Q1 2026 M/I Homes Inc Earnings Call

April 22, 2026

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Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator.

Speaker #1: This call is being recorded on Wednesday, April 22, 2026. I would now like to turn the conference over to Mr. Phil Creek; please go ahead.

Yes.

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Speaker #2: Thank you for joining us today. On the call is Bob Schottenstein, our CEO and president; Derek Klutch, president of our mortgage company. To address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call.

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Good morning, ladies and gentlemen, and welcome to the first quarter earnings Conference call. At this time, all rytary in the listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call may require immediate assistance. Please press star zero for the.

Speaker #2: 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.

This call is being recorded on Wednesday April 22 2006.

Speaker #2: 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.

I would like to turn the conference over to Toby start fairly quick. Please go ahead.

Thank you for joining us today on the call is Bob Schottenstein, our CEO and President Derek clutch President of our mortgage company 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 <unk>.

Speaker #3: Thanks, Phil. Good morning, everyone, and thank you for joining us today. We had a very solid first quarter. Highlighted by revenues of $921 million pre-tax income of $89 million and a strong pre-tax income return of 10%.

Speaker #3: Clearly, during the quarter, new home demand and home-building conditions continued to be challenged and impacted by affordability, uneven consumer confidence, the conflict in the Middle East, and general uncertainty and volatility in the broader economy.

Discussing significant nonpublic 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 todays press release also applies to any comments made during this call.

Be advised that the company undertakes no obligation to update any forward looking statements made during this call.

Speaker #3: Despite this, we were very pleased to increase our first quarter new contracts by 3%, generate gross margins of 22%, and produce a return on equity of 12%.

I'll now turn the call over to Bob Thanks, Phil Good morning, everyone and thank you for joining us today.

We had a very solid first quarter highlighted by revenues of $921 million pre tax income of $89 million and a strong pre tax income return of 10%.

Speaker #3: Our sales momentum from late last year continued into January and February, even with the winter storms, that had a pretty significant impact on a number of our markets at the beginning of the year.

Speaker #3: During this period, we saw improved traffic and heightened home buyer activity as we began the spring selling season. However, market conditions slightly shifted at the end of February and into March, as events in the Middle East pushed mortgage rates up higher, impacted gas prices, and contributed to further market uncertainty.

Clearly during the quarter, new home demand and homebuilding conditions continued to be challenged challenging and impacted by affordability uneven consumer confidence conflict in the middle East and general uncertainty and volatility in the broader economy.

This we were very pleased to increase our first quarter, new contracts by 3% generated gross margins of 22% and produce a return on equity of 12%.

Speaker #3: In managing all of this, mortgage rate buy-downs continue to be an important part of our sales strategy. We continue to successfully balance margins and sale pace at the community level, and offer mortgage interest rate buy-downs both on spec sales and to-be-built sales as a leading incentive to promote our sales activity.

Our sales momentum from late last year continued into January and February even with the winter storms had a pretty significant impact on a number of our markets at the beginning of the year.

Speaker #3: During the quarter, we closed 1,914 homes, a 3% decrease compared to a year ago. Our first quarter total revenue decreased 6% to $921 million, and pre-tax income decreased 39% to $89.2 million.

During this period, we saw improved traffic and heightened homebuyer activity as we began the spring selling season.

However market conditions slightly shifted at the end of February and into March as events in the middle East push mortgage rates up higher impact of gas prices and contributed to further market uncertainty.

Speaker #3: Still, we ended the quarter with a record $3.2 billion in shareholders' equity, and our book value per share is now at a record $125, up 11% from last year.

And managing all of this mortgage rate buy downs continue to be an important part of our sales strategy.

We continue to successfully balance margins and sales pace at the community level and offer mortgage interest rate buy downs, both on spec sales and to be built sales as a leading incentive to promote our sales activity.

Speaker #3: As I mentioned, our sales improved 3% year over year, we sold quarter, our monthly sales pace averaged 3.4 homes per community, consistent with 2025.

During the quarter, we closed 1914 homes, a 3% decrease compared to a year ago.

Speaker #3: We continue to see high-quality buyers in terms of creditworthiness, with average credit scores of 747 and an average down payment of 15%. Our smart series—which is our most affordable line of homes—continues to be an important contributor to our sales performance.

Our first quarter total revenue decreased 6% to $921 million and pre tax income decreased 39% to $89 $2 million.

Still we ended the quarter with a record $3 $2 billion in shareholders' equity and our book value per share is now at a record $125 up 11% from last year.

Speaker #3: During the first quarter, smart series sales were about $47% of total sales compared to $53% a year ago, company-wide, about half of our buyers our first-time home buyers, while the other half are first, second, or third move-up.

As I mentioned, our sales improved 3% year over year, we sold 2000 and 350 homes during the quarter, our monthly sales pace averaged three four homes per community consistent with 2025.

Speaker #3: The diversity of our product offering remains an important factor in contributing to our sales performance and overall profitability. We ended the first quarter with 230 communities, and our on-track to grow our community count in 2026 by an average of about 5% from 2025.

We continue to see high quality buyers in terms of credit worthiness with average credit scores of 747, and an average down payment of 15%.

Our smart series, which is our most affordable line of homes continues to be an important contributor to our sales performance. During the first quarter Smart series sales or about 47% of total sales compared to 53% a year ago companywide about half of our.

Speaker #3: Turning to our markets, our division income contributions in the first quarter were led by Chicago, Columbus, Dallas, Orlando, and Raleigh. New contracts for the first quarter in our northern region decreased by 4%, while new contracts in our southern region increased by 8% compared to a year ago.

Buyers are first time homebuyers, while the other half are first second or third move up.

Speaker #3: Our deliveries in the northern region decreased 9% compared to last year, and represented just under 40% of our company-wide total. Our southern region deliveries increased by 1% over a year ago, and represented the other 60% of our deliveries.

The diversity of our product offering remains an important factor in contributing to our sales performance and overall profitability.

We ended the first quarter with 230 communities and are on track to grow our community count in 2026 by an average of about 5% from 2025.

Speaker #3: We have an excellent land position. Our owned and controlled lot position in the southern region decreased by 13% compared to last year, and increased by 21% compared to a year ago in our northern region.

Turning to our markets our.

Our division income contributions in the first quarter were led by Chicago, Columbus, Dallas, Orlando and Raleigh.

Speaker #3: 40% of our owned and controlled lots are in the northern region, the other 60% in the south. Company-wide, we own approximately 24,200 lots, which is slightly less than a three-year supply.

New contracts for the first quarter in our northern region decreased by 4%, while new contracts in our southern region increased by 8% compared to a year ago.

Our deliveries in the northern region decreased 9% compared to last year and represented just under 40% of our companywide total.

Speaker #3: In addition, we control approximately

Speaker #1: 25,800 lots via option contracts , which results in a total of roughly 50,000 owned and controlled lots . Equating to about a five year supply .

Our southern region deliveries increased by 1% over a year ago and represented the other 60% of our deliveries.

We have an excellent land position are owned and controlled lot position in the southern region decreased by 13% compared to last year and increased by 21% compared to a year ago and our northern region.

Speaker #1: Our balance sheet continues to be very strong , as I previously mentioned , we ended the first quarter with an all time record $3.2 billion of equity , zero borrowings under our $900 million unsecured revolving credit facility and over $750 million in cash .

40% of our owned and controlled lots are in the northern region. The other 60% in the south.

Speaker #1: This resulted in a debt to capital ratio of 18% and a net debt to capital ratio of negative two percent . As I conclude , I'll remind everyone that 2026 marks our 50th year in business .

Companywide, we own approximately 24200 lots, which is slightly less than a three year supply.

In addition, we control approximately 25800 lots via option contracts, which results in a total of roughly 50000 owned and controlled lots equating to about a five year supply.

Speaker #1: We're very proud of our record and look to build on our success in 2026 . Given the strength of our balance sheet , the breadth of our geographic footprint , and excellent land position , and well located communities along with a diverse product offering , we are well positioned to continue delivering , continue delivering very solid results in 2026 .

Our balance sheet continues to be very strong as I. Previously mentioned, we ended the first quarter with an all time record $3 $2 billion of equity.

Zero borrowings under our $900 million unsecured revolving credit facility and over $750 million in cash.

Speaker #1: That I'll turn the call over to Phil .

Speaker #2: Thanks , Bob . Our new contracts were up 3% with compared to last year . They were up 11% in January , up 7% in February and down 6% in March .

This resulted in a debt to capital ratio of 18% and a net debt to capital ratio of negative 2%.

Speaker #2: Our cancellation rate for the quarter was 8% . Our monthly new contracts increased sequentially throughout the quarter Last year's March new contracts were the highest month of 2025 , 50% of our first quarter sales were to first time buyers , and 70% were inventory homes Our community count was 230 at the end of the first quarter , compared to 226 a year ago .

So I conclude I'll remind everyone that 2026 marks our 15th year in business.

We're very proud of our record and look to build on our success in 2026.

