What changed in this filing

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Item 1. Business

2025-02-20 compared with 2024-02-14 · 127 added, 120 removed, 299 unchanged (45% of the section changed)

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We have operations in three regions:

West, Central and East, which are comprised of ten states:

Arizona, California, Colorado, Utah, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee.

West, Central and East, which are comprised of twelve states:

Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee.

These three regions are our principal homebuilding reporting segments.

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At December 31, 2024, we were actively selling homes in 292 communities, with base prices ranging from approximately $203,000 to $1,089,000.

Our average sales price on home closings and orders was approximately $433,400 and $430,200, respectively, for the year ended December 31, 2023.

Our average sales price ("ASP") on home closings and orders was approximately $406,200 and $407,400, respectively, for the year ended December 31, 2024.

Available Information;

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Meritage Homes operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities and setting high standards for ethical conduct.

Our Board of Directors has established an audit committee, executive compensation committee, nominating/governance committee, environmental, social and sustainability committee, and land committee.

Our Board of Directors has established an audit committee, executive compensation committee, environmental, social, nominating and governance committee, and land committee.

The charters for each of these committees are available on our website, along with our Lead Director Charter, Code of Ethics, Corporate Governance Principles and Practices, Conflict of Interest and Related Party Transaction Policy, Securities Trading Policy, Clawback Policy, Human Rights Policy, Vendor Code of Conduct, Environmental Responsibility Policy, and Responsible Marketing Policy (collectively, the "charters and Published Policies").

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Our telephone number is (480) 515-8100.

All facets of Meritage's operations are governed by the core values that define our culture and operational parameters, ensuring that our actions are aligned around our brand promise of delivering to each of our customers a LIFE.

Our six core values include:

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• Lead with action, be relentless in our pursuit of excellence and never settle;

• Commit to building an inclusive culture by fostering diversity and equity across our organization.

These core values are evident in the operational decisions we make in every facet of our business, all of which contribute to the successes we have achieved with our talent acquisition and employee development, our customers, and the homebuilding industry.

Our operational strategy focuses on building affordable, quick move-in homes that are designed to meet the growing demand for entry-level and first move-up product.

• Commit to build a culture of inclusion and belonging across our organization.

These core values are evident in the operational decisions, all of which contribute to the successes we have achieved in becoming the fifth largest homebuilder in America.

Our operational strategy focuses on building affordable, move-in ready homes that are designed to meet the growing demand for entry-level and first move-up product.

Our LiVE.NOW ® communities are targeted to the entry-level price point combining nicely-appointed affordable homes with simplified and streamlined construction and sales processes aimed to create a stress-free buying experience for our customers while also allowing our trade partners and suppliers to work more efficiently and cost effectively, which allows us to pass resulting savings on to our customers.

We have a 100% speculative ("spec") home building strategy for our entry-level product, so we pre-start all of our homes with preselected plans and features from our reduced SKU counts and plan libraries.

During 2023, the supply chain and labor constraints that challenged production in 2022 lessened throughout the year, allowing us to reduce our construction cycle time by over six weeks, replenish inventory and return to normalized inventory levels.

We believe having available specs provides us a competitive advantage by allowing our customers to lock their mortgage rate and offer a quick delivery, as is the current desire in the marketplace.

Our strategy also encompasses a simplification of the home buying process for the first move-up segment, a demographic we have historically had a significant presence in.

For our first move-up product, our pre-set option packages provide an experience that simplifies the sale and design processes, providing an efficient and less stressful way for homebuyers to personalize their new homes through professionally-curated design collections versus the traditional a-la-carte design center offerings, although in 2023 most of these first move-up offerings were also pre-started prior to sales order to expedite the building cycle time and offer quick move-ins for our buyers.

We believe our strategy addresses the need for well-appointed yet lower-priced homes, while allowing us to simplify and maximize the profitability of our business.

We continue to focus on innovation in every new home we build, employing industry-leading building techniques and technologies aimed at surpassing the baseline standards for energy-efficient homebuilding.

Accordingly, at a minimum, every new home we construct meets or exceeds ENERGY STAR ® standards and comes standard with the MERV-13 air filter, one of the most advanced air filtration systems offered today for residential construction, and a multispeed heating, ventilation and air conditioning ("HVAC") system that is designed to operate more efficiently than traditional HVAC systems, allowing owners to better manage the comfort of their home while reducing their environmental impact and operating costs.

We have a 100% speculative ("spec") home building strategy for our entry-level product, so we pre-start all of our homes with preselected plans and features.

Midway through 2024, we introduced a strategic shift of selling homes later in the construction process which enables us to compete more effectively with the resale home market by shortening the delivery time from sale to close, aligning more closely with typical resale home closing timelines.

Our strategic shift focuses on three core tenets:

(1) a 60-day closing ready guarantee beginning in 2025, (2) move-in ready homes, and (3) external realtor engagement.

We believe that focusing on these three tenets reinforces our brand commitment and positions us competitively to capture a larger market share by opening up a category of buyers that previously might not have considered new home construction due to hesitancy over construction and closing delays and hidden move-in costs.

We believe our move-in ready, 60-day closing ready guarantee will help alleviate these concerns.

Further, by focusing on our relationship with the external realtor community, we expand our potential buyer pool as we know that a large percentage of buyers place their trust in these agents when starting their search for a new home.

