Greetings. Welcome to the Meritage Homes Q4 2024 Analyst Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce Emily Tadano, Vice President of Investor Relations and ESG. Emily, you may now begin. Thank you, Operator. Good morning and welcome to our analyst call to discuss our Q4 2024 results. We issued the press release yesterday after the market closed. You can find it along with the slides we'll refer to during this call on our website at investors.meritagehomes.com or by selecting the Investor Relations link at the bottom of our homepage. Please refer to slide two cautioning you that our statements during this call, as well as in the earnings release and accompanying slides, contain forward-looking statements. Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them. Any forward-looking statements are inherently uncertain. Our actual results may be materially different than our expectations due to a wide variety of risk factors, which we have identified and listed on this slide, as well as in our earnings release and most recent filings with the Securities and Exchange Commission, specifically our 2023 annual report on Form 10-K and subsequent 10-Qs. We have also provided a reconciliation of certain non-GAAP financial measures referred to in our earnings release as compared to their closest related GAAP measures. As a reminder, on today's call and in our earnings presentation, the Q1 2025 guidance reflects the two-for-one stock split completed on January 2nd, 2025. However, historical metrics for 2024 and earlier are not adjusted for the stock split. With us today to discuss our results are Steve Hilton, Executive Chairman, Philippe Lord, CEO, and Hilla Sferruzza, Executive Vice President and CFO of Meritage Homes. We expect today's call to last about an hour. A replay will be available on our website later today. I'll now turn it over to Mr. Hilton. Steve? Thank you, Emily. Welcome to everyone listening in on our call. Today, I'll start by highlighting our 2024 results. Philippe will cover how our new strategy drove our results and talk about our quarterly performance. Hilla will provide a financial overview for the Q4 and forward-looking guidance. First, let me start by welcoming our newest board member, Ms. Geisha Williams, to Meritage. We look forward to her insights and contributions to our board. The board has been committed to continuous and ongoing board refreshment in order to balance institutional knowledge from long-tenured directors with fresh perspectives from new members. Over the past five years, we have reduced the average tenure of our board members and enhanced the diversity of perspectives and experiences of our board by adding five new directors. Now let's turn to our results. The Q4 of 2024 capped off another record-setting year for Meritage. Our Q4 2024 deliveries of 4,044 homes, combined with home closing gross margin of 23.2% and SG&A leverage of 10.8%, resulted in diluted EPS of $4.72. 2025 marks both the official start of the first full year of operations under our new move-in strategy and Meritage's 40th year anniversary. Over the past four decades, we've been on an incredible journey from the first home we built in Arizona to now having built nearly 200,000 homes for families across 12 states. We have a great management team at Meritage, and our commitment to growing the business has driven us to where we are today. To celebrate this anniversary, I'd like to recap some highlights from the full year 2024 and reflect on Meritage's success over the last several years. We generated our highest annual closing volume of 15,611 homes, and despite our average sales price coming down to below $400,000 by the end of the year, we still achieved a company-high closing revenue of $6.3 billion in 2024. Our full year home closing gross margin of 24.9% remained historically elevated and was still above our long-term target. We are proud of what we were able to accomplish this year as we navigated through a volatile mortgage rate environment. Our book value per share expanded 21% over a three-year compounded average growth rate from 2022 to $142.98 per share. We have generated and maintained a mid to high double-digit return on equity over the last 3 years, ending 2024 with an ROE of 16.1%. We earned over $1 billion in annual EBITDA for each year of the last 3 years. Our construction cycle times have returned to our historical average of 120 calendar days in the Q of 2024. At the peak of the supply chain issues in 2023, we were over 190 days. That was also when our backlog conversion dropped to around 50%, and as of December 31, 2024, our backlog conversion reached a company record of 177%. We've also demonstrated our commitment to returning capital to shareholders. We have purchased nearly 6% of our outstanding shares of Meritage stock since the start of 2022, and combined with quarterly cash dividends we initiated in 2023, we have returned almost $500 million to shareholders in the last 3 years. To top it all off, Meritage first achieved top five builder status at the end of 2022 and has held that title for 2 years in a row. We will know definitely in the next couple of weeks or so, but I believe we have retained the top five position based on 2024 closings. And we did all of this while delivering our customers a first-rate experience. We achieved our highest customer satisfaction scores in 2024 with an average score of 95%. As we move forward into 2025, we are excited about our opportunity to increase our market share as we compete against new build and resale homes alike. And with that, I'll now turn it over to Philippe. Thank you, Steve. First, let me start by saying that we at Meritage feel very grateful that our Southern California employees and families are not directly impacted by the wildfires. Our hearts go out to everyone who has been and continues to be. While our communities are not directly affected, our foundation will contribute $500,000 to the relief efforts as we hope for a quick rebuild and recovery. As we shared on our last call, we entered the Gulf Coast markets at the end of October by completing the acquisition of Elliott Homes. Now, to add to that new footprint, we also recently expanded our Alabama operations to include our startup in Huntsville, a thriving market with economic expansion, job growth, and immigration. We've been acquiring land in the Huntsville area for several quarters and plan to open our first communities for sales there later this year. Next, I want to touch on the backdrop of Q4. As expected, the home building industry has returned to somewhat historical patterns, and we experienced relatively normal sales pace seasonality in the Q4, although the volatility in the rate environment certainly added to the complexity. While