M/I Homes Reports 2020 Third Quarter Results

·13 min read

COLUMBUS, Ohio, Oct. 28, 2020 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for the three and nine months ended September 30, 2020.

M/I Homes, Inc. Logo (PRNewsfoto/M/I Homes, Inc.)
M/I Homes, Inc. Logo (PRNewsfoto/M/I Homes, Inc.)

2020 Third Quarter Highlights:

  • New contracts increased 71% to 2,949 contracts, an all-time quarterly record

  • Backlog units increased 54% to 4,503, an all-time quarterly record

  • Backlog sales value reached $1.8 billion, an all-time quarterly record

  • Homes delivered increased 29% to 2,137, an all-time quarterly record

  • Revenue increased 30% to an all-time quarterly record of $847.9 million

  • Pre-tax income increased 90% to $95.1 million, an all-time quarterly record

  • Third quarter net income of $73.5 million ($2.51 per diluted share), a 94% increase compared to $37.8 million ($1.32 per diluted share) in 2019

  • Shareholders' equity reached an all-time record of $1.2 billion, a 23% increase from a year ago, with book value per share of $41

  • Homebuilding debt to capital of 36% compared to 44% at September 30, 2019

For the third quarter, pre-tax income increased 90% to a record $95.1 million and third quarter net income increased 94% to $73.5 million, or $2.51 per diluted share. This compares to pre-tax income of $50.1 million and net income of $37.8 million, or $1.32 per diluted share, for the third quarter of 2019. For the nine months ended September 30, 2020, net income increased 86% to a record $159.8 million, or $5.50 per diluted share, compared to $85.8 million, or $3.04 per diluted share, for the same period of 2019.

Homes delivered in 2020's third quarter increased 29% to a record 2,137. This compares to 1,651 homes delivered in 2019's third quarter. Homes delivered for the nine months ended September 30, 2020 increased 25% to a record 5,467 from 2019's deliveries of 4,375. New contracts for the third quarter of 2020 were a record 2,949, a 71% increase over 2019's 1,721. For the first nine months of 2020, new contracts increased 43% to a record 7,299 compared to 5,096 in 2019. Homes in backlog at September 30, 2020 had a total sales value of $1.8 billion, a 60% increase from a year ago. Backlog units at September 30, 2020 increased 54% to a record 4,503 homes, with an average sales price of $404,000. At September 30, 2019, backlog sales value was $1.1 billion, with backlog units of 2,915 and an average sales price of $390,000. M/I Homes had 207 active communities at September 30, 2020 compared to 221 active communities at September 30, 2019. The Company's cancellation rate was 10% and 13% in the third quarter of 2020 and 2019, respectively.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We had an outstanding quarter highlighted by a 71% increase in new contracts, a 29% increase in homes delivered and a 94% increase in net income. Our gross margins were very strong, improving 240 basis points over last year, and our overhead expense ratio improved by 60 basis points. As a result, our third quarter pre-tax income percentage improved to 11.2% from 7.7% last year. And, our backlog sales value at September 30, 2020 increased 60% to a record $1.8 billion."

Mr. Schottenstein continued, "We ended the quarter with record-high shareholders' equity of $1.2 billion, an increase of 23% from 2019's third quarter, book value of $41 per share, cash of $203 million, no borrowings on our $500 million credit facility and a homebuilding debt to capital ratio of 36%. Despite the impact of COVID-19, housing fundamentals remain strong. We have significant operating momentum and are poised to continue delivering very strong results in 2020."

J. Thomas Mason Announces Retirement

On October 27, 2020, J. Thomas Mason announced his decision to retire as Executive Vice President, Secretary, and Chief Legal Officer of M/I Homes effective after the Company has hired his replacement to assure a smooth and orderly transition of responsibilities. It is anticipated that such transition will occur in the first half of 2021. In connection with Mr. Mason's retirement announcement, Robert H. Schottenstein stated, "Tom Mason has been an outstanding leader of our company since joining M/I in 2002. A valued co-worker and friend, Tom has meaningfully contributed to our success. We thank him for all he has done, and wish him only the best in his retirement; and we look forward to a smooth transition in the first half of next year."

The Company will broadcast live its earnings conference call today at 4:00 p.m. Eastern Time. To listen to the call live, log on to the M/I Homes website at mihomes.com, click on the "Investors" section of the site, and select "Listen to the Conference Call." A replay of the call will continue to be available on our website through October 2021.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 125,500 homes. The Company's homes are marketed and sold primarily under the trade names M/I Homes and Showcase Collection (exclusively by M/I Homes), and are also currently sold under the name Hans Hagen Homes in the Minneapolis/St. Paul, Minnesota market. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; and Charlotte and Raleigh, North Carolina.

Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "targets," "envisions," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements involve a number of risks and uncertainties. Any forward-looking statements that we make herein and in any 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 factors, including, without limitation, factors relating to the economic environment, including the impact of COVID-19, interest rates, availability of resources, competition, market concentration, land development activities, integration of acquisitions, construction defects, product liability and warranty claims and various governmental rules and regulations, as more fully discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2019, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. We undertake no duty 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 filings, releases or presentations should be consulted.

M/I Homes, Inc. and Subsidiaries

Summary Statement of Income (unaudited)

(Dollars and shares in thousands, except per share amounts)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2020


2019


2020


2019

New contracts

2,949



1,721



7,299



5,096


Average community count

214



221



219



216


Cancellation rate

10

%


13

%


12

%


13

%

Backlog units

4,503



2,915



4,503



2,915


Backlog sales value

$

1,819,231



$

1,137,207



$

1,819,231



$

1,137,207


Homes delivered

2,137



1,651



5,467



4,375


Average home closing price

$

380



$

382



$

378



$

388










Homebuilding revenue:








Housing revenue

$

812,999



$

631,380



$

2,067,148



$

1,695,558


Land revenue

5,976



8,511



11,109



23,042


Total homebuilding revenue

$

818,975



$

639,891



$

2,078,257



$

1,718,600










Financial services revenue

28,946



13,454



61,461



39,540


Total revenue

$

847,921



$

653,345



$

2,139,718



$

1,758,140










Cost of sales - operations

653,407



519,082



1,672,122



1,410,849


Cost of sales - purchase accounting adjustments



82





639


Gross margin

$

194,514



$

134,181



$

467,596



$

346,652


General and administrative expense

48,879



39,385



123,763



106,248


Selling expense

49,539



40,147



127,494



109,150


Operating income

$

96,096



$

54,649



$

216,339



$

131,254


Equity in income from joint venture arrangements

(252)



(52)



(307)



(118)


Interest expense

1,239



4,637



8,454



16,626


Income before income taxes

$

95,109



$

50,064



$

208,192



$

114,746


Provision for income taxes

21,572



12,226



48,401



28,939


Net income

$

73,537



$

37,838



$

159,791



$

85,807










Earnings per share:








Basic

$

2.57



$

1.35



$

5.60



$

3.10


Diluted

$

2.51



$

1.32



$

5.50



$

3.04










Weighted average shares outstanding:








Basic

28,653



27,981



28,554



27,695


Diluted

29,286



28,598



29,030



28,238


M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)



As of


September 30,


2020


2019

Assets:




Total cash, cash equivalents and restricted cash (1)

$

202,512



$

33,451


Mortgage loans held for sale

140,046



128,322


Inventory:




Lots, land and land development

840,637



824,835


Land held for sale

4,357



8,465


Homes under construction

863,603



848,302


Other inventory

134,812



145,466


Total Inventory

$

1,843,409



$

1,827,068






Property and equipment - net

25,696



27,621


Investments in joint venture arrangements

34,038



47,557


Operating lease right-of-use assets

52,574



19,059


Goodwill

16,400



16,400


Deferred income tax asset

9,205



11,988


Other assets

96,675



70,137


Total Assets

$

2,420,555



$

2,181,603






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$



$

298,712


Senior notes due 2025 - net

247,483



246,962


Senior notes due 2028 - net

394,363




Notes payable - homebuilding



189,900


Notes payable - other

5,325



5,508


Total Debt - Homebuilding Operations

$

647,171



$

741,082






Notes payable bank - financial services operations

136,119



108,594


Total Debt

$

783,290



$

849,676






Accounts payable

176,581



169,528


Operating lease liabilities

52,666



19,059


Other liabilities

233,278



188,699


Total Liabilities

$

1,245,815



$

1,226,962






Shareholders' Equity

1,174,740



954,641


Total Liabilities and Shareholders' Equity

$

2,420,555



$

2,181,603






Book value per common share

$

40.87



$

33.92


Homebuilding debt to capital ratio (2)

36

%


44

%



(1)

Includes $0.2 million and $0.5 million of restricted cash and cash held in escrow for the quarters ended September 30, 2020 and 2019, respectively.

