MTH - Earnings call transcript Q1 2020 | Meritage Homes Corporation

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Operator

Greetings and welcome to the Meritage Homes First Quarter 2020 Analyst Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Mr. of President Vice Anderson, Investor Relations. Brent sir, you you may begin. Thank

Brent Anderson

the the Relations Good Thank website quarter by to issued that after along morning, will can our our slides referring and Donna. link market XXXX homepage. release the bottom closed, the selecting analyst We with first welcome on find of our to or and you, our during at you call yesterday at investors.meritagehomes.com discuss call results. Investor we the press be to our

refer to pandemic. potential our our to and including as impacts adverse our I'll you remind statements, Slide you the the limited release statements well views related X to that regarding press accompanying and forward-looking not call slides current contain during business COVID-XX this but and as conditions

management, expectations projections regarding projections costs, Those financing, assume margins, homes, demand and time, update and the expenses, our represent no and change current are mortgage we obligation them. for liquidity. are Our to flow of subject cash to which overhead at other any home prices, the opinions

inherently are uncertain. statements forward-looking Any

most on these our Our variety risks. shortly. also our actual Form filings We'll a XX-Q well which press risk specifically be recent results identified our slide detailed Report we've of this listed and and of on factors, as to a discussion with filing XX-K in Annual differ contain XXXX SEC, expectations the as then more due may our and wide which release be our materially

as compared GAAP closest referred of non-GAAP measures release in provided measures. to our related reconciliation also press their a certain have We to financial

Hilla our and and Vice Phillippe President Executive CFO; distant, Homes. Officer and With President me are Hilton, Executive Steve Chairman today Operating Meritage Vice Sferruzza, Lord, of and CEO; Chief least at or

active an XX. about the remain in conclude It call. to website through approximately will with May will on a call replay hour, an after the expect we hour be available and our We conclude

call to review the the quarter. over turn Steve? Mr. to first I'll now Hilton

Steven Hilton

sincerely Thank through all able you, you participating your everyone and crisis. and this hope that to healthy call today, safe been health global like Brent. of and have I'd welcome to stay on our families

for Our who by on our and thanks hearts time responders healthcare rely And gas workers, stricken or groceries virus. the to of caring go safe to and heartfelt ones in those our this all are like loved are us sick vital those the out during when most first necessities homes. who

for are your service. We grateful

and the commitment of and our before one as began of wellbeing number our six over last to each spread never I Meritage to team and the coronavirus challenges Meritage overcoming for including concern their our team entire people, commend partners and health, we've business the well Our weeks. since has members customers experienced our as safety been families their

near our remainder upcoming focus of ground the on position is believe financial cover realize term of quarters performance long strength think market We'll keeping QX the year. aligned and we successfully our to for of shortly actually We to April strategy. but the the the balance uncertainty in and the with us of sheet made, quarter the of firm allow prepared financial as also be our of we're the will while in midterm seeing it indicator that weather important a to volatility strategic a what our few well we've review first not we as the our highlights change is

new strong the career. amongst demand higher to Slide demand quarter seen residential for first X. enjoyed Through Turning I've we XX-year most in construction the of my

and confidence with negatively our markets since mid the our deteriorated a impacted have mortgage March, which aware, have you declining consumer well are of across As active and traffic U.S. coupled conditions tightening sales. buyer the

of move-up, first and our Demand of was and XX% capture generate especially strong communities that XX% to almost growth we growth order strategic quarter. that turn that the make were able a over XXX% last and inventory that in up our spec from year's demand [indiscernible] with were XX% markets strong earnings close we drove coming revenue growth quickly. able That while first in entry-level to

our In our quarter simplifying resulted has expanded completed home XXX down of margins of gross our streamline closing SG&A cost as driven the our bps we XXX that improvement [indiscernible] with addition, first part the bps operations and have strategy in leverage. in

and growth. while of opportunities, cash of maintaining earnings for last debt words, other the of flexibility liquidity allowed the for December provided demand capitalize flow for we our most execution through need this our period. to opportunities strong the quarter in the It year In XXX% also provided deliver retirement to on while strategy us early

now Phillippe operate. I'll and to discuss specifics trends recent in to more the over regarding turn made we've changes way we it

Phillippe Lord

X. Slide Steve. you, Thank

through XX% to we our operations earlier Based approximately we February. the from month, April increases sales As impact XX% and X% orders compared half [Indiscernible] XXXX. drop March following March. compared sales in our expect the XXXX began this be reported to January major XX% weekend XX% in notable down [ph] latter year-over-year the to of year. past to the on coronavirus have of a on last About and XXX of in XXX orders to spread

high Shelter-in-place currently increased XX% are our rates and markets. to quarter in still month-to-date most late of XX% are first across orders effect the around in in March in from cancellation teens order the Our April.

all deemed an exception currently as in is of communities our construction of locations residential almost essential our handful [ph] the with in service Our California.

BDC recommended and agencies minimize our homes safe government and stay deliver to to We health risk. following are other protocols continuing the build and the [ph] [indiscernible] by and

Slide X.

just the in is teams it couple we then am are model to today to very different leveraging new what temporary solutions quickly proud continue to remotely. operate world are a the and months have technology While I was way of our ago, which we living our in the adapted of for

via to practice their seeing customers allowing during design by distancing our studio customers are we virtually in and officers only home buying example, centers, appointment and social process. or For sales

Our earlier almost year's and online April. in [indiscernible] helped traffic the XX% has last year since

a net during of came buyers format. from the orders new our of home XX% and Additionally determination validation sales of creativity from these acceptance virtual this tours, the approximately times purchasing team and our of

videos construction homes their photos counselors Our to on they under take sales cannot of of update when construction or progress the home those also home physically buyers visit the site.

