MHO - Earnings call transcript Q2 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the M/I Homes, Inc.

Second Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, July 30, 2024. I would now like to turn the conference over to Phil Creek. Please go ahead.

Phillip Creek

Thank you.

call Derek Bob Mortgage Klutch, the and our Company. on and President; President me today Schottenstein, is CEO Joining of our

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

Robert Schottenstein

Thanks, and Phil. by and We joining had quarter, us revenue, very for pretax income, today. you highlighted strong gross margins second record-setting Good a thank margins. morning,

quarter of pleased with We company quarters clearly, the results; our are history. in best very second one

slight and pleased our to an number fair dominated of and markets, markets, most about There that in underlying first performance, that buyers general in more and uncertainty home a millennials a economic we new quarter, general home. Even volatility, our second one overall Florida fundamentals traffic select strong. industry though we an rise compared that to quarter, notably our ownership. the cautious see and rising housing purchasing exists are with Z rate remain in a of have seen becoming sense we rates XX both shortage ever-increasing slightly and featured continue inventory that We amount of demand of strongly a every seeking given a Gen Texas, a believe the were when the particularly and decline the quarter buyers in

All very industry. of our bright a for this suggests future

than to better quarter, strong, in last second revenues homes coming ago, closed than billion. last reaching in at were quarter the very record $XXX.X a X,XXX $X.X in margins on to solid of year sold of XXXX. a better a quarter, extremely million, XX% terms over of return XX.X% X,XXX compared This during compared resulted our and performance, were XX% we pretax pretax record homes X% XX% year, XX%. We a last year. our XX% XX.X% In second with margins the Moreover, year. improvement income Gross equity

buyers from first quality As as mentioned The earlier, slowed scores demand be down average in very of good average the with April. somewhat of traffic continues our quarter the strong and quarter payment to began and second an XXX our And homes, of over is of XX% with to sales XX% successful continues our comprising our and just business very important or most Series, contributor to sales. Series $XX,XXX. Smart which second of affordable quarter a be Smart line credit

provide comments I additional on our Now, markets. some will

division Our second quarter led the Cincinnati. Chicago, Tampa, Columbus, and were Orlando by Dallas, income contributions in

XX and of with closings our deliveries XX% Northern year, in increased region region. out of the the balance Closings New contracts were our in compared to from last by the our quarter in contracts the Northern year. or Southern by from last came the increased for closings region Northern of the Southern year. XX% region X% region out new last X%, second by flat region increased Southern of in coming while

region. our controlled owned are and by XX% ago owned and position year to the region XX% year the being Northern of Northern in Southern a from increased XX% in increased region the lots the region. lot compared Our in in controlled with and last XX% Southern

with ended the which $XXX. per an we our regards all-time strong with sheet, X-year is $X.X of balance our of own XX,XXX approximately to exceptionally Company-wide, a an strategy. In value of book XXXX equity, have line a equating roughly to We record we supply, share lots, land position. second billion in quarter

million X quarter and a over debt-to-capital minus XX% facility. and of We the debt-to-capital with ended credit $XXX resulted borrowings ratio of a million under also of This net in cash unsecured X%. ratio our revolving $XXX

just As I our best that conclude, we in let are me history. state condition financial the in

stronger, strong I'll and balance is want have it has and our feel M/I over operating turn Homes state a to industry Our about sheet never a and well of to good been have lot to XXXX. With we homebuilding We that, that very very business Phil. momentum. positioned the

Phillip Creek

Bob. Thanks,

contracts XX% second April, X% the our in in our new cancellation time inventory was homes. in X% quarter up were And to rate were were second buyers Our first XX%. of quarter up for and June. flat May, sales and XX%

