M/I Homes, Inc.: Form 10-Q for the period ended Mar 31, 2025

RESULTS OF OPERATIONS

OVERVIEW

M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over 162,300 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; Ft. Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.

Included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are the following topics relevant to the Company’s performance and financial condition:

• Information Relating to Forward-Looking Statements;
• Application of Critical Accounting Estimates and Policies;
• Results of Operations;
• Discussion of Our Liquidity and Capital Resources; and
• Impact of Interest Rates and Inflation.

FORWARD-LOOKING STATEMENTS

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements, including, but not limited to, statements regarding our future financial performance and financial condition. Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties. Any forward-looking statements that we make herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various risk factors, including, without limitation, factors relating to the economic environment, interest rates, availability of resources, competition, market concentration, land development activities, construction defects, product liability and warranty claims and various governmental rules and regulations including changes in trade policy affecting business including new or increased tariffs, as well as the potential impact of retaliatory tariffs and other penalties. See “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.

Any forward-looking statement speaks only as of the date made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See Note 1 (Summary of Significant Accounting Policies) to our consolidated financial statements included in our 2024 Form 10-K for additional information about our accounting policies.

We believe that there have been no significant changes to our critical accounting policies during the quarter ended March 31, 2025 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Form 10-K.

RESULTS OF OPERATIONS

Our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations. The homebuilding operating segments that comprise each of our reportable segments are as follows:

Overview

During the first quarter of 2025, housing market conditions remained subject to challenging macroeconomic conditions. Elevated mortgage interest rates, limited availability of affordable housing and geopolitical uncertainties, including recent trade policies, negatively impacted consumer confidence causing weaker prospective homebuyer demand when compared to the same period of 2024. To address affordability and spur demand, we offered various sales incentives and mortgage interest rate buydowns to homebuyers which negatively impacted our profitability. Within this backdrop, our first quarter performance fell short of 2024’s record levels, but was generally consistent with our expectations. Our results during the first quarter of 2025 in comparison to the first quarter of 2024 were as follows:

• New contracts declined 10% to 2,292 from 2,547
• Revenue decreased 7% to $976.1 million
• Number of homes delivered decreased 8% to 1,976 homes
• Average sales price increased 1% from $471,000 to $476,000
• Gross margins decreased 120 basis points to 25.9%
• Income before income taxes decreased 19% to $146.1 million
• Net income decreased 19% to $111.2 million
• Shareholders’ equity of $3.0 billion (a record high)
• Book value per common share increased to a record high $112 per share; and
• Homebuilding debt to capital ratio was 19%.

In addition to the results described above, our financial services operations achieved a quarterly record for revenue and strong income before income taxes for the first quarter of 2025, benefiting from higher margins and improved capture rates offset in part by a decrease in loans originated.

Our company-wide absorption pace of sales per community for the first quarter of 2025 declined to 3.4 per month compared to 3.9 per month for the prior year’s first quarter as a result of the macroeconomic conditions described above. We plan to open additional new communities during the remainder of 2025 and increase our average community count by about 5% from 2024.

Summary of Company Financial Results

Income before income taxes for the first quarter of 2025 decreased 19% from $180.2 million in the first quarter of 2024 to $146.1 million in 2025. Net income was $111.2 million, or $3.98 per diluted share, in 2025's first quarter, compared to $138.1 million, or $4.78 per diluted share, in 2024's first quarter. Our effective tax rate was 23.9% in 2025’s first quarter compared to 23.4% in 2024.

During the quarter ended March 31, 2025, our total revenue was $976.1 million, of which $944.6 million was from homebuilding and $31.5 million was from our financial services operations. Revenue from homebuilding decreased 7% in 2025's first quarter compared to the same period in 2024 driven primarily by an 8% decrease in the number of homes delivered (182 units) offset in part by a 1% increase in the average sales price of homes delivered ($5,000 per home delivered). Our revenue and average sales price reflect a $40.0 million reduction for incentives and closing costs in 2025’s first quarter compared to a $24.8 million reduction for incentives and closing costs in 2024’s first quarter. Revenue from our financial services segment increased 17% to an all-time quarterly record $31.5 million in the first quarter of 2025 as a result of higher margins on loans sold and improved capture rates offset in part by a decrease in the number of loans originated during the period compared to the first quarter of 2024.

