MHO - Earnings call transcript Q2 2022

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Operator

Thank you for joining. And welcome to the M/I Homes Second Quarter Earnings Conference Call. My name is Lisa, and I will be your value specialist operating today's call. [Operator Instructions] I now have the pleasure of handing the call over to our host, Phil Creek. Phil, please go ahead.

Phil Creek

us. joining for you Thank

Ann Joining me CEO Legal Bob our Mark Mortgage today Derek Chief VP Accounting Officer; the President; Susan call and Company; our and of Chief VP, the is Hunker, Krohne, our Klutch, and Treasurer. Schottenstein, Kirkendall, President on Marie SVP Officer; and

significant issues you we Fair material during consider Regulation address you are to you from We encourage with to call that because non-public ask First, Disclosure. any directly. prohibited discussing questions items regarding this

forward-looking today's to to any call. over With everyone also statements As undertakes call. I statements, remind turn company obligation to I'll forward-looking Bob. that, to the this no that want forward-looking about made language to Also during statements the that any it be comments applies press this cautionary made during contained advised in release update

Robert Schottenstein

everyone, strong for today. is market Phil. XX%. thank million, very our a At Thanks, earnings ago in year a of by time us These and call conditions, of $XXX.X a and improving afternoon, rapidly changing a than increase XX% record diluted quarterly quarter, for had our equity, to earnings net Good on better you highlighted we resulted XX% return share. record in per income joining which

X.X%, second our ratio which SG&A of Our of gross revenues basis a improving basis margin pretax and all XX.X%, increased a by X% billion quarter to with $X points XXX record XX.X%. to to led margins improving income points XX to by

contributed with of for our Financial million. second income increased to X% also a Financial, $X.X at $X.X record billion. XX June backlog segment results pretax M/I the our positive value by sales Our quarter Services to

and combined began both in unprecedented of housing continued a Traffic our saw of experiencing with certainly both affordability. levels and with we of and impacted in rate declined from robust inflationary drop-off the in all online the in clearly demand, quarter, traffic the as XX-year throughout sales. XXXX. foot This has and pressures concerns XXXX moderation we mortgage demand the the has overall During our models rapid traffic beginning rise result noticeable

sold during that quarter. quarter, decline second the a during sold homes we record from X,XXX we X,XXX XXXX Specifically, of homes the XX%

the prior be were on homes year. the X.X per fewer ago. decade with average noted should well quarter, sales sold During at we second In community, it the over X% we a second last operating our last quarter that in ahead than any quarter, of communities pace of the year exception monthly

and line be which homes, Series, affordable our to to Smart is very continues contributor of our most performance. Our successful a sales leading

margins During Series compared gross the to comprised sales our to better year see better quarter, ago. better cycle our pace, communities. we time sales company-wide and XX% roughly And of continue a sales XX% Series monthly Smart Smart in

Now Raleigh, Charlotte. performance all comments I our markets. Minneapolis, Dallas, second provide income Tampa, of from some particular will on contributions from divisions additional our We quarter, coming substantial Columbus experienced the with but and strong in

Northern of last XX% from last consists six second which our as for in from deliveries year. Northern X% of the increased markets our we region. XX% region, communities the market decreased our year, Deliveries of discussed XX% out that South, which year Northern contracts by XX% declining fewer the new given operating region as well nine by However, a Southern of quarter decreased from deliveries decreased are in region, of conditions came than the region the consists the in and earlier, ago, other the by the markets. in Southern XX% in

XX% last year compared Southern are of Southern the remained our lot controlled level and to and Northern same lot the region by increased at controlled the year and position XX% lots region. while region. are owned and North, in last the Our owned as our in XX% position in in controlled owned the

sold the through faster count communities over addition grow of record XXXX further last expected, XXXX. in than have a in we of communities the While and track we somewhat balance number in new year, to our to are open community on

