MHO - Earnings call transcript Q3 2021

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Operator

Hello and welcome to M/I Homes Third Quarter Earnings Conference Call. My name is [Rika] and I will be the call operator for today.

We will have a Q&A session today. [Operator Instructions] I will now handover to Phil Creek to begin today’s presentation. Phil, please go ahead.

Phillip Creek

you. Thank

Officer the Klutch, Bob Company, President Hunker, Chief on and our Ann today Hake, VP, Derek Kevin President, of Accounting call me Schottenstein, is CEO Marie Senior Joining VP. and Controller our Mortgage

cautionary to directly. encourage statements, from Regulation regarding forward-looking everyone any the applies items made discussing that statements remind to about over you call Also during statements material significant we language obligation press that contained I because call, forward-looking you to during ask turn advised release non-public First to to this during this to Bob. Disclosure, in And this also we the you the be made forward-looking no any today's address consider company Fair call. want undertakes as any questions to issues are With comments that update I'll with prohibited call. that,

Robert Schottenstein

thank joining Good for us. afternoon, Phil. and Thanks, you

XX%. the homes quarter, decline third sales demand throughout quarter during XX% We markets very records sold pre-tax are third a better our equity $XXX.X our a revenue with income record remains including Despite than pleased record We highlighted year's strong. reported from in the the of quarter third last sales, housing return on of during quarter. ago million, number $XXX of revised decline very and year record X,XXX the XX% of of million, most a of by strong performance

limit the of costs. in order to fact Our manage than and XX% in continue and decline that to ago operating sales majority deliveries fewer year we in communities in sales control communities better are to the our the is due we

and pace year, of community X.X the seen down active quarter strength with community sales sales continuing reflects underlying our we've per this sales as We we in demand. quarter last monthly of year's community than last despite majority record, Year-to-date, of being have Our sold count XXX in was homes XX X,XXX over and the the highest monthly communities. homes, XX% noted, communities. to years is third the per X% pace other ahead ended limit

opening We record new be a communities number XXXX. in will of

our year our expect XXXX XXX we closed to X,XXX Clearly, count grow X% XXX longer closed. average, more last during industry. times next the were build entire well a disruptions supply end homes year. community continue communities. the and taking by negatively impacted to documented it XX% and with and or get chain On that by stretch homes to impact decrease between the days XX quarter, is from closings us Specifically, We our

build We on achieving while been efficient and complete homes focused to ready have are times, be delivered. that fast properly always assuring and

We will in this continue way. manage to

record than than ended is to third $X.X better which backlog XX% year. all-time ago. with very backlog and billion, quarter backlog And strong. X,XXX an is last a of quarter Our of $XXX,XXX price with by backlog an units XX% a homes year average record in XX% the higher We of increased

also very were Gross XX.X%. basis XXX by In points to points addition basis strong. expense XX year-over-year improved XX.X%. SG&A returns quarter our income, improved third to margins record ratio our to reporting by And

return year on resulted in for income improved this very of our of debt as equity charge percentage from XX%. XX%. last one-time the extinguishment, And Excluding all pre-tax XX.X% nearly noted a to strong

additional some will markets. provide comments our on I Now

most of stating the begin Nashville, excited nation’s Tennessee, that that First, dynamic operations one by growing to are let in me housing markets, announce we XXXX job few our economy, market competitive significant in from forward benefit growth population fastest the XXth and single-family homebuilding commencing permits. and next ranking growth very the we position nationally in over on a building based to look healthy and Nashville to continues years. I’m very

As the our third Columbus southern our in Florida our by for our Orlando, homebuilding Tampa, together Texas with led be and performance Raleigh, markets. Charlotte. divisions reporting Chicago, Minneapolis, from three markets purposes our quarter four Nashville and Dallas, market, in XXth region Charlotte into We will included experienced strong

of strong In our results. fact, markets all produced

Our deliveries to over of deliveries of decreased deliveries, the X,XXX region total. or last X% year. from in XX% an southern year increase the XXX northern The X% region contributed last

position region, northern the to Our XX% increased last while lot region. controlled region owned controlled the and by the to compared XX% southern by year our roughly balance X% owned ago. a the lots year in is in the XX% region southern and northern and increased compared in of in are

we very a two equates have supply. to we that and and We a option additional which of lots. top lots, year own strong half roughly the Companywide, XX,XXX land XX,XXX On approximately control contracts position. a

with our another controlled Based lots supply. very a year about total, performance. in owned So are year on the approximately strong and out backlog, XX,XXX five lots a we expect finish or to record

of billion strong and at of million a This facility. resulted cap credit under book We net XXth revolving per million of borrowings with $X.X unsecured quarter condition cash to $XXX financial with of net equity zero a Our is balance $XXX the value ratio September in share. $XX XX%. and debt a ended our

