M/I Homes Reports 2020 First Quarter Results

|Apr 29|magazine29 min read

COLUMBUS, Ohio, April 29, 2020 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for the three months ended March 31, 2020.

2020 First Quarter Highlights:

  • Homes delivered increased 26% to a first quarter record of 1,495 homes
  • Revenue increased 20% to a first quarter record of $577.6 million
  • Pre-tax income increased 76% to $41.4 million, a first quarter record
  • Record first quarter net income of $31.7 million ($1.09 per diluted share), a 79% increase compared to $17.7 million ($0.63 per diluted share) in 2019
  • New contracts increased 27% to 2,089 contracts, an all-time quarterly record
  • Backlog units increased 23% to 3,265, a first quarter record
  • Backlog sales value reached $1.3 billion, an all-time quarterly record
  • Homebuilding debt to capital of 39% compared to 47% at March 31, 2019
  • Shareholders' equity reached an all-time record of $1.04 billion, a 19% increase from a year ago, with book value per share of $36

For the first quarter of 2020, the Company reported pre-tax income of $41.4 million and net income of $31.7 million, or $1.09 per diluted share.  This compares to pre-tax income of $23.5 million and net income of $17.7 million, or $0.63 per diluted share, for the first quarter of 2019.  Pre-tax income in the first quarter of 2019 included $0.4 million of acquisition-related expense.

Homes delivered in 2020's first quarter increased 26% to a first quarter record of 1,495.  This compares to 1,186 homes delivered in 2019's first quarter.  New contracts for the first quarter of 2020 were an all-time quarterly record 2,089, a 27% increase over 2019's 1,644 new contracts.  Homes in backlog at March 31, 2020 had a total sales value of $1.3 billion, a 22% increase from a year ago and an all-time quarterly record. Backlog units at March 31, 2020 increased 23% to a first quarter record 3,265 homes, with an average sales price of $399,000.  At March 31, 2019, backlog sales value was $1.07 billion, with backlog units of 2,652 and an average sales price of $403,000.  M/I Homes had 223 active communities at March 31, 2020, an increase of 4% over our 214 communities at March 31, 2019.  The Company's cancellation rate was 11% in the first quarter of 2020 compared to 12% in the first quarter of 2019.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are pleased to announce record setting first quarter results - highlighted by record first quarter net income of $31.7 million, a 79% increase over 2019's first quarter, along with all-time quarterly records in both new contracts and backlog sales value. Revenues, pre-tax income, homes delivered, and backlog units each improved by over 20% when compared to 2019's first quarter and were also first quarter records for our Company. Gross margin improved to 20.2%, 90 basis points better than 2019's first quarter and our overhead expense ratio improved 70 basis points to 12.2%. Our diluted earnings per share improved 73% from 2019's first quarter, and we ended the quarter with shareholders' equity of $1.04 billion and a homebuilding debt to capital ratio of 39%."

Mr. Schottenstein continued, "The world is in the midst of an unprecedented battle with the COVID-19 pandemic; our primary concern continues to be the health and well-being of our employees, our trade partners, our customers, the communities in which we do business and all of those impacted by this highly contagious virus. In most of the markets in which we operate, housing construction and mortgage services have been deemed essential businesses and we're doing everything we can to safely continue selling, building and delivering our homes.  We have adapted our operations and business to safeguard our various work environments, while closely monitoring updates and guidelines from the CDC and other state and local government and public health agencies."

Mr. Schottenstein concluded, "The pandemic first began impacting our results in the second half of March. New contracts in the last of half of March were 50% below prior year levels. New contracts during the first three weeks of April have improved and are 35% below the comparable period in 2019.  We are reviewing all aspects of our operations and adjusting our business as needed.  We entered 2020 in the best financial condition in company history. With our experienced leadership team, record quarter-end backlog, and nearly $450 million of available liquidity, we are confident that we will navigate through this very challenging environment."

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 April 2021.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 120,300 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


March 31,


2020


2019

New contracts

2,089



1,644


Average community count

224



212


Cancellation rate

11

%


12

%

Backlog units

3,265



2,652


Backlog sales value

$

1,301,326



$

1,070,074


Homes delivered

1,495



1,186


Average home closing price

$

374



$

393






Homebuilding revenue:




   Housing revenue

$

559,449



$

466,308


   Land revenue

4,687



3,018


Total homebuilding revenue

$

564,136



$

469,326






Financial services revenue

13,467



11,783


Total revenue

$

577,603



$

481,109






Cost of sales - operations

460,924



388,039


Cost of sales - purchase accounting adjustments



428


Gross margin

$

116,679



$

92,642


General and administrative expense

33,847



30,699


Selling expense

36,828



31,551


Operating income

$

46,004



$

30,392


Equity in (income) loss from joint venture arrangements

(52)



