Meritage Homes Corporation has recently released its 10-Q report, revealing a decrease in home closing revenue to $1.3 billion, down 8.5% from the previous year. The company closed 3,416 homes in the first quarter of 2025, a 2.6% decrease from the same period in 2024. The average sales price (ASP) on closings also decreased by 6.0% to $392.9. The company's home closing gross margin declined by 380 basis points to 22.0% compared to the prior year. The decrease in home closing gross margin was attributed to reduced leverage of fixed costs on lower home closing revenue and higher lot costs. Meritage Homes reported net earnings of $122.8 million in the first quarter of 2025, a decrease from $186.0 million in the same period in 2024.
The company's home orders for the first quarter of 2025 decreased by 2.9% from the prior year quarter, totaling 3,876 homes. The order value also decreased by 4.5% year-over-year to $1.6 billion. The cancellation rate remained relatively flat at 9% in the first quarter of 2025, compared to 8% in the first quarter of 2024. Meritage Homes ended the first quarter of 2025 with 2,004 homes in backlog valued at $812.4 million, a decrease of 33.9% and 34.7%, respectively, from March 31, 2024. The lower backlog units are directly tied to the company's record high backlog conversion rate of 221.2% during the first quarter of 2025, compared to 137.6% in the same quarter of 2024.
The company's strategic initiatives include delivering affordable homes on a shorter timeline, offering move-in ready homes with a 60-day closing ready commitment, embracing external realtor relationships, continuously improving the overall home buying experience, and increasing homeowner satisfaction by offering energy-efficient homes. Meritage Homes also aims to achieve or maintain a top 5 market position in all of its markets and maintain its status as a top 5 national builder. The company is committed to carefully managing its liquidity and maintaining a strong balance sheet, balancing returns of capital to stockholders with internal growth goals, managing construction efficiencies and costs, and promoting a positive environment for its employees.
In terms of regional performance, the West Region generated $479.6 million in home closing revenue in the first quarter of 2025, a 7.0% decrease compared to the prior year. The Central Region closed 1,187 homes in the first quarter of 2025, down 8.3% from the same period in 2024, with home closing revenue of $412.5 million, down 14.7% from the prior year. The East Region reported home closing revenue of $449.9 million, a decrease of 3.6% from the first quarter of 2024.
Meritage Homes Corporation's 10-Q report reflects the company's efforts to navigate through a challenging market environment and its strategies to drive strong performance in key financial measures, despite facing headwinds such as elevated land costs and macroeconomic concerns. The market has reacted to these announcements by moving the company's shares -1.4% to a price of $67.95. If you want to know more, read the company's complete 10-Q report here.
