the to even in for in the increased pullback. lion's from in saw we're quarter share what material which results, numbers QX is expectation we all next seeing, our incentives incentive. So what utilization

rates see will with be come think down, when bated the positive a breath impact. there I and to all we're waiting will

we're that incentives. know don't I So in further forecasting another pullback

I and selling the hopefully, season, head will as spring other we the in think, the head direction. tides into turn

not lower. we'll don't we're I'm rate So to fall that But markets I risk coming in quarters margin, in currently for monitoring adjusting our below again, that. long-term accordingly. interest sure is of and actively think anticipating be the

said several this times [indiscernible] Sorry, we've yes. think I

than backlog quicker itself the what's -- because the of think quick of just statements our manifesting in is financial some market I today in conversion. happening our peers our

So through general our couple seeing but in while our it's trend. and been that's volume industry alluding quarters coming sales later, it seeing a of think P&L, our we've a I are to peers

question Next today Michael from is coming JPMorgan. Rehaut from

projecting how of that's Wanted levels, percent us say, this, you to where throughout alluded I the cadence around Hilla, at let's and a already could note into high of sales that further but if quarter. quarter. delve pre-COVID? kind a It ended just think the are I was the in, you incentives sounds price and you're like of normal fourth it to incentives compares hoping remind as to what

definitely Pre-COVID, between pre-COVID. of they're anywhere and couple north market. X% a running They're X%, the bps Right that. the now, nature depending on above it hundred of Yes. was of running

So increased incentives is today which comfortable on basis. long-term there's normal that we're a definitely market, a why from

correct utilization of allow will sometime Our the gross because to in that do don't a so hopeful we we're current financing although The 'XX. right margin that now. the We're long incentives targets dynamics are in happen term. model rate not expect us environment modeling pullback in that, interest

a the September in interest you're So we October, a even from rate and is month's as which utilization, seeing much whole end lot of the right? not the at us but close sales, of currently, of quarter. that We're XX, worth at guidance have current so this of will exit

requiring rate fairly environment as what visibility good have the offer. are to current to us We interest

your get it relates I a I love perspective helpful. as to a as thoughts That's as guys and you to around, secondly, well. company from market certainly, Okay. would guess,

of given footprint? bigger emergence picture, -- with and a supply lots how given finished the would How in on new a that did or the up lots it additional venues area. But more you Just yesterday that becoming challenges you some characterize and of of to availability last Obviously, over little across particularly of competitor call deal Has -- maybe amount just banking you the there. came on up the availability some your down characterize access good pronounced. across perhaps I'll a gives in partners. you Elliott, gone lots levels couple markets, years? the do a stop of finished are this land

see mean, lots last self-develop it's XX% we I do. XX% I We seen for XX over everything almost of we've pattern gone that's of usually anytime Yes, increasing. in is and question. changing that for the been only If it's some for you what The don't decade. in down mean, get not, And doing certainly we not some Thank so we years. opportunistic way, finished soon. finished haven't the time. the we

are I price doesn't often available heavily that a the market in pay often finished bid on, have really hurdle. that you think lots and to the are

retail goes and plus. puts plus lots So a -- plus they're the on ground, there because out expecting if developer the

I the M&A. finished say within and between, few lots of So far is would availability except

us. a of get on to available is have Obviously, can actually today. M&A lot happening certainly on builders Elliott inventory that's those that you there they of Home private finished lot has out because some

So characterize lots availability scarce. as I finished soon. see would the don't of anytime scarce, And that I beyond changing

X us X that's for our X- through always sell right? supply to to expectation, to to community. years And development. it's a to clarify, lots [ Our year assumes Just take the ] been going then X-year of

I last any modeling Phillippe know us it's what So as said the decade. we've for for different don't been than that

a say 'XX a last roughly off that, looking of percentage or one, to add And your That's by X% were XX kind Hilla, I we before that's volume type your closings to lots One growth quick if it's the X, 'XX. mentioned that even it of for maybe in. think like could number. take you I rather squeeze growth. that that. But of you let's X,XXX divided could X,XXX little Elliott, south closer that

that So that of next year? growth bounds you XX%? out closings could should a to we just mean, normal doing think be is it the I to be XX%-plus adding

guidance to not closing growth. X,XXX guiding That sure We we're numbers. XX% includes the Elliott lot that gave rate. our I'm long-term that a Yes. is run

So their intimating that we're to unit I'm of not range the have be Elliott of transaction, X. are year digits. in is number we that that X inclusive X,XXX the The going in component not

at organic think XX,XXX that the That primarily is primarily seeing is midpoint. that units organic. I that So growth you're

Okay. Great.

today Allinson Research. from is Trevor question from Next coming Wolfe

guide. the top several you've margin guidance back the over range. Wanted If end consistently up on past outperformed of margin to we follow XQ years, look your the

of happen to alluded would here play? that's range a into notable see XQ true need built degree conservatism sequentially, well. was that you then you to, what to guide? end the And the talk step that in guidance think for then assumes about you of I into as as come down bottom can your And XQ

Yes.

