Exhibit 99.1
mhlogo1linetaga12.jpg
 
 
Contacts:Emily Tadano, VP Investor Relations and ESG
(480) 515-8979 (office)
investors@meritagehomes.com

Meritage Homes reports third quarter 2022 results including a 35% increase in diluted EPS, highest quarterly home closing revenue and record SG&A leverage of 8.1%

SCOTTSDALE, Ariz., October 26, 2022 - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, reported third quarter results for the period ended September 30, 2022.

Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended September 30,Nine Months Ended September 30,
 20222021% Chg20222021% Chg
Homes closed (units)3,487 3,112 12 %9,566 9,275 3 %
Home closing revenue$1,569,032 $1,251,435 25 %$4,223,435 $3,596,060 17 %
Average sales price - closings$450 $402 12 %$442 $388 14 %
Home orders (units)2,310 3,441 (33)%9,951 10,441 (5)%
Home order value$974,314 $1,488,951 (35)%$4,551,894 $4,337,753 5 %
Average sales price - orders$422 $433 (3)%$457 $415 10 %
Ending backlog (units)6,064 5,838 4 %
Ending backlog value$2,826,759 $2,555,405 11 %
Average sales price - backlog$466 $438 6 %
Earnings before income taxes$329,491 $261,709 26 %$947,069 $643,337 47 %
Net earnings$262,489 $200,752 31 %$729,827 $499,984 46 %
Diluted EPS$7.10 $5.25 35 %$19.65 $13.06 50 %



1

MANAGEMENT COMMENTS
“Despite a rapidly evolving housing market challenged by interest rate hikes, supply chain issues, Hurricane Ian and market uncertainty, in the third quarter of 2022, Meritage achieved its highest quarterly home closing revenue and record quarterly diluted earnings per share,” said Steven J. Hilton, executive chairman of Meritage Homes.

“Our closings of 3,487 homes this quarter were 12% greater than prior year,” added Phillippe Lord, chief executive officer of Meritage Homes. “Our third quarter 2022 home closing revenue of $1.6 billion combined with our home closing gross margin of 28.7%, our lowest SG&A leverage of 8.1% and an energy tax credit catch-up of $13.1 million, led to a 35% year-over-year increase in our diluted EPS from $5.25 to $7.10 this quarter.”

“However, sales orders fell sharply during the quarter. The third quarter 2022 sales orders of 2,310 homes were 33% lower than prior year primarily due to elevated cancellations. The cancellation rate was 30% this quarter. Gross sales orders declined 14% year-over-year, confirming that underlying home demand is stronger than the net numbers convey. Our third quarter 2022 average absorption pace was 2.7 per month, which was down from 5.0 per month in the third quarter of 2021. We expect sales orders will remain weaker until mortgage interest rates stabilize, we complete more move-in ready inventory and close out of our mature backlog. In each market, we are working to find the right combination of price adjustments and incentives to get back to our target absorption pace of 3-4 net sales per month,” Mr. Lord continued.

“We believe the continuation of the rapidly increasing mortgage interest rates, expectations of further significant increases to come, inflation and uncertainty in the economy are temporarily outweighing the positive impact of favorable demographics and the low supply of new and resale housing inventory on demand,” said Mr. Lord. "The market deterioration we experienced at the end of the second quarter deepened throughout the third quarter. Our various discounting and incentive initiatives are helping to attract and retain customers, but we are seeing some homebuyers hold off on their purchase decisions due to uncertain market conditions."

“Building materials and labor shortages are still delaying a return to normal cycle times, but we are confident that our pre-started inventory strategy executed by our exceptional team will ensure that we close timely on our current backlog while offering move-in ready homes for our future homebuyers," remarked Mr. Lord. "We remain committed to growing Meritage's market share and maximizing shareholder return in this evolving market.”