the Fed cut rates in September and November, mortgage rates increased instead of decreasing after such actions, causing us to extend and expand our financial incentive commitments to our customers. With our focus on affordability, we secured 3,304 orders with an average monthly absorption of 3.9, slightly better than what we would have expected to achieve during the typical slower quarter of the year. As a result of our 60-day closing commitment, which includes carrying inventory to a more advanced construction stage prior to releasing the home for sale, our backlog conversion rate was 177% this quarter, which generated 4,044 home deliveries and home closing revenue of $1.6 billion. Home closing gross margin was 23.2%, which combined with SG&A leverage of 10.8%, resulted in diluted EPS of $4.72 for the Q4 of 2024. Now turning to slide four, our sales orders for the Q4 were 3,304 homes, with 91% of the volume coming from entry-level homes, which was up from 88% in the prior year. Orders were 14% higher year over year due to an 8% increase in average absorption pace, up from 3.6 per month in the Q4 of 2023, and a 5% increase in average communities. Cancellation rate this quarter was 10%. This low rate is partially due to the implementation of our move-in strategy, which shortens the timeline from sale to close and reduces buyer hesitation. ASP on orders this quarter of $400,000 was down 4% from prior year due to a greater utilization of financing incentives, as well as product and geographic mix. With our focus on affordability, we have been and will continue to offer our financing incentives, including rate buy-downs, for as long as they are needed for us to maintain our sales pace and help buyers solve for an affordable payment. Q4 2024 ending community count was 292, increasing 5% from 278 at September 30, 2024, and 8% from 270 at December 31, 2023. The count as of December 31, 2024, does not include any communities from the Elliott Homes acquisition. We spent the first couple of months post-acquisition starting homes in our Gulf Coast division and will release these homes for sale as soon as they are 60 days from completion. This quarter, 39 new communities came online, bringing our total full year openings to 129. With our goal of 20,000 units by 2027, we anticipate a double-digit year-over-year increase in community count by the end of 2025. Before I cover our operational performance this quarter, I wanted to provide some high-level commentary on what we are seeing so far in Q1. Consistent with commentary from other builders so far, January started off a little slower, but we saw the return of demand in the back half of the month and continue to feel comfortable that the upcoming spring selling season will be healthy, especially with the recent rollout of our national sales event. Moving to the regional level trends on slide five, the average absorption pace improved year over year across all of our regions in the Q4 of 2024. The central region comprised of our Texas markets had the highest regional average absorption pace of 4.7 per month and a quarterly backlog conversion rate of over 200%. We have intentionally increased our completed spec inventory in advance of the spring selling season in this region, and we believe we are well positioned here. In the Q4 of 2024, the East region had an average absorption pace of 3.8 net sales per month and includes several of our startup divisions. Although we are experiencing more levels of resale in the Florida markets, existing homes are not necessarily comparable to our ASPs, our offerings, and typically don't represent direct competition. The West region experienced 10% year-over-year growth in average absorption pace to 3.3 net sales per month in Q4. While Colorado and Salt Lake City remain some of our more challenging markets due to affordability issues, we continue to see strength throughout the rest of the West region in Arizona and California. Looking to the balance of 2025, we believe favorable demographics for our product offering and undersupply of homes at our price points and stability in the job market will drive solid housing demand for affordable homes at the right monthly payment, which aligns with our strategy. Now turning to slide six. Under our new strategy, we look at the total specs and backlog to assess our desired inventory levels. Most of the orders in the first 4 to 6 weeks of the quarter will become intra-quarter closings. We are comfortable with our approximate 8,600 spec and backlog units as of December 31, 2024, as we head into the spring of 2025. We started nearly 3,600 homes in the Q4 of 2024, which was down 6% sequentially. Since our cycle times are back to our historical averages, we can now align our spec starts more closely with sales. We had over 7,000 spec homes in inventory as of December 31, 2024, up 20% from 5,900 specs as of December 31, 2023. This represents a little more than 24 specs per community this quarter, which was on the upper end of our four to 6 months supply target as we prepare for the higher spring selling season demand. As expected, we have been completing our specs to a later stage of construction prior to listing them for sale to ensure our customers can benefit from our 60-day closing-ready commitment. As such, we increased the percentage of completed specs to 40% as of December 31, 2024. As we continue to execute on our new strategic shift, we will be reevaluating our optimal completed spec targets. Of our home closings this quarter, 98% came from previously started inventory, up from 92% in the prior year. With over 50% of this quarter's closings also sold within the quarter, our ending backlog declined intentionally from about 2,500 units as of December 31, 2023, to approximately 1,500 homes as of December 31, 2024. We believe we are very near our stabilization point of spec counts with our current backlog conversion pace. I will now turn it over to Hilla to walk through our financial results. Hilla. Thank you, Philippe. Let's turn to slide seven and cover our Q4 results in more detail. We generated $1.6 billion of home closing revenue this quarter, which was a 3% year-over-year decrease that primarily resulted from 5% lower ASPs, offset by a 2% pickup in closing volume to 4,044 units. The drop in ASP was a combination of greater utilization of financing incentives as well as product and geographic mix. While a greater percentage of our customers needed assistance with rates this quarter, the cost per home was lower compared to Q4 of 2023, but did increase sequentially from the Q3 of 2024 in line with the corresponding increases in mortgage rates. As Philippe mentioned previously, we anticipate the use of financing incentives to remain elevated for the near