Cavco Industries (CVCO) 3 Feb 232023 Q3 Earnings call transcript

Thank you for standing by and welcome to the Third Quarter Fiscal Year 2023 Cavco Industries, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder today’s conference call is being recorded.

to conference like Mr. your now would turn to the host I Fusler, Relations. Investor Controller Mark and Corporate Please go ahead.

earnings and us third XXXX for day, Cavco call. Good thank Industry's quarter you fiscal for joining conference year

be During Allison and Officer; Vice Paul hearing this Chief Executive call, from Boor, Officer. Chief Aden, Financial President Chief and Accounting Bill President Bigbee, Executive and Officer; you'll

the or management Before future markets or during credit this made about that the future may forward-looking and revenues, we contain comments operational begin, expectations current use, the we'd cash earnings like to savings, statements statements, financial conditions. Cavco's per or market including call operational in efficiencies, assumptions flow remind by of cost you performance, volatility conference or share,

could cause those by and actual All forward-looking affect statements any of statements Cavco's Cavco. its materially from results involve could to expressed differ in on behalf made forward-looking which results or risks actual uncertainties, and

Cavco's without events specific the you may and materially encourage which statements. identify actual Securities factors to company's review those described XX-K from XX-Q differ forward-looking filings Forms or results the recent limitation, cause with the and I including to that Commission, in Exchange most

or this also date date to X, no the by law. accurate that sensitive except time as of oral reflect revise or Friday, after only to obligation events call, circumstances of statements, the call information written XXXX. forward-looking as conference of This whether broadcast, contains live undertakes or this is February conference Cavco required any update

call Bill Executive over Bill? Boor, to President I'd Chief Now Officer. to turn and the like

XXXX. the results today us Welcome third for to and joining you quarter fiscal of our for review thank

profit were improvement. profit. were improvement results year-over-year primarily This margin improved up and from quarter, and average Units sold and another %. XX% XX and driven price revenues gross we Revenue financial was the achieved was year-over-year selling approximately flat in significant pretax

using of capacity We while Operationally, the generally reach changing levels continue utilization market, all days. to plants available high efficiency. the adjusting operating calculate our

For this an XX% yielded utilization. approximate quarter, the

holidays, capacity of However, operated adjusting that utilization. downtime we XX% to go right XX% operated the orders by market market and to about basis, doing ready to On days at conditions the the available downtime. while are improve. we about thing ran This indicates when days weather plants our driven due remaining total a

at Cancellations continued but cancellations of during the the had of of previous downturn. in that the stages And regions quarter, quarter's XX% only rate. the about the were initial the lagged bulk

sense been earliest regions through longer the in of a no So has the major are hit areas, moving factor. cancellations process the a for some and

much is factor As lower much naturally become backlogs to reduced to less levels, so delivery order the timeframe time. real a to the closure cancellations because of

clouds issue than naturally orders Retailer are purchases retailer abrupt the relationship day and one market. in their every each target that slower us picture a to inventories because will of not an until between retailer inventories are be the still that to is targets. be will change wholesale orders. This manufacturing gets and individually to reduced their to demand. one demand moves homebuyer closer underlying It's resolution an homebuyer happening Inventory

in Third seasonality, all and activity, hit the economy's quarter all sides. resulted were wide industry order excess inventory The effect on in the rates from consumer have declines backlog.

and first Well, is updates. first weeks we XX $XXX share important this backlog the market, we're what current the think it's year. quarter don't X to new at Our in month XX% to into down to approximately seeing or In get million the sequentially I normally rates. production

have increased considerably are well early quotes, indications We of as January. seasonal a as in pickup seeing in traffic in which

a rates. seen and might in seasonal indicator half. in been These of the order several at year are or as quotes with weeks, view over we quotes above we've indicators we a and pickup that about have the and underlying fact, demand leading observations future experience level In orders the positive past last

optimism So increased for a in orders. there the inventory is and wholesale correction reason pickup accelerate that demand resolve an might