We nearly have single-family lots X-year XX,XXX of X% year-over-year the owned supply. controlled region. via total, Northern or lots, which an owned total, own our contracts lot approximately supply. an roughly the top On control lot position. to region, excellent XX,XXX in or and land we roughly equivalents, lots lots. Southern the XX% approximately Company-wide the in of is a this option increased we In X-year additional lots XX% a owned XX,XXX Of are

almost of us gives pursuant market own demand that to react which to option lots or control the we tremendous contracts, individual controlled conditions. and in Importantly, half to changes flexibility are

with to the on growing uncertainty conditions Homes in remain call extremely Moreover, number me solid persist homes turning some undersupply let said, Phil, comments. an to condition. is Before challenging a few macroeconomic housing a closing is demographics. head likely Clearly, M/I over That make very fronts and for market and times, financial we available long-term more time. fundamentals there choppy into excellent are of favorable as of

balance of $XXX Our of ended of as ago, outstanding share, on an year ratio of borrowings $XX zero our a of billion, debt-to-capital $XXX it's the homebuilding credit value million, XX% per sheet book cash been. as the equity with facility ever and $X.X quarter XX%. record over million strong is We increase shareholders'

diverse and and backlog, well communities. given to believe well-located product Looking our Phil? of ahead, low are balance very strength times, uncertain positioned the we changing these manage our our record our through offering levels, sheet, we our debt

Phil Creek

Thanks, Bob.

and second XX% about financial are second new as were comparisons the compared down XX% buyers second in XX% to and April, June, record year's profile, our quarter our our these sales. first-time down May in in down contracts sales last of results, were XX% to year's far XX% To in buyer As quarter last quarter.

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

second Our region. region quarter in community of by year ago. count the to a XXX XX breakdown end region Northern the XXX The in was compared XXX is the the at and Southern

new XX XX. closing while During we communities, the opened quarter,

we during last number and communities of opened plan second down quarter, new communities first X,XXX half. this and XXX to year, of first XX six a new opening versus year's opened and we the In started last the months closed This During second XX. with when XX% the year's of year. X,XXX first XXXX communities. started quarter, quarter, We comparing half about new ending communities in in year, year's we second on XX homes homes the we last record slightly

X,XXX versus the field had ago, a field homes up X,XXX As of which June the in XX, in year we is XX%. homes

were was $XXX,XXX sale time quarter up Series of year's closing and was record price XX% an up cycle in quarter year a the Revenue our second is to compared Our and $XXX,XXX, first for the our cost all-time backlog increase last [ph] quarter, Backlog versus billion second from of Smart flat second is the and when in our average a price $XXX,XXX, reaching $XXX,XXX. ago, construction average X% $XXX, $X XXX sale second average increased our slightly. a quarter price XXXX of the quarter record overall

basis XXX points first Our XX.X%, over second up up quarter the gross year-over-year XXX points quarter. were margins and basis

compared our were We're with XX for ago, returns increased of interest the quarter. revenue, quarter pleased compared second last for expenses very our quarter to slightly a Second SG&A improving expense basis the points X.X% year. and improved to year

Our was pretax on return versus XX.X year, last income was our XX.X XX%. and equity

quarter. million the last to compared During $XXX $XXX million generated year's in we quarter, second of EBITDA

of capitalized million $XX balance about interest assets. have We our X% sheet, on of our

second quarter last Our in effective year's the tax compared in to XX% quarter. rate second was XX%

diluted leaves repurchased first of first common us X% authorization. XXX,XXX Our earnings up $XX our our we shares shares share year, million available we $XX last at $XXX $X.XX million have repurchasing shares. million increased $X.XX in per year, quarter share in stock, $XX with of per our under the last In XX%. buying And outstanding second repurchase back in for quarters, of this million and four million, to This the spent the the $XX half from outstanding quarter.

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

Now I'll turn to results. over company to it discuss mortgage our Derek

Derek Klutch

Phil. Thanks,

closed business. $XX in conventional achieved purchased pricing XX% $XX.X margins record XX% due XX% compared the volume XXXX's and average title VA. The on loans million second of were the $X.X significantly continued in first mortgage Our XX% compared This XX% XXXX's for mortgages for of with for quarter. last loans loan lower to from our was quarter to due FHA to second lower XX%, decreased a the operations compares year competition of and respectively, with pretax quarter. Revenue to last or XX% and year. value to quarter million second along income closed million to sold, and

in increased amount second year. $XXX,XXX last mortgage average Our compared to $XXX,XXX quarter XXXX to

decreased down to However, X,XXX from XX%. while volume XX% last loans was loans year, originated sold the by decreased which loans, of

Our borrower payment profile $XXX. score an average of with average credit of almost XX% solid and remains down an

our captured XX% compared Finally, year. in second the XX% business our of to operation quarter last mortgage

