MI HOMES INC

Previous wording

M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 151,400 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Fort Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.

Current wording

M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 160,000 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Fort Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.

Previous wording

In 2023, we achieved our second-highest revenue, income before income taxes and net income in Company history despite the significant headwinds the housing industry faced entering the year, including high mortgage interest rates, inflationary pressures and an uncertain economy. Our new contracts for 2023 increased 20% compared to 2022 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory and potential homebuyers adjusting to the interest rate environment compared to the hesitation that appeared to exist in the second half of 2022. We also had very strong cash flow and liquidity and ended the year with low leverage. In addition, during 2023, supply chain disruptions eased leading to improved construction cycle times, both of which helped sustain our gross margin at 25.3%, the same as last year. Our revenue declined 2% while our homes delivered decreased 3% in 2023 compared to 2022. Income before income taxes and net income decreased 4% and 5%, respectively, from prior year’s record levels.

Current wording

In 2024, we achieved all-time record homes delivered, revenue, and income despite the headwinds the housing industry faced throughout the year, including elevated mortgage interest rates, inflationary pressures, affordability issues and an uncertain economy. Our new contracts for 2024 increased 8% compared to 2023 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory, potential homebuyers adjusting to the interest rate environment, and our offering of mortgage interest rate buydowns in the second half of the year. We also had strong cash flow and liquidity in 2024 and ended the year with low leverage. In addition, we improved construction cycle times in 2024 which helped us achieve a record annual gross margin of 26.6%, an 130 basis point improvement from 2023. Our revenue increased 12% due to our record homes delivered which also increased 12% in 2024 compared to 2023. Income before income taxes and net income both increased 21% from prior year, both company records.

Previous wording

•Absorption pace of sales per community improved to 3.3 per month

Current wording

•Absorption pace of sales per community remained consistent at 3.3 per month

Previous wording

•Shareholders’ equity increased 22% to $2.5 billion, an all-time record high for our Company

Current wording

•Shareholders’ equity increased 17% to $2.9 billion, an all-time record high for our Company

Previous wording

•Book value per common share increased to a record high $91 per share

Current wording

•Book value per common share increased to a record high $109 per share

Previous wording

•Homebuilding debt to capital ratio improved to 22%

Current wording

•Homebuilding debt to capital ratio improved to 19%

Previous wording

In addition to the results described above, our financial services operations achieved a $4.3 million increase in operating income in 2023 compared to 2022, benefiting from higher margins and an increase in the average loan amount.

Current wording

In addition to the results described above, our financial services operations recorded a $14.7 million increase in operating income in 2024 compared to 2023 as a result of an increase in closings and a slight increase in the average loan amount.

Previous wording

Our company-wide absorption pace of sales per community in 2023 improved to 3.3 per month compared to 3.1 per month in 2022 as a result of our 20% increase in new contracts during 2023 compared to prior year, partially offset by a smaller increase in our average community count from 179 at the end of 2022 to 202 at the end of 2023. We plan to open additional new communities during 2024, increasing our average community count by approximately 10% compared to 2023.

Current wording

Our company-wide absorption pace of sales per community in 2024 remained consistent compared to 2023 at 3.3 per month as a result of our 8% increase in new contracts during 2024 compared to prior year, partially offset by a smaller increase in our average community count from 202 at the end of 2023 to 216 at the end of 2024. We plan to open additional new communities during 2025, increasing our average community count by approximately 5% compared to 2024.

Previous wording

Income before income taxes for the twelve months ended December 31, 2023 decreased 4% from $635.2 million for the year ended December 31, 2022 to $607.3 million for the year ended December 31, 2023. In 2023, we achieved net income of $465.4 million, or $16.21 per diluted share, compared to net income of $490.7 million, or $17.24 per diluted share in 2022. Our effective tax rate was 23.4% in 2023 compared to 22.8% in 2022.

Current wording

Income before income taxes for the twelve months ended December 31, 2024 increased 21% from $607.3 million for the year ended December 31, 2023 to $733.6 million for the year ended December 31, 2024. In 2024, we achieved net income of $563.7 million, or $19.71 per diluted share, compared to net income of $465.4 million, or $16.21 per diluted share in 2023. Our effective tax rate was 23.2% in 2024 compared to 23.4% in 2023.