(2)

The ratio of homebuilding debt to capital is calculated as the carrying value of our homebuilding debt outstanding divided by the sum of the carrying value of our homebuilding debt outstanding plus shareholders' equity.


M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data (unaudited)

(Dollars in thousands)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2020


2019


2020


2019

Cash provided by (used in) operating activities

$

114,400



$

(9,640)



$

197,226



$

977


Cash used in investing activities

$

(10,625)



$

(8,980)



$

(31,327)



$

(25,710)


Cash provided by financing activities

$

4,714



$

31,678



$

30,530



$

36,655










Land/lot purchases

$

106,846



$

92,096



$

266,824



$

258,438


Land development spending

$

88,682



$

68,780



$

222,604



$

185,508


Land sale revenue

$

5,976



$

8,511



$

11,109



$

23,042


Land sale gross profit

$

187



$

75



$

251



$

530










Financial services pre-tax income

$

19,179



$

5,623



$

35,647



$

17,279


M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2020


2019


2020


2019

Net income

$

73,537



$

37,838



$

159,791



$

85,807


Add:








Provision for income taxes

21,572



12,226



48,401



28,939


Interest expense net of interest income

327



3,625



5,835



13,788


Interest amortized to cost of sales

8,803



7,836



23,127



20,609


Depreciation and amortization

4,590



4,089



13,014



11,796


Non-cash charges

2,274



1,492



6,372



4,086


Adjusted EBITDA

$

111,103



$

67,106



$

256,540



$

165,025


M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

(Dollars and shares in thousands, except per share amounts)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2020


2019


2020


2019

Income before income taxes

$

95,109



$

50,064



$

208,192



$

114,746


Add: Purchase accounting adjustments (2)



82





639


Adjusted income before income taxes

$

95,109



$

50,146



$

208,192



$

115,385










Net income

$

73,537



$

37,838



$

159,791



$

85,807


Add: Purchase accounting adjustments - net of tax (2)



61





473


Adjusted net income

$

73,537



$

37,899



$

159,791



$

86,280










Purchase accounting adjustments - net of tax (2)

$



$

61



$



$

473










Divided by: Diluted weighted average shares
outstanding

29,286



28,598



29,030



28,238










Diluted earnings per share related to purchase
accounting adjustments (2)

$



$



$



$

0.02










Add: Diluted earnings per share

2.51



1.32



5.50



3.04










Adjusted diluted earnings per share

$

2.51



$

1.32



$

5.50



$

3.06




(1)

We believe these non-GAAP financial measures are relevant and useful to investors in understanding our operations and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information. These non-GAAP financial measures should be used to supplement our GAAP results in order to provide a greater understanding of the factors and trends affecting our operations.

(2)

Represents purchase accounting adjustments related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data



NEW CONTRACTS


Three Months Ended



Nine Months Ended


September 30,



September 30,






%







%

Region

2020


2019


Change



2020


2019


Change

Northern

1,176



635



85

%



2,951



2,040



45

%

Southern

1,773



1,086



63

%



4,348



3,056



42

%

Total

2,949



1,721



71

%



7,299



5,096



43

%




HOMES DELIVERED


Three Months Ended



Nine Months Ended


September 30,



September 30,






%







%

Region

2020


2019


Change



2020


2019


Change

Northern

868



651



33

%



2,190



1,739



26

%

Southern

1,269



1,000



27

%



3,277



2,636



24

%

Total

2,137



1,651



29

%



5,467



4,375



25

%




BACKLOG


September 30, 2020



September 30, 2019




Dollars


Average





Dollars


Average

Region

Units


(millions)


Sales Price



Units


(millions)


Sales Price

Northern

1,904



$

814


$

427,000



1,231



$

529


$

430,000

Southern

2,599



$

1,005


$

387,000



1,684



$

608


$

361,000

Total

4,503



$

1,819


$

404,000



2,915



$

1,137


$

390,000




LAND POSITION SUMMARY


September 30, 2020



September 30, 2019


Lots

Lots Under




Lots

Lots Under


Region

Owned

Contract

Total



Owned

Contract

Total

Northern

6,858


6,892


13,750




6,696


5,015


11,711


Southern

8,203


17,640


25,843




8,145


9,210


17,355


Total

15,061


24,532


39,593




14,841


14,225


29,066


Cision
Cision

View original content to download multimedia:http://www.prnewswire.com/news-releases/mi-homes-reports-2020-third-quarter-results-301161598.html

SOURCE M/I Homes, Inc.