“Although Meritage's community count grew 17% year-over-year, the 275 active communities at September 30, 2022 were 9% lower sequentially compared to June 30, 2022. In response to weakening demand, we added only approximately 1,800 new lots under control, while we reassessed our land positions and successfully reduced our lot supply since the beginning of this year. We terminated options on our lowest performing land deals, which totaled roughly 5,200 lots with a corresponding $8.8 million walk-away charge this quarter. We spent $380 million on land acquisition and development this quarter and at September 30, 2022, lot supply totaled approximately 66,000,” said Mr. Lord. “We feel confident we have ample liquidity and a healthy balance sheet to manage through this changing environment. We had nothing drawn under our credit facility and our net debt-to-capital was 18.9% at September 30, 2022.”
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Mr. Lord concluded, “We continue to monitor and evaluate shifting market conditions. We are projecting 4,300-4,700 home closings for the fourth quarter of 2022, which we anticipate will generate quarterly home closing revenue of $1.85-2.10 billion. Home closing gross margin is projected to be around 25%, reflecting the increased incentives we have been offering the last couple of quarters. With a projected effective tax rate of 23.5%, we expect diluted EPS to be in the range of $6.50-7.40 for the fourth quarter of 2022.”

THIRD QUARTER RESULTS
•Total sales orders of 2,310 homes for the third quarter of 2022 were 33% lower than prior year despite a 25% year-over-year increase in average community count. The average absorption pace decreased 46% to 2.7 per month from 5.0 in the prior year primarily due to our elevated cancellation rate of 30% this quarter. Gross sales orders of 3,291 homes declined 14% compared to the third quarter of 2021. Entry-level represented 88% of third quarter 2022 orders, compared to 84% in the prior year. Average sales price ("ASP") on orders decreased 3% year-over-year to $422,000 in the third quarter of 2022 and decreased 12% sequentially from $480,000 in the second quarter of 2022.
•The 25% year-over-year increase in home closing revenue to $1.6 billion for the third quarter of 2022 was due to 12% greater home closing volume and 12% higher ASPs on closings compared to prior year.
•The 100 bps deterioration in third quarter 2022 home closing gross margin to 28.7% from 29.7% a year ago mainly resulted from greater incentives, $8.8 million in write-offs related to the lot option deposits and diligence costs from terminated land deals and higher direct costs. In the third quarter of 2021, the write-offs for terminated land deals totaled $0.9 million.
•Selling, general and administrative expenses ("SG&A") were 8.1% of third quarter 2022 home closing revenue, a 120 bps improvement over 9.3% in the prior year resulting from greater leverage of fixed expenses on higher home closing revenue as well as lower commissions expense as a percentage of home closing revenue.
•The third quarter effective income tax rate was 20.3% in 2022 compared to 23.3% in 2021. The 2022 rate reflected earned eligible energy tax credits on qualifying homes we delivered in the first nine months of 2022, as the Inflation Reduction Act ("IRA") enacted in August 2022 retroactively extended the Internal Revenue Code §45L new energy-efficient homes credit. The 2021 rate similarly benefited from the Taxpayer Certainty and Disaster Tax Relief Act passed in December 2019 ("2019 Act").
•Net earnings were $262.5 million ($7.10 per diluted share) for the third quarter of 2022, a 31% increase over $200.8 million ($5.25 per diluted share) for the third quarter of 2021. Strong earnings growth reflected pricing power, improved overhead leverage and a catch-up of tax credits, which combined with a lower outstanding share count in the current quarter, led to a 35% year-over-year improvement in earnings per diluted share.

3

YEAR TO DATE RESULTS
•Total sales orders of 9,951 homes for the first nine months of 2022 decreased 5% over prior year despite a 29% year-over-year increase in average community count. The year to date September 2022 average absorption pace declined 26% due to elevated cancellations.
•Home closing revenue increased 17% for the first nine months of 2022 to $4.2 billion due to 14% higher ASPs on closings given the favorable pricing environment and 3% greater home closing volume.
•The 270 bps improvement for home closing gross margin in the first nine months of 2022 to 30.1% from 27.4% was primarily due to higher ASPs on closings resulting from favorable pricing and better leveraging of fixed costs on greater home closing revenue. The year to date 2022 home closing gross margin included $11.6 million of write-offs from terminated land deals related to lot option deposits and diligence costs, which compared to $2.1 million in the prior year.
•SG&A as a percentage of home closing revenue improved 110 bps year-over-year to 8.3% from 9.4% in the first nine months of 2021, due to greater leverage of overhead expenses on higher home closing revenue and lower commissions expense as a percentage of home closing revenue.
•In the first nine months of 2021, we recognized a loss on early extinguishment of debt of $18.2 million in connection with the early redemption in April 2021 of our 7.00% senior notes due 2022. There were no such transactions in the first nine months of 2022.
•The effective tax rate for the first nine months of 2022 was 22.9%, compared to 22.3% for the first nine months of 2021. Tax credits earned on qualifying energy-efficient homes we delivered in the first nine months of 2022 resulted from the passage of the IRA while those related to the prior year were under the 2019 Act.
•Net earnings were $729.8 million ($19.65 per diluted share) for the first nine months of 2022, a 46% increase over $500.0 million ($13.06 per diluted share) for the first nine months of 2021, primarily reflecting pricing power, expanded gross margin and greater overhead leverage in 2022, as well as a lower outstanding share count in the first nine months of 2022.