We continue to focus on building energy efficient, resilient homes and believe it is one of the core differentiators between the new and resale home market.

Accordingly, at a minimum, every new home we construct meets or exceeds ENERGY STAR ® standards which are higher than existing building codes.

These standard offerings provide our customers with homes that utilize, on average, half of the energy of a typical U.S.

home of the same size.

As a result of our commitment to interior air quality, we received the U.S.

Environmental Protection Agency’s ("EPA") ENERGY STAR ® and Indoor airPLUS certifications in 2023.

As a result of our commitment to interior air

quality, we received the U.S.

Environmental Protection Agency’s ("EPA") ENERGY STAR ® certification for the eleventh time in 2024 and the Indoor airPLUS certification for the fourth consecutive year.

Our commitment to incorporate these energy and healthy living standards into all of our homes has resulted in our achievement of design, purchasing and production efficiencies that have allowed us to offer these as standard features to our home buyers for nominal additional cost while providing significant additional value to our customers.

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These efforts reduce the energy consumption and greenhouse gas emissions of our homes, which create energy savings and lower utility bills for our homeowners.

Our homes earn better Home Energy Rating System ("HERS") scores from the third-party energy rater, Residential Energy Services Network, as compared to their reference home.

Our homes earn better Home Energy Rating System ("HERS") scores from the third-party energy rater, Residential Energy Services Network, as compared to a comparable existing home.

We have also received various national and regional awards in recognition of our efforts, including:

• 2023 EPA's ENERGY STAR ® Partner of the Year for Sustained Excellence for the tenth year;

• 2024 EPA's ENERGY STAR ® Partner of the Year for Sustained Excellence for the eleventh year;

• 2021 - 2024 EPA's Indoor airPLUS Leader Award;

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• USA Today’s 2024 America’s Climate Leaders;

• Green Builder Media’s 2023 Eco Leaders List.

• Newsweek's 2024 America's Greenest Companies

Environmental, Social and Governance

We believe transparent corporate governance and social responsibility are important for the long-term sustainability of the business.

Our Environmental Responsibility Policy, Code of Ethics, Vendor Code of Conduct, and Responsible Marketing Policy, collectively, are intended to define, promote and support sustainable practices throughout all phases of the homebuilding cycle.

We believe transparent corporate governance and responsibility are important for the long-term sustainability of the business.

Our Environmental Responsibility Policy, Code of Ethics, Human Rights Policy, Vendor Code of Conduct, and Responsible Marketing Policy, collectively, are intended to define, promote and support sustainable practices throughout all phases of the homebuilding cycle.

We take pride in being an organization driven by ethics and living by our core values and our promise to deliver a Life.Built.Better.

® We promote the long-term interests of our stakeholders and customers and focus on the transparency and accountability of Meritage’s Board of Directors, executive management, our employees and trade partners.

In addition to becoming certified as a Great Place to Work ® in 2023, we also received various national and regional awards in recognition of our corporate stewardship, including:

• 2023 Hearthstone Builder Humanitarian Award;

• Arizona Housing Fund 2023 Partner of the Year Award;

• 2023 AZ Business Angels Award;

• World’s Most Admired Companies for 2023 by Fortune;

• America’s Most Responsible Companies for 2023 by Newsweek;

In addition to being certified as a Great Place to Work ® for a second year in a row in 2024, we also received various national and regional awards in recognition of our corporate stewardship, including:

• Forbes' 2024 Most Successful Mid-Cap Companies;

• The President's Volunteer Service Award for 2024;

• Arizona's 2024 Most Admired Companies;

News & World Report’s Best Companies to Work for in 2024-2025;

• Phoenix Business Journal’s 2023 Best Places to Work;

• AVID Cup – Production, the highest national honor, for a second consecutive year;

• 2024 Fortune Best Workplaces in Construction, Best Workplaces for Women, and Best Workplaces for Parents;

• AVID Cup – Production, the highest national honor, for a third consecutive year;

• Various AVID Diamond, Gold and Benchmark customer service awards across multiple categories and divisions.

More information regarding these topics can be found on our website and within publicly filed reports, including our 2024 environmental, social, and governance (“ESG”) report which includes our Task Force on Climate-Related Financial Disclosures ("TCFD") and our Equal Employment Opportunity data (“EEO-1”).

These disclosures are located within the Investor Relations

area of our website.

These disclosures are located within the Investor Relations area of our website.

The ESG report and other information on our website are not incorporated by reference into this Annual Report on Form 10-K.

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Jacksonville, FL 2023

Coastal Alabama 2024

Coastal Mississippi 2024

Florida Panhandle 2024

Huntsville, AL 2024

Recent Industry and Company Developments

In 2023, the homebuilding market reversed course from the slowdown that commenced in the second half of 2022 due to high inflation and consecutive interest rate hikes that reduced overall housing affordability and deteriorated buyer confidence.

The needs of the millennial and baby boomer generations for affordable, move-in ready homes are driving higher demand, but today's buyer is still seeking assistance with monthly mortgage affordability.

The ability to offer financing incentives, including interest rate locks and buy-downs, combined with a short supply of re-sale inventory available shifted demand to the new home market in 2023.

We believe that our ability to offer financing incentives gives us a competitive advantage, particularly over resale homes, as individual home sellers are not able to provide such incentives, and that our all-spec strategy with a commitment to affordability will meet the persisting demographic demand, providing us with ample opportunity to capture and grow our market share.

