M/I Homes(US:MHO)2025-07-23 15:32Financial Data and Key Metrics Changes - The company reported record second quarter revenue of $1.2 billion, a 5% increase year-over-year [6][10] - Pre-tax income decreased by 18% to $160.1 million, largely due to a decline in gross margins to 25% [6][10] - Gross margins were reported at 25%, down from 28% a year ago [3][13] - Return on equity was 17%, with a pretax income return of 14% [3][14] Business Line Data and Key Metrics Changes - New contracts for the second quarter were down 8% year-over-year, with a monthly sale pace of three homes per community [4][11] - The company closed a record 2,348 homes in the second quarter, a 6% increase compared to the previous year [5][12] - The average closing price for the second quarter was $479,000, a 1% decrease from the previous year [13] 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 [4][5] - The long-term fundamentals of the housing industry are viewed as sound, with expectations of benefiting from undersupply and growing household formations [5] - The company aims to grow its community count by about 5% from 2024 [7][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business despite challenging macroeconomic conditions, citing a strong balance sheet and quality communities [10] - There is a belief that many potential buyers are waiting for better rate environments and improved consumer sentiment [5] - The company remains well-positioned for growth, with a strong land position and community count [10][18] Other Important Information - The company ended the quarter with a record $3.1 billion in equity, a 17% increase year-over-year [10] - The cancellation rate for the quarter was 13%, with 51% of sales to first-time buyers [11] - The company repurchased $50 million of its stock during the quarter, with $150 million remaining under the current authorization [19] Q&A Session Summary Question: Commentary on market trends by price point and geography - Management noted volatility in the market, with Midwest markets outperforming the Carolinas slightly [24][31] Question: Insights on margin normalization and headwinds - Management indicated that margins may level off but could face pressure from higher rates and tariffs [36][40] Question: Order trends and June performance - There was a noticeable uptick in traffic in June, attributed to improved buyer sentiment [42][44] Question: Operational comments on Southern markets - Management confirmed that Texas margins are currently better than Florida, despite some normalization [52] Question: New home inventory levels - Management acknowledged an increase in spec homes, which are critical for performance in the current rate environment [56] Question: Future growth plans in Northern markets - Management expressed bullishness about growth opportunities in the Midwest and plans to invest further in those markets [84][86] Question: SG&A expenses outlook - SG&A expenses are expected to continue increasing due to higher headcount and community count growth [88][89] Question: Backlog margins and mortgage rates - Margins in the backlog are slightly down, with no significant changes in incentives noted [90][91]