XMU was think ready. and at to So as dramatically look and to identified spec all that of the lot have all shifting in from quarters you I from that predicated to on then going where fact you the outperformed, builder past and entry-level move you're entry level from X our that we've was business spec a

transition didn't visibility And the so and that how all it have we was in happening. happening quickly was and confidence complete just

conservatively on guiding So we are that. based

our but look to of of as the higher of conversion last rate at little are margins just came you indicated in going outperformed, be our the And a of down. quarter we a to that and bit in a that we utilization less backlog form slightly everybody guidance, Now lot locks.

that say, we're And would in perform sit of for doing. than XQ much below they're being I lot That higher midpoint, to our like I a currently are don't guide. feel said, October, we think which they here conservatism think we getting would I us So tighter. there's as to much, go in think don't have currently rates I

our don't X look We we're see have close another sales we see procuring of and weeks QX. out we in maybe today, sales that costs or will And up. as going X financing what

XQ. confident So I in for midpoint feel our

that quarter, then in of rates about second in is how did Okay. see elasticity Got related to somewhat you to quarter? movements. And then Can the the talk third question decline you sense. demand responded And when talked have you. others Makes second rate pretty about, quickly half my that current expectation such move the at, the to noise in behind for lower us? the things as they don't non-rate your where What some pretty consistent impacts to election a we is conditions, stay they're election. we the of other have could rates, like demand if spring but in get demand

Yes. Thanks again, Trevor.

in So we're half of of year first going rates like to previous the environment true guidance, the election give. potentially going a much be of years, more like time for in -- to materialized. we because the Because experienced difficult many because what has all we felt the this that we sales back seasonality. of said And was

thing has only material think what have I become been that rates has Fed the cut. just more done after the

The rates. extremely sales elastic to is environment

If we rate was saw third you environment. our increased orders, meaningful the look our best month down in came at cut, rates a because and demand September way after quarter

elevated the we've September. moderate seen demand through have rates As October, from

X-point per is it we're very very, which sit. very, our assuming is do to units next on based to where month being significant over So XX,XXX growth. community elastic. currently there said, We're That net sales growth guiding year, count we

environment. exactly extremely the about of that of lack just out financing the are a we're going lot demand folks So demand home. we there What a confidence that of in confident think in cost buy incentives. the there want be We is and what is to form to

Yes, Appreciate forward. moving color, the and all makes luck good sense.

question Next John is from UBS. coming Lovallo from

similar thought pretty was the seemed up -- have just standpoint. an to last of September made. from the guys follow to comments is you may one just October earlier on Phillippe, it X order like that you indicated September was good. first I The presentation, in

the pace Or seeing level? just kind September? pace about relatively is to so what's I incentive far of in order right the mean, think consistent a way So the at you're higher that

our we're very which pace, about The is are pace-driven why thinking fourth and the we to Yes, confident business. quarter demand it that the is feel go secure way, a able there. guiding you're right margins. we're We to

get at confident that there. So guided incentives to feel we get our go or the we we so can because have margins go X the financing to we month

environment expectation financing the volatile and to it the continuing environment financing to as is procure of relates sale. consumers remains demand the So incentives be and the to cost extremely just that and incentive constructive. the It's and

sense. sure then but answered I'm Makes make that just this, I I And think to you understanding correctly. want it

maintain trend of guys margin the You long-term outlook. the sort

if down right that on rates, that does think they the the so the margins? foot imply do, the if but and do that? more do take come Is incentives And and when who way off and capture knows would to that they that you about gas fact, in

And XXX%, as lot long case, as start getting so quarters. in move you especially as not to things that in there's future It's just look a financing, around we're margins. right? out of our

land on, have cetera, et coming We vintage et newer cetera.

