M/I Homes(US:MHO)2023-07-26 18:09Financial Data and Key Metrics Changes - The company reported a pretax income of $155 million, representing 15.3% of revenue, down from last year's record level [13][18] - Earnings per diluted share decreased to $4.12 from $4.79 a year ago [6] - EBITDA for the quarter was $164 million, compared to $195 million last year [6] - The effective tax rate was 24%, down from 25% a year ago [6] - The company ended the quarter with a record equity of $2.3 billion, equating to a book value per share of $83, an increase of $17 per share from a year ago [15] Business Line Data and Key Metrics Changes - New contracts increased by 21% year-over-year, with 2,197 homes sold during the quarter [13] - The Smart Series homes accounted for approximately 55% of total sales, consistent with the previous year [13] - The average mortgage amount rose to $402,000 from $384,000 a year ago [8] - The mortgage and title operations achieved a pretax income of $11.2 million, a 29% increase from $8.7 million in the previous year [19] Market Data and Key Metrics Changes - New contracts in the Northern region increased by 31%, while the Southern region saw a 14% increase [14] - Deliveries in the Southern region increased by 7%, whereas deliveries in the Northern region decreased by 22% [14] - The company operated in 15% more communities on average than a year ago, with a community count of 195 at the end of the second quarter [17] Company Strategy and Development Direction - The company plans to increase its community count by approximately 15% in 2023, aiming for about 225 communities by year-end [17] - The focus remains on organic growth rather than acquisitions, with a strong emphasis on investing in existing divisions [57] - The company is optimistic about its land position and plans to accelerate land spending in the second half of the year [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial condition, stating it is the best in its history [4] - The company anticipates continued strong demand for its homes, particularly in the Smart Series line, which caters to first-time buyers [54] - Management noted improvements in construction cycle times and expects to maintain solid margins despite rising costs [62] Other Important Information - The company repurchased $15 million of its stock during the quarter and has repurchased 8% of its outstanding shares since the start of 2022 [10] - The average closing price for homes in the second quarter was a record $493,000, a 3% increase from the previous year [18] Q&A Session Summary Question: Can you walk us through the improvement in gross margin? - Management indicated that the improvement was due to better pricing strategies and stable lumber costs [22] Question: What are the expectations for land spending in the second half? - The company expects to increase land spending significantly in the second half, having pushed back some transactions previously [24] Question: How do you see the demand for homes in the current market? - Management noted that demand remains strong, particularly for new homes, as many existing homeowners are reluctant to sell due to low mortgage rates [52] Question: What is the company's strategy regarding broker commissions? - The company is focused on managing broker commissions effectively, which have increased slightly as a percentage of revenue [59][60] Question: What are the expectations for costs and supply chain issues? - Management feels confident about supply chain stability and does not foresee significant cost increases in the near term [62]