PR Newswire | Oct 28, 2020 08:30AM EDT

10/28 07:30 CDT

M/I Homes Reports 2020 Third Quarter Results COLUMBUS, Ohio, Oct. 28, 2020

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.

The ratio of homebuilding debt to capital is calculated as the carrying(2) 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 income327 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 29,286 28,598 29,030 28,238 outstanding



Diluted earnings per share related to purchase $- $- $- $0.02 accounting adjustments ^(2)



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

We believe these non-GAAP financial measures are relevant and useful to investors in understanding our operations and may be helpful in comparing(1) 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 Change2020 2019 Change

Northern1,176635 85 %2,9512,04045 %

Southern1,7731,08663 %4,3483,05642 %

Total 2,9491,72171 %7,2995,09643 %



HOMES DELIVERED

Three Months Ended Nine Months Ended

September 30, September 30,

% %

Region 2020 2019 Change2020 2019 Change

Northern868 651 33 %2,1901,73926 %

Southern1,2691,00027 %3,2772,63624 %

Total 2,1371,65129 %5,4674,37525 %



BACKLOG

September 30, 2020 September 30, 2019

Dollars Average Dollars Average

Region Units (millions)Sales PriceUnits (millions)Sales Price

Northern1,904$814 $427,000 1,231$529 $430,000

Southern2,599$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

Northern6,858 6,892 13,7506,696 5,015 11,711

Southern8,203 17,640 25,8438,145 9,210 17,355

Total 15,06124,532 39,59314,84114,225 29,066

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SOURCE M/I Homes, Inc.