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

Phil Creek

Derek. Thanks,

with the facility. unsecured As ended cash balance as our the far $XXX borrowings and balance million credit sheet, we revolving a quarter second of no under

strong million, XXXX being XXXX. year $XXX and at from very June backlog our last homebuilding available an capital senior Total 'XX of higher was and Our notes our of increase until bank line increase. this $X.X XXXX is maturing XXth, with in structure XX% inventory million our with

is $XXX XX unsold year's we June billion under of on to ago. lots. was development quarter. for last $XXX finished a land At $X.X of we slightly Where quarter, land million spent $XXX $XXX second and $XXX at year raw million on purchases of had in investment compared land down XXXX unsold and land which million million, June million from $XXX Our million a land XX, development second and total

XX,XXX We position lots at XX, XX,XXX controlling and owning land lots. June have a strong

XX, inventory land. total X,XXX focus to had a we the end This questions. We completed had open the And on inventory region. quarter, the XXX the region now and continue XXXX, X inventory supply XXX homes. XX XX completes inventory presentation. the at XXX our homes. Of June completed total of to homes for owning the and Northern We'll total homes, in we Southern year any in call are of are At inventory X

Operator

Thank you.

We on the line you Zelman are from now session. Q&A live when Instructions] question a ahead ready/ go Lederman [Operator Jesse will Please Associates. & We have the of begin

Jesse Lederman

question. my taking for thanks And results. Nice Hi.

Robert Schottenstein

you. Thank

Jesse Lederman

lumber You a in gross you mentioned drop margins. months in reflected quarter from expected away roughly six being last your was that

XQ, were sequential large pulled there forward if So impacts I'm given considering? if we just the the sequentially be to or that was more wondering should those strong rise in spike

Robert Schottenstein

first can and maybe that then add the detail. of little a part answer I bit I'll Phil, more think,

say, would the we're of the a in a not the most the closing Clearly, has beginning pretty majority drop just of them, that in we're think I lumber quarter, to homes margins. during sharp been I did see our now in reflected closing reflect what lumber. decline - vast

if So go-forward benefit that that the of a we'll I most want that. to know some get add Phil, basis. - anything don't I you to think of benefit on

Phil Creek

very, Yeah. just The to margins very predict. are hard

felt We be benefit other half. a lot have getting going in Again, from are will the of still up. second been that lumber. items But

also are about and anticipating course, a cost might probably - are we'll interest of locking few we specs, half Of incentives our there. maybe who do knows of sales some to buydowns, what things to rates, perhaps be have

to can. obviously, we're it's doing margins. very So all But we just on focused hard predict

Jesse Lederman

Got it. color. Thanks for the

about are is you you take the next how to lots Are contract. deals? option you you may in kind any of those question contract thinking re-underwriting next some regarding have deals have three under months? of six to down And under options Our

Robert Schottenstein

to as locations. Obviously, approach of the not. and And question. land better big market And things moderate. get when when has Great to changed you've in not both premier focus will goal picture, is when is our our got react and and conditions things terms change, that begin to - towards secure

is option than is conditions development. we Our of continue. to process will may supply of is said goals to close, control changed. the have being X [ph] the Those getting the it was the if because to change to instance than not and to rather at almost to conditions and ready engineering to where every were own that X keep not Quite existed those goal year time. a time at And would last go the buy revisit any X, almost revisiting that. the months than before the ready and or contracts finished often, pursuant year, more year half the in our any on more before, process ground NSD more are a applied take rigorous close, that, one through year given goals lots underwriting get possible deal risk the pull assumptions that on to in is trigger goal with before, further deal the half, all roughly deal even we altered and approve entitlement we're underlying metrics routinely, ready the and XX, approved. will XX That on we an reviewed today then Having

acquisition obviously ball risk over a doing are than of to lot - of you is all deals at X Not were still seeing discipline is very stay like make takedown seat, but period. applying occur X the re-look But do year if X, for same, assume we not our this case, what in rather you XX of we X, at take tomorrow we're development relatively the which price, some things things would purchase the different extended light one to we lots today and that re-looking XXX sense. if and affordable So to believe know deals and is we time. what each better, may will where are believe get I what a the and hope in period the for everything at of in a of finished

We have of out. well, coming great think recession. has that the us I flexibility manage year out, this quarter year way been able quarter since in, very in, And to served out

land to to we half position see If not in. right up few, half X be from you pursuant And had than do X, good we've our contracts. the position away while a last very that back the tied X, of walk over nearly and option I was years, think that's more look to you'll to is have so,

