Summary Operating Results (unaudited)(Dollars in thousands, except per share amounts)
Three Months Ended March 31,
2026
2025
% Chg
Homes closed (units)
2,967
3,416
(13
)%
Home closing revenue
$
1,107,822
$
1,342,104
(17
)%
Average sales price, closings
$
373
$
393
(5
)%
Home orders (units)
3,664
3,876
(5
)%
Home order value
$
1,400,440
$
1,558,177
(10
)%
Average sales price, orders
$
382
$
402
(5
)%
Ending backlog (units)
1,865
2,004
(7
)%
Ending backlog value
$
711,466
$
812,358
(12
)%
Average sales price, backlog
$
381
$
405
(6
)%
Home closing gross margin
17.5
%
22.0
%
(450) bps
Earnings before income taxes
$
72,524
$
160,159
(55
)%
Net earnings
$
55,309
$
122,806
(55
)%
Diluted EPS
$
0.82
$
1.69
(51
)%
MANAGEMENT COMMENTS
"With the spring selling season commencing this quarter, we experienced some improved demand, achieving an absorption rate of 3.6 net sales per month and sales orders of 3,664 homes. However, these results were below our expectations as 2026 began with a severe winter storm in January and then transitioned into military operations in Iran midway through the quarter, which negatively impacted consumer sentiment and mortgage rates," said Steven J. Hilton, executive chairman of Meritage Homes. "In this environment, we acknowledge that capturing demand requires higher than anticipated incentive utilization, even as we look to optimize every asset while balancing pace and margin."
"We leaned into our strategy again this quarter, focusing on what we can control. We are proud of another year-over-year improvement in our cycle times driving 2,967 closings this quarter, and, with nearly 70% of these deliveries coming from intra-quarter sales, a backlog conversion rate of 254%," added Phillippe Lord, chief executive officer of Meritage Homes. "First quarter 2026 home closing revenue totaled $1.1 billion, however the difficult macroeconomic conditions this quarter drove a lower revenue leverage and increased incentives, resulting in home closing gross margin of 17.5% and diluted EPS of $0.82. As of March 31, 2026, our book value per share increased 6% year-over-year."
"We also maintained our objective of balance sheet preservation in uncertain times while continuing to execute on our shareholder returns commitment. In addition to opening 40 new communities and ending the quarter with 345 communities—our highest ever store count—we also completed $130 million of share repurchases, paid $32 million in dividends and finished the quarter with cash of $767 million, nothing drawn under our revolving credit facility and a net debt-to-capital ratio of 17.4%," concluded Mr. Lord.
FIRST QUARTER RESULTS
Orders of 3,664 homes for the first quarter of 2026 decreased 5% year-over-year mainly as a result of 18% lower average absorption pace, which was partially offset by a 17% increase in average community count. First quarter 2026 average sales price ("ASP") on orders of $382,000 was down 5% from the first quarter of 2025, primarily due to increased utilization of incentives and geographic mix this year.
The 17% year-over-year decrease in home closing revenue in the first quarter of 2026 to $1.1 billion was due to 13% lower closing volume of 2,967 homes combined with a 5% decrease in ASP on closings to $373,000. ASP on closings was impacted by increased utilization of incentives and geographic mix this year.
Home closing gross margin of 17.5% in the first quarter of 2026 was 450 bps lower than 22.0% in the prior year as a result of increased utilization of incentives, higher lot costs and reduced leverage of fixed costs on lower home closing revenue, all of which were partially offset by savings in direct costs, decreased compensation expense and faster cycle times. First quarter 2026 home closing gross margin included $2.4 million of real estate inventory impairments and $1.4 million in terminated land deal walk-away charges, compared to no impairments and $1.4 million in terminated land deal walk-away charges in the prior year.
Selling, general and administrative expenses ("SG&A") as a percentage of first quarter 2026 home closing revenue were 11.8% compared to 11.3% in the first quarter of 2025, primarily as a result of lost leverage on lower home closing revenue as well as higher technology costs, which were partially offset by decreased compensation expense and an intentional reduction in discretionary expenses.
