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Meritage Homes Corporation (MTH)
Deutsche Bank 20th Annual Leveraged Finance Conference Call
October 10, 2012 06:40 PM ET
Larry W. Seay - EVP and CFO
Brent Anderson - VP, Investor Relations
Mike Stanchina - Deutsche Bank Securities, Inc
Previous Statements by MTH
» Meritage Homes' CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Meritage Homes CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Meritage Homes Corporation Q2 2010 Earnings Call Transcript
Mike Stanchina - Deutsche Bank Securities, Inc
Welcome everybody today and it’s a great (indiscernible).
Larry W. Seay
Thanks Mike, (indiscernible). I want to thank Tom Bradshaw and Nishu, the other people at Deutsche Bank for hosting us. We appreciate being here.
I’m going to run through the first few slides pretty quickly here as most of you probably are at least somewhat familiar with Meritage, but first of all I want to point you to the forward-looking statement. Please take a read through this. We’re in kind of a quite period after the end of the quarter, so I can’t really talk about the quarter much, but we’ll try to answer your questions you may have.
Very briefly, we’re [a builder, it’s been in] business since 1985, 20 years of existence and we’re the ninth largest publicly traded company in the United States. We really are a top 10 builder in most of our markets and then a lot of them were the top five builder. We added three new markets in the last year, one in Raleigh-Durham, we’ve been operating in for about a year and then more recently we added a Charlotte operation that’s in a process of getting its first sales going in Tampa that started its first sales last quarter.
We’re primarily a move-up builder, building about 65% of our homes as move-up, the balance being a starter in a few Active Adult and luxury homes. We primarily have a build to order model, mean that we don’t build a lot of specs. That number bounced-up during the downturn to about 50%, but its scaling back down currently about 35% of our homes are a spec. Traditionally we built only about 10% or 15% of our homes are spec, so usually a pre-order kind of basis.
We also don’t have a huge long land supply. We like to have about four or five years of land. We’re not a long-term the land speculator. On the other hand, we do like to have enough lots to make sure our pipeline has adequately filled, so we can plan our business.
State of the housing market; obviously if you’ve been talking to home builders, people are pretty happy about what’s been happening in the last year. So the recovery kind of started to show itself more permanently in the spring, February to March. So the recovery we think is sustainable. We think that the pent-up demand that has built up from people deferring household formation is going to help [buoy] the recovery, high affordability not only with house prices being very low, but also interest rates are being as low as they’ve been in decades and all that translating into improved buyer confidence that keep buyers actually in house prices bottom and stabilize and start to go up. So we really think that all of that means that there’s going to be a continued housing recovery over the next few years.
There are few things that are out of control, the election, European issues. But we don’t think these are going to impact the housing market very much. If at all, because of all those other things, because of the affordability in the pent-up demand. We do think that the governments recognize that improving home building market is very important to the overall economic recovery with these set actions on having the quantities using three (indiscernible) that’s focused on long-term more the years and also the Obama administration I think doing things later in anticipation to boost housing. All those are positive and we think it will again be more of a long-term recovery at this point.
Strongest orders we’ve had in years, these – the charts here show our net orders year-over-year, up 49%. Order value up 63% for the quarter, where August was our 10th consecutive month. Prices had been going up, closing the revenue [up]. Most of that price increase over the last quarter that the year-over-year 10% increase was driven by mix as usual we were selling more houses in high priced states of California. We are also selling larger houses, largest was 3,000 which is driving sales prices up. But a portion of that was true price increase maybe somewhere around 2% or 3% was two price increase. So we’re seeing top-line being driven by order growth, but also by real average sales price increase too.
So, we are reporting very good orders. The orders in the second quarter as I said were up 49%, the highest of the group, and we’ve been the highest in the group over the last (indiscernible) three quarters. So we’re pleased with how we’re doing compared to the competition. We also are seeing on the bottom part of the slide, seeing our sales per community increase. So the last quarter – the second quarter we were selling nine houses per community per quarter or three per month. That’s a very good number in the industry and particularly since we’re moving -- we’re selling a move up product that’s higher priced than some other lower priced builders who should have a lower sales or higher sales rate because they’re selling at lower price.