M/I HOMES, INC.(MHO)Q1 2026 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the M/I Homes First Quarter Earnings Conference Call. This call is being recorded on Wednesday, April 22, 2026. I would now like to turn the conference over to Mr. Phil Creek. Please go ahead.

Thank you for joining us today. On the call is Bob Schottenstein, our CEO and President; Derek Klutch, President of our mortgage company. To address regulation for our disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant nonpublic items with you directly. As to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call. I'll now turn the call over to Bob.

Thanks, Phil. Good morning, everyone, and thank you for joining us today. We had a very solid first quarter, highlighted by revenues of $921 million, pretax income of $89 million and a strong pretax income return of 10%. Clearly, during the quarter, new home demand and homebuilding conditions continue to be challenged and impacted by affordability and even consumer confidence, the conflict in the Middle East and general uncertainty and volatility in the broader economy. Despite this, we were very pleased to increase our first quarter new contracts by 3%, generate gross margins of 22%, and produce a return on equity of 12%. Our sales momentum from late last year continued into January and February, even with the winter storms that had a pretty significant impact on a number of our markets at the beginning of the year. During this period, we saw improved traffic and heightened homebuyer activity as we began the spring selling season. However, market conditions slightly shifted at the end of February and into March as events in the Middle East pushed mortgage rates up higher, impacted gas prices and contributed to further market uncertainty. In managing all of this, mortgage rate buydowns continue to be an important part of our sales strategy. We continue to successfully balance margins and sales pace at the community level and offer mortgage interest rate buydowns both on spec sales and to-be-built sales as a leading incentive to promote our sales activity. During the quarter, we closed 1,914 homes, a 3% decrease compared to a year ago. Our first quarter total revenue decreased 6% to $921 million, and pretax income decreased 39% to $89.2 million. Still, we ended the quarter with a record $3.2 billion in shareholders' equity, and our book value per share is now at a record $125, up 11% from last year. As I mentioned, our sales improved 3% year-over-year. We sold 2,350 homes during the quarter. Our monthly sales pace averaged 3.4 homes per community, consistent with 2025. We continue to see high-quality buyers in terms of creditworthiness with average credit scores of 747 and an average down payment of 15%. Our Smart Series, which is our most affordable line of homes, continues to be an important contributor to our sales performance. During the first quarter, Smart Series sales were about 47% of total sales compared to 53% a year ago. Company-wide, about half of our buyers are first-time homebuyers, while the other half are first, second or third move-up. The diversity of our product offering remains an important factor and contributing to our sales performance and overall profitability. We ended the first quarter with 230 communities and are on track to grow our community count in 2026 by an average of about 5% from 2025. Turning to our markets, our division income contributions in the first quarter were led by Chicago, Columbus, Dallas, Orlando and Raleigh. New contracts for the first quarter in our Northern region decreased by 4%, while new contracts in our Southern region increased by 8% compared to a year ago. Our deliveries in the Northern region decreased 9% compared to last year and represented just under 40% of our company-wide total. Our Southern region deliveries increased by 1% over a year ago and represented the other 60% of our deliveries. We have an excellent land position. Our owned and controlled lot position in the Southern region decreased by 13% compared to last year, and increased by 21% compared to a year ago in our Northern region. Forty percent of our owned and controlled lots are in the Northern region, and the other 60% are in the South. Company-wide, we own approximately 24,200 lots, which is slightly less than a 3-year supply. In addition, we control approximately 25,800 lots via option contracts, which results in a total of roughly 50,000 owned and controlled lots equating to about a 5-year supply. Our balance sheet continues to be very strong. As I previously mentioned, we ended the first quarter with an all-time record $3.2 billion of equity, zero borrowings under our $900 million unsecured revolving credit facility and over $750 million in cash. This resulted in a debt-to-capital ratio of 18% and a net debt-to-capital ratio of negative 2%. As I conclude, I'll remind everyone that 2026 marks our 50th year in business. We're very proud of our record and look to build on our success in 2026. Given the strength of our balance sheet, the breadth of our geographic footprint and excellent land position and well-located communities along with a diverse product offering, we are well positioned to continue delivering very solid results in 2026. With that, I'll turn the call over to Phil.

