Meritage Homes — Third Quarter 2026 Earnings Summary

Financial Performance:

• Home closing revenue for the three months ended September 30, 2026, was $1.162 billion, a 17% decrease from $1.399 billion in the prior year period.
• Home closing revenue for the nine months ended September 30, 2026, was $3.658 billion, a 16% decrease from $4.357 billion in the prior year period.
• Homes closed decreased 14% year-over-year to 3,187 units in Q3 2026 and 12% to 9,879 units for the first nine months of 2026.
• Average sales price on closings was $365,000 in Q3 2026 (down 4% from $380,000) and $370,000 for the first nine months (down 4% from $387,000).
• Home closing gross margin was 17.4% in Q3 2026, down 170 basis points from 19.1% in Q3 2025; for the first nine months, margin was 17.8%, down 290 basis points from 20.7%.
• Adjusted home closing gross margin (excluding impairments and walk-away charges) was 17.9% for Q3 2026 and 18.1% for the first nine months.
• Earnings before income taxes were $84.8 million in Q3 2026 (down 34% year-over-year) and $277.9 million for the first nine months (down 42% year-over-year).
• Net earnings were $67.8 million ($1.04 diluted EPS) in Q3 2026, down 32% from $99.3 million ($1.39 diluted EPS) in the prior year; for the first nine months, net earnings were $213.7 million ($3.22 diluted EPS), down 42% from $369.0 million ($5.13 diluted EPS).
• SG&A as a percentage of home closing revenue was 11.0% in Q3 2026 and 11.0% for the first nine months.
• Cash and cash equivalents totaled $677.5 million as of September 30, 2026, down from $775.2 million at December 31, 2025.
• Debt-to-capital ratio was 26.9% and net debt-to-capital ratio was 18.9% as of September 30, 2026.
• Total real estate inventory was $6.015 billion as of September 30, 2026.

Guidance and Future Outlook:

• Management expects market conditions to continue being unpredictable over the next several quarters.
• The company intends to focus on preserving margins rather than pursuing a higher sales pace in the current challenging environment.
• Management expressed confidence that the strength of the balance sheet and cash preservation will be a differentiator.
• Forward-looking statements indicate expectations regarding the housing market and balance sheet strength, subject to significant uncertainties.

Business Segments and Product Lines:

• The company operates in three reportable segments: West (Arizona, California, Colorado, Utah), Central (Tennessee, Texas), and East (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina).
• Q3 2026 home orders were 3,083 units (down 15% year-over-year) with order value of $1.179 billion (down 17%).
• Q3 2026 average sales price on orders was $383,000 (down 2% year-over-year).
• Ending backlog was 1,611 units valued at $637.2 million as of September 30, 2026, down 5% from the prior year.
• The company closed 3,187 homes across 348 communities in Q3 2026, representing a 4% increase in community count year-over-year.
• Approximately 71,800 lots were owned or controlled as of September 30, 2026, down from 80,800 in the prior year.
• Nearly 2,000 net new lots were added in Q3 2026, representing an estimated 21 future communities.

Market and Competitive Landscape:

• The homebuying environment is described as increasingly challenging, marked by rising mortgage interest rates and persistent geopolitical and macroeconomic uncertainty.
• Constrained affordability weighed on consumer sentiment, contributing to a 15% year-over-year decline in third-quarter orders.
• Average absorption pace decreased 21% year-over-year in Q3 2026, partially offset by a 7% increase in average community count.
• The decline in average sales prices on orders and closings was primarily attributed to higher utilization of incentives (including rate buy-downs) and geographic mix.
• Meritage Homes is the fifth-largest public homebuilder in the United States based on homes closed in 2025.

Risks and Challenges:

• Key risks include increases in interest rates, decreases in mortgage availability, and the cost/use of rate locks and buy-downs.
• Challenges involve the cost of materials, shortages in subcontract labor, supply chain constraints, and legislation related to tariffs.
• Risks include the ability of buyers to sell existing homes, slow absorption rates, and the ability to acquire and develop lots.
• Potential real estate inventory impairments and write-offs of terminated land deals are noted risks.
• The company faces risks related to limited geographic diversification, counterparty risk with capped calls, and exposure to natural disasters.

Management Commentary and Tone:

• Steven J. Hilton, Executive Chairman, noted the challenging environment and the intentional focus on preserving margins over sales pace.
• Phillippe Lord, CEO, highlighted the ability to convert nearly 190% of the backlog and the successful leverage of cost control initiatives.
• Management emphasized that prudently managing capital and maintaining sufficient liquidity are key priorities.
• The tone reflects a defensive strategy focused on balance sheet strength and cash preservation amidst market volatility.

Other Key Points:

• The company returned $86 million to shareholders in Q3 2026 via share repurchases and dividends.
• Year-to-date capital returned to shareholders was nearly $380 million, representing 177% of total earnings for the first nine months of 2026.
• Land acquisition and development spend was $329 million in Q3 2026, down almost 40% year-over-year from $528 million.
• During Q3 2026, the company repurchased 757,128 shares for $55 million; year-to-date repurchases totaled 4,101,288 shares for $285 million.
• As of September 30, 2026, $229 million remained available for share repurchases.
• The company declared and paid quarterly cash dividends of $0.48 per share ($31 million total) in Q3 2026.
• Book value per share increased 4% year-over-year as of September 30, 2026.
• The company ended the quarter with no borrowings under its revolving credit facility.
• Effective income tax rate was 20.1% in Q3 2026, reflecting acquired below-market transferable clean fuel production tax credits.