The supply chain constraints, labor shortages and other economic-related disruptions that impacted construction cycle times for the homebuilding industry during 2022 also began to improve in 2023.

During 2023, we reduced our construction cycle time by over six weeks as supply chain and labor constraints lessened throughout the year.

While there has been some relief in material costs, primarily due to retraction in the cost of lumber commodities, most other home costs have held relatively steady at elevated levels.

We continue to rebid all of our construction inputs and believe costs will begin to trend down to historical levels as additional capacity is created in the marketplace.

Higher land costs following several years of historically high land development have also begun to impact margins for newer communities and we expect will continue to do so in the near-to-mid term.

We have been successfully executing on our strategy to address the demand for more affordable homes by acquiring and developing communities and designing homes that can be delivered at a lower cost.

We are achieving our goal by simplifying our product and construction processes, pivoting to an all spec home sales program for our entry-level communities, which allow buyers to move in quicker, and by enhancing and making the entire home buying experience faster, easier and less costly

for our customers.

We are confident in our strategy and continue to demonstrate our commitment to first-time and first move-up buyers through our land acquisitions, streamlined option packages and upgrade offerings for our first move-up product, and our focus on delivering affordable homes.

Our entire portfolio of active communities is targeted to first-time and first move-up buyers who collectively represented all of our orders and closings in 2023.

The market for new homes was healthy in 2024 as the largest U.S.

population cohorts of the millennial, Gen Z and baby boomer generations continue to need affordable, move-in ready homes.

While demand was stable, volatile and elevated interest rates resulted in increased need for interest rate assistance for potential homebuyers to help with monthly mortgage affordability.

The ability to offer financing incentives, including interest rate locks and buy-downs, combined with a short supply of re-sale inventory available has shifted demand to the new home market in recent years.

We believe that our ability to offer financing incentives gives us a competitive advantage, particularly over resale homes, as individual home sellers are typically not able to provide such incentives, and that our all-spec strategy with a commitment to affordability can meet this demand, providing us with ample opportunity to capture and grow our market share.

Supply chain and labor market disruptions, shortages and other economic-related disruptions that impacted construction cycle times for the homebuilding industry during 2022 and 2023 stabilized in 2024.

Throughout 2024, we further reduced our construction cycle time, reaching normalized cycle times of approximately 120 days by the end of the year.

The increased capacity in supply chain has resulted in a decrease in some material costs over the past few years, and our higher volume allowed us to capture additional volume discounts from our national vendors.

Land costs were elevated in 2024 following several years of historically high land development activity and negatively impacted our margins.

We have been successful in executing on our strategy to address the demand for more affordable homes by acquiring and developing communities and designing homes that can be delivered at a lower cost, simplifying our product and construction processes, and having an all spec home sales program, all of which allow buyers to move in quicker and make the entire home buying experience faster, easier and less costly.

We are confident in our strategy and continue to demonstrate our commitment to first-time and first move-up buyers through our focus on delivering affordable homes.

Our portfolio of active communities is

largely concentrated on first-time buyers, as these provide us the best opportunity to offer affordable homes.

We also remain committed to our key financial goals such as higher home closing revenue, strong home closing gross margin, controlling selling, and general and administrative costs, and maintaining sufficient liquidity.

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Our near-term objectives in today's uncertain environment are expanding our market share and maintaining liquidity.

In 2023, we were upgraded to an investment grade rating by both Standard and Poor’s Financial Services and Fitch Ratings in recognition of our disciplined approach to balance sheet management, while actively pursuing growth and shareholder return.

Home closing revenue of $6.1 billion for the year ended December 31, 2023, decreased 2.4% year over year as the result of a 0.9% decrease in home closing volume and a 1.5% decrease in Average Sales Price ("ASP") on closings.

Improved homebuyer psychology, particularly around higher interest rates, led to a 12.2% improvement in orders volume and the return to a normalized cancellation rate of 12.8%.

ASP on orders decreased 3.7% primarily due to higher financing incentives provided to address homebuyer concerns of monthly mortgage affordability.

Higher order volume partially offset by the lower ASP on orders led to an 8.0% increase in home order value compared to 2022.

Home closing gross margin of 24.8% declined 380 basis points from our highest full-year home closing margin in Company history of 28.6% in 2022.

Our 2023 net earnings of $738.7 million and diluted EPS of $19.93 both decreased by 25.5% compared to prior year.

During 2024 we maintained our investment grade ratings from all three of our rating agencies in recognition of our disciplined approach to balance sheet management, while actively pursuing growth and shareholder return.

Home closing revenue of $6.3 billion for the year ended December 31, 2024, increased 4.7% year over year, the combined result of an 11.7% increase in home closing volume and a 6.3% decrease in ASP on closings.

The improvement in home closing volume was achieved due to strong orders throughout the year alongside higher backlog conversion as a result of our offering all spec, move-in ready homes.

Home order volume improved 10.7% year-over-year due to a 1.4% increase in average active communities and a 7.5% increase in orders pace to 4.3 homes per month.

Higher order volume partially offset by the lower ASP led to a 4.8% increase in home order value compared to 2023.

Home closing gross margin of 24.9% was consistent with 24.8% in 2023.

ASP on orders decreased 5.3% due to greater utilization of financing incentives as well as product and geographic mix shift.