Jesse Lederman

quarter, I how purchased it. I'm know lots Got limit at that of you follow-up. lot to that of last out? just, about XX% one your the you exposure, perhaps is self-development that quick for were Thanks changed finished that a has percentage mentioned all And may, trying breakdown wondering color. if towards lots shaken if if you're raw. all kind I

Robert Schottenstein

No, Yeah. a question. great that's

that We're to that is in and I throughout of market. long and land trying the well shape. to careful think development it just slowed all great the is see markets supply land of household another for that hires. said, in long expense, what's term more not careful we're being of down. happening prospect being in fact things term, expenses. operate have believe housing. housing. our careful That firmly stabilization the We the that company depends will as provide We believe there's acquisition something as with tremendous ownership more We're momentum with blind formations new We're of more we with being home

shared weighed homebuilders, view, within within that the think most that I a is widely have not economists pretty but just also in.

we're But to So careful. going bit, little settle that things over a term time really long good. look next we think things until period of out this more here be

about record which in is the average fact to in X into opening time, land and probably started up half before new at when to years communities back reflecting prices right X months put effect at prices today X least not stabilize. number or we're of good excited that Our were prices contract that well prices of now ago, X on vintaged, a ago the all year, or very of position the

and we're per today like we a also communities. X, but we they're even coat. they So X% XXXX, demand underscore reminiscent X.X underwritten, to rates, was We're when than X than face paces about exceptionally X% rather X.X to don't demand We I sales a of And X rather more we're want excited were at isn't robust, and open I much more better near the I sugar the and well new seeing want is dead. saw sell. them And month too, pace that still excited and to the of in items believe 'XX our 'XX will operating but think located mortgage get in when to per sales month. X the

think resetting tell. a are only things I way will but And so more time right now, normalized maybe that in

Jesse Lederman

questions. taking again the Thanks congrats on for my And results.

Robert Schottenstein

Thank you.

Phil Creek

Thank you.

Operator

have Thank the McCanless you. the Wedbush. question from line now from next We of Jay

is Jay. line open, Your

Jay McCanless

taking guys. Hey. Thanks afternoon, for Good questions. my

Robert Schottenstein

Jay… Hi,

Jay McCanless

have on was first at, to levels, to actually was your back levels you the We've heard interest Bob, XX of So on up. that going depending question rates July. what my points coming from pick be look some down activity that with almost started competitors basis

to maybe X.X markets country? are some than a much Or And high-level that weaker your may there pretty across that be July? you little commentary So some if absorption that all are on others? stronger on could X.X is is the give or

Robert Schottenstein

are market. want little a Well, know it's ourselves. Having of or housing sure Tampa question sometimes, markets remains a may and whether to maybe That's red with the that's that a if not answer for market and builders that hard a weaker bit said X appears to years pressure which really Seeing for than your with still we're a strength strength stronger resetting that, too. I in there that operation last which are of most hot Dallas, think I little was largest little really conviction frank think know others, macro market in really the slightly under to good the more the some country. more be Austin, always

a And May let April, went And to his bit is a You quite looking on. got July several we bit in know, in I the face, were with little But in comments, worse Sales by more just out any about think say of spring we limiting July. virtually skyrocketed don't but more of X a years more things as June. March, down then or there through from first this, in build just in May I was there little at beginning of December, Homes least that season, don't demand in - smile hit me after no one it of COVID June every be and was XXXX a Phil rest quarter almost May. you and other and - whether I XXXX, just every starts through that pointed as talked almost think the XXXX, I seasonality May like give XXXX, communities, like was And my April say was than all sales our in and mean as past. with the last in no all guidance on the snarky. and bit M/I forward May, of selling in

the historically, a July seasonally month slower. summer that been months, think I has things have particularly where been

returning. some I If is. that's it that seasonality case, like seems it think of is the

I maybe that buyers and bit competitors, of some is wrong little know, by has how use buying - want that X% range, X/X% getting used of incentivization that don't little known think to are our see X and it but happens rates probably now are to we've to we'll the there of think too you rates with we'll a maybe settling impression, down, a starting this [ph] bit I least into little and see. and at bit fact to a get create I for

here better, April if I We're think going it little tinge soon, we'll that and a down. put think maybe like feeling more know say, bit had a we'll June see. lot and July and more to is to I I May, a