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

count we XX% be will new XX We our closing year. XX% And quarter last closings higher quarter, in average and was the of homes backlog. the were the our our During that sold in We delivered from X% opened closed came that about second communities, which homes currently while second XX. X,XXX of community quarter, than XXXX estimate quarter. inventory

field XX, year X,XXX homes at of field June the homes As versus X/XX/XX. field in X,XXX X,XXX ago had homes the in the a we in and

decrease second in in the closing price X% a was quarter, to second compared the quarter. revenue X% our $XXX,XXX, last Our average when increased quarter and year's

quarter. XX XXX second Our points XX.X%, year-over-year up our gross up points record first margin basis from and quarter basis a was

versus Our second days second to compared cycle construction quarter. our costs quarter, quarter by first the XX quarter the in decreased first and were the the flat in time

year expenses quarter XX.X% ago. revenue compared a of to XX.X% Our SG&A were second

higher costs was and net $X.X to community was were count. Interest head increased income, of selling interest our million, our additional due quarter expenses, incurred Our count, expense, the interest million. for and increased $X.X

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

income was return on equity XX%. Our and our was pretax XX%

the quarter. year. And last our effective same million second quarter, During $XXX year's generated $XXX in the XX% last million was quarter, we EBITDA tax as to compared rate the second of in

diluted XX%, value book to per per quarter a the increased per $X.XX now increase last $X.XX share record ago. share is per our $XX earnings from for share and share an all-time $XXX, year, year from a per share Our up

Now, Derek Company our Klutch results. Mortgage will address

Derek Klutch

Thanks, Phil.

XX% rights. originated in and the mortgages average XXXX's XX% This an second mortgage $XX.X achieved from increase year. of loan for loans a operations offset of quarter. to quarterly our an to million, record the was Revenue increased XX% average was loan of $XX.X all-time first second to due and in lower pretax sale quarter loans million by income from partially from year on value increase $XX.X title million on servicing margins an proceeds Our XX% sold, amount. The of last to higher last compared

of an continue and XX% respectively, for XXXX's the see closed We quarter to were financing conventional as loans government the of FHA quarter. use XX% in XX% XX% second or VA, the increase compared and in to

$XXX,XXX while in mortgage from average loans to to was up volume the sold last decreased amount compared second XXXX's $XXX,XXX originated increased X,XXX last Loans XX% Our year. by quarter of year, to increased which XX%.

payment solid XXX score Our remains of borrower credit second XXX down profile XXXX's to an average XX% and an compared of quarter. in with average

from improvement of our operation in a Finally, last the our XX% business XX% year. significant captured quarter, mortgage

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

Phillip Creek

Derek. Thanks,

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

well with debt lowest maturities. of levels the positioned public one and have homebuilders of our We the are

Our bank below XXXX in in public and late matures our XXXX have line rates matures XXXX debt and interest and X%.

from we a million Our 'XX XX, and year land unsold $XXX million. At had we owned and $XXX lots. XX,XXX investment is purchases June to spent XXX XX,XXX second inventory raw lots. million million ago. a $XXX at of end had finished At on the $X.X total $XXX of we of quarter, June lots unsold at total $XXX XX, inventory and total XX, billion X,XXX and completed And on land and and development homes Southern in June the total XXX quarter, have And land the under up X,XXX development, now land the XX, during homes in region compared $X.X shares. This homes. We X,XXX billion, we of million are open XX% comments. under we land for controlled repurchased At remaining we the second our $XX We'll presentation. our questions and for Northern had call our completed inventory, million the XXXX, Board of outstanding completes current million $XXX the quarter's homes. stock, have our first in our inventory repurchasing or of $XX Since inventory and 'XX, authorization. June quarter, are XXX million spent the region. And any

Operator

comes Instructions] from Ratner Alan Associates. & question First Zelman at [Operator

Robert Schottenstein

him. hear can't I

Operator

Mr. your with proceed line Ratner, is Please your open. question.

Alan Ratner

me hear you now? Can

Robert Schottenstein

Yes. Alan.