121


Interest expense

4,700



6,792


Income before income taxes

$

41,356



$

23,479


Provision for income taxes

9,610



5,756


Net income

$

31,746



$

17,723






Earnings per share:




Basic

$

1.11



$

0.64


Diluted

$

1.09



$

0.63






Weighted average shares outstanding:




Basic

28,478



27,498


Diluted

29,009



27,970



 

 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)




As of


March 31,


2020


2019

Assets:




Total cash, cash equivalents and restricted cash(1)

$

21,184



$

41,931


Mortgage loans held for sale

156,208



119,665


Inventory:




Lots, land and land development

837,686



807,324


Land held for sale

1,164



8,732


Homes under construction

829,230



760,756


Other inventory

154,451



153,976


Total Inventory

$

1,822,531



$

1,730,788






Property and equipment - net

21,046



28,392


Investments in joint venture arrangements

40,306



40,736


Operating lease right-of-use assets

20,075



20,603


Goodwill

16,400



16,400


Deferred income tax asset

9,540



13,146


Other assets

91,673



60,117


Total Assets

$

2,198,963



$

2,071,778






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$



$

298,160


Senior notes due 2025 - net

247,222



246,702


Senior notes due 2028 - net

393,989




 Notes payable - homebuilding

6,900



218,800


 Notes payable - other

7,546



5,937


Total Debt - Homebuilding Operations

$

655,657



$

769,599






Notes payable bank - financial services operations

145,055



104,026


Total Debt

$

800,712



$

873,625






Accounts payable

150,256



132,935


Operating lease liabilities

20,075



20,603


Other liabilities

190,239



173,153


Total Liabilities

$

1,161,282



$

1,200,316






Shareholders' Equity

1,037,681



871,462


Total Liabilities and Shareholders' Equity

$

2,198,963



$

2,071,778






Book value per common share

$

36.38



$

31.61


Homebuilding debt / capital ratio(2)

39

%


47

%



(1)

Includes $0.5 million and $1.1 million of restricted cash and cash held in escrow for the quarters ended March 31, 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


March 31,


2020


2019

Cash used in operating activities

$

(24,227)



$

(22,633)


Cash used in investing activities

$

(6,546)



$

(6,501)


Cash provided by financing activities

$

45,874



$

49,536






Land/lot purchases

$

75,694



$

80,424


Land development spending

$

61,998



$

54,365


Land sale revenue

$

4,687



$

3,018


Land sale gross profit

$

69



$

55






Financial services pre-tax income

$

5,631



$

4,952


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)




Three Months Ended


March 31,


2020


2019

Net income

$

31,746



$

17,723


Add:




Provision for income taxes

9,610



5,756


Interest expense net of interest income

3,888



5,938


Interest amortized to cost of sales

6,570



5,393


Depreciation and amortization

4,224



3,817


Non-cash charges

2,923



912


Adjusted EBITDA

$

58,961



$

39,539


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

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




Three Months Ended


March 31,


2020


2019

Income before income taxes

$

41,356



$

23,479


Add: Purchase accounting adjustments (2)



428


Adjusted income before income taxes

$

41,356



$

23,907






Net income

$

31,746



$

17,723


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



317


Adjusted net income

$

31,746



$

18,040






Purchase accounting adjustments - net of tax (2)

$



$

317






Divided by: Diluted weighted average shares outstanding

29,009



27,970






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

$



$

0.01






Add: Diluted earnings per share

1.09



0.63






Adjusted diluted earnings per share

$

1.09



$

0.64




(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 (a)












Three Months Ended



March 31,





%

Region











2020

2019

Change

Northern











853


702


22

%

Southern











1,236


942


31

%

Total











2,089


1,644


27

%






































HOMES DELIVERED (a)












Three Months Ended



March 31,





%

Region











2020

2019

Change

Northern











588


474


24

%

Southern











907


712


27

%

Total











1,495


1,186


26

%








BACKLOG (a)


March 31, 2020



March 31, 2019



Dollars

Average




Dollars

Average

Region

Units

(millions)

Sales Price



Units

(millions)

Sales Price

Northern

1,408


$

596


$

423,000




1,158


$

498


$

430,000


Southern

1,857


$

705


$

380,000




1,494


$

572


$

383,000


Total

3,265


$

1,301


$

399,000




2,652


$

1,070


$

403,000









LAND POSITION SUMMARY (a)


March 31, 2020



March 31, 2019


Lots

Lots Under




Lots

Lots Under


Region

Owned

Contract

Total



Owned

Contract

Total

Northern

6,852


6,833


13,685




5,889


6,034


11,923


Southern

7,926


12,209


20,135




8,621


7,435


16,056


Total

14,778


19,042


33,820




14,510


13,469


27,979




(a)

Beginning in the second quarter of 2019, we changed from three reportable segments to two reportable segments: Northern and Southern. Prior year information has been restated for corresponding items of our segment information.

 

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SOURCE M/I Homes, Inc.