future. Home closing gross margins of 23.2% in the Q4 of 2024 was down 200 basis points from 25.2% in the Q4 of 2023. Our 2024 margin reflects greater utilization of financing incentives and higher lock costs, which were partially offset by lower direct costs and shorter construction cycle times. We are still targeting a long-term gross margin of 22.5%-23.5%. Breaking down the components of gross margin, as land and development costs are still running above historical averages, we expect lock costs to remain elevated in 2025 and 2026. Conversely, we have been able to reduce direct costs on a per sq ft basis each quarter since the beginning of 2023 due to a combination of our purchasing team's ongoing cost negotiations, the volume discounts from our increased production, and the overall increased capacity in most supply chains. On a year-over-year basis, our margins reflect about 3% lower cost per sq ft this quarter versus 2023. Our cycle times improved another five days from Q3 to Q4, and we are now at our target build time of an average of 120 calendar days, which is also driving gross margin savings. Going forward, maintaining the cycle time would allow us to turn our WIP inventory three times a year and keep a lower volume of specs on hand. And lastly, during the quarter, labor capacity remained consistent. Top of mind right now are tariffs and the immigration policy. We do not have any clarity at this point, but as an industry, we have experienced extreme supply chain constraints a couple of years back and have routinely dealt with labor shortages, especially over the past decade. For Meritage, our all-spec strategy has and will continue to allow us to pivot and offer a substitute if product availability or cost issues arise. We have been expanding our sourcing channels over the past several years, particularly since COVID, so we remain nimble and ready to adjust to any potential international trade implications. We are confident that our people and our strategy will help us successfully navigate any future headwinds. Turning back to the P&L, SG&A as a percentage of home closing revenue in the Q4 of 2024 was 10.8% compared to 10.7% in the Q4 of 2023. While Q4 represents a 90 basis points increase from Q3 this year, we are pleased that we were able to maintain our leverage relatively in line with last year on lower revenue and in a tougher selling environment, which drove an increase in external commission. Once the mortgage rates moved in the wrong direction this quarter, we intentionally adjusted commissions as they are a commonly used selling tool in challenging markets and can be used interchangeably with higher marketing spend or greater utilization of incentives to drive sales. We are confident that our strong relationships with the broker community continue to be a differentiator for us, and we plan to use all available tools, including increased commissions or incentives, to drive our desired orders volume. Full year SG&A as a percentage of home closing revenue was 10.1%, fairly consistent with 2023, as higher commissions impacted the incremental leverage gained on higher revenue. Our long term target for SG&A as a percentage of home closing revenue is 9.5% or better as we grow our markets and leverage our overhead platform. The Q4' s effective income tax rate was 22.1% this year compared to 23.2% for the Q4 of 2023. Both periods benefited from energy tax credits on qualifying homes under the Inflation Reduction Act, with some incremental qualifying homes in 2024 driving the tax savings. For 2025, the IRS implemented higher thresholds to achieve these tax credits, and we anticipate fewer of our homes will qualify. While we are not planning to eliminate or pull back on any of our energy-efficient offerings, we have elected not to add these new requirements to our homes. We do not believe that the incremental costs to earn the energy tax credits will be viewed as value-accretive by our customers and will not meaningfully benefit our homes, especially as we continue to focus on affordability. We remain fully committed to building 100% energy-efficient homes going forward. Overall, lower home closing revenue and gross profit led to a 12% year-over-year decrease in Q4 2024 diluted EPS to $4.72 from $5.38 in 2023. I will add a little to Steve's comments about full year 2024 results. As compared to 2023, orders were up 11%, closings were up 12%, and our home closing revenue increased 5% to $6.3 billion. Full year 2024 home closing gross margin of 24.9% was slightly up from 24.8% for full year 2023 due to lower direct costs and improved cycle times, which were partially offset by greater utilization of financing incentives and higher lock costs. Net earnings increased 6% to $786 million, and our diluted EPS totaled $21.44 for the year. Before we move on to the balance sheet, I wanted to cover our Q4 2024 customer credit metrics. As expected, our buyer profile remained relatively consistent with our historical averages, with FICO scores in the mid-730s and DTI around 41%-42%. LTVs were still in the mid-80s. On to slide eight. We maintained a healthy balance sheet at December 31, 2024, with nothing drawn on our credit facility and a net debt-to-cap of 11.7%. As we continue to grow our land position, our net debt-to-cap ceiling remains in the mid-20s% range. We ended the year with $652 million in cash compared to $921 million at December 31, 2023, as we increased our investments in real estate and also completed the Elliott acquisition this quarter. Our capital allocation in the Q4 of 2024 remained centered on investing in growth and returning cash to shareholders. This quarter, we spent about $742 million on land acquisition and development, which was up 13% from prior year. This is inclusive of the Elliott acquisition. For full year 2024, our land spend totaled $2.5 billion. We expect full year land spend to be around $2.5 billion for the next several years. As we nearly tripled our quarterly cash dividend on a year-over-year basis to $0.75 per share in 2024 from $0.27 per share in 2023, our cash dividends totaled $27 million this quarter and about $109 million for full year 2024. We spent $40 million to buy back nearly 220,000 shares in Q4, well above our $15 million systematic quarterly commitment. On a full year basis, we spent nearly $126 million on share buybacks, repurchasing over 730,000 shares, or 2% of our shares outstanding at the beginning of the year. During the Q4 of 2024, our board approved an additional $250 million in authorized share repurchases, and as of year-end, $309.1 million remained available to repurchase under the program. We returned a total of $235 million of cash to shareholders in 2024, a 138% increase year-over-year. And as we announced earlier