Entry-level represented 92% of full year 2024 sales orders, compared to 87% in the prior year.

Net earnings for the year ended December 31, 2024 of $786.2 million and diluted EPS of $10.72 both increased by 6.4% and 7.6%, respectively, compared to prior year.

We carefully manage our liquidity and balance sheet, particularly during times of limited economic visibility.

Our earnings generate cash that allows us to reinvest in our business through acquiring and developing land, increasing the number of homes under construction, and returning shareholder value by repurchasing our common stock and paying dividends.

During 2023, we repurchased 437,882 shares of our common stock for $59.1 million, paid dividends totaling $39.5 million, and we also partially redeemed $150.0 million of our Senior Notes due 2025.

During 2024, we repurchased 1,464,510 shares of our common stock, or 2.0% of the shares outstanding at the beginning of the year, for $125.9 million, paid dividends totaling $108.6 million, and redeemed $250.0 million of our Senior Notes due 2025.

We ended the year with cash and cash equivalents totaling $651.6 million as compared to $921.2 million at December 31, 2023, while growing our inventory 21.3% to $5.7 billion.

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For information about the calculation of the net debt-to-capital ratio and the reasons why we believe it is a relevant financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources".

On November 21, 2024, our Board declared a two-for-one stock split to stockholders of record at the close of business on December 31, 2024 that was effective on January 2, 2025.

All share and per share amounts in this Annual Report on Form 10-K have been retroactively adjusted to reflect the Stock Split for all periods presented.

See "Part II, Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities".

Land Acquisition and Development

Our current land pipeline goal is to maintain an approximate four-to-five year supply of lots, which we believe provides an appropriate planning horizon to address regulatory matters, perform land development and manage to our business plan for future closings.

With the increasing demand for new homes, and in support of our commitment to grow community count and market share, we are aggressively seeking new land acquisitions that align with our underwriting criteria.

During the year ended December 31, 2023, we invested approximately $1.9 billion in land acquisition and development and secured approximately 16,000 net new lots, up significantly from 2,000 net new lots in 2022.

Our current land pipeline goal is to maintain an approximate four-to-five year future sales order pace supply of lots, which we believe provides an appropriate planning horizon to address regulatory matters, perform land development and manage to our business plan for future closings.

With the increasing demand for new homes, and in support of our commitment to grow community count and market share, we are increasing our efforts to find new land that aligns with our underwriting criteria.

During the year ended December 31, 2024, we invested approximately $2.5 billion in land acquisition and development and secured approximately 37,000 net new lots, up from 16,000 net new lots in 2023.

Included in the 2024 new lots are those we acquired as part of our entry into new markets in Alabama and the Gulf Coast.

We ended the year with 85,613 lots under control at December 31, 2024 versus 64,313 in 2023.

As of December 31, 2023 we have a 4.6 year supply of lots, based on 2023 closings, in line with our goal to maintain four to five years supply.

Nearly all of the lots placed under control in 2024 are designated for entry-level communities.

We are currently focused on growing our market share in our existing markets, including Salt Lake City and Jacksonville, the two new markets we entered this year.

We continually evaluate our markets, monitoring and adjusting our lot supply through lot and land acquisitions to ensure we have a sufficient pipeline that is in sync with local market dynamics as well as our goals for growth in those markets.

During 2023, we closed 13,976 homes, purchased approximately 14,900 lots for $832.7 million, spent $1.1 billion on land development, and started construction on 14,524 homes.

We are currently focused on growing our market share in our newly-entered and existing markets, and we continually evaluate our markets, monitoring and adjusting our lot supply through lot and land acquisitions to ensure we have a sufficient pipeline that is in sync with local market dynamics as well as our goals for growth in those markets.

During 2024, we closed 15,611 homes, purchased approximately 27,300 lots for $1.2 billion, spent $1.3 billion on land development, and started construction on 15,824 homes.

At December 31, 2024 and 2023, respectively, approximately 62% and 72% of our controlled lots were owned.

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The entitlement and development of raw and undeveloped land and partially developed lots require a longer lead time before new communities are able to open for sales.

Typically, undeveloped and partially developed lots will have a lower all-in cost than finished lots as we are responsible for improvements on the land, rather than paying a mark-up on improvements completed by a different developer.

When evaluating any land acquisition opportunity, our selection is based upon a variety of factors, including:

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• environmental impact and sustainability considerations;

• existing concentration of lots owned and controlled by other builders and developers in surrounding markets, including nearby Meritage communities;

• existing concentration of lots owned and controlled by Meritage and other builders and developers in surrounding markets;

• development timeline, generally a three to five-year period from the purchase of the underlying property to the delivery of the last home;

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• assessment of development risks, complexities and timelines;

• availability and financial impact of seller-provided purchase options or agreements that allow us to defer lot purchases until needed for production, if applicable.

When purchasing undeveloped or partially developed land, we strive to defer the land acquisition until after entitlements have been obtained to eliminate or significantly minimize risk and so that development or construction may begin immediately, improving returns.

• availability and financial impact of seller-provided purchase options or structured financing agreements that allow us to defer lot purchases until needed for production, if applicable.

When purchasing undeveloped or partially developed land, we strive to defer the land acquisition until after entitlements have been obtained to eliminate or significantly minimize lot yield risk and so that development or construction are known and may begin immediately, improving returns.

