CVCO - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter Fiscal Year 2018 Cavco Industries Incorporated Earnings Call Webcast. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answers session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. CEO. and Chairman Stegmayer, Joe Mr. Stegmayer, you begin. may

Joseph Stegmayer

be Thank call. We’ll and Urness, Dan? the then welcome, your any Vice everyone, conference quarter providing we’ll and report, third our financial to begin questions. Dan take of to President, you, happy with Executive our

Daniel Urness

everyone. Hello,

we made respectfully in questions, to that may be All within historical remind are our Before and certain context this to therefore on responses of statements made begin, in harbor in in All either forward-looking. risks many our are rules. we today considered safe nature are the call, our you comments statements uncertainties, remarks control. beyond or not of forward-looking subject which statements are and

or statements disclaims any other available place is Our More to website part information sources. update on performance. made reliance obligation is them. complete actual investors our this yesterday filed or anticipated on Cavco on may results from any should forward-looking performance and and on call, differ this of release subject and materially of our not earnings as any results included from

a Services Consolidated Lexington period from Financial to quarter housing be new homes. in factory market Homes year. Now this the larger prices $XXX The this million revenue XX.X% incremental improved XX.X%, from resolution up a improvement margin rising fiscal compared quarter. segment, of the compared increased in Net and last growth. of the $XXX fiscal percentage of revenue and for quarter gross higher-priced to third sales to million and net Mississippi, to from revenue key volume during factory-built increase sales constrained gross $XX.X result more as Breaking challenges home higher labor revenue million, down The million from dispute the by net $X.X favorable policies material settlement insurance year X%, quarter was fiscal up XXXX. the home third force our sales the in of year. profit our financial increased proportion in net including third same continued a segment results. volume, was for business X% was prior loan

have lower income of X.X% This $X.X a million taxes. income fiscal income full of result lower only this a to order transitional of liability tax quarter, in resulted and net year federal tax revaluation to quarter span which rate tax The blend this fiscal which the estimated new product an deferred higher large tax during related quarter of cost as tax realization benefits. cost input Selling, of implemented rising the income gained same third effective quarter was of and last percentage from costs, a recorded in XXXX to have company although to XX.X% levels the revenue comprehensive order prices the U.S. offset December from net government’s XX.X%, compared and full We improvement controls. The general coming of our after rates and reflects was expense year. administrative blended expected obligations. Income law, efficiencies to net the expenses backlogs fixed legislation. net a March benefited fiscal final revenue fiscal year. higher XX%, ends The of tax the this quarter benefit a the adjust enactment income rate is approximately before tax to in effective the that deferred tax –

included quarter fiscal $XX.X of XXXX, XXXX was year. beginning compared tax fiscal from quarter and in tax rates was Lexington fiscal prior effective an the XX, the XXXX quarter Net net to quarter. in reported XXXX are consolidated income of the balance year’s the income this the December Comparing benefit diluted share estimated versus low X, sheet sheet, the only year. at as last in the per the occurred $X.XX should acquisition this lower of Lastly, current million for income April of third Net $X.XX income reflect year in to Homes balance third fully $XX.X rate XXs. balances million same

$XXX mainly compared Our for homes the balance cash stages partially higher additional feed earlier. growth, activities. increased of Inventories in months the provided deposits stocking final to and the customer rates. approximately quarter. incident the million the increased to of during primarily income quarter. increased $XXX decreases net is was production by net salary more at rebate sales cash increase The higher wage sales the from by end to – receivable from in nine Accounts million, home cash also sales Accrued accruals net home period. operating of and was increased Inventory and raw at end liabilities offset from materials volume higher accruals from

equity April from the report. grew XXXX as stockholders’ million $XXX up approximately million Lastly, X, XX, Joe, December XXXX, approximately to of that completes financial $XX the balance.

Joseph Stegmayer

for a would to homes. rather people few government XXXX particularly in public standards first homeownership. in comments. certain drove and to homeownership banks calls years. U.S. and prior buyers rent On policies their ease make increase school that is Cavco The indicate general taken young Thank than year rate continue you, last because after it to of restrained other has comes XX boost to younger Dan. lending The Federal I’d exception the comments, that Reports this. conference notable, thought time like previous encouraged rose buy with the