Previous wording

In 2023, we recorded total revenue of $4.03 billion, of which $3.91 billion was from homes delivered, $25.3 million was from land sales, and $93.8 million was from our financial services operations. Revenue from homes delivered decreased 2% from 2022 driven primarily by a 3% decrease in the number of homes delivered in 2023 (254 units), offset partially by a 1% increase in the average sales price of homes delivered ($4,000 per home delivered). Revenue from land sales decreased $9.5 million from 2022 due primarily to fewer land sales in the current year compared to the prior year. Revenue from our financial services segment increased 9% to $93.8 million in 2023 as a result of an increase in loans closed and sold during the year, in addition to higher margins on loans sold during the period compared to the prior year.

Current wording

In 2024, we recorded total revenue of $4.50 billion, of which $4.39 billion was from homebuilding and $116.2 million was from our financial services operations. Revenue from homes delivered increased 12% from 2023 driven primarily by a 12% increase in the number of homes delivered in 2024 (943 units) as the average sales price of homes delivered remained $483,000. Revenue from our financial services segment increased 24% to $116.2 million in 2024 as a result of an increase in loans closed and sold during the year and a slight increase in the average loan amount.

Previous wording

Total gross margin (total revenue less total land and housing costs) decreased $24.9 million in 2023 compared to 2022 as a result of a $32.5 million decline in the gross margin of our homebuilding operations (the sum of housing gross margin and land gross margin), offset partially by a $7.6 million improvement in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) declined $24.2 million, due to the 3% decrease in the number of homes delivered, offset partially by the 1% increase in the average sales price of homes delivered ($4,000 per home delivered) compared to prior year. Our housing gross margin percentage declined 10 basis points from 23.6% in the prior year to 23.5% in 2023. Our gross margin on land sales (land gross margin) declined $8.4 million in 2023 compared to 2022 as a result of fewer land sales and the mix of lots sold in the current year compared to the prior year. The gross margin of our financial services operations, however, improved by $7.6 million in 2023 compared to 2022 as a result of an increase in the number of loan originations, higher margins on loans sold, and an increase in the average loan amount during 2023 compared to prior year.

Current wording

Total gross margin (total revenue less total land and housing costs) increased $180.0 million in 2024 compared to 2023 as a result of a $157.6 million increase in the gross margin of our homebuilding operations and a $22.4 million improvement in the gross margin of our financial services operations. Our homebuilding gross margin improved $157.6 million due to the 12% increase in the number of homes delivered. Our homebuilding gross margin percentage improved 120 basis points from 23.5% in the prior year to 24.7% in 2024. The gross margin of our financial services operations improved by $22.4 million in 2024 compared to 2023 as a result of an increase in the number of loan originations, higher margins on loans sold, and a slight increase in the average loan amount during 2024 compared to prior year.

Previous wording

We opened 76 new communities during 2023, our second highest number in Company history. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year.

Current wording

We opened 72 new communities during 2024. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year.

Previous wording

For 2023, selling, general and administrative expense increased $25.3 million, and increased as a percentage of revenue to 10.7% in 2023 from 9.8% in 2022. Selling expense increased $17.3 million from 2022 and increased as a percentage of revenue to 5.2% in 2023 from 4.6% in 2022. Variable selling expense for sales commissions contributed $13.3 million to the increase due to the increase in the average sales price of homes delivered as well as higher external sales commission rates paid during the period compared to prior year. Non-variable selling expense increased $4.0 million primarily related to increased costs associated with our sales offices and models due to our increased community count. General and administrative expense increased $8.0 million compared to 2022 and also increased as a percentage of revenue from 5.2% in 2022 to 5.5% in 2023. The dollar increase in general and administrative expense was primarily due to an $8.9 million increase in compensation-related expenses and a $1.1 million increase in land-related costs, offset partially by a $2.0 million decrease in miscellaneous expenses.