model, can underwriting, the cetera. in what conversion, our our backlog So to on that our our leverage, long-term long-term we'll able efficiencies targets are based operating create new competitors on the be for positively incentive our But the also needle are payment our negatively the but solving or that move environment. in customer, environment. not just obviously It's what the the doing is et

potentially that If high go would, So rates provide down, margins. a potentially present and tailwind a if headwind. that even for think, rates go stay I higher, could

that can pricing, can cetera. structure We a things can do et preserve there We cost differently. with are a other in Now little do lot we environment. margin of things bit our to navigate

higher want that yes, a provide this. rates rates lower I -- vulnerable say to So completely to tailwind, we're don't But provide rates a headwind.

once resale inventory, bit, that don't that also Yes. are ability of going increase. going couple rate to to don't Fed the was announcements guiding increase I mentioned of a -- a have think think availability remodeling impact we we're the to will to Phillippe correctly, push it it I cuts more That's which pricing. margins

So there's forces both in directions.

at below. little long-term that with range. comfortable with bit margin on I doesn't that little what's think be we're that we're guidance above, based fairly our this going It term mean a long but around to I quarter-to-quarter, time. comfortable market margin happening with we're think not a that All bit

Reichardt today coming from Carl question from is BTIG. Next

more a to ask of to broadly. wanted little bit about I Elliott sort

X be about very thinking more the the really that got has gain unit entering goal Elliott since midpoint. you've presume Does for years, additional the XX,XXX model now in And share my trying you. you'd I production any you've -- XX,XXX you got been the Is acquisitions? to thinking next at new year are mean, actual and So already are then new within dialed a different really in. is market you markets that

or new something is for XX,XXX doing sets to to Or So for that it is that we a help geographies more unit new an you direction acquisitions Phillippe? this really could goal? get opportunistic say deal,

at of housing. are lack markets are these to are from in They fit Actually, life. was provide homebuyers and provide quality first great a We've strong. regionally are down economies to move affordability Yes. They benefiting nicely deal with around overall very up. markets really, in strategy first-time for Elliott us. for a states still affordable the These move attractive looking a of our strategic really while. a They the that actually here. And been

organically for these built those into markets us was quickly phenomenal been we through go with scale thinking gentleman from and could a there. about a getting we've franchise to a more in that so partner who markets opportunity or Homes So great great M&A. Elliott

very So a it was much strategic fit.

Plan always As is I in markets said are. before, we increase our the A to share market organically

top first-time are most X top a We entry-level should be spec a builder We as builder, markets. X think across a we our of builder.

the operating we that that markets to also to allow we organically our XX,XXX units strategy As of at a top market at into through X price. be a would that have us get that we can easily think that where we can about enter are number growth. identified we we But builder, or consumer our looking strategic as the right strategically builder going strategy to acquiring segment and fits to have

M&A to going there. value. anything shareholder a organically as go to we it's being standpoint looking we out That good planned deploy don't of have have there currently an long So a capital from we're and existing of always markets. at as our but those, And that return been both We're from lot said, it's is actionable. growth we'll for our appropriately things,

XX,XXX organic. on in units it investor to we guided assuming all calls, June When was our

is we're that doing incremental. anything So now

And right. thing. X just then All

land 'XX what in billion 'XX to $X.X think on about to split versus you be in between spend versus similar development too? Is it your was in said spend development matched and land new 'XX. I or likely

] a a on [ acquiring basis? -- It's Yes, spent on land go-forward of dollars We've bit probably heavier land. development. lot a little

we've self-develop. we so everything acquire, of mentioned XX% we about And

dollars bit development. going of out on So there's door quite the a

a basis. the acquisition between I fairly ratio that and on development is consistent in think go-forward relative 'XX

Next question today from Maklari Goldman is Sachs. coming from Susan

last cost? or several wood and first about seeing talk is brick general to does Thoughts there? the bit inflate for the strategy you do potential some core this that costs. stick a homes we some input then how you effectively Can on in get that what commodities? We've in on path weeks allow And you're seen My that perhaps volatility question continues price just these in lumber actually. products the as of

Yes.

of has exactly So market. of last is normal weeks, kind all of a what our being lumber bit the kicked couple up although direct over right, you're the whole, composite we on of see the in a

On go corresponds of things pickup, average, up, there's a down. it things maybe a bit we're kind with some on side. ASP go Some of little but what seeing the

relatively normal stabilizing, would of the material what consider a costs. With kind bound holding from seeing So direct of we not net-net, labor a environment. there's everything drag we're within

not ticked outsized is bit. But they overall, still in everything we're fairly up lumber seeing the So line. anything super a market, have on although

quickly. supply seeing and see volatility with that's fairly returning cost We we not the levels, chain volatile home. of back lumber most in locks component that have do quick market But to we and variability secure we're normal kind today. biggest stabilizing individual to in going builder, the the itself of are our turn that are in said displaying The right? a you the the So happening anything cost results in that

like So X we're movement the the we But straight years. or direct most in in do seeing for some not had tremendous X we part, last there. lining have maybe

maybe then allocation. color. helpful capital turning That's And to Okay.