this month, given our confidence in Meritage's long-term growth trajectory subsequent to year-end, we completed a two-for-one stock split on January 2, 2025. Turning to slide nine. In the Q4 of 2024, we secured and put about 14,400 net new lots under control. This included the approximately 5,500 lots we obtained through the acquisition. In the Q4 of 2023, we put just over 7,600 net new lots under control. As of December 31, 2024, we owned or controlled a total of about 85,600 lots, equating to 5.5 year supply of 2024 closings, but fairly in line with four to 5 years of forward-looking 2025 demand. We also had nearly 33,500 lots that were still undergoing diligence at the end of the Q4. As we accelerate our land acquisition to support our goal of 20,000 units in about 3 years time, we are actively sourcing off-balance sheet land financing to ensure our balance sheet is not overburdened. About 62% of our lot inventory at December 31, 2024, was owned and 38% was optioned compared to prior year, where we had a 72% owned inventory and a 28% owned lot position. Finally, I'll direct you to slide 10 for our guidance. Based on current market conditions, we are now guiding to full year 2025 closings of 6,250 to 6,750 units and $6.6 to $6.9 billion in home closing revenue. We are projecting the following for Q1 2025: total closings between 3,200 and 3,500 units, home closing revenue of $1.26 to $1.40 billion, home closing gross margin of around 22%, an effective tax rate of about 24%, and diluted EPS in the range of $1.59-$1.83. With that, I'll turn it back over to Philippe. Thank you, Hilla. To summarize on slide 11, looking at our full year 2024 results, we are proud of what we've been able to accomplish in a volatile market and attribute these successes to our scale and strategic focus on delivering affordable, move-in ready homes. As we look into the spring selling season, we will lean into pace over price and our new strategy to continue growing our market share and creating further long-term value for our shareholders. With that, I will now turn the call over to the operator for instructions on the Q&A. Operator. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press Star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press Star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the Star keys. One moment, please, while we poll for questions. Thank you. Thank you. Our first question today comes from the line of Michael Rehaut with J.P. Morgan. Please proceed with your questions. Great. Thanks so much for taking my questions. Good morning, everybody. First, I'd love to focus around kind of the drivers of the gross margin trajectory. Obviously, incentives having a huge part, a huge role in this, and looking for a little bit of a further easing in the Q1. How should we think about to the extent that incentives stabilize here in the Q1? Are there any other kind of puts and takes that we should anticipate as 2025 progresses relative to lock costs or construction costs? And just kind of curious about even if you have upcoming community mix changes that might impact the 22% starting point that you see in the Q1, again, if incentives kind of stay where they are currently. Thanks for the question, Mike. I think overall, this is just a function of the incentives. When we're closing and selling so many of our homes in the same quarter, the current market is what we're modeling. So it's primarily an incentive issue, although, as Philippe mentioned, the slight pullback in demand in the first couple of weeks of January is causing us to model a slightly lower volume, which, as you know, also impacts the margin. So this is just modeled on what we're seeing in the market today. There's definitely opportunity for improvement if the volume picks up or if we can pull back on the cost of financing incentives. Okay. Great. I guess secondly, with maybe a little bit of a softer start to the year, I'm also just curious about, again, if demand kind of stays where it is today, are there other levers? Would you be on track, in effect, to hit the full year closings guidance, or would you need to take other measures, like perhaps even raising incentives further to get to that full year closings guidance? Just trying to understand, again, what the assumptions for the market backdrop would be when we're thinking about 2Q to 4Q. Yeah. Thanks, Mike. This is Philippe. I think we feel very comfortable with our full year closing guide based on current market conditions, which are getting better as we move through January. So we're optimistic that January was just a little bit slow for other reasons, and the spring selling season is starting to materialize in a way that makes more sense based on the current pattern. But I think we're still going to be relatively conservative given that we're operating in the 7% mortgage rate environment, and we're not expecting that to get any better. So we feel really comfortable that we can hit our number in that environment with current incentive structure based on the current demand we're seeing. I'm optimistic, actually, that rates are going to hopefully settle down here and maybe get a little bit better. And then I think we can possibly recover in February and March and get back to a 17,000 number over time. We have the lots and the inventory and the communities to achieve 17,000 units, but we're just being conservative based on the 7% mortgage rate environment. Great. Understood. Thanks for the color. Appreciate it. Thank you. Our next question is from the line of Alan Ratner with Zelman & Associates. Please proceed with your questions. Hey, guys. Good morning. Nice job in a tough sales environment in the quarter. Philippe, I think you kind of somewhat answered the question I had in your last comment about having the lots in the communities for 17,000 closings. But I guess I'll ask it a little bit differently in the sense of if I interpret your prior comments, I think that you have a fairly similar strategy as some other spec builders in that you're more volume-focused, and price and margin are going to be the lever to achieve a certain closing number or volume target. With your margin at 22%, I guess my question is, is there a level where that shifts a little bit, where you lighten up a bit on the volume, or are you willing to take that margin lower if need be to achieve that target? Yeah. Great question. I don't know if the market is that elastic at a 7% rate environment. Based on kind of what we're seeing today, we feel like achieving four to four and a half net sales per store at this 22-23 is probably the sweet spot for us and optimizes our land bank. If rates get better, I think we can lower incentives and possibly get a little bit more. I would argue that if rates