Total gross margin (total revenue less total land and housing costs) decreased $30.6 million in the first quarter of 2025 compared to the first quarter of 2024 as a result of a $35.1 million decline in the gross margin of our homebuilding operations and a $4.5 million increase in the gross margin of our financial services operations. Our homebuilding gross margin percentage declined by 170 basis points to 23.4% from 25.1%. The decline in gross margin dollars primarily resulted from the 8% decrease in homes delivered and a $9.8 million increase in interest rate buydowns offered in 2025 compared to 2024. Our homebuilding gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes due to the variation in margin between different communities and incentives used to encourage demand due to market conditions. The gross margin of our financial services operations increased $4.5 million in the first quarter of 2025 compared to the first quarter of 2024 as a result of higher margins on loans sold, improved capture rates offset in part by a decrease in the number of loan originations.

We opened 27 new communities during the first quarter of 2025 and closed 21 communities. 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, absorption pace and housing gross margin from year to year.

For the three months ended March 31, 2025, selling, general and administrative expense increased $1.8 million, and increased as a percentage of revenue from 10.5% in the first quarter of 2024 to 11.5% in the first quarter of 2025. Selling expense decreased $1.2 million from 2024's first quarter and increased as a percentage of revenue to 5.4% in 2025's first quarter from 5.2% for the same period in 2024. The dollar decrease in selling expense related to a $3.4 million decrease in sales and realtor commissions due to the decrease in the homes delivered during the period compared to prior year which was partially offset by a $2.2 million increase in costs associated with our sales offices, including compensation-related expenses and advertising initiatives in the first quarter of 2025. General and administrative expense increased $3.0 million in the first quarter of 2025 compared to first quarter of 2024 and also increased as a percentage of revenue from 5.4% in the first quarter of 2024 to 6.1% in first quarter of 2025. The increase in general and administrative expense was primarily due to a $2.7 million increase in compensation-related expenses, a $0.9 million increase in costs associated with information systems offset by a $0.6 million decrease in miscellaneous expenses.

Outlook

We are currently navigating an uncertain environment in the housing market due to challenging macroeconomic conditions, including ongoing elevated mortgage interest rates, housing affordability concerns, and heightened geopolitical uncertainties. Additionally, recently announced changes in U.S. trade policies and other U.S. government administrative changes may produce additional uncertainty and negatively impact the housing market. Despite this uncertain environment and the challenges it presents, we remain optimistic about our business. During the first three months of 2025, tariffs had no impact on our costs. However, we continue to monitor potential impacts of tariffs with our supply chain. Similarly, we did not encounter any labor disruptions due to immigration enforcement during the first quarter of 2025. We believe that long-term housing market drivers are largely positive, including favorable demographic trends, rising household formations, and the undersupply of new and resale homes.

However, we expect that the softer market conditions we experienced in the first quarter of 2025 will persist throughout the year. We believe that these conditions have negatively impacted consumer confidence, caused homebuyers to take longer to make purchase decisions and reduced demand at the start of the Spring selling season compared to recent years. We remain sensitive to market conditions and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending, and selectively offering homebuyer concessions, such as mortgage interest rate buydowns, to support homebuyers, maximize order activity, and minimize cancellations. The extent to which these factors will continue to impact our business is highly uncertain and unpredictable, and our past performance should not be considered indicative of future results given the uncertainty in the U.S. economy.

We believe that we are well-positioned to manage through these uncertain times. We continue to maintain a healthy backlog, despite a decline from the prior year, with an average sales price that is 4% higher than at the end of the first quarter of 2024. Our strong balance sheet and ample liquidity provide us with the flexibility to manage through these uncertain economic conditions. However, we cannot provide any assurances that our strategic business objectives will remain successful, and we will need to remain agile to effectively address changes in market conditions as they arise.

