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MH

M/I HOMES, INC. (MHO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record quarterly homes and income: revenue $1.21B (+24% YoY), diluted EPS $4.71 (+29% YoY), pre-tax income $170.6M (+24% YoY) .
  • Sequential margin compression emerged as mortgage rate buydowns expanded; gross margin fell to 24.6% (−250 bps QoQ, −50 bps YoY), with ~50% of buyers using buydowns .
  • Backlog contracted: 2,531 units (−16% YoY) with sales value $1.40B (−11% YoY) but ASP in backlog hit a record $553K (+5% YoY); community count rose to 220 .
  • Management expects 2025 effective tax rate ~23% and “likely” further gross margin compression; buyback pace remained active in Q4 ($50M) and later expanded with a new $250M authorization (Feb 11, 2025), a potential capital return catalyst .

What Went Well and What Went Wrong

What Went Well

  • Record Q4 revenue ($1.21B), deliveries (2,402), and income; EPS rose to $4.71 vs $3.66 YoY as strong execution offset choppy demand .
  • Geographic strength: division contributions led by Dallas, Columbus, Tampa, Orlando, Chicago, Raleigh; well‑located communities sustaining upper‑tier margins despite incentives .
  • Balance sheet resilience: cash ~$822M, zero revolver borrowings, homebuilding debt/capital 19%, book value/share $109; “best financial condition” in company history .

What Went Wrong

  • Gross margin contracted to 24.6% (−250 bps QoQ) on higher rate buydown costs as rates rose late-Q3/Q4; ~50% of Q4 buyers used buydowns, pressuring unit profitability .
  • Backlog units (-16% YoY) and sales value (-11% YoY) declined, reflecting faster conversion and lower backlog carry into 2025, raising visibility risk amid demand choppiness .
  • Florida (especially Tampa) faced demand softness and hurricane impacts; insurance costs likely to rise, adding affordability headwinds in that market .

Financial Results

Headline Metrics – Sequential and YoY Comparison

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$972.6 $1,109.8 $1,142.9 $1,205.3
Diluted EPS ($USD)$3.66 $5.12 $5.10 $4.71
Pre-tax Income ($USD Millions)$138.0 $194.1 $188.7 $170.6
Homes Delivered (Units)2,019 2,224 2,271 2,402
Avg Closing Price ($USD Thousands)$471 $482 $489 $490
Gross Margin %~25.1% (calc from $244.4/$972.6) 27.9% 27.1% 24.6%

Notes: Q4 2023 gross margin % derived from disclosed gross margin $244.4M and revenue $972.6M . Q2/Q3 % from management commentary ; Q4 % from call .

Operating Income, SG&A, EBITDA

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Operating Income ($USD Millions)$129.8 $186.8 $182.0 $164.0
SG&A ($USD Millions)$114.5 (G&A $60.3 + Selling $54.3) $122.5 (G&A $64.0 + Selling $58.5) $127.4 (G&A $68.3 + Selling $59.2) $132.8 (G&A $70.1 + Selling $62.8)
SG&A % of Revenue~11.8% (derived) 11.0% 11.2% 11.0%
Adjusted EBITDA ($USD Millions)$152.5 $199.8 $197.8 $183.1

Backlog and Community KPIs

KPIQ2 2024Q3 2024Q4 2024
Backlog Units (Homes)3,422 3,174 2,531
Backlog Sales Value ($USD Millions)$1,823 $1,726 $1,400
Backlog ASP ($USD Thousands)$533 $544 $553
Cancellation Rate (%)10 10 14
Community Count (Period End)211 217 220
First-time Buyer Share (%)53 50 50
Inventory Homes Share of Sales (%)60 60 68
Mortgage Capture Rate (%)87 89 91
Homes in Field (Units)4,500 (as of 3/31/24) 5,100 4,700

Regional Breakdown (Q4 2024)

RegionNew Contracts (Units)Deliveries (Units)Backlog UnitsBacklog Value ($USD Millions)Backlog ASP ($USD Thousands)
Northern707 1,064 1,136 $637 $561
Southern1,052 1,338 1,395 $763 $547
Total1,759 2,402 2,531 $1,400 $553

Balance Sheet Highlights (Quarter-End)

MetricQ3 2024Q4 2024
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$719.9 $821.6
Total Inventory ($USD Millions)$3,132.7 $3,091.9
Total Debt ($USD Millions)$930.1 $981.2
Shareholders’ Equity ($USD Millions)$2,845.4 $2,939.7
Book Value per Share ($USD)$104.59 $108.62
Homebuilding Debt/Capital (%)20 19

Actuals vs Consensus (Q4 2024)

MetricActualConsensusSurprise
Revenue ($USD Millions)$1,205.3 N/A (S&P Global data unavailable at query time)N/A
Diluted EPS ($USD)$4.71 N/A (S&P Global data unavailable at query time)N/A

