Cavco(CVCO) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Cavco Industries reported decreased net revenue and net income for Q1 FY2024 due to lower home sales, while strengthening its balance sheet and improving operating cash flow Financial Performance Summary (in thousands) | Financial Metric | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | | :--- | :--- | :--- | | Net Revenue | $475,875 thousand | $588,338 thousand | | Gross Profit | $117,879 thousand | $144,724 thousand | | Income from Operations | $56,199 thousand | $78,588 thousand | | Net Income | $46,411 thousand | $59,694 thousand | | Diluted EPS | $5.29 | $6.63 | Balance Sheet Highlights (in thousands) | Balance Sheet Item | July 1, 2023 | April 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $352,234 thousand | $271,427 thousand | | Total current assets | $858,687 thousand | $804,579 thousand | | Total assets | $1,353,047 thousand | $1,307,975 thousand | | Total current liabilities | $293,376 thousand | $293,391 thousand | | Total stockholders' equity | $1,022,826 thousand | $976,286 thousand | Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,293 thousand | $58,240 thousand | | Net cash provided (used) by investing activities | $2,086 thousand | ($24,399) thousand | | Net cash used in financing activities | ($1,490) thousand | ($40,213) thousand | | Net increase (decrease) in cash | $82,889 thousand | ($6,372) thousand | Notes to Consolidated Financial Statements Notes detail segment performance, including housing revenue decline and financial services growth, alongside loan portfolio concentration and undrawn credit facility - The company operates in two segments: factory-built housing (wholesale and retail) and financial services (consumer finance and insurance)[130] Revenue by Segment (in thousands) | Revenue by Segment (in thousands) | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | | :--- | :--- | :--- | | Factory-built housing | $457,109 | $572,597 | | Financial services | $18,766 | $15,741 | | Total Net Revenue | $475,875 | $588,338 | - As of July 1, 2023, the consumer loans receivable portfolio had significant concentration in Texas (39%) and Florida (15%)[82] - The company maintains a $50 million revolving credit facility expiring in 2027, with no borrowings outstanding as of July 1, 2023[16][169] - Fair value adjustments from the Solitaire Homes acquisition resulted in an additional $1.0 million in Goodwill during the quarter[13] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reported a revenue decline due to lower home sales volume, a reduced backlog, and improved gross margin from favorable material costs Company and Industry Outlook The manufactured housing industry saw a significant decline in shipments, leading to a reduced company backlog, yet affordability remains a key advantage - Industry home shipments for the calendar year through May 2023 decreased by 29.0% compared to the same period last year[189] - The company's backlog was $177 million at July 1, 2023, a significant decrease from $244 million at April 1, 2023, and $1.0 billion at July 2, 2022[69] Results of Operations Net revenue decreased due to lower housing volumes and prices, while financial services grew, and gross profit margin improved from favorable material costs Revenue Analysis (Q1 FY2024 vs Q1 FY2023) (in thousands) | Revenue Analysis (Q1 FY2024 vs Q1 FY2023) | Q1 FY2024 | Q1 FY2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Factory-built housing revenue | $457.1M | $572.6M | ($115.5M) | (20.2)% | | Financial services revenue | $18.8M | $15.7M | $3.0M | 19.2% | | Total Net Revenue | $475.9M | $588.3M | ($112.4M) | (19.1)% | | Factory-built homes sold | 4,582 | 5,346 | (764) | (14.3)% | | Net revenue per home sold | $99,762 | $107,108 | ($7,346) | (6.9)% | - The gross profit percentage for factory-built housing increased to 24.8% from 24.4% in the prior year, primarily due to favorable material costs[72][194] - Selling, general and administrative expenses decreased by $4.5 million (6.7%) YoY, mainly from lower legal expenses, professional fees, and incentive compensation, partially offset by the addition of Solitaire Homes[48][73] Liquidity and Capital Resources Cash and equivalents increased significantly due to improved operating cash flow from working capital management, with an undrawn revolving credit facility Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | | :--- | :--- | :--- | | Beginning Cash Balance | $283,490 | $259,334 | | Operating Activities | $82,293 | $58,240 | | Investing Activities | $2,086 | ($24,399) | | Financing Activities | ($1,490) | ($40,213) | | Ending Cash Balance | $366,379 | $252,962 | - The increase in cash from operating activities was primarily due to reductions in accounts receivable, inventories, and prepaid expenses, which offset lower net income[104] - Management believes that cash on hand and cash flow from operations will be sufficient to fund operations, cover obligations, and provide for growth for at least the next 12 months[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the quantitative and qualitative disclosures about market risk from the prior Annual Report on Form 10-K - There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K[81] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The President and Chief Executive Officer and the Chief Financial Officer concluded that as of July 1, 2023, the company's disclosure controls and procedures were effective[109] - There were no material changes to the company's internal control over financial reporting during the fiscal quarter ended July 1, 2023[110] PART II. OTHER INFORMATION Item 1. Legal Proceedings Management believes pending legal matters are unlikely to materially adversely affect the company's financial position, liquidity, or operations - Management does not believe that loss contingencies from pending legal matters are likely to have a material adverse effect on the company's consolidated financial position, liquidity, or results of operations[174] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K were identified - The company states that there are no material changes to the risk factors discussed in Part I, Item 1A of its Form 10-K[86] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Repurchases of Equity Securities No stock repurchases occurred during the quarter, but the Board approved a new $100 million repurchase program, increasing total available funds - No stock repurchases were made during the fiscal quarter ended July 1, 2023. $35.7 million remained available under the existing program[111] - On August 1, 2023, the Board of Directors approved an additional $100 million stock repurchase program, increasing the total available amount for repurchases to $135.7 million[87] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[89]