Thanks, Bob. Our new contracts were up 3% when compared to last year. They were up 11% in January, up 7% in February and down 6% in March. Our cancellation rate for the quarter was 8%. Our monthly new contracts increased sequentially throughout the quarter. Last year's March new contracts were the highest month of 2025. Fifty percent of our first quarter sales were first-time buyers and 70% were inventory homes. Our community count was 230 at the end of the first quarter compared to 226 a year ago. The breakdown by region is 91 in the Northern region and 139 in the Southern region. During the quarter, we opened 22 new communities while closing 24. We delivered 1,914 homes in the first quarter. About 50% of these deliveries came from inventory homes that were both sold and delivered within the quarter. As of March 31, we had 4,600 homes in the field versus 4,800 homes in the field a year ago. Revenue decreased 6% in the first quarter. Our average closing price for the first quarter was $459,000, a 4% decrease when compared to last year's first quarter average closing price of $476,000. Our first quarter gross margin was 22%, down 390 basis points year-over-year due to higher homebuyer incentives and higher lot costs versus the same period a year ago. Our first quarter SG&A expenses were 12.7% of revenue versus 11.5% a year ago, and our first quarter expenses increased 4% versus a year ago. Increased costs were primarily due to increased selling expenses, increased community count and additional headcount. Interest income, net of interest expense for the quarter was $3.1 million. Our interest incurred was $9 million. We had solid returns for the first quarter given the challenges facing our industry. Our pretax income was 10% and our return on equity was 12%. During the quarter, we generated $99 million of EBITDA compared to $154 million a year ago, and our effective tax rate was 24% in the first quarter, the same as the prior year first quarter. Our earnings per diluted share for the quarter was $2.55 per share compared to $3.98 last year, and our book value per share is now $125 a share, a $12 per share increase from a year ago. Now Derek Klutch will address our mortgage company results.

Thanks, Phil. Our mortgage and title operations achieved pretax income of $14.1 million, a decrease of 12% from $16.1 million in 2025's first quarter. Revenue decreased 1% from last year to $31.2 million due to slightly lower margins on loans sold and a lower average loan amount, but offset by an increase in loans originated. Average loan-to-value on our first mortgages for the quarter was 85% compared to 83% in 2025's first quarter. Sixty-six percent of the loans closed in the quarter were conventional and 34% FHA/VA, compared to 57% and 43%, respectively, for 2025's first quarter. Our average mortgage amount decreased to $401,000 in this first quarter of 2026 compared to $406,000 last year. Loans originated increased to 1,579 loans, which was up 3% from last year, while the volume of loans sold increased by 1%. Finally, our mortgage operation captured 96% of our business in the first quarter, up from 92% last year. Now I will turn the call back over to Phil.

Thanks, Derek. Our financial position continues to be very strong. We ended the first quarter with no borrowings under our $900 million credit facility and had a cash balance of $767 million. We continue to have one of the lowest debt levels of the public homebuilders and are very well positioned. Our bank line matures in 2030 and our public debt matures in 2028 and 2030, and has interest rates below 5%. Our unsold land investment at the end of the quarter was $1.9 billion compared to $1.7 billion a year ago. At March 31, we had $844 million of raw land and land under development, and $1 billion of finished unsold lots. During the 2026 first quarter, we spent $79 million on land purchases and $104 million on land development for a total of $183 million. At the end of the quarter, we had 740 completed inventory homes and 2,584 total inventory homes. Of the total inventory, 999 are in the Northern region and 1,585 in the Southern region. At March 31, 2025, we had 686 completed inventory homes and 2,385 total inventory homes. We spent $50 million in the first quarter repurchasing our stock and have $170 million remaining under our Board authorization. In the last four years, we have repurchased 18% of our outstanding shares. This completes our presentation. We'll now open the call for any questions or comments.

Your first question comes from the line of Natalie Kulasekere from Zelman & Associates.

