M/I Homes, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Milestone: 2026 marks 50th year in business; company in best financial condition with strong leadership and well-positioned in 17 markets.
• 2025 Performance: Despite economic challenges, performance was solid. New contracts were slightly down for the full year but up 9% in Q4. Delivered 8,921 homes with revenue $4.4B. Pretax income was nearly $590M (down 20% from prior year). Financial services segment strong. Gross margins were 24.4% excluding charges, down due to higher incentives and lot costs. Net income was $403M with ROE 13.1%. Shareholders' equity reached a record $3.2B.
• Quarterly Details: Q4 2025 new contracts up 9% YOY. Sales pace 2.8, cancellation rate 10%. 48% of sales to first-time buyers, 79% inventory homes. Community count 232, up 5% from prior year. Revenue $1.1B, gross margin 18.1% including charges, 22.6% excluding. SG&A expenses flat, interest income $6M. EBITDA $608M for the full year.

Segment Performance

• Homebuilding: In 2025, delivered 8,921 homes with revenue of $4.4 billion. Full year gross margins excluding inventory and warranty charges were 24.4%. New contracts were slightly down for the full year but up 9% in the fourth quarter. Smart Series sales accounted for 49% of total company sales in the fourth quarter.
• Financial Services: Achieved a record capture rate of 93%, record volume levels, and pretax income of $56 million for the year.

Guidance

• Expect average community count to be ~5% higher in 2026.
• 2026 effective tax rate expected to be around 23.5%.
• No specific margin guidance provided.

Risks

• Macro-economic pressures such as choppy demand, affordability challenges, and economic uncertainty.
• Impairments in entry-level communities with average selling prices below $375,000.
• Inventory and warranty charges impacting margins.

Question and Answer

• Q: Address 13% growth in South region, split by Texas and Florida A: Southern region up 13%, with Texas (Dallas, Houston) and Florida (Orlando, Tampa) having varying performances; newer markets like Nashville and Fort Myers Naples starting to skew percentages.
• Q: Margin differential between intra-quarter closings and backlog, Smart Series impact A: Majority of closings from spec sales, SPAC margins lower than to-be-built, but to-be-built business seeing slight pickup.
• Q: Impairments in fourth quarters, watch list for communities A: Impairments due to accounting rules and business decisions; entry-level communities with lower ASPs are more pressured, but expecting improvement.
• Q: Land purchase acceleration, market focus A: No specific market focus, just normal land development to maintain one year supply of finished lots.
• Q: Florida trends, mortgage rate buy downs A: Bullish on Florida, especially Fort Myers Naples; successful mortgage rate buy downs include sub 5% 30-year fixed with possible two-one buy down.
• Q: Margin guidance, incentive levels A: No margin guidance; incentives include mortgage rate buy downs, focusing on improving construction costs and cycle time.
• Q: Traffic pickup, inventory, new community margins A: Traffic picking up, feeling better than a year ago; inventory levels managed conservatively; new community margins vary by community, focusing on right product and price.
• Q: Flexibility in business, new community product planning A: Significant flexibility in new community planning based on site zoning, internal division and corporate evaluations, adjusting product lines to market needs.