technologies of are We accelerating and to new working getting the accustomed organization. are remotely adoption throughout

in tend visit a even purchase by that We website, buyers answer the to place, robust again. able with center, mobility functioning customers who today phone, market are continue be highly restrictions comfortable. to the contact will abide With with motivated community and they seeing and are assist fully the We email agents is available to them their ready are or we in customer need home. to until actually the text, research without to a their questions after

monthly in help the of of to sales have increased most them Customers more Consultants earlier without the process using a tool move them with traffic to ever to rates through online work conversion year. our qualifying cases. Mortgage quickly. to to come are office purchase needing complete process Consequently, XX/X the home from our pre-approval this to mortgage MTH

customers' or and are We on a drive now email remotely through deposits link. cards equipped earnest credit through doing closings secure are debit to money process also

homes are Since closing and work reduce made for more with tools our safer home lifestyle. cost are of We of buyers and These many and keep to more it the us. help today's to selling changes with convenient sync procedures efficient pandemic we recedes. also and even expand more the the current make upon, digital intend in after to

we do us billing and We're enable working to complete utilities effectively well inspections, business and as payment services. with municipalities permits remotely and get for with to as

have experienced so maintain any far. typically significant and schedules, we are our not disruption supply Our construction crews able to chain

occupied work For temporarily all interior customers, of homes. safety the our the we and employees warranty suspended involving non-emergency of have

allowed We our warranty go in soon will work begin as as markets. to

Moving than quarter highlight review typically to Hilla out first in covering results operating I'll our point it over just financial do. as the turning on, to much before a results. as I rather detail our to

Slide X.

exceptional any XX% quarter weeks measure. the were of XX Absorptions The were first year-over-year. by up

having achieved We open despite communities ago. a growth. still year order than fewer So on X% average XX%

first to and ending QX quarter. our Those quarter. is community move-up to represented are at level. of X% XXXX assets, total or XX% entry March to dropped community, XX% of of for pivot first order benefit continues year-over-year for orders orders XXXX from of when our results. up and account of Entry-level volume were ongoing under XX% non-core our up XX% were and the of XX, Orders level our anything entry the our orders outside our our which XX% entry-level significantly from Our total

Slide X.

home started, ago. The selling spec canceled concessions. completed which quarter down completion end resell have to were quarter any at been end a of that year-over-year typically XX% total without from just at We're XXXX up spec before number Our XX% to over year additional and homes a homes inventory able X% completed. only of stocks was more was of

X.X having spec. average due specs a to XX which ago, little year quarter of the ended compared with community, XXX% over an a We per communities, to are more mainly entry-level

volume space. the our change spec the built of starting we we strategy the entry last Although do specs over we are level to reduced not in of plan certainly selling month,

volume. to the demand is X-month a to Thatt managing to order meet inventory are movements. We keep spec XX-month on supply X quick supply based for

will as demand demand smaller number when increases. be softens it larger So and

Slide X.

level Our driven last of California absorption market. average. XX% and orders California fewer very Entry XX% XX% more the orders in the in quarter the exposure makes communities communities than Total increase of total value first with West by XXXX order doubled jumbo with X% up a first were limited year's up to over over in on our quarter. almost region now

community quarter, growth accross XX% in communities, resulting drop the of XX.X at quarter. the the Despite XX% strongest year-over-year absorption Arizona in an per for XX% company order average for the produced average again average a up

XX%. absorptions our of quarter had year-over-year with communities. community exceptional first despite up Texas in our and count, region in entry-level Our presence XX% XX% orders for were growth increase LiVE.NOW had strong to a the a XX% due Austin decline

be believe, and this we last we resilient as as the to of we come Texas experienced cycle. downturn continue Overall, will out in

average during community order growth was X% XX% decline XX% We our in count. quarter. an region Year-over-year first offset in which to East due to absorption, in increase continued the improvement a see

devastating and the due were to Closings orders tornado during in Nashville reduced March.

North largest a product driven to significantly orders, the XX% Carolina increase the absorptions there. in increase by contributed produced XX% which year-over-year with primarily in region, mix, Within

don't is close. backlog the buyers the is We just solid. Our count that's and homes sale at to sell, contract waiting continued to

to due market to to most today's advantage seeing the our and close for are in uncertainties mortgage financing. quickly, qualify on which higher of it expect backlog near-term employment limited standards We we is an and cancellations

pre-qualified mortgage qualification many our backlog all honoring using standards exist them is that requalifying approvals for the Our tighter today. customers partner JV in without with lenders

of will over additional Hilla? hand results. now to it to Hilla some our I financial analysis provide

Hilla Sferruzza

Phillippe. you, until economy, in clarity fluid note appropriate and to withdrawing lack the of that regarding before the like the guidance our timing previous future. Considering stable and I'd I we're begin, more conditions pass a to Thank time back an

rate from revenue compared XX% XX. backlog last first the over XX% strong XX% to Starting of quarter We that expansion over of of XXXX coming leverage on SG&A conversion result a XX%, up home the produced inventory growth. XX% in and spec XXXX, growth XXX% first Closings addition achieve and Slide closing were to year. earnings the with with and in quarter margin XXXX of

gross to XXXX, traditionally, margins margin the last XXX quarter closing quarter. of first home lowest bps Our for our QX increased year's XX% over

from negotiating cost to as from construction due processes, and efficiencies efficiencies of quarters the over well number our simplification incremental and margins and better efficiencies of the power overhead couple closing revenue. as of power Our on pricing lower a construction benefited additional from last products SKUs

homes for impairment, topic resale investors before price a discussion discounting about would able which Although gross our high concessions our among been taking markets, to in not would notable seen absorb have meaningful has material we margins lately. we've yet be new of concerns or any

are homes the in current close every we and still this but will sell day. we anticipate time, environment, volume lower continuing At to be