Current wording

For 2024, selling, general and administrative expense increased $61.1 million, and increased as a percentage of revenue to 10.9% in 2024 from 10.7% in 2023. Selling expense increased $25.4 million from 2023 and remained consistent as a percentage of revenue at 5.2%. Sales and realtor commissions contributed $16.5 million to the increase in selling expense in 2024 due to the increase in the homes delivered as well as higher external sales commission rates paid during the period compared to prior year. In addition to commissions, costs associated with our sales offices, including compensation-related expenses and models, increased $8.9 million in 2024 due to our increased community count. General and administrative expense increased $35.7 million in 2024 compared to 2023 and also increased as a percentage of revenue from 5.5% in 2023 to 5.7% in 2024. The dollar increase in general and administrative expense was primarily due to an $19.4 million increase in compensation-related expenses, a $4.2 million increase in costs associated with information systems, a $3.8 million increase in professional fees, a $2.3 million increase in land-related costs, and a $6.0 million increase in miscellaneous expenses.

Previous wording

Housing market conditions stabilized during 2023 compared to the second half of 2022 with interest rates leveling off late in 2023. Future homebuyer demand remains subject to uncertainty due to various macroeconomic conditions, including labor and material costs and availability, interest rates, inflation, and the economic concerns of our potential homebuyers. The extent to which these factors will impact our business is unpredictable. However, we believe that we are well positioned to manage through these economic conditions with our affordable product offerings, land position and planned new community openings. We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and selectively offering incentives for closing cost assistance or mortgage rate buydowns. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic conditions. However, we cannot provide any assurances that the strategic business objectives listed below will remain successful, and we may need to adjust elements of our strategy to effectively address evolving market conditions.

Current wording

Housing market conditions were relatively healthy in 2024 despite inflation, elevated mortgage interest rates and rising housing prices, which impacted affordability for the average homebuyer, particularly in the second half of the year. Despite these affordability challenges, our offering of sales incentives and mortgage interest rate buydowns helped spur our new contracts in this period. We expect to selectively offer sales incentives in 2025 to support homebuyers, drive order activity and minimize cancellations. Our use of sales incentives and mortgage interest rate buydowns in 2025 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, sales pace and lots remaining available for sale. We expect some margin compression in 2025 when compared to 2024 levels as a result of the current market conditions. We also expect to increase our land acquisition and development investment activity in 2025 compared to 2024 to support future growth, subject to market conditions and available opportunities that meet our investment return standards. We will continue to prioritize managing our land spend and inventory levels of finished lots and inventory homes by balancing our development investment activity and our construction pace. While we believe that the homebuilding industry will continue to benefit over the long term from a continued undersupply of available homes, positive consumer demographics, and increasing rent prices, the housing market remains subject to unpredictability as a result of uncertain macroeconomic conditions, including labor and material costs and availability, inflation, mortgage interest rates, and the economic concerns of our potential homebuyers. Although the extent to which these factors will impact our business is unpredictable, we believe that we are well positioned to continue to grow over the long-term by focusing on our land position, new community openings, and affordable product offerings. We remain sensitive to potential changes in market conditions, and will continue to focus on controlling overhead leverage in addition to carefully managing our investment in land and land development spending. Our strong balance sheet and ample liquidity should also provide us with flexibility through changing and uncertain economic conditions. We cannot provide any assurances that our strategic business objectives listed below will remain successful, and we will need to remain agile to effectively address changes in market conditions. We expect to emphasize the following strategic business objectives in 2025:

Previous wording

During 2023, we invested $343.5 million in land acquisitions and $512.1 million in land development. We invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities. We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly.

Current wording

During 2024, we invested $472.9 million in land acquisitions and $646.0 million in land development. We invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities. We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly.

Previous wording

We ended 2023 with approximately 45,700 lots under control, which represents a 5.6 year supply of lots based on 2023 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 9% increase from our approximately 42,100 lots under control at the end of 2022.

Current wording

We ended 2024 with approximately 52,200 lots under control, which represents a 5.8 year supply of lots based on 2024 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 14% increase from our approximately 45,700 lots under control at the end of 2023.

Previous wording

We opened 76 communities and closed 59 communities in 2023, ending the year with a total of 213 communities, compared to 196 at the end of 2022. Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our average community count by approximately 10% by the end of 2024.

Current wording

We opened 72 communities and closed 65 communities in 2024, ending the year with a total of 220 communities, compared to 213 at the end of 2023. Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2025.