Alan Ratner

Hey, sorry that. about

into maybe little the technical quarter to difficulties. strong the the drill trends the and through Great Yes. Congrats quarter. job performance. love I'd Bob, a on Some on bit in in July.

what and demand saying. bit, slowed think, which others a been consistent, mentioned I You have is traffic with

Your in June. uptick month, basis see did at on though, year-over-year orders by you an a least

into a I'm where kind pull of So back half pricing you as anything bit maybe heading to drive that's the a back? the more you curious rates Or incentive of incentives better do of little and those the results? buyers did on maybe of whether or environment coming function demand kind do order And year? back the see broader

Robert Schottenstein

it's July, last comment fair with Great of do any almost current a days several month, anyway. typically on these questions. in don't amount We the usually which there's won't the calls. on is though We even comments make we activity all what over, and

So financing delivered bit can not more to that a that way or we I little that which so. in wouldn't a want days below did something homes commitments, did little one is think XX we incent or the market significant, but only below-market bit I financing regardless. But suggest to be within with generally other applies more do June,

case are of product in year. to with how the know back to competition, is the a exactly hard going to half So that, it's really the things applies homes. It's as shake spec our out

now, that the One that same most slowed not X in our guess, financing need. We're they we think or the think a Clearly, the is were little very fact up for sales second the in, bit continue second months levels this rate looking year, like provide -- of sales had kind probably I that of I quarter. the the incentives so at get going looks first to people happy about priced to I But cuts. we're XX%. to the at are with we to if X X sure it to believe one. have we're

and it bit that of lot noise who about I there's business. different the a all knows And an of got how and coming from think know. But a obviously is as of there of going was really -- a everything, economy is to that's election optimistic we've we buyers. seasonal. just by parts affect up some But I'm Some places and all of caution overall, also intra-quarter

positioned, well been in liquidity very anyway. are I standpoint. think builders that most from We've a the better shape never

all levels cylinders, I hitting in are we're market always There's low. not something our on in our whole markets. gaining of very but debt of hitting all on Our cylinders We're share places. And almost quite footprint. all a lot our love that's

diversity product is Our strong.

Really that's is best count. on. a this really what ever we what But year is ways future Our going to community poised We're year strong year there for it a get optimistic increase strong. for poised we're about be focused got land M/I be yet. next But position we're the to and lies. and had, to we've and the to

Alan Ratner

And the is thoughts. bright. your appreciate I agree, definitely future Great. we

So, that liquidity. your note, mentioned on you

you And and of Board so shape, quarter, up picking pace. And I is net this were see. about of still debt. to yet that pick mentioned sheet in conversations negative potentially balance is fantastic kind buybacks did million, that with this $XX some the quarter, the You quarter, pace know you up your did last which having you great

kind is -- Where rate in on is $XX run should your at one-off it this as forward? programmatic this Was kind think So currently head more going of the about buyback? of a million we nature?

Robert Schottenstein

will that answer Phil one.

Phillip Creek

Yes.

in than in Our current half we first opening stores always in said, good We the is that, few business. Bob half, did as which view do there's a more is news. the second on challenges plan

of repurchase the in to backlog and in our did land But us staying million would first and the term on again, to policy of half with we in more spec our of area, than see we spending I good near longer did stock want kind business But half. about where from Again, and program. see kind we that's kind on levels, and $XX the I are second the dependent on a plan go the also somewhat million, would We economy. feel consistent have We now continuing the $XX term. there. us in

see staying of kind there Alan. us So, in term, yes, I the short

Operator

Buck Next question at James. Horne comes from Raymond

Buck Horne

great a on Congratulation quarter.

Robert Schottenstein

the good Buck, call. to you Buck, on it's to -- have good it's

Buck Horne

how land to like great longer the about be few option acquisitions spending forward I lots a some on just back term, here. strategy I'm half your added quarter-over-quarter. maybe guess, It's under the year. what and control? lot how And looks going you land your keep and still talk the Obviously, quite as new to pricing here to option it you've as wanted developers contract just And think in curious of banks maybe kind other of increasing want much maybe more land of for you're there? in seeing percentage, under about or markets those total broadly, out overall kind trends land your working with you

Robert Schottenstein

Yes, great question.

