M/I Homes, Inc. (MHO) Q2 2023 Earnings Conference Call July 26, 2023 10:30 AM ET

Company Participants

Phillip Creek - EVP and CFO

Robert Schottenstein - CEO and President

Derek Klutch - President, Mortgage Company

Conference Call Participants

Alex Barron - Housing Research Center

Jesse Lederman - Zelman & Associates

Jay McCanless - Wedbush Securities

Carl Reichardt - BTIG

Operator

Good morning, ladies and gentlemen, and welcome to the M/I Homes, Inc. Second Quarter Earnings Webcast Conference Call. [Operator Instructions]. I would now like to turn the conference over to Phil Creek. Please go ahead, sir.

Phillip Creek

Thank you for joining us today. On the call 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.

Robert Schottenstein

Thanks, Phil. Good morning, everyone, and thank you for joining us today. We had a very strong second quarter. Despite higher interest rates and uncertain economic conditions, very pleased with our new contracts, homes delivered, margins and income. And we ended the quarter with our balance sheet in excellent shape.

In terms of our new contracts, we sold 2,197 homes during the quarter, 21% better than 1,820 homes that we sold during 2022 second quarter. Smart Series, which is our most affordable line of homes, continues to be an important contributor to our sales performance. During the quarter, our Smart Series sales comprised about 55% of total company sales, roughly the same percentage as a year ago. During the quarter, we were operating in 15% more communities on average than we were a year ago. Our sales pace equaled 3.7 homes sold per community per month. We are on track to open a number of new communities this year. We expect to increase our community count for 2023 by approximately 15%, 196 communities that we had opened at the end of 2022. Closed 1,990 homes in the quarter and continue to improve our construction cycle time throughout all of our divisions. Gross margins for the quarter were very solid 26%, considerably better expected going into this year. Our pretax income for the quarter was $155 million, down from last year’s record level, still very pleased to produce pretax results of 15.3% of revenue.