Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | |||||||||
2022 | 2021 | % Chg | |||||||
Homes closed (units) | 2,858 | 2,890 | (1) | % | |||||
Home closing revenue | $ | 1,245,456 | $ | 1,079,982 | 15 | % | |||
Average sales price - closings | $ | 436 | $ | 374 | 17 | % | |||
Home orders (units) | 3,874 | 3,458 | 12 | % | |||||
Home order value | $ | 1,767,710 | $ | 1,349,130 | 31 | % | |||
Average sales price - orders | $ | 456 | $ | 390 | 17 | % | |||
Ending backlog (units) | 6,695 | 5,240 | 28 | % | |||||
Ending backlog value | $ | 3,038,927 | $ | 2,082,259 | 46 | % | |||
Average sales price - backlog | $ | 454 | $ | 397 | 14 | % | |||
Earnings before income taxes | $ | 285,883 | $ | 165,977 | 72 | % | |||
Net earnings | $ | 217,254 | $ | 131,843 | 65 | % | |||
Diluted EPS | $ | 5.79 | $ | 3.44 | 68 | % |
MANAGEMENT COMMENTS
“Meritage had a robust start to the 2022 spring selling season even as we continued to navigate labor and supply chain constraints. We achieved our highest quarterly sales order volume in the first quarter of 2022 and our second highest first quarter of home closings. We also set new financial records including our highest quarterly home closing gross margin, our highest first quarter of home closing revenue and the best quarterly SG&A leverage in our company’s history,” said
“We recognize that recent interest rate increases and six quarters of strong pricing power will eventually impact both buyer psychology and affordability. To alleviate some uncertainties for our customers, in March,
“Meritage’s community count grew 32% year-over-year and 3% sequentially from
“Our closings of 2,858 homes this quarter were just 32 units shy of our highest first quarter of home closings, which occurred in 2021. As a result of favorable pricing power, home closing revenue increased 15% year-over-year to
“During the quarter, we spent
FIRST QUARTER RESULTS
- Orders of 3,874 homes for the first quarter of 2022 increased 12% year-over-year, driven by a 32% growth in average active communities that was partially offset by a 16% decrease in average absorptions per store to 4.9 per month from 5.8 per month in the first quarter of 2021. Entry-level represented 83% of first quarter 2022 sales orders, compared to 76% in the same quarter of 2021. Average sales price ("ASP") on orders in the first quarter of 2022 exceeded
$450,000 .
- The 15% year-over-year increase in home closing revenue to
$1.2 billion for the quarter reflected a 17% increase in ASP on closings due to sustained homebuying demand even as we shifted our product mix toward entry-level homes. This was partially offset by a 1% decline in home closing volume year-over-year.
- Home closing gross margin improved 560 bps to 30.3% in the first quarter 2022 from 24.7% in the prior year with higher ASPs more than offsetting high commodity costs as well as the benefit of the lower interest costs stemming from lower interest rates on our refinanced debt.
- Selling, general and administrative expenses ("SG&A") as a percentage of first quarter 2022 home closing revenue of 8.5% improved 130 bps from 9.8% in the first quarter of 2021 due to lower commissions, greater leverage of fixed costs on higher home closing revenue as well as the benefits of technology for our sales and marketing functions.
- The first quarter effective income tax rate was 24.0% in 2022 compared to 20.6% in 2021. The higher rate in 2022 reflects the expiration of the 2019 Taxpayer Certainty and Disaster Tax Relief Act, under which we earned eligible energy tax credits on qualifying homes closed in 2021.
- First quarter 2022 pre-tax margin increased 690 bps to 22.1%, compared to 15.2% in the first quarter of 2021. Net earnings were
$217.3 million ($5.79 per diluted share) for the first quarter of 2022, a 65% increase over$131.8 million ($3.44 per diluted share) for the first quarter of 2021. Strong earnings growth reflected pricing power, expanded gross margin and improved overhead leverage, which combined with a lower outstanding share count in the current quarter, led to a 68% year-over-year improvement in diluted EPS.
BALANCE SHEET
- Cash and cash equivalents at
March 31, 2022 totaled$520.4 million , compared to$618.3 million atDecember 31, 2021 , primarily as a result of net cash used for investments in real estate and share repurchases. Real estate assets increased from$3.7 billion atDecember 31, 2021 to$4.0 billion atMarch 31, 2022 .