It's inventory develop because behind predict when the will still how see the watching issue into the us to going be very difficult orders spring. we're

best my we months a have few level some However, more is of drag. of the inventory guess feeling

as a For location. very point, competitive industry location months up about cyclical the there be held price This will Again, the will range in most this is from see that question orders the movements when and develop for a of part, prices and never largely to to long. pressure how stay price near answered well has pricing recognizing well. always stagnant is coming be term we

strategy. Let course growth me change our a in few on developments and touch

that talked First, to in And strong Hamlet, started over is production. We production carried was plant up time North fully That this new We a a ready past. of this plant on owner's transition Carolina the budget. successfully with that on we've from management HUD building and the execute employees for prior and complex volumetric about quarter. plant needed the delivered team project the to staffed operation.

a Hamlet. everyone really great job So by at in both

we January previously We're Homes announced excited X, on Solitaire acquisition. brings. this opportunities about the On combination the closed

product anticipate out the value practices include network, company. retail Solitaire that production across as has and XX insurance filling retail to to in accessing combined lines We facility, added retail well as production four lines our enhance sales the their best network significant Solitaire bringing stores. opportunities

a might the take I to area on our the digital about discuss are of to like developments work marketing. minute working talk in enough we prospectively not company. also I'd in

now you milestone. come a fruition. the situations one point on is of to me time for This to big because working major when been this and for we've our some important efforts company it's it reached a tell to So have make

models our stock across communities X,XXX consumer geographic X,XXX and Launching In brands. and this X,XXX our it January, on research homebuyers based we area. retailers for flagship home went also to to and park easier their marketplace. live them plans, website manufactured, with cavcohomes.com, facing our new It new floor makes digital discover model modular and connects

This photos, providing The plans, site the them. special the dealer to new pricing specific product as to home own videos, their and to ERP photos, are research for shopper The is the current retailers smart ability information, have retailers as offers we for easy have seamlessly experience with product integrated well. our availability. site any enhances customers tours now can access videos that and as dealer device. microsites availability floor They giving and system, virtual our and well using

is Cavco benefit milestone. It by I but marketplace. most dealers a of opens our for perhaps generated and from And the using and our importantly, customers. era know really technical this new major leads up consumers tremendous digital a between teams. phone mouthful, this our calls site brand the our a the and culmination serve reach to and to directed is collaboration a that's with build marketing nationally more effectively Launching

built our we've work, the and an of we've Marketing powerful this organizational the capability for VP Senior Communications, marketing And only our benefit not under team. the Through created will site, Colleen a leadership the upon homebuyers foundation partners. improve of in continue digital add retail of they've Rogers, built team that to

financial turn it over discuss results to like to quarter's I'd that, in the to more detail. With Allison

third million, XX% prior period was revenue fiscal $XX.X the to $XXX.X million during compared million you, or quarter. $XXX.X Thank Bill. up year's for Net the

million, in million to due net the segment, built increase XX.X% revenue product up million $XXX.X pricing This $XXX.X factory increase quarter. year’s due prior to XX.X% or $XX.X increases. compared was per to was Within in sold average the primarily revenue a housing third home

to to $XX.X was up revenue was million, a due revenue the built of increased XX.X% last million to net of housing segment, percentage segment year. the Consolidated in same This insurance pricing. product profit QX in Services XXXX In of in with million. force. versus consistent XX.X% Financial factory percentage of gross or X.X% the higher XX.X% policies net from primarily gross was XXXX, XX.X% a number $XX.X year-over-year increase QX period as $X.X in profit due

of events of a and in XX.X% million general of in decreased the cost the incentive in decrease energy third-party offset XX.X% improved expenses as from is administrative of Selling, or Financial Arizona during million to by impact due lower tax net due Services of Texas. XX.X% of with wages last $XX.X to margin $XX.X was Gross revenue of credit project (ph) The XXXX greater related weather were quarter or and percentage to QX in net SG&A XXXX and revenue primarily on XX% assisting dollar to consultants QX year. partially same the commission compared and revenue earnings.