BALANCE SHEET
•Cash and cash equivalents at September 30, 2022 totaled $299.4 million, compared to $618.3 million at December 31, 2021, primarily as a result of investments in real estate. Real estate assets increased from $3.7 billion at December 31, 2021 to $4.7 billion at September 30, 2022.
•A total of approximately 66,000 lots were owned or controlled as of September 30, 2022 compared to approximately 70,000 total lots at September 30, 2021.
•Debt-to-capital and net debt-to-capital ratios were 23.9% and 18.9%, respectively, at September 30, 2022, which compared to 27.6% and 15.1%, respectively, at December 31, 2021.
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•The Company repurchased 1,166,040 shares of stock for a total of $109.3 million during the first nine months of 2022. There were no share repurchases during the current quarter. As of September 30, 2022, $244.1 million remained available to repurchase under our authorized share repurchase program.

CONFERENCE CALL
Management will host a conference call to discuss its third quarter results at 8:00 a.m. Pacific Daylight Time (11:00 a.m. Eastern Daylight Time) on Thursday, October 27, 2022. The call will be webcast live with an accompanying slideshow available on the "Investor Relations" page of the Company's website at https://investors.meritagehomes.com. Telephone participants will be able to join by dialing in to 1-877-407-6951 US toll free or 1-412-902-0046 on the day of the call.
A replay of the call will be available via webcast beginning at approximately 11:00 a.m. Pacific Daylight Time (2:00 p.m. Eastern Daylight Time) on October 27, 2022 and extending through November 10, 2022, at
https://investors.meritagehomes.com.
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Meritage Homes Corporation and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)

 
 Three Months Ended September 30,
20222021Change $Change %
Homebuilding:
Home closing revenue$1,569,032 $1,251,435 $317,597 25 %
Land closing revenue8,989 8,470 519 6 %
Total closing revenue1,578,021 1,259,905 318,116 25 %
Cost of home closings(1,118,394)(879,759)238,635 27 %
Cost of land closings(8,577)(7,706)871 11 %
Total cost of closings(1,126,971)(887,465)239,506 27 %
Home closing gross profit450,638 371,676 78,962 21 %
Land closing gross profit412 764 (352)(46)%
Total closing gross profit451,050 372,440 78,610 21 %
Financial Services:
Revenue6,308 5,208 1,100 21 %
Expense(2,804)(2,308)496 21 %
Earnings from financial services unconsolidated entities and other, net
1,338 1,324 14 1 %
Financial services profit4,842 4,224 618 15 %
Commissions and other sales costs(77,884)(68,952)8,932 13 %
General and administrative expenses(48,443)(47,192)1,251 3 %
Interest expense— (79)(79)(100)%
Other (expense)/income, net(74)1,268 (1,342)(106)%
Earnings before income taxes329,491 261,709 67,782 26 %
Provision for income taxes(67,002)(60,957)6,045 10 %
Net earnings$262,489 $200,752 $61,737 31 %
Earnings per common share:
BasicChange $ or sharesChange %
Earnings per common share$7.18 $5.33 $1.85 35 %
Weighted average shares outstanding36,569 37,647 (1,078)(3)%
Diluted
Earnings per common share$7.10 $5.25 $1.85 35 %
Weighted average shares outstanding36,946 38,229 (1,283)(3)%