get better, we'll go after volume more aggressively. If rates get worse, we're just going to have to increase our incentives to achieve the same volume. So that's how we're kind of looking at it. We obviously would take lower margins if rate got worse because we still got to maximize our pace. But if rates got better, I think we could get pace and margin at the same time. Yeah. I think you heard from several of our peers already. It's not a demand issue. There's definitely demand out there in the marketplace. It's an affordability issue. We're not going to cut margins to something that doesn't make sense, but we still have quite a bit of breathing room between where we are today and what we think we'll need to do considering we're already at a 7% interest rate. So I think that we're fairly comfortable that we'll be able to achieve the margins that we've set out there. Perfect. That's helpful. And then as we just kind of think about the build-up to 20,000 closings in 2027, so if we take the midpoint of your 2025 guide, call it 5% growth plus or minus, would seem to suggest you need to accelerate that to 10% annually in 2026 and 2027. Do you feel like you have the organic growth for that, or is M&A a possibility or a likelihood to contribute towards that? Yeah. I think with our acquisition of Elliott Homes and then the entry into Huntsville, we have more than enough of a market platform to get to 20,000 units by increasing our market share across our existing footprint. So really no M&A. We might buy land portfolios here and there, but no real company M&A in that strategy at 20,000 units. We have all the land we need right now to achieve that growth in 2026 and 2027. We really are only buying land at this point to grow from 2027 to 2028. The land bank is in place, the community count is in place to get there in our existing footprint. As we mentioned, we have about 86,000 lots owned and under control already, and another 33,000 lots that we're working through diligence. So to Philippe's point, the 100,000-plus-ish lots are already available if we want to pull the trigger. I appreciate it. Thanks a lot. Thank you. Our next questions are from the line of John Lovallo with UBS. Please proceed with your questions. Good morning, guys. Thank you for taking my questions as well. The first one is, at the midpoint, the sales guide implies about 6.5% year-over-year growth. So if we think about SG&A and leverage, I mean, how are you thinking about the ability to get to 10% or below, sort of as you guys talked about in 2024? Yeah. I think our long-term goals for SG&A as we go from here to 20,000 units is to get to 9.5% or better. The path on the way there, it just kind of really depends on the market and what we're seeing with commissions. And then we're investing quite a bit in our new strategy. We have infrastructure that we have to put into place. We have IT and technology that we have to put in place. So we think we can operate at 10 or better on our way up to the 20,000 units. But the real goal is to set our business up to get to 9.5 or better at 20,000 units. Understood. And then obviously, there's a lot of concern about certain markets in terms of inventory. I mean, Texas being one of the more broader markets. I think Austin, in particular, I mean, your performance there was really strong with absorption in Texas of 14%. Just curious if you could give us any color on what you're seeing across the major markets in Texas in terms of overall inventory and just demand, perhaps. Yeah. Great question. I'll probably answer it a couple of different ways. I mean, our absorptions in Texas were the strongest in the company in this current environment. So I think the market is still very, very strong. We have great locations and great communities and a great price point. So I think we're doing quite well. It's really a submarket-by-submarket conversation versus a market-by-market conversation. There are certain submarkets in Austin and San Antonio and even probably Houston and Dallas that have slowed down a little bit more due to affordability than, I would say, existing homes. But then there are also submarkets throughout that footprint that are doing quite, quite well. And the other thing I would say is when you look at the resale, when you look at where resale's coming back, it's really not coming back at our price point with our product offering and our community offering. So the resale doesn't really compete directly with what we're offering. So from our perspective, based on the research that we're doing, even though resale environment is returning to a more normal state, most of it's not really competitive to what we're offering. And just to state the obvious, they are paying the 7% on the resale for their mortgages, which is, again, why the new build space continues to have an advantage in today's interest rate environment. Yep. All makes sense. Thank you, guys. Thank you. Our next question is from the line of Trevor Allinson with Wolfe Research. Please proceed with your question. Hi. Good morning. Thank you for taking my questions. First, we get a lot of questions from investors about home builder completed inventory levels. Clearly, your business model is designed to have more completed or near-completed inventory levels so that you can offer your 60-day guarantee. The comment we hear from investors is that in a slower market, completed inventory could perhaps be a little riskier from a price discounting perspective. The question is, do you share that view? And then if not, can you talk about why you disagree with that view? Well, at the macro level, obviously, this is a supply and demand business. In my humble opinion, demand is still much stronger than the current supply markets, even with new home builders filling the gap that the existing home market currently isn't filling because of the lock-in effect. So I think currently, I don't share that view. I think we're meeting the demand that's out there because the existing home market is not. Over the long term, when we look at Meritage Homes specifically, we don't offer anything else but completed inventory. So I think where discounting becomes part of the equation is when you offer something else. When all you offer is specs, you can't buy a build-to-order, and this is all we offer, there's not as much discounting that's required. But when you have a bunch of specs in a community and you offer build-to-order in that community, that's where we saw in the past downturns where discounting really happened. So we kind of view our product very homogenous, and therefore, we're not feeling that over time we're going to have to discount our product more because we have more inventory. We're competing directly with the retail market. We're