Meritage Homes Corporation

Greetings and welcome to the Meritage Homes fourth quarter 2022 analyst call. At this time, all participants are on a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Ms. Emily Tadano, Vice President of Investor Relations and ESG. Thank you. Please go ahead.

Thank you, operator. Good morning and welcome to our analyst call to discuss our fourth quarter and full year 2022 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 in the earnings release and accompanying slides, contain forward-looking statements. 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 earnings release and most recent filings with the Securities and Exchange Commission, specifically our 2021 annual report on Form 10-K and subsequent quarterly reports on Form 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 today's 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 until February 16th. I'll now turn it over to Mr. Hilton. Steve?

Thank you, Emily. Good morning. Welcome to everyone participating in our call this morning. I'll start with a brief discussion about what we are seeing in the market and provide an overview of our recent company milestones. Philippe will cover our strategy and quarterly performance. Hila will provide a financial overview of the fourth quarter and forward-looking guidance. Q4 marked a strong finish to a year of exceptional execution and dedication from the Meredith team. We delivered 29% more homes this quarter and generated $2 billion in home closing revenue in the fourth quarter, which was 32% higher than the fourth quarter of 21. Our home closing gross margin of 25.2% and quarterly SG&A leverage of 8.4% led to our quarterly diluted EPS of $7.09. Although favorable demographics and the low supply of housing inventory should drive long-term demand, We believe they were overshadowed in the back half of the year by ongoing economic uncertainty and buyer psychology, increasing mortgage interest rates and inflation. With home buyers on the fence about when to get back into the market, our fourth quarter sales orders declined 46% year over year, driven by a cancellation rate of 39%. Today's higher mortgage interest rates continue to pressure housing prices as monthly payments still remain above 2020 and 2021 levels, despite price cuts and rate locks. We believe that until rates stabilize, home sales activity will remain choppy. We see some potential buyers who could qualify but are waiting for further price declines as they anticipate additional builder incentives are coming. Other current buyers with rate locks in place Our below current market mortgage rates were canceling due to the buyer hesitancy, as they may have been nervous about the general economy or their own financial positions. However, given our available inventory, we are seeing some buyers read into the market and respond favorably to our quick movement selection, as well as our incentives and company-wide sales initiatives. Now on to slide four. As a team that embodies our start with heart core value, Meritage employees donated countless hours to deliver three mortgage-free homes to deserving military veterans and their families on Veterans Day in Houston, Nashville, and Tucson. This is one of the most impactful annual initiatives that the entire organization looks forward to, and we were excited and humbled to continue that tradition in 2022. We also expanded our long-term history of contributing to local nonprofit organizations to further our diversity, equity, and inclusion mission, as well as volunteered time and donated financial support to organizations combating food insecurity across the country and providing shelter to those in need. This quarter, Meritage was recognized by the Phoenix Business Journal both as one of the best places to work and one of the healthiest employers. And as a result of our overall commitment to ESG, Meredith was named one of the 2023 America's Most Responsible Companies by Newsweek Magazine. Overall, we are proud of what our team members accomplished this quarter on top of the quarter of solid operational execution. I'll now turn it over to Philippe.