M/I Homes, Inc. (NYSE:MHO) Q2 2016 Earnings Conference Call - Final Transcript
Jul 27, 2016 • 04:00 pm ET
Good afternoon. My name is Bethany, and I will be your conference operator today. At this time, I would like to welcome everyone to the M/I Homes Inc. Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions) Thank you. I'd now like to turn the call over to Phil Creek. Please go ahead, sir.
Thank you. Thank you for joining us today. On the call is Bob Schottenstein, CEO and President; Tom Mason, EVP; Paul Rosen, President of our Mortgage Company; Ann Marie Hunker, VP, Corporate Controller; and Kevin Hake, SVP. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly. (Forward-Looking Cautionary Statements) With that, I'll turn the call over to Bob.
Thanks, Phil. Good afternoon and thank you for joining our call to review our second quarter results. Following our strong first quarter results, we had another very good quarter, highlighted by record-setting second quarter sales, solid increases in both revenue and profit and our highest second quarter backlog in ten years. Our sales for the quarter were particularly strong, increasing by 23% over last year. For the year, our sales are 20% better than a year ago. All three of our operating regions posted solid second quarter increases in sales.
Specifically, sales in the Midwest were up 28%. In the southern region, sales were up 27% and in our Mid-Atlantic region, our sales increased by 12%. Obviously, we were very pleased by our sales strength and -- we were very pleased with our sales strength in most of our markets. Our traffic for the quarter was up 12%, implying greater sales conversion and in fact, our sales pace for the quarter was 2.5 sales per community versus 2.4 sales a year ago.
Homes delivered during the quarter increased by 13% and revenues during the quarter improved by 24%. Our net income for the quarter increased by 19%, and our pre-tax income, exclusive of stucco-related charges increased by 27%. Gross margins for the second quarter, excluding the stucco charges, were 21%, 50 basis points better than the first quarter, though 80 basis points below last year, primarily due to higher lot costs. We're also pleased to improve our operating leverage. Second quarter SG&A was 70 basis points lower than last year, coming in at 13.1% of revenue.
We continue to focus on lowering our overhead ratio and improving returns. Our backlog sales value increased 28% to $842 million and our units in backlog increased 27% to 2,281 homes. Our financial services segment, M/I Financial, also had another strong quarter with pre-tax income of $4.9 million. And we were pleased to achieve our goal for new community openings. We had 174 communities opened at the end of the quarter, which is 12% more than a year ago. We remain on track to achieve our planned community