I'm just curious, have you received any form of communication regarding any cost increases from your vendors because of fuel prices, maybe a fuel surcharge stacked on top of your existing contracts? And if you have, do you think it's something that you could negotiate with your trade partners? Yes. And I guess I just have one more follow-up. Your ASP has been within the $470,000 to $480,000 range, if not higher across most quarters since 2022. So is there anything specific that drove this lower this quarter? And if so, how should we look at it going forward? Should it kind of be lower than the $470,000 to $480,000 range? Or do you think it's going to climb back up to that?

Thanks, Natalie. The short answer is yes. The issue of increased fuel has come up in several divisions. I don't know if it's come up everywhere. I'm aware of two, three or four instances where it has and it could well be more. So far, there hasn't been much impact. In fact, so far, I think there's been no impact. Having said that, if the conditions were to persist or worsen at some point, we've been in business for 50 years, and one of the things we're most proud about is not only the consistency of our strategy, but the long-standing relationships both at the national level and at the local level that we have with so many of our subcontractors and suppliers, many of whom we've been doing business with for a long time. One of the reasons that we're able to do business with people for a long time is we try to deal very fairly with them both in good times and in bad. You didn't ask maybe this as part of your question, but during the last year we've gone back to a number of those subcontractors from our point of view and sought to see cost reductions. We had a very aggressive, intense internal cost reduction effort that we launched a little over a year ago in anticipation of current conditions with declining margins and so forth. And we had quite a bit of success doing that. We know that's a two-way street, and there are times that they work with us and times that we're going to have to work with them. So far on the gasoline and oil situation, though, I'm not aware of any impact, unless you are, Phil. I hope that's helpful. Regarding ASP, it surprised me that it was lower — we knew it would be lower; I didn't think it would be quite this much lower. It's not that much when you really look at it — $470,000 versus $460,000. Having said that, affordability is the favorite buzzword in our industry today other than maybe rate buydowns. Affordability is up there. It really began in our company about five years ago where we began a very concerted effort to produce more affordable product, particularly attached townhome product. Company-wide, it's probably maybe 20% to 25% of our business; it moves a little quarter-to-quarter with new communities and timing of closeouts. I think it's more mix than anything else. I'd expect our average sales price to be at this level, maybe slightly higher, so they bounce around in the upper $400,000s for the foreseeable future.

Your next question comes from the line of Kenneth Zener from Seaport Research Partners.

I wonder, given your Smart Series being very successful at 47% of sales, can you talk to that? Are most of your intra-quarter order closings coming from the Smart Series almost by definition because it's like prebuilt? Is that the correct assumption that I'm making? Yes. And I see that you don't report segment data, and you have two regions. Given the margin swings over the past 18 months where the North is now doing better than the South, yet as I look at your new contracts and closings, I see that the North is declining in terms of the mix as a percent of the total, with deliveries down in the North year-over-year. Can you talk to how much of the margin we're seeing is just that the higher-margin North isn't flowing through? And then maybe comment a little bit on the Southern mix. I think in the past you've talked about Texas being larger than Florida in that Southern segment. If you could just give us a little sense of how those different regions are impacting the margins.

Not necessarily. We manage our spec levels or inventory home levels on a subdivision-by-subdivision basis. It's less related to the price point of the community at times than to the location of the community where we think the buyers are coming from. Clearly, I think there are a few more specs with attached product because you build building by building. Some of that is Smart Series, some of it isn't. I don't think there's any discernible difference between intra-quarter closings coming from Smart Series spec homes versus the other half of our business. And by the way, not every Smart Series buyer is a first-time homebuyer either. It's just a product line that we've tried to push really hard to bring our price points down. Phil, do you want to add something?