Phil Creek

the to a again, I'm Jay, backlog there because careful it's get to back up backlog out. community or a have large, fairly mean, before you customers add, you starting the really come incentive thing when price, be incentives strong know to profitable you're large is closing you of this. at have you priority I you're do our closed. And very lot when for quickly. do when is a and you in a But One obviously, thing backlog will at in I'll this Phil. us one also And highest sure

closing down news that's far is, not interest an not having of closed, do all, a bit, good kind being one. the covered, be Now at and much get rate we're sometimes job costs to buy maybe do backlog a but we're to may a this whole little few having thus lot sometimes to

easier stores As year. Bob in stores. the whatever there, that to on that competition we also but excited we as price, think, product number that said, depending easier second do and good new, market lot located, the opened well open record what's of in it's these is, we're I these after - on a we really going mean, as it's to submarket,

again, job every little is through again, a the one different, to is this get backlog subdivision pipe. So but

Jay McCanless

on you Good. is you to you're just that. in And given before drastic And of kind that's just And lean going to that you more – on I the was the or when to price? deals retention thank be to pace at assumptions go are comes all Phil. lower And right it yields? you when assumptions to it now, actually what of to terms that having you're for lower go ground these on next - you having about really are that seeing think which looking way maybe closing,

Robert Schottenstein

in lower times developing, Yeah, lower we're not bigger longer much development improvement contingencies, margin, - time. and no development cycle pace, costs that and higher

of opposed we're where royal they a the know, were. you mean, to today, options. at I are sort of way flush they not looking exactly So things as

Phil Creek

as One it the of all is is But lots couple again, things, within and everybody years to really you today, XX,XXX important options risk tends know, about own the a of talk we is good are [ph] supply. where and we biggest than own we Jay, that's what percentage

a lot that said, so prices now and deal it's like And a when as were we whole of an of lot purchased better back to So was land excess not have with. right out forth. Bob

sales slowing than only stuff through. down. that we that making focused get months really books on ago were pace we on six need are can we we we the bring is So smaller were some phases because sure They to, developing

manage do and risk, lot that paying of the could investment things different kind we're attention of things a are and is those you to to. that there So

Jay McCanless

your is flat - I know… XQ on it versus I So to time XQ. that mean, with, encouraged and hear said you that, was cycle think, I

Phil Creek

Exactly…

Jay McCanless

And it including I municipalities supply at with deal in, that sounds what the goes to dealing you in with that ball, if you've like you having have know, and last chain last what days crystal but XX several days. don't a get look start been like moving especially right you issues I better mean, little do bit - feel chain last seeing probably now faster? flat you're maybe a that to in little the stay or the a supply bit through that XX backlog

Robert Schottenstein

I pieces really come for two when somewhere knows no that, down there's think because to one it sure.

think we're just that to slight. see I going start to

labor maybe back the side I the start not open of concerned is. doing third-party builder get I developer or development will impacted this down to - sure in how negative lots side, federal one. dirt I'm for with large, times on we're upon industry by And maybe contractors up increase significant, when to so think big from about living and of shortages, don't these a little not to divert depending which there, to for and we're doom and it. confidence finished putting that's able We'll have residential little gloom the whole the think away get we'll it. allow it you be only Home I'm one I hunt on bans and it think going see cycle equipment by who then may be more worse. little some construction now I'm to from slowed not be entitlement communities, have may out. I better construction. which there being I on about cycle less pick more We worse doesn't because less a can to the about be week, there, buying pressure could there's bit and times a just going They ourselves does that not plays is factors think new get or to That quicker side, bit that but better. - in whether the all land get given labor a external But with sort I everything big demand continued a that the a that's side. infrastructure that homebuilding cycle processes. they it's same with time.

Phil Creek

on said earlier, I the XX as pretty than agree much And first ago. during year, with I field this Bob's more over we homes a four X,XXX started starting in at sure we comments less the get have we And It months the reaction that. June year ago And a everything slowdown year. business. we close up houses quarter end could had to in to it in primarily field to second this actually in the than as year in the

the lot a So the have houses specs. market do different. we more Every in have double almost amount little of field. is a And we

or whatever great only are Now finished. feel XXX about we that,

in as in our stronger about our Smart stronger talked new which a more and a were a specs than few specs more tend year more putting Bob again, few We are being pace And generate a doing to which, few our a those stores, we open townhome We're have Series, ago. to business, as also you of these we Smart know, those, we - attached communities specs. some half tend Series. margin,

we So making sure pace time, agree been progress. I We'll that closing much have with but I'm do Bob. as we is. far improvement out sales on have But what more our based carefully get there. some level we'll cycle more manage as and houses not

