Skyline Champion(US:SKY)2021-11-03 17:38Financial Data and Key Metrics Changes - Net sales increased by 63% to $524 million in Q2 2022 compared to the same quarter last year, driven by a $188 million increase in the U.S. factory-built housing segment and a $14 million increase in the Canadian segment [17][21] - Net income for Q2 was $51 million or $0.89 per diluted share, compared to $18 million or $0.31 per diluted share in the same period last year, reflecting higher revenue and improved profitability [23][24] - Adjusted EBITDA for the quarter was $73 million, an increase of 153% over the same period last year, with an adjusted EBITDA margin expanding by 490 basis points to 13.9% [25] Business Line Data and Key Metrics Changes - The U.S. factory-built housing segment saw a 26% increase in the number of homes sold, totaling 5,902 homes, while the average selling price per U.S. home increased by 32% to $79,900 [17][18] - Canadian revenue increased by 57% to $39 million, with the number of homes sold rising by 19% to 358 units and the average home selling price increasing by 32% to $107,500 [19][20] Market Data and Key Metrics Changes - The company reported a backlog growth of $169 million during Q2, reaching $1.4 billion, equating to an average of 40 weeks of production [6][7] - The market for affordable housing is experiencing rising demand due to favorable financing, low inventory levels, and a growing customer base seeking alternatives to site-built homes [5][11] Company Strategy and Development Direction - The company is focused on increasing output efficiently while managing supply chain challenges, with expectations for material availability to improve in subsequent quarters [13][14] - Investments in digital transformation are aimed at enhancing customer engagement and simplifying the buying experience, which is expected to lead to higher order rates and increased production levels [12][14] Management's Comments on Operating Environment and Future Outlook - Management noted that both internal and external factors are creating a long runway for growth, with demographic and economic trends driving the need for affordable starter homes [11] - The company anticipates that supply chain challenges will peak in Q3 and early Q4, followed by moderate improvements, while also investing in automation to increase production capacity [13][14] Other Important Information - The company had $310 million in cash and cash equivalents as of October 2, 2021, and generated $57 million in operating cash flows during the quarter [29][30] - A new $200 million revolving credit facility was established to enhance liquidity for strategic initiatives and acquisitions [29][30] Q&A Session Summary Question: Production ramp-up and supply chain challenges - Management expects a moderate ramp-up in production coming out of Q4 into next year, with backlogs building until the end of the calendar year [38][39] Question: Demand trends and consumer types - Orders accelerated post-Labor Day, with affordability being a key driver for increased market share in single-family completions [40][42] Question: Financing terms and their impact - Recent increases in financing terms for chattel and land home loans have made homeownership more accessible, potentially driving additional volume [47][48] Question: Order rates and backlog quality - The strength of backlogs is solid, with virtually no cancellations, and demand is strong across all channels [50][51] Question: Sustainability of gross and EBITDA margins - Gross margins are expected to remain sustainable, but EBITDA margins may see some deterioration due to reduced production levels and higher SG&A costs [54][86] Question: Impact of supply chain on gross margins - Supply chain challenges are still prevalent, and while there is potential for gross margin expansion, caution is advised [94]