M/I Homes, Inc., Columbus, Ohio (NYSE:MHO) on Wednesday reported net income of $37.8 million, or $1.32 per diluted share, for its third quarter ended Sept. 30. The gain represented an increase of 29% from $29.3 million, or $2.56 per diluted share, in the 2018 quarter. Wall Street expected a gain of $0.99 per share.
Revenue increased 15% to a third quarter record of $653 million. Homes delivered reached a third quarter record of 1,651, 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, CEO 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."
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 home-building 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."