The term “entitlements” refers to appropriate zoning, unit density and total lot yield, development agreements and preliminary, tentative and final maps or plats, depending on the jurisdiction within which the land is located.

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We may also determine the overall community design for each project we develop including street and community layout, individual lot size and layout, and common areas and amenities to be included within the community.

The homes offered depend upon many factors, including the guidelines, if any, of the existing community, housing available in the area, the needs and desired housing product for a particular market, pricing targets for the surrounding metro and our lot sizes, though we almost exclusively use our standardized home design plans in our communities.

The homes offered depend upon many factors, including the guidelines, if any, of the existing community, housing available in the area, the needs and desired housing product for a particular market based on consumer research, and pricing targets for the desired product offering in the surrounding area, though we almost exclusively use our standardized home design plans in our communities.

We also build homes in master-planned communities with home sites that are adjacent to or near major amenities, such as golf courses or recreation facilities.

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As such, these finished lots may be more attractive to us, despite their higher price, as we typically can immediately bring the community to market and begin home construction as well as mitigate potential cost and time risks that can occur during the land entitlement and development process.

As a means of accessing parcels of land, both undeveloped and finished, with minimal cash outlay, we may use option contracts.

As a means of accessing parcels of land, both undeveloped and finished, with minimal cash outlay, we may use option contracts to secure land rights.

Acquiring our land through option contracts, when available, allows us to leverage our balance sheet by controlling the timing and volume of lot and land purchases from third parties.

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Lot option contracts are generally non-recourse and typically require the payment of non-refundable deposits of 5% to 20% of the total land purchase price.

The use of option contracts limits the market risks associated with land ownership by allowing us to re-negotiate option terms or terminate options in the event of market downturns but also include a financial return to the counterparty.

The use of option contracts limits the market risks associated with land ownership by allowing us to re-negotiate option terms or terminate options

in the event of market downturns but also include a financial return to the counterparty.

In the event we elect to cancel an option contract, our losses are typically limited to the forfeiture of our option deposits and any associated capitalized pre-acquisition costs.

The cost of obtaining land through such option contracts is generally higher than if we were to purchase land in bulk, although the financial

leverage benefits they can provide can outweigh the financing costs associated with them.

The cost of obtaining land through such option contracts is generally higher than if we were to purchase land in bulk, although the financial leverage benefits they can provide can outweigh the financing costs associated with them.

Due to our strong liquidity position, our and purchases are generally financed through our working capital, including corporate borrowings.

At December 31, 2023, in addition to our 46,294 owned lots, we also had 18,019 lots under committed purchase or option contracts with a total purchase price of approximately $914.1 million secured by $97.8 million in cash deposits.

At December 31, 2024, in addition to our 53,335 owned lots, we also had 32,278 lots under committed purchase or option contracts with a total purchase price of approximately $1.4 billion secured by $176.8 million in cash deposits.

We purchase and develop land primarily to support our homebuilding operations, although we may sell land and lots to other developers and homebuilders from time to time where we have excess land positions or for other strategic reasons.

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Construction Operations

We typically act as the general contractor for our projects and hire experienced subcontractors on a geographic basis to complete construction at fixed prices.

We typically act as the general contractor for our projects and hire experienced subcontractors on a geographic basis to complete construction.

We usually enter into agreements with subcontractors and materials suppliers after receiving competitive bids.

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However, because such materials are substantially comprised of natural resource commodities, their cost and availability are subject to national and worldwide price fluctuations and inflation, each of which could be impacted by legislation or regulation relating to energy, climate change and tariffs.

We typically do not enter into any derivative contracts to hedge against weather or materials fluctuations as we do not believe they are particularly advantageous to our operations, although we do periodically lock in short and mid-term pricing with our vendors for certain key construction commodities.

Throughout 2022, we experienced continued building material cost pressures and production capacity issues with some of our main product suppliers, including supply chain constraints largely associated with world-wide labor, material, and transportation shortages.

These pressures began to lift in 2023, and we continue our focus on controlling costs by expanding our trade base and strengthening critical relationships.

We typically do not enter into any derivative contracts to hedge against weather or materials price fluctuations as we do not believe they are particularly advantageous to our operations, although we do periodically lock in short and mid-term pricing with our vendors for certain key construction commodities.

Throughout 2022, we experienced building materials cost pressures and production capacity issues with some of our main product suppliers, including supply chain constraints largely associated with world-wide labor, materials, and transportation shortages.

The market returned to normal conditions in latter 2023 and has maintained that position throughout 2024.

We continue our focus on controlling costs by expanding our trade base and strengthening critical relationships.

We generally build and sell homes in phases within our larger projects, which we believe creates efficiencies in land development, home construction operations and cash management.

We also believe it improves customer satisfaction by reducing the number of vacant lots and construction activity surrounding completed and occupied homes.

Our homes are typically completed within three to five months from the start of construction, depending upon the geographic location and the size and complexity of the home, although in 2022 we did experience longer cycle times due to the supply chain constraints previously discussed.

Our homes are typically completed within three to five months from the start of construction, depending upon the geographic location and the size and complexity of the home.

Construction schedules may vary depending on the size of the home, availability of labor, materials and supplies, product type, location, municipal requirements and weather.

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We believe that we have an established reputation for building attractive, high quality energy-efficient, affordable homes, which helps generate demand for our product.