We expect to emphasize the following strategic business objectives throughout the remainder of 2025:

• Promote sales through interest rate buydowns and/or other incentives where necessary
• Manage our land spend and inventory levels
• Manage our construction cycle times
• Open new communities
• Manage overhead spend
• Maintain a strong balance sheet and liquidity levels
• Emphasize customer service, product quality and design, and premier locations

During the first three months of 2025, we invested $146.0 million in land acquisitions and $101.6 million in land development compared to $107.7 million and $119.4 million, respectively, during the first three months of 2024. We invested in more land acquisitions in the first quarter of 2025 compared to the first quarter of 2024 as a result of the land supply needs of our divisions. We continue to closely review 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.

We ended the first quarter of 2025 with approximately 51,100 lots under control, which represents an approximately six-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents an 8% increase from our approximately 47,500 lots under control at the end of last year’s first quarter.

We opened 27 communities and closed 21 communities in the first quarter of 2025, ending the first quarter with 226 active communities, compared to 219 at the end of last year’s first quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2025.

The following table shows, by segment: revenue; cost of sales; selling, general and administrative expense; operating income; and interest (income) expense - net for the three months ended March 31, 2025 and 2024:

(In thousands)

(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.

The following tables show total assets by segment at March 31, 2025 and December 31, 2024:

(In thousands)

(In thousands)

(a) Inventory includes: single-family lots; land and land development costs; land held for sale; homes under construction; model homes and furnishings; community development district infrastructure; and consolidated inventory not owned.

(b) Includes development reimbursements from local municipalities.

Reportable Segments

The following table presents, by reportable segment, selected operating and financial information as of and for the three months ended March 31, 2025 and 2024:

(Dollars in thousands)

(a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.

(Dollars in thousands)

30

A home is included in “new contracts” when our standard sales contract is executed. “Homes delivered” represents homes for which the closing of the sale has occurred. “Backlog” represents homes for which the standard sales contract has been executed, but which are not included in homes delivered because closings for these homes have not yet occurred as of the end of the period specified.

The composition of our homes delivered, new contracts, net and backlog is constantly changing and may be based on a dissimilar mix of communities between periods as new communities open and existing communities wind down. Further, home types and individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots. These variations may result in a lack of meaningful comparability between homes delivered, new contracts, net and backlog due to the changing mix of communities between periods.

Cancellation Rates

The following table sets forth the cancellation rates for each of our homebuilding segments for the three months ended March 31, 2025 and 2024:

Seasonality

Typically, our homebuilding operations experience significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase in the second half of the year compared to the first half of the year. We believe that this seasonality reflects the tendency of homebuyers to shop for a new home in the spring with the goal of closing in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions. Our financial services operations also experience seasonality because loan originations correspond with the delivery of homes in our homebuilding operations.

Year Over Year Comparison

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Northern Region. During the three months ended March 31, 2025, revenue in our Northern region increased $1.9 million, from $408.5 million in the first quarter of 2024 to $410.4 million in the first quarter of 2025. This slight increase in revenue was primarily the result of a 2% increase in the average sales price of homes being delivered and the mix of homes being delivered offset in part by a decrease in number of homes delivered. Operating income in our Northern region increased $2.5 million from $58.1 million in the first quarter of 2024 to $60.6 million during the quarter ended March 31, 2025. This increase in operating income was the result of a $2.1 million improvement in our gross margin and a $0.4 million decrease in selling, general and administrative expense. Our gross margin improved $2.1 million to $90.9 million in the first quarter of 2025 from $88.8 million in the first quarter 2024. Our gross margin percentage improved 0.5% to 22.2% from 21.7% in the prior year’s first quarter. These improvements were primarily due to the mix of homes delivered compared to prior year.

Selling, general and administrative expense decreased $0.4 million, from $30.7 million for the quarter ended March 31, 2024 to $30.3 million for the quarter ended March 31, 2025 and declined 10 basis points as a percentage of revenue to 7.4% in 2025's first quarter from 7.5% in 2024's first quarter. The decrease in selling, general and administrative expense was attributable to a $0.3 million decrease in general and administrative expense primarily related to land-related expenses and a $0.1 million decrease in selling expense. The decrease in selling expense was due to a $0.9 million decrease in sales and realtor commissions produced by the lower number of homes delivered offset in part by a $0.8 million increase in costs associated with our sales offices, including compensation and model homes.