Previous wording

The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); interest (income) expense; and depreciation and amortization for the years ended December 31, 2023, 2022 and 2021:

Current wording

The following table shows, by segment: revenue; selling, general and administrative expense; operating income (loss); interest (income) expense; and income before income taxes for the years ended December 31, 2024, 2023 and 2022:

Previous wording

(b)Other income is comprised of the gain on the sale of a non-operating asset during the fourth quarter of 2021 as well as equity in (income) loss from joint venture arrangements.

Current wording

(b)Other income is comprised of the equity in (income) loss from joint venture arrangements.

Previous wording

Northern Region. During the twelve months ended December 31, 2023, homebuilding revenue in our Northern region decreased $190.3 million, from $1.71 billion in 2022 to $1.52 billion in 2023. This 11% decrease in homebuilding revenue was the result of a 12% decrease in the number of homes delivered (412 units), primarily attributable to the lower backlog at the beginning of 2023 caused by the slowdown in demand that began in the latter half of 2022 in connection with the higher interest rate environment, offset partially by a $1.8 million increase in land sale revenue and a slight increase in the average sales price of homes delivered ($1,000 per home delivered). Operating income in our Northern region decreased $41.2 million, from $217.5 million in 2022 to $176.3 million in 2023. The decrease in operating income was primarily the result of a $39.3 million decrease in our gross margin in addition to a $1.9 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $39.4 million, and our housing gross margin percentage declined 10 basis points from 19.5% in 2022 to 19.4% in 2023. The decline in our housing gross margin was primarily due to the mix of homes being delivered, the decrease in the number of homes delivered, and increased costs related to incentives offered, including mortgage interest rate buydowns and closing cost assistance. Our land sale gross margin improved $0.1 million as a result of more land sales in 2023 as well as due to the mix of lots sold in the current year compared to the prior year.

Current wording

Northern Region. During the twelve months ended December 31, 2024, homebuilding revenue in our Northern region increased $376.1 million, from $1.52 billion in 2023 to $1.90 billion in 2024. This 25% increase in homebuilding revenue was the result of a 22% increase in the number of homes delivered (704 units), primarily attributable to delivering prior year backlog, an increase in new contracts and a slight increase in the average sales price of homes delivered ($11,000 per home delivered), offset partially by a $1.7 million decrease in land sales. Operating income in our Northern region increased $104.8 million, from $176.3 million in 2023 to $281.1 million in 2024. The increase in operating income was primarily the result of a $124.7 million increase in our gross margin offset in part by a $19.9 million increase in selling, general, and administrative expense. Our homebuilding gross margin percentage improved 270 basis points from 19.4% in 2023 to 22.1% in 2024. The improvement in our homebuilding gross margin was primarily due to the number and mix of homes being delivered offset in part by increased costs related to incentives offered, including mortgage interest rate buydowns and closing cost assistance.

Previous wording

Selling, general and administrative expense increased $1.9 million from $116.8 million in 2022 to $118.7 million in 2023 and increased as a percentage of revenue to 7.8% in 2023 from 6.8% in 2022. The increase in selling, general and administrative expense was attributable to a $1.7 million increase in selling expense, due to a $1.2 million increase in variable selling expenses resulting from an increase in realtor commissions and a $0.5 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models. The increase in selling, general and administrative expense was also attributable to a $0.2 million increase in general and administrative expense, which was primarily related to an increase in land-related expenses.

Current wording

Selling, general and administrative expense increased $19.9 million from $118.7 million in 2023 to $138.6 million in 2024 and decreased as a percentage of revenue to 7.3% in 2024 from 7.8% in 2023. The increase in selling, general and administrative expense was attributable to a $13.8 million increase in selling expense, due to a $11.6 million increase in sales and realtor commissions and a $2.2 million increase primarily related to costs associated with our sales offices and models. The increase in selling, general and administrative expense was also attributable to a $6.1 million increase in general and administrative expense, which primarily related to an increase in compensation-related expenses.

Previous wording

During 2023, we experienced a 22% increase in new contracts in our Northern region, from 2,747 in 2022 to 3,361 in 2023. Backlog increased 18% from 1,056 homes at December 31, 2022 to 1,248 homes at December 31, 2023. The increases in new contracts and backlog were primarily due to increased demand as a result of the increase in our average number of communities to 101 communities compared to 92 communities in the prior year and improved absorption rate. Average sales price in backlog increased to $531,000 at December 31, 2023 compared to $523,000 at December 31, 2022 primarily due to the mix of homes being sold. During the twelve months ended December 31, 2023, we opened 33 new communities in our Northern region compared to 34 during 2022. Our monthly absorption rate in our Northern region improved to 2.8 per community in 2023 compared to 2.5 per community in 2022 as a result of the increase in the number of new contracts during the period compared to prior year, offset, in part, by a smaller increase in the number of average active communities.

