Meritage Homes reports third quarter 2022 results including a 35% increase in diluted EPS, highest quarterly home closing revenue and record SG&A leverage of 8.1%

Rhea-AI Summary

Meritage Homes Corporation (MTH) announced strong Q3 2022 results despite challenges in the housing market. Home closing revenue surged to $1.57 billion, a 25% increase year-over-year, with home sales up 12% to 3,487 units. However, home orders plummeted 33% to 2,310 units due to a cancellation rate of 30%. Net earnings rose 31% to $262.5 million, with diluted EPS climbing 35% to $7.10. Management anticipates Q4 closings between 4,300-4,700 homes, generating revenue of $1.85-$2.10 billion. Concerns about mortgage rates and economic stability linger.

Positive

• Home closing revenue increased 25% year-over-year to $1.57 billion.
• Net earnings rose 31% to $262.5 million.
• Diluted earnings per share (EPS) increased 35% to $7.10.
• Home closing volume was up 12% to 3,487 units.

Negative

• Home orders fell 33% to 2,310 units, primarily due to a 30% cancellation rate.
• The average absorption pace decreased by 46% to 2.7 per month compared to the prior year.
• Ending backlog value increased only modestly by 11%.

SCOTTSDALE, Ariz., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, reported third quarter results for the period ended September 30, 2022.

Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)

		Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021		% Chg				2022			2021		% Chg
Homes closed (units)			3,487			3,112		12	%			9,566			9,275		3	%
Home closing revenue		$	1,569,032		$	1,251,435		25	%		$	4,223,435		$	3,596,060		17	%
Average sales price - closings		$	450		$	402		12	%		$	442		$	388		14	%
Home orders (units)			2,310			3,441		(33	)%			9,951			10,441		(5	)%
Home order value		$	974,314		$	1,488,951		(35	)%		$	4,551,894		$	4,337,753		5	%
Average sales price - orders		$	422		$	433		(3	)%		$	457		$	415		10	%
Ending backlog (units)												6,064			5,838		4	%
Ending backlog value											$	2,826,759		$	2,555,405		11	%
Average sales price - backlog											$	466		$	438		6	%
Earnings before income taxes		$	329,491		$	261,709		26	%		$	947,069		$	643,337		47	%
Net earnings		$	262,489		$	200,752		31	%		$	729,827		$	499,984		46	%
Diluted EPS		$	7.10		$	5.25		35	%		$	19.65		$	13.06		50	%

MANAGEMENT COMMENTS

“Despite a rapidly evolving housing market challenged by interest rate hikes, supply chain issues, Hurricane Ian and market uncertainty, in the third quarter of 2022, Meritage achieved its highest quarterly home closing revenue and record quarterly diluted earnings per share,” said Steven J. Hilton, executive chairman of Meritage Homes.

“Our closings of 3,487 homes this quarter were 12% greater than prior year,” added Phillippe Lord, chief executive officer of Meritage Homes. “Our third quarter 2022 home closing revenue of $1.6 billion combined with our home closing gross margin of 28.7%, our lowest SG&A leverage of 8.1% and an energy tax credit catch-up of $13.1 million, led to a 35% year-over-year increase in our diluted EPS from $5.25 to $7.10 this quarter.”

“However, sales orders fell sharply during the quarter. The third quarter 2022 sales orders of 2,310 homes were 33% lower than prior year primarily due to elevated cancellations. The cancellation rate was 30% this quarter. Gross sales orders declined 14% year-over-year, confirming that underlying home demand is stronger than the net numbers convey. Our third quarter 2022 average absorption pace was 2.7 per month, which was down from 5.0 per month in the third quarter of 2021. We expect sales orders will remain weaker until mortgage interest rates stabilize, we complete more move-in ready inventory and close out of our mature backlog. In each market, we are working to find the right combination of price adjustments and incentives to get back to our target absorption pace of 3-4 net sales per month,” Mr. Lord continued.