bit you trying earlier catch year. to the stock as a buy you're back mentioned that in did You from up

how thinking think of thoughts the return as into effect? the on and here full component any business Just we about the you're strategy about coming shareholder 'XX

QX and XXXX earnings definitely yet don't capital targets return. can guidance have on we on call. I think We any those allocations our share shareholder for for

with luck everything. Good

Center. Alex next coming today is Research Our Barron Housing from from question

just wanted Great job Elliott, to to quarter. ask about understand. on the I

your to Basically, are going out? under and and keeping construction it's are homes communities, previous the under to going going to owners anything those benefit? how these way are is to So accrue existing -- play whatever that out those backlog. new and Is finishing

the the Yes. and remaining those. is that sold the communities' existing in communities, keeping lots nuance those, we'll construction securing homes anything within the only the our communities under were start But the existing is be team, with buying and and their models from existing Elliott we'll on but profits

the So homes go-forward and on we're communities. existing including only buying land land, starting inside the

right, the working builders you like are and every guys now and I'm stuff saying you? is all team, all But salesperson that Okay. for keeping

have don't an operation in Gulf the Yes. Coast. We

team, our So forward the down Elliott a is building great company and there. team we look joining to

Okay.

continuing their their And in as other Now it along pretty I guys looks markets? homes allowing land so, and some those just was mean, what's XXX,XXX. in Is on planning like as I same at price are cheaper the points? briefly that? than you looking low are price even Are low. those website, if points markets

it. Yes, The we lower, love the affordability for better, folks. more the

we've today, we plan answer And as and price they best operating private So to the in. here had to that your points ever from we submarkets in builders. seen the currently margins question, some sit continue they're of

and profitable can they've on business you there, the a ground executed that land the to get affordability. very achieve So

it's much that. XX some And kind that. of we in to a low their the and continue load core they is franchise too We're Xs, is low with stuff XX model not unique [indiscernible]. operating of Xs, our to Some build stuff were But that the probably around and building. intend high going

building going lot be of Yes, we're their products. to a

fantastic that So there. offering we're down maintaining the be have they to going product

is And which improved expect in profitability. these markets, price Phillippe should significantly that. to alluded points, as the less allows expensive see actually lower you to, So but what lot cost is

best luck. Well, Got of it.

is next from coming Wedbush question Your Jay McCanless Securities. from

some nominal mortgage ratio we're to seeing? bps want increase if basis Actually, ones ask about margin? mortgage rate the XXX -- of of rate buydowns is wanted rate competitors volatility mortgage XX of some Elliott. that ratio your I had costing that is to of I still But these I the with now gross Alex the points about Or increasing. on of ask, told we've rates heard of talk And most rate of did cost

Yes.

rate slightly a locks. have our structure different on We

that sure there's that. thumb rule can a you that So I'm not offering we've our any changed use little bit. elevated, of costs staying although The for are

many them market, So in the the materially of certain I the lock not per even utilization meeting, and meeting shouldn't [ using the are due a buying increasing. or I ] say how say different, psychological fear time should to rate at is the folks is about lag home leaning -- that rate would but percentage

Yes. communities is for question give so But add? community And then And 'XX -- Elliott bit count had growth? the to how do many other fiscal I I on you and I guidance any jumped apologize. late, anticipated a

did we acquisition. over this would including comfortably we that Yes, year, end Homes the to finish XXX guide Elliott

guided year also that number. next growth double-digit to We for over

they're Elliott have. that going active, to do then be release. a our So that's make we before long want communities next what active how money our evaluating to count final provided that, prepared on still we but go-forward going And going we be how be in we're are on ones we not exactly to which we're to and in release. we'll a to sure understand only With Homes, give

was the think, I question? operator, last that

for you further It closing Over any was. sure to or comments.

your who day rest everyone today like [ Thank Meritage continued in a you doctors week. you. great I'd to thank rest go have interest Homes. We the and your And hope this of joined of call great ]. a for

teleconference Thank and you. conclude webcast. does That today's

participation a thank at time, your day. this disconnect you may have line and You today. wonderful your We for