During the three months ended March 31, 2025, we experienced an 8% decrease in new contracts in our Northern region from 1,162 in the first quarter of 2024 to 1,065 in the first quarter of 2025. Homes in backlog decreased 12% from 1,567 homes at March 31, 2024 to 1,375 homes at March 31, 2025. The decreases in new contracts and backlog were primarily a result of weakened market demand compared to prior year. Average sales price in backlog increased approximately 6% to $556,000 at March 31, 2025 compared to $525,000 at March 31, 2024 primarily due to the mix of homes being sold. During the three months ended March 31, 2025, we opened 16 new communities in our Northern region compared to opening seven during

2024's first quarter. Our monthly absorption rate in our Northern region was 3.8 per community in both the first quarter of 2025 and the first quarter of 2024.

Southern Region. During the three month period ended March 31, 2025, revenue in our Southern region decreased $77.0 million, from $611.2 million in the first quarter of 2024 to $534.2 million in the first quarter of 2025. This 13% decrease in revenue was the result of a 13% decrease in the number of homes delivered (165 units). Operating income in our Southern region decreased $37.4 million from $117.8 million in the first quarter of 2024 to $80.4 million in the first quarter of 2025. This decrease in operating income was the result of a $37.2 million decline in our gross margin and a $0.2 million increase in selling, general, and administrative expense. Our gross margin declined $37.2 million, due primarily to the decrease in the number of homes delivered during the period and the incentives offered on homes delivered compared to prior year. Our gross margin percentage declined 300 basis points from 27.4% in prior year’s first quarter to 24.4% in the first quarter of 2025, primarily due to the mix of homes being delivered and incentives offered.

Selling, general and administrative expense increased $0.2 million from $49.7 million in the first quarter of 2024 to $49.9 million in the first quarter of 2025 and increased 120 basis points as a percentage of revenue to 9.3% in the first quarter of 2025 from 8.1% in the first quarter of 2024. This increase in selling, general and administrative expense was primarily attributable to a $1.2 million increase in general and administrative expense, which was due to a $0.5 million increase in compensation-related expenses, a $0.3 million increase in land-related expenses, and a $0.4 million increase in miscellaneous expenses. Selling expense decreased $1.1 million due to a $2.5 million decrease in realtor and sales commissions offset in part by a $1.4 million increase in costs related to our sales office, compensation and models due to an increase in our community count.

During the three months ended March 31, 2025, our new contracts decreased in our Southern region, from 1,385 in the first quarter of 2024 to 1,227 in the first quarter of 2025, which was primarily due to weakened market demand. Homes in backlog decreased by 19% from 1,824 homes at March 31, 2024 to 1,472 homes at March 31, 2025, primarily as a result of weakened demand and a shift in demand to inventory homes which offer incentives compared to last year. Average sales price in backlog increased to $540,000 at March 31, 2025 from $530,000 at March 31, 2024 primarily due to the mix of homes being sold. During the three months ended March 31, 2025, we opened 11 new communities in our Southern region compared to opening 14 communities during 2024's first quarter. Our monthly absorption rate in our Southern region declined to 3.2 per community in the first quarter of 2025 compared to 4.0 per community in the first quarter of 2024 as a result of a decrease in new contracts.

Financial Services. Revenue from our mortgage and title operations increased 17% to an all-time quarterly record $31.5 million in the first quarter of 2025 from $27.0 million in the first quarter of 2024 due to higher margins on loans sold and capture rates during the period compared to prior year’s first quarter and a 2% decrease in the number of loan originations from 1,556 in 2024's first quarter to 1,530 in the first quarter of 2025, and an increase in the average loan amount from $386,000 in the quarter ended March 31, 2024 to $406,000 in the quarter ended March 31, 2025.

Our financial services segment experienced a $3.6 million increase in operating income in the first quarter of 2025 compared to 2024's first quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $1.0 million increase in selling, general and administrative expense compared to the first quarter of 2024, which was primarily the result of an increase in compensation-related expenses.

