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M/I Homes Inc. (MHO)
F1Q10 Earnings Call
April 28, 2010; 4:00 pm ET
Bob Schottenstein - CEO and President
Phil Creek - EVP and CFO
Paul Rosen - President, Mortgage Company
Josh Levin - Citi
Alan Ratner - Zelman & Associates
Alex Barren - Housing Research
Joel Locher - FBN Securities
Previous Statements by MHO
» M/I Homes, Inc. Q4 2008 Earnings Call Transcript
» M/I Homes Incorporated Q3 2008 Earnings Call Transcript
Thank you. Mr. Creek, you may begin your conference.
Thank you very much and thanks for joining us today. Joining me on the call is Bob Schottenstein, our CEO and President; Tom Mason, our EVP and Corporate Consul; Paul Rosen, President of our Mortgage Company; Ann Marie Hunker, VP Corporate Controller and Kevin Hake, VP, Treasurer.
First to address regulation per disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today’s press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call.
With that, I will now turn the call over to Bob.
Thank you Phil and good afternoon everyone. We are pleased to share with your our first quarter results. We continue to make meaningful progress in a number of key areas as we remain firmly focused on returning to profitability. While we believe 2010 will be somewhat choppy and challenging, conditions today are clearly better than a year ago and we are optimistic about our future.
I would like to take a few minutes to highlight a number of our accomplishment during the quarter. Sales, we sold 15% more of homes the last years first quarter despite an 8% decline in active communities. This marks our sixth consecutive quarter positive sales comp. We grew our market share at everyone of our market during 2009. In our first quarter sales results allow us to continue to build on that momentum.
In addition, we improved our sales absorption rate per community from 1.8 sales per month one year ago to 2.4 sales per month for the first quarter, a 33% increased and approaching our internal goal of selling at least 2.5 homes per month per community. Also, we experienced improved per month absorption rates in each of our regions.
Closings, for the quarter we closed 479 homes, a 22% increase over the last year’s first quarter. Margins as stated in the release, our gross operating margins for the quarter was 17.3%, reaching our highest level in more than two years.
Our first-quarter gross margins improved over the margins for 2009’s fourth quarter by 100 basis points. In calendar year 2009 for the year, our gross margins equal 15.3%. Clearly, the increase in margins is an important and vital component as we work to retuned to profitability and while we experience the loss for the quarter its worth noting that our loss has been materially reduced from last year's first quarter by more than 60%. And after having achieved in operating profit during last year's fourth quarter, our first quarter results still represent our third consecutive quarter of positive EBITDA.
Backlog. As a result of our continued positive sales performance, our units and backlog were up 12% year-over-year. The value of homes in backlog at March 31, equal $247 million compared to $193 million a year ago, a 28% increase. In particular, our average sales price in backlog is $263,000 of home compared to $230,000 a year ago which is the 14% increase.
SG&A, as a percentage of revenue we continue to make progress in reducing the impact of our SG&A. For the quarter, our SG&A percentage equal 19.7% compared to 22% last year. New communities, obviously one of our greatest challenges in one of our greatest areas of opportunity relates to tying up and securing new land deals in the opening of new communities. As we work through this cycle, we have been both cautious and prudent in our approach to buying new lots and new land. In a few minutes, Phil will be reviewing in detail our land purchases made during the quarter. There are however several points that I’d like to make relating to land.
Clearly, we have begun seeing an increase in the number of new land opportunities and we have been successful in securing many of them. For the year over two thirds of our planned purchases will be based in our DC Charolette, Raleigh and Chicago markets. Our minimum threshold for new land deals as 20% of return on investment and we seek an even greater return in those instances will buying land in bulk as appose to buying finish lots on an option taken home basis.
We feel very good about our new land deals and we feel even better about the opening of new communities. There is no question that these new communities will play an increasingly important role in our return to profitability. Specifically, we were pleased to open 40 new communities in the first quarter with the expectation that we will open up these 20 additional communities by year-end.