Meritage Homes Reports Decline in Revenue and Profitability in Q1 2025

Meritage Homes Corporation reported its financial results for the first quarter of 2025, revealing a decline in both revenue and profitability compared to the same period in 2024. The company generated home closing revenue of $1.34 billion, an 8.5% decrease from $1.47 billion in the prior year. This decline was attributed to a 2.6% drop in home closing volume, totaling 3,416 homes, and a 6.0% decrease in the average sales price (ASP) of homes closed. The gross profit from home closings fell to $295.7 million, down from $378.0 million, resulting in a gross margin of 22.0%, a decline of 380 basis points year-over-year.

In terms of operational metrics, Meritage Homes experienced a decrease in home orders, with 3,876 orders in the first quarter of 2025, down 2.9% from 3,991 in the same quarter of 2024. The cancellation rate remained relatively stable at 9%, compared to 8% in the previous year. The company ended the quarter with a backlog of 2,004 homes valued at $812.4 million, reflecting a significant decrease of 33.9% in units and 34.7% in value from the prior year. This reduction in backlog was linked to a record high backlog conversion rate of 221.2%, as the company focused on selling homes later in the construction cycle.

Strategically, Meritage Homes has been expanding its market presence, ending the quarter with 290 active communities, an increase from 275 a year earlier. The company also invested approximately $222.1 million in lot purchases and $242.7 million in land development during the quarter. Notably, the financial services segment reported a profit of $3.6 million, a turnaround from a loss of $0.7 million in the previous year, primarily due to reduced charges related to interest rate commitments.

The company’s balance sheet showed total assets of $7.70 billion as of March 31, 2025, up from $7.16 billion at the end of 2024. Cash and cash equivalents increased significantly to $1.01 billion, compared to $651.6 million at the end of the previous year. Total liabilities also rose to $2.51 billion, driven by an increase in senior and convertible senior notes, which reached $1.80 billion. The company maintained a debt-to-capital ratio of 26.1% and a net debt-to-capital ratio of 13.7%, indicating a solid financial position.

Looking ahead, Meritage Homes anticipates continued challenges due to high mortgage rates and macroeconomic concerns affecting consumer sentiment. However, the company remains optimistic about its strategy of offering affordable, move-in ready homes and leveraging financing incentives to maintain a competitive edge in the market. The management believes that these initiatives will support strong performance in key financial metrics and community growth in the coming quarters.