always delivers closings it in important construction is mind, savings to is production cadence profit fixed from cover important we While streamlined home front processes. the our current maintain costs. a continue of to to It's environment, maintain cost with to believe flow to our also cash

adjust As the next the couple our our pricing will decisions in of we'll order threshold. markets we quarters, we to minimum continue to with over maintain volume as necessary and operate monitor conditions locally

on from SG&A, to The for to XX.X pace a XX.X% We long-term additional leveraging QX target the also in declined year closing ago. revenue full-year. resulted were increased of XX% hit in our which our

aren't continue we economic the current environment. Although trajectory in to that expecting

compared last were quarter segment offered We Services customer of to Financial lower mortgage first changed for structure in joint the JV incentives part the services XXXX. being those now our XXXX, our as relating reported of results. year, profit $X closing million of venture revenue, from mortgage incentives our Earnings using home from to is part as included such financial our than rather as

December decrease our interest of first $X in of Our XXXX that in million in debt a aided net early quarter repayment expense XXXX. resulted

also benefited We into with rate a lower XXXX. the energy the credits of tax from extension tax

for QX last year year. this Our XX% tax rate approximately versus was XX%

Our expected XX%. is XX% rate full-year and tax to year this between be

quarter. shares million an for previously per average authorized had at repurchases, Board $XXX X Our of repurchased around $XX this share million share price we and

of current we authorized. repurchases repurchases quarter benefit fairly was of EPS a conditions. meaningfully have remaining majority limited economic indefinitely of go-forward in share light the XXXX, the the occurred but of in million activity in $XX the basis. it March, have diluted We as more first will suspended benefit The But on

Slide XX.

best the point lowest Our been in is our with balance condition in sheet ever history. one net it's at leverage of company's the

against to that extreme and to We short-term. our borrowed economic cash March additional we for period We banking if million credit and during the partners in reserve flexibility extend ample uncertainty, are needed. this of additional least hold credit expect willing provide facility have at to $XXX liquidity our

cash, low to of liquidity almost We the The about debt of almost net the million at $XXX cost of X%. facility, XX.X%. of debt is XXX cap with net additional that quarter credit under under very and ended

with maturities no the until the our feel debt operating spec non-essential of anticipated sales cancellations we differing don't over have ample to it's to land homes of are last weeks, We while pressure We results short-term. uncertainties. recent better internal XXXX expenses been projections development future our and lower liquidate and for eliminating and than and preserve to our higher generate trending acquisition most assets six production liquidity any discretionary and cash downside metering than

about Slide XX, about that deliberately we first quarter expected to to when in XXXX land what We $XXX on million March. XX,XXX we trailing lots X.X the net year based XXXX. March lots just of less we this quarter XXXX we spent spending approximately about That supply where with added on curtailed approximately million closings. XX was first X,XXX development than of a and new during end spend to year's end months $XXX represents entered in lot due

end of for lots We mid target end in of in by under the prior in goal on the terminated spent limited just to since decision mid-March, were charges approval prior our the and more couple period of pullback quarter. of $X We a their resulted the expiration to several prior April XXX Since feasibility million. of of quarter communities XXXX preserve deferred liquidity. to we deals very our the cash approximately additional to March to XXXX incurred

deadline, work terms, work more been to additional monitoring if for with our willing anticipated. to and with economic more we're have our currently the land protracted feasibility sellers extend purchase and than offering sellers to closely although recovery termination acceptable continue us We is deal

expect such year. walk the result only to the rest for amount a We charges actions in of limited away of

expenditures requiring with risk confidence defined development expected the land land development consistent or and provides much market, of our in our margin us corporate less in position. cash playbook with land no land a for that time. luxury all our no more the addition, significant deals projects, In in last reviews approvals now, speculative with we daily upcoming well and downturn risk book entitlement with land Unlike spend have have current acquisition we far the level significant

We our also provide information on some want to mortgage regarding to profile Slide financing additional XX. buyer in relation

and XX% XXX XXX Our over of with buyers entry for than is the mark. that, mark. have FICO the solid are well FICO buyers around buyers, XXX Even the XXX scores over average typically those XX% our level of more above

been years. of many buyer DTI That's XX%. for groups the entry true below Our back-end and average our level across has for including is buyer all

our mid with mortgages Nearly of in payments finance two-thirds with averaging the teens. down buyers conventional

indicators All buyers. stable level than traditional the of are a for of more entry credit those profile credit

Our where or banks able has deliver in continue JV this environment. mortgages our lenders and longtime partner been won't for to buyers to non-bank can't other

While Meritage own servicing as there for no is broker is a loans risk risk and a put-back that could mortgage, to further qualify JV the or our to tighten ability for buyers’ market or mortgage servicing a an is assets. banker impact doesn't only, any cash not a mortgage there

with working from far be our financing We the to the daily. had lenders have have seems would qualified solutions successful shifting and have which navigating buyers pre-COVID-XX. To-date, limited through qualify inability to mortgage we thus that environment, been and impact

turn over it With I'll to that, back Steve.