At March 31, 2025, M/I Financial provided financing services in all of our markets. Approximately 92% of our homes delivered during the first quarter of 2025 were financed through M/I Financial, compared to 88% in the first quarter of 2024. Capture rate is influenced by financing availability and competition in the mortgage market and can fluctuate from quarter to quarter.

Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $1.1 million from $17.8 million for the first quarter of 2024 to $18.9 million for the first quarter of 2025. This increase resulted from a $1.1 million increase in compensation-related expenses.

Interest Income, net of Interest Expense. The Company earned $5.2 million of interest income - net for the three months ended March 31, 2025 compared to $6.9 million for the three months ended March 31, 2024. This decrease was primarily due to a lower average cash balance on hand compared to prior year.

Income Taxes. Our overall effective tax rate was 23.9% for the three months ended March 31, 2025 and 23.4% for the three months ended March 31, 2024. The increase in the effective tax rate from the three months ended March 31, 2024 was primarily attributable to a $1.2 million decrease in tax benefit from equity compensation in 2025.

LIQUIDITY AND CAPITAL RESOURCES

Overview of Capital Resources and Liquidity.

At March 31, 2025, we had $776.4 million of cash, cash equivalents and restricted cash, with approximately $776.1 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $45.3 million decrease in unrestricted cash and cash equivalents from December 31, 2024. This decrease in cash is primarily due to the decline in home deliveries and the timing of land spend compared to prior year offset by a larger beginning of year balance on hand. Our principal uses of cash for the three months ended March 31, 2025 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $50.1 million of our outstanding common shares under the 2025 Share Repurchase Programs (as defined below). 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 MIF Mortgage Repurchase Facility (as defined below), and other sources of liquidity.

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 on October 22, 2024 (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower.

As of March 31, 2025, 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 $928.0 million, with $228.0 million payable within 12 months. Future interest payments associated with these notes payable totaled $118.9 million as of March 31, 2025, with $31.9 million payable within 12 months.

As of March 31, 2025, there were no borrowings outstanding and $69.4 million of letters of credit outstanding under our $650 million Credit Facility, leaving $580.6 million available. We expect to continue to manage our balance sheet and liquidity carefully during the remainder of 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.

During the first quarter of 2025, we delivered 1,976 homes, started 2,077 homes, ended the quarter with 4,800 homes under construction compared to 4,500 at the end of last year’s first quarter, and spent $146.0 million on land purchases and $101.6 million on land development.

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 March 31, 2025, we had a total of 25,887 lots under contract, with an aggregate purchase price of approximately $1.47 billion, to be acquired during the remainder of 2025 through 2031.

Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. We use these arrangements to secure the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.

Operating Cash Flow Activities. During the three-month period ended March 31, 2025, we generated $64.9 million of cash from operating activities, compared to generating $115.8 million of cash from operating activities during the first quarter of 2024. The cash provided by operating activities in the first quarter of 2025 was primarily a result of net income of $111.2 million, and an increase of $72.4 million in accounts payable, customer deposits and other liabilities, proceeds from the sale of mortgage loans which exceeded mortgage loan originations by $50.5 million, offset, in part, by a $107.3 million increase in inventory purchases, an increase in other assets of $12.5 million, and a decrease in accrued compensation totaling $48.9 million. The cash generated in operating activities during the first quarter of 2024 was primarily a result of net income of $138.1 million, a $15.8 million decrease in inventory purchases due to delays and timing of land purchases and an increase of $54.9 million in accounts payable and other liabilities, offset, in part, payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $61.6 million and a decrease in accrued compensation totaling $40.0 million.

Investing Cash Flow Activities. During the first quarter of 2025, we used $2.9 million of cash in investing activities, compared to using $17.1 million of cash in investing activities during the first quarter of 2024. The cash used in investing activities in the first quarter of 2025 was primarily a result of a $8.3 million increase in our investment in joint venture arrangements and a

$1.3 million increase in property and equipment, offset, in part, by $6.7 million of proceeds from the sale of a portion of our mortgage servicing rights. The cash used in investing activities during the first quarter of 2024 was primarily a result of a $23.7 million increase in our investment in joint venture arrangements offset, in part, by $6.9 million of proceeds from the sale of a portion of our mortgage servicing rights.