We have robust communication and marketing plans that reach prospective customers through a combination of online advertising, online listings, social media, email and articles.

We leverage a suite of digital offerings to provide our customers with a simple and streamlined sales and marketing experience, including:

• Online scheduling to allow customers to schedule in-person, self-guided model home tours after hours in select locations;

• Virtual tours in all of our communities for realtors and prospective buyers;

We have robust communication and marketing plans that reach real estate agents and prospective buyers through a combination of online advertising, online listings, social media, email and articles.

In mid-2024, we announced our strategic shift to focus on real estate agents as the primary customer and we created a variety of tools to help agents leverage a suite of digital offerings to provide a simple and streamlined sales and marketing experience, including:

• Immediate lockbox access for models and completed homes;

• Industry-leading dedicated Agent Portal where agents can find and save homes, view clients, see loyalty program status and more - all in one place;

• Virtual tours in all of our communities;

• Extensive online tools such as 3-D tours and dynamic floor plans to mimic the live experience of walking through a model home;

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• Digital signing of sales contracts and drive-through and partial or fully virtual closings in states where such services are permitted.

In addition, our local marketing efforts are focused on opening new communities with strong interest lists and driving consumer traffic through digital media campaigns, virtual events for both prospective buyers and real estate agents, grass roots marketing, and strategically placed signage in the surrounding areas of our communities.

Our marketing strategy is aimed at differentiating Meritage Homes by highlighting our simplification throughout the buying, building and closing processes, our transparency in setting clear expectations and by building a better home leveraging industry leading energy-efficient features, cutting edge design, upgrades and finishes.

In addition, our local marketing efforts are focused on online listings and generating leads through digital media campaigns, in-person and virtual events for real estate agents, and grass roots marketing efforts.

Our marketing strategy is aimed at differentiating Meritage Homes by focusing on real estate agents as our primary customer, supported by our industry-leading Agents Rock Rewards program, which provides opportunities for real estate agents to grow their business in true partnership with Meritage Homes.

From a product perspective, Meritage homes delivers the best of both worlds with the stylish design, energy-efficiency and a new home warranty combined with quick move-in timelines and turnkey experience often found with used homes.

Our move-in ready homes include a suite of appliances and whole home blinds, and with our 60-day closing ready commitment, we guarantee the home will be closing ready in 60 days or less.

If the deadline is missed due to our actions, we'll reimburse up to $5,000 of expenses related to the delay.

All of this is part of our LIFE.

® brand promise to our customers, by providing a home that is quieter, cleaner, healthier and smarter.

® brand promise to our customers.

In addition to our robust digital marketing platform, we also use furnished model homes as a marketing tool to demonstrate to prospective homebuyers the advantages of the designs and features of our homes.

At December 31, 2023, we owned 327 completed model homes, had 41 models under construction and leased back 2 model homes previously sold to buyers.

At December 31, 2024, we owned 341 completed model homes, had 28 models under construction and leased back one model home previously sold to a buyer.

We generally employ or contract with interior and landscape designers who enhance the appeal of our model homes, which highlight the features and options available.

We typically build between one and three model homes for each actively selling community, depending upon the products to be offered and the number of homes to be built in the project.

We typically build between one and three models for each actively selling community, depending upon the products to be offered and the number of homes to be built in the project.

We strive to implement marketing strategies that will educate our buyers on how our unique building techniques and the energy efficient and home automation features in our homes differentiate them from other homes.

Our strategy of providing simplification and transparency extends to our approach to interior design and finishes perspective, which is particularly appealing to our entry-level and first move up buyer segments.

Our strategy of providing simplification and transparency extends to our approach to interior design and finishes, which is particularly appealing to our first-time and first move up buyer segments.

Leveraging feedback from our homebuyers and based on our core values of innovating with the customer in mind, we took action to completely rethink how the home buying and design process should work to meet the needs of today’s buyer.

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Our homes generally are sold by our commissioned local sales associate employees.

We also employ a team of online sales associates who offer assistance to potential buyers viewing our communities and products online through digital offerings such as virtual tours and 3-D tours and dynamic floor plans.

At December 31, 2024, we had approximately 473 full-time sales and marketing personnel.

Our goal is to ensure that our sales force has extensive knowledge of our homes and their energy efficient and innovative features, our sales strategies and mortgage options, in order to fully execute our marketing message.

To achieve this goal, we train our sales associates and conduct regular meetings to update them on our product, surrounding communities, sales techniques, competition in the area, financing availability, construction schedules, marketing and advertising plans, available product lines, pricing, and options offered, as well as the numerous benefits our energy efficient product provides.

Our goal is to ensure that our sales force has extensive knowledge of our homes and their differentiated offerings, our sales strategies and mortgage options, in order to fully execute our marketing message.

To achieve this goal, we train our sales associates and conduct regular meetings to update them on our product, sales techniques, competition in the area, financing availability, construction schedules, marketing and advertising

plans, available product lines, pricing, and options offered, as well as the numerous benefits our energy efficient product provides.

Our sales associates are licensed real estate agents where required by law.

Third-party brokers may also sell our homes and are usually paid a sales commission based on the price of the home.

Frequently, third-party brokers bring prospective buyers to our communities.

We have a robust loyalty program for these brokers and we aim to partner with them, which we believe help enhance the impact of our marketing message.