Steven Hilton

Hilla. you, Thank

first quarter our closures focus the of of landscape now. with managing much results was changed U.S. a are cylinders as strategy then, market. our and severely all our March As large has to Since demonstrated, impact on through the hitting the began different we economy sectors until company leading late

However, been employees, homeowners investors partners, demand inventories the this we producing our for many and are short relative supply years. is reminded in XXXX. still that not has under industry and Home

quick affordable still down on very, Mortgage to focused discounts homes aggressive rates offering, are in attraction who homes to moving inflated for world. been and into by The today's is are low costs shelter-in-place a bringing more not taking homes from rather standards than is flip them. tighter looking harvest are are for builders of more profit. are cash. Demand very possession homes Prices buyers yet investors arbitrary and single-family interest compelling make even to

continue our and successful future. is crisis this our and and We streamline been believe to-date will through in which the operations, serve has us in regard very simplifying well we that well believe Meritage to positioned with strategy in

Our more bottom home higher buyer. level at offers competitors credit of entry value we so attract can LiVE.NOW of than the some surprisingly a the market, entry-level our

homes also first Our which up move-up pool. attract expands buyers are features potential buyer finishes our point that and some second the move

the also were before in conditions recession. We are much last a there better

Our balance been sheet is and and strongest levels ever manageable very the it's maturities. liquidity ample debt with

our discretionary necessary. in development beyond and XXXX delayed curtailed cash reduced where projects have as and possible, We spending outlays

starts managing are in We our inventory. spec carefully

help We [ph] our of communities that and will for competitive entry to model margins. base maintain cost maintain level a our the protect edge

the in first positioned well well. are serve believe level We with we continue to us will communities, and which entry move-up market our

We in team our morale communities experienced management are each families, our have is that serve. an we strategy. that supporting Employee with we business was and sync good the current partners other, and our

end that the remarkable It's rolled program last end, week charitable world a to active ever of out not most the where seen. is This the new And solidarity the world. global Meritage for has and Foundation proud $XXX,XXX employees to and day of our Cares our hard team to a make entire putting our America. are every feed customers contribution. positive Meritage I'm contributing first working we

That I'd Homes prepared Operator? and take thank we'll support your concludes our for at Meritage like remarks. you now questions. to

Operator

is Thank question from first America. of Lovallo Please you. Bank of coming Our John [Operator Instructions] ahead. go

John Lovallo

guys. all and Hey, well. taking questions you hope for are Thank my you I

we maybe weeks maybe you're Hilla, two that more First expecting can in April April, some context of past first think maybe two has you just decline a in kind can of bit and versus the I progressing? activity recently, in how terms declines gauge question, of of improved XX% year-over-year the weeks things the frame to XX% in you are the mentioned

Steven Hilton

Let one. Phillippe take that

Phillippe Lord

that John, I'll Phillippe. take Yes, it’s

XX%, we of dramatic the when occur the homers week back and certainly were March. really we year's the then to much of pretty April. last gotten state two half things through of as first in But a April, slowdown the April of they off occurred from shelter-in-places were have that started And really last instituted, saw move month were slow the better. XX%ish So, weeks

XX% talking you XX% to XX% where about. start So that we're to us really you gets being that’s off that that to see

the we a sort half half back tell sell meaningful would have of of I versus not difference of April week what we March. more but that of a is yet, So and here, in and days first and April you the few seen April last over

Hilla Sferruzza

point and other higher backlog typical mentioned I during us. for a John, that cancellation one backlog and that's a Just last add describing every some I'll to We the a not scrub detailed folks know week day. have other rates

high or days the spike in in So month. we're cancellations not expecting the occur last to an through unusually

Phillippe Lord

don't we or sales in report numbers any our Yes, backlog numbers. contingent in sales our

John Lovallo

was orders physically it, all the will And I'm of of that Got I just to that a before purchasing? those neighborhood. tours to typically curious in or the percentage that really guys. that's think helpful then folks from there house think in virtual see I came XX% something will need come mention

Phillippe Lord

physically I buy XX% to number but that happy think home we will believe are they point would I potentially reality are stat house are could this out new it, and house that a and walking of want but think in site the that to remarkable I that we basically doing point a going all believe to The couldn't that come pretty it's buyers come before some it, and staff. buying that virtually the – they without really people I the at of It's is unseen struggled touching the staff see close, in increase. believe our process. then and actually they’ll they a

thing reopening. that are many one America said Phase place let our X of with, shelter that being more orders me and said, the expiring That and markets, the of in add just replaced

this of our weekend, for then of communities situation. a many So and into business normal back more the following be weekend open we'll under

So in in to back our been next relaxed. and online begin some offices those we orders have of we'll week will states place, have where shelter bring

Steven Hilton

that having is to difficult a a much able do difficult, in It's environment. much how you’re to that order virtually. employees finished really home as sell obviously I built would just add facts more

more are specs, to carry we Now Live models Our have carry, of and Live specs. Now specs variety

those out all you you specs. what for there. will finished that on tell you the home virtual What in you demonstrate when we see sales, And part get of are to that So get is a most have I tour.

Hilla Sferruzza

It's that's a being declined, else's nervous about folks about tours very are proxy the good doing proxy as in lifted for that. for inventory, inventory good are people nervous home existing that – it’s and someone

John Lovallo

Makes sense, thanks, guys.

Steven Hilton

Thank you.

Operator

Thank you.

Ratner from & is proceed question coming next Please Zelman Our of your Alan with question. Associates.

Alan Ratner

Hey, performance the guys, the and on both quarter strong congrats well doing good in and morning. then everyone's hear to as since well. Glad

my on So, a just about advantage little first comment question of guess, bit finished I that last touching having the specs.

things One of seeing resale their they're environment homes sell huge on current the move? been can't and side in we've this it looking the in decline in inventories that is are there's sheltered been a people if presumably as to

you And five forward you by week? have that think I guess so you obviously, quickly to that are adjusting And guys some would perhaps because imagine are have you start listings ideal that there. the four that specs dramatically ground. from question as month changing on you about benefitted to the trends do to eventually, How I of the is, to and have extent look supply the start-case that of kind increase.

should current does happen with think it kind online? come April what's be once taking are that your XX%, resale So that based view eventually in range you're on forecasting going to XX% inventory some start you activity, of in different about or down to back we