- A total of about 75,100 lots were owned or controlled as of
March 31, 2022 , compared to approximately 58,000 total lots atMarch 31, 2021 . We added over 4,100 net new lots in the first quarter of 2022, representing an estimated 27 future communities, of which 93% are for entry-level communities.
- Debt-to-capital and net debt-to-capital ratios were 26.9% and 16.9%, respectively, at
March 31, 2022 , which compared to 27.6% and 15.1%, respectively, atDecember 31, 2021 .
- The Company repurchased 1,037,967 shares of stock for a total of
$99.3 million during the first quarter of 2022.$54.1 million remained available to repurchase under our authorized share repurchase program as ofMarch 31, 2022 .
CONFERENCE CALL
Management will host a conference call to discuss its first quarter results at
A replay of the call will be available via webcast beginning at approximately
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)
Three Months Ended | ||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||
Homebuilding: | ||||||||||||||
Home closing revenue | $ | 1,245,456 | $ | 1,079,982 | $ | 165,474 | 15 | % | ||||||
Land closing revenue | 41,478 | 3,799 | 37,679 | 992 | % | |||||||||
Total closing revenue | 1,286,934 | 1,083,781 | 203,153 | 19 | % | |||||||||
Cost of home closings | (867,807 | ) | (813,327 | ) | 54,480 | 7 | % | |||||||
Cost of land closings | (30,685 | ) | (3,252 | ) | 27,433 | 844 | % | |||||||
Total cost of closings | (898,492 | ) | (816,579 | ) | 81,913 | 10 | % | |||||||
Home closing gross profit | 377,649 | 266,655 | 110,994 | 42 | % | |||||||||
Land closing gross profit | 10,793 | 547 | 10,246 | 1,873 | % | |||||||||
Total closing gross profit | 388,442 | 267,202 | 121,240 | 45 | % | |||||||||
Financial Services: | ||||||||||||||
Revenue | 4,672 | 4,751 | (79 | ) | (2) | % | ||||||||
Expense | (2,512 | ) | (2,171 | ) | 341 | 16 | % | |||||||
Earnings from financial services unconsolidated entities and other, net | 1,174 | 1,180 | (6 | ) | (1) | % | ||||||||
Financial services profit | 3,334 | 3,760 | (426 | ) | (11) | % | ||||||||
Commissions and other sales costs | (65,540 | ) | (67,744 | ) | (2,204 | ) | (3) | % | ||||||
General and administrative expenses | (39,995 | ) | (37,949 | ) | 2,046 | 5 | % | |||||||
Interest expense | (41 | ) | (90 | ) | (49 | ) | (54) | % | ||||||
Other (expense)/income, net | (317 | ) | 798 | (1,115 | ) | (140) | % | |||||||
Earnings before income taxes | 285,883 | 165,977 | 119,906 | 72 | % | |||||||||
Provision for income taxes | (68,629 | ) | (34,134 | ) | 34,495 | 101 | % | |||||||
Net earnings | $ | 217,254 | $ | 131,843 | $ | 85,411 | 65 | % | ||||||
Earnings per common share: | ||||||||||||||
Basic | Change $ or shares | Change % | ||||||||||||
Earnings per common share | $ | 5.87 | $ | 3.50 | $ | 2.37 | 68 | % | ||||||
Weighted average shares outstanding | 36,996 | 37,644 | (648 | ) | (2) | % | ||||||||
Diluted | ||||||||||||||
Earnings per common share | $ | 5.79 | $ | 3.44 | $ | 2.35 | 68 | % | ||||||
Weighted average shares outstanding | 37,527 | 38,339 | (812 | ) | (2) | % |
Consolidated Balance Sheets
(In thousands)
(Unaudited)
Assets: | ||||||
Cash and cash equivalents | $ | 520,395 | $ | 618,335 | ||
Other receivables | 155,380 | 147,548 | ||||
Real estate(1) | 4,027,950 | 3,734,408 | ||||
Real estate not owned | 8,011 | 8,011 | ||||
Deposits on real estate under option or contract | 93,432 | 90,679 | ||||
Investments in unconsolidated entities | 5,631 | 5,764 | ||||
Property and equipment, net | 38,299 | 37,340 | ||||
Deferred tax asset, net | 40,515 | 40,672 | ||||
Prepaids, other assets and goodwill | 168,548 | 124,776 | ||||
Total assets | $ | 5,058,161 | $ | 4,807,533 | ||