Given the strength of our balance sheet, the breadth of our geographic footprint and excellent land position and well located communities along with a diverse product offering we are well positioned to continue delivering continued delivering very solid results in 2026.

Speaker #2: The breakdown region is 91 in the northern region and 139 in the southern region . During the quarter , we opened 22 new communities while closing 24 .

That I will turn the call over to Phil Thanks, Bob our new contracts were up 3% when compared to last year. They were up 11% in January up 7% in February and down 6% in March our cancellation rate for the quarter was 8% our monthly new contracts increased.

Speaker #2: We delivered 1914 homes in the first quarter . About 50% of these deliveries came from inventory homes that were both sold and delivered within the quarter , and as of March 31st , we had 4600 homes in the field versus 4800 homes in the field a year ago .

<unk> throughout the quarter last year's March new contracts, where the highest month of 2025.

Speaker #2: Revenue decreased 6% in the first quarter . Our average closing price for the first quarter was 459,000 , a 4% decrease when compared to last year's first quarter .

50% of our first quarter sales were to first time buyers and 70% where inventory homes. Our community count was $2 30 at the end of the first quarter compared to $2 26, a year ago. The breakdown by region is 91 in the northern region and $1 39 in the southern region during the quarter, we opened 20.

Speaker #2: Average closing price of 476 . Our first quarter gross margin was 22% , down 390 basis points year over year due to higher home buyer incentives and higher lot costs versus the same period a year ago .

Two new communities, while closing 24, we.

We delivered 1914 homes in the first quarter about 50% of these deliveries came from inventory homes that were both sold and delivered within the quarter.

Speaker #2: Our first quarter G&A expenses were 12.7 of revenue versus 11.5 a year ago . And our first quarter expenses increased 4% versus a year ago Increased costs were primarily due to increased selling expenses , increased community count , and additional headcount Interest income .

And as of March 31, we had 4600 homes in the field versus 4800 homes in the field a year ago.

Revenue decreased 6% in the first quarter, our average closing price for the first quarter was 459000% to 4% decrease when compared to last year's first quarter average closing price of $4 76.

Speaker #2: Net of interest expense for the quarter was 3.1 million . Our interest incurred was 9 million . We had solid returns for the first quarter .

Speaker #2: Given the challenges facing our industry . Our pre-tax income was 10% and our return on equity was 12% . During the quarter , we generated 99 million of EBITDA compared to 154 million a year ago .

Our first quarter gross margin was 22%.

390 basis points year over year, due to higher homebuyer incentives and higher lot costs versus the same period a year ago.

Speaker #2: And our effective tax rate was 24% in the first quarter , same as the prior year . First quarter . Our earnings per diluted share for the quarter was 2.55 per share , compared to 3.8 last year .

And our first quarter SG&A expenses were 12, 7% of revenue versus $11 five a year ago, and our first quarter expenses increased 4% versus a year ago.

Increased costs were primarily due to increased selling expenses increased community count and additional head count interest income net of interest expense for the quarter was $3 1 million our interest incurred was $9 million we.

Speaker #2: And our book value per share is now $125 a share . A $12 per share increase from a year ago Now , Derek Kluch will address our mortgage company results .

Speaker #3: Thanks , Phil . Our mortgage and title operations achieved pre-tax income of $14.1 million , a decrease of 12% from $16.1 million in 2025 .

We had solid returns for the first quarter given the challenges facing our industry. Our pretax income was 10% and our return on equity was 12% during the quarter, we generated $99 million of EBITDA compared to $1 $54 million a year ago, and our effective tax rate was 24% in the first.

Speaker #3: First quarter revenue decreased 1% from last year to $31.2 million , due to slightly lower margins on loans sold and a lower average loan amount .

<unk> same as the prior year first quarter.

Speaker #3: But offset by an increase in loans originated Average loan to value on our first mortgages for the quarter was 85% , compared to 83% in 2025 .

Our earnings per diluted share for the quarter was $2 55 per share compared to $3 98 last year and our book value per share is now $125 a share a $12 per share increase from a year ago.

Speaker #3: First quarter , 66% of the loans closed in the quarter were conventional , and 3,434% FHA or VA , compared to 57% and 43% , respectively .

Now Derek <unk> will address our mortgage company results. Thanks, Phil our mortgage and title operations achieved pretax income of $14 1 million a.

Speaker #3: For 2025 . First quarter , our average mortgage amount decreased to $401,000 in 2026 . First quarter , compared to $406,000 last year .

A decrease of 12% from $16 1 million in 2025 first quarter.

Revenue decreased 1% from last year to $31 $2 million due.

Speaker #3: Loans originated increased to 1579 loans , which was up 3% from last year . While the volume of loans sold increased by 1% .

Due to slightly lower margins on loans sold and a lower average loan amount, but offset by an increase in loans originated.

Speaker #3: Finally , our mortgage operation captured 96% of our business in the first quarter , up from 92% last year . Now , I will turn the call back over to Phil .

Average loan to value on our first mortgages for the quarter was 85% compared to 83% in 2025 first quarter.

66% of the loans closed in the quarter were conventional and 34, 34% FHA or VA.

Speaker #2: Thanks , Derek . Our financial position continues to be very strong . We ended the first quarter with no borrowings under our $900 million credit facility , and had a cash balance of 767 million .

Impaired to 57% and 43% respectively for 2025 first quarter.

Speaker #2: We continue to have one of the lowest debt levels of the public home builders , and are very well positioned . Our bank loan matures in 2030 and our public debt matures in 2028 , and 2030 , and has interest rates below 5% .

Our average mortgage amount decreased to $401000 in 2026, as first quarter compared to $406000 last year.

Loans originated increased to 1579 loans, which was up 3% from last year, while the volume of loans sold increased by 1%.

Speaker #2: Our unsold land investment at the end of the quarter was 1.9 billion , compared to 1.7 billion a year ago . At March 31st , we had 844 million of raw land and land under development and 1 billion of finished unsold lots During 2026 first quarter , we spent 79 million on land purchases and 104 million on land development , for a total of 183 million .

Finally, our mortgage operation captured 96% of our business in the first quarter up from 92% last year.

Now I will turn the call back over to Phil. Thanks, Derrick our financial position continues to be very strong. We ended the first quarter with no borrowings under our $900 million credit facility and had a cash balance of $767 million. We continue to have one of the lowest debt levels of the public homebuilders and are very well positioned.

Speaker #2: The end of the quarter , we had 740 completed inventory homes in 2584 . Total inventory homes and of the total inventory , 999 are in the northern region and 1585 in the southern region .

Our bank line matures in 2030, and our public debt matures in 2028, and 2030 and as interest rates below 5%, our unsold land investment at the end of the quarter was $1 9 million compared to $1 7 billion a year ago.

Speaker #2: In March , 31 , 2025 , we had 686 completed inventory homes . In 2385 . Total inventory homes . We spent 50 million in the first quarter repurchasing our stock and have 170 million remaining under our board authorization in the last four years .

At March 31, we had $844 million of raw land and land under development and $1 billion of finished unsold lots.

Speaker #2: We have repurchased 18% of our outstanding shares . This completes our presentation . We'll now open the call for any questions or comments .

During 2026 first quarter, we spent $79 million on land purchases and $104 million on land development for a total of $183 million.

Speaker #4: Thank you , ladies and gentlemen . We will now begin the question and answer session . Should you have a question , please press star followed by the number one on your touchtone phone .

We ended the quarter, we had 740 completed inventory homes and 2584 total inventory homes and of the total inventory of 999 are in the northern region and one $5 85 in the southern region at March 31, 2025, we had 686.

Speaker #4: You will hear a prompt that your hand has been raised . Should you wish to decline from the following process , please press star followed by the number two .

Speaker #4: If you are using speakerphone , please leave the handset before pressing any keys . Your first question comes from the line of Natalie Filesecure from Zelman Associates .

<unk> completed inventory homes 2385 total inventory homes.

Spent $50 million in the first quarter repurchasing our stock.

Speaker #4: Your line is now open .

Speaker #5: Hey . Good morning . Thank you for taking my question . I'm just curious , have you received any form of communication regarding any cost increases from your vendors Because of , you know , field prices , maybe it could be a fuel surcharge stacked on top of your existing contracts .

I have a $170 million remaining under our board authorization in the last four years, we have repurchased 18% of our outstanding shares. This completes our presentation and we'll now open the call for any questions or comments.

Yeah.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one.

Speaker #5: And if you have , do you think it's something that you could negotiate with your trade partners ?

Speaker #1: Thanks , Natalie . The the short answer is yes . The issue of increased fuel has come up in several divisions . I don't know if it's come up everywhere .

Colin you would hear problem that you have has been re <unk> four in the filing process. Please press star followed by the number too.

Thank you speaker phone. Please thank you Barbara and Mickey.

Your first question comes from the line of Natalie <unk>.

Speaker #1: I'm aware of two or 3 or 4 instances where it has . And it could well be more . So far , there hasn't been much impact .

From Zelman and Associates. Your line is now open.

