M/I HOMES, INC. Q3 FY2024 earnings call

• Strong third quarter highlighted by record homes delivered, revenue, and income despite macroeconomic headwinds, hurricanes, and election impact. Closed 2,271 homes in Q3, 8% better than year ago; year-to-date closed 6,653 homes, 9% increase over 2023.
• Revenue in Q3 was $1.1 billion (9% better than last year), year-to-date revenue $3.3 billion (8% increase over 2023). Pre-tax income in Q3 was $188.7 million (6% increase), year-to-date $563 million (20% higher than 2023).
• Gross margin for Q3 was a record 27.1%, return on equity 20%, book value per share $105 (up 20% from year ago).
• Product mix: Half of sales were Smart Series and half move-up; community count expected to be 5% higher in 2024 than 2023, with growth planned for 2025.
• Mortgage company: Pre-tax income $12.9 million (31% increase), revenue $30 million (27% increase), loans originated 1,695 (15% increase).

Homebuilding Segment

• Third quarter: Closed 2,271 homes (8% better than year ago), revenue reached a record $1.1 billion (9% better than last year), pre-tax income increased 6% to $188.7 million. Year-to-date: Closed 6,653 homes (9% increase over 2023), revenue $3.3 billion (8% increase over 2023), pre-tax income $563 million (20% higher than 2023). Gross margin for the third quarter was a record 27.1%.
• Product mix: Half of third quarter sales were Smart Series (affordable) and half were move-up products.
• Region breakdown: Deliveries 55% from southern region, 45% from northern region. Owned and controlled lot position: southern region up 20%, northern region up 11%.

Mortgage Company Segment

• Third quarter: Pre-tax income $12.9 million (31% increase from 2023), revenue $30 million (27% increase from last year). Loans originated 1,695 (15% increase), average mortgage amount $403,000 (increase), mortgage operation captured 89% of business.

• Expect to open new communities in the fourth quarter and many new communities in 2025. Average 2024 community count expected to be about 5% higher than 2023. Confident in continued growth and strong results in 2025.

• Macroeconomic headwinds and interest rate volatility impacting traffic and demand. Hurricane impacts on operations and traffic in Florida markets. Election impact on consumer behavior. Potential insurance cost increases post-hurricanes.

Q: Alan Ratner asks about price point differences and spring season positioning.

A: Bob Schottenstein mentions product diversification, with Smart Series and move-up sales each around 50%, and optimism for the spring selling season despite affordability issues.

Q: Kenneth Zener asks about Texas share and mortgage incentives pulling forward demand.

A: Bob Schottenstein states Texas is a larger part of business than Florida, and Derek Klutch talks about demand and mortgage buydowns helping sales without clear evidence of pulling forward demand.

Q: Alex Barron asks about average mortgage rate, incentives, and G&A.

A: Bob Schottenstein and Phil Creek discuss mortgage incentives varying by community, SG&A expenses up due to increased community count, headcount, and selling expenses.

Q: Buck Horne asks about hurricane impacts, insurance, and traffic.

A: Bob Schottenstein and Phil Creek talk about minimal lingering impacts from hurricanes, potential insurance cost increases, and traffic uptick in recent weeks.

Q: Jay McCanless asks about sales mix, October performance, election impact, and pricing.

A: Phil Creek and Bob Schottenstein discuss sales mix trends, October performance better than expected, minimal election impact heard, and focus on pricing by location and product.

Q: Alex Barron asks about share repurchases and dividends.

A: Phil Creek talks about share repurchases and no current plans for a dividend.