Liabilities: | ||||||
Accounts payable | $ | 280,114 | $ | 216,009 | ||
Accrued liabilities | 388,921 | 337,277 | ||||
Home sale deposits | 48,278 | 42,610 | ||||
Liabilities related to real estate not owned | 7,210 | 7,210 | ||||
Loans payable and other borrowings | 22,561 | 17,552 | ||||
Senior notes, net | 1,142,762 | 1,142,486 | ||||
Total liabilities | 1,889,846 | 1,763,144 | ||||
Stockholders' Equity: | ||||||
Preferred stock | — | — | ||||
Common stock | 367 | 373 | ||||
Additional paid-in capital | 321,519 | 414,841 | ||||
Retained earnings | 2,846,429 | 2,629,175 | ||||
Total stockholders’ equity | 3,168,315 | 3,044,389 | ||||
Total liabilities and stockholders’ equity | $ | 5,058,161 | $ | 4,807,533 | ||
(1)Real estate – Allocated costs: | ||||||
Homes under contract under construction | $ | 1,294,680 | $ | 1,039,822 | ||
Unsold homes, completed and under construction | 496,058 | 484,999 | ||||
Model homes | 81,770 | 81,049 | ||||
Finished home sites and home sites under development | 2,155,442 | 2,128,538 | ||||
Total real estate | $ | 4,027,950 | $ | 3,734,408 |
Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
Three Months Ended | |||||||
2022 | 2021 | ||||||
Depreciation and amortization | $ | 5,759 | $ | 6,535 | |||
Summary of Capitalized Interest: | |||||||
Capitalized interest, beginning of period | $ | 56,253 | $ | 58,940 | |||
Interest incurred | 15,213 | 16,092 | |||||
Interest expensed | (41 | ) | (90 | ) | |||
Interest amortized to cost of home and land closings | (12,343 | ) | (17,402 | ) | |||
Capitalized interest, end of period | $ | 59,082 | $ | 57,540 | |||
Senior notes, net, loans payable and other borrowings | $ | 1,165,323 | $ | 1,160,038 | |||
Stockholders' equity | 3,168,315 | 3,044,389 | |||||
Total capital | $ | 4,333,638 | $ | 4,204,427 | |||
Debt-to-capital | 26.9 | % | 27.6 | % | |||
Senior notes, net, loans payable and other borrowings | $ | 1,165,323 | $ | 1,160,038 | |||
Less: cash and cash equivalents | (520,395 | ) | (618,335 | ) | |||
Net debt | $ | 644,928 | $ | 541,703 | |||
Stockholders’ equity | 3,168,315 | 3,044,389 | |||||
Total net capital | $ | 3,813,243 | $ | 3,586,092 | |||
Net debt-to-capital | 16.9 | % | 15.1 | % |
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 217,254 | $ | 131,843 | ||||
Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities: | ||||||||
Depreciation and amortization | 5,759 | 6,535 | ||||||
Stock-based compensation | 5,975 | 5,367 | ||||||
Equity in earnings from unconsolidated entities | (936 | ) | (750 | ) | ||||
Distribution of earnings from unconsolidated entities | 1,069 | 1,100 | ||||||
Other | 208 | 2,651 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in real estate | (283,885 | ) | (193,395 | ) | ||||
Increase in deposits on real estate under option or contract | (2,753 | ) | (4,821 | ) | ||||
Increase in other receivables, prepaids and other assets | (52,098 | ) | (7,118 | ) | ||||
Increase in accounts payable and accrued liabilities | 115,927 | 38,743 | ||||||
Increase in home sale deposits | 5,668 | 5,899 | ||||||
Net cash provided by/(used in) operating activities | 12,188 | (13,946 | ) | |||||
Cash flows from investing activities: | ||||||||
Investments in unconsolidated entities | — | (1 | ) | |||||
Purchases of property and equipment | (6,423 | ) | (4,993 | ) | ||||
Proceeds from sales of property and equipment | 178 | 84 | ||||||
Maturities/sales of investments and securities | 2,213 | 2,566 | ||||||
Payments to purchase investments and securities | (2,213 | ) | (2,566 | ) | ||||
Net cash used in investing activities | (6,245 | ) | (4,910 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of loans payable and other borrowings | (4,580 | ) | (1,947 | ) | ||||
