Meritage Homes Corporation

Greetings and welcome to Meritage Homes second 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Emily Tadano. Vice President, Investor Relations for Meritage Homes. Please go ahead.

Thank you, Brock. Good morning and welcome to this call to discuss our second 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 two, 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, Trends in Construction Costs, Supply Chain Constraints and Cycle Time, Projected Third Quarter and Full Year 2021 Home Closings and Revenue, Gross Margin, 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 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 and Quarterly Reports on Form 10-Q, which contain 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 August 12th. I'll now turn it over to Mr. Hilton. Steve?

Thank you, Emily. Welcome to everyone participating on our call. I'll start out by discussing the market trends we're experiencing today, provide an overview of the first half of the year. Phillippe will cover our strategy and quarterly performance, and Hila will provide a financial overview of the quarter and 2021 guidance. The housing market continues to be very healthy. Home buying activity in the second quarter of 2021 remains strong and steady in all our geographies. Even as we manage our order space to align with production constraints, our second quarter of 2021 average absorption base was 5.5 per month, up from 5.0 per month from the prior year. This quarter, we also successfully navigated supply chain challenges as our long-term partnerships with our trades allowed us to minimize the impact to our job sites where possible. We delivered 3,273 homes, which was both above what we forecast considering our anticipated cycle time expansion and also greater than the prior year. We achieved our best second quarter of closings We generated the highest quarterly home closing gross margin in company history of 27.3%, with pricing power more than offsetting commodity cost increases. We grew our community count from 203 at March 31st to 226 at June 30th, as our focus remains on our 300 community goal. We believe this 11% sequential quarterly increase is the start of meaningful growth. To address the macro backdrop and what we are seeing and hearing in our communities, housing supply remains constrained. Lower interest rates continue to influence purchase decision and demographic trends in home buying for millennials and baby boomers are driving consistent demand in the housing industry today. Mortgage interest rates remain at or near historical low levels. Buyers in the entry-level space are mostly buying at payment, so as long as rates remain low and the average monthly payment make sense that demand continues to be strong. Secondly, the tight supply of new and resale homes remains an issue in the market. While we anticipate builder pipelines and new resale home listings will eventually adjust, we believe the current supply and demand constraints will persist for the foreseeable future. Lastly, demand based on demographics should continue to drive home building for the next several years. Millennials and baby boomers are still in the early stages of life events that align with home ownership. With our growing community count and focus on entry level and first move up markets, we believe marriage is well positioned to deliver a greater volume and drive profitability over the next several years. At 300 communities, we can generate 15,000 orders and normalize run rate of 50 orders per store, which is just a bit over four net orders per month. I'll now turn it over to Phillippe. Phillippe?