Workflow
Cavco(CVCO) - 2022 Q2 - Earnings Call Transcript
CavcoCavco(US:CVCO)2021-11-05 19:42

Financial Data and Key Metrics Changes - Cavco Industries reported a record quarter with revenues increasing approximately 39% year-over-year and diluted EPS up nearly 150% [8] - The company achieved a record housing gross margin of 24.1%, attributed to a 13% sequential increase in average selling price and favorable lumber pricing [8][10] - Consolidated gross profit as a percentage of net revenue was 25%, up from 20.8% in the same period last year, marking a 420 basis point improvement [22] Business Line Data and Key Metrics Changes - Within the factory-built housing segment, net revenue increased 42% to $342 million compared to $241 million in the prior year quarter, driven by a 35.3% uplift in average revenue per home sold [19] - The Financial Services segment net revenue increased 2.6% to $17.5 million, primarily due to higher home loan sales volume and servicing income [21] Market Data and Key Metrics Changes - Demand for Cavco's products remained strong, with backlogs growing to approximately $1.1 billion, representing about 40 to 42 weeks of production [9] - Active utilization for Q2 2022 was consistent with Q1 2022 at 75%, higher than the 70% utilization rate in Q2 2021 [21] Company Strategy and Development Direction - The company is focused on addressing affordable housing issues and has made strategic investments to improve production efficiency, such as a 20% throughput improvement in Fort Worth [14][15] - The acquisition of Commodore Homes is expected to enhance geographic expansion and increase capacity by 25% [16][17] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing supply chain challenges affecting production, but expressed optimism about stabilizing and growing the workforce [11][12] - The company anticipates continued strong demand and believes it can sell every house it can produce, despite labor and supply constraints [10][11] Other Important Information - The cash balance decreased to $224.3 million, down $98 million from six months earlier, primarily due to the acquisition of Commodore Homes and higher inventory purchases [29] - Stockholders' equity increased to approximately $733.1 million as of October 2, up $49.5 million from April 3 [33] Q&A Session Summary Question: Sustainability of gross margin levels - Management indicated that while there was a temporary drop in lumber prices, predicting future gross margins remains challenging due to fluctuating costs [34][35] Question: Expectations for production levels - Management noted that supply chain issues remain a key concern, but they are seeing progress in stabilizing the workforce [38][39] Question: Demand environment by channel - Demand is strong across all channels, with the company capturing market share from site-built homes due to challenges faced by traditional builders [46][48] Question: Backlog management - Management explained that they have been conservative in reporting backlog numbers, excluding some long-term orders to maintain a high-quality backlog [50][53] Question: Commodore acquisition impact - The acquisition had a minimal impact on gross margin in the current quarter due to purchase accounting, but margins are expected to improve as inventory is sold through [54][55] Question: SEC complaint status - Management provided an update on the SEC complaint, indicating that they filed a motion to dismiss and are prepared for litigation if necessary [70][71]