Hey, good morning, Thank you for taking my question.

Speaker #1: In fact , so far , I think there's been no impact . Having said that , if the condition were to persist at worse , you know , at some point , you know , we've been in business for 50 years .

Have you.

Eastern regarding any cost increases from the vendors.

Because.

Maybe it could be <unk>.

Scott comes out.

Contact.

And if you have good thing.

Speaker #1: And one of the things we're most proud about is not only the consistency of our strategy , but the long standing relationships , both at the national level and at the local level that we have with so many of our subcontractors and suppliers , many of whom we've been doing business with for a long , long time .

Now you could see pocketed.

Thanks Natalie.

Yeah.

Yes, the short answer is yes.

The issue of increased fuel has come up in several divisions.

I don't know if its come up everywhere.

Speaker #1: And one of the reasons that we're able to do business with people for a long time is , you know , we try to deal very fairly with them both in good times and in bad .

There are two or three or four instances, where it has and it could well be more.

So far.

There hasnt been much impact.

In fact, so far I think there's been no impact.

Speaker #1: You didn't ask . Maybe this as part of your question , but during the last year , we've gone back to a number of those subcontractors from our point of view and sought to to see cost reductions .

Having said that if the conditions were to persist.

Worse.

At some point.

No.

We've been in business for 50 years and one of the things we're most proud about.

Speaker #1: We had a very , very aggressive , intense internal cost reduction effort that we launched , I think , a little over a year ago , maybe a little more than a year ago in anticipation of , you know , the current conditions with declining margins and so forth .

Is not only the consistency of our strategy, but the longstanding relationships both at the national level and at the local level that we have with so many of our sub contractors and suppliers many of whom we've been doing business with for a long long time.

Speaker #1: And we had quite a bit of success doing that . We know that's a two way street . And , you know , there's times that they work with us .

And.

One of the reasons that we're able to do business with people for a long time.

Speaker #1: There's times that we're going to have to work with them . So far on the gas , gasoline and oil situation , though , I'm not aware of any impact unless you are .

We tried to deal very fairly with them both in good times and in bad.

You didn't ask maybe this is part of your question, but during the last year, we've gone back to a number of those some contractors from our point of view and sought to see cost reductions we have a very very aggressive intense internal cost reduction effort that we launched.

Speaker #1: Phil . Yeah , I hope that's helpful .

Speaker #5: Yes . Thank you so much . And I guess I just have one more follow up . So your ASP was in the four 7480 range , if not higher across most quarters since 2022 .

Speaker #5: So is there anything specific that drove this lower this quarter . And if so , how should we look at it going forward ?

I think a little over a year ago, maybe a little more than a year ago in.

Speaker #5: Should it kind be lower than the four 7080 range , or do you think it's going to . Do you reckon it's going to climb back up to that ?

In anticipation of.

The current conditions with declining margins and so forth and we had quite a bit of success doing that.

Speaker #1: You know , it surprised me that it was as I we knew it would be lower . I didn't think it would be , you know , maybe quite this much lower .

No Thats, a two way street.

<unk>.

There's times that they worked with US Theres times that we're going to have to work with them. So far on the gas gasoline and oil situation, though.

Speaker #1: I mean , it's not that much . You know , when you really look at it . 470 versus 460 . Having said that , you know , affordability is is the favorite buzzword in our industry today .

I'm not aware of any impact unless you are Phil.

I hope that's helpful.

Yes. Thank you so much and I guess I just have one more follow up.

Speaker #1: Other than maybe rate buy downs . As I think about it . But affordability is up there and really it began in our company about five years ago where we began very concerted effort to produce more affordable product , particularly attached townhome product company wide .

He was in the 70 to 80 range, if not higher across the quarter I think Jay Thank you Susan.

Anything specific that drove that this quarter any how should we look at it.

So they tend to be lower.

Lower down the 470 to 80 range on keeping it.

Speaker #1: It's probably discussing maybe 20 or 25% of our business somewhere in there . It moves a little quarter to quarter with new communities and so forth .

Dave I think it's going to climb back up to that.

You know.

Yes.

It surprises me that it was.

We knew it would be lower I didn't think it would be maybe quite this much lower it's not that much.

Speaker #1: And timing of of Closeouts . And I think it's I , I actually think it's more mix than anything else . I , I expect our average sale price to be at this level , maybe slightly higher sort of bounce around in this in the upper fours for , for the foreseeable future .

You really look at it $4 70 versus 460, <unk>, having said that.

No affordability.

As the favorite Buzz word in our industry today other than Navy rate buy downs as I think about it but affordability is up there and.

Speaker #5: Got it . Thank you so much .

Speaker #1: Thank you .

Really it began in our company about five years ago, where we began.

Speaker #4: Thank you again , if you would like to ask a question , please press star followed by the number one on your touchtone phone .

Very concerted effort to produce more affordable product, particularly attached townhome product.

Speaker #4: Your next question comes from the line of Kenneth Zener from Seaport Research Partners . Your line is now open

Companywide is probably.

Saying, maybe 20 or 25% of our business somewhere in there it moves a little quarter to quarter with new communities and so forth.

Speaker #6: Good morning everybody .

Speaker #1: Morning .

Speaker #6: I wonder , given your smart series , very successful 47 . I'm just going to call it half up and half . You know .

Timing of Closeouts.

And I think it's I actually think it's more mix than anything else.

Speaker #6: Can you talk to that ? Are most of your intra quarter order closings coming from the smart series ? Almost by definition , because it's .

I would expect our average sell price to be at this level, maybe slightly higher sort of bounce around in this in the upper fours for the foreseeable future.

Speaker #6: Like pre-built ? Is that the correct assumption that I'm making ?

Alright, Thank you very much.

Thank you.

Speaker #1: Not necessarily . Are we we manage our spec levels or inventory home levels on a subdivision by subdivision basis . And it's , it's less , less related to maybe the price point of the community at times than it is .

Thank you again, if you would like to ask a question. Please press star followed by the number one on your Touchstone phone. Your next question comes from the line of Gannett Xena from Seaport Research Partners. Your line is now open.

Good morning, everybody.

Good morning.

Speaker #1: I think it's , it's more , it's more relates to the location of the community where we think the buyers are coming from .

I Wonder given your smart series very successful 47, I'm, just going to call it half.

And huh.

Speaker #1: Clearly , I think there's a few more specs with attached product because you build building by building . Right . And some of that smart series , some of it isn't .

Can you talk to that.

Are most of your intra quarter order closings.

Coming from the Smart series almost by definition, because it's like prebuilt is that.

Speaker #1: I don't think there's really any discernible difference between intra quarter closings coming from smart series spec homes versus the other half of our business .

Correct assumption.

That I'm, making.

Not necessarily.

Oh.

Speaker #1: And by the way , you know , not every smart series buyer is a first time home buyer either . It's just a product line that we that we've tried to push really hard to take advantage of , of bringing our price points down .

We manage our spec levels, our inventory homes levels on a subdivision by subdivision basis, and it's less less related to.

Speaker #1: But Phil , do you want to add something . ?

Maybe the price point of the community at times.

Speaker #2: And overall , you know , we feel really good about where our spec levels are as Bob says , it really varies . You know , community to community .

Yes, I think it's more it more relates to the location of the community.

We think the buyers are coming from.

Speaker #2: You know , this has been a a higher percentage , you know , about 50% of the closings occurring , you know , within the quarter , reduced cycle time has helped .

Clearly I think there is a few more specs with attached product because you've been building by building.

And some of that smart series some of it isn't.

I don't think there's really any discernible difference between intra quarter closings coming from smart series spec homes versus the other half of our business and by the way not every smart series buyers are first time homebuyer, either it's just a product line that we that we've tried to push really hard to take advantage of.

Speaker #2: It doesn't take us as long to get houses built as it did , you know , a year ago . We're also trying to continue to be focused on when we put specs out there .

Speaker #2: Let's make sure we put the right specs out there on the right lots . You know , we're like most builders , we would prefer to have more dirt sales , more to be built , sales because in general , you know , those houses have more upgrades , higher price point , higher margins .

Yeah.

Bringing our price points down, but Phil do you want to add.

Overall, we feel really good about where our spec levels are.

As Bob says it really varies.

Speaker #2: But you also have to balance off when you're offering interest rate buy downs , when you start getting , you know , longer term , it's harder to get , you know , those effective rates by downs .

32 community.

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This has been a higher percentage you know about 50% of the closings occurring within the quarter.

Speaker #2: So a lot of those things are being balanced off . But overall , we were pretty pleased with the quarter . You know , with our closings .

Reduced cycle time has helped it.

It doesn't take as long to get houses built as it did a year ago. We're also trying to continue to be focused on when we put specs out there, let's make sure we put the right specs out there on their lots.

Speaker #2: But we feel good about our investment level and specs .

Speaker #1: The other thing I'll mention , just because it gets a lot of attention for years , the differential in margin between specs and too-b builds has been an issue on our industry , where anywhere from 100 or 2 points , 100 or 200 basis points of margin erosion occurred between specs and too-b builts in some cases , three , four , 500 points .