Current wording

During 2024, we experienced a 12% increase in new contracts in our Northern region, from 3,361 in 2023 to 3,761 in 2024. Backlog decreased 9% from 1,248 homes at December 31, 2023 to 1,136 homes at December 31, 2024 as a result of more inventory homes sold in the fourth quarter of 2024 due to sales incentives offered. The increase in new contracts was primarily due to increased demand and improved absorption rate. Average sales price in backlog increased to $561,000 at December 31, 2024 compared to $531,000 at December 31, 2023 primarily due to the mix of homes being sold. During the twelve months ended December 31, 2024, we opened 21 new communities in our Northern region compared to 33 during 2023. Our monthly absorption rate in our Northern region improved to 3.3 per community in 2024 compared to 2.8 per community in 2023 as a result of the increase in the number of new contracts and the decrease in the number of average active communities during 2024 compared to 2023.

Previous wording

Southern Region. For the twelve months ended December 31, 2023, homebuilding revenue in our Southern region increased $84.8 million, from $2.33 billion in 2022 to $2.42 billion in 2023. This 4% increase in homebuilding revenue was primarily the result of a 3% increase in the number of homes delivered (158 units) due to increased availability of inventory homes, improved construction cycle times on our backlog homes and a 1% increase in the average sales price of homes delivered ($5,000 per home delivered) primarily due to the mix of homes delivered, partially offset by an $11.3 million decrease in land sale revenue. Operating income in our Southern region decreased $11.7 million from $451.9 million in 2022 to $440.2 million in 2023. This decrease in operating income was the result of an $18.4 million increase in selling, general, and administrative expense, offset, in part, by a $6.7 million improvement in our gross margin. With respect to our homebuilding gross margin, our housing gross margin improved $15.2 million, due primarily to the increase in the average sales price of homes delivered and the increase in the number of homes delivered during the period, offset partially by increased construction and lot costs. Our housing gross margin percentage declined 40 basis points, however, from 26.6% in 2022 to 26.2% in 2023 primarily due to increased costs related to incentives offered, including mortgage interest rate buydowns and closing cost assistance, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $8.4 million as a result of fewer land sales in 2023 compared to 2022 as well as due to the mix of lots sold in the current year compared to the prior year.

Current wording

Southern Region. For the twelve months ended December 31, 2024, homebuilding revenue in our Southern region increased $72.7 million, from $2.42 billion in 2023 to $2.49 billion in 2024. This 3% increase in homebuilding revenue was primarily the result of a 5% increase in the number of homes delivered (239 units) due to increased availability of inventory homes and improved construction cycle times on our backlog homes offset in part by a 1% decrease in the average sales price of homes delivered ($7,000 per home delivered) and a $10.9 million decrease in land sales. Operating income in our Southern region increased $10.4 million from $440.2 million in 2023 to $450.6 million in 2024. This increase in operating income was the result of a $32.9 million improvement in our gross margin offset by a $22.5 million increase in selling, general, and administrative expense. Our homebuilding gross margin improved $32.9 million, due primarily to the increase in the number of homes delivered during the period offset by the decrease in the average sales price of homes delivered. Our homebuilding gross margin percentage improved 50 basis points from 26.1% in 2023 to 26.6% in 2024 primarily due to increased number and mix of homes delivered.

Previous wording

Selling, general and administrative expense increased $18.4 million from $171.5 million in 2022 to $189.9 million in 2023 and increased as a percentage of revenue to 7.9% in 2023 from 7.4% in 2022. The increase in selling, general and administrative expense was attributable to a $3.3 million increase in general and administrative expense, which was primarily related to a $4.2 million increase in compensation related expenses as a result of an increase in incentive compensation due to our strong financial performance during the period and a $0.4 million increase in land-related expenses, partially offset by a $1.3 million decrease in miscellaneous expenses. Selling expense increased $15.2 million due to a $12.1 million increase in variable selling expenses resulting from increases in realtor commissions and a $3.1 million increase in non-variable selling expenses primarily attributable to costs related to our sales offices and models due to our increased community count.