“We believe the continuation of the rapidly increasing mortgage interest rates, expectations of further significant increases to come, inflation and uncertainty in the economy are temporarily outweighing the positive impact of favorable demographics and the low supply of new and resale housing inventory on demand,” said Mr. Lord. "The market deterioration we experienced at the end of the second quarter deepened throughout the third quarter. Our various discounting and incentive initiatives are helping to attract and retain customers, but we are seeing some homebuyers hold off on their purchase decisions due to uncertain market conditions."

“Building materials and labor shortages are still delaying a return to normal cycle times, but we are confident that our pre-started inventory strategy executed by our exceptional team will ensure that we close timely on our current backlog while offering move-in ready homes for our future homebuyers," remarked Mr. Lord. "We remain committed to growing Meritage's market share and maximizing shareholder return in this evolving market.”

“Although Meritage's community count grew 17% year-over-year, the 275 active communities at September 30, 2022 were 9% lower sequentially compared to June 30, 2022. In response to weakening demand, we added only approximately 1,800 new lots under control, while we reassessed our land positions and successfully reduced our lot supply since the beginning of this year. We terminated options on our lowest performing land deals, which totaled roughly 5,200 lots with a corresponding $8.8 million walk-away charge this quarter. We spent $380 million on land acquisition and development this quarter and at September 30, 2022, lot supply totaled approximately 66,000,” said Mr. Lord. “We feel confident we have ample liquidity and a healthy balance sheet to manage through this changing environment. We had nothing drawn under our credit facility and our net debt-to-capital was 18.9% at September 30, 2022.”

Mr. Lord concluded, “We continue to monitor and evaluate shifting market conditions. We are projecting 4,300-4,700 home closings for the fourth quarter of 2022, which we anticipate will generate quarterly home closing revenue of $1.85-2.10 billion. Home closing gross margin is projected to be around 25%, reflecting the increased incentives we have been offering the last couple of quarters. With a projected effective tax rate of 23.5%, we expect diluted EPS to be in the range of $6.50-7.40 for the fourth quarter of 2022.”

THIRD QUARTER RESULTS

• Total sales orders of 2,310 homes for the third quarter of 2022 were 33% lower than prior year despite a 25% year-over-year increase in average community count. The average absorption pace decreased 46% to 2.7 per month from 5.0 in the prior year primarily due to our elevated cancellation rate of 30% this quarter. Gross sales orders of 3,291 homes declined 14% compared to the third quarter of 2021. Entry-level represented 88% of third quarter 2022 orders, compared to 84% in the prior year. Average sales price ("ASP") on orders decreased 3% year-over-year to $422,000 in the third quarter of 2022 and decreased 12% sequentially from $480,000 in the second quarter of 2022.
• The 25% year-over-year increase in home closing revenue to $1.6 billion for the third quarter of 2022 was due to 12% greater home closing volume and 12% higher ASPs on closings compared to prior year.
• The 100 bps deterioration in third quarter 2022 home closing gross margin to 28.7% from 29.7% a year ago mainly resulted from greater incentives, $8.8 million in write-offs related to the lot option deposits and diligence costs from terminated land deals and higher direct costs. In the third quarter of 2021, the write-offs for terminated land deals totaled $0.9 million.
• Selling, general and administrative expenses ("SG&A") were 8.1% of third quarter 2022 home closing revenue, a 120 bps improvement over 9.3% in the prior year resulting from greater leverage of fixed expenses on higher home closing revenue as well as lower commissions expense as a percentage of home closing revenue.
• The third quarter effective income tax rate was 20.3% in 2022 compared to 23.3% in 2021. The 2022 rate reflected earned eligible energy tax credits on qualifying homes we delivered in the first nine months of 2022, as the Inflation Reduction Act ("IRA") enacted in August 2022 retroactively extended the Internal Revenue Code §45L new energy-efficient homes credit. The 2021 rate similarly benefited from the Taxpayer Certainty and Disaster Tax Relief Act passed in December 2019 ("2019 Act").
• Net earnings were $262.5 million ($7.10 per diluted share) for the third quarter of 2022, a 31% increase over $200.8 million ($5.25 per diluted share) for the third quarter of 2021. Strong earnings growth reflected pricing power, improved overhead leverage and a catch-up of tax credits, which combined with a lower outstanding share count in the current quarter, led to a 35% year-over-year improvement in earnings per diluted share.