Financing Cash Flow Activities. During the three months ended March 31, 2025, we used $107.2 million of cash in financing activities, compared to generating $38.7 million of cash in financing activities during the first three months of 2024. The cash used in financing activities in 2025 was primarily due to the repurchase of $50.1 million of our outstanding common shares during the first quarter of 2025, and repayments (net of borrowings) under our MIF Mortgage Repurchase Facility of $58.2 million offset partially by $1.1 million in proceeds from the exercise of stock options during the first quarter of 2025. The cash provided by financing activities in the first quarter of 2024 was primarily due to proceeds from borrowings (net of repayments) under our M/I Financial credit facility of $58.5 million and $5.5 million in proceeds from the exercise of stock options during the first quarter of 2024, offset partially by the repurchase of $25.3 million of our outstanding common shares during the first quarter of 2024.

On February 11, 2025, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company was permitted to purchase up to $250 million of its outstanding common shares (the “2025 Share Repurchase Program”), which replaced the 2024 Share Repurchase Program. During the first quarter of 2025, the Company repurchased 0.4 million outstanding common shares for an aggregate purchase price of $50.1 million under the 2025 Share Repurchase Program which was funded with cash on hand. As of March 31, 2025, the Company is authorized to repurchase an additional $199.9 million of outstanding common shares under the 2025 Share Repurchase Program (see Note 12 to our financial statements for more information).

Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing common shares during the remainder of 2025. The timing and amount of any future purchases under the 2025 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

At both March 31, 2025 and December 31, 2024, our ratio of homebuilding debt to capital was 19%, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity. We believe that this ratio provides useful information for understanding our financial position and the leverage employed in our operations, and for comparing us with other homebuilders.

We fund our operations with cash flows from operating activities, including proceeds from home deliveries, land sales and the sale of mortgage loans. We believe that these sources of cash, along with our balance of unrestricted cash and borrowings available under our credit facilities, will be sufficient to fund our currently anticipated working capital needs, investment in land and land development, construction of homes, operating expenses, planned capital spending, and debt service requirements for at least the next twelve months. In addition, we routinely monitor current and anticipated operational and debt service requirements, financial market conditions, and credit relationships, and we may choose to seek additional capital by issuing new debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure. The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors. If we seek such additional capital or engage in such other financial transactions, there can be no assurance that we would be able to obtain such additional capital or consummate such other financial transactions on terms acceptable to us, if at all, and such additional equity or debt financing or other financial transactions could dilute the interests of our existing shareholders, add operational limitations and/or increase our interest costs.

Included in the table below is a summary of our available sources of cash from the Credit Facility and the MIF Mortgage Repurchase Facility as of March 31, 2025:

(In thousands)

(a) The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled $2.28 billion of availability for additional senior debt at March 31, 2025. As a result, the full $650 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $69.4 million of letters of credit outstanding at March 31, 2025, leaving $580.6 million available. The Credit Facility has an expiration date of December 9, 2026.

(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of March 31, 2025, which was $300 million. The MIF Mortgage Repurchase Facility has an expiration date of October 21, 2025.

Notes Payable - Homebuilding.

Homebuilding Credit Facility. The Credit Facility provides for an aggregate commitment amount of $650 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $800 million, subject to obtaining additional commitments from lenders. The Credit Facility matures on December 9, 2026. Interest on amounts borrowed under the Credit Facility is payable at multiple interest rate options, including one, three, or six month adjusted term secured overnight financing rate (“SOFR”) (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).

Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory. The Credit Facility also provides for a $250 million sub-facility for letters of credit. The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.85 billion at March 31, 2025 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity. In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries. The guarantors for the Credit Facility are the same subsidiaries that guarantee our 2030 Senior Notes and our 2028 Senior Notes.

