Yahoo Finance M/I Homes Inc (MHO) (Q1 2024) Earnings Call Transcript Highlights: Record-Breaking Performance ...
Homes Delivered: Increased 8% to a record 2,158 homes.
Revenue: Increased 5% to a record $1.05 billion.
Pre-tax Income: Increased by 33% to a first-quarter record of $180.2 million.
Gross Margin: 27%, up 360 basis points year over year and 200 basis points sequentially.
Return on Equity: 21%.
New Contracts: Increased by 17%.
Community Count: Increased by 10% over 2023.
Shareholders' Equity: Reached a record $2.6 billion, up 21% from a year ago.
Cash Balance: $870 million at quarter's end.
Debt-to-Capital Ratio: 21%, down from 24% a year ago.
Net Debt-to-Capital Ratio: Negative 7%.
Earnings Per Share: Increased to a first-quarter record of $4.78, up 31% from last year.
Book Value Per Share: $95, up $16 from a year ago.
EBITDA: $187 million, up from $147 million in last year's first quarter.
Effective Tax Rate: 23%, down from 24% last year.
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Bob, my first question, I guess, you gave the monthly order growth rates which is helpful. Rates did pick up towards the tail end of the quarter and thus far into April. Just curious if you've seen any impact either on traffic sales, any kind of price point differentiation with rates climbing more recently, and what are your current incentives that you're offering on the rate buydowns to combat that? A: Robert Schottenstein - M/I Homes Inc-Chairman of the Board - President, Chief Executive Officer: Yes, we have seen a slight moderation in activity and traffic recently, similar to industry trends. We use targeted financing incentives as necessary, varying by market and community. Our approach is very localized and strategic, aiming to maintain strong margins by being selective about incentives. We remain optimistic about the housing market fundamentals and our growth targets.
Q: Second, very helpful, the 5% to 10% kind of goal or target for growth. Last year, the seasonality of your closings was a little bit unusual. It's based on kind of where you had homes under construction and field. Your fourth quarter was a lower closing quarter, and this quarter you were up sequentially, which is also pretty unusual for 1Q. So without giving specific guidance, can you maybe just walk us through the year, how you expect the closing cadence to unfold? A: Phillip Creek - M/I Homes Inc-Chief Financial Officer - Executive Vice President, Director: We expect closings to be somewhat flat, possibly increasing in the second half of the year. Our strategy includes maintaining a mix of about 50% to 60% specs, particularly in townhouse communities and more affordable segments. We aim for a steady growth rate of 5% to 10% annually.
Q: If I could squeak in one last one, and then I'll move it on. I was a little surprised to see your FHA share up so much year over year, going from 19% to 32%, because it seems like your first-time buyer share has been holding pretty steady. Any particular reason why you've seen that kind of mix shift in the mortgage products? A: Derek Klutch - M/I Homes Inc-Chief Executive Officer of M/I Financial: The increase in FHA loans is likely due to buyers opting for lower down payments in response to rising interest rates. Our buyers are still high-quality, with substantial average down payments, but they are choosing FHA loans for their favorable terms under current economic conditions.
Q: So to take Alan's question a step further, assuming that you're going to see more buyers, they're going to need to be under the FHA and the VA loan limits, how are you feeling about your current community mix and where your pricing is set on those, and then especially as you go into the back half of the year and open up more communities, do you feel like your product will be priced appropriately to be under those limits? A: Robert Schottenstein - M/I Homes Inc-Chairman of the Board - President, Chief Executive Officer: We are well-positioned relative to FHA loan limits across our markets. Our Smart Series, in particular, is consistently priced under these limits, and we are confident in our pricing strategy as we expand into new communities.
Q: In the first quarter the orders in the south were up only about 3% after rising by a double-digit percentage the last couple of quarters. Could you discuss the competitive dynamics in the southern region, and are you seeing more competition on price and/or incentives in those markets? A: Robert Schottenstein - M/I Homes Inc-Chairman of the Board - President, Chief Executive Officer: The southern region's slower growth is partly due to market adjustments in Austin and slight softness in San Antonio and Florida. However, other areas like the Carolinas and Dallas continue to perform strongly. We maintain a focused approach on managing incentives and pricing competitively.
Q: Stock repurchase, how are you feeling about that for the year, and should we expect some level ongoing stock repurchase on a quarterly basis going forward? A: Phillip Creek - M/I Homes Inc-Chief Financial Officer - Executive Vice President, Director: We continuously evaluate our stock repurchase strategy and discuss it with our Board. Given our strong cash position and low leverage, we see value in maintaining a consistent repurchase program, potentially adjusting the level as needed based on ongoing assessments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