YEAR TO DATE RESULTS

• Total sales orders of 9,951 homes for the first nine months of 2022 decreased 5% over prior year despite a 29% year-over-year increase in average community count. The year to date September 2022 average absorption pace declined 26% due to elevated cancellations.
• Home closing revenue increased 17% for the first nine months of 2022 to $4.2 billion due to 14% higher ASPs on closings given the favorable pricing environment and 3% greater home closing volume.
• The 270 bps improvement for home closing gross margin in the first nine months of 2022 to 30.1% from 27.4% was primarily due to higher ASPs on closings resulting from favorable pricing and better leveraging of fixed costs on greater home closing revenue. The year to date 2022 home closing gross margin included $11.6 million of write-offs from terminated land deals related to lot option deposits and diligence costs, which compared to $2.1 million in the prior year.
• SG&A as a percentage of home closing revenue improved 110 bps year-over-year to 8.3% from 9.4% in the first nine months of 2021, due to greater leverage of overhead expenses on higher home closing revenue and lower commissions expense as a percentage of home closing revenue.
• In the first nine months of 2021, we recognized a loss on early extinguishment of debt of $18.2 million in connection with the early redemption in April 2021 of our 7.00% senior notes due 2022. There were no such transactions in the first nine months of 2022.
• The effective tax rate for the first nine months of 2022 was 22.9%, compared to 22.3% for the first nine months of 2021. Tax credits earned on qualifying energy-efficient homes we delivered in the first nine months of 2022 resulted from the passage of the IRA while those related to the prior year were under the 2019 Act.
• Net earnings were $729.8 million ($19.65 per diluted share) for the first nine months of 2022, a 46% increase over $500.0 million ($13.06 per diluted share) for the first nine months of 2021, primarily reflecting pricing power, expanded gross margin and greater overhead leverage in 2022, as well as a lower outstanding share count in the first nine months of 2022.
  

BALANCE SHEET

• Cash and cash equivalents at September 30, 2022 totaled $299.4 million, compared to $618.3 million at December 31, 2021, primarily as a result of investments in real estate. Real estate assets increased from $3.7 billion at December 31, 2021 to $4.7 billion at September 30, 2022.
• A total of approximately 66,000 lots were owned or controlled as of September 30, 2022 compared to approximately 70,000 total lots at September 30, 2021.
• Debt-to-capital and net debt-to-capital ratios were 23.9% and 18.9%, respectively, at September 30, 2022, which compared to 27.6% and 15.1%, respectively, at December 31, 2021.
• The Company repurchased 1,166,040 shares of stock for a total of $109.3 million during the first nine months of 2022. There were no share repurchases during the current quarter. As of September 30, 2022, $244.1 million remained available to repurchase under our authorized share repurchase program.

CONFERENCE CALL

Management will host a conference call to discuss its third quarter results at 8:00 a.m. Pacific Daylight Time (11:00 a.m. Eastern Daylight Time) on Thursday, October 27, 2022. The call will be webcast live with an accompanying slideshow available on the "Investor Relations" page of the Company's website at https://investors.meritagehomes.com. Telephone participants will be able to join by dialing in to 1-877-407-6951 US toll free or 1-412-902-0046 on the day of the call.

A replay of the call will be available via webcast beginning at approximately 11:00 a.m. Pacific Daylight Time (2:00 p.m. Eastern Daylight Time) on October 27, 2022 and extending through November 10, 2022, at https://investors.meritagehomes.com.