Current wording

Selling, general and administrative expense increased $22.5 million from $189.9 million in 2023 to $212.4 million in 2024 and increased as a percentage of revenue to 8.5% in 2024 from 7.9% in 2023. The increase in selling, general and administrative expense was attributable to a $11.1 million increase in general and administrative expense, which was primarily related to a $4.9 million increase in compensation related expenses as a result of an increase in headcount and incentive compensation due to our strong financial performance during the period, a $1.2 million increase in land-related expenses, and a $5.0 million increase in miscellaneous expenses. Selling expense increased $11.3 million due to a $4.9 million increase in realtor commissions and a $6.4 million increase in costs related to our sales offices and models due to our increased community count.

Previous wording

During 2023, we experienced an 18% increase in new contracts in our Southern region, from 3,921 in 2022 to 4,616 in 2023, which was primarily due to an increase in our average number of communities to 101 communities compared to 86 communities in the prior year. Backlog decreased 16% from 2,081 homes at December 31, 2022 to 1,754 homes at December 31, 2023. The decrease in backlog was primarily due to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog decreased to $520,000 at December 31, 2023 from $551,000 at December 31, 2022 primarily due to the mix of homes delivered. During 2023, we opened 43 communities in our Southern region compared to 67 in 2022. The decline in the number of new communities opened primarily related to our decision to delay land purchases that were scheduled to occur in late 2022 and early 2023 due to the declining market demand for new homes that began in the second half of 2022 along with extended timelines related to utility availability, which pushed community openings into 2024. Our monthly absorption rate in our Southern region remained flat at 3.8 per community in both 2023 and 2022.

Current wording

During 2024, we experienced a 4% increase in new contracts in our Southern region, from 4,616 in 2023 to 4,823 in 2024, which was primarily due to an increase in our average number of communities to 121 communities compared to 101 communities in the prior year. Backlog decreased 20% from 1,754 homes at December 31, 2023 to 1,395 homes at December 31, 2024. The decrease in backlog was primarily due to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog increased to $547,000 at December 31, 2024 from $520,000 at December 31, 2023 primarily due to the mix of homes in backlog. During 2024, we opened 51 communities in our Southern region compared to 43 in 2023. The increase in the number of new communities opened primarily related to prior year delays that were pushed to 2024. Our monthly absorption rate in our Southern region decreased to 3.3 per community in 2024 from 3.8 per community in 2023 due to the increase in average community count.

Previous wording

Financial Services. Revenue from our mortgage and title operations increased $7.6 million, or 9%, from a $86.2 million for the twelve months ended December 31, 2022 to $93.8 million for the twelve months ended December 31, 2023 as a result of an increase in the number of loan originations, from 5,374 in 2022 to 5,395 in 2023 and an increase in the average loan amount from $385,000 in 2022 to $393,000 in 2023.

Current wording

Financial Services. Revenue from our mortgage and title operations increased $22.4 million, or 24%, from $93.8 million for the twelve months ended December 31, 2023 to $116.2 million for the twelve months ended December 31, 2024 as a result of an increase in the number of loan originations, from 5,395 in 2023 to 6,731 in 2024 and an increase in the average loan amount from $393,000 in 2023 to $399,000 in 2024.

Previous wording

Our financial service operations ended 2023 with a $4.3 million increase in operating income compared to 2022, which was primarily due to the increase in revenue discussed above, partially offset by a $3.3 million increase in selling, general and administrative expense compared to 2022. The increase in selling, general and administrative expense was attributable to a $1.1 million increase in compensation expense related to our improved results during the period, a $0.6 million increase in indemnifications, a $0.9 million increase in appraisal costs, and a $0.7 million increase in miscellaneous expenses.

Current wording

Our financial service operations ended 2024 with a $14.7 million increase in operating income compared to 2023, which was primarily due to the increase in revenue discussed above, partially offset by a $7.7 million increase in selling, general and administrative expense compared to 2023. The increase in selling, general and administrative expense was primarily attributable to a $6.4 million increase in compensation expense related to our improved results during the period, a $0.7 million increase in computer-related costs, and a $0.6 million increase in miscellaneous expenses.

