M/I Homes, Inc.

good morning ladies and gentlemen and welcome to the mi homes inc first quarter earnings conference call at this time all lines in a lesson only mode following the presentation we will conduct a question and answer session if at any time during this call you require immediate assistance please press star zero for the operator this call is being recorded on wednesday april 4th 2024. i would now like to turn the conference over to phil creek please go ahead

Thank you. Joining me on our call today is Bob Schottenstein, our CEO and President, and Derek Clutch, President of our mortgage company. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. And 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.

With that, I'll turn it over to Bob. Thanks, Phil. Good morning, and thank you all for joining us today. We had an exceptional first quarter. one of the best quarters in company history, setting first quarter records in homes delivered, revenue, and income. Homes delivered increased 8% to a record 2,158 homes. Revenue increased 5% to a record $1.05 billion, and pre-tax income increased by 33% to a first quarter record of $180.2 million, equating to 17.2% of revenue. Gross margins for the quarter were very strong, coming in at 27%, 360 basis points better than a year ago, and up 200 basis points sequentially, and return on equity equal 21%. Despite a volatile interest rate environment and continued macroeconomic uncertainties, we were very pleased with our new contracts. For the quarter, new contracts increased by 17% owing to the strength of our communities and product offerings and very solid across-the-board execution on the sales front. During the quarter, we were operating on average in 10% more communities than a year ago. We continue to benefit from strong housing fundamentals, including and undersupply of homes and low inventory levels in most markets. We have seen a slight uptick in used home listings in certain markets, particularly Florida. However, the use of below-market financing incentives where necessary in select markets and targeted communities has been and continues to be an important driver of our business. Our Smart Series homes, which is our most affordable line of homes, continues to be a meaningful contributor to our sales and operating performance. Smart Series sales accounted for 52% of total company sales. This is roughly equal to what it was a year ago. As we enter the second quarter, we are on track to open a number of new communities, increasing our average community count by roughly 10%. over 2023. And the quality of our buyers in terms of credit worthiness continues to be very solid, with average credit scores of 747 and an average down payment of 18%, which is about $85,000. We have made significant progress in improving our cycle time. Many of our markets are now operating at pre-COVID cycle time levels. and we continue to be focused on this important operating imperative. From a balance sheet standpoint, we ended the quarter in excellent shape, the best in company history. Shareholders' equity reached a record $2.6 billion, a 21% increase from a year ago, and that equates to a book value of $95 a share. Our cash balance at quarter's end equaled $870 million, We had zero borrowings under our $650 million unsecured credit facility and a debt-to-capital ratio of 21%, down from 24% a year ago, as well as a net debt-to-capital ratio of negative 7%. Now I will provide some additional comments on our markets. Our division income contributions in the first quarter were led by Dallas, Orlando, Columbus, Raleigh, Tampa, and Chicago. New contracts for the first quarter in the northern region increased by 40%. New contracts in our southern region increased by 3%. Our deliveries in the southern region increased by 9% from a year ago. Our deliveries in the northern region increased by 6%. 61% of our closings came out of the southern region. 39% out of the northern region. Our owned and controlled lot position in the southern region increased by 21% compared to a year ago and increased by 9% in the northern region. 34% of our owned and controlled lots are in the northern region, the other 66% in the southern region. We have an excellent land position. Company-wide, we own approximately 24,000 single family lots, which is roughly a three-year supply. And on top of that, we control via option contracts an additional 23,000 lots, thus owning and controlling about a five-year supply. As I conclude, let me just state that we are in the best financial condition in our history. We feel very good about our business. We have a lot of operating momentum, and we continue to be focused on gaining market share, growing our business by approximately 5% to 10% per year. MI Homes is well-positioned to have another year of very strong results in 2024. With that, I'll turn it over to Phil. Thanks, Bob.