Meritage Homes Corporation

Hello, and welcome to the Meritage Homes first quarter 2021 analyst call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Emily Tadano. Please go ahead.

Thank you, Kevin. Good morning, and welcome to our analyst call to discuss our first quarter 2021 results. We issued the press release yesterday after the market closed. You can find it along with the slides we'll refer to during this call on our website at investors.meritagehomes.com or by selecting the investor relations link at the bottom of our homepage. Please refer to slide 2, cautioning you that our statements during this call, as well as the press release and accompanying slides, contain forward-looking statements including, but not limited to, our views regarding the health of the housing market, economic conditions and changes in interest rates, community count and absorption, supply chain constraints and cycle times, Projected second quarter and full year 2021 home closings and revenue, gross margins, tax rates, and diluted earnings per share, potential disruptions to our business from COVID-19, as well as others. Those and any other projections represent the current opinions of our management, which are subject to change at any time, and we assume no obligation to update them. Any forward-looking statements are inherently uncertain. Our actual results may be materially different than our expectations due to a wide variety of risk factors, which we have identified and listed on this slide, as well as in our press release and most recent filings with the Securities and Exchange Commission, specifically our 2020 Annual Report on Form 10-K, which contains a more detailed discussion of those risks. We have also provided reconciliation of certain non-GAAP financial measures referred to in our press release as compared to their closest related GAAP measures. With us today to discuss our results are Steve Hilton, Executive Chairman, Phillippe Lord, CEO, and Hilla Sferruzza, Executive Vice President and CFO of Meritage Homes. We expect this call to last about an hour. A replay will be available on our website within approximately two hours after we conclude the call and will remain active through May 13th. I'll now turn it over to Mr. Hilton. Steve?

Thank you, Emily. I'd like to welcome everyone participating in our call today and hope that you and your families are continuing to stay safe and healthy. I'll start by discussing current market trends and give an overview of the start to the year. Phillippe will cover our strategy and quarterly performance. Hilla will provide a financial overview of the quarter and 2021 guidance. The housing market remains very robust, a continuation of the exceptional momentum of 2020. The spring selling season began earlier than normal and is still going strong today. Meritage delivered another record performance including the company's highest first quarter orders and closings and the highest quarterly home closing gross margin since Q1 of 2006. The successful execution of our strategy focused on affordable entry level and first move out homes to meet the current demand culminated in our absorption pace of 5.8 per month for the first quarter of 2021, up from 4.3 per month in the prior year, which was the strongest first quarter absorption pace since 2005. We achieved this pace even as we managed our spec starts and the corresponding orders in most communities to align with the production constraints in the market today. Absent significant interest rate increases, we believe the current market demand will continue the rest of this year and provide the housing industry ongoing pricing power to offset commodity and other cost increases and deliver strong margins. Looking forward, we believe the favorable home-building macroeconomic conditions will continue for the next several years. Mortgage interest rates remain very affordable, and despite the recent uptick on an average 30-year mortgage rate, 30-year mortgage rates are below 3.25% in our backlog. Buyers in the entry-level space are mostly buying a payment, so as long as the payment still makes sense, the demand continues to be very strong. Secondly, strong demographic trends persist. Most millennials are having life events that align with home ownership, and most baby boomers are becoming empty nesters, wanting a smaller home. Lastly, the supply of new and resale homes continues to be constrained, and we believe that Merida is well positioned to capitalize on this current environment and will continue to deliver greater year-over-year volume and drive profitability over the next several quarters. Now please turn to slide four. Earlier this month, Valadie and Merida's deep commitment to be an early adopter and industry leader in building energy efficient homes The EPA awarded Meritage Homes the 2021 Energy Star Partner of the Year for Sustained Excellence. As an ACON recipient of this recognition, we challenge ourselves every day to improve upon our environmental stewardship in our communities and the planet as a whole, as evidenced by our recent launch of a new multi-speed HVAC system standard in all new homes as of this April. This system operates more efficiently than traditional air conditioning units, allowing owners to better manage the comfort of their home while reducing their environmental impact and operating costs. In keeping with our commitment to innovation, we also rolled out an enhanced M-connected smart home automation suite to complement existing home technologies to complement existing features we've introduced as a centralized management hub of our entire smart home technologies to enhance functionality for our owners while also adding door sensors and motion detectors to increase safety and security. This quarter, we allowed customers to transact quicker and more easily by adding an on-demand homeowner's insurance quotes to our online financial services offering, which already included online mortgage pre-qualification tools and electronic payment of earnest money deposit. In addition to launching our ESG page on Earth Day last week, detailing our commitments to the environment, our employees, well-being, and corporate responsibility from a diversity, equity, and inclusion perspective, we enhanced our recruitment process targeting an even stronger, more diverse next generation of Meredith's leaders, both in the field and at corporate. We will continue to financially support organizations that drive more diversity, equity, and inclusion across our nation. Our achievements in energy efficiency, innovation, and DE&I will continue to add long-term value to the customer experience and shareholder return. I'm also proud to announce that we're entering our first new market since 2016. With the completion of several land acquisitions, the new Coastal Carolinas Division expands our East Region operations into Charleston, Myrtle Beach, and surrounding areas in South Carolina. will start marketing campaigns in the next few quarters ahead of opening these five new affordable entry-level communities in 2022. I'll now turn it over to Phillippe.