XXXX. over have we and turn the With to excellent and an in in is I’ll shape outstanding company shape, to full are year outstanding best an it that, quarter poised Our Phil. fourth ever

Phillip Creek

Thanks Bob.

contracts a to our And year’s the year’s XX% quarter. compared quarter from last X,XXX New the third last and third we’re were year. for X,XXX contracts in decreased up third prior new record quarter for to

and was down in September quarter. XX% third Our in cancellation the X% new contracts were in in rate down down and our XX% XX% August July

about buyer in first to the the our buyers XX% quarter. our sales profile time were third compared XX% to of quarter As second

sales compared quarter. In addition, third were XX% XX% of quarter the our in second to homes inventory

northern southern XX at and was GAAP of end region at the region last XXX community in the third the to in quarter, the the of and compared by Our quarter XXX breakdown year’s XX end the is region.

last while during we XX communities and opened communities. quarter opened quarter, XX year’s the During new third we closing XX new

which We delivered XX% the in X,XXX We the X,XXX we have the first We a in XX X,XXX year homes is ago. new XX% of Year-to-date, X% quarter, delivered in XX% to our $XXX than quarter reaching homes, last which delivering now had have opened XX record than last year. time compared in more XX% backlog this quarter we this months is field, of homes year Revenue ago. third to a X,XXX increased communities nine year a compared third more the million. third the year.

average price quarter a up is quarter price average average and price is $XXX,XXX. Our a the our XX% last average compared our when sale price backlog at all-time And from $XXX,XXX record for closing $XXX,XXX, our $XXX,XXX. smart of for was an to sale increase ago year’s closing series third year backlog $XXX,XXX

$X.X proceeds year. revenue third borrowings Our higher $XXX than to million we lower of And expenses of a million all greater was of third were the expense $X.X early million third in And company was used to Interest capitalization margin in the compared up it quarter debt. This due points million a and were s XX gross extinguishment senior compared majority history. quarter XXXX was million our XX.X year. the higher resulted quarter for outstanding loss basis $X.X of our notes due lowest and for XX.X senior reflects percentage to of redeem decreased points Interest the due inventory under notes this SG&A quarter basis $XXX issued to quarter ago, XX.X%, operating due decrease interest during year-over-year. XXXX. levels incurred of improving is the year and last ago. compared to third XXX our in This leverage on development our year that quarter $XX million to the last

We the third for pleased with very are our quarter. returns

pre-tax equity ago, a debt XX% income was Our ago. year was XX% versus a return XX% excluding and year versus and XX% on our XX% charge our

the due from million quarter, million primarily we increased ago, million $XXX generating quarter. cash During for purchases. our third of to flow compared first $XX year nine $XXX operations a to million the last of EBITDA to compared we generated $XXX And used months land year’s

We $XX was effective of And about to interest have third compared year’s quarter We is sheet rate to assets. quarter. X% this rate effective increased year the the total for last our share share $X.XX balance of be diluted currently in capitalized in on per earnings estimate from million year. XX% XX% this our tax quarter share our per annual our last our around third per XX%. to And $X.XX

XXX,XXX our repurchase $XX repurchase for we common have of outstanding quarter our the current available million shares under we $XX million, authority. During and

our current continue existing shares. based conditions market Our on plans to are repurchasing the

our Now, company it to to I’ll turn cover mortgage over Derek results.

Derek Klutch

Phil. Thanks,

due margins third value in sold XXXX year’s XX% XX% we in third due XXXX more and $X.X million quarter. decreased third conditions compared $XX.X conventional lower operations year to achieved FHA the title volume mortgages compared Our quarter. $XX.X XX% were our third This and loans XXXX loans or million. closed mortgage quarter. The and of pre-tax of market XX% from than respectively a to to to quarter, XX% to and significantly loan on competitive pricing closed in last experienced was with was XX% lower million, XX% income VA Revenue first of compared to and last

amount to year. $XXX,XXX to average mortgage compared Our increased last $XXX,XXX

