M/I Homes, Inc.

Good morning, ladies and gentlemen, and welcome to the MI Home Second Quarter Earnings Conference Call. At this time, our lines are in listen-only mode. Following the presentation, we will conduct question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, 23rd, 2025. I will now turn the conference over to Phil Creek. Please go ahead.

Thank you. Joining me on the call today is Bob Schottenstein, our CEO and President, and Derek Flutch, President of our mortgage company. First, to address regulation and 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, 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 for joining us. As outlined in today's release, MI Homes had a very solid second quarter. highlighted by record second quarter revenue, record second quarter homes delivered, and continued strong returns, including 25% gross margins, 14% pre-tax income, and a 17% return on equity. We were very pleased to post these results given the challenging macroeconomic backdrop. When we last spoke on our first quarter earnings call, we commented on the demand challenges we faced during the last half of 2024, as well as during the first quarter of this year. Little has changed as we continue to face challenging and choppy conditions, primarily due to higher interest rates, which has contributed to uncertainty and impacted consumer confidence. Throughout this year, we have strategically and effectively used mortgage rate buy downs to drive traffic and incent sales. Though such buy downs have impacted profitability and margins, they have been most successful as we strive to balance price and pace across our 234 communities. Though our second quarter new contracts were down 8% from a year ago, we were pleased to record a monthly sale pace of three homes per community. And moreover, we were pleased to see a sequential improvement in new contracts from May to June. We have repeatedly said that long-term fundamentals of our industry are sound and that housing will benefit greatly from the current undersupply of homes and growing household formations, particularly in our markets. There's little doubt that many potential buyers are sitting on the sidelines waiting for a better rate environment. and an improvement in consumer sentiment. As we go forward, we will continue to use rate buy downs to drive traffic as we manage our operations to meet the demands of the current environment. We feel very good about our business and believe that we can continue to drive performance and produce solid returns and profitability. In the second quarter, we closed a record 2,348 homes, a 6% increase compared to a year ago. Our second quarter total revenue, also a record, increased by 5% to $1.2 billion, and pre-tax income decreased 18% to $160.1 million, largely due to the decline in gross margins to 25%, but still a very good 14% pre-tax income return. We continue to see quality buyers in terms of creditworthiness, with strong average credit scores of 746 and an average down payment of 17%. We ended the second quarter with a record 234 communities and remain on track to grow our community count the balance of 2025. We believe our 2025 average community count will increase by about 5% from 2024. Our division income contributions in the second quarter were led by Columbus, Dallas, Orlando, Chicago, Minneapolis and Charlotte. New contracts for the second quarter in our northern region decreased by 13%, while new contracts in our southern region decreased 4%. Our deliveries in the southern region increased by 8%. Deliveries in the northern region increased 2% from a year ago. 59% of our deliveries come out of the southern region, the other 41% out of the northern region. We have an excellent land position. Our owned and controlled lot position in the southern region increased by 7% compared to a year ago, and decreased by 7% versus last year in the northern region. 31% of our owned and controlled lots are in the north, the other 69% in the south. Company wide, we own approximately 24,500 lots, which is slightly less than a three year supply. In addition, we control via option contracts approximately 26,000 additional lots, resulting in a total of 50,500 owned and controlled lots, equating to about a five to six year supply. Our balance sheet is the strongest in company history. We ended the second quarter with an all-time record $3.1 billion of equity, equating to book value per share of $117, which is up 17% from a year ago. We also ended the quarter with zero borrowings under our $650 million unsecured revolving credit facility and $800 million of cash. This resulted in a debt-to-capital ratio of 18%, down from 20% a year ago, and a net debt to capital ratio of negative 3%. So I conclude, let me just say that we remain very optimistic about our business. Given the strength of our balance sheet, the quality of our communities, and the tremendous land position that we have, we are well positioned as we begin the third quarter of 2025. And with that, I'll turn it over to Phil.