We're like most builders, we would prefer to have more dirt sales more to be built sales because in general those houses have more upgrades higher price point higher margins.

But you also have to balance off when you're offering interest rate buy downs. When you start getting longer term, it's harder to get those effective rate buy down. So a lot of those things are being balanced off but overall, we were pretty pleased with the quarter.

Speaker #1: It sort of moves around market to market and period to period . It's that that issue never been lost on us . We've always , always tried to generate more to be built than spec sales .

Now with our closings.

Speaker #1: Having said all that , we're also trying to successfully balance pace and , you know , we've , you know , initially when we first got into rate buy downs , it was strictly for specs , but for some time now , we've been heavily focused on rate buy downs for to builds as well , because they do generate higher margins and it should go without saying .

But we feel good about our investment level and specs.

Other thing I'll mention just because it gets a lot of attention.

For years the.

Differential in margin between specs and to be built has been an issue what our industry.

There anywhere from 100 or two points 100, or 200 basis points of margin erosion occurred between specs and to be built to in some cases, three four or 500 points that sort of moves around market to market and period to period.

Speaker #1: But I guess I'll say it anyway . All of that , all of that gets poured into the strategy , which we think has helped us generate , you know , very strong returns compared to our peers quarter to quarter

Speaker #6: Yes . And I see that . I wonder if , you know , home building doesn't the companies in general , you're not unique in this , you know , don't report the segment data And you have two segments , right ?

Yes.

That issue has never been lost on US, we've always always strive to generate more <unk> than spec sales, having said all of that we're also trying to successfully balance pace and.

Speaker #6: With the South Texas and Florida being big inputs . They're given the margin swings that we had over , you know , last six , 18 months where the North is now doing better than the South , yet as I look at your new contracts and closings , I see that North is , you know , declining in terms of the mix , right .

<unk>.

Initially when we first got into rate buy downs. It was strictly for specs, but for some time now we've been heavily focused on rate buy downs for to be built as well because they do generate higher margins.

It should go without saying, but I guess I'll say it anyway all of that all of that gets tourism strategy, which we think has helped us generally.

Speaker #6: As a percent of the total , just the year over year change was down in the north . For example , on deliveries , can you talk to how much of that , you know , the margin we're seeing is just that the higher margin north isn't flowing through .

So very strong returns compared to our peers.

Quarter to quarter.

Yes.

I see that I wonder if.

Speaker #6: And then maybe comment a little bit on the southern mix . I think in the past , you've talked about right , Texas being larger than Florida in that southern segment .

Homebuilding doesn't.

The companies in General you are not unique in this don't report the segment data and you have two segments right with the south.

Thanks, Liz and Florida being big inputs, there given the margin swings that we had.

Speaker #6: If you could just give us a little sense of how those different regions are impacting the margin trend .

Well I think 18 months, where the north is now doing better than the south yet as I look at your new contracts and closings.

Speaker #1: Thank you . Happy to do it . In general , over the last year or so , our margins have held up better in our Midwest markets than in our Florida markets .

I see the north.

Is.

Yes.

Declining in terms of the mix as a percent of the total just the year over year change was down in the North for example on delivery can you talk to how much of that.

Speaker #1: You know , for for a while , our Florida markets had some of the best margins in the company . That's not the case today .

Speaker #1: We have had very strong margins in Dallas for a long time . Their lower now than they were that market or that market , like many , is off a little bit .

The margin, we're seeing is just that the higher margin north isn't flowing through.

And then maybe comment a little bit on the southern mix I think in the past you've talked about Texas.

Speaker #1: But comparatively speaking . To give good context , you know , we're we're we still have very solid margins in Dallas . The , the percentage of our business , our , our Texas markets , which really you can't claim newness anymore .

Texas being larger than Florida in that Southern segment. If you could just give us a little sense of how those.

Different region well.

Tomorrow.

Thank you yeah happy to do it in general over the last year or so our margins have held up better in our Midwest markets than in our Florida markets.

Speaker #1: They were new for a while , but those markets are really growing a lot for us . And , you know , our margins in Charlotte are very strong .

Speaker #1: Our we have very solid margins in Raleigh as well . It's sort of market to market . I think I mentioned that our most profitable divisions in the first quarter were Chicago , Columbus , Dallas , Orlando , Raleigh .

For a while our Florida markets had some of the best margins in the company that's not the case today.

We have had very strong margins in Dallas for a long time, there are lower now than they were that mark that market like many is off a little bit but comparatively speaking.

Speaker #1: But , you know , I don't want to leave out Charlotte or , or , you know , as I think about it , Cincinnati , Minneapolis , very solid operations in these markets .

And to give good context.

We still have very solid margins in Dallas.

Speaker #1: Look , I wish all 17 of our markets were performing at a high level , but most are . And we're very encouraged by that .

The percentage of our business.

Our techs are Texas markets, which really you can't claim newness anymore. They were new for a while but those markets are really growing a lot for us.

Speaker #1: When I say high level , given the conditions holding up quite well , I think right now , if I had to identify any part of our business that is feeling the pinch more than others , it would be the west coast of Florida , really from Tampa down through Sarasota .

And.

Our margins in Charlotte are very strong.

We have very solid margins in Raleigh, as well, it's sort of market to market.

I think I mentioned that our most profitable divisions in the first quarter, where Chicago, Columbus, Dallas Orlando Raleigh.

Speaker #1: That appears to be the most challenging right now . It's not horrible , but it's just nowhere near what it once was . And we're working through it .

But I don't want to leave out Charlotte or or.

Speaker #2: We're really pleased with where we are having the 17 markets , having the diversification Share , you know , we all remember a couple of years ago how hot Florida and Texas were for those markets have come back down the Midwest , Carolinas never got quite that hot .

As I think about Cincinnati, Minneapolis, very solid operations in these markets.

Look I wish all 17 of our markets were performing at a high level.

But most are and we're very encouraged by that when I say high level, given the conditions holding up quite well.

Speaker #2: And plus we have , you know , a really good presence . You know , we talk about meaningful presence all the time .

I think right now if I had to identify any part of our business that is feeling the pinch more than others. It would be the west coast of Florida really from Tampa down.

Speaker #2: We have a good presence in most of our markets . You know , we're a pretty big player . So having this diversity , you know , in markets and also in price points and products .

Down through Sarasota that appears to be the most challenging right now it's not horrible, but it's just nowhere near what it once was and we're working through it.

Speaker #2: Oh we we do have 50% first time buyers . But that tends to be the , you know , for , for 50 type price point as opposed to that kind of down and dirty , which there's a whole lot of competition .

But we're really pleased with where we are having the 17 markets have been the diversification sure. We all remember a couple of years ago, How hot Florida, and Texas were for <unk>.

Speaker #2: So again , you know , we try to react to every market based on what the competitive landscape is or the land position and those type things .

Those markets have come back.

Speaker #2: You know , we try to really focus on , you know , having better locations , you know , in better school districts , better , near better shopping , better transportation .

Down the Midwest.

Carolinas.

Never got quite that hot and plus we have a really good presence we've talked about meaningful presence. All time, we have a good presence in most of our markets were a pretty big player. So having this diversity.

Speaker #2: Again , try to give people a reason to buy and not just price . So that's what we focus on .

Speaker #6: Thank you very much .

Speaker #1: Thanks , Ken .

Speaker #4: Thank you . Your next question comes from the line of Jay McCanless from citizens . Your line is now open .

Markets and also in price points and products.

We do have 50% first time buyers, but that tends to be that.

Speaker #7: Hey , good morning guys . I guess kind of morning guys . So sticking on kind of the questions on the north , could you talk about the increase year on year in the lots from the North ?

For $4 50 type price point as opposed to that kind of down and dirty, which there is a whole lot of competition. So again, we try to react to every market based on what the competitive landscape is land position and those type things, we try to really focus on having better locations.

Speaker #7: And is that something that potentially could help grow margins down the road

Speaker #1: You know , I , I , I , I think that the increase in the lot position , some of it's what's the right word ?

And better School district, near better shop in better transportation again try to give people a reason to buy not just price. So that's what we focus on.

Speaker #1: Episodic . I don't know if that's the right word or not . Sometimes things come on at different times because they're delayed and it , it skews a quarter .

Thank you very much.

Thanks, Ken.

Thank you and your next question comes from the line of game colleagues from <unk>. Your line is now open.

Speaker #1: We have a lot of opportunity to grow in Indianapolis still . Chicago , Minneapolis , Columbus , Cincinnati , maybe slightly less so in Detroit .

Hey, good morning, guys.

I guess kind of hey, Jay good.

Good morning, guys sticking on kind of the questions on the North could you talk about the increase year on year and the loss from the north and is that something that potentially can help gross margins down the road.

Speaker #1: But you take those others . We , you know , we we believe we can grow our operations there . 5 to 10% a year for the foreseeable future , in some cases , maybe slightly more .

