M/I Homes(US:MHO)2025-07-23 15:30Financial Data and Key Metrics Changes - The company reported record second quarter revenue of $1.2 billion, a 5% increase year-over-year [7] - Pre-tax income decreased by 18% to $160.1 million, largely due to a decline in gross margins to 25% [7][14] - Gross margins were reported at 25%, down from 28% a year ago, and return on equity was 17% [4][10] - Earnings per diluted share decreased to $4.42 from $5.12, a 14% decline [15] Business Line Data and Key Metrics Changes - New contracts for the second quarter decreased by 8% year-over-year, with a monthly sale pace of three homes per community [5][12] - The company closed a record 2,348 homes in the second quarter, a 6% increase compared to the previous year [6][7] - The average closing price for the second quarter was $479,000, a 1% decrease from the previous year [14] Market Data and Key Metrics Changes - New contracts in the Northern Region decreased by 13%, while the Southern Region saw a decrease of 4% [8] - Deliveries in the Southern Region increased by 8%, while Northern Region deliveries increased by 2% [8] - 59% of deliveries came from the Southern Region, with 41% from the Northern Region [8] Company Strategy and Development Direction - The company plans to continue using mortgage rate buy downs to drive traffic and sales despite their impact on profitability [5][6] - The company is optimistic about long-term fundamentals in the housing market due to undersupply and growing household formations [6][10] - The company aims to grow its community count by about 5% from 2024, ending the second quarter with 234 communities [7][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges due to higher interest rates affecting consumer confidence [5][6] - The company remains optimistic about its business, citing a strong balance sheet and quality land position [10] - Management noted that while conditions are challenging, they are not as severe as in past downturns, with a current assessment of the market at a "C to C+" level [32] Other Important Information - The company ended the quarter with $3.1 billion in equity, a 17% increase year-over-year, and a debt to capital ratio of 18% [10] - The company has a total of 50,500 owned and controlled lots, equating to about a five to six year supply [9][10] - The company repurchased $50 million of its stock during the quarter, with $150 million remaining under its current authorization [20] Q&A Session Summary Question: Commentary on market trends by geography and price point - Management noted volatility in the market, with Midwest markets outperforming the Carolinas slightly, and mixed conditions in Florida [25][26] Question: Insights on margin normalization and headwinds - Management indicated that margins may level off but could face pressure from higher rates and tariffs [39][42] Question: Order trends and incentives - Management observed an uptick in traffic in June, attributing it to organic demand rather than increased incentives [44][66] Question: Operational comments on Southern markets - Management confirmed that Texas margins are currently better than Florida, but both have seen some normalization [55] Question: Inventory levels and demand - Management stated that while new home inventory is up, their ability to offer rate buy downs gives them a competitive edge over existing homes [58] Question: Future growth plans in Northern markets - Management expressed bullishness about growth opportunities in the Midwest and plans to invest further in those markets [88][89]