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Cavco(CVCO) - 2022 Q4 - Earnings Call Transcript
CavcoCavco(US:CVCO)2022-05-27 18:49

Financial Data and Key Metrics Changes - Cavco Industries reported record results for fiscal year 2022, with revenue growth of 47% and earnings growth of 119% compared to the previous year [7] - Net revenue for Q4 2022 was $505.5 million, up 64.9% from $306.5 million in Q4 2021, with the acquisition of Commodore contributing $89.2 million to this increase [17] - Consolidated gross profit margin increased to 25.6% in Q4 2022 from 23.1% in the same period last year [20] - Net income attributable to Cavco shareholders rose 112.6% to $53.6 million, with diluted earnings per share increasing to $5.86 from $2.71 [24] Business Line Data and Key Metrics Changes - The factory-built housing segment saw net revenue increase by 69.5% to $488.3 million, driven by the addition of Commodore operations and a 31% increase in average revenue per home sold [18] - Financial services segment net revenue decreased by 7.2% to $17.2 million due to lower interest income and home loan sales income [20] Market Data and Key Metrics Changes - The backlog remained flat sequentially but was significantly up year-over-year, with orders above pre-pandemic levels [10] - Production capacity utilization improved from approximately 75% to over 80%, exceeding pre-pandemic levels [8] Company Strategy and Development Direction - The company is focused on increasing production capacity through new plants and strategic acquisitions, including the Commodore acquisition which added approximately 25% to capacity [12] - There is an emphasis on product simplification and improving staffing and retention to enhance production efficiency [9][43] - The company aims to address the housing supply deficit, particularly in urban areas, and expects to capture market share from traditional site-built housing [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges such as labor and supply chain issues, as well as the impact of rising interest rates on affordability [13][14] - Despite these challenges, management remains optimistic about the demand for manufactured housing, particularly as buyers shift from site-built to manufactured homes due to affordability concerns [15] - The company is monitoring market dynamics closely to adjust strategies as needed [16] Other Important Information - The company completed a $100 million stock repurchase authorization, demonstrating its commitment to returning value to shareholders [12] - The effective tax rate increased to 22.1% due to lower tax benefits from stock options compared to the previous year [24] Q&A Session Summary Question: Capacity and Production Outlook - Management indicated that there is potential for continued increases in unit production due to improved productivity and labor management [29] Question: Supply Chain Challenges - Management noted that supply chain issues remain persistent, with logistics and trucking becoming significant challenges [30] Question: Margin Expectations - Management expects a continued impact of approximately 200 basis points on margins from the Commodore acquisition for the next couple of quarters [32] Question: Demand and Cancellations - Management reported that while there has been some shifting in orders due to rising prices and interest rates, overall demand remains strong [34] Question: Demand Consistency Across Channels - Management observed strong demand from community operators, particularly larger REITs, while retail demand remains stable [38] Question: Backlog Mix Changes - Management noted a steady shift towards multi-section homes, driven by affordability challenges [40] Question: Product Simplification Progress - Management confirmed that product simplification efforts are ongoing and are expected to continue to enhance production efficiencies [42] Question: Industry Capacity Increases - Management indicated that while some competitors are adding capacity, the overall increase is limited by staffing and supply chain constraints [45] Question: Consumer Delinquencies and Mortgage Rates - Management reported no significant increase in consumer delinquencies and noted that home-only mortgage rates have recently increased to a range of low-6s to mid-7s [46][47]