Meritage Homes Corporation and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)

		Three Months Ended September 30,
			2022				2021			Change $				Change %
Homebuilding:
	Home closing revenue	$	1,569,032			$	1,251,435			$	317,597			25	%
	Land closing revenue		8,989				8,470				519			6	%
	Total closing revenue		1,578,021				1,259,905				318,116			25	%
	Cost of home closings		(1,118,394	)			(879,759	)			238,635			27	%
	Cost of land closings		(8,577	)			(7,706	)			871			11	%
	Total cost of closings		(1,126,971	)			(887,465	)			239,506			27	%
	Home closing gross profit		450,638				371,676				78,962			21	%
	Land closing gross profit		412				764				(352	)		(46	)%
	Total closing gross profit		451,050				372,440				78,610			21	%
Financial Services:
	Revenue		6,308				5,208				1,100			21	%
	Expense		(2,804	)			(2,308	)			496			21	%
	Earnings from financial services unconsolidated entities and other, net		1,338				1,324				14			1	%
	Financial services profit		4,842				4,224				618			15	%
Commissions and other sales costs			(77,884	)			(68,952	)			8,932			13	%
General and administrative expenses			(48,443	)			(47,192	)			1,251			3	%
Interest expense			—				(79	)			(79	)		(100	)%
Other (expense)/income, net			(74	)			1,268				(1,342	)		(106	)%
Earnings before income taxes			329,491				261,709				67,782			26	%
Provision for income taxes			(67,002	)			(60,957	)			6,045			10	%
Net earnings		$	262,489			$	200,752			$	61,737			31	%
Earnings per common share:
	Basic									Change $ or shares				Change %
	Earnings per common share	$	7.18			$	5.33			$	1.85			35	%
	Weighted average shares outstanding		36,569				37,647				(1,078	)		(3	)%
	Diluted
	Earnings per common share	$	7.10			$	5.25			$	1.85			35	%
	Weighted average shares outstanding		36,946				38,229				(1,283	)		(3	)%

		Nine Months Ended September 30,
			2022				2021			Change $				Change %
Homebuilding:
	Home closing revenue	$	4,223,435			$	3,596,060			$	627,375			17	%
	Land closing revenue		53,901				25,225				28,676			114	%
	Total closing revenue		4,277,336				3,621,285				656,051			18	%
	Cost of home closings		(2,950,409	)			(2,612,428	)			337,981			13	%
	Cost of land closings		(42,046	)			(24,246	)			17,800			73	%
	Total cost of closings		(2,992,455	)			(2,636,674	)			355,781			13	%
	Home closing gross profit		1,273,026				983,632				289,394			29	%
	Land closing gross profit		11,855				979				10,876			1,111	%
	Total closing gross profit		1,284,881				984,611				300,270			30	%
Financial Services:
	Revenue		16,119				15,624				495			3	%
	Expense		(7,897	)			(6,846	)			1,051			15	%
	Earnings from financial services unconsolidated entities and other, net		4,033				3,821				212			6	%
	Financial services profit		12,255				12,599				(344	)		(3	)%
Commissions and other sales costs			(212,807	)			(210,585	)			2,222			1	%
General and administrative expenses			(136,370	)			(128,297	)			8,073			6	%
Interest expense			(41	)			(246	)			(205	)		(83	)%
Other (expense)/ income, net			(849	)			3,443				(4,292	)		(125	)%
Loss on early extinguishment of debt			—				(18,188	)			(18,188	)		n/a
Earnings before income taxes			947,069				643,337				303,732			47	%
Provision for income taxes			(217,242	)			(143,353	)			73,889			52	%
Net earnings		$	729,827			$	499,984			$	229,843			46	%
Earnings per common share:
	Basic									Change $ or shares				Change %
	Earnings per common share	$	19.87			$	13.26			$	6.61			50	%
	Weighted average shares outstanding		36,736				37,703				(967	)		(3	)%
	Diluted
	Earnings per common share	$	19.65			$	13.06			$	6.59			50	%
	Weighted average shares outstanding		37,136				38,285				(1,149	)		(3	)%

Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)

