M/I Homes (MHO): A Homebuilder Delivering Exceptional Results

Published on September 24, 2024 | Ticker: MHO

M/I Homes, Inc. (NYSE: MHO) is one of the nation's leading homebuilders, having sold over 153,900 homes since commencing operations in 1976. The company's homes are marketed and sold primarily under the M/I Homes brand and it has homebuilding operations in 17 markets across the Midwest, Southeast, and Texas.

Recent Developments

M/I Homes delivered an exceptional first quarter in 2024, setting new records for homes delivered, revenue, and income. The company reported net income of $138.1 million, or $4.78 per diluted share, for the quarter, up 34% from the prior year period. Annual net income for 2023 was $465.4 million. Revenue for the first quarter increased 5% to $1.05 billion, with the company delivering 2,158 homes, an 8% increase from the prior year. Annual revenue for 2023 was $4.03 billion.

The company's strong performance was driven by a 17% increase in new contracts during the quarter, as well as a 360 basis point improvement in gross margin to 27.1%. M/I Homes' focus on affordable product offerings, such as its Smart Series homes, which accounted for 52% of total sales, has been a key contributor to its success. The company's operating cash flow for 2023 was $552.1 million, while free cash flow was $546.4 million.

Geographic Performance

From a geographic perspective, the company's Southern region, which includes markets such as Florida, Texas, and the Carolinas, accounted for 61% of home deliveries in the first quarter. New contracts in the Southern region increased 3% year-over-year, while deliveries were up 9%. In the Northern region, which includes markets like Ohio, Illinois, and Minnesota, new contracts increased 40% and deliveries were up 6%.

Financial Services Segment

The company's financial services segment, which includes mortgage and title operations, also performed well, contributing $12.3 million in pre-tax income during the quarter. Mortgage capture rate improved to 88% from 78% in the prior year period.

Financials

M/I Homes ended the first quarter with a strong balance sheet, including $870 million in cash and no borrowings under its $650 million unsecured credit facility. The company's debt-to-capital ratio was 21%, down from 24% a year ago. This financial flexibility positions M/I Homes well to navigate the current market environment and continue investing in land acquisitions and development.

Outlook

Looking ahead, the company expects to grow its average community count by approximately 10% in 2024 compared to 2023, as it continues to open new communities across its markets. Management has provided a 5-10% annual growth target for the business, driven by its focus on affordable product offerings and strategic land positioning.

Conclusion

While the housing market has faced some headwinds from rising interest rates and economic uncertainty, M/I Homes has demonstrated its ability to adapt and deliver strong results. The company's disciplined approach to land acquisition, construction, and pricing has allowed it to maintain healthy margins and profitability. With a solid balance sheet, strategic geographic diversification, and a focus on affordable housing, M/I Homes appears well-positioned to continue its track record of success.

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