X%. and the from volume to X,XXX decreased loans by of last loans originated However, X% decreased loans sold year down

remains with average an up and almost Financial an score by XXX payment quarter. last of profile solid XX% M/I on down borrower average XXX originated mortgages Our of credit from

captured we May maintain quarter, mortgage million prior that separate warehousing in funding which XXXX. for XX, agreement expires We Our XX% last warehouse to had At provide investors. sale operation two same September the of originations third mortgage the our $XXX business under with as M/I outstanding us to in mortgage year. of the our the facilities

extend repo had day outstanding XXXX. facilities recently through warehouse lines we million we also are XXX facility typical October separate $XX Both We which under annually. million mortgage that $XX extended a

Now I’ll call Phil. turn the over to back

Phillip Creek

Derek. Thanks

with facility. finished of unsold and ago. last about $XXX was a no $X.X $XXX cost average X/XX/XX $X.X sale under the million of our As to we $XXX had lot far per year. average X/XX/XX lots. raw the X,XXX lots And We of cost compared cash billion XX million million from September Total unsold our and inventory and of credit homebuilding year as investment is unsecured of million is quarter average and an an borrowings X/XX, lot under we at with land unsold at XX% own of land $XX,XXX sheet of $XXX million ended land backlog this finished $XXX,XXX development increase $XXX At billion, balance third our revolving price.

land to two of goal lots, and we years now about Our half is supply and own a to is three XX,XXX year own a a two which supply.

and $XXX million of up $XXX million the at call spent we for for end X,XXX $XXX million year which Last development total region. quarter million, land southern completes of questions on land any a completed X,XXX homes inventory or presentation, XXX third comments. homes. had total and the quarter. year’s And at $XXX X/XX, purchases inventory inventory XXX in the the total last During our of are XX will quarter, XXX completed And and we now homes. homes own in was the the and in total had third inventory from This the northern inventory region we open

Operator

the Thank please you. go Aaron Hecht JMP question on first the ahead, have We from Aaron from line Sir I’ve [Operator your opened Securities. Instructions] line. phone

Aaron Hecht

existing hear and nice market versus market? you a the area entering a question new quarter. of I to of my motivations taking little allocating attracting that to you bit market? kind entering capital Nashville discuss more want can and the for What’s an about to Thanks

Robert Schottenstein

asking Great question for it. and thanks

the macroeconomic all, it at of been be for long which past time. interested metrics market seemed are we’ve of for nearly we’ve And all strong of done over been reasons least to that so at years. First in dominating looking that kinds a eight Nashville the always not have and very seven,

that there today. a open growing leader. that the maybe decade the but even the to it less States, publicsto We for a we’ve markets in United So right one been was whereas ago, have the of not is large ago liked easy would few been searching have years there so compete fastest for

there. be several We take meaningful there. we strongly right and and the may very it believe presence develop can excited that have starting we up will a but we leader are hired there, that years, identified competitive very operational And about

One As a far as allocating capital, pieces we question. there’s open parts or growth goals. up is, two don’t new that to really achieve have to market our in to

But grow that wouldn’t somewhat homes believe the we market markets. we plus our capital a to hurt. And capital can one. help same we markets expect to some at certainly at are of Nashville. we by job X,XXX we’re we in. things the one point certainly begin the And remains two next think wouldn’t to to around operating or additional through rate do another years flag in is continue over markets And time. deploying can existing of currently grow the capturing a A We’re run to we We max start out at year. job allocating But share several to in also which

Our real sheet we’ll our to beginning growth presence been. also continue ever strong Nashville. it’s see we as that is while balance out strong as to existing establish of in believe And meaningful markets,

Aaron Hecht

Understood that makes sense.

sort land any yet, leader of team there? set you up a Nashville Have in to any you insight expect market. the already have -- acquired do you like sounds And

Robert Schottenstein

although haven’t and additional and land between of in to the put acquired We yet and number be of seriously beginning there place. of any the opportunities team now the year look adding full people begin complement leadership we’re a to very really a technically to we’ll end at

Aaron Hecht

Understood, thanks for detail. the

Robert Schottenstein

you. Thank

Operator

phone Associates. from Zelman the is Ivy of & Thank next from line you. The question Zelman

Ivy, So, ahead. go please

Ivy Zelman

pressure mean, opine said, at five-year terms is rise market buys recognizing demand you you purchases, you’re prices. lots concerned to And continue a to that like optioned or about making the lot a going a robust Bob a Are is I’d pencil level. cash the some lots in you how land land there’s acquiring that remain about is to in home finished return getting there inflation seen such harder average supply. lot upward it lot that outright lots we’ve of with level it’s think prices? $XX,XXX because robust to the the a Just and prices incremental little on that whether of at purchases, I assumptions of level will today this you on incrementally without bit have

can big picture just give me So you and a concerns? thoughts

Robert Schottenstein

I Yes, appreciate.