		September 30, 2022			December 31, 2021
Assets:
Cash and cash equivalents		$	299,387		$	618,335
Other receivables			193,307			147,548
Real estate (1)			4,726,262			3,734,408
Real estate not owned			—			8,011
Deposits on real estate under option or contract			88,428			90,679
Investments in unconsolidated entities			11,356			5,764
Property and equipment, net			39,437			37,340
Deferred tax asset, net			41,060			40,672
Prepaids, other assets and goodwill			171,853			124,776
Total assets		$	5,571,090		$	4,807,533
Liabilities:
Accounts payable		$	322,227		$	216,009
Accrued liabilities			353,512			337,277
Home sale deposits			57,767			42,610
Liabilities related to real estate not owned			—			7,210
Loans payable and other borrowings			12,460			17,552
Senior notes, net			1,143,314			1,142,486
Total liabilities			1,889,280			1,763,144
Stockholders' Equity:
Preferred stock			—			—
Common stock			366			373
Additional paid-in capital			322,442			414,841
Retained earnings			3,359,002			2,629,175
Total stockholders’ equity			3,681,810			3,044,389
Total liabilities and stockholders’ equity		$	5,571,090		$	4,807,533
(1) Real estate – Allocated costs:
Homes under contract under construction		$	1,452,691		$	1,039,822
Unsold homes, completed and under construction			986,862			484,999
Model homes			87,550			81,049
Finished home sites and home sites under development			2,199,159			2,128,538
Total real estate		$	4,726,262		$	3,734,408

Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Depreciation and amortization	$	5,822			$	6,478			$	17,545			$	19,892
Non-cash charges	$	8,791			$	877			$	11,608			$	2,092
Summary of Capitalized Interest:
Capitalized interest, beginning of period	$	61,459			$	56,710			$	56,253			$	58,940
Interest incurred		15,179				15,212				45,563				47,625
Interest expensed		—				(79	)			(41	)			(246	)
Interest amortized to cost of home and land closings		(14,548	)			(14,550	)			(39,685	)			(49,026	)
Capitalized interest, end of period	$	62,090			$	57,293			$	62,090			$	57,293
	September 30, 2022				December 31, 2021
Senior notes, net, loans payable and other borrowings	$	1,155,774			$	1,160,038
Stockholders' equity		3,681,810				3,044,389
Total capital	$	4,837,584			$	4,204,427
Debt-to-capital		23.9	%			27.6	%
Senior notes, net, loans payable and other borrowings	$	1,155,774			$	1,160,038
Less: cash and cash equivalents		(299,387	)			(618,335	)
Net debt	$	856,387			$	541,703
Stockholders’ equity		3,681,810				3,044,389
Total net capital	$	4,538,197			$	3,586,092
Net debt-to-capital		18.9	%			15.1	%

Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows 
(In thousands)
(Unaudited)

		Nine Months Ended September 30,
			2022				2021
Cash flows from operating activities:
Net earnings		$	729,827			$	499,984
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization			17,545				19,892
Stock-based compensation			16,897				14,435
Loss on early extinguishment of debt			—				18,188
Equity in earnings from unconsolidated entities			(3,703	)			(2,878	)
Distribution of earnings from unconsolidated entities			3,785				3,324
Other			11,154				(3,085	)
Changes in assets and liabilities:
Increase in real estate			(990,106	)			(810,731	)
Decrease/(increase) in deposits on real estate under option or contract			176				(18,453	)
Increase in other receivables, prepaids and other assets			(89,177	)			(51,611	)
Increase in accounts payable and accrued liabilities			118,636				67,301
Increase in home sale deposits			15,157				14,928
Net cash used in operating activities			(169,809	)			(248,706	)
Cash flows from investing activities:
Investments in unconsolidated entities			(5,674	)			(1	)
Distributions of capital from unconsolidated entities			—				—
Purchases of property and equipment			(19,537	)			(17,910	)
Proceeds from sales of property and equipment			328				404
Maturities/sales of investments and securities			1,032				2,795
Payments to purchase investments and securities			(1,032	)			(2,795	)
Net cash used in investing activities			(24,883	)			(17,507	)
Cash flows from financing activities:
Repayment of loans payable and other borrowings			(14,953	)			(6,308	)
Repayment of senior notes			—				(317,690	)
Proceeds from issuance of senior notes			—				450,000
Payment of debt issuance costs			—				(6,102	)
Repurchase of shares			(109,303	)			(37,017	)
Net cash (used in)/provided by financing activities			(124,256	)			82,883
Net decrease in cash and cash equivalents			(318,948	)			(183,330	)
Beginning cash and cash equivalents			618,335				745,621
Ending cash and cash equivalents		$	299,387			$	562,291

Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(Unaudited)

		Three Months Ended September 30,
		2022					2021
		Homes		Value			Homes		Value
Homes Closed:
Arizona		599		$	254,530		532		$	193,847
California		321			236,872		295			177,623
Colorado		166			98,625		144			80,149
West Region		1,086			590,027		971			451,619
Texas		1,218			499,713		1,012			383,206
Central Region		1,218			499,713		1,012			383,206
Florida		426			166,138		386			139,642
Georgia		117			53,108		139			52,004
North Carolina		340			148,111		371			145,268
South Carolina		147			48,777		92			31,686
Tennessee		153			63,158		141			48,010
East Region		1,183			479,292		1,129			416,610
Total		3,487		$	1,569,032		3,112		$	1,251,435
Homes Ordered:
Arizona		232		$	97,462		550		$	233,828
California		187			122,994		319			213,859
Colorado		37			20,642		207			123,242
West Region		456			241,098		1,076			570,929
Texas		635			253,321		1,070			427,689
Central Region		635			253,321		1,070			427,689
Florida		531			214,004		534			192,479
Georgia		175			71,731		176			74,766
North Carolina		251			98,147		347			140,135
South Carolina		137			42,728		100			31,535
Tennessee		125			53,285		138			51,418
East Region		1,219			479,895		1,295			490,333
Total		2,310		$	974,314		3,441		$	1,488,951

		Nine Months Ended September 30,
		2022					2021
		Homes		Value			Homes		Value
Homes Closed:
Arizona		1,599		$	687,527		1,423		$	497,105
California		852			597,913		890			547,754
Colorado		424			254,089		464			239,399
West Region		2,875			1,539,529		2,777			1,284,258
Texas		3,139			1,269,868		3,129			1,105,429
Central Region		3,139			1,269,868		3,129			1,105,429
Florida		1,301			503,820		1,246			440,847
Georgia		423			190,769		456			169,620
North Carolina		996			415,975		1,000			372,119
South Carolina		400			132,855		258			87,741
Tennessee		432			170,619		409			136,046
East Region		3,552			1,414,038		3,369			1,206,373
Total		9,566		$	4,223,435		9,275		$	3,596,060
Homes Ordered:
Arizona		1,342		$	594,631		1,776		$	713,067
California		888			642,938		949			604,478
Colorado		406			249,105		557			317,155
West Region		2,636			1,486,674		3,282			1,634,700
Texas		3,027			1,293,282		3,286			1,248,032
Central Region		3,027			1,293,282		3,286			1,248,032
Florida		1,788			724,209		1,481			547,706
Georgia		620			280,010		533			213,632
North Carolina		1,015			439,618		1,156			450,854
South Carolina		435			146,100		264			90,532
Tennessee		430			182,001		439			152,297
East Region		4,288			1,771,938		3,873			1,455,021
Total		9,951		$	4,551,894		10,441		$	4,337,753
Order Backlog:
Arizona		888		$	397,695		1,346		$	560,090
California		429			314,622		503			331,454
Colorado		310			192,763		301			182,536
West Region		1,627			905,080		2,150			1,074,080
Texas		1,766			790,227		1,787			715,226
Central Region		1,766			790,227		1,787			715,226
Florida		1,355			571,001		785			321,831
Georgia		400			180,059		233			101,996
North Carolina		584			247,405		610			242,192
South Carolina		168			57,664		126			44,028
Tennessee		164			75,323		147			56,052
East Region		2,671			1,131,452		1,901			766,099
Total		6,064		$	2,826,759		5,838		$	2,555,405

Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited)