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 Nine Months Ended September 30,
20222021Change $Change %
Homebuilding:
Home closing revenue$4,223,435 $3,596,060 $627,375 17 %
Land closing revenue53,901 25,225 28,676 114 %
Total closing revenue4,277,336 3,621,285 656,051 18 %
Cost of home closings(2,950,409)(2,612,428)337,981 13 %
Cost of land closings(42,046)(24,246)17,800 73 %
Total cost of closings(2,992,455)(2,636,674)355,781 13 %
Home closing gross profit1,273,026 983,632 289,394 29 %
Land closing gross profit11,855 979 10,876 1,111 %
Total closing gross profit1,284,881 984,611 300,270 30 %
Financial Services:
Revenue16,119 15,624 495 3 %
Expense(7,897)(6,846)1,051 15 %
Earnings from financial services unconsolidated entities and other, net
4,033 3,821 212 6 %
Financial services profit12,255 12,599 (344)(3)%
Commissions and other sales costs(212,807)(210,585)2,222 1 %
General and administrative expenses(136,370)(128,297)8,073 6 %
Interest expense(41)(246)(205)(83)%
Other (expense)/ income, net(849)3,443 (4,292)(125)%
Loss on early extinguishment of debt— (18,188)(18,188)n/a
Earnings before income taxes947,069 643,337 303,732 47 %
Provision for income taxes(217,242)(143,353)73,889 52 %
Net earnings$729,827 $499,984 $229,843 46 %
Earnings per common share:
BasicChange $ or sharesChange %
Earnings per common share$19.87 $13.26 $6.61 50 %
Weighted average shares outstanding36,736 37,703 (967)(3)%
Diluted
Earnings per common share$19.65 $13.06 $6.59 50 %
Weighted average shares outstanding37,136 38,285 (1,149)(3)%


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Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
September 30, 2022December 31, 2021
Assets:
Cash and cash equivalents$299,387 $618,335 
Other receivables193,307 147,548 
Real estate (1)
4,726,262 3,734,408 
Real estate not owned— 8,011 
Deposits on real estate under option or contract88,428 90,679 
Investments in unconsolidated entities11,356 5,764 
Property and equipment, net39,437 37,340 
Deferred tax asset, net41,060 40,672 
Prepaids, other assets and goodwill171,853 124,776 
Total assets$5,571,090 $4,807,533 
Liabilities:
Accounts payable$322,227 $216,009 
Accrued liabilities353,512 337,277 
Home sale deposits57,767 42,610 
Liabilities related to real estate not owned— 7,210 
Loans payable and other borrowings12,460 17,552 
Senior notes, net1,143,314 1,142,486 
Total liabilities1,889,280 1,763,144 
Stockholders' Equity:
Preferred stock— — 
Common stock366 373 
Additional paid-in capital322,442 414,841 
Retained earnings3,359,002 2,629,175 
Total stockholders’ equity3,681,810 3,044,389 
Total liabilities and stockholders’ equity$5,571,090 $4,807,533 

(1) Real estate – Allocated costs:
Homes under contract under construction$1,452,691 $1,039,822 
Unsold homes, completed and under construction986,862 484,999 
Model homes87,550 81,049 
Finished home sites and home sites under development2,199,159 2,128,538 
Total real estate$4,726,262 $3,734,408 




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Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Depreciation and amortization$5,822$6,478$17,545$19,892
Non-cash charges$8,791$877$11,608$2,092
Summary of Capitalized Interest:
Capitalized interest, beginning of period$61,459 $56,710$56,253 $58,940 
Interest incurred15,179 15,21245,563 47,625 
Interest expensed—(79)(41)(246)
Interest amortized to cost of home and land closings(14,548)(14,550)(39,685)(49,026)
Capitalized interest, end of period$62,090 $57,293$62,090 $57,293 
 September 30, 2022December 31, 2021
Senior notes, net, loans payable and other borrowings$1,155,774$1,160,038
Stockholders' equity3,681,8103,044,389
Total capital$4,837,584$4,204,427
Debt-to-capital23.9%27.6%
Senior notes, net, loans payable and other borrowings$1,155,774$1,160,038
Less: cash and cash equivalents(299,387)(618,335)
Net debt$856,387$541,703
Stockholders’ equity3,681,8103,044,389
Total net capital$4,538,197$3,586,092
Net debt-to-capital18.9%15.1%
 


