Skyline Champion(SKY) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales decreased by 9% to $322 million in the second quarter compared to the same quarter last year, with a decline in U.S. factory-built housing segment revenue of$ 29.5 million and a decrease of $1.8 million in the Canadian segment [21][22] - Net income for the second quarter was$ 17.5 million or $0.31 per share, compared to net income of$ 17.7 million or earnings of $0.31 per share during the same period last year [28] - Adjusted EBITDA for the quarter was$ 28.9 million, a decrease of 10.9% over the same period a year ago, with an adjusted EBITDA margin of 9% [30] Business Line Data and Key Metrics Changes - Consolidated orders were up 70% sequentially from the first quarter and up 53% from the second quarter of last year [9] - Delivered 4,991 homes during the quarter, an 18% improvement from the first quarter but down 7% from the prior year [9] - U.S. housing segment gross margins were 19.2% of segment net sales, down 170 basis points from the second quarter last year due to increased material costs [25] Market Data and Key Metrics Changes - U.S. manufacturing facilities improved capacity utilization by 5%, reaching 63% during the quarter despite challenges from COVID-19 and supply chain disruptions [9] - Canadian revenue decreased by 7% to $24.6 million compared to last year, driven by a 4% decline in average home selling price [24] Company Strategy and Development Direction - The company is focused on expanding its automation and digital capabilities to scale effectively over the long term [18] - The demand for affordable housing solutions is expected to grow, driven by low interest rates and favorable demographic trends [17] - The company is gaining traction in the builder-developer channel with its Genesis brand, which offers a turnkey solution for builders [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strength of the housing market, driven by low interest rates and changing lifestyles [7][8] - The company anticipates continued challenges from increased material costs and labor constraints in the near term, but expects strong demand for single-family homes to persist [31][33] - Management noted that while recruitment has improved, production capability may still be limited by COVID-related absenteeism [34] Other Important Information - The company's effective tax rate for the quarter was 24.4%, down from 29.8% in the prior year, primarily due to increased federal tax credits [29] - The company had$ 264 million in cash and cash equivalents as of September 26, 2020, and generated $32 million of operating cash flow during the quarter [37][38] Q&A Session Summary Question: Monthly cadence of homes shipped through the quarter - Management reported a 21% increase in production in the second quarter versus the first quarter, with production levels in October running about 10% to 15% higher than the average of the second quarter [46][47] Question: Significant bottlenecks to expanding production - Management identified labor improvements early in the quarter, but later faced supply disruptions, particularly with forest products [48] Question: Margins outlook - Management expects margins to decrease sequentially from the second quarter due to backlog length and lumber contract structures [50] Question: Increased backlogs and input costs volatility - Management indicated that the pricing environment is favorable, allowing for the passing of price increases, although some contracts were disrupted [55] Question: Competitive dynamics - Management noted that demand currently outweighs manufacturing supply, with the ability to pass on price increases depending on regional competitive pressures [71] Question: Genesis product line rollout - Management expressed excitement about the Genesis product line, which is gaining traction with builders and offers a turnkey solution [79]