S&P Global Wall Street consensus for Q4 2024 was unavailable at time of request due to API limits.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax Rate (%)FY 2025Not specified~23% New/clarified
Gross Margin TrendFY 2025“Slight downward pressure possible” (Q3 commentary) “Likely compression vs 2024” Lowered
Avg Community Count Growth (%)FY 2025Growth expected, no figure ~5% Clarified
Share Repurchase Authorization ($USD)Ongoing$107M remaining (as of 1/31/25) New $250M authorization (Feb 11, 2025) Raised
DividendOngoingNo plans No plans (unchanged) Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Mortgage rate buydownsUsed to offset rising rates; margins strong at 27.9% ~1/3 buyers used buydowns; margins 27.1% ~50% buyers used; margins 24.6% and likely compression in 2025 Incentives rising; margin pressure increasing
Spec strategy (sell/close intra‑quarter)30% sold and closed intra‑quarter ~40% closings intra‑quarter; specs critical ~30% closings sold and closed in quarter; potential to reach ~40% Elevated spec reliance sustained
Florida/Texas demandInventory rising in FL/TX; still strong fundamentals FL hurricanes impacted Q3 ops; Tampa/Sarasota monitoring; TX strong Tampa soft; TX strong; insurance likely to rise Florida watchlist; Texas resilient
Product mix (Smart Series vs move‑up)Smart Series 53% of sales; diverse pricing ~50% Smart / ~50% move‑up; diversity aids stability ~50% first‑time buyers; inventory share up to 68% Mix balanced; affordability support needed
Cycle times and costsCycle time down 10 days QoQ; costs flat Costs flat; slight cycle improvement Focus on sticks/bricks to offset buydown margin pressure; cycle time improved by 11 days in 2024 Operational efficiency steady
Land strategy/costsOwn 23k lots; control 49k; A‑locations priority Own 24k; control 52k; prime locations competitive 24k owned; 28.4k controlled via options in remarks; finished lot costs up 10–15% YoY Continued investment; inflation moderating
Capital return$50M buyback pace in Q2; 12% shares repurchased since 2022 $50M buyback in Q3; $157M remaining $50M buyback in Q4; later new $250M authorization Consistent buybacks; authorization expanded

Management Commentary

  • “We are in excellent financial condition… record shareholders' equity of $2.9 billion, cash of $822 million… homebuilding debt to capital ratio of 19% and a net debt to capital ratio of negative 5%.”
  • “Gross margin… 24.6%, down 50 basis points from a year ago and sequentially down approximately 250 basis points… primarily due to mortgage interest rate buydown incentives.”
  • “We will likely experience some compression in our gross margins in 2025… Despite choppy market conditions, homebuilding benefits from undersupply, positive demographics and household formations.”
  • “We currently estimate a 5% average community count growth for 2025… and expect 2025’s effective tax rate to be around 23%.”

Q&A Highlights

  • Florida/Tampa softness and insurance: Tampa demand more challenged than Orlando/Sarasota; insurance costs likely to rise post‑hurricanes; monitoring localized incentive needs .
  • Spec levels and margins: Specs remain critical for buydown programs; spec margins typically 100–150 bps lower, but varies by market; intra‑quarter closings ~30% with potential to reach ~40% .
  • Margin sustainability: Management expects strong returns but acknowledges likely margin compression; mix and rate trajectory will influence magnitude .
  • Land costs and positioning: Finished lot costs up ~10–15%; focus on premier locations to support pace and pricing despite competitive land market .
  • Buybacks: Board reviews authorization and pace quarterly; programmatic approach sustained; strategy unchanged given valuation disconnect .

Estimates Context

  • S&P Global Wall Street consensus was unavailable at the time of query due to provider limits; therefore, we cannot quantify beats/misses versus consensus for Q4 2024. We recommend refreshing S&P Global EPS and revenue consensus to update the comparison view.

Key Takeaways for Investors

  • Sequential margin compression is a key narrative shift, driven by broader use/cost of rate buydowns; expect ongoing pressure into 2025 until rates ease materially .
  • Execution remains strong: record deliveries, rising ASPs in backlog, tight SG&A control (~11% of revenue) and robust capital returns underpin valuation support .
  • Watch regional dispersion: Texas remains resilient; Tampa/Sarasota require targeted incentives amid insurance and hurricane after‑effects .
  • Spec strategy sustains pace and volume, but necessitates disciplined pricing to protect gross margins; intra‑quarter closings will remain elevated .
  • Balance sheet optionality enables continued buybacks and land investment; new $250M authorization strengthens capital return trajectory .
  • Near‑term trading: stock may react to margin guidance and Florida headlines; medium‑term thesis centers on undersupplied housing, community growth (~5%), and maintaining industry‑upper‑tier returns despite normalized margins .
  • Refresh consensus estimates to calibrate model adjustments; given Q4 actuals, expect analysts to trim margin assumptions but maintain volume/community growth given backlog ASP and market footprint.

Sources: Q4 press release and 8-K exhibit ; Q4 earnings call transcript ; Q3 press release/call ; Q2 press release/call .