• Homes Delivered: 2,271 homes, an 8% increase from the previous year.
• Revenue: $1.1 billion, a 9% increase from last year.
• Year-to-Date Revenue: Approximately $3.3 billion, an 8% increase over 2023.
• Pre-Tax Income: $188.7 million, a 6% increase from last year.
• Gross Margin: 27.1%, a third-quarter record, up 20 basis points from last year.
• Return on Equity: 20%.
• Book Value Per Share: $105, up 20% from a year ago.
• Community Count: 217 at the end of the quarter, up from 204 a year ago.
• Cash Balance: $720 million with no borrowings under the $650 million unsecured revolving credit facility.
• Debt to Capital Ratio: 20%, down from 22% a year ago.
• Earnings Per Diluted Share: $5.10, a 6% increase from $4.82 last year.
• Mortgage and Title Operations Pre-Tax Income: $12.9 million, a 31% increase from last year.
• Average Closing Price: $489,000, a 2% increase from last year's third quarter.
• Interest Income Net Interest Expense: $6.7 million.
• Effective Tax Rate: 23%.
• Land Investment: $1.6 billion at quarter end, compared to $1.3 billion a year ago.
• Stock Repurchase: $50 million spent in the third quarter, with 157 million remaining under current board authorization.

• Warning! GuruFocus has detected 5 Warning Sign with MRAM.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• M/I Homes Inc (NYSE:MHO) achieved record homes delivered, revenue, and income in the third quarter despite macroeconomic challenges.
• The company closed a record 2,271 homes in the quarter, an 8% increase from the previous year.
• Pre-tax income for the quarter increased by 6% to a record $188.7 million, with a year-to-date increase of 20% over 2023.
• Gross margins for the quarter reached a record 27.1%, and the company achieved a 20% return on equity.
• M/I Homes Inc (NYSE:MHO) has a strong land position with approximately 24,000 owned lots and 52,000 controlled lots, supporting future growth.

Negative Points

• Interest rate volatility impacted traffic and demand, with mortgage rates rising above 7% during the quarter.
• Hurricanes in Florida affected operations, leading to temporary closures and impacting sales and demand.
• New contracts in the southern region were flat compared to the previous year, and deliveries in the southern region decreased by 7%.
• The company experienced a 10% cancellation rate for the quarter.
• Increased SG&A expenses due to higher community count, additional headcount, and increased selling expenses.

Q & A Highlights

Q: Can you discuss the differences in demand across various price points and how you plan to position the company for the upcoming spring selling season? A: Robert Schottenstein, CEO, explained that while affordability issues are real, M/I Homes benefits from a diverse product offering. The Smart Series and move-up products each account for about 50% of sales, providing flexibility. The company is optimistic about the spring selling season and plans to grow its community count, with no strategic shift planned in product mix.

Q: With the increase in rate buy-downs, should we expect pressure on margins in the coming quarters? A: Schottenstein noted that while the current gross margins of 27% and pre-tax margins of 17% may not be sustainable long-term, any decline is expected to be slight. The company remains focused on maintaining strong returns and believes its margins will continue to compare favorably with peers.

Q: What percentage of closings were intra-quarter orders, and how do margins compare between Smart Series and move-up products? A: Phillip Creek, CFO, stated that about 40% of closings came from spec homes sold and closed during the quarter. Margins are strong across both Smart Series and move-up products, with well-located communities contributing to higher margins.

Q: Are mortgage incentives pulling forward demand, and what is the impact of these incentives on future sales? A: Schottenstein and Creek acknowledged that mortgage rate buy-downs are currently a significant factor in driving sales. However, they believe the underlying demand remains strong due to favorable macroeconomic conditions and household formations.

Q: How has the recent hurricane activity in Florida impacted operations and future sales? A: Schottenstein reported minimal damage to homes and communities, with some impact on sales and closings due to lost selling days. While there may be slight lingering effects on demand, the company remains optimistic about its long-term prospects in Florida.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.