M/I Homes Reports 2020 Second Quarter Results

|Jul 29|magazine32 min read

COLUMBUS, Ohio, July 29, 2020 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for the three and six months ended June 30, 2020.

2020 Second Quarter Highlights:

  • New contracts increased 31% to 2,261 contracts, an all-time quarterly record
  • Backlog units increased 30% to 3,691, an all-time quarterly record
  • Backlog sales value reached $1.46 billion, an all-time quarterly record
  • Homes delivered increased 19% to a second quarter record of 1,835 homes
  • Revenue increased 15% to a second quarter record of $714 million
  • Pre-tax income increased 74% to $71.7 million, an all-time quarterly record
  • Record second quarter net income of $54.5 million ($1.89 per diluted share), an 80% increase compared to $30.2 million ($1.08 per diluted share) in 2019
  • Shareholders' equity reached an all-time record of $1.1 billion, a 21% increase from a year ago, with book value per share of $38.34
  • Homebuilding debt to capital of 37% compared to 45% at June 30, 2019

For the second quarter of 2020, pre-tax income increased 74% to $71.7 million, an all-time quarterly record, and second quarter record net income increased 80% to $54.5 million, or $1.89 per diluted share.  This compares to pre-tax income of $41.2 million and net income of $30.2 million, or $1.08 per diluted share, for the second quarter of 2019.  For the six months ended June 30, 2020, net income increased 80% to a record $86.3 million, or $2.98 per diluted share, compared to $48.0 million, or $1.71 per diluted share, for the same period of 2019.

Homes delivered in 2020's second quarter increased 19% to a second quarter record of 1,835.  This compares to 1,538 homes delivered in 2019's second quarter.  Homes delivered for the six months ended June 30, 2020 increased 22% to a record 3,330 from 2019's deliveries of 2,724. New contracts for the second quarter of 2020 were an all-time quarterly record 2,261, a 31% increase over 2019's 1,731 new contracts. For the first six months of 2020, new contracts increased 29% to a record 4,350 compared to 3,375 in 2019. Homes in backlog at June 30, 2020 had a total sales value of $1.46 billion, a 30% increase from a year ago and an all-time quarterly record. Backlog units at June 30, 2020 increased 30% to an all-time quarterly record 3,691 homes, with an average sales price of $396,000.  At June 30, 2019, backlog sales value was $1.12 billion, with backlog units of 2,845 and an average sales price of $395,000.  M/I Homes had 220 active communities at June 30, 2020 and at June 30, 2019.  The Company's cancellation rate was 14% in the second quarter of 2020 and 2019.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "The first half of 2020 has been a time of significant economic and social instability in our country and globally, precipitated by an unprecedented health crisis.  Notwithstanding these difficult and challenging conditions, we are pleased to report a strong, record-setting quarter.  We began the quarter with a focus on adapting our operations and business to safeguard our employees, customers, and work environment, while also continuing to sell and build quality homes.  In late March and early April, our new contracts declined substantially; conditions, however began to improve in the last half of April and then rebounded significantly in May and June. As a result, we ended the quarter with an all-time quarterly record 2,261 new contracts, a 31% increase over last year.  Despite the challenges presented by the pandemic, we were able to maintain our construction schedule in most of our markets and delivered a second quarter record 1,835 homes, a 19% increase over 2019.  Combined with a higher gross margin of 21.9% in the quarter, 270 basis points better than 2019's second quarter, and a 30 basis point decline in our overhead expense ratio, our increase in deliveries led to an all-time quarterly record in pre-tax income of $71.7 million, a 74% increase over 2019's second quarter.  We also achieved an all time-quarterly record backlog in both units and sales value, with each up 30% or more compared to June 2019."

Mr. Schottenstein continued, "Clearly, economic conditions remain uncertain due to the on-going impact of COVID-19; accordingly, we will continue to monitor conditions closely.  We ended the quarter with shareholders' equity of $1.1 billion, a cash balance of $94 million and no borrowings on our $500 million credit facility. We could not be more pleased with the solid execution and outstanding effort of our teams, who have managed to continue to meet the needs and expectations of our customers in achieving their goals of living in a safe and comfortable home.  Our strong results position us to have an outstanding 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 July 2021.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 122,600 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


Six Months Ended


June 30,


June 30,


2020


2019


2020


2019

New contracts

2,261



1,731



4,350



3,375


Average community count

222



217



223



214


Cancellation rate

14

%


14

%


13

%


13

%

Backlog units

3,691



2,845



3,691



2,845


Backlog sales value

$

1,460,076



$

1,124,756



$

1,460,076



$

1,124,756


Homes delivered

1,835



1,538



3,330



2,724


Average home closing price

$

379



$

389



$

377



$

391










Homebuilding revenue:








   Housing revenue

$

694,700



$

597,870



$

1,254,149



$

1,064,178


   Land revenue

446



11,513



5,133



14,531


Total homebuilding revenue

$

695,146



$

609,383



$

1,259,282



$

1,078,709










Financial services revenue

19,048



14,303



32,515



26,086


Total revenue

$

714,194



$

623,686



$

1,291,797



$

1,104,795










Cost of sales - operations

557,791



503,728



1,018,715



891,767


Cost of sales - purchase accounting adjustments



129





557


Gross margin

$

156,403



$

119,829



$

273,082



$

212,471


General and administrative expense

41,037



36,164



74,884



66,863


Selling expense

41,127



37,452



77,955



69,003


Operating income

$

74,239



$

46,213



$

120,243



$

76,605


Equity in income from joint venture arrangements

(3)



(187)



(55)



(66)


Interest expense

2,515



5,197



7,215



11,989


Income before income taxes

$

71,727



$

41,203



$

113,083



$

64,682


Provision for income taxes

17,219



10,957



26,829



16,713


Net income

$

54,508



$

30,246



$

86,254



$

47,969










Earnings per share:








Basic

$

1.91



$

1.10



$

3.03



$

1.74


Diluted

$

1.89



$

1.08



$

2.98



$

1.71










Weighted average shares outstanding:








Basic

28,531



27,599



28,504



27,549


Diluted

28,836



28,090



28,920



28,027


 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)



As of


June 30,


2020


2019

Assets:




Total cash, cash equivalents and restricted cash (1)

$

94,023



$

20,393


Mortgage loans held for sale

163,536



123,909


Inventory:




Lots, land and land development

843,649



804,453


Land held for sale

2,385



13,018


Homes under construction

834,661



796,479


Other inventory

150,115



149,529


Total Inventory

$

1,830,810



$

1,763,479






Property and equipment - net

21,004



28,094


Investments in joint venture arrangements

45,144



41,344


Operating lease right-of-use assets

51,193



19,397


Goodwill

16,400



16,400


Deferred income tax asset

9,378



12,594


Other assets

96,220



63,596


Total Assets

$

2,327,708



$

2,089,206






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$



$

298,436


Senior notes due 2025 - net

247,353



246,832


Senior notes due 2028 - net

394,174




 Notes payable - homebuilding



174,300


 Notes payable - other

7,041



5,092


Total Debt - Homebuilding Operations

$

648,568



$

724,660






Notes payable bank - financial services operations

134,184



104,003


Total Debt

$

782,752



$

828,663






Accounts payable

169,088



154,070


Operating lease liabilities

51,193



19,397


Other liabilities

230,270



182,836


Total Liabilities

$

1,233,303



$

1,184,966






Shareholders' Equity

1,094,405



904,240


Total Liabilities and Shareholders' Equity

$

2,327,708



$

2,089,206






Book value per common share

$

38.34



$

32.74


Homebuilding debt to capital ratio (2)

37

%


45

%



(1)

Includes $0.5 million and $1.0 million of restricted cash and cash held in escrow for the quarters ended June 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


Six Months Ended


June 30,


June 30,


2020


2019


2020


2019

Cash provided by operating activities

$

107,053



$

33,250



$

82,826



$

10,617


Cash used in investing activities

$

(14,156)



$

(10,229)



$

(20,702)



$

(16,730)


Cash (used in) provided by financing activities

$

(20,058)



$

(44,559)



$

25,816



$

4,977










Land/lot purchases

$

84,284



$

85,918



$

159,978



$

166,342


Land development spending

$

71,924



$

62,363



$

133,922



$

116,728


Land sale revenue

$

446



$

11,513



$

5,133



$

14,531


Land sale gross (loss) profit

$

(5)



$

400



$

64



$

455










Financial services pre-tax income

$

10,837



$

6,704



$

16,468



$

11,656


 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)



Three Months Ended


Six Months Ended


June 30,


June 30,


2020


2019


2020


2019

Net income

$

54,508



$

30,246



$

86,254



$

47,969


Add:








Provision for income taxes

17,219



10,957



26,829



16,713


Interest expense net of interest income

1,620



4,225



5,508



10,163


Interest amortized to cost of sales

7,754



7,380



14,324



12,773


Depreciation and amortization

4,200



3,890



8,424



7,707


Non-cash charges

1,175



1,682



4,098



2,594


Adjusted EBITDA

$

86,476



$

58,380



$

145,437



$

97,919


 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

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



Three Months Ended


Six Months Ended


June 30,


June 30,


2020


2019


2020


2019

Income before income taxes

$

71,727



$

41,203



$

113,083



$

64,682


Add: Purchase accounting adjustments (2)



129





557


Adjusted income before income taxes

$

71,727



$

41,332



$

113,083



$

65,239










Net income

$

54,508



$

30,246



$

86,254



$

47,969


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



95





412


Adjusted net income

$

54,508



$

30,341



$

86,254



$

48,381










Purchase accounting adjustments - net of tax (2)

$



$

95



$



$

412










Divided by: Diluted weighted average shares outstanding

28,836



28,090



28,920



28,027










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

$



$



$



$

0.01










Add: Diluted earnings per share

1.89



1.08



2.98



1.71










Adjusted diluted earnings per share

$

1.89



$

1.08



$

2.98



$

1.72




(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



Six Months Ended


June 30,



June 30,






%







%

Region

2020


2019


Change



2020


2019


Change

Northern

922


703


31%



1,775


1,405


26%

Southern

1,339


1,028


30%



2,575


1,970


31%

Total

2,261


1,731


31%



4,350


3,375


29%




HOMES DELIVERED


Three Months Ended



Six Months Ended


June 30,



June 30,






%







%

Region

2020


2019


Change



2020


2019


Change

Northern

734


614


20%



1,322


1,088


22%

Southern

1,101


924


19%



2,008


1,636


23%

Total

1,835


1,538


19%



3,330


2,724


22%



BACKLOG


June 30, 2020



June 30, 2019




Dollars


Average





Dollars


Average

Region

Units


(millions)


Sales Price



Units


(millions)


Sales Price

Northern

1,596


$

668


$

419,000



1,247


$

528


$

424,000

Southern

2,095


$

792


$

378,000



1,598


$

596


$

373,000

Total

3,691


$

1,460


$

396,000



2,845


$

1,125


$

395,000


LAND POSITION SUMMARY


June 30, 2020



June 30, 2019


Lots


Lots Under





Lots


Lots Under



Region

Owned


Contract


Total



Owned


Contract


Total

Northern

6,859


6,222


13,081



6,456


5,471


11,927

Southern

7,921


13,515


21,436



8,403


8,746


17,149

Total

14,780


19,737


34,517



14,859


14,217


29,076

 

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SOURCE M/I Homes, Inc.