Slide 1: Second Quarter 2020 Analyst Conference Call
Second Quarter 2020 Analyst Conference Call July 23, 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 statements regarding the health of the housin
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: Record Orders
Record Orders +32% 3,597 +66% 1,600 +44% 1,502 1,400 1,320 2,735 1,200 1,000 916 15% 916 903 775 800 600 400 200 0 Apr May Jun 2Q 2019 2020 4
Slide 5: Demand Drivers for New Homes
Demand Drivers for New Homes • AFFORDABILITY – historically low interest rates • Low INVENTORIES of existing homes • SAFETY, HEALTH and SECURITY of single-family home • More SPACE for work-at-home 5 bed | 3 bath | 3 garage for less than $1,950/mo vs Comparable rental $2,700/mo 5
Slide 6: Strategic Advantages
Strategic Advantages • EXCLUSIVELY FOCUSED ON ENTRY-LEVEL & 1ST MOVE-UP • UNIQUE MERITAGE VALUE PROPOSITION: • Quality construction • M.Connected® Home automation • Leading Energy Efficiency • Simplified & streamlined • “Surprisingly more” • Full virtual capabilities 6
Slide 7: Positioned for Growth
Positioned for Growth Strongest balance sheet & plenty liquidity Investing aggressively in ON PLAN FOR land/lots (~6K in 2Q) 300+ COMMUNITIES + robust pipeline BY EARLY 2022 Community count growth (opportunities for +50 in July alone) 7
Slide 8: Entry-Level Outperforming
Entry-Level Outperforming Ending community count by Orders by product 42% product type type Absorptions & Y/Y% 148 35% 15.1 24 279 35 364 55 938 19% 12.8 79 Other 1,048 27% 10.6 (2MU+AA) 37% 114 896 9.0 112 1MU 8.5 Entry Level 2,511 134 1,408 70% 105 57% 990 86 2Q18 2Q19 2Q20 2Q18 2Q19 2Q20 2Q19 3Q1
Slide 9: Broad Strength Led by West and Central Regions
Broad Strength Led by West and Central Regions STATES & REGIONS Y/Y (%) changes 2Q20 vs 2Q19 AZ CA CO West TX FL GA NC SC TN East 36 29 13 77 73 35 16 21 6 12 89 Average Active Communities (4)% 39% (41)% (3)% (7)% 3% (20)% (15)% (40)% 5% (10)% -Entry-level % 58% 68% 54% 61% 59% 53% 41% 57% 40% 55% 5
Slide 10: 78% Earnings Growth in 2Q20
78% Earnings Growth in 2Q20 ($Millions except EPS) 2Q20 2Q19 %Chg YTD2020 YTD2019 %Chg 2Q20 NOTES: Home closings 2,770 2,253 +23% 5,086 4,018 27% • 74% of closings from specs ASP (closings) $372K $383K (3)% $378K $389K (3)% Home closing revenue $1,032 $863 +20% $1,922 $1,562 23% • 78% backlog conver
Slide 11: Strongest Balance Sheet in Meritage History
Strongest Balance Sheet in Meritage History Net Debt-to-Capital Reconciliation ($Millions) • Strong balance sheet provides (non-GAAP reconciliation) June 30, 2020 Dec 31, 2019 flexibility for growth as well as security Notes payable and other $1,017 $1,019 borrowings(1) • Lowest net debt/cap in Comp
Slide 12: Accelerated Land & Development investment
Accelerated Land & Development investment 45 46 Real Assets 2Q20 2Q19 Land & development 36 $214M $175M spending 32 30 As of period ended Jun-30: Total lots controlled 42,851 34,654 Years supply of lots 4.2 4.0 13 - Owned 60% 66% 1,687 4,035 5,503 6,829 2,858 5,883 - Optioned 40% 34% 1Q19 2Q19 3Q19
Slide 13: Guidance
Guidance • 10,850-11,350 home closings FULL • $4.0-4.3 billion home closing revenue YEAR • Home closing gross margin ~21% 2020 • Effective tax rate ~22% • Diluted EPS $8.75-9.25 • 2,700-2,950 home closings 3Q • $1.0-1.1 billion home closing revenue 2020 • Home closing gross margin ~21% • Diluted EPS
Slide 14: Summary
Summary • Strong demand for new homes • Well-positioned with entry-level & 1st move-up • Executing at a high level • Strategy to grow • Earnings power from volume, margins and leverage 14
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