Repurchase of shares | (99,303 | ) | (8,385 | ) | ||||
Net cash used in financing activities | (103,883 | ) | (10,332 | ) | ||||
Net decrease in cash and cash equivalents | (97,940 | ) | (29,188 | ) | ||||
Cash and cash equivalents, beginning of period | 618,335 | 745,621 | ||||||
Cash and cash equivalents, end of period | $ | 520,395 | $ | 716,433 |
Operating Data
(Dollars in thousands)
(Unaudited)
Three Months Ended | ||||||||||
2022 | 2021 | |||||||||
Homes | Value | Homes | Value | |||||||
Homes Closed: | ||||||||||
458 | $ | 198,095 | 410 | $ | 137,268 | |||||
275 | 187,410 | 277 | 171,899 | |||||||
131 | 77,919 | 175 | 84,263 | |||||||
864 | 463,424 | 862 | 393,430 | |||||||
873 | 347,828 | 963 | 318,385 | |||||||
873 | 347,828 | 963 | 318,385 | |||||||
438 | 168,075 | 417 | 140,828 | |||||||
127 | 56,434 | 146 | 55,139 | |||||||
297 | 119,004 | 299 | 107,013 | |||||||
121 | 39,713 | 85 | 27,846 | |||||||
138 | 50,978 | 118 | 37,341 | |||||||
1,121 | 434,204 | 1,065 | 368,167 | |||||||
Total | 2,858 | $ | 1,245,456 | 2,890 | $ | 1,079,982 | ||||
Homes Ordered: | ||||||||||
550 | $ | 240,007 | 602 | $ | 222,435 | |||||
346 | 247,343 | 286 | 173,391 | |||||||
209 | 125,999 | 169 | 89,779 | |||||||
1,105 | 613,349 | 1,057 | 485,605 | |||||||
1,296 | 548,567 | 1,115 | 391,968 | |||||||
1,296 | 548,567 | 1,115 | 391,968 | |||||||
572 | 226,914 | 479 | 179,109 | |||||||
220 | 100,891 | 164 | 61,557 | |||||||
373 | 163,008 | 419 | 157,687 | |||||||
154 | 52,656 | 76 | 26,402 | |||||||
154 | 62,325 | 148 | 46,802 | |||||||
1,473 | 605,794 | 1,286 | 471,557 | |||||||
Total | 3,874 | $ | 1,767,710 | 3,458 | $ | 1,349,130 | ||||
Order Backlog: | ||||||||||
1,237 | $ | 535,586 | 1,185 | $ | 429,171 | |||||
464 | 331,321 | 453 | 276,202 | |||||||
406 | 246,932 | 202 | 110,279 | |||||||
2,107 | 1,113,839 | 1,840 | 815,652 | |||||||
2,301 | 973,828 | 1,782 | 645,959 | |||||||
2,301 | 973,828 | 1,782 | 645,959 | |||||||
1,002 | 411,478 | 612 | 253,188 | |||||||
296 | 136,266 | 174 | 64,355 | |||||||
641 | 269,898 | 574 | 214,079 | |||||||
166 | 57,643 | 111 | 39,785 | |||||||
182 | 75,975 | 147 | 49,241 | |||||||
2,287 | 951,260 | 1,618 | 620,648 | |||||||
Total | 6,695 | $ | 3,038,927 | 5,240 | $ | 2,082,259 |
Operating Data
(Unaudited)
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Ending | Average | Ending | Average | |||||
Active Communities: | ||||||||
40 | 39.5 | 33 | 33.0 | |||||
23 | 22.5 | 19 | 17.5 | |||||
18 | 17.5 | 12 | 11.5 | |||||
81 | 79.5 | 64 | 62.0 | |||||
75 | 74.0 | 59 | 61.0 | |||||
75 | 74.0 | 59 | 61.0 | |||||
41 | 41.0 | 30 | 30.5 | |||||
15 | 15.0 | 12 | 9.5 | |||||
29 | 27.5 | 24 | 22.5 | |||||
13 | 13.5 | 6 | 6.0 | |||||
14 | 13.0 | 8 | 7.5 | |||||
112 | 110.0 | 80 | 76.0 | |||||
Total | 268 | 263.5 | 203 | 199.0 |
About
For more information, visit www.meritagehomes.com.
The information included in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general; projected 2022 home closings, home closing revenue, home closing gross margins, effective tax rate and diluted earnings per share; future community counts; trends in construction costs; and expectations about our future results.
Such statements are based on the current beliefs and expectations of Company management and current market conditions, which are subject to significant uncertainties and fluctuations. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, except as required by law, to update or revise any forward-looking statements to reflect future events or changes in these expectations.
Contacts: | |
(480) 515-8979 (office) | |
investors@meritagehomes.com |
Source:
2022 GlobeNewswire, Inc., source