M/I Homes Reports 2019 Third Quarter Results
COLUMBUS, Ohio, Oct. 23, 2019 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three and nine months ended September 30, 2019.
2019 Third Quarter Highlights:
- New contracts increased 32% to a third quarter record 1,721 contracts
- Homes delivered increased 16% to a third quarter record 1,651 homes
- Revenue increased 15% to a third quarter record of $653 million
- Net income increased 29% to $37.8 million from $29.3 million in 2018
- Diluted earnings per share increased 31% to $1.32 from $1.01 in 2018
- Shareholders' equity reached an all-time record of $955 million, a 14% increase from a year ago, with book value per share of $34
For the third quarter of 2019, the Company reported record pre-tax income of $50.1 million and net income of $37.8 million, or $1.32 per diluted share. For the nine months ended September 30, 2019, the Company reported record pre-tax income of $114.7 million and net income of $85.8 million, or $3.04 per diluted share. This compares to pre-tax income of $96.9 million and net income of $75.3 million, or $2.56 per diluted share, for the same period of 2018. The Company incurred $0.6 million of pre-tax acquisition-related expense year-to-date in 2019 compared to $6.2 million in the same period of 2018.
Homes delivered in 2019's third quarter reached a third quarter record of 1,651 deliveries, increasing 16% from 1,422 deliveries in 2018's third quarter. Homes delivered for the nine months ended September 30, 2019 increased 11% to a record 4,375 deliveries from 3,953 deliveries in the first nine months of 2018. New contracts for 2019's third quarter reached a third quarter record 1,721 contracts, increasing 32% from 1,302 new contracts in 2018's third quarter. For the first nine months of 2019, new contracts increased 9% to a record 5,096 contracts from 4,672 contracts in 2018. Homes in backlog increased 2% at September 30, 2019 to 2,915 units, with a sales value of $1.1 billion, and an average sale price of $390,000. At September 30, 2018, the sales value of homes in backlog was $1.1 billion, with an average sale price of $401,000 and backlog units of 2,846. M/I Homes had 221 active communities at September 30, 2019 compared to 212 at September 30, 2018. The Company's cancellation rate was 13% in the third quarter of 2019 and 16% in the third quarter of 2018.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "Our third quarter results were very strong highlighted by record new contracts, homes delivered, revenue and pre-tax income. New contracts for the quarter increased 32%, homes delivered increased 16%, revenue improved by 15%, and net income increased by 29%. Gross margin improved to 20.5%, a 130-basis point improvement from the second quarter of 2019. In addition, we continue to improve our operating leverage as our overhead expense ratio for the quarter was 12.2%, 50 basis points better than last year's third quarter. The combination of our revenue growth and improved margins resulted in a 27% increase in pre-tax income to a third quarter record of $50.1 million."
Mr. Schottenstein continued, "Our financial condition remains strong. We ended the third quarter with record-high shareholders' equity of $955 million, an increase of 14% from 2018's third quarter, book value per share of $34, and a homebuilding debt to capital ratio of 44%. As we begin the final quarter of 2019, we are on track for another solid year of growth and improved financial performance."
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 2020.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 116,500 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 also currently are sold under the name Hans Hagen Homes in the Minneapolis/St. Paul, Minnesota market and Pinnacle Homes in the Detroit, Michigan 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; Charlotte and Raleigh, North Carolina; and the Virginia and Maryland suburbs of Washington, D.C.
