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- **Resilient Performance Despite Challenges**: Q3 revenue of $1.1B (-1% YoY) supported by 2,296 home closings (+1% YoY) and 12% pretax margin, despite 6% decline in new contracts.
- **Mortgage Buydowns Driving Traffic**: 250 basis points of gross margin decline attributed to rate buydowns, with costs stabilizing in Q3. Southern region deliveries up 8% vs. Northern region's 7% decline.
- **Strong Financial Position**: $734M cash, no debt, and 18% debt-to-capital ratio. Mortgage division achieved 93% capture rate, up from 89% YoY.
- **Growth Focus**: 5%+ community count growth in 2025, with 50,700 owned/controlled lots (5-6 year supply) and $3.1B equity.

**【CEO Summary Section】**
- Q3 2025 revenue decreased 1% to $1.1 billion, with pretax income of $140 million (12% of revenue) and gross margin of 24%. Home closings rose 1% year-over-year to 2,296 units, while new contracts fell 6% due to challenging market conditions.
- The company emphasized selective use of mortgage rate buydowns to drive traffic, with 52% of sales from the affordable Smart Series line. Cycle time improved by 10 days year-over-year, and the company ended the quarter with 233 communities (5% growth year-to-date).
- Southern region deliveries increased 8%, while Northern region deliveries declined 7%. The company maintained a strong land position with 50,700 owned and controlled lots (5-6 year supply) and a book value per share of $120.

**【CFO Financial Commentary】**
- GAAP pretax income of $140 million reflected a 26% decline from Q3 2024, driven by $7.6 million in inventory charges (60 basis points of gross margin decline). Non-GAAP EPS was $3.92, down 23% year-over-year due to higher selling expenses and mortgage buydown costs.
- The company extended its unsecured credit facility to $900 million (maturing in 2030) and ended the quarter with $734 million in cash, no debt, and a debt-to-capital ratio of 18%. EBITDA was $157 million, down 21% year-over-year.
- SG&A expenses rose 6% to $11.9 million of revenue, driven by higher community count and sales incentives. Construction costs remained stable, with no material impact from tariffs.

**【Mortgage Division Highlights】**
- M/I Financial reported pretax income of $16.6 million (28% year-over-year growth), with record $34.6 million in mortgage revenue. The mortgage capture rate reached 93%, up from 89% in Q3 2024, reflecting strong internal sales efforts.
- Average loan size increased to $406,000, with 45% of loans FHA/VA-backed, up from 34% a year ago. The company originated 1,848 loans, a 9% increase year-over-year.

**【Q&A Key Highlights】**
- **Mortgage Buydowns Impact**: CEO Bob Schottenstein stated 250 basis points of gross margin decline was due to buydowns, with costs stabilizing in Q3. The company aims to maintain double-digit pretax margins despite pressures.
- **Regional Performance**: Southern region new contracts grew 3% vs. Northern region's 17% decline. Columbus, Chicago, Dallas, and Orlando divisions exceeded expectations, while Texas markets showed cooling.
- **Balance Sheet Flexibility**: CFO Phil Creek highlighted $900 million credit facility and $1.8 billion unsold land investment, with no plans for M&A despite strong liquidity.
- **Spec Homes Management**: Completed inventory homes rose to 776 (vs. 555 in Q3 2024), but the company maintained a 75-77% broker co-op rate without increasing incentives.
- **2026 Outlook**: Community count expected to grow 5% year-over-year, with focus on existing market expansion rather than new market entry.

M/I Homes, Inc. (MHO) Q3 2025 Earnings Call Transcript

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