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Skyline Champion(SKY) - 2023 Q1 - Earnings Call Transcript
SKYSkyline Champion(SKY)2022-08-03 17:34
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Financial Data and Key Metrics Changes - In Q1 2023, net sales increased by 42% to 726millioncomparedtothesamequarterlastyear[25]−AdjustedEBITDAroseby159726 million compared to the same quarter last year [25] - Adjusted EBITDA rose by 159% to 163 million, with an adjusted EBITDA margin expanding by over 1,000 basis points to 22.4% [36] - Net income for the quarter was 117million,or117 million, or 2.04 per diluted share, compared to 43million,or43 million, or 0.75 per diluted share in the prior year [35] Business Line Data and Key Metrics Changes - U.S. factory-built housing segment revenue grew by 204million,drivenbya7204 million, driven by a 7% increase in the number of homes sold, totaling 6,813 homes [26] - Average selling price (ASP) for U.S. homes sold increased by 35% to 97,000 due to price adjustments for inflation [27] - Canadian revenue increased by 19% to 45million,drivenbya3045 million, driven by a 30% increase in ASP, despite a 9% decline in the number of homes sold [30] Market Data and Key Metrics Changes - Backlog at the end of June decreased by 264 million to 1.4billioncomparedtotheMarchquarter[15]−Leadtimesimprovedto28weeksfrom35weeksattheendoftheMarchquarterduetoenhancedproductioncapabilities[15]−Minimalcancellationswereobservedattheendconsumerlevel,indicatingstrongdemandforaffordablehousing[13]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonincreasingproductionlevelsandreducingbacklogstopre−pandemiclevelsof4to12weeks[16]−Investmentsinmanufacturingtechnologyandcustomerdigitalaccessareprioritizedtoenhanceaffordabilityandattainabilityofhomes[21]−TheacquisitionofAltaCimaandtheintegrationoftheManiscustombuildersareaimedatexpandingmanufacturingfootprintandenhancingcustomerexperience[11][22]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinnavigatingthecurrenteconomicenvironmentduetostructuralimprovementsandoperationalinitiatives[37]−Thedemandforaffordablehousingremainsstrong,drivenbyrisingrentalratesandinflationarypressures[17]−Thecompanyanticipatesthatmarginswillnormalizebacktofiscal2022levelsastheone−timeeffectsofFEMAorderssubside[38]OtherImportantInformation−Thecompanyproducedalmost901.4 billion compared to the March quarter [15] - Lead times improved to 28 weeks from 35 weeks at the end of the March quarter due to enhanced production capabilities [15] - Minimal cancellations were observed at the end consumer level, indicating strong demand for affordable housing [13] Company Strategy and Development Direction - The company is focused on increasing production levels and reducing backlogs to pre-pandemic levels of 4 to 12 weeks [16] - Investments in manufacturing technology and customer digital access are prioritized to enhance affordability and attainability of homes [21] - The acquisition of Alta Cima and the integration of the Manis custom builders are aimed at expanding manufacturing footprint and enhancing customer experience [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic environment due to structural improvements and operational initiatives [37] - The demand for affordable housing remains strong, driven by rising rental rates and inflationary pressures [17] - The company anticipates that margins will normalize back to fiscal 2022 levels as the one-time effects of FEMA orders subside [38] Other Important Information - The company produced almost 90% of a 200 million FEMA disaster relief order during the quarter, recognizing approximately 83millioninrevenue[9][27]−Cashandcashequivalentsstoodat83 million in revenue [9][27] - Cash and cash equivalents stood at 464 million, with long-term borrowings of 12 million and no maturities until 2029 [39] - The company plans to utilize its favorable liquidity position to reinvest in the business for long-term growth [40] Q&A Session Summary Question: Can you provide more detail on demand by channel and visibility into community build for rent? - Management noted strong demand in community REITs and build-to-rent channels, with retail demand remaining good despite a 20% decline in traffic [50] Question: Regarding FEMA units, how should we think about the September quarter? - Management confirmed that approximately 97 million in revenue from FEMA units will be recognized in the September quarter, expecting a relatively flat top line quarter-over-quarter [54] Question: What is the outlook for average selling prices (ASPs)? - ASPs are expected to remain flat in the second quarter, with a potential return to normal levels in the second half of the year due to consumer preferences for fewer options [60] Question: How stable is the backlog given the current environment? - Management indicated that consumer cancellations have been minimal, and the stability of the backlog is good despite some dealer inventory adjustments [62] Question: What are the drivers of margin increases this quarter? - Management highlighted efficient FEMA production and favorable lumber pricing as key drivers, but noted that margins may normalize in the second half of the year [70] Question: How is the company adapting to changes in sales channels? - Management stated that retail sales account for about 50% of total sales, with growth in other channels like build-to-rent and builder developers [106] Question: What are the current trends in zoning regulations? - Management observed a reduction in zoning regulatory barriers, with increased focus on affordable housing initiatives at state and local levels [102]