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, 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2018, 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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
New contracts | 1,721 | 1,302 | 5,096 | 4,672 | |||||||||||
Average community count | 221 | 211 | 216 | 204 | |||||||||||
Cancellation rate | 13 | % | 16 | % | 13 | % | 14% | ||||||||
Backlog units | 2,915 | 2,846 | |||||||||||||
Backlog sales value | $ | 1,137,207 | $ | 1,140,037 | |||||||||||
Homes delivered | 1,651 | 1,422 | 4,375 | 3,953 | |||||||||||
Average home closing price | $ | 382 | $ | 390 | $ | 388 | $ | 384 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 631,380 | $ | 554,820 | $ | 1,695,558 | $ | 1,518,278 | |||||||
Land revenue | 8,511 | 829 | 23,042 | 6,424 | |||||||||||
Total homebuilding revenue | $ | 639,891 | $ | 555,649 | $ | 1,718,600 | $ | 1,524,702 | |||||||
Financial services revenue | 13,454 | 12,193 | 39,540 | 39,095 | |||||||||||
Total revenue | $ | 653,345 | $ | 567,842 | $ | 1,758,140 | $ | 1,563,797 | |||||||
Cost of sales - operations | 519,082 | 451,337 | 1,410,849 | 1,245,518 | |||||||||||
Cost of sales - purchase accounting adjustments | 82 | 692 | 639 | 4,549 | |||||||||||
Gross margin | $ | 134,181 | $ | 115,813 | $ | 346,652 | $ | 313,730 | |||||||
General and administrative expense | 39,385 | 36,897 | 106,248 | 99,514 | |||||||||||
Selling expense | 40,147 | 35,054 | 109,150 | 100,708 | |||||||||||
Operating income | $ | 54,649 | $ | 43,862 | $ | 131,254 | $ | 113,508 | |||||||
Acquisition and integration costs | — | — | — | 1,700 | |||||||||||
Equity in income from joint venture arrangements | (52) | (44) | (118) | (268) | |||||||||||
Interest expense | 4,637 | 4,426 | 16,626 | 15,192 | |||||||||||
Income before income taxes | $ | 50,064 | $ | 39,480 | $ | 114,746 | $ | 96,884 | |||||||
Provision for income taxes | 12,226 | 10,198 | 28,939 | 21,628 | |||||||||||
Net income | $ | 37,838 | $ | 29,282 | $ | 85,807 | $ | 75,256 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.35 | $ | 1.03 | $ | 3.10 | $ | 2.65 | |||||||
Diluted | $ | 1.32 | $ | 1.01 | $ | 3.04 | $ | 2.56 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 27,981 | 28,469 | 27,695 | 28,389 | |||||||||||
Diluted | 28,598 | 28,906 | 28,238 | 29,511 | |||||||||||
M/I Homes, Inc. and Subsidiaries | |||||||
Summary Balance Sheet and Other Information (unaudited) | |||||||
(Dollars in thousands, except per share amounts) | |||||||
As of | |||||||
September 30, | |||||||
2019 | 2018 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash(1) | $ | 33,451 | $ | 36,360 | |||
Mortgage loans held for sale | 128,322 | 115,189 | |||||
Inventory: | |||||||
Lots, land and land development | 824,835 | 754,322 | |||||
Land held for sale | 8,465 | 14,312 | |||||
Homes under construction | 848,302 | 831,129 | |||||
Other inventory | 145,466 | 151,762 | |||||
Total Inventory | $ | 1,827,068 | $ | 1,751,525 | |||
Property and equipment - net | 27,621 | 28,691 | |||||
Investments in joint venture arrangements | 47,557 | 24,568 | |||||
Operating lease right-of-use assets | 19,059 | — | |||||
Goodwill | 16,400 | 16,400 | |||||
Deferred income tax asset | 11,988 | 16,925 | |||||
Other assets | 70,137 | 68,677 | |||||
Total Assets | $ | 2,181,603 | $ | 2,058,335 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 298,712 | $ | 297,608 | |||
Senior notes due 2025 - net | 246,962 | 246,441 | |||||
Notes payable - homebuilding | 189,900 | 222,700 | |||||
Notes payable - other | 5,508 | 8,838 | |||||
Total Debt - Homebuilding Operations | $ | 741,082 | $ | 775,587 | |||
Notes payable bank - financial services operations | 108,594 | 104,026 | |||||
Total Debt | $ | 849,676 | $ | 879,613 | |||
Accounts payable | 169,528 | 148,421 | |||||
Operating lease liabilities | 19,059 | — | |||||
Other liabilities | 188,699 | 195,097 | |||||
Total Liabilities | $ | 1,226,962 | $ | 1,223,131 | |||
Shareholders' Equity | 954,641 | 835,204 | |||||
Total Liabilities and Shareholders' Equity | $ | 2,181,603 | $ | 2,058,335 | |||
Book value per common share | $ | 33.92 | $ | 29.69 | |||
Homebuilding debt / capital ratio(2) | 44 | % | 48 | % | |||
(1) | Includes $0.5 million and $0.9 million of restricted cash and cash held in escrow for the quarters ended September 30, 2019 and 2018, 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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash (used in) provided by operating activities | $ | (9,640) | $ | (54,194) | $ | 977 | $ | (75,119) | |||||||
Cash used in investing activities | $ | (8,980) | $ | (17,417) | $ | (25,710) | $ | (120,302) | |||||||
Cash provided by financing activities | $ | 31,678 | $ | 40,154 | $ | 36,655 | $ | 80,078 | |||||||
