PR Newswire | Jul 29, 2020 08:30AM EDT

07/29 07:30 CDT

M/I Homes Reports 2020 Second Quarter Results COLUMBUS, Ohio, July 29, 2020

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 222 217 223 214 count

Cancellation rate 14 %14 %13 %13 %

Backlog units 3,691 2,845 3,691 2,845

Backlog sales $1,460,076 $1,124,756 $1,460,076 $1,124,756 value

Homes delivered 1,835 1,538 3,330 2,724

Average home $379 $389 $377 $391 closing price



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$695,146 $609,383 $1,259,282 $1,078,709 revenue



Financial services19,048 14,303 32,515 26,086 revenue

Total revenue $714,194 $623,686 $1,291,797 $1,104,795



Cost of sales - 557,791 503,728 1,018,715 891,767 operations

Cost of sales - purchase - 129 - 557 accounting adjustments

Gross margin $156,403 $119,829 $273,082 $212,471

General and administrative 41,037 36,164 74,884 66,863 expense

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(3) (187) (55) (66) arrangements

Interest expense 2,515 5,197 7,215 11,989

Income before $71,727 $41,203 $113,083 $64,682 income taxes

Provision for 17,219 10,957 26,829 16,713 income taxes

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$94,023 $20,393 ^(1)

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 134,184 104,003 operations

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.

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 Six Months Ended

June 30, June 30,

2020 2019 2020 2019

Cash provided by operating$107,053 $33,250 $82,826 $10,617 activities

Cash used in investing $(14,156)$(10,229)$(20,702)$(16,730)activities

Cash (used in) provided by$(20,058)$(44,559)$25,816 $4,977 financing activities



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) $(5) $400 $64 $455 profit



Financial services pre-tax$10,837 $6,704 $16,468 $11,656 income

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 1,620 4,225 5,508 10,163 income

Interest amortized to cost of 7,754 7,380 14,324 12,773 sales

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 - 129 - 557 adjustments ^(2)

Adjusted income before income $71,727$41,332$113,083$65,239taxes



Net income $54,508$30,246$86,254 $47,969

Add: Purchase accounting - 95 - 412 adjustments - net of tax^ (2)

Adjusted net income $54,508$30,341$86,254 $48,381



Purchase accounting adjustments -$- $95 $- $412 net of tax^ (2)



Divided by: Diluted weighted 28,836 28,090 28,920 28,027 average shares outstanding



Diluted earnings per share related to purchase accounting $- $- $- $0.01 adjustments ^(2)



Add: Diluted earnings per share 1.89 1.08 2.98 1.71



Adjusted diluted earnings per $1.89 $1.08 $2.98 $1.72 share



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 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 PriceUnits (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.