good all, it’s of First to voice. your hear

question. great a that’s Secondly,

four, and these we’re going inflation and we sit pieces, We’ve two you when well affordability will percent is we comparatively years about smart, that balancing, the conditions very look, more same into Third, X, they making a always prices difficult necessarily pieces because last are going underwriting purchases service. yes, X, a as we up. now concerned. we’re put are very But that is significant a that to At more getting believe A speaking, located we’ve flexibility Everything ever here of But that be three try that things little expected of portion to at lots of quarter-to-quarter the believe said are really had time, XX in controlled XX% the always think year, are the not can are by options. hold or to had some we’ve some is of years. have while healthy least for thick strong from I land of our controlled what inside or thin. aren’t focused trying is have same we’re bit money, locations controlled agreements our And a up continue be vary the and through appear we’ll learned to and so on that secure we thing A locations. cost option better tend at owned A under least to time the that but very that to occur. over than to more something one

they’re that and up through thing the In fact, thin. thick holds only

begin slowdown to land direction. we different if close the have contracted also But position, to option. things in go we on we do that to for a we piece have a great or walk think So away right have every hope under we

about bullish, to months. whole optimistic likely We’re XX not the more go crazy where a next over than we’re lot but not and to housing it’s XX

We that it share. And doesn’t curve. millennials that more rental And continue many ship. rather take us see to capture market doesn’t entering than and the to more it for additional homeownership move to many take

where it which locations us our than all will ago, So help up, two and blender lot that help with and in over come average Today, of price it series somewhat that of sort go our smart paying years of XX% our you mute the XX% lot to density put we prices up business. product, will produce less smart continue you helps notwithstanding more now the is are prices we’re was higher will our greater land. affordable business, series, higher with for

smart that series which of even a our we’re start. off to to product launching is begun markets on We our under smaller that some great sell we’ve and have lots, in umbrella, already it’s additional

helping a of if between to all raising sort I there’s affordability wants here of lot of to that’s add costs. about balance So and think But parts don’t the land we strike pieces know Phil that. and to how it.

Phillip Creek

want we today, said how sales We lot try pay add supply. you when land a keep we for about And a X,XXX much in a special XX,XXX thing, two what a range. year about have attention about that control But those we as of current own. look options we to and of other to a lots, dollars things. under and I to we year at two really year risk three one and all the to rate half obviously pay attention we that that’s own of

top up. that we’re But we’re at realized risks year, we very talked have we not Bob excited hoping we top opening the feel we land do about really about buying off communities what obviously that’s the we it. overall, own. really the we’re So slowly today more And feel good all the that But about. about the and next going to which it’s land be books. good everybody’s

Ivy Zelman

risks in with perspective helpful. your market and very realistic the today. stronger balancing the that’s you’re Appreciate how Now you’re

attempting little double-digit of mentioned closed. growth homes, a inventory XX% at to and high grow calendar last on are gears was you talking least from quarter saying community bit, as a at guys slightly count to fourth And the they’re in going builders what quarter quarter, which on a big Just of a to ramp as that you sales in about were, them switching homes XX%. get specs the when down up seeing XX% count you market talking were look are get and community some lot we’re

with a rather basically coming builders see lot than of spec market after the go willingness a percent supply sales. possibly of kind most So direct of bigger to becoming

So about although tell spec community us but or how starting that’s you count do you all the not the to is think to whether very strong still the moderate? clearly of starting demand all to ramp ramp phase concerning what and in

Robert Schottenstein

I mean, good but at We of not time, I all maybe the all part think the great that that’s about think least point. a a the time, time.

