M/I Homes, Inc. Q1 FY2026 earnings call

• Solid first quarter with revenues $921M, pre-tax income $89M, 10% pre-tax income return. - Sales momentum from late last year continued into Jan-Feb despite winter storms, but market shifted in Mar due to Middle East events pushing mortgage rates up. - Mortgage rate buy-downs used as sales strategy. - Sales improved 3% y-o-y, sold 2,350 homes, monthly sales pace 3.4 homes per community. - Smart Series sales 47% of total. - Division income led by Chicago, Columbus, Dallas, Orlando, Raleigh. - Northern region new contracts down 4%, deliveries down 9%; southern region new contracts up 8%, deliveries up 1%. - Strong balance sheet: $3.2B equity, zero borrowings under credit facility, $767M cash. - Mortgage and title operations pre-tax income $14.1M, down 12% y-o-y.

Product segments: Home building: Revenues $921 million, down 6% y-o-y; pre-tax income $89.2 million, down 39% y-o-y; gross margin 22%, down 390 basis points y-o-y. New contracts up 3%, closed 1,914 homes, down 3% y-o-y. Smart Series sales 47% of total sales. Mortgage company: Pre-tax income $14.1 million, down 12% y-o-y; revenue $31.2 million, down 1% y-o-y; loans originated 1,579, up 3% y-o-y; mortgage operation captured 96% of business, up from 92% last year. Revenue contribution: Home building is the main segment, mortgage contributes a smaller portion.

• 2026 marks 50th year, well positioned with strong balance sheet, geographic footprint, land position, diverse product offering to deliver solid results. - Expect average sell price to be at current level, maybe slightly higher, bounce around in upper fours for foreseeable future. - Focus on profitable growth with solid returns.

• Market challenges: affordability, uneven consumer confidence, Middle East conflict, general economic uncertainty and volatility impacting new home demand and building conditions. - Fuel price increases could impact costs if not negotiated with trade partners. - Market volatility affecting mortgage rates and gas prices, leading to market uncertainty.

Q: Did receive communication about cost increases from vendors due to fuel prices and ability to negotiate?

A: Yes, fuel cost issue came up in several divisions, so far no impact but could get worse, long-standing relationships help negotiate.

Q: What drove ASP lower this quarter?

A: More mix of affordable product, particularly attached townhome product.

Q: Are intra-quarter order closings mostly from Smart Series?

A: Not necessarily, related to community location, not just price point.

Q: Margin trends in different regions?

A: Margins held up better in Midwest than Florida, some markets like Dallas have lower margins now but still solid.

Q: Increase in northern region lots and impact on margins?

A: Increase in lots in northern markets with growth opportunities, over time expected to contribute to profitability.

Q: Smart Series community mix between north and south?

A: Pretty evenly balanced with some exceptions like San Antonio and Houston.

Q: Gross margin in backlog?

A: Backlog not changed much, hard to predict due to uncertainty.

Q: Traffic and monthly order cadence?

A: Pleased with traffic through first quarter and April so far; monthly order cadence: up 11% in Jan, 7% in Feb, down 6% in Mar.

Q: Response to March volatility in incentives and carry forward to Q2 margins?

A: Used 30-year fixed rate mortgage incentives, cost fluctuated with rate volatility.

Q: Possibility of increasing share repurchase schedule?

A: Will discuss with board, likely stay current but possible change.