$X.X was compared on income in by securities, million driven compared The same Pretax corporate higher equity balances. $X.X period. prior to loans of quarter. was XX.X% gains lower income $X.X million year The XX.X% other million in to partially interest was to prior million million in in rate $XX.X by the last $XX.X commercial unrealized profit earned decrease year million offset the primarily is Net income effective benefit a cash $XX.X or of XX.X% year. tax up compared the period and

benefit quarter energy efficient pretax third credits of Our $XX.X tax non-recurring the fiscal of included a to income sale of million, related XXXX homes.

our $X.XX a shareholders Net period to in would that $XX.X in per year, income net XX.X% were attributed same million last have Excluding income per expense of period. diluted been this as share. $X.XX the of was Cavco tax item, share $XX.X earnings million percentage to compared income the pretax versus

acquisition recent finished will Solitaire record Purchase sale our next of requires Through value acquired of note we to us inventory that I inventory not we'll of profit means accounting our Homes. the results acquisition, recognize at fair home upon those upon include addition, homes. which a In at acquisition, retail site. quarter the that

through see result, is XXX acquisitions these basis the points the on these the cash quarters sell margins XXX that next accounting treatment. we basis a in of as our we homes. same for of will by couple receive homes dynamic As happens all impact This we approximately an and to affected not points the will is to

are bringing locations. your amount because we are the attention of this retail the several inventory purchasing purchasing, we're to fact of is which driven that by We

on $XXX Carolina like quarter. to priorities of million the balance recently Solitaire and will with subsequent Glendale, in closed to just with Before take utilize Arizona Homes to North acquisition we manufacturing of million the that the discuss capital us purchase. The XX a facilities minute leaving of over Homes, allocation adjustments, sheet, to $XX our in approximately highlight continue share cash the Solitaire we cash closing the I'd opening in execute before our purchase and our Hamlet, of million repurchase

capital to including this will We continue deploy share appropriately repurchases.

I'll Now over to sheet. balance to Paul it turn the discuss

capital, in Allison. to increase end the from December of million, I'm XXXX net X, Thanks, working sheet through up $XXX year. The at million. compared common cash offset was in walk stock balance changes prior $XXX.X XXXX. The and equipment, by property, the of facilities to XX, million items primarily non-cash providing of Today, Glendale, of Carolina April for was in partially $XXX.X purchases the cash changes new or going adjusted $XX income balance buybacks plant due This primarily XX% is and to Hamlet, amount fiscal North approximately and million our Arizona. and

return our inventory at the due from were home that Mae. retail primarily materials Prepaid and delinquent to decreased have sales. assets option decreased other partially a raw Ginnie involved lower short-term, regard loans to ventures income recorded one higher from taxes, including lots. assets to lower to Investments, sold greater the offset with joint prepaid repurchase the of due in in of capital by been Inventories and on decline

reserves, facility due primarily higher setup, the in current to sales. freight, expenses rebates payable, development Property, more the facility purchase previously. higher up from plant Hamlet, combination as Accrued the discussed North all Arizona continued work of of liabilities Carolina other and and increased Glendale, is on warranty and and equipment

Lastly, prior stockholders' up from or of $XXX.X equity fiscal was year. approximately end $XXX the million XX.X% million, the

This back turn to and financial Bill. completes report, I'll the you, it

Paul. Thanks,

balance Allison which consistent As sheet of path we've the a allocation supports Paul upon. very continuation healthy, our explained, and capital been delivering remains

the the view While much decrease we bigger (ph) for these need something through is housing. cycles picture past managed the off well dire of in backlogs, drop abrupt the to mini be working several quarter resulting industry and within as the months for the

feel to operational market repurchases and to housing about the we strong to We'll return manage And share the a manufactured good using sheet. invest is lack and will strategy. growth, very we view affordable inevitable given continue stretches in continuing responsibly continue the We demand available improvements balance where our nationwide capacity of housing.

that, the With please open Valerie, questions. for line

are queue. Moore, you think I Dan the I see All right. with in us? you

am hear there. I I did indeed. the not prompt

Yeah. Go ahead, Dan.

translating retail across in as developers, the you inquiries, customers down between you Thanks trends maybe Are your Maybe morning. Appreciate from start more terms seeing Good REITs issue. you different -- quotes seeing built, to from not traditional at And even are all orders just delineate are what taking interest for seeing as with question. site across inventory them? the well of if versus it. directly traffic just of end you markets. community institutions trading Bill, can it's and because

