Core Insights - M/I Homes, Inc. (NYSE:MHO) is highlighted as a top affordable housing stock with a favorable medium-term outlook despite short-term margin pressures, supported by a $165 price target from Citizens analyst James McCanless [1][3] Group 1: Company Performance - M/I Homes reported record results in its financial services segment for Q4 2025, achieving a capture rate of 93% for the year and 94% in Q4, generating a pretax income of $56 million for the year, including $8.5 million in Q4 [3] - The company ended 2025 with 232 active communities, a 5% increase year-over-year, and opened 81 new communities during the year, with expectations for another 5% increase in community count in 2026 [3] Group 2: Market Positioning - M/I Homes benefits from significant exposure to the Midwest and Plains states, which are more affordable compared to the Southeast, helping to sustain demand in a higher interest rate environment [1][3] - The company's entry-level Smart Series is gaining traction, delivering above-average gross margins while addressing affordability constraints for first-time buyers [1][3] Group 3: Company Background - Founded in 1976 and headquartered in Columbus, Ohio, M/I Homes focuses on designing, constructing, and selling single-family homes and townhomes, with a strong entry-level offering and growing contributions from financial services [4]

Financial Data and Key Metrics Changes - In 2025, the company delivered 8,921 homes and recorded revenue of $4.4 billion, with pre-tax income of nearly $590 million, down 20% from the previous year's record of $734 million [5][6] - The net income was $403 million, or $14.74 per share, with a return on equity of 13.1% and shareholders' equity increased by 8% year-over-year to $3.2 billion [6][10] - Gross margins for the full year were 24.4%, down 220 basis points from 2024, primarily due to higher incentives and lot costs [6][10] Business Line Data and Key Metrics Changes - The financial services segment achieved a record capture rate of 93% and pre-tax income of $56 million for the year [5][16] - The Smart Series product, which is the most affordably priced, accounted for 49% of total company sales in the fourth quarter, down from 52% a year ago [7] Market Data and Key Metrics Changes - New contracts in the Southern Region increased by 13% year-over-year, while the Northern Region saw a 4% increase [8] - Deliveries in the Southern Region represented 57% of the company-wide total, with a slight increase in homes delivered compared to the previous year [8] Company Strategy and Development Direction - The company is focused on maintaining quality and customer service while navigating economic challenges, and it is well-positioned in its 17 markets [3][10] - The company plans to continue using mortgage rate buydowns as incentives on a community-by-community basis to drive sales [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry despite current challenges, stating that the company is in the best financial condition in its history [10] - There is optimism regarding the early traffic improvements and demand as the selling season begins [45][90] Other Important Information - The company ended the year with a cash balance of $689 million and zero borrowings under its unsecured credit facility, resulting in a strong debt-to-capital ratio of 18% [10][18] - The company owns approximately 26,000 lots, with an additional 24,000 lots controlled via option contracts, providing flexibility to respond to market conditions [9] Q&A Session Summary Question: Can you address the 13% growth in the South and bifurcate that into Texas and Florida? - Management noted solid sales across various markets, with Florida's Orlando market performing well and Texas showing mixed results, particularly with Dallas and Houston remaining solid while Austin and San Antonio were weaker [24][25] Question: Can you comment on margin pressures and the differential between intra-quarter closings and backlog? - Management acknowledged that margins are under pressure but noted that a significant portion of sales now comes from spec sales, which have lower margins compared to to-be-built homes [26][35] Question: What is the strategy regarding mortgage rate buy-downs? - The company has been successful with a 4.875% 30-year fixed mortgage rate and offers temporary buydowns to attract buyers [72][74] Question: How is the company structuring its land purchases and development? - Management indicated that land purchases and development spending increased, reflecting confidence in demand, but emphasized that there is no specific strategy driving this increase [64][66] Question: What is the outlook for margins and community openings? - Management did not provide specific guidance on margins but expressed optimism about maintaining a strong sales pace and improving margins through operational efficiencies [82][92]