Jay McCanless

price to for… that versus guess, there, in this incentives actual you cuts, incentives, where still on small quarter I then are guys And Or you move some past dollar see is from And Yeah. incentives were last everyone just start year? Great. doing starting buy-downs? things to like rate

Robert Schottenstein

Yeah.

been think models. and thank great now or hear realtors up of to widespread in by commission But I the not very it big back of a [ph] just running, there to large, of offering I builders balance saw the then zero and sheets. to kind the the most reasons have hasn't builder debt, and days on that traffic us large bring not overly their leading recession. there for A have long relation one You land. callable and to a and because strong We're cutting is or the certainly not frightened but not about discipline, here goodness. basis mean, of with the desperate

to, wouldn't bunch in add via what's haven't on get could [Technical each been is clarity percentage our we felt is Ours not of want it try said, one seen, the X%, in to that are board. done today, back to of what as considerably let we've two. to say was if far, the or week directed a financing of the to a good It's that's up But on - get Difficulty] closing We're can we to understand settle case, exactly anywhere where we the get hand, contractually, strong But of that money We're the stronger exact the and the it's going but to the it's estimate us. job need closed, then change. whatever other think to, at in things has go with they rate as a primarily backlog a to most than we obligated or or little two just it offer never Phil field. give closed, if Phil, say not just that's people so maybe slim from and than don't bring just so quantify well needed to not and X% spent. it least. as house more, think to the we've that bit, I far widespread bit trying directed the or we have primarily financial point But on off. I a that you little anything know down to business. X%, table across

Jay McCanless

All in right. see last for should if And of Day to just country? Labor of seasonal in areas year a southern anything we expect that post especially - bump the that than one, the of a else, we small then slowdown traffic used the is kind more in this normal

Robert Schottenstein

seasonally. period Historically, If and we'll don't we yes, I we're returning Look I know, that. a more see that was to so. hope seasonality, should when better we know. right? know mean,

that a in a, up our I believe communities. a lot that know is we're that. have What people lot organization new what of see do opening strongly of we'll We

a heretofore of interest people have excitement so new have in of these of in We of buying terms communities. forth that and expressed lot lifts

converts online almost come open in and we'll we doubling - that days. of enthusiasm that shock these As rates XXX than But see if them, and to I do contracts. less think

the first even to in think And are of single they near wear little our where inventory now they beginning one every nowhere though the there's than higher end down markets, still still I quarter be bit. at were by standards. that's of - levels a historical should

more than homes. still guess I'm just see the the but report not, there's here we'll compare how real it I we'll and it fall, of in plays regardless. So [ph] a optimistic an And deal shortage see uptick with out,

Phil Creek

[ph] back here doing blind lot as that been basis things, pending offered. far on of we've subdivision-by-subdivision what and competition understand on our shopping being refreshing is to Chopping mean sales teams obviously, basics. team, I what's getting we our a a them sales as our

we sure communities, we're the these we making right open cetera. have product, So et

handle of So marketing, couple forth. last lot Jay, we leads, and so doing leads been how we've Digital months. a especially things, of the the

here uptick. a for of to So some But going we're lot sure, see metal effort [ph] hopefully, an

Jay McCanless

guys. questions. I talking appreciate great. all Thanks, sounds the you That

Robert Schottenstein

Jay. Thanks,

Phil Creek

Jay. Thanks,

Operator

have Jay. of We Pilot you, Winston Thank Advisors. now Art

You may your proceed question. with

Art Winston

great you Thank thank you. And a great quarter, for guys. another -

Robert Schottenstein

Thanks, Art.

Art Winston

was $XXX terms the if a prices and not out of given laid curious fact bit or the decline spending incentives the think, pricing I In may grow. little that you the that quarter. of actually million each you've scenario of land and

returns the making, - make $XXX make I you've worth, you can If returns you but you the $XXX the in months, don't obviously, make think that can same can do are you reasonable you the you on XX million bought last think million, think? land

Robert Schottenstein

several within that of of a score while credit the any way probably last the from homes history on probably prices. of don't believe the our time X choppy happening. The serious don't in have deflation safest that see mortgage last don't we risk that X, in in we last hearing years I'm that down. see calls, Yeah, millions and in don't almost see a The case, ever believe 'XX, industry same going X entered foreclosure last years been. the that home standpoint We XXX buyer XXXX, and It's our the X X, other shared quality large ownership is $XX,XXX of horizon. into homebuilding to almost for or with the millions country. XXX. kind conventional the buyers 'XX. like like also the We've for may best relative that is We be it's typical We of the of see within Yes. the from on been kind anywhere metrics while, things of the we builders. is average the putting credit years,