providing you a new home opportunity instead of buying a used home, and we don't feel like we'll have to discount that. Yeah. I think there's two ways where folks that offer both see the penalty between spec and non-spec. First is at initial purchase. If you have a spec home and then you can also go into the design studio and pick everything exactly the way you want it for yourself, you're going to expect a discount if you didn't have the opportunity to do that if it's offered. The second time is when builders accept a home that maybe had gone through that channel and it was canceled and it comes back. Now it's at a disadvantage to the existing home inventory. So both intentional and unintentional specs cause that margin gap for folks that offer both patterns. For us, if a home cancels, great. We just have a completed inventory home that we can sell fast. So for us, there is no variance because there is no comparable. Yeah. Makes a lot of sense. Appreciate that color. And then second question is on community count in 2025. Talked about double-digit growth. How should we think about the cadence of that community count growth throughout the year, and does it skew more heavily to any one of your regions? Thanks. Oh, regionally? I do think I have to look at that, and I could follow up with you. We can follow up with your one-on-one call. I think it's probably happening more in the south and southeast than it is other parts, but I would say it's happening everywhere. And then the cadence is just pretty much growth starting in Q2 and beyond. I think as we get Elliott Homes up and running, you'll see a pop starting in Q2 with all that activity popping in, and then so it's pretty steady growth from here and mostly across all the regions, although probably skewed a little bit more to the southeast. All right. Thank you. Good luck moving forward. Thanks. Thank you. Our next question is from the line of Stephen Kim with Evercore. Please proceed with your question. Yeah. Thanks a lot, guys. Appreciate all the color. I had to step off briefly, so I hope I don't repeat anything. But I guess my first question relates to your longer-term land strategy. Hilla, you had sort of hinted that there might be something innovative coming there. I was curious if you could give us any update. And I guess as a prompt, I've been hearing that you're looking into expanding your JVs. Some folks in the industry have been talking about a level of financing availability that's quite high. I've been hearing in the multi-billion-dollar range. And so I was curious if you could talk about what you're doing there and how we might see that affect your overall land holdings and inventory balance in the next, let's say, 2 to 3 years. Thanks for the question, Stephen. And your little birdies telling you what's out there are correct. We actually have signed our first relationship with a partner on a joint venture structure that will allow us to finance land, particularly in California, in a significantly more efficient manner. As everyone is aware, California is a fantastic place to buy land, but it's also one of the most difficult parts of the country to get that land ready to go vertical. So we have a partner who is extremely well-versed with California land development who is providing financing for some off-balance sheet structures for us. So you'll definitely see an increase of off-balance sheet usage for us, particularly in California. The structure is a little bit different than a traditional land bank, and we're not going to get into the minutiae details on here, but it provides a healthy return for both parties in a way that's slightly more accretive than a traditional land bank structure. So we're going to give it a shot. We're going to roll with it for a little while, see how it works. We've already put a couple of deals into this venture, so we're already up and running. And then based on the success, which we expect to be fantastic, we'll see how we can roll something similar throughout the rest of the country. Got it, but yeah. Okay, so my sense is that California venture is probably longer-term, longer duration kind of stuff. I had a sense that you had already had some agreements in place for a broader across the country with maybe a couple of other players. Is that something you're still sort of going to work on, this California venture as an incubator or whatever? You're going to see it first before you go live with any other JVs? That's, I guess, the question, and would those other JVs also be longer duration? If you can kind of give us some sense of kind of the duration of these deals. Because everyone's got Millrose in mind, which is much shorter duration kind of thing, so first of all, we have not abandoned traditional land banking relationships. We do have other land banking relationships across the country. The joint venture structure is really more something so in California, everything takes a little bit longer. So it is slightly longer duration, but I don't want to intimate that something's going in their pre-entitlement. So it's not something that is happening on a significantly extended basis, in an extended basis because everything in California is on an extended basis. So this is something that we're going to pilot. It's already working fairly well. And we're not abandoning existing land banking relationships. But if this structure proves to be as fruitful as we expect it to be, then it's probably something that we'll roll out in a similar fashion in other markets. Yeah. And I think, Stephen, I'll just add the opportunity we see at Meritage Homes is really some of these larger longer-term deals across the country. And then the longer-term deals in California, just because of the regulatory environment, if we can place those in a JV structure, we think it drives tremendous capital efficiency. Typically, those longer, bigger deals have more margin in them as well. So there's an opportunity to bring in a JV partner and pay a JV partner while also still preserving our normal home building margins. Yeah. That's awesome. I'm really interested to see how that evolves. Regarding your operating margin, it was really kind of you to address and volunteer that long-term sustainable level that you see for gross margin in SG&A. And I was struck by the fact that they were both basically the same as what you had told us about six or seven months ago, which I think is encouraging. But I know that the issue around longer-term sustainable margins is a huge debate point right now for the investor base. And most people think that operating margins are going to go back to the high single digits. And so you're obviously seeing something very different here. I was curious if you could contextualize what we've seen