Cavco(US:CVCO)2021-01-29 20:29Financial Data and Key Metrics Changes - Net revenue for Q3 2021 was $288.8 million, up 5.5% from $273.7 million in the same quarter last year [17] - Consolidated gross profit margin decreased to 20.5% from 21.9% year-over-year, primarily due to higher material costs impacting the factory-built housing segment [19] - Net income decreased by 5.7% to $19.7 million compared to $20.9 million in the same quarter of the prior year [24] Business Line Data and Key Metrics Changes - Factory-built housing segment net revenue increased by 5.3% to $270.8 million, driven by a 13% increase in average revenue per home sold, despite a 6.8% decrease in units sold [17][18] - Financial services segment net revenue rose by 8.4% to $18 million, attributed to higher home loan sales volume and an increase in insurance policies [18] Market Data and Key Metrics Changes - Backlogs increased to $472 million, up 47% from the previous quarter, equating to approximately 26 to 28 weeks of production [8][9] - Order rates remained strong, up 65% year-over-year, indicating sustained high demand despite production challenges [10] Company Strategy and Development Direction - The company aims to increase production capacity beyond pre-COVID levels to address high backlogs and demand [7][8] - Management is focused on maintaining dollar profitability amidst volatile input costs and is exploring growth opportunities through both organic investments and acquisitions [14][15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustained demand for housing, attributing it to a long period of underbuilding and low interest rates [31][46] - The company is actively monitoring labor availability and supply chain challenges, which remain significant concerns [48][49] Other Important Information - The company has not executed any share repurchases since the Board's authorization mid-quarter, indicating a focus on strategic investments [14] - The effective income tax rate increased to 23.9% from 15.5% in the prior year, influenced by tax credits from the previous year [23] Q&A Session Summary Question: Are there signs of dealers trying to jump in line due to rising backlogs? - Management noted that while there could be some evidence of this, they do not see a meaningful amount occurring currently [29][30] Question: How long until gross margins return to normal levels? - Management indicated that price increases are ongoing, but predicting a timeline for margin recovery is challenging due to rapid cost escalations [32][34] Question: Any significant differences in demand by geography or channel? - Demand has been strong across most regions, with some recovery noted in community business, which had previously lagged [43][45] Question: What is the outlook for backlog conversion to revenue? - Management remains optimistic about demand and is focused on maximizing production capacity to meet orders [46][47] Question: Any updates on SEC investigations? - Management acknowledged the Wells Notice from the SEC and views it as a step in the process, emphasizing the need to support the ongoing investigation [59][60]