M/I Homes, Inc.

Thank you for standing by. My name is Perla and I will be your conference operator today. At this time, I would like to welcome everyone to the MI Homes Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, please press the star followed by the number one on your telephone keypad. And if you would like to withdraw your question, please press the star again. Thank you. I would now like to turn the conference over to Phillip Creek. You may begin.

Thank you. Joining me on the call today is Bob Schottenstein, our CEO and President, and Derek Klutch, 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. I'll now turn the call over to Bob.

Thanks, Phil. Good morning and thank you for joining us today. We are pleased to report solid second quarter and first six month results. 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. For the second quarter, we sold a second quarter record 2,387 homes, 15% better than last year. and for the first six months we have sold 4,737 homes, 8% better than a year ago. Pre-tax income from the quarter was $105 million, though down 35% from a year ago, we were very pleased to post a pre-tax income percentage equal to 10% of revenue. Pre-tax income for the first six months was $194 million, also equating to a very solid 10% pre-tax income percentage. And we were pleased to generate a 10% return on equity for the second quarter. Contributing to our solid returns was a second quarter gross margin of 22%, which includes $4 million of inventory charges. Notably, excluding those charges, our second quarter gross margins would have approached 22.5%, which is slightly better than our first quarter gross margins. We closed 2,206 homes in the quarter, down 6% compared to a year ago, and for the first six months we have closed 4,120 homes, down 5% from last year. Revenue for the quarter was $1.1 billion, down 9% from last year. Our second quarter record due contracts resulted in a monthly sales pace average of 3.4 homes per community compared to a pace of 3 per community a year ago. We ended the quarter with 234 communities and remain on track to grow our 2026 average community count by about 5%. In terms of product mix, We have seen a slight increase in the sale of our move-up product. Specifically, during the quarter, our Smart Series, which is our most affordable line of homes that caters primarily to the first time buyer, accounted for 43% of company-wide sales. This compares to 52% a year ago. We believe the primary driver of our solid sales results is well-located communities and excellent product. At the same time, we continue to use mortgage rate buy-downs as our primary incentive, and given the current rate environment, will continue to promote with such buy-downs for the foreseeable future. Approximately 78% of our second quarter sales were spec homes, roughly the same as the first quarter. Our rate buy-down program is targeted to both spec homes and to-be-built homes. The to-be-built buy-down program appropriately features a longer-term rate lock. Our mortgage company had a terrific and very strong second quarter, capturing a record 96% of our business. We continue to see quality buyers, for the most part, in terms of creditworthiness with average credit scores of 748% and an average down payment of about 15%. We feel very good about all 17 of our home building markets. We expect to have a very solid year in Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis, Orlando, Dallas, Charlotte and Raleigh. Tampa, which historically has been one of our top performing markets, is currently somewhat challenged in terms of the macro environment Thank you for joining us. New contracts for the second quarter in the northern region increased by 16% while new contracts in our southern region increased by 14%. The biggest increase we saw was in the Carolinas. The Midwest was up across the board followed closely by Texas and our sales in Florida were also up. Our deliveries in the northern region decreased by 8% compared to last year's second quarter and represented 40% of our company-wide total. Our southern region deliveries also decreased by 5% over last year and represented 60% of total deliveries. We have an excellent land position. Our owned and controlled lot position in the southern region decreased by 15% compared to last year and increased by 24% in the northern region. 40% of our owned and controlled lots are in the northern region, while 60% are in the south. Company-wide, we own approximately 23,500 lots, which is roughly a two and a half year supply. In addition, we control approximately 25,700 lots via option contracts, resulting in a total of slightly more than 49,000 owned and controlled lots, which equates to about a five-year supply. Our balance sheet continues to be excellent, highlighted by S&P's recent upgrade of our credit rating to BB+. We ended the second quarter with an all-time record $3.2 billion of equity, equating to a book value per share of $128. We had no borrowings under our $900 million unsecured revolving credit facility and we ended the quarter with $736 million of cash. This resulted in a debt to cap ratio of 18% and a net debt to cap ratio of negative 1%. In closing, as we celebrate our 50th year in business, we remain very confident in the long-term fundamentals of the home building industry. Given the quality of our geographic footprint, our strong land position, Very well-located communities and diverse product offering, we believe MI Homes is well-positioned to have a solid 2026. With that, I'll turn it over to Phil.