To attract buyers, we may offer various sales incentives, including mortgage-related incentives such as interest rate locks or buy-downs, price concessions, assistance with closing costs, and landscaping or interior upgrades.

Third-party real estate agents also sell our homes and are paid a sales commission, usually based on the price of the home.

We are now more heavily focused on this relationship and have our robust Agents Rock Rewards loyalty program for these agents, demonstrating our commitment to leaning into the external realtor market with our recent strategic shift.

To attract buyers, we may offer various sales incentives, including mortgage-related incentives such as interest rate locks or buy-downs, price concessions, and assistance with closing costs.

The use, type and amount of incentives depends largely on economic and local market conditions.

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We may enter into joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile and leveraging our capital.

While purchasing land through a joint venture can be beneficial, we do not view joint ventures as critical to the success of our homebuilding operations.

We currently have two active land development ventures.

In addition to the land development joint ventures, we also participate in one mortgage business joint venture.

In addition to the land development joint ventures, we also participate in one mortgage business joint venture ("MTH Mortgage").

The mortgage joint venture is engaged in mortgage activities and primarily provides services to our homebuyers.

In connection with our land development joint ventures, we may also provide certain types of limited guarantees to associated lenders and municipalities.

Our sales contracts require cash deposits and may be subject to certain contingencies such as the buyer’s ability to qualify for financing.

Homes covered by sales contracts but which are not yet closed are considered “backlog” and are representative of potential future home closing revenue.

Started homes are excluded from backlog until a sales contract is signed and are referred to as unsold speculative or “spec” inventory.

Started homes are excluded from backlog until a sales contract is signed and are referred to as unsold spec inventory.

A contract contingent upon the sale of a customer’s existing home or a mortgage pre-approval is not considered a sale and not included in backlog until the contingency is removed.

We strive to achieve a 100% spec home building strategy for our entry-level product, whereas for our first move-up homes, we also typically start construction on spec homes but may allow buyers the ability to select their interior packages if the sale occurs early in the construction cycle.

We strive to achieve a 100% spec home building strategy for all of our homes.

Our spec inventory per active community as of December 31, 2024 was 24.1 or 7,029 units as compared to 21.8 or 5,877 units as of December 31, 2023.

At December 31, 2023, approximately 97% of our 2,549 homes in backlog were under construction.

At December 31, 2024, 100% of our 1,544 homes in backlog were under construction.

We do not recognize any revenue from a home sale until a finished home is delivered to the homebuyer, payment is collected and other criteria for sale and profit recognition are met.

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We believe that during 2025 we will deliver to customers substantially all homes in backlog at December 31, 2024 under existing contracts, or, in the case of cancellations, replacement sales contracts.

The number of units in backlog decreased 23.5% to 2,549 units at December 31, 2023 from 3,332 units at December 31, 2022 with a 28.6% decrease in the value of backlog to $1.1 billion from $1.5 billion.

The decrease in backlog units is due to reduced construction cycle times which allowed us to close homes quicker.

The number of units in backlog decreased 39.4% to 1,544 units at December 31, 2024 from 2,549 units at December 31, 2023 with a 42.1% decrease in the value of backlog to $629.5 million from $1.1 billion.

The decrease in backlog units is due to reduced construction cycle times and increased backlog conversion as a result of our strategy of offering move-in ready homes.

Customer Financing

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• experience within our geographic markets which allows us to develop and offer products that provide superior design and quality in line with the needs and desires of the targeted demographic;

• ENERGY STAR ® standards in all of our communities and incremental energy-efficient features that create a variety of benefits to our customers which we believe differentiate our product from competing new and existing home inventories by providing cleaner, and healthier homes;

• ENERGY STAR ® standards and incremental energy-efficient features that create a variety of benefits to our customers which we believe differentiate our product from competing new and existing home inventories by providing cleaner, and healthier homes;

• inclusion of home automation through our M.Connected Home Automation Suite ® ;

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• ability to capitalize on opportunities to acquire land in desirable locations and on favorable terms;

• digital offerings in all stages of the homebuying process, as previously discussed;

• digital offerings in all stages of the homebuying process;

• reputation for outstanding service and quality products and our exceptional customer and warranty service.

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Governing agencies may also require concessions or may require the builder to construct certain improvements to public areas such as parks and streets.

In addition, governing agencies may impose construction moratoriums and therefore we could become subject to delays or may be precluded entirely from developing communities due to building moratoriums, “no growth” or “slow growth” initiatives or building permit allocation ordinances, which could be implemented in the future.

However, because most of our land is entitled, construction moratoriums typically do not affect us in the near term unless they arise from health, safety or welfare issues, such as insufficient water, electric or sewage facilities.

In addition, governing agencies may impose entitlement, development or construction moratoriums and therefore we could become subject to delays or may be precluded entirely from developing communities in the future as a result.

However, because we acquire almost all of our land after entitlement, construction moratoriums typically do not affect us in the near term unless they arise from health, safety or welfare issues, such as insufficient water, electric or sewage facilities.

In addition, there is constantly a variety of new regulations being adopted and legislation being enacted, or considered for enactment, at the federal, state and local levels relating to energy and climate change.

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New building code requirements could significantly increase the cost to construct homes, although our focus on energy-efficiency technologies and offerings may give us a competitive advantage regarding implementation of new code standards.

