Meritage Homes Corporation

Greetings and welcome to the Meritage Homes fourth 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 call over to Emily Tadano, Vice President of Investor Relations. Thank you. You may begin.

Thank you operator. Good morning and welcome to our analyst call to discuss our fourth quarter 2021 and year to date 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, trends in construction costs, supply chain and labor constraints, and cycle times. projected first quarter and full year 2022 home closings and revenue, gross margin, tax rates and diluted earnings per share, potential future distractions to our business from an epidemic or pandemic such as 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 subsequent quarterly reports on Forms 10-Q, which contain a more detailed discussion of those risks. We've also provided a 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, Philippe Lord, CEO, and Gilles Ferruza, 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 February 10th. I'll now turn it over to Mr. Hilton. Steve?

Thank you, Allie. Welcome to everyone participating on our call. I'll start with a brief discussion about current market trends and provide an overview of our significant accomplishments in 2021. BLEEP will cover our strategy and quarterly performance, and Hela will provide a financial overview of the fourth quarter and forward-looking guidance for 2022. Demand in the fourth quarter continued to demonstrate the strength we have seen all year. Mortgage remained very affordable and home buying demand continued to outpace housing inventory, driven by favorable home buying activity from millennials and baby boomers. As such, Meritage again broke several company records in the fourth quarter of 2021. In the face of a prolonged supply chain constraint and a tightening labor market, we achieved our highest fourth quarter sales sales orders, and our second highest quarterly home closings, while accelerating our spec starts. Our foreclosure results include the highest quarterly home closing revenue, home closing gross profit, and delivery to EPS, as well as the lowest quarterly SG&A as a percentage of home closing revenue in our company's history. From a full year 2021 perspective, I couldn't be more proud of what our team's accomplished. we achieved our highest annual sales orders of 13,808 homes and closings of 12,801 homes. Our 2021 annual home closing revenue was also a record at 5.1 billion, as was our full year home closing gross margin of 27.8%. Price increases due to sustained strong demand coupled with our operational efficiency and the leveraging of our fixed costs over higher home closing revenue drove our lowest full-year SG&A rate of 9.2%, translating to our highest full-year diluted EPS of $19.29. Our community count grew 33% year-over-year. We're entering the spring selling season with 259 active selling communities and forecast the continued double-digit community growth into 2022. We expect that our strategy capitalizing on the solid demand for the entry level and first move of homes will produce increased volume coming from additional communities and will enable us to gain market share in all of our geographies. Now let's turn to slide four. In addition to delivering impressive financial results, we achieved numerous milestones related to our corporate social stewardship in the fourth quarter. As a team organized around an ambition to start with heart, Meritage employees donated countless hours to deliver a new mortgage-free home to a deserving military veteran and his family on Veterans Day in Florida through Operation Homefront. We also donated to various nonprofit organizations to further strengthen diversity, equity, and inclusion missions, and to help families during the holiday season in the communities in which we do business, and to support tree planting programs to share our ongoing approach to long-term sustainability practices, DE&I commitments, and our ESG milestones. We issued our inaugural ESG report during the quarter. We also joined more than 2,100 other companies by signing the CEO Action for Diversity Inclusion Pledge. We'll have more to share about our ESG efforts with you throughout 2022. We're excited about our employees, executive and board level commitments to these important issues. And with that, I'll now turn it over to Philippe. Thank you, Steve.