M/I Homes Reports 2020 Second Quarter Results

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M/I Homes, Inc. (NYSE:MHO) reported record-breaking second quarter results for 2020, with new contracts rising 31% to 2,261 and backlog units up 30% to 3,691. Revenue increased 15% to $714 million, while net income soared by 80% to $54.5 million ($1.89 per diluted share). Shareholders' equity reached $1.1 billion, reflecting a 21% year-over-year increase. Despite challenges from COVID-19, the company maintained robust construction schedules, achieving a higher gross margin of 21.9%. The firm remains cautiously optimistic about future market conditions.

Positive

• New contracts increased 31% to an all-time quarterly record of 2,261.
• Backlog units rose 30% to 3,691, reflecting strong demand.
• Revenue increased 15% to a quarterly record of $714 million.
• Net income surged 80% to $54.5 million, setting a new record.
• Shareholders' equity reached an all-time high of $1.1 billion.

Negative

• None.

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.