Steven Hilton

downturn the many us to very guys defining elements going are builders don't question think this market share strategy. do we want to First I strategy a the believe to don't this and for it. that well because it's of our the in for hope I'll allows going gain forward wait strongly be home. all that tell overall environment to is buyers in of and And environment you you what you thank be our And going also. doing Alan, spec

move but to can be our want report have starts That quickly – we'd previous down we us, they you down significantly. our significantly going what have don't, where we don't where where we be and obviously, fine tell and April we and said I we for them. months We inventory will have normal starts we're starts, want too from And are that many April enough. made tuning don't to where specs for have because from and

rate selling – And a places, specs. and fast many building at houses are where we're we're there

we you So I need sold day And combat. this hand we out tell manage manage leads Phillippe is we to hand every support effort on and where replace how it. we the to him. and do that what I that Phillippe I daily, together, figure can we

very managing We're part our the right of just we're that about the on development. the putting ground as acquisitions, about cash, place right our but managing the business at land aggressively land price. the conserving right – Not product

Alan Ratner

– insights That's the there. I appreciate very helpful.

Disney you or Orlando. hit indefinitely. resorts Obviously by your Your job like second a think what's shutdown question, that from just oil there know about thinking you're as when maybe I least pandemic footprint, with this the being perspective at about being with some say it markets seems there's current are harder with Houston on going

you your perhaps two? Is last footprint, job So that or where bounce is this sharply of late is as discernible you widespread your strength ones trends due seeing pretty over that differences footprint? when the across back week look demand and are seemed across hasn't any the to to uncertainty that or maybe

Steven Hilton

just almost that, going the very say that in furloughed barrel Disney. Houston way dollars Orlando would I laid the kind through XX,XXX about is it, I into was about Orlando concerned it think you right. most just people out I market, this and There of with and also Orlando, oil. worried Houston couple about for – leisure XX,XXX it's work very a a ago They weeks a for of about travel a market, resort zero worried few people pandemic

April. challenged much Orlando, one we Houston off, I as in this have but very having been be in the we're that I'm Houston California. state – as where sales well month. homes awed robust our moment could surprisingly California by. have But for how selling been have sales think would I most is at this Really the be would challenges we're most expected. not

our Fortunately, not that is California large. in footprint

have bit only about. concerned about but what Colorado. that's concerned I'm also XX communities California, We in a I'm

cautious. year ago a into has communities. are in been to our of price in in selling I Our to very and new of well. as from out good and the little Texas But continues more communities think fallen XX be bit stellar, being demand community dramatically high replacing pretty price even Colorado local most But weeks, last with a them buyers there lower through XX six count is because of market we've in Arizona and housing the Colorado is demand

So question. that hopefully your answered

Alan Ratner

luck the great. Thank that's stay good and you Yes healthy. for and color

Steven Hilton

you. Thank

Operator

Thank you.

coming go from is Truman of Our next question ahead. Patterson Fargo. Wells Please

Paul Przybylski

Przybylski. in as Paul land market Steve you demand, reengage would look for comfort an what remain see, it. I the we would give you and develop conservative? it's to to you guess, long to actually How need Thanks, inflection

Steven Hilton

through reviewing a couple not of be of in decide may a with. unengaged, we're pipeline, hard to modest gone amount we going our may part we maybe hundred them some Well, XXX we've a escrow, those. deals We're those, okay? on. those of that We're ways have land had We

market And to one so, the Every of blow pipeline. going different. every going We're land them. completely is we're not just up reanalyze to

position land. we in they sticky land but go some are for in places, don't certain may to be somewhat other down think places prices to and going in a I we want overpaid be I think

and that couldn't to think, be we'll private go we environment of they're going maybe buy. to we wanting that builders this stressed able in also other have maybe to the let buy, to We land builders, be going are now some buy to

this strategic, market opportunity this to an we're share. And increase our going use to going is opportunity, we're to and be very

– we Particularly where to going we're I to hold experienced summer, rates sales to buy this our running So, out going sure. going if markets to if be city we're were and this that don't tomorrow. buying some makes up, – know particularly ready land be and that be But sense. it ready we're for land

So different as earlier, not we're stay it's I to said throwing where pots pans is ship This off afloat. the situation. the just and XXXX a

Hilla Sferruzza

only away a far. Just to of deals walked clarify so from we've handful Paul,

the all is we've most we done timeline deals for part, For the that have. pushed the out just

Steven Hilton

that be I this material. some more some don't from we’ll quarter that, away and going think it's expense there'll deals have We’ll to for walk that too but be

Paul Przybylski

and triggering any range? magnitude? call mentioned earlier the have on the XX% impairments. it Do Hilla headroom on front the had you in you color Is incentive on before probably you the Okay, like significant

Hilla Sferruzza

quarter I guys margin saw were you Yes, XX%. this mean, the

be is too costs not accounting the probably between there additional little a on There have but impairments. would to you is and gotten auditors XX% before we that start at making geeky conversations breakeven. the is which some no to and there in – is are. get XX% a decline ASPs, we the runway money, all before even market having that's there assuming more but in about quite would that long obviously part, for bit on So to between today, price concessions And still need

us of of combination think I of gives of kind items that those room. all So breathing lot a

Steven Hilton

caused last in recession, price to had great XX% XX% We all the which declines impairments. certainly those

not meaningfully. a were bit, little incentives they that real not margins really Our That any and we're up certainly now But even time. but declines picked strong were seeing at stronger price yet.

Paul Przybylski

Okay, thank you.

