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MH

M/I HOMES, INC. (MHO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was resilient operationally but softer than prior periods: revenue fell to $0.976B and diluted EPS to $3.98, with gross margin strong at 25.9% and pre‑tax margin at 15% in a choppy demand backdrop .
  • Results missed Wall Street consensus: revenue materially below $1.121B* and EPS slightly below $4.16*; limited coverage (two estimates) heightens impact of individual forecasts [GetEstimates]*.
  • Management flagged continued use of mortgage rate buydowns (now used by 54% of buyers) and expects gross margins to be below the 2024 full-year level of 26.6% as 2025 progresses, while community count is targeted to rise ~5% YoY .
  • Balance sheet and capital returns remain a key support: $776M cash, no revolver borrowings, homebuilding debt-to-capital 19%, and a new $250M share repurchase authorization announced in February (with $50M repurchased in Q1) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin held at 25.9% despite rate buydowns; “we were effective in balancing pace and price” and saw sequential margin improvement vs Q4 .
  • Strong balance sheet and liquidity: $776M cash, zero borrowings on $650M revolver, debt-to-capital 19% and net debt-to-capital negative 3% .
  • Financial services delivered record revenue ($31.5M, +17% YoY) and higher pretax income ($16.1M, +31% YoY), with 92% capture rate and solid borrower quality (avg FICO 746, 17% down payment) .

What Went Wrong

  • Demand and pace: new contracts down 10% YoY; deliveries down 8% YoY; cancellation rate ticked up vs Q1 2024 (10% vs 8%) amid “declining consumer confidence” and “choppy” conditions .
  • Revenue and EPS below consensus; revenue miss driven by fewer deliveries and lower contracts vs prior year, while backlog value and units fell YoY (value: $1.56B vs $1.79B; units: 2,847 vs 3,391) [GetEstimates]*.
  • Margin outlook: management expects ongoing compression through 2025 vs 2024 (26.6% FY gross margin), given continued reliance on rate buydowns and affordability pressures .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$1,142.9 $1,205.3 $976.1
Diluted EPS ($)$5.10 $4.71 $3.98
Operating Income ($USD Millions)$182.0 $164.0 $140.9
Pre‑tax Income ($USD Millions)$188.7 $170.6 $146.1
Gross Margin ($USD Millions)$309.4 $296.8 $252.8
Gross Margin (%)27.0% n/a25.9%
Pre‑tax Margin (%)16.5% n/a15.0%
Homes Delivered (units)2,271 2,402 1,976
New Contracts (units)2,023 1,759 2,292
Cancellation Rate (%)10% 14% 10%
Avg. Closing Price ($USD Thousands)$489 $490 $476
Backlog Units (units)3,174 2,531 2,847
Backlog Sales Value ($USD Millions)$1,725.4 $1,399.7 $1,559.3
Active Communities (count)217 220 226

Segment revenue breakdown

MetricQ3 2024Q4 2024Q1 2025
Housing Revenue ($USD Millions)$1,111.4 $1,175.9 $940.0
Land Revenue ($USD Millions)$1.6 $0.9 $4.5
Total Homebuilding Revenue ($USD Millions)$1,112.9 $1,176.8 $944.6
Financial Services Revenue ($USD Millions)$30.0 $28.5 $31.5

Non‑GAAP

MetricQ3 2024Q4 2024Q1 2025
Adjusted EBITDA ($USD Millions)$197.8 $183.1 $154.0

KPIs

KPIQ3 2024Q4 2024Q1 2025
Spec share of sales (%)n/an/a65%
Rate buydown usage (%)n/a~50% (Q4 reference) 54%
Avg. borrower FICOn/an/a746
Avg. down payment (%)n/an/a17% (~$90k)
Financial services pretax ($USD Millions)$12.9 $10.0 $16.1
ROE (%)20% 21% (FY24) 19%

Estimates vs Actuals

MetricQ3 2024Q4 2024Q1 2025
Revenue Actual ($USD Millions)$1,142.9 $1,205.3 $976.1
Revenue Consensus Mean ($USD Millions)*$1,127.1$1,168.3$1,120.9
OutcomeBeatBeatMiss (material)
EPS Actual ($)$5.10 $4.71 $3.98
EPS Consensus Mean ($)*$4.94$4.83$4.16
OutcomeBeatMiss (slight)Miss (slight)
# of EPS Estimates*332
# of Revenue Estimates*332

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (%)FY 2025None givenExpected below FY 2024’s 26.6% as rate buydowns persist Lowered (qualitative)
Community Count (avg)FY 2025None givenPlan to grow average community count ~5% YoY Initiated (growth)
Rate Buydowns2025None givenContinue throughout spring unless demand returns; 54% buyer usage in Q1 Maintained (continued use)
Share Repurchase AuthorizationOngoingPrior program had $107M remaining (Jan 31) New $250M authorization (Feb 11); $50M purchased in Q1 Raised
Effective Tax Rate2025None given24% in Q1; no forward guidance provided n/a