Previous wording

At December 31, 2023, M/I Financial provided financing services in all of our markets. Approximately 83% of our homes delivered during 2023 were financed through M/I Financial, compared to 78% during 2022. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

Current wording

At December 31, 2024, M/I Financial provided financing services in all of our markets. Approximately 89% of our homes delivered during 2024 were financed through M/I Financial, compared to 83% during 2023. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

Previous wording

Corporate Selling, General and Administrative Expenses. Corporate selling, general and administrative expense increased $1.7 million, from $76.3 million in 2022 to $78.0 million in 2023. The increase was primarily due to a $4.2 million increase in compensation expense primarily due to our strong financial performance during the period, partially offset by a $0.8 million decrease related to costs associated with new information systems and a $1.7 million decrease in miscellaneous expenses.

Current wording

Corporate Selling, General and Administrative Expenses. Corporate selling, general and administrative expense increased $11.0 million, from $78.0 million in 2023 to $89.0 million in 2024. The increase was primarily due to a $4.9 million increase in compensation expense due to our strong financial performance during the period, a $2.1 million increase related to costs associated with information systems and a $4.0 million increase in miscellaneous expenses.

Previous wording

Other income. Other income for 2023 and 2022 includes equity in income from joint venture arrangements. Equity in income from joint venture arrangements represents our portion of pre-tax earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners. The Company earned less than $0.1 million of equity in income from its LLCs during both 2023 and 2022.

Current wording

Other income. Other income for 2023 includes equity in income from joint venture arrangements. Equity in income from joint venture arrangements represents our portion of pre-tax earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners. The Company earned less than $0.1 million of equity in income from its LLCs during 2023.

Previous wording

Interest (Income) Expense - net. The Company earned $20.0 million of interest income - net in the twelve months ended December 31, 2023 compared to incurring $2.3 million of interest expense - net in the twelve months ended December 31, 2022. This was primarily due to a higher average cash balance on hand compared to prior year.

Current wording

Interest (Income) Expense - net. The Company earned $27.5 million of interest income - net in the twelve months ended December 31, 2024 compared to earning $20.0 million of interest income - net in the twelve months ended December 31, 2023. This was primarily due to a higher average cash balance on hand compared to prior year.

Previous wording

Income Taxes. Our overall effective tax rate was 23.4% for the year ended December 31, 2023 and 22.8% for the year ended December 31, 2022. The increase in the effective rate for the twelve months ended December 31, 2023 was primarily attributable to decreased tax benefits from energy tax credits offset by increased tax benefits from equity compensation (see Note 14 to our Consolidated Financial Statements for more information).

Current wording

Income Taxes. Our overall effective tax rate was 23.2% for the year ended December 31, 2024 and 23.4% for the year ended December 31, 2023 (see Note 14 to our Consolidated Financial Statements for more information).

Previous wording

At December 31, 2023, we had $732.8 million of cash, cash equivalents and restricted cash, with $732.6 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $422.0 million increase in unrestricted cash and cash equivalents from December 31, 2022. The increase in cash is primarily due to 2023 net income, home deliveries, fewer homes under construction compared to prior year, and the timing of land spend compared to prior year. Our principal uses of cash during 2023 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $65.3 million of our outstanding common shares under our 2021 Share Repurchase Program (as defined below) during 2023. In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our credit facilities, and other sources of liquidity.

Current wording

At December 31, 2024, we had $821.6 million of cash, cash equivalents and restricted cash, with $821.5 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $88.9 million increase in unrestricted cash and cash equivalents from December 31, 2023. The increase in cash is primarily due to 2024 net income and home deliveries and the timing of land spend compared to prior year. Our principal uses of cash during 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $177.0 million of our outstanding common shares under our 2021 and 2024 Share Repurchase Programs. In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our credit facilities, and other sources of liquidity.

Previous wording

The Company is a party to two primary credit agreements: (1) a $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries and (2) a $300 million (subject to increases and decreases during certain periods) mortgage repurchase agreement, dated October 24, 2023, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”).

Current wording

The Company is a party to two primary credit agreements: (1) a $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries and (2) a $300 million mortgage repurchase agreement, dated October 24, 2023, as amended most recently on October 22, 2024 (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower.

