M/I Homes Q2 Earnings Call Highlights

M/I Homes reported record second-quarter new contracts, with home sales up 15% year over year to 2,387 despite higher mortgage rates and economic uncertainty. The average sales pace improved to 3.4 homes per community, while the cancellation rate was 8%. Profitability declined: Revenue fell 9% to $1.1 billion, pretax income dropped 35% to $105 million, and diluted EPS decreased to $3.02 from $4.42. Gross margin was 22.1%, pressured by inventory charges and continued reliance on mortgage-rate buydowns. Balance sheet remained strong: The company ended the quarter with $736 million in cash, no revolver borrowings, an 18% debt-to-capital ratio and $3.2 billion in equity. M/I Homes also repurchased $50 million of stock and maintained a land position exceeding 49,000 owned and controlled lots. M/ I Homes NYSE: MHO reported record second-quarter new contracts as demand increased despite higher mortgage rates, economic uncertainty and what management described as a choppy housing market. The homebuilder sold 2,387 homes during the quarter, a 15% increase from a year earlier, while first-half sales rose 8% to 4,737 homes. 'Despite continued challenges in the broader economy, choppy demand, economic uncertainty, rising interest rates, and the impact of the conflict in the Middle East, we are very proud of our results,' Chairman, President and CEO Bob Schottenstein said during the company’s earnings call. Second-quarter pretax income totaled $105 million, down 35% from the prior-year period, while pretax income as a percentage of revenue was 10%. Revenue declined 9% to $1.1 billion as deliveries fell and the company’s average sale price decreased. Diluted earnings per share fell to $3.02 from $4.42 a year earlier. Sales Growth and Product Mix M/I Homes said its monthly sales pace averaged 3.4 homes per community in the second quarter, compared with 3.0 homes per community a year earlier. Its cancellation rate was 8%, and 50% of second-quarter sales were to first-time buyers. The company ended the quarter with 234 active communities, unchanged from a year earlier. It opened 27 communities and closed 23 during the quarter, and management expects average community count in 2026 to rise about 5% from the prior year. Sales growth occurred across both major regions. New contracts increased 16% in the northern region and 14% in the southern region, with the Carolinas posting the largest increase. Schottenstein identified Columbus, Chicago, Minneapolis, Raleigh and Charlotte as leading divisions during the quarter. He said the Midwest performed strongly, Texas sales improved, and Florida sales were also higher. At the same time, deliveries declined 6% to 2,206 homes. Northern-region deliveries fell 8% and represented 40% of the total, while southern-region deliveries declined 5% and accounted for the remaining 60%. The company saw a modest shift toward move-up buyers. Its Smart Series homes, the company’s most affordable product line and one aimed primarily at first-time buyers, represented 43% of sales, compared with 52% a year earlier. Schottenstein said the change reflected both somewhat stronger demand for move-up homes and the company’s efforts over the past 18 to 24 months to identify more move-up opportunities in select markets. 'Some of the more high-priced or move-up land opportunities penciled better in terms of underwriting,' Schottenstein said, adding that certain smaller and infill sites could support attractive returns. Margins, Incentives and Inventory Second-quarter gross margin was 22.1%, including $4 million of inventory charges. Excluding those charges, gro...