Yes. Overall, we feel really good about where our spec levels are. As Bob says, it really varies community to community. This has been a higher percentage—about 50% of the closings occurring within the quarter. Reduced cycle time has helped; it doesn't take us as long to get houses built as it did a year ago. We're also trying to continue to be focused on when we put specs out there, let's make sure we put the right specs out there on the right lots. We're like most builders; we would prefer to have more dirt sales, more to-be-built sales, because those houses generally have more upgrades, higher price point and higher margins. But you also have to balance off when you're offering interest rate buydowns; when you start getting longer term, it's harder to get those effective rate buydown benefits. A lot of those things are being balanced off. Overall, we were pretty pleased with the quarter with our closings, and we feel good about our investment level in specs.

The other thing I'll mention because it gets a lot of attention: for years, the differential in margin between specs and to-be-builts has been an issue in our industry, anywhere from 100 to 200 basis points of margin erosion between specs and to-be-builts, in some cases 300, 400 or 500 basis points. It moves around market-to-market and period-to-period. That issue has never been lost on us. We've always tried to generate more to-be-built than spec sales. Having said all that, we're also trying to successfully balance pace. Initially, when we first got into rate buydowns, it was strictly for specs. But for some time now, we've been heavily focused on rate buydowns for to-be-builts as well because they do generate higher margins. All of that gets poured into the strategy, which we think has helped us generate very strong returns compared to our peers quarter-to-quarter.

Yes. I see that. I wonder if homebuilding companies in general, you're not unique in this, you don't report the segment data and you have two segments. Given the margin swings that we had over the past 18 months where the North is now doing better than the South, yet I see your new contracts and closings show the North declining as a percent of total and deliveries down. Can you talk to how much of what we're seeing in margins is that the higher-margin North isn't flowing through? And maybe comment a bit on the Southern mix, like Texas versus Florida.

Happy to do it. In general, over the last year or so, our margins have held up better in our Midwest markets than in our Florida markets. For a while, our Florida markets had some of the best margins in the company. That's not the case today. We have had very strong margins in Dallas for a long time; they are lower now than they were, like many markets, but comparatively speaking we still have very solid margins in Dallas. The percentage of our business in Texas markets is growing a lot for us. Our margins in Charlotte are very strong. We have very solid margins in Raleigh as well. It really varies market to market. I mentioned that our most profitable divisions in the first quarter were Chicago, Columbus, Dallas, Orlando and Raleigh, but I don't want to leave out Charlotte or Cincinnati, Minneapolis, which have very solid operations. I wish all 17 of our markets were performing at a high level, but most are. When I say high level given the conditions, holding up quite well, I think the part of our business feeling the pinch more than others would be the West Coast of Florida, really from Tampa down through Sarasota. That appears to be the most challenging right now. It's not horrible, but it's nowhere near what it once was, and we're working through it.

We're really pleased with having 17 markets and the diversification. We remember a couple of years ago how hot Florida and Texas were, but those markets have come back down. The Midwest never got quite that hot. We have a really good presence in most of our markets; we're a pretty big player. Having diversity in markets and also in price points and product is important. We do have 50% first-time buyers, but that tends to be at the $400,000 to $450,000 price point, as opposed to the lower price segments which have a lot of competition. We try to react to every market based on the competitive landscape, land position and those types of things. We focus on better locations, better schools, proximity to shopping and transportation—try to give people a reason to buy, not just price. That's what we focus on.

Your next question comes from the line of Jay McCanless from Citizens.

So sticking on the North, could you talk about the year-on-year increase in lots from the North? Is that something that could potentially help gross margins down the road?

