M/I HOMES, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was outstanding with record homes delivered (9,055), revenue ($4.5B), income ($734M), and 21% return on equity.
• Sales decelerated in Q4 due to rising mortgage rates and choppy demand; rate buy-downs used to drive traffic.
• Strong buyer quality: avg credit score ~750, avg down payment ~$90k (18%). Ended 2024 with 220 communities, 5% growth expected in 2025.
• Division income led by Dallas, Columbus, Tampa, etc. Southern region new contracts +8% Q4, +4% full year; Northern region +1% Q4, +12% full year.
• Owned and controlled 52,000 lots (5.5-year supply). Balance sheet: $2.9B equity, $800M cash, 0 borrowings.

Segment Performance

• Homebuilding:
  • Full year 2024: Homes delivered 9,055 (+12% vs 2023), revenue $4.5B (+12% vs 2023), gross margin 26.6% (130 basis points better than 2023), pre-tax margin 16.3% ($734M pre-tax income, 21% better than 2023), sold 8,584 homes (+8% vs 2023).
  • Fourth quarter 2024: Sold 2,402 homes, revenue $1.2B (+24% vs 2023), gross margin 24.6% (down 50 basis points y/y, 250 basis points q/q), SG&A up 16%, pre-tax income 14.2%.
• Mortgage:
  • Fourth quarter 2024: Pre-tax income $10M, revenue $28.5M (+45% vs 2023). Full year 2024: Pre-tax income $49.7M, revenue $116.2M.

Guidance

• Likely compression in gross margins in 2025 due to rate buy-downs.
• Continue using rate buy-downs to drive traffic.
• Expect average community count growth of 5% in 2025.

Risks

• Impact of rising mortgage rates on cost of rate buy-downs.
• Choppy demand in certain markets, especially Tampa.
• Uncertainty around labor availability and insurance costs in Florida.

Question and Answer

• Q: Alan Ratner asked about trends in Texas and Florida, spec models, and margin pullback. A: Bob Schottenstein discussed better outlook for Texas vs Florida, spec levels controlled closely, and margins impacted by rate buy-down costs.
• Q: Ken Zener asked about homes in the field, margin spread, and Smart Series. A: Phil Creek and Bob Schottenstein talked about homes in the field growth, margin differences between specs and 2B builds, and product diversity.
• Q: Buck Horne asked about Tampa hurricane impact, labor availability, and stock valuation. A: Bob Schottenstein mentioned Tampa softening, labor uncertainty, and stock repurchase discussion.
• Q: Jay McCanless asked about segment growth, sold and closed pace, and land costs. A: Phil Creek and Bob Schottenstein addressed segment growth factors, sold and closed pace potential, and land cost challenges.