in the last 6 to 7 months where there has been a very significant, noticeable reduction in the profitability coming out of the builder community, and you're seeing some of that too. Why that's not shaking your longer-term sustainable margin outlook? Because I think that's going to be something that would be very helpful for the investors to understand. Yeah. Thanks for the question, Steve. I think at the start of this, I would just say it all starts with how we buy land. So we bought 14,000 lots here in the last quarter. We're up to 85,000 lots from 60,000 lots. And as we look at those lots, although land has certainly gotten more expensive, we haven't had to compromise our long-term underwriting and what the margin profile can be on that land based on our current operational structure. Now, clearly, we're operating in an elevated incentive environment right now, but that is largely driven by the 7% interest rates. That's really what's impacting the last Q2 of margin. If those elevated incentive rates weren't running, we'd be well above our structural long-term. And once again, we're not having any issue finding land across our geographic footprint to support the long-term margins or better that we see going forward. Now, if rates stay elevated for the next 5 years when we bring all that land into the market and we have to continue operating in this elevated incentive environment, they could be lower like they are right now. But long-term, in a normal rate environment, we feel very good about our long-term prospects given the land that we're buying. I would say that the margins that we telegraph for Q1, as we said, are what we're seeing in the market literally right this minute. And also, you can tell by the guidance of the units, it's not going to be a high-volume quarter for us with our midpoint target at 16,500. So we should be able to hopefully come out of the year, even if conditions hold flat for the remainder of the year. You should see an accretion in the margin on sheer volume leveraging alone. So you should be able to get back into that long-term margin even in today's tough environment by the end of the year. We delivered for the full year 2024 north of 24% margins, and that was in a very competitive interest rate environment where consumers were going through some bit of a shock, and really, Q3 and Q4 was the impact of that, but we still achieved well above our long-term target, so I think we feel really comfortable based on our cost structure, our ability to drive efficiencies in this new operating model that we're going to be right where we need to be long-term. That's really helpful. Thanks so much, guys. Next question is from the line of Carl Reichardt with BTIG. Please proceed with your question. Thanks. Hey, guys. Nice to talk to you. Thanks for taking the time. So you talked, I think, about cycle times vertically for house construction. I'm curious about cycle times on the development turning dirt horizontal. Not entitlements, but just the process once you start digging dirt to when you get a finished lot. How are those cycle times sort of peak post-COVID to now? Yeah. They're still really elevated. There's just not enough folks out there moving dirt. And so the land development game has shrunk dramatically. We do most of our land development in-house. And so those times are very, very long right now. They got long through COVID, and they really haven't shrunk since then. They've sort of stabilized at that longer level, which is frankly about double what they were. That's kind of how we model our community account openings when we're doing self-development. They're stable, though. That's the good news. At least they're not moving around on us like they were for the last 3 years. They're pretty predictable at this point. They're pretty consistent at that point. They seem to be performing at that longer elongated timeline. But we're not seeing anything out there to suggest that those will come down, at least in the short term. How many months, Philippe, could you tell me? I don't know exactly. I don't want to just speak off the cuff, but I know that they're at least double what they used to be when things were prior to COVID. So we can get that to you on the 101, but I don't know exactly what those are. Yeah. They also vary. I mean, you don't buy every piece of land in the state of completion, and there's different timelines across the country. As we just mentioned, California is longer than maybe Arizona, and if you buy a piece of raw dirt versus partially completed, so it's hard to have a number. It's just longer, but what I do know is I look at every single land deal that comes through the company, and they're not coming down. Okay. Thank you, and then just, I mean, everyone will think about you as an entry-level builder building smaller houses, but you have at least a passel of move-down customers. And I'm curious if you can share or if you know maybe what percentage of your customer base is actually a move-down, previous owner of a home, and whether or not that changed during 2024 or you expect it to change as you go forward. Thanks. Yeah. I mean, move-down is not necessarily just a previous owner of a home since we also have first-time move-up. But move-down is a smaller percentage of our total business, maybe about a third all in. Thanks, Philippe. Appreciate it. Thank you. Our next question is from the line of Susan Maklari with Goldman Sachs. Please proceed with your questions. Thank you. Good morning, everyone. My first question is just thinking high level about demand. If we do see fewer Fed rate cuts this year, and perhaps that brings just more stability to mortgage rates regardless of what the level is, do you think that that could be enough to get some people off the sidelines and to see perhaps some relative easing on some of the headwinds and the demand pressures that you've seen? Or do you think that rates actually need to come down in order to see a bigger increase in activity? Yeah. Great question. I feel like if they just stabilized, that would be very, very helpful. The spread is still way too wide as well, which makes it very expensive to buy the rate buy-down. So that would certainly be a tailwind for margins. And then if they came down while stabilizing, it would only be a huge benefit. But I certainly agree with your thesis that a more predictable, stable, less volatile rate environment gives consumers confidence in what their numbers are going to be versus them trying to time the market, deciding whether it's a good time to buy or not, would be very helpful. Stabilization in interest rate markets at whatever level also helps our cost on rate locks, right? They're also based on volatility expectations. So the stability would not just