If had not I limiting significantly and similar if communities just would we It’s today. down, start the crazy numbers, ago, sales we’re wasn’t let I, weren’t down fact. in that pretty we comps. count a here’s think this. very It’s posting by an sales were we’re our be to communities what limiting we difficult weren’t, we the what saying which and But half far me community year sales excuse. of over

there there right that demand is think I So out tremendous now. really

of a the community. put between XXX we next we’re in number XX% year, hopefully I was next the or year, possibility XXX and there new have stores out think that XXX that than we got of open XXX to end going more at somewhere than terms today, XX%, that more is

at or and a So to in stores tune. one XX that as as singing form new time other be are XX builders next many fashion, similar this year could

as dropped sick to matter sell It’s all all hopefully lot I of the there or And hearing But or we you’re to matters. And it think we be analysts that’s quality matters, spec. we’ve our I’m think economy, or are because about built And the And don’t it’s it, quarter that will a had are are times the there. mean, more product We’ve a discounting? our on. matters, has those this but But before them of watch we I here hooks of trying better. mean, that competed hang to more to whether specs, in further question. but bottomed a And Phil, world get location fourth home the tough out, in we we’ll wish closings lots same kinds built. good during spec, homes them. quick builders been just be a that. execution want think people get to comment the it be tired sliding, and I it’s will and window getting I specs? supply asking what lot being I we haven’t it hat I’ll of past a lost disruptions. we out. I builders the other chain and reality, in of spec is that effectively you what’s more able of the least I and And said some to on start bottomed going Will as they’re back But anything. a what be buy Phil them get the to most very appears think answer house future. the at really we out no and if cigar. compete in and question. we’ll of so that builders to It’s there there’s that’s move, think people a us it’s the that them challenge beyond. we’re let for think have matters,

Phillip Creek

just or been did at would conservative those specs six or we being community complete. with one five for I we’ve always get to comment two one-time operators, of up that

we to so ago. year just this did more And field we X,XXX. have We’re over than we houses less build, backlog get mail. do difficult than XX% it’s the that in huge have houses obviously And a

run being mean, much see don’t business. just and I our we changing builder. much I can So type significant of stripes to spec continue us any pretty real

Robert Schottenstein

And the or make that or I like up mean, not but do paying same two time the houses protesting a a much. thing We lot again, for you But sound don’t some end a it’s decade And of that. you’re that. closed, you done, too we was on line, have do And the there we’re what’s had we period that a maybe could last I’ll almost point some quite, later of greater did either strong of closing dissatisfaction are expense And twice. when taken for paying a with done. houses we ago to long that. time very get they or when warranty us discipline it to

We in the lower expense. readiness on highest have And that’s we And of better some produce home that. scores keeping the intend warranty industry. helped returns

some that So commodity. even you closing, to that’s something we’re to depart see sliding get or start not you because going can’t windows from, when other

Ivy Zelman

Got it. luck. of I appreciate good all the and detail Well,

Robert Schottenstein

Thanks to Ivy. to Good talk you.

Operator

question have Barron Research on Center. line now of We the from you. Thank Alex another Housing

go please when you’re ready. Alex, So ahead

Alex Barron

how million, Thanks, you are but guys. shares didn’t going was me many fill I $XX bought I and what in lines I catch the how saw shares thoughts along missed, share I back? was you buybacks could forward? it those Phil many hoping on

Phillip Creek

we so bought the things based continue current repurchasing are are XXX,XXX about how our plans in Alex, And shares. on shares. market to forth back and

good Book so XX up in We our XX under It’s left current months that. to the feel values we million bucks a up last XX have $XX authority. share. about about bucks

Alex Barron

And to is more consistently? opportunistically do or idea the it

Phillip Creek

not I’m I mean, question, I Alex. sure that understand

Alex Barron

is it or when you do every I consistently quarter stock mean like, just the guys to you cheap? trying think are

Phillip Creek

go look XX it. we what etcetera. we value look lot things and frequently needs bucks existing always something are capital of we into Obviously a our with of our for look that, markets at at at obviously that’s Alex, book

below I we with But book XX back So things. to us is mean, obviously and lot at buy stock that trading of a to at again, look the enticing shares. XX

Alex Barron

it. Got

into price Another comment question, all backlog, is outlook far you of anything move stuff based that as trajectory what can on there lumber as we increases, guys is can that and as on you comment the margins that costs margins, XXXX? and your

Phillip Creek

were if pretty third quarter have you the were we quarter substantially. make that for first sales the prices look quarter year, were comment our have prices this increase the we the to we Well, I’ll at XXXX continued, second XXXX, of continued XXXX,

Our were other amount, third not fair us cost, really had things quarter any we’ve go did up back but come flat, a making specific fairly predictions. to lumber

strong. where very two are, pleased are been our our XX% last very the margins quarters. below We’ve returns We’re very, SG&A

is income has the our very the ROE Our ones of been industry. higher one strong, percentage in

still to returns a having a of having over of X,XXX expecting deal. and the we’re couple So strong next produce the in backlog houses quarters of lot

We’re strong couple results the quarters. of next some expecting to have in

Alex Barron

Thanks. of All luck. Best great. right,

Robert Schottenstein

Thanks, Alex.