Operator

Thank you.

ahead. of Our Stephen go Kim next is Evercore question ISI. coming Please from

Stephen Kim

looking Yes, you're it as reopen in you a Good where delayed the thanks your to markets mean, markets, and that the few hear. are markets guess be you may that these versus the more strategy what how anticipating versus for markets curious things than different going where lot I earlier be could follow? certainly as perhaps in Encouraging comment opening up to you reopening guys. going on will looking were be seem other are they what in holding gauge you or are pivot I a to I'm of you're up lot weeks the like expecting what the a Yes, states were to kind states ago. stuff. whether are like where better to you're does will they specifically it

Steven Hilton

around that And the seeing field really Well, it's buyer are in the pretty What it and incentives It's our and is it time. than the necessary in I traffic, to not going bad activity than mean, activity, buying a mean, different necessary a get land. to simple it's to a people no we're I building pricing. it's is good and drive communities transact. sales in engagement, decisions formula. or specs time is in

In right markets incremental in opening. up the traffic South opened I sort here. the Steve now little seeing Carolina, bit, of a buyer that mean, articulated. Georgia open markets, seeing away. we up We're Texas way engagement We're we're for the seeing are as paving

seeing we're So all that.

the to I sort mean, of of these the markets. watch key be just each one it'll economic landscape for

opening I improve the an with idea keep engagement But just but we've of back buyer think on someone up. to that. seen mentioned where we've, the job occur, loss is already going eye

So incremental a we activity environment. traffic we're in without be up actually in appointment opened only non-virtual when can expecting certainly

Stephen Kim

increase over this, you the seeing that Yes, planning you've and Can traffic I'm assuming important. you conversely and absolutely. incentives You've increase to of that are incentives call you indicated these special near-term to part about some pull nice up? degree is any engagement. during to going to back how couple you last maybe a or on diagnostic or might you markets weeks what material or talk Do in phase? in the pickup the in incentives things is attribute programs. seen are Particularly, the a open your incentives absence you're buyer of on as utilize improve which anticipating

Steven Hilton

they say, question And what our of I to we were Well, tools variety April, bps. a be about more in April? the add but incentives used in really XXX all would up should

commissions, of we closing that Some raising that were some it we variety was cost, in said things of a did, a was March. of prices more different it

the XXX inventory to prices our of So our believe were a think going have going April on we incentives April. into that is that meaningful upswing I on our margin I bps impact because that don't our spent

this, go our and to going watch But what our know we calls our going the to by. lot So do. telegraph But that to what movie going and maintain competitors and as volume then kind to you aggressive these telling it level hands we're a sit we're I reasonable a to to are I product in refrain to want of so to don't market going We're compete. reading I of can we're to be on going do sure I'm watches. listening transcripts, not the tell move you May. our and active the from making in well

do. really there had it They - the what what good downturn, level them. to it this And they're builders entry last the builders do, that's do right and And the just be with now. did up in to I going good we're going

So to you I be what I offering. incentives what tell we're can else to don't but tell going you on know going precisely I'm not that,

Phillippe Lord

Every a I different story. to houses a XXX We peanut this largely place in approach. going not a would add, has April, community sheltering just butter is over sell we're believe in environment. in

level communities, especially lot entry at of the underwriting a that above or expectations. in have We original our performed

better we to of looking do incentivize over coming think not they'll We're this. as out especially those

it's again every and incentivizing is by and you story we on a story? market also community I And market evaluate by the would what very incentivizing then different at, we thing. look advantage thing, So competition what's our doing, specs. specs, than having the When our look a of I tell you, dirt. that believe community this community, it's community So spec is what's at

control can margin better. erosion the You much

Stephen Kim

the the guys. tightened I appreciate encouraging. very And also lot Yes, is appreciate fact a mention standards bit I recent didn't and encouraging. lending Thanks the it's really I weeks strength in you it. it. that little a all too know so

Steven Hilton

Thank you.

Operator

you. Thank

Reichardt ahead. next go Our Please question is Carl coming of BTIG. from

Carl Reichardt

in to the LiVE.NOW could business basis was morning about how on two segments? in curious those April and or hear maybe up you're spec a good I folks. versus net the Glad level side of talk absorptions turned move of if gross well. had terms between you Thanks, entry Phillippe

Phillippe Lord

the of versus But No, for at in the non-strategic sort is can tell our stronger slower, LiVE.NOW much in It's in been of XMU versus first don't in more then was perform stats data continuing of how assets. and much I the now. very is There right XMU. just have strongly. to yet definitely level I look pullback me front modest quarter. that XMU those I can me the than you front has on of it slower stuff And April was more there entry the than definitely

level, end entry the you general, just that see come entry first higher tell And we would level May think XMU lower trend into much plots, end well. as in better April in I you'll than I as and all is So performing stuff.

Hilla Sferruzza

about are about consistent. space, XXX% XXX% for stuff first entry relatively total volume is only QX. end for us footnote X% the is relatively and of and at absorption time even ratios a of first pace anymore, movers It's cost movers time holding was Higher those and and not holding level really consistent

Steven Hilton

score. little a and are those buyers impacted competitors entry credit cater level, deem to what would more and We've has premium been who they're our we and score. some bit - they're closer a the as some tending credit more challenged that few better a to to a are communities creditworthy of less have have lower see of We level I ultra-entry a buyer, because of I watching that do are

generally level might XXX other any over low even have XXX. don't but entry is level of do buyers entry credit people high buyers Our those that have. We XXXs, in some we have some the XXX

level entry in off our communities activity. have drop a seen So not really

Carl Reichardt

Analyst Hilla, is, of slow question like, grew. market replace your that do XX%, some community count the months, before aggressive previously rate? or your And to and talked the I answer. there effectively, I guess a Thanks, community before under been, we to If down, sort your a assumption just Is would count that's community of at XX rebound. expansion which about and you'll need run communities Day before is a sort then, you then you count operate type where the of - to more that sell what out does what are community transition Okay, appreciate have me of think that was guys. a XX count? at down that look year a XX% sense start let's about the you're for before few

Steven Hilton

answer at that's because moving too this just many to moment, got Carl, hard parts. we so