Speaker #1: We have a lot of growth opportunities . Having said that , though , in Charlotte and Raleigh , our Raleigh operation is has underperformed from a volume standpoint , not profitability in large part just because of the incredible delays we've experienced in bringing some new deals to market .

No.

I think that the increase in the lot position some of it's what's the right word.

Episodic I don't know if that's the right word or not sometimes things come on at different times, because they are delayed and it skews a quarter.

Speaker #1: We're super excited about where we as we look out over the next number of quarters , we're very excited about what we have coming on in Raleigh over the next several years .

We have a lot of opportunity to grow.

In Indianapolis still Chicago, Minneapolis, Columbus Cincinnati.

Speaker #1: And , you know , we we still have big plans to grow in Houston and Dallas . Maybe slightly less so in Austin .

Maybe slightly less so in Detroit, but you take those others.

Speaker #1: But still , we still intend to grow in Austin . And we're growing in San Antonio . Big plans for Fort Myers , Naples .

We believe we can grow our operations there, 5% to 10% a year for the foreseeable future in some cases may be slightly more.

Speaker #1: We're really just getting started there . We expect that to be a very meaningful contributor to us down the road . Tampa and Orlando , we've had top five positions in both those markets for a long , long time and are not going to give up market share in either place .

A lot of growth opportunities, having said that though in Charlotte and Raleigh.

Our Raleigh operation is as underperformed from a volume standpoint, and a profitability in large part just because of the incredible delays, we've experienced and bringing some new deals to market.

Speaker #1: And then Nashville , Nashville has been a slower start for us . I thought we'd be a little further along than we are right now .

Super excited about where we as we look out over the next number of quarters. We're very excited about what we have coming on in Raleigh over the next several years.

Speaker #1: The only encouraging thing is I don't think we're alone . I see you tend to see that with other builders as well . But but having said that , we , you know , we've , we're we're clearly going to grow operation there this year .

And you know, we still have big plans to grow in Houston, and Dallas, maybe slightly less so in Austin, but still we still intend to grow in Austin and we are growing in San Antonio.

Speaker #1: It's well , well ahead of where it was a year ago . And all of this should contribute , you know , as the markets , you know I mean we don't know what's going to happen with the economy .

Big plans for Fort Myers, Naples, we're really just getting started there we expect that to be a very meaningful contributor to us down the road.

Speaker #1: We'll adjust as necessary . You know what will happen to margins down the road . I think that over time , I mean I don't know what'll happen , but I think over time we've always pushed very hard to be in the upper tier .

<unk> Orlando, we've had top five positions in both those markets for a long long time and are not going to give up market share in either place.

Speaker #1: And and I believe we'll wherever home margins settle , I think you'll see mi in the in the upper tier of margin performance relative to our peers , our mortgage operation contributes to that as well .

Nashville, Nashville has been a slower start for us.

I thought we'd be a little further along than we are right now.

The only encouraging thing is I don't think we're alone.

You tend to see that with other builders as well, but but having said that we.

Speaker #1: You know , we , we had a 95% plus capture rate in the first quarter given all the activity with rate buy downs , even though I'm very proud of our mortgage operation , if we weren't at least a 90% capture rate , I think that would require a discussion because , you know , it seems like everybody should be going through our mortgage company with with all the rate buy downs that we and our peers are doing .

We're clearly going to grow operation there this year, it's well well ahead of where it was a year ago.

And all of this should contribute as the markets.

I mean, we don't know what's going to happen with the economy, we will adjust as necessary.

What will happen to margins down the road.

Speaker #1: But having said that , M/I HOMES, INC. capture rates the highest in the industry and we're very proud of that . And that contributes to profitability as well .

I think that.

Speaker #2: And also , Jay , you know , this is just to add as far as , you know , from a land position standpoint , I mean , you know , what we try to do , we really focus on , you know , what do we own ?

Speaker #2: And , you know , we own today about 24,000 lots a year ago , we owned about 25,000 . It's kind of changed a little bit inside , you know , today we own almost we own 10,000 finished lots .

Speaker #2: We like to own about a year supply . And with our run rate a little less than ten right now , we're really well positioned there .

Speaker #2: Our finished lot cost . Today is up about 5% versus a year ago . Land development costs have kind of settled down a little bit the last couple of quarters .

Speaker #2: So we feel like we're really in good situation from a land position standpoint . You know , Bob talked about , you know , growth .

Speaker #2: We do have a few more a few less houses in the field than a year ago . But again , when we're building houses faster , we don't need to put the investment out there as fast .

Speaker #2: So we're trying to be efficient . We're trying to have specs where we need it . So again , we are very focused on , you know , trying to continue our growth .

Point. I mean, you know what we try to do

Speaker #2: But we want it to be profitable growth with solid returns not just , you know , give a bunch of houses away . We think we do have a really good land position .

Speaker #2: So we are excited about where we are .

Speaker #7: That's great guys . So the second question I had , if you think about smart series , are most of those communities located in the southern region or I guess what's the mix between the northern and the southern for the smart series communities ?

Speaker #1: I think it's pretty evenly balanced with a couple of exceptions . San Antonio is almost 90% smart series . Our communities there , Houston approaching 90% smart series , maybe even a little higher .

But again when we were building houses faster, we don't need to put the investor.

5,000. It's kind of changed a little bit inside, you know, today we own almost. We own 10,000. Finish Lots. We like to own about a year Supply and with our run rate a little less than 10 right now, we're really well positioned there. Uh, our finished lot cost today is up about 5% versus a year ago. Land Development costs have kind of settled down a little bit the last couple of quarters. So we feel like we're really in good situation from a land position standpoint, you know, Bob talked about, you know, growth, we we do have a few, a few less houses in the field than a year ago.

That's what we're trying to be efficient, we're trying to have specs, where we need it. So again, we are very focused on.

Speaker #1: But but if you take those out and look at the other 15 markets , it's pretty close to , you know , 30 to 50% of our business .

Trying to keep our growth we want it to be well both solid return.

Not just yet.

Speaker #1: They tend to have slightly higher absorptions . So it skews and distorts the actual sales number , but it's somewhere between a third and a half

We think they have a really good lamp.

We are now to where we are.

Okay.

The question I had.

Speaker #7: That's good to know . Thanks , Bob . And then if you could fill maybe talk about what the gross margin looked like in backlog at the end of the quarter

About smart series.

Speaker #2: Sorry , the backlog .

Speaker #7: Yeah . Gross margin in backlog at the end of the quarter .

Speaker #2: It really hasn't changed much . Jay And of course , the backlog is , is , is not that big . We are focused on trying to do more to be built houses with higher margins in general and so forth .

Robert H. Schottenstein: If you take those out and look at the other 15 markets, it's pretty close to 30% to 50% of our business. They tend to have slightly higher absorptions. It skews and distorts the actual sales number. It's somewhere between 1/3 and 1/2.

Speaker #2: Really hasn't moved much . The thing that's hard is that like this quarter , when you know , half of our closings , you know , got sold and closed in the quarter .

Speaker #2: So it's just really , really hard to predict average sale price , really hard to predict margins because so much stuff goes through , you know , every 90 days .

Speaker #1: I mean , you know , I know that you all would love to see us give , you know , margin guidance . I think it's , I think it's a bit of a , I'll just say it fool's errand .

Phillip G. Creek: That's good to know. Thanks, Bob. If you could, Phil, maybe talk about what the gross margin looked like in backlog at the end of the quarter.

Jay McCanless: That's good to know. Thanks, Bob. If you could, Phil, maybe talk about what the gross margin looked like in backlog at the end of the quarter.

Robert H. Schottenstein: Sorry, the backlog?

Phillip G. Creek: Sorry, the backlog?

Speaker #1: There's just so much uncertainty . You know . During our last conference call , we weren't talking about a war . We weren't talking about $4 gas prices in 90 days .

Phillip G. Creek: Yeah, gross margin in the backlog at the end of the quarter.

Jay McCanless: Yeah, gross margin in the backlog at the end of the quarter.

Yeah, gross margin in the backlog. At the end of the quarter.

Robert H. Schottenstein: really hasn't changed much, Jay. Of course, the backlog is not that big. We are focused on trying to do more to-be-built houses with higher margins in general and so forth. It really hasn't moved much. The thing that's hard is that this quarter, when half of our closings got sold and closed in the quarter. It's just really hard to predict average sale price, really hard to predict margins because so much stuff goes through every 90 days. Yeah. I know that you all would love to see us give margin guidance. I think it's a bit of a, I'll just say it, fool's errand. There's just so much uncertainty. During our last conference call, we weren't talking about a war. We weren't talking about $4 gas prices. In 90 days, look how things like that have changed. It's very hard to predict what's going to happen.

Phillip G. Creek: It really hasn't changed much, Jay. Of course, the backlog is not that big. We are focused on trying to do more to-be-built houses with higher margins in general and so forth. It really hasn't moved much. The thing that's hard is that this quarter, when half of our closings got sold and closed in the quarter. It's just really hard to predict average sale price, really hard to predict margins because so much stuff goes through every 90 days.