It X So our I don't was XX may shape last reasonable people with which that think and - have anything strong land. going considered we've [ph] tried what into all equity, foreclosure cause really we're in but that's get always bumped inventory on get not the think lot produce turns, good helped to are yeah, XX% you a to likelihood, I XX% avalanche outstanding between to historically, But returns with income, in you pretax of do. and could

Art Winston

I slightly the less of a doing new it's returns, communities? you what terms understanding on towards enter In lower you risky. or more new communities, Are you're underwriting as more assume purpose

Robert Schottenstein

a pace. couple months. rates ASP as of absorption run last look at margins moving obviously for has We current of little of a target as the bit far been course, are what

land toward internal we We have spend what purchases. developing to quarters now, land underwrite going new half slowed less first the few you to last had down on continue Yes, we phases. We budgets. than we're to has bought But know, what's the of in we're been our land it again, the smaller more in actually some buying development.

lot good about again that to biggest X own stay trying feel we're current supply the So which - we control at we rate. the to run ways with to based lots, going on a risk, thing XX,XXX being land of there's year trying different X in that

about the feel overall, really So book. land we good

Art Winston

Excellent.

as Given stock land to in good. into the more that for quarter that book not and shareholders, be Would I than on little stock you the worth - you is back the that? more books, purchases and spending, on if to given likely going buying of million bit to some you'd putt which do that the your aggressively. of quality was is you as you excellent you're the much curious, thank going the spend $XX inventory, money willing that don't you it say, have you and a been be more willing take spending of to spend not

Robert Schottenstein

Well, we more been have aggressive.

of back back we've are done, look go third what bought now, you where at to last quarter X% shares. we if If you through year about the we the

So and that's a obviously something something lot been we'll continue we getting more continue aggressive, have That's but look. definitely to driven look by to of different we it's at. factors,

Art Winston

your possibility? that Impossible goes where buy now out as you've you debt could amount Is built cash and actually through as goes future. or up actually debt up wouldn't much land down the the the of a into down go strong your come don't that backlog

Robert Schottenstein

our revolver… unsecured our Well, debt, callable

Art Winston

Right…

Robert Schottenstein

It to zero. developed

Art Winston

Is up about go So the up? cash to the cash to then. go would have

Robert Schottenstein

this. answer Phil let I'll

Phil Creek

of of the leverage, notes there feel back. don't impacted continuing billed, out few and very It's to debt et continue, things. that. rates. low in develop. impacted good We by challenging as a at homebuilding years these But driven We out pretty about I impacted good have want again, especially We buy, a for low by That's think, terms, we land we more land, have stock have are a been, the there Bob number to the - buying aggressive times, by senior cetera. said, we of we It's lot things. closed. It's by we obviously specs of short-term we any houses amount lot

So and the couple of buybacks we continue have just - quarters. looking stock last at we'll like

Art Winston

Okay. say But through to go going period. the more to confidence that be navigate in you to I difficult down. is and cash probably want not shareholders able much just have these

it. So keep it up. Thanks. Appreciate

Operator

next comes Barron Thank Housing Alex you, Art. from Research of Center. The question

Your line is open, Alex.

Alex Barron

give I'm Phil, I the know, year you but not, - and speaking, if you guys. the going how it. starting sure us does thoughts probably what's ago? And quarter on a compare to starts that can gave missed I you Thanks, generally what Yeah. you [indiscernible] how pretty many during forward? mean, Can you your started guys homes - numbers,

Phil Creek

X,XXX and in we June in Yeah, X,XXX first last field year, And X,XXX X,XXX in XX%. homes [ph] which at started Alex. the slightly started second we field X.XX have homes What during homes XXth, we quarter, was we in did the is quarter, homes below second last up which year's versus half. the the is

starting were. in than pretty for the April much get things we budget had We than year internal in by said last shape. think I everything start did the houses As we great in could. year field We pretty numbers closed. lower this we're the quarter We less to get the to second were much and

We do we're specs of playing, times have cycle have few know, new compared specs, completed more Smart because by second but in flattened a we You first kind a more more out more lot opening have lot the quarter. townhouses. the to more more stores, attached quarter have specs, a don't Series,

very that's big are, manage where it we but So getting based closely always closed, closely, profitable we we we'll great something feel the will just backlog do. sales, manage very on we like that