		Three Months Ended September 30,
		2022				2021
		Ending		Average		Ending		Average
Active Communities:
Arizona		52		54.0		38		38.0
California		32		32.0		18		19.0
Colorado		18		18.5		16		16.5
West Region		102		104.5		72		73.5
Texas		74		77.0		68		66.0
Central Region		74		77.0		68		66.0
Florida		30		35.5		38		36.0
Georgia		18		16.0		12		11.0
North Carolina		27		29.5		26		26.0
South Carolina		12		14.5		11		9.0
Tennessee		12		12.0		9		9.5
East Region		99		107.5		96		91.5
Total		275		289.0		236		231.0

		Nine Months Ended September 30,
		2022				2021
		Ending		Average		Ending		Average
Active Communities:
Arizona		52		46.8		38		35.5
California		32		27.3		18		18.3
Colorado		18		18.0		16		14.0
West Region		102		92.1		72		67.8
Texas		74		75.6		68		63.6
Central Region		74		75.6		68		63.6
Florida		30		38.4		38		33.3
Georgia		18		15.5		12		10.3
North Carolina		27		28.6		26		24.3
South Carolina		12		14.0		11		7.5
Tennessee		12		12.5		9		8.5
East Region		99		109.0		96		83.9
Total		275		276.7		236		215.3

About Meritage Homes Corporation

Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2021. The Company offers a variety of entry-level and first move-up homes. Operations span across Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, Tennessee and Utah.

Meritage Homes has delivered over 160,000 homes in its 36-year history, and has a reputation for its distinctive style, quality construction, and award-winning customer experience. The Company is the industry leader in energy-efficient homebuilding and a nine-time recipient of the U.S. Environmental Protection Agency’s ("EPA") ENERGY STAR® Partner of the Year for Sustained Excellence Award since 2013 for innovation and industry leadership in energy efficient homebuilding, and the recipient of the EPA Indoor airPLUS Leader Award.

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; expectations about our future results; and projected fourth quarter 2022 home closings, home closing revenue, home closing gross margin, effective tax rate and diluted earnings per share.

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. Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. These risks and uncertainties include, but are not limited to, the following: changes in interest rates, the availability and pricing of residential mortgages and the potential benefits of rate locks; inflation in the cost of materials used to develop communities and construct homes; supply chain and labor constraints; our ability to acquire and develop lots may be negatively impacted if we are unable to obtain performance and surety bonds; the ability of our potential buyers to sell their existing homes; legislation related to tariffs; the adverse effect of slow absorption rates; impairments of our real estate inventory; cancellation rates; competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing if our credit ratings are downgraded; our potential exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; a change to the feasibility of projects under option or contract that could result in the write-down or write-off of earnest money or option deposits; our limited geographic diversification; the replication of our energy-efficient technologies by our competitors; shortages in the availability and cost of subcontract labor; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure of our employees and representatives to comply with laws and regulations; our compliance with government regulations related to our financial services operations; negative publicity that affects our reputation; potential disruptions to our business by an epidemic or pandemic (such as COVID-19), and measures that federal, state and local governments and/or health authorities implement to address it; and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the quarter ended June 30, 2022 under the caption "Risk Factors," which can be found on our website at investors.meritagehomes.com.

		Contacts:	Emily Tadano, VP Investor Relations and ESG
			(480) 515-8979 (office)
			investors@meritagehomes.com

FAQ

What were Meritage Homes' Q3 2022 earnings and revenue results?

Meritage Homes reported Q3 2022 earnings of $262.5 million and revenue of $1.57 billion.

How many homes did Meritage close in Q3 2022?

In Q3 2022, Meritage Homes closed 3,487 homes, a 12% increase from the prior year.

What challenges did Meritage Homes face in Q3 2022?

Meritage faced challenges such as a 33% drop in home orders and a cancellation rate of 30%.

What is the projected revenue for Meritage Homes in Q4 2022?

Meritage Homes projects Q4 2022 revenue between $1.85 billion and $2.10 billion.

What is the cancellation rate for Meritage Homes in Q3 2022?

The cancellation rate for Meritage Homes in Q3 2022 was 30%.