Uh, really hasn't changed much Jay. Uh,

Speaker #1: Look how look how things like that have changed . It's very , very hard to predict what's going to happen . You know , conditions right now are marked with uncertainty .

Speaker #1: Having said that , I think housing is holding up pretty damn well . I've seen a whole lot worse . And so is anyone that's been in this business more than a couple of years .

And of course the backlog is is is not that big we are focused on. Trying to do more to be build houses with higher margins in general and so forth. Really has a move much. The thing that's hard is that like this quarter when you know half of our closings, you know, got sold and closed in the quarter.

Speaker #1: You know , we have , you know , by history , we've been in business 50 years . You know , this is going to be one of our 5 or 6 best years in company history .

Robert H. Schottenstein: I know that you all would love to see us give margin guidance. I think it's a bit of a— I'll just say it, fool's errand. There's just so much uncertainty. During our last conference call, we weren't talking about a war. We weren't talking about $4 gas prices. In 90 days, look how things like that have changed. It's very hard to predict what's going to happen.

Speaker #1: And that's pretty damn good . Sign me up . So , you know , I think we're very well positioned to deal with the conditions as they are .

So it's just really, really hard to predict average sale price really hard to predict margins because so much stuff goes through, you know, every 90 days. I mean, you know, I know that you all would love to see us give, you know, got margin guidance. Um,

Speaker #1: I think we were encouraged that our first quarter gross margin sequentially were almost the same as they were in the fourth quarter . Does that mean they're leveling off ?

Uh, I think it's, I think it's a bit of a, I'll just say it, fool's errand. There's just so much uncertainty. You know, during our last conference call we weren't talking about a war.

Speaker #1: I guess we'll know when we know . I just know that we'll continue to do everything we can to push profitability . We're very proud of this environment .

Robert H. Schottenstein: Conditions right now are marked with uncertainty. Having said that, I think housing's holding up pretty damn well. I've seen a whole lot worse, and so has anyone that's been in this business more than a couple of years. We've been in business 50 years. This is going to be one of our five or six best years in company history, and that's pretty damn good. Sign me up. I think we're very well positioned to deal with the conditions as they are. I think we were encouraged that our Q1 gross margins sequentially were almost the same as they were in Q4. Does that mean they're leveling off? I guess we'll know when we know. I just know that we'll continue to do everything we can to push profitability. We're very proud in this environment to have a double-digit pre-tax income percentage of 10%.

Speaker #1: To have a double digit pre-tax income percentage of 10% . Not easy to do . I know a couple of builders do , but most don't .

We weren't talking about 4 dollar, gas prices in 90 days. Look how look how things like that have changed. It's very, very hard to predict what's going to happen. Um, you know, conditions right now are are marked with uncertainty. Having said that, I think housing's holding up pretty damn well.

Speaker #1: And and I think that , you know , it's one thing to say we focused on profitability . It's another thing to deliver it .

Speaker #1: And I think we're delivering it .

Speaker #2: And we spend a lot of time you know , talking about flow , not just the flow of spec inventory , you know , for instance , at the end of the quarter , as I said , we have about 740 completed specs at the end of the first quarter of last year , it was 686 .

Speaker #2: We also not only tracked those getting through . That doesn't mean we far sell them to move them through . But again , we don't want to get too big on specs .

Speaker #2: We also keep track very closely of what specs are coming through the system . Are they drywalled ? What's the stage of them ?

Speaker #2: So again , you know , not just specs out there , you know , Nilly Willy , you know , every subdivision , but what what can we work through ?

Robert H. Schottenstein: Not easy to do. I know a couple of builders do, but most don't. I think that it's one thing to say we're focused on profitability. It's another thing to deliver it, and I think we're delivering it.

Speaker #2: What is the demand ? What can we decent margin and we do the same thing at land . You know , we make sure that , you know , when we buy raw land , you know , we get into development , we put the finished lots out there that we need , that we can work through .

I've seen a whole lot worse and so is anyone that's been in this business more than a couple of years? Um, you know, are we, we have, you know, by histo, we've been in business, 50 years, you know, this is going to be 1 of our 5 or 6, best years in company history and that's pretty damn good. Uh sign me up. So you know I think we're very well positioned to deal with the conditions as they are. Um I think we were encouraged that our first quarter gross margin sequentially or almost the same as they were in the fourth quarter. Um, does that mean they're leveling off? I guess. We'll know when we know, I just know that we'll continue to do everything we can to push profitability. We're very proud in this environment to have a double digit pre-tax income percentage of 10%. Um, not easy to do. I, I know a couple of Builders do but most don't and, um, and and I think that, you know, it's 1 thing to say we focused on profitability.

Phillip G. Creek: We spend a lot of time, Jay, talking about flow, not just the flow of spec inventory. For instance, at the end of the quarter, as I said, we have about 740 completed specs. At the end of Q1 of last year, it was 686. We also not only track those getting through. That doesn't mean we fire-sale them to move them through, but again, we don't want to get too big on specs. We also keep track very closely of what specs are coming through the system. Are they drywalled? What's the stage of them? We again not just throw specs out there, willy-nilly, every subdivision, but what can we work through? What is the demand? What can we sell at a decent margin? We do the same thing at land.

Phillip G. Creek: We spend a lot of time, Jay, talking about flow, not just the flow of spec inventory. For instance, at the end of the quarter, as I said, we have about 740 completed specs. At the end of Q1 of last year, it was 686 completed specs. We also not only track those getting through. That doesn't mean we fire-sale them to move them through, but again, we don't want to get too big on specs. We also keep track very closely of what specs are coming through the system. Are they drywalled? What's the stage of them? We again not just throw specs out there, willy-nilly, every subdivision, but what can we work through? What is the demand? What can we sell at a decent margin? We do the same thing at land.

Speaker #2: But again , trying to do a better job on managing our investment levels . But yeah , we again , we think we're in good shape and we can react to whatever we need to .

It's another thing to deliver it, and I think we're delivering it and we spend a lot of time. You know, Jake talking about flow, not just the flow of spec inventory, you know? For instance, at the end of the quarter, as I said, we have about 740 completed specs.

At the end of the first quarter of last year, it was 686.

Speaker #1: You know , the last thing I'll say , and it sounds like we're patting ourselves on the back , maybe we are never gotten the bill to rent business .

Speaker #1: We were the only builder that didn't don't land bank . We're one of the only builders that doesn't . Our strategy has been pretty damn consistent for as long as I've been here .

Speaker #1: Focus on our communities . We focus on quality . We strive to deliver the highest levels of customer service that we can , and we try to produce , build our homes in excellently well-located a communities all the time .

We also not only track those getting through. That doesn't mean we fire-sell them to move them through, but again, we don't want to get too big on specs. We also keep track very closely of what specs are coming through the system—are they drywalled, what the stage of them is. So again, you know, not just throw specs out there.

Phillip G. Creek: We make sure that when we buy raw land, we get into development. We put the finished lots out there that we need, that we can work through. Again, trying to do a better job on managing our investment levels, again, we think we're in good shape, and we can react to whatever we need to.

Speaker #1: There's no issue that distracts us from pace and margin on a community by community basis . That's that's no , nothing gets more attention than that in our company .

No nearly Willie, you know, every subdivision but what what can we work through? What is the demand, what can we settle to the decent margin and we do the same thing at land, you know, we make sure that, you know, when we buy raw land, you know, we get into the development, we put the Finish Lots out there that we need that we can work through. But again, trying to do a better job on manage our investment levels. But uh,

Speaker #1: And , you know , we have within certain of our cities special rate buy down programs that are only applicable to certain lots and certain communities .

Robert H. Schottenstein: The last thing I'll say, and it sounds like we're patting ourselves on the back. Maybe we are. Never got in the build-to-rent business. We were the only builder that didn't. Don't land bank. We're one of the only builders that doesn't. Our strategy has been pretty damn consistent for as long as I've been here. Focus on our communities. We focus on quality. We strive to deliver the highest levels of customer service that we can. We try to produce, build our homes in excellently well-located A communities all the time. There's no issue that distracts us from pace and margin on a community-by-community basis. Nothing gets more attention than that in our company. We have, within certain of our cities, special rate buydown programs that are only applicable to certain lots and certain communities. We don't paint with a broad brush.

Yeah, we again, we think we're in good shape and we can react to whatever we need to, you know, the last thing I'll say and it sounds like we're patting ourselves on the back. Maybe we are.

Speaker #1: We don't paint with a broad brush . We really try to manage this business on a subdivision by subdivision basis , even within markets .

Never gotten a bill to rent business. We were the only Builder that didn't

We don't land bank. We're one of the only builders that doesn't.

Speaker #1: And that's what we've always done . And that's what our management team is focused on . And it's worked for us

our strategy has been pretty damn consistent for as long as I've been here.

We focus on our communities, we focus on quality, we strive to deliver the highest levels of customer service, and that we can.

