Meritage Homes Corporation · NYSE:MTH
Meritage Homes — Q1 2020 Earnings Presentation
15 slides from Meritage Homes's earnings presentation, Apr 29, 2020
Slide 1: First Quarter 2020 Analyst Conference Call
First Quarter 2020 Analyst Conference Call April 29, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements The information included in this presentation and the accompanying comments from management contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's projected full year 2020 home cl
Slide 3: Management Representatives
Management Representatives Steven J. Hilton – Chairman & CEO Phillippe Lord – EVP & Chief Operating Officer Hilla Sferruzza – EVP & Chief Financial Officer Brent Anderson – VP Investor Relations 3
Slide 4: Strong demand provided the fuel… sound strategy & execution drove earnings growth
Strong demand provided the fuel… sound strategy & execution drove earnings growth Strong demand Quick closings 3,102 orders 1Q20 Net +23% Y/Y Higher margins 70% spec inventory 2,316 homes closed Overhead earnings +31% Y/Y 20% GM leverage up 180% +27% revenue growth +330 bps Y/Y SG&A Y/Y Simplifying
Slide 5: Strong order growth continued through mid-March
Strong order growth continued through mid-March +38% +51% (8)% ~(25-30)%E Month Gross Cancellations 2020 Orders %* 1,200 2019A 2020 Jan 1,159 140 / 12% 1,000 Feb 1,255 129 / 10% 800 Mar 1,141 184 / 16% 1,126 600 1,044 1,019 957 916 400 Est Est 748 738 Apr 600 (650+) ~20% 200 *Cancellation rate % on
Slide 6: Operating within Social Distancing guidelines
Operating within Social Distancing guidelines • Appointment—only visits Sales & Studio M® • Virtual tours & construction updates design centers • Serious buyers = higher conversion rate • Plans, elevations, floor plans, specs, quick move-in’s, Website tools transparent prices • 24/7 mortgage pre-app
Slide 7: Entry-level driving growth
Entry-level driving growth 1Q20/1Q19: Absorptions +35%, Entry-level orders +69% Ending community count by Orders by product product type type 10% 321 176 15% 430 25% 1,020 39% 1,079 Other 49% 1,028 (2MU+AA) 43% 1MU Entry Level 1,906 51% 1,130 36% 900 32% 1Q18 1Q19 1Q20 1Q18 1Q19 1Q20 7
Slide 8: Maintaining 4-5 month supply of specs
Maintaining 4-5 month supply of specs based on community-level sales and closings 1Q20 1Q19 Y/Y %Chg Spec inventory 2,703 2,205 +23% Closings from specs 69% 67% 200 bps Specs/community 11.2 8.5 +32% Completed 28% 36% (800) bps Under construction 72% 64% 800 bps 8
Slide 9: Higher absorptions & order growth in West & TX regions
Higher absorptions & order growth in West & TX regions where entry-level is above 50% States & Regions Y/Y (%) changes 1Q20 vs 1Q19 AZ CA CO West TX FL GA NC SC TN East 32.0 26.5 15.5 74.0 77.5 33.5 16.5 22.5 8.0 10.5 91.0 Average Active Communities (14)% 39% (28)% (5)% (13)% 6% (20)% (10)% (30)% 0%
Slide 10: Strong earnings growth in 1Q20
Strong earnings growth in 1Q20 ($millions except EPS) 1Q20 1Q19 %Chg Home closings 2,316 1,765 +31% Improved across all operating benchmarks: ASP (closings) $384K $396K (3)% Revenue growth Home closing revenue $890 $699 +27% Gross margin Home closing gross profit $178 $116 +53% SG&A leverage H
Slide 11: Strongest balance sheet in Meritage's history
Strongest balance sheet in Meritage’s history Net debt-to-capital reconciliation ($millions) (non-GAAP reconciliation to net debt-to Mar-31, 2020 Dec- 31, 2019 capital ratio) (1) Drew down $500M of $780M Revolving Credit Notes payable and other borrowings(1) $ 1,518 $ 1,019 Facility in March 2020 to
Slide 12: Reducing & deferring Land & Development spend
Reducing & deferring Land & Development spend 45 46 Real assets 1Q20 1Q19 Land & development 36 $246M $141M spending 32 As of period ended Mar-31: Activity deliberately Total lots controlled 41,501 33,809 curtailed Years supply of lots 4.2 3.9 13 - Owned 63% 71% 1,687 4,035 5,503 6,829 2,858 - Optio
Slide 13: Meritage average buyer credit profile
Meritage average buyer credit profile 1Q19 2Q19 3Q19 4Q19 1Q20 Average DTI 39.0 37.9 37.7 38.0 38.2 Average FICO score 729 732 732 733 730 Average Down Payment 17% 16% 16% 16% 15% Loan Type (% of total) Conventional 66% 69% 69% 66% 67% FHA 19% 16% 15% 17% 16% VA 12% 13% 14% 15% 15% Jumbo 3% 1% 1% 1%
Slide 14: Summary
Summary Market conditions vs 2008 Meritage is well-positioned Shortage of inventory Entry-level & first move-up focus Buyers are owner-occupied vs Strongest balance sheet ever flippers Curtailed spending to preserve Tighter mortgage standards but liquidity lower interest rates Spec str
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