Cavco(US:CVCO)2023-08-04 23:06Financial Data and Key Metrics Changes - Revenue for Q1 2024 was flat at $476 million, with pretax profit slightly increasing from $59 million to $61 million [7] - Net revenue decreased by $12.4 million or 19.1% compared to the prior year's first fiscal quarter [13] - Consolidated gross profit as a percentage of net revenue was 24.8%, up 20 basis points from 24.6% in the same period last year [15] - Net income attributable to shareholders decreased by $13.2 million or 22.1% from $46.4 million to $59.6 million [25] - Cash balance increased by $80.8 million or 29.8% from $271.4 million at the end of the prior fiscal year [28] Business Line Data and Key Metrics Changes - In the factory-built housing segment, net revenue was $457.1 million, down 20.2% from $572.6 million in the prior year quarter [13] - Financial services segment net revenue increased by 19.2% to $18.8 million from $15.7 million, driven by more insurance policies and higher premium rates [15] - Factory-built gross margins remained healthy at 24.8%, supported by lower material costs [10][16] Market Data and Key Metrics Changes - Backlogs decreased from seven to eight weeks to five to six weeks, indicating production is outpacing wholesale orders [8] - Order rates were up year-over-year and significantly increased over Q4 [8] - Interest income for Q1 was $4.6 million, up 251% from the prior year quarter due to higher interest rates [24] Company Strategy and Development Direction - The company aims to responsibly deploy capital focusing on plant improvements, further acquisitions, and evaluating lending operations [20] - The acquisition of Solitaire Homes is progressing well, with a focus on developing new models and updating existing products [11] - The company is prepared to ramp up production as market demand improves, despite current reduced production schedules [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in underlying demand based on traffic and buyer activity, despite concerns over interest rates and economic confidence [9] - The company believes it has seen the bottom of wholesale orders and anticipates returning to full production schedules as market support develops [9] - The housing affordability problem is worsening, but the underlying demand continues to increase [49] Other Important Information - Selling, general, and administrative expenses decreased to $61.7 million from $66.1 million due to lower third-party support costs [18] - The effective income tax rate was 23.5%, down from 24.7% in the prior year, reflecting the expiration of Energy Star credits [19] - A new $100 million stock repurchase program was approved, increasing total availability to $135.7 million [26] Q&A Session Summary Question: What are the expectations for orders and shipments in the near term? - Management expects orders to continue building, with backlogs stabilizing and potentially increasing, supporting production ramp-up [58][61] Question: How are margins impacted by increased claims in financial services? - Management noted that high claims were due to weather events, but they do not expect this to continue in the near term [35][36] Question: How does the company plan to manage capital allocation between stock repurchases and expanding operations? - The company plans to use stock buybacks as a balance sheet management tool while also considering expansion opportunities [46][52] Question: What is the current state of order rates across different markets? - Retail orders are increasing significantly, while community orders are lagging due to inventory issues, but improvements are expected by year-end [75][79]