As of March 31, 2025, the Company was in compliance with all covenants of the Credit Facility, including financial covenants. The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of March 31, 2025:

(Dollars in millions)

Notes Payable - Financial Services.

MIF Mortgage Repurchase Facility. The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a maximum borrowing availability of $300 million and expires October 21, 2025.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the repurchase agreement. The MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings. The MIF Mortgage Repurchase Facility also contains certain financial covenants each of which is defined in the repurchase agreement. There are no guarantors of the MIF Mortgage Repurchase Facility.

As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders. We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 21, 2025, but we cannot provide any assurance that we will be able to obtain such an extension.

As of March 31, 2025, there was approximately $228 million outstanding under the MIF Mortgage Repurchase Facility and M/I Financial was in compliance with all covenants thereunder. The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of March 31, 2025:

(Dollars in millions)

Senior Notes.

3.95% Senior Notes. On August 23, 2021, the Company issued $300 million aggregate principal amount of 3.95% Senior Notes due 2030. The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of March 31, 2025, the Company was in compliance with all terms, conditions, and covenants under the indenture.

4.95% Senior Notes. On January 22, 2020, the Company issued $400 million aggregate principal amount of 4.95% Senior Notes due 2028. The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of March 31, 2025, the Company was in compliance with all terms, conditions, and covenants under the indenture.

See Note 8 to our financial statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.

Supplemental Financial Information.

As of March 31, 2025, M/I Homes, Inc. had $300 million aggregate principal amount of its 2030 Senior Notes and $400 million aggregate principal amount of its 2028 Senior Notes outstanding.

The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor Subsidiaries”). The Subsidiary Guarantors of the 2030 Senior Notes, the 2028 Senior Notes and the Credit Facility are the same.

Each Subsidiary Guarantor is a direct or indirect 100%-owned subsidiary of M/I Homes, Inc. The guarantees are senior unsecured obligations of each Subsidiary Guarantor and rank equally in right of payment with all existing and future unsecured senior indebtedness of such Subsidiary Guarantor. The guarantees are effectively subordinated to any existing and future secured indebtedness of such Subsidiary Guarantor with respect to any assets comprising security or collateral for such indebtedness.

The guarantees are “full and unconditional,” as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that the indentures governing the 2030 Senior Notes and the 2028 Senior Notes provide that a Subsidiary Guarantor’s guarantee will be released if: (1) all of the assets of such Subsidiary Guarantor have been sold or otherwise disposed of in a transaction in compliance with the terms of the applicable indenture; (2) all of the Equity Interests (as defined in the applicable indenture) held by M/I Homes, Inc. and the Restricted Subsidiaries (as defined in the applicable Indenture) of such Subsidiary Guarantor have been sold or otherwise disposed of to any person other than M/I Homes, Inc. or a Restricted Subsidiary in a transaction in compliance with the terms of the applicable indenture; (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture; (4) M/I Homes, Inc. exercises its legal defeasance option or covenant defeasance option under the applicable indenture; or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.

The enforceability of the obligations of the Subsidiary Guarantors under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes.

The following tables present summarized financial information on a combined basis for M/I Homes, Inc. and the Subsidiary Guarantors. Transactions between M/I Homes, Inc. and the Subsidiary Guarantors have been eliminated and the summarized financial information does not reflect M/I Homes, Inc.’s or the Subsidiary Guarantors’ investment in, and equity in earnings from, the Non-Guarantor Subsidiaries.

Summarized Balance Sheet Data

(In thousands)

Summarized Statement of Income Data

(In thousands)

Weighted Average Borrowings. For the three months ended March 31, 2025 and 2024, our weighted average borrowings outstanding were $726.8 million and $719.0 million, respectively, with a weighted average interest rate of 5.29% for both three months ended March 31, 2025 and 2024. The increase in our weighted average borrowings related to increased average borrowings under our M/I Financial credit facility during the first quarter of 2025 compared to the same period in 2024.

At both March 31, 2025 and December 31, 2024, we had no borrowings outstanding under the Credit Facility. To the extent we elect to borrow under the Credit Facility during the remainder of 2025, the actual amount borrowed and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries. The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2025 Share Repurchase Program and any other extraordinary events or transactions. The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.