least time, land to years, acquisition, versus Our not optioned, longer. owned at with long in strategy honestly, maybe has changed long, a XX respect

inflation and of of own our the want X is several in earnings a of to lot the any precious one rate and also arguably a ours. Land run equivalents is by top the over There in XX,XXX supply. With own in control owning most previous under encouraging. to to that we're lots. conference own, control of business. than supply on year less Embedded but a a quarterly do this been the development XX% -- our at looking that we've is side, X slowing the precious which to some that our is goal appears years. land next our We'd we're time, industry. to somewhat, growing or of point line has And current X around threshold is in regulator. to clearly several goal rather, calls and talked commodity, year or about and that to over the that, X year a last we conference X X% a year That years, rather, internal Our more rather today, own business sort we're grow not be more, lot

continue acquiring Xx shy on Xx other say and the we'll we're to would for units or got locations, will be. get about the Xx builder And pricey On the the for XX%. to X now wants and higher, continue densities of anywhere hand, but locations, not markets average represent can that all to. There's for say. By on to locations lucky X densities A average, and zoning. land and escalating A be doing lot But of townhome things in business, per or lot whereas townhomes, acre which is from to developments less dependent -- against you'll range the of single-family upon from local townhomes A attached it you costs, a to probably to pay easy of locations. on can the contrasted now, cost XX% density should a help prime Right manage I every a side, densities years in our to X costs, of land over be it's that, attached to XX ago which terms doing X happening way, mitigate but was We're more affordability with X. in acre, trying be single-family land our occasionally, being than use slightly right per lot what produce

consistent pretty essentially than finished always other relates to seller. And that all the cost a land been banking with But we've lot. no do We strategy. end of so this with

seller, As as try that ready. you land is We the as can hold to banker do much get Phil possible. them to till says, often best the if you're

lot to think rent know was at to us That wholesale be into business of or our just do so-called build approach. never not to Frankly, either. the on we us try for this big business of land big we that's know and and do, for We doesn't are. like leaping builders appealing institutional bankers. have We too We point. a seem sort how core third-party focus our to engaged with what

Phillip Creek

Buck, this And Phil. is

better points will better on think okay, the the really But it. near premier as Bob in add so better still can; difficult really to there. of near good those transportation. in will think the much We sell can districts, shopping, in hopefully you A said, couple we locations really we they through as Like Just also focus work well. school a we times, locations sell times,

So, we X strive year to finished of supply that have lots. own X a to to X year X X supply to and a inside year about

lots developers has which in as too off-balance today, of look which about on than that in things. $X.X type about is risk dark billion. books our billion. under off of a rely go we as far It's don't of you far X% about again, have dollars, about that, XX,XXX option. outside little $XX sheet, And as sites, is have own the don't the those we Today, XX% past. And about higher lot of been much raw. that's risk develop So, communities value. we of $X.X the of million about The a and as Again, of value or we dollars

So, at are. makes we that with of about risk. again, where it to Again, lot get sense. But, feel X% the have good value about sellers very as we we we try terms

Our units closing rate year. is current a X,XXX about

XX,XXX, are going about we good We year, about good now. stores. And we to really XX is less new where we're which We feel feel XX. again, that. owning open So this that. opened than Last about year,

run important community, we're sales in the shape. we first location, But would us. pace maybe brought faster year. We quality XX% and like our good than it's we it concentrating is We community this working we're year. that's the average thought, really thought are count more always to of rate the like a be X% through stores why little overall, very down very, But of to the the feel on

Buck Horne

impressive That exceptionally thorough was and really answer.

a follow-up. second, So quick

Just quite in that about year-over-year lows. I'm your inventory, markets vary? particularly have resale very, increase it just you're if inventory several in markets Because the very others, historic a exposed you kind terms inventory resale in Southern Ohio sell the thinking Northern some does versus can remains different what those where is situation near of and incentivize the incentives markets, What's both tight, does offering play to but right different -- highlight, it the in now? of in regions maybe that level you're does markets? the that in of to the house in markets the take a out markets -- wondering

Robert Schottenstein

make particularly inventory. we've Clearly, pretty Florida. comment about me let a a seen First, noticeable increase, in

the quite up so, of have mind Some in listings. or that markets used up is jumped Texas some a Increasingly, show of your back that Keep for many MLS really specs, builder listings. traditional bit in builder specs, which a well. maybe going decade home years, the not as inventory didn't

Now in we're there.