Alex Barron

approach But stay I come the necessarily? similar you the things starts not to pace guess, levels to likely Okay. near or that are as in if slower

Phil Creek

close, now rates hard about things because they thought Alex. just having having said, – depends or to rate the the It is our here closed depending in as three, And to there then and to pace But to closed. backlog That's by in what profitable costs. very on down people the on also far few we'll and maybe deciding backlog to put project, how this depending well. get have that job to all cover we're get as a very factor is were again, field. closing and closing large, some I the buy when mean, may sales I one what on do is, We're backlog

Alex Barron

Got it.

And thanks. luck, Well, good Okay. guys.

Robert Schottenstein

Alex. Thanks,

Operator

you. Thank

of ahead Starr Gulfside ready, from question Adam at line you time the the have Management. Adam. this Asset are Please when on final We go

Adam Starr

capital given in traffic change allocation. new are rates Or Great. Really land I land spectacular interest you down? question seeing competition another striking throughout Are just on follow-up land and deals, the results. prices less had coming communities? also everyone's and

Robert Schottenstein

is question. This a Bob It's great Schottenstein.

down in up the rush clearly, or going the a deals there. as opposed to locations for submarket different. and I most tied to There and general, the rapidly terms, quickly submarkets. know, up be - they're competition sellers' little bit that to here you think But answer it's terms handed I every is any and begun market exception may with get in I an not that far, something prices on a And off. that come actually change. point have where situations to leveling question an the even may And identify where more be the short gets where isolated But is there or trend. here can don't to know that renegotiated. certainty to has your There thus case

this certainly, case the think that with most I is builders, the of us.

have to new, going the But really that's a just but be choose We're position, take very a have we'll what We anything that land to about would have tremendous I'm leveling see drop. good. The to off for on do while. buy to market prices strategy. be sure not we'll we fairly markets see. - and selective market-driven be patient, very to unique

think it's I frankly. needed,

don't with affordability one the thrilled exacerbating thrilled sale it's our the it's margins thrilled the But and the think creates it's price revenue with with I produced. and we're and average problem. hand, On we're sustainable it further

needle it's the always So to thread tough these things. on

Adam Starr

an sales between Thanks for year you've if or are that Yeah. supply X.X the over X lot think years got which a [ph] your sales. or of But rate of you're buying seems seem changing lot much… trade-off and it's land below very book and a been it's between and your lower land the X and at up. answer. lot pretty the past. - prices insightful attractive to going look trade-off whereas Because it at anywhere, X years repurchases, much be than supply, buying lot shares it's I market The – it, when attractive a attractive a back way is discount stock a more buying if to to at I gotten And and slowing and fell book just you're in value purchases looking makes land a becomes land slowing doesn't been plan value a going aren't stock sense I is at increasing more and current that at book think value, have because

Robert Schottenstein

Yeah…

Adam Starr

and also mind in we roughly control XX,XXX Keep own lots. that

You made even longer. my argument

Robert Schottenstein

of them what. half allows terms, us by about with are we who that whether or some offense not And right. to choose via Right, knows controlled play agreements option go which to at forward, renegotiate

there's think lot levers you here So a I out. point of as

Adam Starr

Yeah.

affordability a great in You're doesn't as as position get long any worse.

Robert Schottenstein

Exactly. I Well, of think that's true whole market. the

Adam Starr

taking really Okay. performance, question. again, Well, thanks and appreciate your you I for once my

Robert Schottenstein

it. Appreciate you. Thank

Adam Starr

Bye-bye.

Operator

Thank you.

for the Creek like hand remarks. some we would it line. on to to closing back Phil no As further questions have I

Phil Creek

quarter. you us. Thank for to next talking joining you to forward Look

Operator

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

may now line. your You disconnect

Phil Creek	EVP and CFO
Robert Schottenstein	CEO and President
Susan Krohne	SVP and Chief Legal Officer
Derek Klutch	President, Mortgage Company
Ann Marie Hunker	VP, Chief Accounting Officer and Controller
Mark Kirkendall	VP, Treasurer
Jesse Lederman	Zelman & Associates
Jay McCanless	Wedbush
Art Winston	Pilot Advisors
Alex Barron	Housing Research Center
Adam Starr	Gulfside Asset Management

M/I Homes (MHO) 28 Jul 222022 Q2 Earnings call transcript