help consumer confidence. It would also help our cost structure on the rate locks. Yeah. Okay. That's helpful. And then when you think about the year ahead and just the conditions that you're facing out there, any thoughts on how we should think about that conversion rate as we move into past the first quarter and into the rest of the year? Just anything there that we should be aware of or thoughtful of as we're going through this? Are you talking about our backlog conversion rate? Yeah. Yeah. No, I think we feel pretty good about where it's at. Our strategy is fully rolled out at this point. So we're basically selling move-in ready homes across the country except for probably Elliott Homes that we just acquired. So it'll take a little time for us to get there. So what you're seeing in the last couple of quarters is probably where we're going to run. The only thing that's out there that could impact that potentially is any cycle time expansion. And right now, we're not seeing anything that would suggest our cycle times will get longer, but we'll see how the year goes. We appreciate that our current run rate is significantly north of our long-term guidance, and that's probably part of the genesis of the question. The reason that we're not changing our long-term guidance yet is we've only had two, three quarters under a partial rollout of the strategy. I think we need to have the strategy be live under a couple other economic cycles, and then we'll have confidence to say if our prior long-term target is the right one or if we need to bring it back up. Yeah. Okay. You got to my point, Hilla, with that. Thank you very much. And good luck to everyone there. Thank you. Our next question is from the line of Alex Barron with Housing Research Center. Please proceed with your questions. Yeah. Thank you. I was hoping you could help me understand your thought process around starts versus incentives versus sales pace. And what I mean is what's sort of the main driver that you guys focus on in this sense? If, let's say, you're targeting four sales a month, which would also imply roughly four starts a month, but if the market isn't doing that, if you start to pile up, let's say, a few specs more than you were hoping, do you increase the incentive or do you slow down the start pace? How are you guys sort of thinking about that balancing act? Yeah. Great question. I think at the end of the day, we want to do four or more a month per subdivision, and that drives everything else. So if we're achieving four per month, we're trying to maximize our margins at four a month. If we're not achieving four a month, we're adjusting incentives appropriately to get to four a month. The starts pace, at the end of the day, we just want to align with our sales pace. We're able to slow down starts modestly this year because our cycle times are much better, so we can now mirror our sales pace exactly. But at the end of the day, it's four a month and maximize margins. If we can't get four a month, make adjustments to get to four a month and then align our starts pace appropriately. And does the competitive environment have a lot to do with that? In other words, well, you mentioned interest rates, right? So interest rates are at 7%. But let's say if some other competitors are willing to drop their advertised rates to, I don't know, let's say 3.5%, even though that's a big hurt on margins, are you guys willing to chase that? Or is there some point where you say, "Well, maybe I won't get four sales a month, but I'm not going to drop my margins that low to try to get there"? I mean, obviously, again, it's market by market, community by community. But if we're surrounded by a bunch of competitors that are willing to make adjustments and that is impacting our ability to get four a month, we're going to do what we need to do to get four a month. So we'll do whatever it takes to get four a month based on the competitive environment. But our sense in general is that it's not so much the competition right now. It's the interest rate that's affecting our ability on a community-by-community basis to get four a month. Got it. Thank you so much. Thank you. Our next question. That was the last. Oh, pardon me. Please go ahead, sir. No, go ahead. I thought that was the last one. Please let's hear the last question. Thank you. The last question will come from the line of Jade Rahmani with KBW. Thank you very much. In Phoenix, new listings look to be up about 10% year over year according to one broker. Have you seen that? And do you have any color as to what's driving that? I mean, if it's affecting your markets. So for Phoenix in particular, the existing home market, the resale inventory is up year over year. So it's out there. But again, as we said in our opening comments, a lot of that existing home product is not really in our price point or in our submarkets. Some of it's further out. So it's impacting a couple of communities here and there for sure. We're having to make adjustments appropriately to compete with that. But overall, the Phoenix market is extremely strong. We're seeing tremendous job growth, tremendous immigration. So overall, our Phoenix prospects are looking really, really good. The other thing I would say is, once again, we offer rate locks and rate buy-downs while the existing home market isn't really offering that. So that creates a kind of competitive advantage even as resale starts to grow in these markets. We have a strategic advantage that we can leverage to capture sales. Thank you. And then, secondly, I think in your comments, you said there was a 4% sales price decline reflecting incentives. And I just wanted to check if the mortgage buy-down incentive, which I believe is the predominant incentive, affects net realized sales price at all. So the incentive does directly affect the average sales price that we report, although that's not the entire drop. There was also a notable shift out of our higher ASP region of the West into the East region. So it's both a shift in geography. It's also a shift in product mix. We also noted that we have a higher percentage of our homes being the entry-level versus the first-time move-up and the increased component that relates to the incentive. So we're not going to break out the different components, but it's the combination. But we are verifying that, or confirming, I should say, that any incentive that we offer, financing or otherwise, for Meritage runs through average sales price. Thanks for that clarification. Appreciate it. Perfect. Thank you, operator. I'd like to thank everyone who joined this call today for your continued interest in Meritage Homes. We hope you have a great rest of your day. Goodbye. This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.