I think that the increase in the lot position is somewhat episodic. Sometimes things come on at different times because they're delayed and it skews a quarter. We have a lot of opportunity to grow in Indianapolis, still in Chicago, Minneapolis, Columbus and Cincinnati, maybe slightly less so in Detroit. We believe we can grow our operations in those areas 5% to 10% a year for the foreseeable future; in some cases, maybe slightly more. We have a lot of growth opportunities. In Charlotte and Raleigh, our Raleigh operation has underperformed from a volume standpoint, not profitability, largely because of delays in bringing some new deals to market. We're excited about what we have coming on in Raleigh over the next several years. We still have big plans to grow in Houston and Dallas, maybe slightly less so in Austin, but we still intend to grow in Austin, and we're growing in San Antonio. We have big plans for Fort Myers and Naples; we're really just getting started there and expect that to be a meaningful contributor down the road. Tampa and Orlando have been top five positions for a long time and we won't give up market share in either place. Nashville has been a slower start for us; I thought we'd be further along than we are, but I don't think we're alone—other builders have seen similar trends. We're going to grow our operation there this year; it's well ahead of where it was a year ago. All of this should contribute as the markets evolve. I don't know what's going to happen with the economy; we'll adjust as necessary. Over time, we've always pushed very hard to be in the upper tier of margin performance, and I believe that wherever homebuilding margins settle, you'll see M/I in the upper tier of margin performance relative to our peers. Our mortgage operation contributes to that as well. We had a 95% plus capture rate in the first quarter given all the activity with rate buydowns. If we weren't at least around a 90% capture rate, I think that would require a discussion because it seems like many buyers should be going through our mortgage company with all the rate buydowns that we and our peers are doing. M/I Homes' capture rates are among the highest in the industry, and we're very proud of that; it contributes to profitability as well.

From a land position standpoint, we focus on what we own. Today we own about 24,000 lots. A year ago, we owned about 25,000; it's kind of changed a little bit internally. Today we own almost 10,000 finished lots. We like to own about a year of supply, and with our run rate, it's a little less than 10 months right now, so we're really well positioned. Our finished lot cost today is up about 5% versus a year ago. Land development costs have kind of settled down the last couple of quarters. We feel like we're in a good situation from a land position standpoint. Bob talked about growth; we do have a few fewer houses in the field than a year ago, but when we're building houses faster, we don't need to put the investment out there as fast. We're trying to be efficient, have specs where we need them and continue growth that is profitable with solid returns. We think we have a really good land position and are excited about where we are.

That's great, guys. So the second question I had: are most Smart Series communities located in the Southern region? Or what's the mix between the Northern and the Southern for the Smart Series communities?

I think it's pretty evenly balanced with a couple of exceptions. San Antonio is almost 90% Smart Series among our communities there. Houston is approaching 90% Smart Series, maybe even a little higher. But if you take those out and look at the other 15 markets, it's pretty close to 30% to 50% of our business being Smart Series. They tend to have slightly higher absorptions so it skews and distorts the actual sales number. But overall it's somewhere between one-third and one-half.

That's good to know, Bob. And then if you could, Phil, maybe talk about what the gross margin looks like in backlog at the end of the quarter.

The backlog really hasn't changed much, Jay. And of course, the backlog is not that big. We are focused on trying to do more to-be-built houses with higher margins in general, and it really hasn't moved much. The thing that's hard is that this quarter, half of our closings were houses that were sold and closed in the quarter. It's really hard to predict average sale price and margins because so much flows through each quarter.

I know you would love to see us give margin guidance, but it's a bit of a fool's errand. There's so much uncertainty. During our last conference call we weren't talking about a war or $4 gas prices. In 90 days, things like that can change. It's very hard to predict. Conditions right now are marked with uncertainty. Having said that, I think housing is holding up pretty well. I've seen a whole lot worse, and so has anyone that's been in this business more than a couple of years. We've been in business 50 years; this is going to be one of our five or six best years in company history, and that's pretty good. I think we're very well positioned to deal with current conditions. We were encouraged that our first quarter gross margins were nearly the same as the fourth quarter sequentially. Does that mean they're leveling off? I guess we'll know when we know. We'll continue to do everything we can to push profitability. We're proud in this environment to have double-digit pretax income of 10%, not easy to do. A couple of builders do, but most don't. It's one thing to say we're focused on profitability; it's another to deliver it, and I think we're delivering it.

We spend a lot of time talking about flow, not just the flow of spec inventory. At the end of the quarter we had about 740 completed specs versus 686 at the end of the first quarter of last year. We also track what specs are coming through the system and their construction stages—drywall or other stages. We don't fire-sell them to move them; we try not to get too big on specs. We also track land closely—when we buy raw land, we get into development and put finished lots out that we can work through. We focus on managing our investment levels. We feel we're in good shape and can react as needed.