Financial Data and Key Metrics Changes - In 2025, the company delivered 8,921 homes and recorded revenue of $4.4 billion, with pre-tax income of nearly $590 million, down 20% from the previous year's record of $734 million [5][6] - The net income was $403 million, or $14.74 per share, with a return on equity of 13.1% and shareholders' equity increased by 8% year-over-year to $3.2 billion [6][10] - Gross margins for the full year were 24.4%, down 220 basis points from 2024, primarily due to higher incentives and lot costs [6][10] Business Line Data and Key Metrics Changes - The financial services segment achieved a record capture rate of 93% and pre-tax income of $56 million for the year [5][16] - The Smart Series product, which is the most affordably priced, accounted for 49% of total company sales in the fourth quarter, down from 52% a year ago [7] - The average mortgage amount increased to $414,000 in the fourth quarter of 2025, compared to $409,000 in the previous year [16][17] Market Data and Key Metrics Changes - New contracts in the Southern Region increased by 13% year-over-year, while the Northern Region saw a 4% increase [8] - Deliveries in the Southern Region increased by 1% over the previous year's fourth quarter, representing 57% of the company-wide total [8] - The company owns approximately 26,000 lots, with 30% in the Northern Region and 70% in the Southern Region, and controls an additional 24,000 lots via option contracts [9] Company Strategy and Development Direction - The company is focused on maintaining quality and customer service while navigating economic challenges, positioning itself well in 17 markets [3][10] - The strategy includes using mortgage rate buydowns as incentives to drive sales, particularly in the current market environment [6][34] - The company plans to open more communities in 2026, estimating a 5% increase in average community count compared to 2025 [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry despite current challenges, stating they are in the best financial condition in their history [10] - There is optimism regarding demand improvement as the selling season begins, with management noting increased traffic in many markets [45][90] - The company is cautious about pricing strategies and inventory management, focusing on maintaining margins while responding to market conditions [52][104] Other Important Information - The company ended the year with cash of $689 million and zero borrowings under its $900 million unsecured revolving credit facility, resulting in a strong debt-to-capital ratio of 18% [10][18] - The company spent $1.2 billion on land purchases and development in 2025, up from $1.1 billion in 2024 [18] Q&A Session Summary Question: Can you address the 13% growth in the South and bifurcate that into Texas and Florida? - Management noted solid sales across various markets, with Florida's Orlando market performing well and Texas showing mixed results, particularly with Dallas and Houston remaining strong while Austin and San Antonio lagged [24][25] Question: Can you comment on margin pressures and the differential between intra-quarter closings and backlog? - Management acknowledged that margins are under pressure but noted that a significant portion of sales now comes from spec homes, which has changed the sales dynamics [34][35] Question: What is the strategy regarding mortgage rate buy-downs? - The company has been successful with a 4.875% 30-year fixed mortgage rate and offers temporary buydowns to attract buyers [72][74] Question: Any guidance on margins for the next quarter? - Management does not provide specific guidance on margins but expressed satisfaction with current performance and ongoing efforts to manage costs [82] Question: How is the inventory situation and what are the broader industry trends? - Management feels confident about their inventory levels and noted that while some excess spec inventory exists, they are focused on careful management to avoid overexposure [104]

Financial Data and Key Metrics Changes - For Q1 2026, the company reported a 6% increase in gross profits and a 26% year-over-year growth in non-GAAP EPS [10] - Adjusted EBITDA margins were at 5.2%, with a cash conversion of non-GAAP net income at 88% [10] - The company ended Q1 with approximately $125 million in cash and a net debt leverage ratio of approximately zero [13] Business Line Data and Key Metrics Changes - In the Specialty Technology Solutions segment, net sales declined by 5% year-over-year and 9% quarter-over-quarter, with gross profits increasing by 7% year-over-year [11] - The Intellisys and Advisory segment saw a 4% increase in net sales year-over-year, with annualized net billings reaching approximately $2.78 billion [12] Market Data and Key Metrics Changes - The company believes it maintained market share despite the decline in revenue, attributing the challenges to timing issues with larger deals rather than loss of market share [21][22] - The company is focusing on the indirect channel to deliver recurring, complex, and high-value solutions as technology markets converge [5] Company Strategy and Development Direction - The company is investing in its Intelisys and Advisory segment to accelerate new order growth, including expanding its solutions engineering team [6] - The recent acquisition of DataZoom is expected to enhance the company's capabilities in mobile data connectivity and support its strategic plan [13][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in reaffirming the full-year net sales growth outlook, expecting revenue growth to accelerate in the second half of the fiscal year [14][45] - The company emphasized that the decline in revenue is not indicative of overall demand weakness but rather a timing issue with large deals [45] Other Important Information - The company is actively pursuing acquisition targets to expand capabilities and drive additional value across its partner ecosystem [13] - The company plans to maintain a target net debt leverage ratio of one to two times adjusted EBITDA while balancing acquisitions and share repurchases [14] Q&A Session Summary Question: Concerns about revenue decline and market share - Management clarified that they prioritize profitable growth and do not believe they are losing market share, attributing revenue challenges to timing and deal structuring [20][21] Question: Sustainability of supplier rebates - Management indicated that supplier programs have evolved and are tied to activities rather than inventory, suggesting sustainability in the rebates [23][24] Question: Details on the DataZoom acquisition - Management described DataZoom as a tuck-in acquisition that will be margin accretive and enhance mobile device sales through improved connectivity solutions [27][28] Question: Guidance on net sales growth - Management reaffirmed guidance based on internal plans and noted that Q1 results were in line with expectations, indicating confidence in future performance [44][45] Question: Business development investments in Intelisys - Management reported double-digit new order growth year-over-year, indicating that investments are translating into pipeline activity [57]