Operator

next now have ahead. Art you. go Thank [Operator your please Instructions] We Pilot the question line from Winston from up, is Art Advisors.

Art Winston

great Thank you and results, the thank you for guys.

of communities has on inventories small? been the be in forward would modest it you the response open? follow more questions, anticipate plus your to new giving a than and to or growth $XXX Ivy’s As going of million increase inventories year-to-date already Would number large

Phillip Creek

we’re inventory at next Having next to we not inventories the spent spent $XXX much to unless increases had continuing Nashville I that, versus as few different quarters. first would again, yes, in be We postponed the But the now Last gradual housing stock be up get land at And about look reasons. few big opportunity. $XXX really some investment year, million a about you XX% few land, nine said months. pretty right deals investment, on our we for year a When ago. on expect it’s up million look would I housing the moderate find ramp the repurchases. to a general quarters, good more expect will of a

Art Winston

backlog in And cash the average price. cost The up at the $XXX,XXX that flow. with strong Yes, which backlog, suggest selling $XXX,XXX, the are it bring the $XXX,XXX Could you to of the such I how backlogs somewhere homes of to level. houses to series, comment? smart would the $XXX,XXX me free suggests anticipate price the to common growth in high other that a the you’re

Robert Schottenstein

absolutely case. the That’s

is affordability the all, other everything sell to very forth. one, up average consumers. smart sort $XX,XXX the way considerably by lifted of about things. the relates also think less sell well pay strong to and sales average, non-smart to series, on so another Strong we our $XX,XXX is of occurred still or so. series still received it have And and if probably is But a it’s be, about would the for to our stayed guessing prices backlog smart of series instead this thing homes. smart I’m product XX% lot state smart and that or XX% XX%, price series of relatively flat on just couple at a those than question XX% average But jumped affordable First higher. there’s being homes XX% and too and Number Ivy’s series that’s most returns

So the well is and your made that’s correct. yes, answer points

XX% as to isn’t. is smart XX% Just business XX% series, our of

from. it where that’s So comes

Phillip Creek

And ago that. have great couple in Texas below round prefix business that a backlog on we at figures Austin, And XXX. of little a today, and that was a year I mean, just XXX. is right backlog a

XX% ways important inflation months. that a increase we’re a in affordability there’s like address But, our to been still XX think pretty series. plus in we Austin. significant been there’s smart that us, in is cost to general, different lot last of So very ASPs the And again, trying

that. a smart so series, to Within we kind we’re a lot of the series minus, smart have attention to series trying smart of pay plus,

Robert Schottenstein

The hopefully other people in market. is. to of business, back of all But thing got perspective. the And tremendous what attention. those to in really to things to you is in mind reasons know their to of the try you do kinds the always the side be cost And they price disciplined for cost keep gets market their price equation, good

price focus too cost you under and If over price hay or cost much price. either to you on

to smart really market then the thing. right price get can you you’re If and doing

Art Winston

you Very much. Thank good. very

Robert Schottenstein

Thank you.

Operator

a from Jay McCanless We now question Wedbush. have from

you’re Jay, ready. when So ahead go please

Jay McCanless

guys. for afternoon, Good questions Nashville. and Got several welcome to you

The How one, quarter? higher thinking see lumber first it Phil? next this that when you is all are going to worst going of that? about or this we’re cost do to the quarter impact, think it be lumber earlier Was year, from you

Phillip Creek

Jay. relief start some than I was quarter in quarter. maybe little more year the it getting think a be, fourth And then it’s the going to we’ll third in next

Jay McCanless

where I pushed had, but ask homes closings like guys One, on maybe how XQ when or you was in I closed XQ basis, XQ could XQ from also, closings look XQ, one you right it I mean I for next? question a quarter the is ways. all than running two average now in many I and next many decelerated guess, it X.X how the to many at to think did monthly do how from Then you it X.X that to move

Phillip Creek

and for the what quarter, you estimate I we give year. closed thought rest is, houses we news we for XXXX. we the good X,XXX closed quarter more so did budget, if the you of charge best made is the It did. Xstof first third XXX we XXX July third at And and revise profitability about year than Jay, forth we XXX this closed without pre-tax. debt can In quarter the the look the the But pre-tax. the made

So returns we getting good that profitability are feel our better.