The last thing I'll say: our strategy has been consistent for a long time. We didn't get into build-to-rent and we don't land bank like some others. We focus on our communities, quality, customer service and building in well-located A communities. Nothing distracts us from pace and margin on a community-by-community basis. Within certain cities, we have special rate buydown programs applicable only to certain lots in certain communities. We don't paint with a broad brush; we manage the business on a subdivision-by-subdivision basis within markets. That's what our management team is focused on, and it's worked for us.

Right. That's great. Any qualitative commentary you can give about traffic or web traffic for April, just given some of the uncertainty that's out there? And then also, Phil, can you repeat what the monthly order cadence was? I missed that part.

The only thing I'll say about traffic is given the market, I've been pleased with our traffic through the first quarter and through April so far. The month is far from over; we're optimistic but we'll see.

We're focused on opening a lot of communities. Last year we opened about 80. This year, we plan on opening more than 80. We're trying to open them the right way. In general, they're at a higher price point where we see steadier demand these days. We're staying on top of it community by community.

Right. Phil, what was the monthly order cadence again, please?

During the quarter, we were up 11% in January, up 7% in February, and March was down 6%; last year's March was the highest month of last year. We did sell more houses in February than in January, and we sold more houses in March than we did in February. Overall, we were pretty pleased with our sales.

Your next question comes from the line of Buck Horne from Raymond James.

I'm wondering, thinking about March's volatility in terms of incentives, did you increase or lean into certain incentives more in March to try to offset the mortgage rate volatility or conversely was there enough natural seasonal demand where you were able to keep the same strategy in place? I'm also wondering if there's a potential carryforward to second quarter margins due to incentives that were provided. Secondly, you're throwing off quite a bit of positive cash flow and have dialed back land spend with a good land position. I'm wondering if there's a possibility that you'd increase the schedule of buybacks for the remainder of the year.

Normally, I wouldn't want to get too specific, even though it's all on our website for competitors to see. But I'll say what has worked for us on specs for the most part: even though we've seen people working with 2/1 and 3/2/1 buydowns and some ARM product, the vast majority of our buyers want a 30-year fixed rate mortgage. What we have led with for quite some time now, and been pretty consistent with on homes that can be delivered within roughly 60 days—call it inventory homes—is a buydown structure that results in an effective rate benefit for the buyer on both FHA/VA as well as conventional. We've also offered on to-be-builts a long-term rate lock at a rate in the very low 5s. Those programs are working for us now and resulted in our 3% year-over-year increase in sales. The cost went up, went down, then it went up during the quarter. It went down before geopolitical events and then afterwards it went up. It's been bumping around quite a bit since. We live in a minute-to-minute news cycle with constant overreactions to news, which affects rates. There's been volatility in the 10-year. When it goes up, it costs us a little more if we're buying on that day. We look at it every day. Derek and his team at M/I Financial are intensely focused on this daily.

That's very helpful. Secondly, just thinking through the business setup right now, with strong cash flow and a good land position, you've been programmatic about the share repurchase schedule but you're still building up cash. Is there a possibility you might increase the buyback schedule for the rest of the year?

We talk about it with our Board, at least periodically. We have a meeting in two weeks and we'll probably discuss it. I don't really see any change, but it's possible. I don't know. I think we're going to stay where we are.

I agree. We're not anticipating the cash to build up much more. We are a little lower now than we thought we would be internally. I would have a few more spec dollars out there than I have; we could do a better job managing that. We will be opening quite a few more communities and have continued spending needs. I would expect to have a strong cash position but would not expect it to be up very much more. We're spending at a rate of about $200 million a year to buy stock back, which we've done for the last few quarters—about $50 million a quarter—and we still think it's a good use of capital. We've bought back almost 20% of the stock over the last couple of years. It's something we'll continue to look at.

Congrats. Appreciate the color.

There are no further questions at this time. Turning the call back over to Mr. Creek.

Thank you for joining us. Look forward to speaking to you next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.