The first quarter effective income tax rate was 23.7% in 2026 compared to 23.3% in 2025.
Net earnings were $55 million ($0.82 per diluted share) for the first quarter 2026, a 55% decrease from $123 million ($1.69 per diluted share) for the first quarter of 2025, mainly resulting from lower home closing revenue and gross profit.
BALANCE SHEET & LIQUIDITY
Cash and cash equivalents at March 31, 2026 totaled $767 million. This compared to cash and cash equivalents of $775 million at December 31, 2025.
Land acquisition and development spend, net of land development reimbursements, totaled $326 million for the first quarter of 2026, reflecting a deliberate pullback due to market conditions. This compared to $465 million of land acquisition and development spend, net of land development reimbursements, in the first quarter of 2025.
Approximately 75,500 lots were owned or controlled as of March 31, 2026, compared to approximately 84,200 lots as of March 31, 2025. Nearly 400 net new lots were added in the first quarter of 2026, representing an estimated 11 future communities.
First quarter 2026 ending community count of 345 was up 19% compared to prior year and up 3% compared to the fourth quarter of 2025.
Debt-to-capital and net debt-to-capital ratios were 26.6% and 17.4%, respectively, at March 31, 2026, which compared to 26.0% and 16.9%, respectively, at December 31, 2025.
The Company declared and paid quarterly cash dividends of $0.48 per share totaling $32 million in the first quarter of 2026. This compared to $0.43 per share totaling $31 million in the first quarter of 2025.
During the first quarter of 2026, the Company repurchased 1,815,820 shares of stock, or 2.7% of shares outstanding at the beginning of the quarter, for $130 million. This compared to $45 million in the first quarter of 2025. As of March 31, 2026, $384 million remained available to repurchase.
GUIDANCE
Based on current market conditions, the Company is updating its guidance for full year 2026 home closing volume and revenue to at or within 5% of full year 2025 results.
CONFERENCE CALL
Management will host a conference call to discuss its first quarter 2026 results at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) on Thursday, April 23, 2026. To listen, please go to Meritage's Investor Relations page for the live webcast or dial in to 1-800-445-7795 US toll free or 1-785-424-1699. A replay will be available on the Investor Relations page.
Meritage Homes Corporation and SubsidiariesConsolidated Income Statements(In thousands, except per share data)(Unaudited)
Three Months Ended March 31,
2026
2025
Change $
Change %
Homebuilding:
Home closing revenue
$
1,107,822
$
1,342,104
$
(234,282
)
(17
)%
Land closing revenue
9,361
15,421
(6,060
)
(39
)%
Total closing revenue
1,117,183
1,357,525
(240,342
)
(18
)%
Cost of home closings
(914,024
)
(1,046,454
)
(132,430
)
(13
)%
Cost of land closings
(9,630
)
(12,256
)
(2,626
)
(21
)%
Total cost of closings
(923,654
)
(1,058,710
)
(135,056
)
(13
)%
Home closing gross profit
193,798
295,650
(101,852
)
(34
)%
Land closing gross (loss)/profit
(269
)
3,165
(3,434
)
(108
)%
Total closing gross profit
193,529
298,815
(105,286
)
(35
)%
Financial Services:
Revenue
6,285
7,082
(797
)
(11
)%
Expense
(3,623
)
(4,192
)
(569
)
(14
)%
Earnings from financial services unconsolidated entities and other, net
831
673
158
23
%
Financial services profit
3,493
3,563
(70
)
(2
)%
Commissions and other sales costs
(79,472
)
(94,720
)
(15,248
)
(16
)%
General and administrative expenses
(51,402
)
(56,997
)
(5,595
)
(10
)%
Interest expense
(587
)
—
587
N/A
Other income, net
6,963
9,498
(2,535
)
(27
)%
Earnings before income taxes
72,524
160,159
(87,635
)
(55
)%
Provision for income taxes
(17,215
)