There were $69.4 million of letters of credit issued and outstanding under the Credit Facility at March 31, 2025. During the three months ended March 31, 2025, the average daily amount of letters of credit outstanding under the Credit Facility was $74.5 million and the maximum amount of letters of credit outstanding under the Credit Facility was $80.4 million.

At March 31, 2025, M/I Financial had approximately $228.0 million outstanding under the MIF Mortgage Repurchase Facility. During the three months ended March 31, 2025, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $26.8 million and the maximum amount outstanding was $286.2 million, which occurred during January.

Universal Shelf Registration. In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025. Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units. The timing and amount of offerings, if any, will depend on market and general business conditions.

INTEREST RATES AND INFLATION

Our business is significantly affected by general economic conditions within the United States and, particularly, by the impacts of interest rates and inflation. These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction.

The annual rate of inflation in the United States was 2.4% in March 2025, as measured by the Consumer Price Index, down slightly from prior quarter, and down from 3.5% in March 2024. As the rate of inflation has declined from 2022’s historic levels, our costs have remained stable. However, increases in inflation rates could impact our costs, potentially reduce our gross margins, reduce the purchasing power of potential homebuyers, and negatively impact their ability and desire to buy a home.

Mortgage interest rates have hovered around 7% since the end of 2023. Elevated mortgage interest rates have made it more difficult for homebuyers to qualify for mortgages or obtain mortgages at interest rates that are acceptable to them. We plan to to continue to address these elevated rates in 2025 by offering interest rate buydowns to potential homebuyers. We believe that offering mortgage interest rate buydown incentives may cause otherwise hesitant potential homebuyers to decide to enter the homebuying market due to the improved affordability of obtaining a mortgage, and we believe we are well prepared to address increased demand in our markets with our current land position and open communities. However, offering sales incentives, such as interest rate buydowns, may reduce our margins in 2025 compared to 2024.

Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility and the MIF Mortgage Repurchase Facility, which permitted borrowings of up to $950 million as of March 31, 2025, subject to availability constraints. Additionally, M/I Financial is exposed to interest rate risk associated with its mortgage loan origination services.

Interest Rate Lock Commitments: Interest rate lock commitments (“IRLCs”) are extended to certain homebuying customers who have applied for a mortgage loan and meet certain defined credit and underwriting criteria. Typically, the IRLCs will have a duration of less than six months; however, in certain markets, the duration could extend to twelve months.

Some IRLCs are committed to a specific third party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan. Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings.

Forward Sales of Mortgage-Backed Securities: Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date. FMBSs related to uncommitted IRLCs are classified and accounted for as non-designated derivative instruments and are recorded at fair value, with gains and losses recorded in current earnings.

Mortgage Loans Held for Sale: Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. During the period between when a loan is closed and when it is sold to an investor, the interest rate risk is covered through the use of a whole loan contract or by FMBSs. The FMBSs are classified and accounted for as non-designated derivative instruments, with gains and losses recorded in current earnings.

The table below shows the notional amounts of our financial instruments at March 31, 2025 and December 31, 2024:

The table below shows the measurement of assets and liabilities at March 31, 2025 and December 31, 2024:

The following table sets forth the amount of (loss) gain recognized on assets and liabilities for the three months ended March 31, 2025 and 2024:

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The following table provides the expected future cash flows and current fair values of borrowings under our credit facilities and mortgage loan origination services that are subject to market risk as interest rates fluctuate, as of March 31, 2025. Because the MIF Mortgage Repurchase Facility is effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, their outstanding balances are included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at March 31, 2025. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair market value of the debt instrument, but do affect our earnings and cash flow. We do not have the obligation to prepay fixed-rate debt prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.

(Dollars in thousands)

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Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) was performed by the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business is subject to a variety of risks and uncertainties. These risks are described elsewhere in this Quarterly Report on Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations above, or in our other filings with the SEC, including Part I, Item 1A of our 2024 Form 10-K. There have been no material changes to the risk factors disclosed our 2024 Form 10-K.