Land/lot purchases | $ | 92,096 | $ | 81,222 | $ | 258,438 | $ | 256,498 | |||||||
Land development spending | $ | 68,780 | $ | 63,680 | $ | 185,508 | $ | 152,256 | |||||||
Land sale revenue | $ | 8,511 | $ | 829 | $ | 23,042 | $ | 6,424 | |||||||
Land sale gross profit | $ | 75 | $ | 66 | $ | 530 | $ | 552 | |||||||
Financial services pre-tax income | $ | 5,623 | $ | 4,846 | $ | 17,279 | $ | 18,860 | |||||||
M/I Homes, Inc. and Subsidiaries | |||||||||||||||
Non-GAAP Financial Results (1) | |||||||||||||||
(Dollars in thousands) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 37,838 | $ | 29,282 | $ | 85,807 | $ | 75,256 | |||||||
Add: | |||||||||||||||
Provision for income taxes | 12,226 | 10,198 | 28,939 | 21,628 | |||||||||||
Interest expense net of interest income | 3,625 | 3,516 | 13,788 | 12,765 | |||||||||||
Interest amortized to cost of sales | 7,836 | 6,278 | 20,609 | 17,345 | |||||||||||
Depreciation and amortization | 4,089 | 3,650 | 11,796 | 10,754 | |||||||||||
Non-cash charges | 1,492 | 1,041 | 4,086 | 3,771 | |||||||||||
Adjusted EBITDA | $ | 67,106 | $ | 53,965 | $ | 165,025 | $ | 141,519 | |||||||
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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income before income taxes | $ | 50,064 | $ | 39,480 | $ | 114,746 | $ | 96,884 | |||||||
Add: Purchase accounting adjustments (2) | 82 | 692 | 639 | 4,549 | |||||||||||
Add: Acquisition and integration costs (3) | — | — | — | 1,700 | |||||||||||
Adjusted income before income taxes | $ | 50,146 | $ | 40,172 | $ | 115,385 | $ | 103,133 | |||||||
Net income | $ | 37,838 | $ | 29,282 | $ | 85,807 | $ | 75,256 | |||||||
Add: Purchase accounting adjustments - net of tax (2) | 61 | 512 | 473 | 3,366 | |||||||||||
Add: Acquisition and integrations costs - net of tax (3) | — | — | — | 1,258 | |||||||||||
Adjusted net income | $ | 37,899 | $ | 29,794 | $ | 86,280 | $ | 79,880 | |||||||
Purchase accounting adjustments - net of tax (2) | $ | 61 | $ | 512 | $ | 473 | $ | 3,366 | |||||||
Acquisition and integration costs - net of tax (3) | $ | — | $ | — | $ | — | $ | 1,258 | |||||||
Divided by: Diluted weighted average shares outstanding | 28,598 | 28,906 | 28,238 | 29,511 | |||||||||||
Diluted earnings per share related to purchase accounting adjustments (2) | $ | — | $ | 0.02 | $ | 0.02 | $ | 0.12 | |||||||
Diluted earnings per share related to acquisition and integration costs (3) | — | — | — | 0.04 | |||||||||||
Add: Diluted earnings per share | 1.32 | 1.01 | 3.04 | 2.56 | |||||||||||
Adjusted diluted earnings per share | $ | 1.32 | $ | 1.03 | $ | 3.06 | $ | 2.72 | |||||||
(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. |
(3) | Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our acquisition of Pinnacle Homes. As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred. |
M/I Homes, Inc. and Subsidiaries | ||||||||||||||||||
Selected Supplemental Financial and Operating Data | ||||||||||||||||||
NEW CONTRACTS (a) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
% | % | |||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
Northern | 635 | 537 | 18 | % | 2,040 | 1,891 | 8 | % | ||||||||||
Southern | 1,086 | 765 | 42 | % | 3,056 | 2,781 | 10 | % | ||||||||||
Total | 1,721 | 1,302 | 32 | % | 5,096 | 4,672 | 9 | % | ||||||||||
HOMES DELIVERED (a) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
% | % | |||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
Northern | 651 | 583 | 12 | % | 1,739 | 1,548 | 12 | % | ||||||||||
Southern | 1,000 | 839 | 19 | % | 2,636 | 2,405 | 10 | % | ||||||||||
Total | 1,651 | 1,422 | 16 | % | 4,375 | 3,953 | 11 | % | ||||||||||
BACKLOG (a) | ||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||||||||||
Dollars | Average | Dollars | Average | |||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | ||||||||||||||||
Northern | 1,231 | $ | 529 | $ | 430,000 | 1,284 | $ | 549 | $ | 427,000 | ||||||||||||
Southern | 1,684 | $ | 608 | $ | 361,000 | 1,562 | $ | 591 | $ | 379,000 | ||||||||||||
Total | 2,915 | $ | 1,137 | $ | 390,000 | 2,846 | $ | 1,140 | $ | 401,000 | ||||||||||||
LAND POSITION SUMMARY (a) | ||||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Northern | 6,696 | 5,015 | 11,711 | 5,561 | 6,921 | 12,482 | ||||||||
Southern | 8,145 | 9,210 | 17,355 | 8,219 | 8,904 | 17,123 | ||||||||
Total | 14,841 | 14,225 | 29,066 | 13,780 | 15,825 | 29,605 | ||||||||
(a) | Beginning in the second quarter of 2019, we changed from three reportable segments to two reportable segments: Northern and Southern. Prior year information has been restated for corresponding items of our segment information. |
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SOURCE M/I Homes, Inc.