M/I Homes(US:MHO)2024-07-31 13:50PART 1. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements This section presents the unaudited financial statements for M/I Homes, Inc as of and for the periods ended June 30, 2024 Condensed Consolidated Balance Sheets Total assets grew to $4.34 billion, driven by increases in inventory and cash, while shareholders' equity rose to $2.74 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents and restricted cash | $837,458 | $732,804 | | Inventory | $2,938,464 | $2,797,151 | | Total Assets | $4,340,070 | $4,022,440 | | Liabilities & Equity | | | | Total Liabilities | $1,598,953 | $1,505,501 | | Total Shareholders' Equity | $2,741,117 | $2,516,939 | | Total Liabilities and Shareholders' Equity | $4,340,070 | $4,022,440 | Condensed Consolidated Statements of Income The company reported significant year-over-year growth in net income and diluted EPS for Q2 and H1 2024 Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,109,781 | $1,014,013 | $2,156,484 | $2,014,543 | | Income before income taxes | $194,139 | $155,357 | $374,378 | $291,339 | | Net Income | $146,746 | $118,001 | $284,807 | $221,067 | | Diluted EPS | $5.12 | $4.12 | $9.90 | $7.77 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $143.3 million for H1 2024, primarily due to a larger increase in inventory Consolidated Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $143,283 | $417,689 | | Net cash used in investing activities | ($27,541) | ($2,802) | | Net cash used in financing activities | ($11,088) | ($58,142) | | Net increase in cash | $104,654 | $356,745 | Notes to Financial Statements The notes detail key accounting policies, a new share repurchase program, and segment revenue breakdowns - Total inventory increased to $2.94 billion, with spec inventory at 2,150 units valued at $426.8 million2425 - The company maintains a $650 million unsecured revolving credit facility with no borrowings outstanding and $569.9 million available777881 - A new $250 million share repurchase program was approved in May 2024, with $207.1 million remaining available for repurchases103105 Revenue by Source (in thousands) | Revenue Source | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Housing | $2,088,557 | $1,955,144 | | Land sales | $10,203 | $8,852 | | Financial services | $57,724 | $50,547 | | Total revenue | $2,156,484 | $2,014,543 | Management's Discussion and Analysis (MD&A) Management discusses record-setting performance, segment results, liquidity, capital allocation, and the company's outlook Overview and Summary of Results The company achieved record Q2 2024 gross margin, pre-tax income, and net income, driven by a 9% revenue increase - Q2 2024 performance highlights include a 9% revenue increase to a record $1.11 billion, a record 27.9% gross margin, and a 24% increase in net income to a record $146.7 million126129 - H1 2024 performance highlights include a 7% revenue increase to a record $2.16 billion, a 10% increase in homes delivered, and a 29% increase in net income to a record $284.8 million126128 Reportable Segments Performance Both Northern and Southern homebuilding regions saw growth, while the Financial Services segment posted record revenue Homebuilding Operating Data by Region - Q2 2024 vs Q2 2023 | Metric | Region | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | | Homes Delivered | Northern | 951 | 783 | +21% | | | Southern | 1,273 | 1,207 | +5% | | New Contracts, net | Northern | 1,002 | 949 | +6% | | | Southern | 1,253 | 1,248 | +0.4% | | Housing Revenue (in thousands) | Northern | $464,606 | $383,486 | +21% | | | Southern | $607,438 | $596,712 | +2% | - The Financial Services segment's income before taxes increased to $14.4 million in Q2 2024, with the capture rate rising to 87% from 81%144158 New Contract Cancellation Rates | Region | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Northern | 9.3% | 9.1% | | Southern | 10.2% | 11.4% | | Total | 9.8% | 10.4% | Liquidity and Capital Resources The company maintains a strong liquidity position with $837.5 million in cash and an improved debt-to-capital ratio of 20% - Ended Q2 2024 with $837.5 million of cash, cash equivalents, and restricted cash175 - The homebuilding debt to capital ratio improved to 20% at June 30, 2024, down from 22% at year-end 2023188 - Repurchased $75.6 million of common shares in H1 2024, with $207.1 million remaining under the current repurchase program186 - Controlled approximately 49,500 lots as of June 30, 2024, representing about a six-year supply and a 20% increase YoY135 Outlook and Impact of Macroeconomic Factors The company plans to grow community count by 5% in 2024 while navigating uncertainty from mortgage rates and inflation - Strategic objectives for 2024 include managing land spend, improving cycle times, opening new communities, and maintaining a strong balance sheet137 - The company plans to increase its average community count by approximately 5% by the end of 2024127136 - Management remains cautious as high mortgage rates, hovering around 7% in H1 2024, continue to pressure housing affordability218219 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuation, which is managed through derivative instruments Notional Amounts of Financial Instruments (in thousands) | Description | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Uncommitted IRLCs | $227,821 | $174,274 | | FMBSs related to uncommitted IRLCs | $250,000 | $174,000 | | Mortgage loans held for sale covered by FMBSs | $211,151 | $160,547 | Recognized Gain (Loss) on Hedging Instruments (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Mortgage loans held for sale | $(623) | $(3,139) | | Forward sales of mortgage-backed securities | $1,647 | $4,632 | | Interest rate lock commitments | $(1,322) | $(2,537) | | Total gain (loss) recognized | $545 | $(570) | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024 - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the reporting period229 - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024230 PART II. OTHER INFORMATION Other Information (Items 1-6) This section confirms no material changes to risk factors and details Q2 2024 share repurchase activities - There have been no material changes to the risk factors previously disclosed in the company's 2023 Form 10-K232 Common Share Purchases - Q2 2024 | Period | Total Shares Purchased | Average Price Paid per Share | Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | April 2024 | — | $— | $102,523,768 | | May 2024 | 320,000 | $126.06 | $217,079,090 | | June 2024 | 80,000 | $124.61 | $207,110,140 | | Total Q2 | 400,000 | $125.77 | $207,110,140 | - The company reports no defaults upon senior securities and no new Rule 10b5-1 trading arrangements by directors or officers236