Speaker #7: , right ? That's great . And actually , could you any qualitative not quantitative , but qualitative commentary . You can give about traffic or web traffic for April .

Speaker #7: Just again , given some of the uncertainty that's out there . And then also , if you don't mind , Phil , can you repeat what the monthly order cadence was ?

Speaker #7: I missed that part .

Speaker #1: The only thing I'll say about traffic is given the market , I've been pleased with our traffic through the first quarter and through April .

Speaker #1: So far , that's . We'll just leave it at that because we don't . The month's far from over . And you know , you know , we're we're optimistic .

Robert H. Schottenstein: We really try to manage this business on a subdivision-by-subdivision basis, even within markets. That's what we've always done, and that's what our management team's focused on, and it's worked for us.

Speaker #1: But we'll see . Phil , you want to comment on .

Speaker #2: That . Really focused also . I mean we're opening a lot of stores . You know last year we opened about 80 . This year .

Try to manage this business on a subdivision by subdivision basis even within markets and that's what we've always done. And um, that's what our management teams focused on and it's, it's worked for us.

Jay McCanless: Right. That's great. Actually, could you any qualitative, not quantitative, but qualitative commentary you can give about traffic or web traffic for April, just again, given some of the uncertainty that's out there? Also, if you don't mind, Phil, can you repeat what the monthly order cadence was? I missed that part.

Jay McCanless: Right. That's great. Actually, could you any qualitative, not quantitative, but qualitative commentary you can give about traffic or web traffic for April, just again, given some of the uncertainty that's out there? If you don't mind, Phil, can you repeat what the monthly order cadence was? I missed that part.

Speaker #2: You know , we plan on opening more than 80 . So we're trying to open them the right way . In general , they're at a higher price point where we see a little more steady demand .

Speaker #2: These days . But again , just staying , staying on top of it community by community , right ?

Right. That's great. Um and actually could you any qualitative not quantitative but qualitative commentary, you can give about traffic or web traffic for April just again giving some of the uncertainty that's out there and then also if you don't mind Phil, can you repeat what the monthly order Cadence was? I missed that part.

Robert H. Schottenstein: The only thing I'll say about traffic is, given the market, I've been pleased with our traffic through Q1 and through April so far. We'll just leave it at that because the month's far from over and we're optimistic, but we'll see. Phil, you want to comment on this as well?

Speaker #7: And Phil , if you could , what were the monthly order cadence again , please

Speaker #2: During the quarter ?

Speaker #7: Yeah , yeah .

Speaker #2: The first , yeah , the first quarter . Let's see . J we were , we were up 11% in January . We were up 7% in February , March was down 6% .

The only thing I'll say about, uh, traffic is, given the market, I've been pleased with our traffic through the first quarter.

and through April so far that's what we'll, we'll just leave it at that because we don't the months far from over and you know um,

Speaker #2: But last year's March was the highest month of last year . And we did sell more houses in February than we did in January .

Phillip G. Creek: No, I'm really focused. Also, we're opening a lot of communities. Last year, we opened about 80. This year, we plan on opening more than 80. We're trying to open them the right way. In general, they're at a higher price point where we see a little more steady demand these days. Again, just staying on top of it community by community. Right. Phil, if you could, what were the monthly order cadence again, please? During the quarter? Yeah. Yeah. Q1, let's see, Jay, we were up 11% in January. We were up 7% in February. March was down 6%, but last year's March was the highest month of last year, and we did sell more houses in February than we did in January. We sold more houses in March than we did in February. Overall, we were pretty pleased with our sales. Okay.

Speaker #2: And we sold more houses in March than we did in February . So overall , we were we were pretty pleased , you know , with our sales .

You know, we're we're optimistic but we'll see Phil. You want to comment on something, I'm really focused. Also, I mean, we're opening a lot of stores. Uh you know, last year, we opened about 80

This year, you know, we found an opening more than 80.

Speaker #7: Okay . That's great . Thanks guys . Appreciate it .

Speaker #1: Take care . Take care Jay .

Speaker #2: Thanks , Jay .

Speaker #7: You too . Thanks , guys .

Speaker #4: Thank you . And again , as a reminder , please press star one to ask a question . Your next question comes from the line of Buck Horne from Raymond James .

So we're trying to open them the right way. Uh, in general, they're at a higher price point where we see a little more steady demand these days, but again, just staying on top of it, community by community.

Jay McCanless: Phil, if you could, what were the monthly order cadence again, please?

Right? And Phil, if you could, what were the monthly order cadence again, please?

Speaker #4: Your line is now open

Phillip G. Creek: During the quarter?

Jay McCanless: Yeah.

Speaker #8: Hey good morning guys . Appreciate the time . I kind of want to ask you a question slightly Is , hey , wondering , thinking through the monthly cadence of or just how you responded to March's volatility in terms of incentives , did you have to or did you increase or lean into certain incentives more in March to try to offset the mortgage rate volatility or , you know , conversely , was there just enough , you know , natural , seasonal demand where you kind of were able to keep the same strategy in place ?

Phillip G. Creek: Q1, let's see, Jay, we were up 11% in January. We were up 7% in February. March was down 6%, but last year's March was the highest month of last year, and we did sell more houses in February than we did in January. We sold more houses in March than we did in February. Overall, we were pretty pleased with our sales.

Uh, during the quarter. Yeah, yeah. The first, yeah, the first quarter, let's see. Jay we were, uh, we were up 11% in January. We were up 7% in February, March was down 6%, but last year's March was the highest month of last year and we did sell more houses in February than we did in January. And we have some more houses in March that we did in February.

Jay McCanless: Okay. That's great. Thanks, guys. Appreciate it.

So uh, overall we were, we were pretty pleased uh, you know, with our sales.

Jay McCanless: That's great. Thanks, guys. Appreciate it. Take care, Jay.

Speaker #8: I'm just kind of wondering if there's a potential carry forward to second quarter margins just due to the incentives that were provided .

Phillip G. Creek: Take care, Jay.

Robert H. Schottenstein: Thanks, Jay.

Jay McCanless: You too. Thanks, guys.

Okay, that's great. Thanks, guys. Appreciate it. Take care. Take care, J. Thanks, Jay. You too. Thanks, guys.

Operator: Thank you. Again, as a reminder, please press star one to ask a question. Your next question comes from the line of Buck Horne from Raymond James. Your line's now open.

Speaker #1: You know , normally I wouldn't want to get too specific , even though it's all on our website for our competitors to see .

Speaker #1: But I'll just say what has worked for us on specs for the most part is even though we've , you know , we've got C people working with the two one and the 321 buy downs .

Thank you. And again, as a reminder, please press star 1 to ask a question. Your next question comes from the line of back corn from Raymond James. Your line is open

Buck Horne: Hey, good morning, guys. Appreciate the time. Kind of want to ask Jay's question in slightly different ways, wondering, thinking through the monthly cadence of, or just how you responded to March's volatility in terms of incentives. Did you have to or did you increase or lean into certain incentives more in March to try to offset the mortgage rate volatility? Or conversely, was there just enough natural seasonal demand where you kind of were able to keep the same strategy in place? I'm just kind of wondering if there's a potential carry forward to Q2 margins just due to the incentives that were provided.

Speaker #1: Some buyers , you know , some some subdivisions , we see some arm product . But the vast majority of buyers want one thing .

Speaker #1: And that's a 30 year fixed rate mortgage . And what we have , what we have led with for quite some time now and been pretty consistent with it on homes that can be delivered within roughly 60 days .

Hey, good morning guys. Appreciate the time. Um, kind of want to ask you this question, slightly different ways is. Hey wandering thinking through the monthly Cadence of, or just how you responded to March's volatility in terms of incentives, did you have to, or did you increase or lean into certain incentives? More in March, to try to offset the the mortgage rate volatility or, you know, conversely was there just enough, you know, natural, seasonal demand where you you kind of were able to keep the same strategy in place. I'm just kind of wondering if there's a potential

Speaker #1: So call it inventory homes is a four and 7/8 rate on both FHA , VA as well as conventional and we've also offered on Too-b builds .

Will carry forward to second quarter margins, just due to the incentives that were provided.

Robert H. Schottenstein: Normally, I wouldn't want to get too specific, even though it's all on our website for our competitors to see. I'll just say what has worked for us on specs, for the most part, is even though we see people working with the 2-1 and the 3-2-1 buydowns, some buyers, some subdivisions, we see some ARM product. The vast majority of our buyers want one thing, and that's a 30-year fixed rate mortgage. What we have led with for quite some time now and been pretty consistent with it on homes that can be delivered within roughly 60 days, so call it inventory homes, is a 4 7/8 rate on both FHA, VA, as well as conventional. We've also offered on to-be builds, which has a long-term rate lock, a rate in the very, very low fives.