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Demand and OrdersQ3: New contracts ~flat YoY; cancellations 10% . Q4: New contracts +11% YoY; cancellations 14% .New contracts −10% YoY; cancellations 10%; spring selling season “B to C” Softer vs Q4; uneven weekly patterns
MarginsQ3 gross margin strong at 27% . FY24 gross margin 26.6% .Q1 gross margin 25.9%; expect compression below FY24 levels through 2025 Sequentially up vs Q4; YoY down; downward bias
Rate BuydownsNot highlighted in Q3/Q4 press releases; implied promotions sector‑wide.54% of buyers using buydowns; expected to continue; protects backlog integrity Structural tool; sustained use
Spec StrategyNot detailed in press releases.65% of sales from spec; ~150–200 bps margin gap vs build‑to‑order; ~3 finished specs/community Elevated spec mix; managed per subdivision
Regional TrendsQ3: Broad strength; backlog ASP record $544k . Q4: Deliveries record; backlog ASP $553k .Tampa previously soft but “showing signs of life”; Chicago, Indianapolis strong; Dallas/Houston good; Detroit softer Mixed; FL improving; Midwest/TX solid
Costs/Supply Chain/TariffsQ3/Q4: No acute cost headwinds noted .Sticks and bricks “essentially what they were a year ago” to slightly lower; tariff impacts not yet felt; lot costs rising Neutral on build costs; land inflation persistent
Capital AllocationQ3/Q4: $50M buybacks each; strong liquidity .$50M repurchased; new $250M authorization; shares below book discussed; consistent cadence Continued buybacks; authorization expanded

Management Commentary

  • “While our new contracts were down 10% compared to a year ago, we were effective in balancing pace and price as our gross margin was a strong 25.9%. And we were very pleased with our 15% pre‑tax profit margin and 19% return on equity.” — Robert H. Schottenstein, CEO .
  • “As we begin 2025, it was clear to us that rate buydowns remain necessary… Clearly, that has not happened [consistent demand]. Instead, what we have seen is the continuation of choppy and challenging conditions.” .
  • “Given the need to continue using rate buydowns… our gross margins will likely be under some pressure as we move through the year and continue to be below 2024’s full‑year margins of 26.6%.” .
  • “Our balance sheet is the strongest in Company history… cash of $776 million… homebuilding debt‑to‑capital of 19% and a net debt‑to‑capital ratio of negative 3%.” .
  • “We ended the quarter with a record 226 communities and remain on track to grow our community count in 2025 by an average of 5%.” .

Q&A Highlights

  • Demand mix and geography: Smart Series remains ~54% of sales; Tampa rebounding; Indianapolis/Chicago strong; Dallas/Houston good; Detroit softer; little true pricing power in most communities (<10%) .
  • Spec strategy: Spec share ~65%; margin gap vs build‑to‑order ~150–200 bps; target ~3 finished specs per community; starts managed subdivision‑by‑subdivision .
  • Rate buydowns vs price cuts: Buydowns preferred to protect backlog; government loan buydown rates lower than conventional; tool will remain pivotal until rates moderate .
  • Costs and tariffs: Build costs steady to slightly lower; tariff impacts not yet visible; lot costs continue to rise; multi‑sourcing pursued .
  • Capital returns: Consistent $50M quarterly buybacks; new $250M authorization; management favors steady cadence over timing; leverage conservative .

Estimates Context

  • Q1 2025 missed consensus: revenue $0.976B vs $1.121B* and EPS $3.98 vs $4.16*; only two covering estimates magnify variance impact [GetEstimates]*.
  • Q4 2024 revenue beat while EPS was slightly below consensus; Q3 2024 beat both revenue and EPS [GetEstimates]*.
  • Expect estimate revisions downward on revenue and margin trajectory, given management’s commentary on continued buydowns and margin compression below FY24 levels .

Key Takeaways for Investors

  • Near‑term: The material revenue miss vs consensus and commentary on margin compression are likely to drive estimate cuts and caution on near‑term multiple expansion; monitor weekly order trends and spec margins .
  • Medium‑term: Strong balance sheet, expanded buyback authorization ($250M), and community count growth (~5%) provide support to per‑share value and volume capacity through cycles .
  • Operational focus: Elevated spec strategy and targeted buydowns are sustaining pace but modestly diluting margins; subdivision‑level execution remains key .
  • Regional/affordability: Mixed geographic performance with Florida improving; persistent lot cost inflation keeps affordability in focus; product/spec discipline matters .
  • Mortgage dynamics: High buydown usage (54%) implies sensitivity to rate paths; any decline in rates would reduce buydown cost and relieve margin pressure .
  • Watch KPIs: Cancellations, backlog trajectory, ASP trends, and mortgage capture (92%) will be leading indicators of margin resilience and revenue cadence .
  • Capital returns: Expect continued buybacks under the new authorization and conservative leverage to underpin book value compounding and downside support .

Citations: 8‑K/press release and transcript details . Estimates marked with * are values retrieved from S&P Global via GetEstimates.