We communities on. see we've a going short for frozen have to development of some that period what's time

year. this opening will later of be delayed. but So those That be those plan will had – some

slower little continue have to out some open year. are selling that communities We maybe than a through bit the be

have faster. We going are that some

get the storm community a little on guidance want give We're road now. want just in right with farther we we – I of down don't don’t the until eye And this. the to counts any

mindset have ball a I definitely give We dealt get pretty there. still on the communities, And wanting that good XXXX. It take reasonable end going were We're little by to We and curve to quarter this get longer. of next to think question like kind housing, going tight a our through supply XXX these ask. and in that of to a there us our But its any is getting just be going I target here. way. to of more want still don't guidance bit to the low I that rates with interest we're think, yet. to

Hilla Sferruzza

eye mark. going is his prepared it's Not prize. We're to going for I trying navigate the long-term. think the thought still the remarks. strategy in the it the and hit but to happen had us on to still short nothing Steve midterm, was on to that in, happen that's just is quarter we XXX changed but sure that the community That's

Carl Reichardt

it. Okay, Thanks. I appreciate

Operator

you. Thank

is next JPMorgan. coming proceed your questions. Please Michael Rehaut question with of Our from

Michael Rehaut

morning healthy good I hope is everyone and and safe. everyone Thanks and

on XX% to some First the…? provided a be to of clarification of question, around of appears April more was specifically, I and – if get decline hoping a some kind down earlier, just a the XX% just in ways to gross of maybe that extrapolate in you more numbers

Hilla Sferruzza

had think we're XXX there's April projecting XXX our in north presentation, had sales of – Mike year’s we slide last I a net. net, we and

the how to XX%. that's So we're to XX% getting

the all already cancellations of has that there. in So

Michael Rehaut

Okay gross? April or with the is up in but offline around in early those of XX% then down down and, XX% guess, I that's of the numbers we and last XX to follow that maybe also couple also net some could weeks, helpful

Phillippe Lord

This net. all is

to of what – is two I'm sure year-over-year on. question were we I'm first weeks trends April the and week-to-week spot about and I'm So, if not the trying think was,

and first last this we than move meaningfully is as the think the weeks, point are of the April. two week, I stronger weeks through two

Hilla Sferruzza

weekly the on up caught get wouldn't percentages. maybe And

and Phillippe since of XX% XX% is And been out improving right toughest shelter-in-place takeaway to country the exiting year. ever that considering almost the into think the It's close March. out likely now that to I was rougher of we're expect mentioned, and the be net. going month will April entire we April next steadily as in

Phillippe Lord

than and and I the the notice later up because at takes month a of Yes they end People harder sales expire, their incentives you've do month the long motivated, know salespeople you numbers the clean as of But time. in Mike get work always at okay, more backlog build cans. they month. the get beginning

So building. as you move through are a always month, numbers

as in So the weeks two last Hilla that numbers declining. March said, said, were

what And April the numbers our week, deal of we're weeks particularly last with But couple of you prime we, selling of first pretty the we're always cans to we numbers. than two been weeks, basis reporting it's net season. But and expect lower a endeavor last on the for time daily strong. the

Michael Rehaut

month. guess again that also I the I just around XXX margins and was there mid very, gross quarter change, conditions I the okay that's confused there on will lot impressive on, a you - gross the XX% in the but expecting? was secondly, But, forward. margin followup were going first number understanding I clarity. to of quarter think the for was market just number a a chart the the first in with can off current Basically compares the on maybe the bar appreciate where we there Okay, for XXs

the drivers the So that I if of on relative and were basis point, a what of kind little starting else of equal. was all in a new upside just get terms that's bit hoping to

a that If shift is was level out any but realize? perhaps higher incentives structurally and of, you quarter, if benefited take were to maybe one mix market demand kind do, going you to kind timing type if than or you're of of at there or that

Phillippe Lord

okay, thing because quarter the in in a model. them sell with here's conversion We're strategy we the had our ratio homes QX. able close XX% and to and our Well

quarter, a to, to first gave that had for we guidance we and higher January revenue. robust outperform close didn't within we us create robust have because drove were and which you which produce overhead margin we able the and any inventory a So the to outside sell half to it of February, closings, additional allowed

the important So, it's tremendous overhead the leverage and significant, keep on to and that's building selling, impact line. is a has bottom why because

those gross a few January, better than because February We we So, close sold to to. able homes saw and we margin. quite expected strong and more were produce a we

Hilla Sferruzza

XX a about, we've bps increase efficiencies we're leverage The that is that been rest the increased what So ability year-over-year, last we the Mike, and that higher our for bps about also the The we've about talked is into XXX combination QX-to-QX about improvement from of of pricing. of volume. talked which of if looking as that those talking years. but for quarter, processes been our our cost to strength product, couple coming we improving is

comprised that became although our of reductions, is leveraging from in in So that from again, really bps the the cost and closings is all combination from evident overhead, in there XXX there QX improved volume. so that processes additional mostly XX

Michael Rehaut

thank Okay, you.