Robert H. Schottenstein: Normally, I wouldn't want to get too specific, even though it's all on our website for our competitors to see. I'll just say what has worked for us on specs, for the most part, is even though we see people working with the 2-1 buydowns and the 3-2-1 buydowns, some buyers, some subdivisions, we see some ARM product. The vast majority of our buyers want one thing, and that's a 30-year fixed rate mortgage. What we have led with for quite some time now and been pretty consistent with it on homes that can be delivered within roughly 60 days, so call it inventory homes, is a 4 7/8 rate on both FHA, VA, as well as conventional. We've also offered on to-be builds, which has a long-term rate lock, a rate in the very, very low fives.

you know, um,

Normally, I wouldn't want to get too specific, even though it's all on our website, for our competitors to see.

Speaker #1: This has a long term rate lock , a rate in the very , very low fives and we have found those two things .

Speaker #1: There's some there's some exceptions . You know , it's probably more than two or 3 or 5 exceptions . But we have 200 plus communities .

Um, but I'll I'll just say, what? What has worked for us on specs. For the most part is even though we've, you know, we've got

Speaker #1: The vast majority of our communities , those programs are what is working for us now . And resulted in our 3% year over year increase in sales .

Speaker #1: The cost went up , went down , then it went up during the quarter . It went down before , before , you know , we started bombing Iran and then afterwards it went up and it's been it's been bumping around quite a bit since , you know , we live in a minute to minute news cycle where there's a constant overreaction to good news or not .

Robert H. Schottenstein: We have found those two things. There's some exceptions, probably more than two, three, or five exceptions, but we have 200-plus communities. The vast majority of our communities, those programs are what is working for us now and resulted in our 3% year-over-year increase in sales. The cost went up, went down, then it went up during the quarter. It went down before we started bombing Iran, and then afterwards it went up. It's been bumping around quite a bit since. We live in a minute-to-minute news cycle where there's a constant overreaction to good news or not. All that affects what's happening with rates, and there's been a fair amount of volatility with the 10-year. I mean, between 440 and the low 420s. When it goes up, it costs us a little more if we're buying it on that day.

Speaker #1: So , you know , all that affects what's happening with rates . And there's been a fair amount of volatility with the ten year .

Speaker #1: I mean , between 440 and low four 20s . So but so when it goes up it costs us a little more if we're on that day , we look at it .

See people working with the 2 1 and the 321 buy Downs. Some buyers, you know some some subdivisions we see some arm product but the vast vast majority of our buyers want 1 thing and that's a 30-year fixed rate mortgage and what we have, what we have led with for quite some time now and been pretty consistent with it on homes, that can be delivered within roughly 60 days. So call it inventory homes is a 4 and 7/8 um rate on both FHA VA as well as uh conventional. And um we've also offered on 2B belts. This has a long-term rate, lock a rate in the very very low fives and um we have found those 2 things. There's some, there's some exceptions.

Speaker #1: Oh , we look at it every day . You know , it's it's I , I , I Derek sitting right here . He's , you know , his , his team at MI financial is , is pretty intensely focused on this every single day .

Um, you know, it's probably more than 2 or 3 or 5 exceptions, but we have 200 plus communities, the vast majority of our communities. Those programs are what is working for us now and resulted in our 3% year-over-year. Increase in sales,

The cost went up.

Speaker #8: That's very helpful . I think it's pretty clear . Appreciate that extra color there . Thank you . Secondly , I'm kind of curious thinking through your just the way the business is set up right now , you're throwing off quite a bit of positive cash flow .

Speaker #8: You've dialed back the , the land , spend your land position seems to be in a really good position already . So I'm just wondering if you think through the possibility of the , you know , you've been very programmatic about the share repurchase schedule , but you're still building up quite a bit of cash .

Speaker #8: I'm just wondering if you think that there's a possibility that you you'd kind of increase the kind of the schedule of , of the buybacks that you're , you're , you know , you're penciling in for the remainder of the year .

Robert H. Schottenstein: We look at it every day. Derek's sitting right here. His team at M/I Financial is pretty intensely focused on this every single day.

I mean between $4.40 and the low $4.20s, so when it goes up, it costs us a little more. If we're buying it on that day, we look at it. We look at it every day.

you know, it's it's uh, I I

Speaker #8: Just some , at some point in the future .

Speaker #1: Talk about it with our board , maybe not every board meeting , but at least every other . We have a meeting coming up in two weeks .

I Derek sitting right here. He's you know his his team at me Financial is is pretty intensively focused on this every single day.

Buck Horne: That's very helpful. I think that's pretty clear. Appreciate that extra color there. Thank you. Secondly, I'm kind of curious, thinking through the way the business is set up right now, you're throwing off quite a bit of positive cash flow. You've dialed back the land spend. Your land position seems to be in a really good position already. So I'm just wondering if you think through the possibility of the. You've been very programmatic about the share repurchase schedule, but you're still building up quite a bit of cash. I'm just wondering if you think that there's a possibility that you'd kind of increase the schedule of the buybacks that you're penciling in for the remainder of the year or just at some point in the future.

Speaker #1: We'll probably discuss it at that meeting . I don't really see any change , but it's possible . I guess . I don't know , I think we're going to stay sort of where we are .

Speaker #2: Yeah .

Speaker #1: And I don't know if you want to add to that .

Speaker #2: No , I , I agree . I also we're not really anticipating the , the cash to build up that much more . We are a little lower now than we thought we would be internally .

Speaker #2: I thought we'd have a few more spec dollars out there than I have a little better job managing that . I did mention we're going to be opening quite a bit more as far as new stores , and so forth .

Speaker #2: So I would still expect to have a pretty strong cash position , would not expect it to be up very much more . And again , spending at the rate of 200 million a year to buy stock back , which we've done for the last , you know , last few quarters , 50 a quarter , we still think is pretty good .

That's very helpful. I think it's pretty clear. Uh, appreciate that extra color there, thank you. Um, secondly I'm kind of curious, um, thinking through your just the way the business is set up right now, you're throwing off quite a bit of positive cash flow. Uh, you've dialed back the the the land. Spend your, your land positions seems to be in a, in a really good position already. Um, so I'm just wondering if you think through the possibility of the, you know, you've been very programmatic about the share repurchase schedule, uh, but you're still building up quite a bit of cash. I'm just wondering if you think that there's a possibility that you you'd kind of increase the, uh, kind of the, the schedule of of the the BuyBacks that you're, you're um, you know, your your penciling in, for the remainder of the year, just some at some point in the future.

Robert H. Schottenstein: Talk about it with our board, maybe not every board meeting, but at least every other. We have a meeting coming up in two weeks. We'll probably discuss it at that meeting. I don't really see any change, but it's possible, I guess. I don't know. I think we're going to stay sort of where we are.

Speaker #2: We bought back almost 20% of the stock the last couple of years . But that's something we'll continue to look at .

Buck Horne: Yeah.

Robert H. Schottenstein: I don't know if you want to add to that.

Speaker #8: All right . Sounds good guys . Congrats . Appreciate the color .

Phillip G. Creek: No, I agree. Also, we're not really anticipating the cash to build up that much more. We are a little lower now than we thought we would be internally. I thought I would have a few more spec dollars out there than I have. Done a little better job managing that. I did mention we're going to be opening quite a bit more as far as new stores and so forth. I would still expect to have a pretty strong cash position, would not expect it to be up very much more. Again, spending at the rate of $200 million a year to buy stock back, which we've done for the last few quarters, $50 a quarter, we still think is pretty good. We bought back almost 20% of the stock the last couple of years. That's something we'll continue to look at.

Speaker #1: Thanks , Buck .

Speaker #2: Thanks .

Speaker #4: Thank you . There are no further questions at this time . Turning over back to Mr. Crick .

Talk about it with our board. Maybe not every board meeting but at least every other uh we have a meeting coming up in 2 weeks. We'll probably discuss it at that meeting. I don't really see any change but it's possible. I guess. I don't know. I think we're going to stay sort of where we are. Yeah. And I don't know if you want to add to that. No, I I agree. I also, we're not really anticipating the the cash to build up that much more.

We are a little.

Speaker #2: Thank you for joining us . Look forward to speaking to you next quarter

Now, than we thought we would be internally about, would have a, a few more spec dollars out there than I have.

Buck Horne: All right. Sounds good, guys. Congrats. Appreciate the color.

A little better job managing that I didn't mention we're going to be opening quite a bit more as far as new stores and so forth. So uh I would still expect to have a pretty strong cash position would not expected to be up very much more and again spending at the rate of 200 million, a year to buy stock back which we've done for the last. You know, last 3 quarters, 50 a quarter. We still think it's pretty good. We bought back almost 20% of the stock, the last couple of years, but that's something we'll continue to look at.

Robert H. Schottenstein: Thanks, Buck.

All right. Sounds good, guys. Congrats, appreciate the color.

Phillip G. Creek: Thanks.

Thanks Buck, thanks.

Operator: Thank you. There are no further questions at this time. Turning back over to Mr. Creek.

Phillip G. Creek: Thank you for joining us. Look forward to speaking to you next quarter.

Thank you. There are no further questions at this time. Turning it back over to Mr. Creek.

You next core.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you, please disconnect your lines.

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