in markets point, at I we're historical this it, don't by not more before. it's watch offering not financing. is incent lot buyers still and used Dallas. of all Raleigh and to haven't we our our now So ignore serious haven't specs, we markets It's frankly, building as difference seen in consider of much Minneapolis, of manageable. use are of with specs it any levels just are below-market XX% is something of homes. where most of few our those. By utilizing a had very we going very monthly, not it than means. discernible There's there's really it's Chicago impact, that incentives. issue builders Columbus us any A to ever standards, a carefully between But while much and very our in Tampa And but as inventory it And

Operator

McCanless comes [Operator Instructions] Next question Jay Wedbush. from from

James McCanless

margin Buck's your question. and what Southern follow-up your gross is Northern So, Could on talk about differential between just you segment segment? a the

Robert Schottenstein

X top a you at specifically performing specific bag. of X I are in are I to X I never mixed that have Texas, front this if given a me try X mean, point, the that or I'll you X if really I X in in [ don't of Florida in -- or Midwest. on it's look X it's X know the in way, take We've -- at that will it margin; of or and gross Phil X tell ]. that kind guidance. the Carolinas, really answer or divisions are this are you bit

Phillip Creek

The issue, Jay, know... you

Robert Schottenstein

operation just a about about say relates to of of It's much and Phil, is that pretty than communities. it me more quality it sorry, the this. the lot our It's of Ohio A versus -- let lot Florida. strength our

Phillip Creek

subdivision -- business really does mean, divisions. today to right we always and XX different boil the It we -- things -- I down are are and now, with in

then have when bottom couple lot last Texas, just of Carolinas things the margins. a that stores times margins X, couple can divisions the the XX the great of Florida, really puts at the were have years you were that that But, of so operations, in exceptional of doing on really other all is Midwest are hot X, in general, hot, wasn't has markets, and couple a money a We a and at best month I tell Midwest the certain hot. And and our line.

kind really our really focus very we the on know. it open. we're margins you and pleased our and with overall, just that, have So in as much But markets just depends of on We returns. stores general,

James McCanless

impressive, you said especially going that the down Bob, think is here. you question, this of in pretty leads is Right. from into do probably which what year? into of but darn number second XX.X% is the you don't sustainable half sustainable think incentive back that light then to come the how do be, earlier, And levels my going How

Phillip Creek

volume-first approved, of as X be as We're some our little ago, to competition a today it sold is. forth. It's move margins hard very mean, to that than the far a trying you're like on XX% backlog the through and months hard company, in closed as I everything inventory and so community different tend zoned, in the the developed, is get that's higher backlog a the system. But And happens quarter. closings in any incentives find general, not these answer said because I driven isn't what was our open. number of to hardly locations, my comments, to

volume subdivision of our a communities. need we first. to every certain second amount We different. do kind So, of margins were through were we our do what very surprised, than is better But to get quarter

Robert Schottenstein

even the mouth, another add, they words or still next in they're dropped X XX% ask are to our or put to level But hope that And if your pretax almost pretax don't several years. we'd But if would And above, XX.X% sustainable right I'd a XX% not only we are Jay. whose be, way right now. There's that little margins? how thing are bit and way are question, XX%, the to Yes. than the for ask builders today. many down that's builders another or better I question all most, Because other where margins now. only at I to below mean be sustainable X

have we to. favorably so compared continue last ours I think And of answer very to don't I peers. they'll way want our And I margins drop. years over best number that. can That's with the think our But the believe I ours --

Phillip Creek

And impact a year, of far of in a of to is ahead off open said, getting we those the stores also, a just levels, XX big than and your of the get and hopefully, and lot new ourselves XX new we foot. the stores opening first we get XX the We impact too lot But expense Like there's stores And your last more moving way half. stores. opened new open Jay, parts intend second also half. opened new and we're the right margins, mean, stores don't I to that. on right the in

James McCanless

of as a question should had expecting terms talking about you with quarter. quarterly that, for guys in What good were were increase than higher dollars, Got it. especially we think I next in count And then little about? the rate G&A community we run the this