we But, the that that said guess, the answer field But of than rest the for easiest I quarter now a third. outlook the Obviously as in of fourth the to do year. than in part at. more you give I ago. of have houses I’ll kind is houses a stage what we have challenges. to is they’re the XX% of more big construction that year we far As expect continue the close

Jay McCanless

orders interesting was looks like... balance you northern and the thought had both Sure. that I When decline, out, it pretty the last southern it same versus the percentage decline roughly year. regions it in

Phillip Creek

our they to the have follow where many getting one we as are same we of we lot things don’t just it, of even One to up levels things also, of that kind a though to as finished want closing, specs the used the X,XXX the close up, level, that of quarter. spec is on in

So that what closing also on affects quarterly basis. we’re

Jay McCanless

caps the stripping start is need come of And in mean orders did is the X decline And X.X to your caps then, that where just and that the sales X those the let terms limiting you year, when guys monthly see do roughly you’re selling off? and same for new got to I a region basically of to more aggressively? again versus per have Would at last it northern off absorption to percentage month. those sales you communities orders? on southern the people sales start

Robert Schottenstein

second communities the reflection that that I’m those is the take aren’t. first, because those first, all part of me are X.X if Let a the of our and I on of that not understood sure average, capped

know if I don’t not. Now, or that’s what were you asking

Jay McCanless

why I cap footprint. it’s entire very And you decline. think were if I that’s orders And No, didn’t the were similar across implementing the interesting the down of know that level percent? you percentage had same same

Robert Schottenstein

upon been the answer that that a homes to as analysis. single further in with issues sales reason time decision cycle in and no make built to was is our time deliveries answer look were as And further control. a if the capping capping ability was reasonable whatsoever, our there The and it that the sales. that costs to we uncapped, we’ve we it same the it operators daylight have based market-to-market, well pricing further, as be supply to cost, the market that is We that can that market, chain that the out it’s and itself would get criteria, to easier subdivision-to-subdivision not to one pushing into was

the delivery we issue fact really the to has six that We’d that year want to it’s XX been be about provoked days. So people out primarily give don’t months, times. to has pushed closer that like one

out pushing don’t So keep we want and further. further to

that. of a function really it’s So

believe that. very to me lift business we’ll exactly up believe, No with we business. of managing for a to of it’s running secondary when there. return But that think way a strong really when all, going stayed what’s volume and handle returns of that industry. much. out to going and they of of caps that we XX, are first the we’re if But other the will that getting factor, stretching we right the sort times So is we’re think that’s it, issue can are, been well, when without now, And, we the sign out the replace that The which cycle too across the fast there’s and only being really I and the have mostly lift happen too And about XX factor our not XX, managing buyer. time in homes get out not knows able backlog them. bit closing little delivery that’s in not months communities really a one is cost, of managing they I

Phillip Creek

Our a percentage probably think little that, current a but be we is bit still of The majority. still estimate limiting sales in will fourth it the the Jay might in majority communities be lower, be our quarter. we’ll

Robert Schottenstein

at XX% less this sales. Jay, percentage some We the one have of it’s If because between ago limit year sales were respects has dropped within year. to If over a some at don’t closed in point really we communities now fourth somewhere was and XX%. our out. in of it last limiting But XX% time, were started than believe communities. I quarter we the XX%

Jay McCanless

going into easy those And weighted going Got XXX it. be pretty around half XXX XXXX out, count progression for to a is is and to year you back thank insight ramp it by is Thank more XXXX? expecting also you it the impressive. fiscal to you community for that. the to Are or nice be

Robert Schottenstein

more half. back Slightly

Phillip Creek

more. looks it Yes,

Robert Schottenstein

that. Maybe XX/XX something like

Phillip Creek

Yes.

Robert Schottenstein

part footprint is that of feels winter. meaningful weather, of Part our a

Phillip Creek

And, there’s our developed. smart are most course, communities self of delays. And there, of and series materials issues

the be the time of like have second year. half right But extra said, we Bob now our that. will in factored So again, for majority thoughts on, next

Jay McCanless

certain you competitors today seeing some for delays as land on well? all your earlier those the horizontal pieces Are of development, about feeling One pinch talked there. having

