Skyline Champion(SKY) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue decreased by 3.5% to $342 million compared to the same quarter last year [8][18] - Operating income increased nearly 50% year-over-year, with adjusted EBITDA growing by 13% to$ 29.7 million [8][24] - Adjusted EBITDA margin improved by 130 basis points to 8.7% [8][24] - Net income for the quarter was $17 million, or$ 0.30 per share, compared to $10.5 million, or$ 0.19 per share in the prior year [22] Business Line Data and Key Metrics Changes - U.S. factory-built housing segment revenue declined by $4.7 million, while Canadian revenue decreased by 16% to$ 23 million [18][19] - Average selling price per U.S. home sold decreased by 2% to $60,600 due to a shift in product mix towards single-section homes [18] - Canadian units sold decreased to 276 homes from 329 homes in the prior year [19] Market Data and Key Metrics Changes - HUD industry volumes increased by approximately 6.7% year-over-year, with strong growth in the South-Central region [11] - The broader housing market showed signs of strong growth, particularly for affordable housing [12] Company Strategy and Development Direction - The company is focused on operational improvements and product rationalization initiatives to achieve a 10% adjusted EBITDA margin target within 18 to 24 months [26] - The company anticipates continued growth driven by favorable demographic and economic factors, particularly in affordable housing [10][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market's health, driven by increased demand for affordable housing and improvements in the financing environment [31] - The company expects HUD industry volume growth to continue at a mid-single-digit rate for the remainder of the calendar year [11][31] Other Important Information - Consolidated backlog decreased to$ 133 million from $181 million year-over-year, with an average U.S. plant backlog of five weeks of production [25] - The company had$ 171 million in cash and cash equivalents, with $44 million of unused borrowing capacity under its revolving credit facility [27][28] Q&A Session Summary Question: Can you discuss underlying demand trends and expectations for backlog? - Management noted good traffic at the dealership level and expects backlog to build into the fourth quarter [34] Question: What are your thoughts on average selling prices and product mix? - Management anticipates a gradual uptick in average selling prices as the year progresses, particularly towards multi-section homes [35] Question: Can you elaborate on the Genesis and builder developer channel? - Management reported strong interest and activity from builders and developers, with some orders already in production [37] Question: What trends are you seeing in January? - Management indicated good year-over-year order activity in January [41] Question: Can you discuss the M&A pipeline? - Management is actively looking at M&A opportunities, with a pipeline of potential near-term and long-term activity [44] Question: What is your outlook for the near-term revenue? - Management expects softness in the RV market and Canadian revenues but anticipates good growth in the U.S. [50] Question: What is your expectation for HUD market growth in 2020? - Management expects mid-single-digit growth for the HUD industry, with the company likely to perform similarly [55] Question: Can you provide insights on financing trends? - Management noted that GSEs have not yet moved on the duty-to-serve chattel program but expressed optimism about private placements and interest rate drops [90]