Yeah. I that. can take a stab at

we've think pretty time through have that remained been I First, communities this strong. period consistent

impact big has street mostly of side. retail activity seen more of the the decreased So retailer we've recently been

We've say to very So a I'd present to comments lot points don't few here, a January. balanced communities And which data in got strong. -- continue want picture, of I be right? our a here I

that but as out of encouraging the my back what we're interest characterize We about street going side up. generally thought I talk reflects mood where a trying data they're level just points, it retailer because optimistic January was a important points. It's would know data to to here. coming Most of figure I in few on

retailers So have been reason be communities is consistent, January. there there, some to in data The slowed optimism Street the looks have still but for points with we inventory down. some

what sense always out a consistently far know magnitude way that right? think a happening. bit And talking goes I'm expect way got it they say, buying to want because given I with. retail we on, trade we've and the figured know happy having got come end that's things as that they're we As to didn't are to manufacturer and -- frustrated a but great something down, see it because in we give the you've helps. that's But of haven't that's going, up folks little the I that dynamic, I might And been people of

from also we it independent think our retailers. I And hear

ground Does the can't run-up it, missed? is is. really certainly you big trend But I over it So Dan? Did of sense I years, industry you couple this give some in cover I have the how that has know pricing. just with last on that that aspects any something of another taken actually, that

given gears, to guess, think how No, Do say, over I the switching to the -- that production bit. about before in just trying order weeks. a XX backlog you we orders. continuing to add backlogs? should two rates -- over given we you're one managing X,XXX of that's very quarters? comfortable layer you helpful. little we in produce of Solitaire, versus kind Kind that homes decline you're before seeing, to about next, Do nine see expect curtail need obviously, when about production think Are a how the in to to Backlog significant you you uptick

right, a were the going big, minute Yeah. region, the we It's reported board, mean it didn't there to was matter region years, Dan. was couple about important everything right? really to wasn't -- I question really a and it and numbers because across of just numbers talk last because up, didn't differentiation it probably and much for the backlog

a plant, this. But have do kind flavor, plant very much considerably now that vary like And backlog, give estimate and bit a does very of that meaning you from less more we region to plants little that when average do situation to weeks, very, a the have we've region, situation expand backlogs. strong and got have some to that's we on little your bit in of an question

scripted downtime we call that part forms, lower. that this the were took in that you told different outages I And have backlogs extended advantage takes some did holiday where market So of of quarter. we the past

plants, day a four plants, adjusted our number have And some of weeks. work actually, our good of to

that XX%. was available of lowered So days kind running of about our that what to time and going was

that it lower backlog those in continuing even until end to start the weeks, individual that and up. we're see plants in And they mode see stabilize come

do long downtime. of happening kind for is think to as I pickup X:X to seasonal conceptual not see the order day. we days. very I But signs starting to winded that's get flow-through which operate if a a kind see that that abate of, still all news closer answer orders, we're all So but you, market And we homebuyer available cancellations of reducing that of we'll good expect every get and

the being comment honestly about been on tell always few updates quotes these right, Just at that to orders up reporting on. calls. we're cancellations. in, minute get throw And the weeks, this fall early of to But giving to comparable last the not summer, like late significantly a on into I'll up. we're again, mode hesitant you bit kind net to Also we they've quarter of did I last focus of little year. looked of We'd on written,

qualifying keep doesn't out of to of the means, but couple any a points points. statements going data we're I'm woods my mean good by So at data they're

helpful, it reasonable exact of I really guess I term the of that's that production or get Bill. into where sounds give take, versus want for anything a the last and QX, proxy know in short a down to of guidance we you in number don't terms will was quarter nature? No, the leg be, But big units. like or

Yes.

or expectations one as tick more modestly ASPs, come maybe continue to materials just those down, raw we lower? two to Lastly, expect

an because a out it and Yeah. that a I competitive manufacturing I bit how I've in really can't a markets. on being gets materials local this relationship And there, it again, and maybe but bit and question I little kind little answer, read playing bit going you are give a of direct backlogs generalized how for of always orders. apologize is to less little a more outlier to

dropped seen where lower been backlogs price. sliding tax there's where quickly have some and markets to levels some We on

backlog a make what's in issue sense is doesn't of to really price. inventories orders, remain others And not reduction we've seen because just reduce the the dealer restricting in or it still where price

to generalize. hard again, So

in leakage. I geographies this a environment some be with this lot to able a more are competitive backlog and think We price in not it we'll make stabilize, of through

