Cavco(CVCO) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 16% year-over-year to $500.6 million, up from$ 431.7 million in the same quarter last year [26] - Pretax profit rose by 29% to $76.1 million compared to$ 58.9 million in the prior year [28] - Net income attributed to shareholders was $59.5 million, down from$ 79.6 million in the same period last year, with diluted earnings per share at $6.66 versus$ 8.57 [20] Business Line Data and Key Metrics Changes - Financial Services segment net revenue was $19.4 million, up 7.1% from$ 18.1 million, driven by a higher number of insurance policies [19] - In the factory-built housing segment, net revenue was $481.2 million, up 16.3% from$ 413.6 million, primarily due to a 15.9% increase in average revenue per home sold [26] Market Data and Key Metrics Changes - Backlog decreased by 34% sequentially to $427 million, equating to approximately 9 to 11 weeks at current production rates [13] - Cancellations were at about 60% of the previous quarter's rate, indicating a gradual improvement in order fulfillment [11] Company Strategy and Development Direction - The company successfully launched a new plant in Hamlet, North Carolina, which is fully staffed and operational [15] - A new consumer-facing digital home marketplace was launched, enhancing the homebuying experience and connecting consumers with retailers [23][24] - The acquisition of Solitaire Homes is expected to add significant value and enhance sales through its retail network [22] Management's Comments on Operating Environment and Future Outlook - Management noted that while the inventory issue is ongoing, there are early signs of a seasonal pickup in traffic and quotes, which are positive indicators for future orders [14] - The company remains optimistic about the long-term demand for manufactured housing due to the nationwide lack of affordable housing [38] Other Important Information - Gross margin as a percentage of revenue in Financial Services decreased to 46.6% from 61.2% due to weather-related impacts [27] - The company executed share repurchases totaling$ 34 million during the quarter [32] Q&A Session Summary Question: Trends in traffic inquiries and quotes across different markets - Management indicated that communities remain strong while street retail activity has decreased, but there are signs of optimism in January [46] Question: Production expectations given the decline in backlogs - Management expects to continue operating at reduced capacity until backlogs stabilize, with some plants adjusting to four-day work weeks [52] Question: Expectations for average selling prices as raw materials decrease - Management noted that pricing is more influenced by backlog levels and competitive dynamics rather than raw material costs alone [56] Question: Guidance on Solitaire Homes' annual revenues and shipments - Management indicated that the acquisition would increase manufacturing capacity by about 10% but cautioned that margins would be impacted in the next two quarters due to purchase accounting [72][74] Question: Insights from park operators regarding 2023 - Community operators, particularly large REITs, are maintaining growth plans and have significant capital invested, indicating steady demand [83]