Skyline Champion(SKY) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated quarterly revenue was flat at $355 million compared to the prior year period, despite soft HUD industry shipments [7][19] - Gross profit increased by 25% year-over-year to$ 74 million, driven by improved material costs and synergies from the merger [7][22] - Adjusted EBITDA grew by 36% year-over-year to $32.5 million, with an adjusted EBITDA margin of 9.2%, a 250 basis point improvement [7][26] - Net income for the quarter was$ 17.7 million or $0.31 per share, compared to a net loss of$ 77 million or a loss of $1.42 per share in the prior year [24] Business Line Data and Key Metrics Changes - U.S. factory-built segment revenue grew by 2%, driven by a 2% increase in average selling price to$ 62,200 [20] - Canadian revenue increased by 4% to $26 million, with stable home sales volume at 311 homes [21] - The factory-built housing segment comprised 96% of total revenue, up from 93% in the prior year [19] Market Data and Key Metrics Changes - HUD industry shipments declined by approximately 2.6% year-over-year, with Texas being a primary driver of the decrease [8][9] - Backlog decreased by 32% year-over-year to$ 172 million, but grew 12% sequentially from the June quarter [12][13] - Retailers have normalized their ordering patterns, keeping inventory levels lower than last year [12] Company Strategy and Development Direction - The company remains positive on the outlook for the manufactured housing industry, driven by strong demand for affordable housing [8][10] - The launch of the Genesis Home brand aims to serve builder developers and retailers, with a focus on off-site construction options [16][40] - The company is investing in technology and automation to improve production efficiency and reduce reliance on subcontractors [18][99] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand environment is strong, with placements up 7% through August [36] - The company expects continued growth in the HUD industry volumes for the remainder of the fiscal year [10] - Management anticipates that EBITDA margins can reach around 10% over the next 18 to 24 months, driven by operational improvements [80] Other Important Information - The company completed a securitization of a $0.5 billion portfolio of manufactured housing home loans, marking a significant milestone in the market [14][86] - The effective tax rate for the quarter was 29.8%, compared to a negative 8.2% in the prior year [25] Q&A Session Summary Question: Can you provide insights on geographic areas outperforming in demand? - Management indicated that while Texas has been a drag, overall demand remains strong, with placements up 7% [36] Question: What are the biggest levers for continued improvement in margins? - Management highlighted operational improvements and margin enhancements as key drivers, with significant upside potential remaining [38] Question: Can you elaborate on the Genesis brand and its impact? - The Genesis brand is aimed at builder developers, focusing on off-site solutions that improve returns and reduce construction time [40][98] Question: What are the expectations for volume growth and ASPs for the remainder of the year? - Management expects mid-single-digit volume growth, with stronger performance anticipated in the fourth quarter [62] Question: How is the automation initiative progressing at the Leesville plant? - Management reported positive progress with automation, indicating it could be rolled out to other facilities in the future [68]