M/I Homes Reports 2020 Third Quarter Results

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M/I Homes, Inc. (MHO) reported impressive third quarter results for 2020, achieving record highs in several key areas. New contracts surged 71% to 2,949, while backlog units climbed 54% to 4,503. Revenue reached $847.9 million, a 30% increase, and pre-tax income jumped 90% to $95.1 million. Net income soared 94% to $73.5 million, equivalent to $2.51 per diluted share. Shareholders' equity also hit a record of $1.2 billion, a 23% growth from the previous year. The company maintained a healthy financial position, with a debt to capital ratio of 36% and no borrowings on its credit facility.

Positive

• New contracts up 71% to 2,949, a record high.
• Backlog units increased 54% to 4,503, a record high.
• Revenue rose 30% to $847.9 million, setting a record.
• Pre-tax income grew 90% to $95.1 million, another record.
• Net income increased 94% to $73.5 million, or $2.51 per diluted share.
• Shareholders' equity reached a record $1.2 billion, up 23% year-over-year.
• Strong cash position with $203 million and no borrowings on credit facility.

Negative

• Cancellation rate increased to 10% from 13% year-over-year.

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

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

 

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SOURCE M/I Homes, Inc.

FAQ

What were M/I Homes' new contracts for Q3 2020?

M/I Homes reported new contracts increased by 71% to 2,949 in Q3 2020.

How much did M/I Homes' revenue increase in Q3 2020?

Revenue for M/I Homes increased by 30% to $847.9 million in Q3 2020.

What is the net income for M/I Homes in Q3 2020?

M/I Homes reported a net income of $73.5 million, or $2.51 per diluted share, for Q3 2020.

What is M/I Homes' backlog sales value as of September 30, 2020?

The backlog sales value reached $1.8 billion, a 60% increase from a year ago.

How did M/I Homes perform in terms of homes delivered for Q3 2020?

Homes delivered increased by 29% to 2,137, setting a new quarterly record.