9

Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows 
(In thousands)
(Unaudited)
Nine Months Ended September 30,
 20222021
Cash flows from operating activities:
Net earnings$729,827 $499,984 
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization17,545 19,892 
Stock-based compensation16,897 14,435 
Loss on early extinguishment of debt— 18,188 
Equity in earnings from unconsolidated entities(3,703)(2,878)
Distribution of earnings from unconsolidated entities3,785 3,324 
Other11,154 (3,085)
Changes in assets and liabilities:
Increase in real estate(990,106)(810,731)
Decrease/(increase) in deposits on real estate under option or contract176 (18,453)
Increase in other receivables, prepaids and other assets(89,177)(51,611)
Increase in accounts payable and accrued liabilities118,636 67,301 
Increase in home sale deposits15,157 14,928 
Net cash used in operating activities(169,809)(248,706)
Cash flows from investing activities:
Investments in unconsolidated entities(5,674)(1)
Distributions of capital from unconsolidated entities— — 
Purchases of property and equipment(19,537)(17,910)
Proceeds from sales of property and equipment328 404 
Maturities/sales of investments and securities1,032 2,795 
Payments to purchase investments and securities(1,032)(2,795)
Net cash used in investing activities(24,883)(17,507)
Cash flows from financing activities:
Repayment of loans payable and other borrowings(14,953)(6,308)
Repayment of senior notes— (317,690)
Proceeds from issuance of senior notes— 450,000 
Payment of debt issuance costs— (6,102)
Repurchase of shares(109,303)(37,017)
Net cash (used in)/provided by financing activities(124,256)82,883 
Net decrease in cash and cash equivalents(318,948)(183,330)
Beginning cash and cash equivalents618,335 745,621 
Ending cash and cash equivalents $299,387 $562,291 
 

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Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(Unaudited)
 Three Months Ended September 30,
 20222021
 HomesValueHomesValue
Homes Closed:
Arizona599 $254,530 532 $193,847 
California321 236,872 295 177,623 
Colorado166 98,625 144 80,149 
West Region1,086 590,027 971 451,619 
Texas1,218 499,713 1,012 383,206 
Central Region1,218 499,713 1,012 383,206 
Florida426 166,138 386 139,642 
Georgia117 53,108 139 52,004 
North Carolina340 148,111 371 145,268 
South Carolina147 48,777 92 31,686 
Tennessee153 63,158 141 48,010 
East Region1,183 479,292 1,129 416,610 
Total3,487 $1,569,032 3,112 $1,251,435 
Homes Ordered:
Arizona232 $97,462 550 $233,828 
California187 122,994 319 213,859 
Colorado37 20,642 207 123,242 
West Region456 241,098 1,076 570,929 
Texas635 253,321 1,070 427,689 
Central Region635 253,321 1,070 427,689 
Florida531 214,004 534 192,479 
Georgia175 71,731 176 74,766 
North Carolina251 98,147 347 140,135 
South Carolina137 42,728 100 31,535 
Tennessee125 53,285 138 51,418 
East Region1,219 479,895 1,295 490,333 
Total2,310 $974,314 3,441 $1,488,951 
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 Nine Months Ended September 30,
 20222021
 HomesValueHomesValue
Homes Closed:
Arizona1,599 $687,527 1,423 $497,105 
California852 597,913 890 547,754 
Colorado424 254,089 464 239,399 
West Region2,875 1,539,529 2,777 1,284,258 
Texas3,139 1,269,868 3,129 1,105,429 
Central Region3,139 1,269,868 3,129 1,105,429 
Florida1,301 503,820 1,246 440,847 
Georgia423 190,769 456 169,620 
North Carolina996 415,975 1,000 372,119 
South Carolina400 132,855 258 87,741 
Tennessee432 170,619 409 136,046 
East Region3,552 1,414,038 3,369 1,206,373 
Total9,566 $4,223,435 9,275 $3,596,060 
Homes Ordered:
Arizona1,342 $594,631 1,776 $713,067 
California888 642,938 949 604,478 
Colorado406 249,105 557 317,155 
West Region2,636 1,486,674 3,282 1,634,700 
Texas3,027 1,293,282 3,286 1,248,032 
Central Region3,027 1,293,282 3,286 1,248,032 
Florida1,788 724,209 1,481 547,706 
Georgia620 280,010 533 213,632 
North Carolina1,015 439,618 1,156 450,854 
South Carolina435 146,100 264 90,532 
Tennessee430 182,001 439 152,297 
East Region4,288 1,771,938 3,873 1,455,021 
Total9,951 $4,551,894 10,441 $4,337,753 
Order Backlog:
Arizona888 $397,695 1,346 $560,090 
California429 314,622 503 331,454 
Colorado310 192,763 301 182,536 
West Region1,627 905,080 2,150 1,074,080 
Texas1,766 790,227 1,787 715,226 
Central Region1,766 790,227 1,787 715,226 
Florida1,355 571,001 785 321,831 
Georgia400 180,059 233 101,996 
North Carolina584 247,405 610 242,192 
South Carolina168 57,664 126 44,028 
Tennessee164 75,323 147 56,052 
East Region2,671 1,131,452 1,901 766,099 
Total6,064 $2,826,759 5,838 $2,555,405 

