Cavco(US:CVCO)2023-05-19 18:52Financial Data and Key Metrics Changes - Net income attributable to Cavco shareholders was $47.3 million, down from $53.6 million in the same quarter of the prior year, with diluted earnings per share at $5.39 compared to $5.80 [4] - Gross margins in financial services decreased to 45.7% in Q4 2023 from 58.5% in Q4 2022 due to weather events in Texas and Arizona [3] - Net revenue for the period was $476.4 million, down 5.8% or $29.1 million compared to $505.5 million in the prior year's fourth fiscal quarter [47] - Pre-tax profit decreased by 14.6% to $58.6 million from $68.6 million for the prior year period [64] Business Line Data and Key Metrics Changes - Within the factory-built housing segment, net revenue was $466.1 million, down 6.6% or $32.2 million from $488.3 million in the prior year quarter, primarily due to a decline in base business units [47] - Financial Services segment net revenue increased 18.4% to $20.3 million from $17.2 million, driven by more insurance policies in force and higher premium rates [91] Market Data and Key Metrics Changes - The company reported a 10% year-over-year decline in volumes and a 6% drop in revenue, indicating a challenging operating environment [42] - The retail inventory issue has largely been resolved, moving closer to a 1:1 ratio of homebuyer demand to manufacturer orders [44] Company Strategy and Development Direction - The company is focused on maintaining a variable cost structure to sustain profit and cash flow at lower volumes, which has been effective in the current environment [42] - The acquisition of Solitaire Homes is expected to enhance product offerings and support the company's strategic priorities [49][61] - The company is also investing in operational improvements and growth while managing its balance sheet through share buybacks [95] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving order rates, with net orders significantly higher compared to the last two quarters [58] - There is a positive sentiment among retailers, with healthy traffic and quotes indicating a potential increase in future orders [60] - The company anticipates that the fundamental need for homes will create positive pressure for future order improvement [60] Other Important Information - The company completed the acquisition of Solitaire Homes, which utilized approximately $106 million in net cash, leaving a strong cash balance of over $270 million [49] - Interest income for the fourth quarter was $3.9 million, up 212% from the prior year quarter, primarily due to higher interest rates on invested cash balances [48] Q&A Session Summary Question: What is the cadence of new order rates exiting Q4 and into Q1? - Management indicated that they do not expect further declines in order rates and may see a slight pickup in production [8] Question: Can you quantify the order rates and what has been seen in April and May? - Management noted that net orders on a same plant basis are up over March, indicating a significant pickup beyond seasonal trends [17] Question: What is the expected impact of the Solitaire acquisition on gross margins? - Management expects the impact of purchase accounting to continue for a couple of quarters, but long-term performance is anticipated to align with large manufacturing gross margin rates [72] Question: How does the company view the online sales channel in the future? - Management believes that a significant portion of home sales will begin with an online experience, indicating a central role in their strategy [76] Question: What is the current state of inventory levels among dealers? - Management acknowledged that while some dealers are still cautious about replacing homes, the overall inventory issue is largely resolved [110][117]