Previous wording

As of December 31, 2023, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $866 million, with $166 million payable within 12 months. Future interest payments associated with these notes payable totaled $166 million as of December 31, 2023, with $32 million payable within 12 months.

Current wording

As of December 31, 2024, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $986 million, with $286 million payable within 12 months. Future interest payments associated with these notes payable totaled $135 million as of December 31, 2024, with $32 million payable within 12 months.

Previous wording

As of December 31, 2023, there were no borrowings outstanding and $70.7 million of letters of credit outstanding under our Credit Facility, leaving $579.3 million available. We expect to continue managing our balance sheet and liquidity carefully in 2024 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2024 from cash receipts, excess cash balances and availability under our credit facilities.

Current wording

As of December 31, 2024, there were no borrowings outstanding and $80.4 million of letters of credit outstanding under our Credit Facility, leaving $569.6 million available. We expect to continue managing our balance sheet and liquidity carefully in 2025 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2025 from cash receipts, excess cash balances and availability under our credit facilities.

Previous wording

During the year ended December 31, 2023, we delivered 8,112 homes, started 7,956 homes, ended the year with 4,375 homes under construction compared to 4,522 at the end of last year, and spent $343.5 million on land purchases and $512.1 million on land development.

Current wording

During the year ended December 31, 2024, we delivered 9,055 homes, started 9,196 homes, ended the year with approximately 4,700 homes under construction compared to approximately 4,500 at the end of last year, and spent $472.9 million on land purchases and $646.0 million on land development.

Previous wording

We are actively acquiring and developing lots in our markets to replenish our lot supply and will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly. Pursuant to our land option agreements, as of December 31, 2023, we had a total of 21,286 lots under contract, with an aggregate purchase price of approximately $1.1 billion, to be acquired from 2024 through 2030.

Current wording

We are actively acquiring and developing lots in our markets to replenish our lot supply and will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly. Pursuant to our land option agreements, as of December 31, 2024, we had a total of 28,320 lots under contract, with an aggregate purchase price of approximately $1.4 billion, to be acquired from 2025 through 2031.

Previous wording

Operating Cash Flow Activities. During 2023, we generated $552.1 million of cash in operating activities, compared to generating $184.1 million of cash from operating activities in 2022. The cash generated by operating activities in 2023 was primarily a result of net income of $465.4 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $72.9 million and a $46.7 million decrease in inventory, offset partially by a $35.2 million decrease in other liabilities and $31.9 million decrease in accounts payable and customer deposits. The cash generated by operating activities in 2022 was primarily a result of net income of $490.7 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $33.5 million and a $34.3 million increase in other liabilities, offset partially by a $348.7 million increase in inventory and $30.7 million decrease in accounts payable and customer deposits.

Current wording

Operating Cash Flow Activities. During 2024, we generated $179.7 million of cash from operating activities, compared to generating $552.1 million of cash from operating activities in 2023. The cash generated by operating activities in 2024 was primarily a result of net income of $563.7 million and a $23.1 million increase in other liabilities, offset partially by a $297.7 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $114.0 million, a $23.8 million increase in other assets and a $21.9 million decrease in accounts payable and customer deposits. The cash generated by operating activities in 2023 was primarily a result of net income of $465.4 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $72.9 million and a $46.7 million decrease in inventory, offset partially by a $28.8 million decrease in other liabilities and $31.9 million decrease in accounts payable and customer deposits.

Previous wording

Investing Cash Flow Activities. During 2023, we used $18.6 million of cash in investing activities, compared to using $27.4 million of cash in investing activities during 2022. This $8.7 million decrease in cash usage was primarily due to $10.7 million of proceeds from the sale of a portion of our mortgage servicing rights (which occurred during the second quarter of 2023), offset, in part, by a $3.4 million decrease in cash contributions to our joint venture arrangements compared to prior year. The cash used in investing activities during 2022 was primarily a result of an increase in our investment in joint venture arrangements.

Current wording

Investing Cash Flow Activities. During 2024, we used $54.9 million of cash in investing activities, compared to using $18.6 million of cash in investing activities during 2023. This $36.3 million increase in cash usage was primarily due to a $30.5 million increase in cash contributions to our joint venture arrangements compared to prior year. The cash used in investing activities during 2023 was primarily a result of an increase in our investment in joint venture arrangements.