Very helpful.

out. factors we There were I What the and you sequentially. said do were think some apologize. rate including disturbance I'll quarter Lastly Allison, about the lower for me, the missed in maybe what what how jump just SG&A. It and I Solitaire. about was run

background the Apologies third-party due Lower reduction sequentially Yeah. in you. to for Thank the expenses. noise.

energy last middle our quarter were tax efficient project. we of the right year, Third in credit

and support then these. a had variable have we we based the offset on that of third with on parties outflow all large for commissions compensation that So by by been slow of

of XX% as variable, and can that's the expand we still So basically, SG&A about being now contract. component leverage we

back any Okay. I’ll you. if jump follow-ups. Thank

Thanks, Dan.

Thank question you. next from from Craig-Hallum. will come And Eggerichs Danny our

Your line is open.

Yeah. On hit just a for quick I modeling here. Palm was it questions. Greg real quite was one taking the still on lower I to the Thanks was than that today. hoping SG&A. on Street last for mean, bit

guess Solitaire, reasonable layering before million a I baseline is that of? to go So on $XX say, off more number,

variable structure for level. on the tax SG&A, credits. is a fluctuation model that XX% our quarter with industry helps What consistent year you're significant very of seeing current the it represents the the that has think steady talked more is left relatively flow related did with compensation third-party side expertise just absorbed will if a will. you on and state, and we now about because were ago, revenue. and ebb as I because commission we amount of of an going more that working as always was We we the There kind which a a is

SG&A now, realistic a of if revenues modeled probably a at picture. you So level

the calendar of see broadly, saw to helpful. guess, It realistic I what for color scenarios I months? on pick of maybe kind 'XX. just maybe that terms I more backdrop, industry starting January. like then quarter, current up. just demand things the guess, sounds shipments That's of year the for the throughout kind for overall you cadence appreciate Okay. And in

It’s Yeah. million the one. in last quarter? last question, cadence the What's dollar a question the on

quarter? of Just that a out for you fiscal I more saw this throughout quarter how three, guess, play cadence, the how, monthly

Yeah. Okay.

there you months, those I of and You seasonal too. lot in there's interesting it's mean, got think of because holidays there's it, slowing a

is one entire guess, a that that as I we to a the good it's messy the quarter XX% quarter. were were were which I they month-to-month bit in of the about the things think within of for well. is little that So previous sign cancellations what commented interpret quarter, on

down throughout present So say other were typically than of more we quarter, kind down. still December but in the in order I would they're And do cancellations months. rates they're improving going just the slow

there. So of on a lot going things

Okay. I’ll there now. it leave for Thanks.

Okay.

Wedbush. you. Instructions] [Operator come question next will from And Thank our from McCanless Jay

Your line is open.

Hey. Good afternoon.

guidance maybe what rate 'XX question what my Solitaire, also And first the collectively give shipments be? would could revenues year run of kind with then annual calendar So you around entities? us think any were from combined you

Solitaire about said for kind mean deal went the overarchingly is I we've that of overall. what So XX%

about also quarters fiscal of the for margin as gross -- down But similar be about ASPs as quarters, upon in said We we touch purchase the work bit. rest through for our So which the a we about expect. prior of a because the the we reasons a did and next increase of we the about think and know the will year. basically, the is XX% as capacity. two that margin overall to can rest that the That's accounting, it if

capacity. XX% manufacturing

Manufacturing capacity, . yes

level want on had to revenue. the don't that Jay, you to tack company I think asked people revenue,

Understood.