As climate change concerns continue to grow, legislation and regulations of this nature are expected to continue and may result in increased costs and longer approval and development timelines.

As climate change concerns continue to grow, legislation and regulations of this nature may result in increased costs and longer approval and development timelines.

Similarly, energy and environment-related initiatives affect a wide variety of companies throughout the United States and the world, and because our operations are heavily dependent on significant amounts of raw materials, such as lumber, steel, and concrete, such initiatives could have an indirect adverse impact on our operations and profitability to the extent the manufacturers and suppliers of our materials are burdened with expensive carbon dioxide emissions control and other environmental and energy-related regulations.

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We are committed to cultivating a diverse team, fostering an inclusive culture and creating a workplace environment where our team members are treated with respect, are valued for their unique perspectives and experiences, and feel a sense of belonging.

We have a robust talent recognition and succession planning model designed to identify and develop employees and provide a roadmap for promotion so that they can reach their full potential in support of organizational goals.

Developing our employees enhances each individual’s opportunity to progress their career at Meritage and enrich their work experience.

We work to retain talent by offering competitive and comprehensive compensation and benefits that include health insurance with health savings accounts and company match, 401(k) savings plan with a competitive company match, paid time off, paid parental benefits, employee assistance program, fertility support benefits, caregiving benefits, employee discounts, tuition reimbursement, and a wellness program, among many others.

We work to attract, motivate, and retain talent by offering competitive and comprehensive compensation and benefits that include health insurance with health savings accounts and company match, 401(k) retirement plan with a competitive company match, paid time off, paid parental benefits, women's health and fertility support benefits, mental well-being support and resources, employee assistance program, caregiving benefits, employee discounts, tuition reimbursement, and a wellness program, among many others.

Of our entire employee population at December 31, 2024, 40% were female and 27% were minorities.

We are proud of the diversity in our team and are committed to the ongoing and intentional work to achieve inclusive excellence, including the long-term goals of attracting diverse talent and forming strategic relationships.

Based upon employee feedback we have three voluntary, employee led groups to empower and promote belonging for all employees while creating community and connection.

We are dedicated to learning, improving our practices and challenging our leaders and employees to recognize and leverage our differences for the greater good of the team and the organization.

We promote an open-door policy where individuals are encouraged to voice concerns which are promptly addressed.

In order to uphold our core values, we intend to continue to expand our commitment to diversity, equity & inclusion ("DE&I"), which we believe will drive change throughout our organization as well as strengthen our business and competitiveness in the homebuilding sector.

We remain committed to promoting inclusion and belonging efforts which we strongly believe amplifies our core values, enhances our culture, drives positive change throughout our organization, as well as strengthens our business, enhances our relationships with our customers, and promotes competitiveness in the homebuilding sector.

Our operations are carried out through both local and centralized management.

Our corporate management team sets our strategy and leads decisions related to land acquisition, risk management, finance, cash management, capital allocation, information systems and people management.

Local operations are made up of our division employees, led by management with significant homebuilding experience and who possess a great depth of knowledge in their particular markets.

Local operations are made up of our division employees, led by division management with significant homebuilding experience and who possess a great depth of knowledge in their particular markets.

Our employees are not unionized.

We have a highly engaged workforce and in 2023 we were certified as a Great Place to Work ® .

We act solely as a general contractor, and all construction operations are coordinated by our project managers and field superintendents who schedule and monitor third-party independent subcontractors.

During 2024 we were certified as a Great Place to Work® for the second year in a row and were named as Fortune’s Best Workplaces for Construction.

We act solely as a general contractor, and all construction operations are coordinated by our area managers and field construction managers who schedule and monitor third-party independent subcontractors.

We may use independent consultants and contractors for certain architectural, engineering, advertising, technology and legal services, and we strive to maintain good relationships with our subcontractors and independent consultants and contractors.

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Historically, we have experienced seasonal variations in our quarterly operating results and capital requirements.

We typically sell more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year.

We typically benefit from the cash generated from home closings more in the third and fourth quarters than in the first and second quarters.

Historical cycles were impacted in 2020 by unprecedented demand that continued through the middle of 2022, and were further impacted by supply chain and labor constraints and rising interest rates.

Historical seasonality returned in the back half of 2022 and we expect it to continue over the long term, although it may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.

We typically take orders for more homes in the first half of the fiscal year than in the second half, which has created additional working capital requirements in the second and third quarters to build our inventories to satisfy seasonally higher closings in the second half of the year.

While we expect the seasonal orders pattern to continue over the long term, our higher backlog conversion rate and all-spec strategy may shift the timing of home closings and capital requirements to build our inventories to earlier in the year.

Additionally, seasonality may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.

Information about our Executive Officers

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Hilton co-founded Monterey Homes in 1985, which merged with Homeplex Mortgage Investments in December 1996 and later became known as Meritage Homes.

Hilton served as Co-Chairman and Co-Chief Executive Officer from

July 1997 to May 2006, served as Chairman and Chief Executive Officer from May 2006 to December 31, 2020, and became the Executive Chairman effective January 1, 2021.

Hilton served as Co-Chairman and Co-Chief Executive Officer from July 1997 to May 2006, served as Chairman and Chief Executive Officer from May 2006 to December 31, 2020, and became the Executive Chairman effective January 1, 2021.

Phillippe Lord was appointed Chief Executive Officer on January 1, 2021.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business