Skyline Champion(SKY)2021-08-07 14:59Financial Data and Key Metrics Changes - Net sales increased by 87% to 208 million increase in the U.S. factory-built housing segment and a 42.9 million or 11.9 million or 62.7 million, an increase of 178% over the same period a year ago, with an adjusted EBITDA margin expanding by 410 basis points to 12.3% [26] Business Line Data and Key Metrics Changes - U.S. factory-built revenue increased by 87% driven by a 58% increase in the number of homes sold, totaling 6,372 homes [20][21] - Canadian revenue increased by 149% to 112 million, up 107% versus the prior-year quarter due to increased sales volume and higher pricing [23] Market Data and Key Metrics Changes - Backlogs grew by more than 1.2 billion, despite sequential unit production growth [6] - U.S. manufacturing facilities operated at capacity utilization levels near 80% for the quarter, improving about 2% from the prior quarter [6][11] Company Strategy and Development Direction - The company is focused on expanding capacity and investing in automation to enhance production processes, aiming to boost supply to channel partners and customers seeking affordable housing [13][14] - The strategic direction includes a move into digital and turnkey offerings to meet the growing demand for affordable housing solutions [15][16] - The company plans to continue investing in technology to enhance the customer buying experience and drive growth [15] Management's Comments on Operating Environment and Future Outlook - Management expects strong demand for affordable housing to continue through the second quarter, with challenges from raw material availability and supply chain issues expected to persist in the near term [12] - The company anticipates that supply chain challenges will cause sequential declines in production in the second and third quarters, but expects improvements by the fourth quarter [12] - Management remains confident in the long-term growth opportunities due to low entry-level housing supply and increasing millennial household formations [13] Other Important Information - The company had 200 million revolving credit facility to enhance liquidity for strategic initiatives [29][30] - The company is focused on executing growth and operational initiatives, planning to reinvest cash into the business [30] Q&A Session Summary Question: What drove the sequential improvement in raw material availability? - Management indicated that the first quarter benefited from sourcing additional materials from the supply chain, allowing for an uptick in production [34] Question: Are there measures in place to restrict orders to align with production? - Management stated that backlogs are encouraging and reflect strong demand, with no controls being put in place as delivery times remain manageable [35] Question: Can you provide specific examples of automation efforts? - Management expressed excitement about automation initiatives and plans to test automation pilots over the next 12 to 24 months to address labor challenges [42][43] Question: What is the outlook on lumber prices and margin opportunities? - Management noted that while lumber prices have decreased, other material costs remain high, leading to margin compression during the quarter [45] Question: Why isn't the company acting more aggressively to bring on new capacity? - Management cited supply chain and labor challenges as limiting factors for increasing output, with expectations for improvement in the fall [52] Question: What insights can you provide on buyer qualifications? - Management indicated that appraisals are not keeping pace with price increases, affecting buyer qualifications, but buyers are still able to qualify for homes [56] Question: What are the key demand drivers for housing? - Management highlighted that many first-time home buyers are seeking attainable housing due to high prices of site-built homes and demographic shifts towards rural living [68]