sense feel Just do come heavy where call? seeing like what an feel little still trying you're I quarter this the the guess a the the in be starting -- is a need sure, might we too point how second to of inflection out. to that inventory cancellations it this get or make to channel down like backlog does to you in question, with model a make

the we how are say, here calendar of clear a would was the as of unfold the update have in year, months. going of guys I Yeah. next to can. we we're sensing to view what when we kind give turned balanced. the I see been on, the much an of that have we're activity it the right? didn't Because corner market have as negative economy the I we mean seasonal If that in traffic a going to That's things orders. doesn't been a uptick, really pickup corner we would doomsday scenario where and we that want been to seasonal -- focused would and I that mean would see of trying be deposits the are game, sign. the -- on had ultimately seasonal have was you higher view that indications when really and But couple turned winning

encouraging I period news data were I orders Just as as that discussion. one the levels start were in explained, seeing kind the I said I is, in talked or weeks of a really around quotes some week earlier few traffic, to even pretty first back answers right, of of here, from over finally good times. the so a and that you And healthy get you here the up think beyond January, data of

going There's uncertainty So There's the in eye it. the a early indications economy. there. going are good. still lot to out on We're on keep our

us I And how to up for stuff all the know for year. connect really that things shape think to have (ph) unfold to going are

up there last unbelievably think years with and in that with started an tail talking for three shipments, first I'm the in half calendar overall the but in year, months. industry, we off as quarters the off of push I now, an shipments couple of industry to strong the was finished

was shipments the Mark range. think data, the (ph) I think industry have down seasonally mid-XX,XXX November November in of I adjusted might was rate

We're if little start there off go calendar well, slow of a going was things a off we're be last tail in hoping there. for. to bit reverse year. probably will it year. That's a of So And what a kind of this

decline rates seeing seen really Got chattel rates We've Are same mortgage since you type (ph)? the of October. mortgage for down you. come in

Chattel chattel a is No. [indiscernible] sticky. states, fancy

So rates. It move be land chattel to seen all couple tends of last at independent really we haven't the home of over months.

So improvement I rates, as don't as Net all chattel there. around I'm to have note because nothing far the data. looking

chattel think to X% are the high right running I low in now. X%s rates

know. good you. Thank That's to

year. the half about [indiscernible]

apologize are earlier, then what you about might they hear And park if just expect from to and them? are days? these you touch we what and you. I thinking this Got hearing on How 'XX should operators -- from but the

bit generalization been a of lot just of but plans, large particularly They've lots get we bit. generalizing, paid on thing. mean REITs I community I'm They've and think steady they that staying significant rock there's a with that a capital been it's a they've that a to Yeah. the and good I in with for deal work, house operators, them. it's got they get been pretty put quite growth can't don't a if whole

I've bit, too So buffer industry. term use a past in about I that there's -- talking the talked little maybe a often this

their But but one also to may homes doing of own are land lot can and renting a have within the come a we they so buying have lease the it home them. buffers, payments, of model they one where is communities downturns is lots, person really the I think put their get and be on of their

perspective. to I from at kind that can't that to they own. become homebuyer resiliency that gives so for of afford think look demand when a right those And operators now we And it community a solution some

been at through So of demand their all don't period. been there's in much waning whole consistent. very think they've I this

of I do what last great That's was mean, the versus versus what you hear. now think community dealers and year? to is it mix retail maybe operators

been the think, industry. that's mean, Yeah. note about operators over XX% huge I time, about XX% a shift. of community I I'd don't or

going shift take it that they're realtors That's I little a I Street your But don't I dramatically focus crazy think personally. So get it's pause. it to shifted question, if normally on a bit. and reason the stands I mean, that

my for questions. Thanks taking all Great. Okay.

you. Thank Yeah.

conference like now our Boor you. no I lines. closing am Thank phone I'd any questions And for showing Bill further over turn back from to to the remarks.

on Again, strong results. you. to been quarter it's Thank of great Okay. another report

organization. our think and and of the financial operations, responding insurance ability to which to on they're focused are really important. working I leaders staying through-the-cycle and think our lending, together, market retail this results the opportunities, is flexibly dynamics, the Across highlight the I just really manufacturing, continue closely they're

for always, as your interest everyone, to we Cavco, forward keeping thank look to updated. and want I So you in

your conference Thank you. today's call. for does This Thank you conclude participation.

disconnect. wonderful now may Everyone, have You day. a