Phillip Creek

I do at had XX% year a stores ago. than about more ago. look I than more today people you have a it, when Well, I year have

ago. Our side than a year a the selling little expenses variable are higher on

expenses year. SG&A back with the disappointed old little than So, hoping in we I were I to range. our But to in quarter. a I'll you that second gets the don't I want where am, bit stay faster far imagine Jay, last as be the percentage of sure forth little thing, less was and a kind It would revenue. growing than XX% of kind so as

James McCanless

able during then, talk the could price And what raise the Maybe price you're of quarter? power to during quarter? hold you communities or percentage about pricing

Robert Schottenstein

been few, demand. probably lowered. so as have exact slight sense have of few lower, I or there is the that stayed is few had XX% communities softness, don't fringes, softening second -- kept guess raised that a handful. a we have many quarter in And to very prices. an a than same. might first that the we softer the Most that been because My is we might that might raised that percentage. same. a My There the we slightly we we've raise the either, the given have on There being that or few been that

Phillip Creek

And the flat as the were in pretty much costs first good also thing, I mentioned, time. construction then cycle versus the our quarter second

returns. So to helping things our working all we the on continue we can are

James McCanless

that's question. that going my be last -- And to Yes. was

you And in tailwind? then you're could Is maybe about also seeing hearing of terms talk Just what that lumber on a what prices? labor? you're

Robert Schottenstein

Well, industry, hard costs lumber thing, prices have moved our the right good a clearly. in That's the quarter. for during direction total

Phillip Creek

They're a pretty push. much

Robert Schottenstein

push. a much Pretty

Phillip Creek

heads little like detail kind But purchasing so a of included different. got with budget looks all all is teams, it and of overall, revised discussions market are our forth. just We Every bit division a of push. things which our leadership through having

we're said, Bob doing detached. As more attached single-family townhouses, more doing smaller we're

do last few anticipating flat. to up, at cost. pretty not not level trying have but best from lower We're going been years. development has with Our and double-digit they go we can. been We're the affordability average deal continue to any much sale the costs getting price benefit up really Land as never

So that's we're really on some. Jay. much, helping counting not to But us cost reductions us that help

Operator

Next Research Center. question at Barron from Alex comes Housing

Alex Barrón

the results. on Congratulations

corporate million kind there Going Or SG&A, was expense? is run one-time a item? any this the $XX back the of to rate,

Phillip Creek

of plan and there's not a in more It's stores just we're stores on those expense. things, more just people more of people more Alex, combination combination growth there. opening No, It's really more because and anything continuing our obviously a unusual all XX% year. selling and little next

Alex Barrón

build that Got build cut you us XX push as think you what? but time, the what's much far tell time can it. Like can and you from to as days, it? you then down And more what do how current mentioned you the

Robert Schottenstein

levels every at know sneak nearly more near I many -- divisions, of pre-COVID. But this, some could tell think efficiencies markets. high max. I level, out you in don't single think improved probably at construction about a I it. the we're We're from days majority acceptable one markets actually of below now, in We've I or pre-COVID our can our level. in and vast a of very we are right very how at our

Alex Barrón

X is something like that ballpark? absolutes, in it in months, But

Phillip Creek

is right Average now XXX. about

Robert Schottenstein

be Yes. to towns, XXXs, have there more big But and markets in market. markets, -- we variations some we from Smart XXXs, where XXXs, can where the some market more in see in pretty we're do you'll maybe Series

Phillip Creek

like by again, product Yes. templates about for as have We lines. varies XXX. actually overall, that each our also. But Bob today, market we're And said, of

Alex Barrón

ask one more. if could Got it. I And

right In terms percentage build guys to what order, at versus are you like, spec of now?

Phillip Creek

We're spec now. right about XX%

Alex Barrón

Thanks, luck. Okay. guys, best of and

Operator

for all Phil is That the I back Creek call we have. will turn over comments. you. to Thank closing the questions

Phillip Creek

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

Operator

and gentlemen, please you ask you We for this lines. your your thank disconnect conference we that concludes and participating, for Ladies today.

M/I Homes (MHO) 30 Jul 242024 Q2 Earnings call transcript