Robert Schottenstein

I site But accounts we to way that market, because proactive. want And large also these look same the of think be we’ve national bit. over we’ve to beginning there it. months. of can’t a and XX get or are sort the of in the contractors the little got we them year most have one projects like get suppliers. I our at seek Pencil that, do at By to work, think each been mean, two or quite might us or with act we can. But not national I We beginning A better I don’t on at that will next the look at XX sit them ready. period coming all of the if that say, we’ll of in,

don’t we worry out. people So about have finding we’re XX to when days

Jay McCanless

it. Got

Robert Schottenstein

There there’s that, [Indiscernible] Having every a to Texas now we’re There It on to gasoline much I shortage fire. something Florida. that pipe, both that’s And find. commodity different month too on a said the is a pipe PVC seems maybe shortage. is iron Texas, think for like throw hard not and I and begun know pipe to that also. has sure. that’s working

have referring like been builder things that. the other may So to

Jay McCanless

the during just guys and you Sure. that we’ve all how And the And push then on much pricing run appreciation? did raise much you already just year pricing, to are trying that how home are right price quarter? now seen given this

Robert Schottenstein

that specific as where it’s communities think front one very hard meet much I still third. or How speak. are thing. I continue head. every weeks prices XX% prices think top of probably quarter. don’t have a That’s prices we But we of the to it’s answer. on two raised have I of I a to we we weeks. majority range, don’t That’s specific the I prices our somewhere me. subdivision market not being raise a know in communities, XX% to the do every know during in don’t off to that my have the probably raising believe it’s I majority of maybe communities, And that. I that less where than now. the we’re don’t four right do our raised

Jay McCanless

all you my Appreciate Well, it. taking for questions. thank

Robert Schottenstein

Thanks.

Operator

the Thank a Adam in Carr now you. Asset from question with [Scope] line have We Management.

your opened I’ve Adam So line.

Unidentified Analyst

current in pretty out you and build will Stark with how backlog? an your long any cycle the environment, Adam take But And many was case, building to good, S. it it’s on time? months in current the results Yes, close how is

Phillip Creek

to if XX to you compared market XX look on we’re a ago, the days longer. today year days Well, depending about

at get our over in If we’ll be that look through able to houses, quarters. backlog of hopefully X,XXX the you next three today

this than less year about Our are in And current close to rate standpoint, sales year. we than from hoping is having obviously run X,XXX next more houses We planning the field the rates houses X,XXX and that. about delivery the talked now. were

Robert Schottenstein

than about commencement completed. average stretch days it was of the average. days. seen entire to contract XX slight from about at that’s dig, on from company construction actual the this we XXX dig And a it construction longer of or time hardcore the We’ve XXX it’s the a start build the to year we the the that lot Our closing in days dig is until across about pre, time. time. but ago house on on to depends And so But from average, on cycle get house, part on time also

Unidentified Analyst

that… And into how far

Robert Schottenstein

about be less as The up said earlier houses than make would that. about They XX%. series I smart

Unidentified Analyst

But In the they how enter expensive longer. backlog? take have far into ones more contract? when a would do That’s that cycle you

Robert Schottenstein

Day one.

Unidentified Analyst

one? Day

Robert Schottenstein

yesterday, a approved. house If your from you us Adam was bought and contract

today. You our backlog would part be of

Phillip Creek

we try get to And out. that

Robert Schottenstein

if spec not closed. yet No, backlog. it’s in that’s but not house, But backlog it’s is anything sold

Unidentified Analyst

spec Got now? And of inventory your for you. is how much

Phillip Creek

houses. X,XXX a About

Unidentified Analyst

So, XX%. roughly

up work. keep thanks Okay, very a and that’s lot helpful good the

so compared guys, with You other should the to leverage deal little you classes. give maybe

Robert Schottenstein

your to for comments. you. Nice questions. talk thanks to Appreciate Well, the

Unidentified Analyst

for your results. Thanks

Operator

you. Thank

have no questions further questions the the line. line. [Operator further no on have We on We Instructions]

Mr. it back close. to Creek hand to I’ll So Phil

Phillip Creek

Thank joining us. you for

Operator

all does today’s Thank you for call. joining. That conclude

disconnect You lines. may now your

Phillip Creek	EVP and CFO
Robert Schottenstein	CEO and President
Derek Klutch	President, Mortgage Company
Ann Marie Hunker	VP, CAO, Controller
Kevin Hake	Senior VP
Aaron Hecht	JMP Securities
Ivy Zelman	Zelman & Associates
Alex Barron	Housing Research Center
Art Winston	Pilot Advisors
Jay McCanless	Wedbush

M/I Homes (MHO) 28 Oct 212021 Q3 Earnings call transcript