Operator

you. Excuse thank me,

coming from is Please Rahmani KBW. question next ahead. Our of go Jade

Ryan Tomasello

large indications the actually for any a for Tomasello for M&A I morning. if market? early taking questions. across seeing scale the wondering in Ryan and on acquisition Jade. the This including in is you're increase Thanks opportunities landscape was potential Good

Phillippe Lord

don't even of any right for looking be think No, I acquisitions inclined builders at to a a selling the lifeline. And one's now they're middle no pandemic. are unless looking then in

no. is So, short answer

Ryan Tomasello

are renters? multifamily demand and of pandemic, of you signs in preliminary the seeing any from a market your specifically increasing result as then today Okay,

Steven Hilton

high too Sunbelt it's this anecdotal based from rolling we're and any to getting influx few a from mean, move going just of in it's that away where build. people the upon are out think They're We okay. But, take suburbs. quarters. to we people want really, distance a I know, socially thing to in early can't to be think density tight too to just trends early we're own yes long-term you to home. not a believe to we live cities I to evidence, want tell. into the want going going They're weeks to this you

operator. question, Next

Operator

Alex Research Certainly, Barrón of is ahead. coming Housing from question go next Center. our Please

Alex Barrón

Yes, affected social thanks. you time Hope I distancing stuff? are guys being well. much to is and ask your build wanted that all by about how

Phillippe Lord

not is, worse. I would Yes. Thanks thing Alex. This say is getting first any Well,the Phillippe. it's

will more a level being effective job largely very what distraction. trade carved This are that's an I tell being fact, at attributed They work We seeing now. They In service construction think the us high right do. crews essential less to is have that site That's you out. activity. to to a getting other we're faster. performing are the

Supply point. chains are moving at effectively this

building probably because tight. now ever those we faster still right times our And of all extremely are so cycle we're have houses and reasons than

making I it's little things up and are certainly of actual that, like build a big, think we're times, seeing too a lag and the bit we but the with nothing build permits time. that on vertical

ever the performing a crews high I've start think five over executing will are time, extremely XX I and again, but trade best in will the I you, So, unwind this they're years tell right to it's seen such struggle, an the been now to level. last

Steven Hilton

stuff over can some in two over, Yes, the our said, and to say crews sure come and I are those our we came early and let's one more Alex, of job friends built. pandemic shutdown construction, or big would say double bills we site, get just on up,

hard paper both reading are well. guys maintain and their nervous too, to and the as they're they're share So working

Alex Barron

to hear. That's good

to of can controlled what of done? flexibility? check let flexibility your centrally work regardless guess, takes? said, money not do you're are to it guys? have have share? to I my all and or each So, guess they trying else up on you Steve, the get much to question own how the does that salesperson trying you are on is they and pool of to a to incentives sale does I'm market not question take how other do going versus The done they just be anybody incentives more going sales aggressive each sale words, I their need some you the way salesperson individual let other I'm In kind understand have getting is others

Steven Hilton

corporate. bit have of to a discretion. But pocket they things locally control the leadership, regional little centrally division office Obviously, we and the at

the delay the is So, levers job. every He the his monitors our don't hands what's on job, happening And on day. to that needed. He this we Phillippe's in as pulling is that’s any has have He reacting wheel. ground.

Phillippe Lord

an mean, on Yes. rarely are where whatever empowered at And cost. go we get just into salespeople I buyers paper environment to

Steven Hilton

Yes.

Phillippe Lord

way from long that. certainly We're a

Steven Hilton

operate. that's Yes, not how we

Alex Barron

a have Okay, need my if you that kind without for or guys what haven't trigger a maybe how of that? need communities few or the would last any is, any incentive activity many reevaluate relook your question go had is weeks to weeks, by before to your of pricing, to kind sale seeing you

Steven Hilton

we figure cetera. what a We're way. But doing, we're be weeks, there, adjustments Yes, I competition it could But It SWAT three could the is, We with be too product, don't granular. wrong you can can't accordingly. et going have make team houses somewhere not we're the think salesperson, after that it talk the reason slash that's is, reasons. be we multiple the tell something there or yes, We're don't to a going price. is to a to the whatever clearly about send little what that. problem - something going to out with function the showing could and the haven't. be in don't rational formula I

Alex Barron

Okay, thanks and luck best this. for of

Steven Hilton

I end. any have to one Operator questions? close getting more more. well. stay Alex, the may think Do we we're take We Thanks

Operator

time Sachs. from Charles Please which Goldman ahead. last Perron go one will be from We for question, are showing

Unidentified Analyst

these question my provide different trends today. is, to Hey, for and good Susan to tailwind first morning, the weaker demand if gentlemen. you're in discuss that you in assuming material margins through And we can a XXXX, And environment? seeing I'm a labor believe costs filling the April. the in

Steven Hilton

would that had price haven't in - we say I April. increases any

at builders will of forward. less oil, than concessions lower lower renewing we cost us those trade And lumber has our going have from with able course, forward, is did think expiring and believe But March, in be certain think the a more others. XX% muted. increase our but than to it's - XX% also contracts for and experience that moving believe Certainly base. is in tomorrow, more concessions, more from should of been some lot become others trade we for and I do we price favorable to geographies, cost cost I maybe say the price base. I some lumber low we be going of Our get I others cost contracts, environment we're to

Unidentified Analyst

And Okay, little like the for a where very what hit don't second, sense thank bit go the obviously, do agenda overall And on you to like would go SG&A. can I could of the you back things even you. on you for us give for if That's helpful. target your the a year, this more And to expect trend year? XX% year?

Steven Hilton

be would That guidance. We're not guidance. giving

So I don't know to that. how to respond

Hilla Sferruzza

couple said prepared back numbers. times we we will remarks, a pulling the is say we're discretionary thing we're spend. dramatically non-essential The revenue and a during of on percentage revenue it only out That function giving can't. not is and We

So is guidance so on be prepared revenue piece right costs provide SG&A think don't I very to so controlling tightly, we're we're the murky, now. to going but any

Unidentified Analyst

that’s helpful. very day. Okay, Have good a

Steven Hilton

Okay, thank you.

So our other remarks side. on We out We and joining call. appreciate navigate and on come that concludes here question-and-answer you this through prepared crisis our coming and the and well today. everybody hope in stay

you to So quarter. we'll a again talking to very next much. great Have look day. you forward Thank

Operator

and participation. event. This Ladies your for today's concludes gentlemen, you thank

a day. your time wonderful You and may disconnect this lines at have

Meritage Homes (MTH) 29 Apr 202020 Q1 Earnings call transcript