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Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited)

 
 Three Months Ended September 30,
 20222021
 EndingAverageEndingAverage
Active Communities:
Arizona52 54.0 38 38.0 
California32 32.0 18 19.0 
Colorado18 18.5 16 16.5 
West Region102 104.5 72 73.5 
Texas74 77.0 68 66.0 
Central Region74 77.0 68 66.0 
Florida30 35.5 38 36.0 
Georgia18 16.0 12 11.0 
North Carolina27 29.5 26 26.0 
South Carolina12 14.5 11 9.0 
Tennessee12 12.0 9 9.5 
East Region99 107.5 96 91.5 
Total275 289.0 236 231.0 
 Nine Months Ended September 30,
 20222021
 EndingAverageEndingAverage
Active Communities:
Arizona52 46.8 38 35.5 
California32 27.3 18 18.3 
Colorado18 18.0 16 14.0 
West Region102 92.1 72 67.8 
Texas74 75.6 68 63.6 
Central Region74 75.6 68 63.6 
Florida30 38.4 38 33.3 
Georgia18 15.5 12 10.3 
North Carolina27 28.6 26 24.3 
South Carolina12 14.0 11 7.5 
Tennessee12 12.5 9 8.5 
East Region99 109.0 96 83.9 
Total275 276.7 236 215.3 


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About Meritage Homes Corporation
Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2021. The Company offers a variety of entry-level and first move-up homes. Operations span across Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, Tennessee and Utah.
Meritage Homes has delivered over 160,000 homes in its 36-year history, and has a reputation for its distinctive style, quality construction, and award-winning customer experience. The Company is the industry leader in energy-efficient homebuilding and a nine-time recipient of the U.S. Environmental Protection Agency’s ("EPA") ENERGY STAR® Partner of the Year for Sustained Excellence Award since 2013 for innovation and industry leadership in energy efficient homebuilding, and the recipient of the EPA Indoor airPLUS Leader Award.
For more information, visit www.meritagehomes.com.
The information included in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general; expectations about our future results; and projected fourth quarter 2022 home closings, home closing revenue, home closing gross margin, effective tax rate and diluted earnings per share.
Such statements are based on the current beliefs and expectations of Company management and current market conditions, which are subject to significant uncertainties and fluctuations. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, except as required by law, to update or revise any forward-looking statements to reflect future events or changes in these expectations. Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. These risks and uncertainties include, but are not limited to, the following: changes in interest rates, the availability and pricing of residential mortgages and the potential benefits of rate locks; inflation in the cost of materials used to develop communities and construct homes; supply chain and labor constraints; our ability to acquire and develop lots may be negatively impacted if we are unable to obtain performance and surety bonds; the ability of our potential buyers to sell their existing homes; legislation related to tariffs; the adverse effect of slow absorption rates; impairments of our real estate inventory; cancellation rates; competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing if our credit ratings are downgraded; our potential exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; a change to the feasibility of projects under option
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or contract that could result in the write-down or write-off of earnest money or option deposits; our limited geographic diversification; the replication of our energy-efficient technologies by our competitors; shortages in the availability and cost of subcontract labor; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure of our employees and representatives to comply with laws and regulations; our compliance with government regulations related to our financial services operations; negative publicity that affects our reputation; potential disruptions to our business by an epidemic or pandemic (such as COVID-19), and measures that federal, state and local governments and/or health authorities implement to address it; and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the quarter ended June 30, 2022 under the caption "Risk Factors," which can be found on our website at
https://investors.meritagehomes.com.

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