M/I Homes, Inc. Q2 FY2025 earnings call

• M/I Homes had a solid second quarter with record second quarter revenue, homes delivered, and strong returns despite challenging macroeconomic conditions.
• Faced challenging and choppy market conditions due to higher interest rates impacting consumer confidence. Used mortgage rate buydowns to drive traffic despite impacting profitability.
• Second quarter new contracts down 8% year-over-year, with a sequential improvement from May to June. Closed a record 2,348 homes, up 6% from a year ago. Total revenue increased 5% to $1.2 billion.
• Division income contributions led by Columbus, Dallas, Orlando, Chicago, Minneapolis, and Charlotte. Southern region deliveries up 8%, Northern region new contracts down 13%.
• Balance sheet is the strongest in company history with $3.1 billion of equity, $800 million cash, and a debt-to-capital ratio of 18%.
• Mortgage and title operations had pretax income of $14.5 million, slight increase from 2024, with revenue up 2% to $31.5 million.

Homebuilding Segment

• Second quarter closed 2,348 homes, a 6% increase from a year ago. Total revenue was a record $1.2 billion, up 5% from the prior year. Pretax income decreased 18% to $160.1 million, largely due to a decline in gross margins to 25%. New contracts were down 8% year-over-year. Deliveries: 59% from the Southern region and 41% from the Northern region. Ended the second quarter with 234 communities, up from 211 a year ago. Average credit score of buyers was 746 with an average down payment of 17%.

Mortgage Company Segment

• Pretax income was $14.5 million, slightly higher than $14.4 million in 2024's second quarter. Revenue reached a second quarter record $31.5 million, up 2% from the prior year, driven by higher margins on loans sold, a higher average loan amount, and an increase in loans originated. Average loan to value on first mortgages was 83% in 2025 Q2 compared to 81% in 2024 Q2. Loans originated increased 15% to $1,865, and loans sold increased 10%.

• Management remains optimistic about the business, expecting community count to increase by about 5% in 2025 from 2024.
• Plan to continue using mortgage rate buydowns to drive traffic and manage operations to meet current market demands.
• Confident in the company's position with strong balance sheet, quality communities, and land position to support third quarter performance.

• Macroeconomic challenges due to higher interest rates affecting consumer confidence and market volatility.
• Potential impact of tariffs on lumber costs, though currently minimal impact is seen.
• Volatility in week-to-week market conditions.

Q: Alan Ratner asks about commentary across footprint, differentiation, and trends by price point and geography.

A: Robert Schottenstein mentions Midwest markets outperformed Carolinas slightly, Florida mixed with Orlando holding up better than Tampa, Texas markets with Dallas softer but still good, and confidence in various regions including Columbus, Indianapolis, etc.

Q: Ken Zener inquires about new home inventory compared to census data.

A: Robert Schottenstein states that new home inventory includes more spec homes due to rate buydowns requiring homes to close within 60 days, and existing home listings are up but builders can offer rate buydowns more agilely than existing home sellers.

Q: Buck Horne asks about monthly order trends and incentives.

A: Robert Schottenstein notes an uptick in traffic in June, likely due to perceived rate drops, and Phillip Creek mentions managing specs and community growth while being cautious about forcing volume.

Q: James McCanless asks about SG&A, lumber tariffs, and Northern market expansion.

A: Phillip Creek says SG&A will continue to increase with community count growth, no significant expected impact from lumber tariffs currently, and optimism about growing Northern markets profitably.