M/I Homes(MHO) - 2023 Q4 - Annual Report

Revenue and Financial Performance - In 2023, the company achieved total revenue of $4.03 billion, with$3.91 billion from homes delivered, $25.3 million from land sales, and$93.8 million from financial services operations[188]. - Total revenue decreased to $4.03 billion in 2023 from$4.13 billion in 2022, a decline of approximately 2.6%[200]. - Income before income taxes decreased by 4% from $635.2 million in 2022 to$607.3 million in 2023, while net income fell by 5% to $465.4 million[187]. - The company reported revenues of$3,939.7 million for the year ended December 31, 2023, with a net income of $434.8 million[261]. - The company generated$552.1 million in cash from operating activities in 2023, compared to $184.1 million in 2022, driven by net income of$465.4 million and proceeds from mortgage loan sales exceeding originations by $72.9 million[231]. Contracts and Sales - New contracts increased by 20$483,000[191]. - The total cancellation rate decreased from 14.3% in 2022 to 11.4% in 2023, indicating improved customer retention[209]. - New contracts in the Northern region rose by 22% from 2,747 in 2022 to 3,361 in 2023, while the Southern region saw an 18% increase from 3,921 to 4,616[212][215]. Home Deliveries and Pricing - The company delivered 8,112 homes in 2023 and ended the year with 4,375 homes under construction, a decrease from 4,522 homes at the end of the previous year[228]. - The average sales price of homes delivered increased by 1%, contributing an additional $4,000 per home delivered[188]. - The average sales price of homes delivered increased to$483,000 in 2023 from $479,000 in 2022, indicating a slight upward trend in pricing[210]. - Total homes delivered across both regions decreased from 8,366 in 2022 to 8,112 in 2023, reflecting a decline in backlog and demand[210]. Margins and Expenses - The company's gross margin remained stable at 25.3$24.9 million to $1.02 billion in 2023, with homebuilding operations contributing a$32.5 million decline[200]. - Selling, general and administrative expenses increased by $25.3 million, rising to 10.7$1.7 million, from $76.3 million in 2022 to$78.0 million in 2023, primarily due to a $4.2 million increase in compensation expense[219]. Financial Services - Financial services operations saw a$4.3 million increase in operating income in 2023, benefiting from higher margins and an increase in average loan amounts[185]. - Financial services revenue increased by 9% from $86.2 million in 2022 to$93.8 million in 2023, attributed to a rise in loan originations[216]. - The average loan amount in financial services increased from $385,000 in 2022 to$393,000 in 2023, reflecting higher financing needs[216]. Regional Performance - Homebuilding revenue in the Northern region decreased by 11% from $1.71 billion in 2022 to$1.52 billion in 2023, primarily due to a 12% decrease in homes delivered[210]. - The Southern region experienced a 4% increase in homebuilding revenue, rising from $2.33 billion in 2022 to$2.42 billion in 2023, driven by a 3% increase in homes delivered[213]. - Operating income in the Northern region decreased by $41.2 million to$176.3 million in 2023, primarily due to a decline in gross margin[210]. - Selling, general and administrative expenses increased in both regions, with the Northern region rising to 7.8% of revenue and the Southern region to 7.9%[211][214]. Future Outlook and Investments - The company plans to open additional new communities in 2024, aiming for a 10% increase in average community count compared to 2023[186]. - The company invested $343.5 million in land acquisitions and$512.1 million in land development during 2023[194]. - Future homebuyer demand remains uncertain due to macroeconomic conditions, but the company is positioned to manage through these challenges[192]. Tax and Compliance - The effective tax rate for 2023 was 23.4%, compared to 22.8% in 2022[187]. - The effective tax rate increased to 23.4% for the year ended December 31, 2023, compared to 22.8% for 2022, primarily due to decreased tax benefits from energy tax credits[222]. - The company was in compliance with all covenants of its Credit Facility as of December 31, 2023, including a consolidated tangible net worth of $2,435.5 million, exceeding the requirement of$1,534.4 million[244]. Debt and Liquidity - The company had outstanding notes payable totaling $866 million as of December 31, 2023, with$166 million due within 12 months[226]. - The company expects to continue managing its balance sheet and liquidity carefully in 2024, anticipating cash requirements to be met from cash receipts and available credit facilities[227]. - The leverage ratio was 4.73 to 1.0, significantly below the covenant requirement of 12.0 to 1.0, indicating strong financial health[250]. Market Conditions - The annual inflation rate in the U.S. was 3.4% in December 2023, down from 6.5% in December 2022, impacting housing affordability and buyer sentiment[268]. - Interest rates rose to over 8% by the end of October 2023, affecting mortgage qualification for homebuyers[269].