during at the XXXX, calendar XXXX, that year to low. fourth increase of earlier, XX-year the from homeownership bottomed someone to headed group early rather quarter. a age home-buying to appears market is homeownership rate the a be of quarter among age any largest the the Census was which XX.X% rose According XX% since a XXXX rose Bureau, in under boomers, a U.S. of quarter out largest the to to The rate in in from fourth the homeownership generation XX.X%. driving rent calendar the The own what coming baby millennials. XX.X% XX% move households than by of Now rate

have the approximately of these quarter first climbing indicating XX%. In is The year, of been reliable average figures a trend. the upward long-term since still addition, homeownership rate last below

rates reports will X.X% that CoreLogic homeownership to apparent are the times single-family wages of This fully becomes buyers. to factors, prices S&P to that growing XX the and not National report factory-constructed other factors. Cavco’s new The inflation. XXXX, rose and the home price tax faster recover, mortgage affordability home headwinds Some as believe, Home than potentially ended the homeownership years such offer value in changes economic adverse code three Case-Shiller about Price for and and we’re rising suggest inflation. for in take Index as months home November environment, suggest rate immune sales. incentives pure Certainly, of however, We that an might such more homes actually rates trend

construction. construction face the build builders. Furthermore, generally price efficient company of in not people onsite our Our use same waste more very of to less challenges building as The prices. Far of onsite our homes that, is reach materials must must and the of points offer difference inflation materials and very can homes effective to and the process our is much homes, wages and face. ability of qualified availability competitive that affordable of builders at a new we are even method of to systems interest labor results

in price prospect all housing. reached steady a in get that needs. We’re there affordable think XXXX not should home for be XXXX, continued But of September prices market demand national record with suggesting homes and their we escalation factory-built

talent and meet challenges typically tax We long-term improving boomers, just lie which baby With growth. work for others, and ahead any And we qualify now, have come; we’d feel we many lots accomplish robust objectives. our save be of to to have our growing payment can to the from among economy. do, of employment; changes of the suggested, the There’s economic demographic buyers environment your attractive and the help for large buyers we and could segments, glad a reasons, and two capital but questions. take positive our of loan; millennials that and indications I’ve generate people down a and for that

Operator

from comes with Securities. [Operator Moore Daniel CJS Instructions]. first And our question

is Your now open. line

Daniel Moore

Good Good afternoon, afternoon, Joe. Dan.

Joseph Stegmayer

Hi, Dan.

Daniel Moore

release, or of it In rise? annually headwind. wanted you you can – years, remarks out? grow and the given in sort next mentioned ongoing call ongoing prepared a obviously, – units that an to worse, over an Is to called these constraints, continues few fast press labor, in And headwind the you getting just out the the demand it’s how if

Joseph Stegmayer

problem, Labor Well, availability availability, just for it our I labor that we employment. see issue. that qualified hear we just we from issue our from an not all We our will all our this people don’t of that to onsite our changed point although has remains we pass come think competitors. from the is in vendors, the in it is industries, who from industry, hear still an even hear hear people or and quarter-to-quarter. from it requirements And business out much environment this across. But peers builders it and certainly we other

entire it’s it’s are facing is. for And So systemic the everyone and country. think issue as challenge – else we I it, a

to things to all do that. trying address we’re Now sorts of

in exclusively We is around talent aboard all all recruiting brought areas our have full-time work and of recruiter that runs company. and have her we

Even areas, in facilities media, onboarding in work for wage continue We’re programs, invest an facilities to and will and – we at newly have working wages at We’ve using will our provide the the we different various been training social have people. continue all to our looked device programs to surveys environment. and attractive look environment, programs. in we incentive

we the more goal good like, help Dan, retaining try you how to then things these attracting, people. us extent growing I from restrain so importantly, mind production or to will that that with much we And just tell of issue. it’s couldn’t us do and an all in But,

can to we to progress. certainly utilization full facilities we face enough and and utilization full our there we we’re on think quite ability are hire substantial But depends accomplish have of to good make not and yet. workforce addressing the We our

Daniel Moore

or inject helpful. intend additional liquidity into there? on update and Very you’re when MH GSE’s to gears, Maybe serve to the they anything hearing how duty industry, the switching any

Joseph Stegmayer

Yes.

Fannie you GSEs their Mac, home industry been to the have the and to making general. Mae our both They programs have lending. manufactured with So presentations increase Freddie participation association, asked industry involved I’m in trade both glad in

will. themselves, XXXX, $XXX for property preliminary that additional chattel both where huge million intend mortgages, a increasing three chattel industry. good And an for will the Now It’s the until In but which Then the you that by trend the makes help. making like also loans. the they’re property bit side, progress. looks equals There’s about it their statement right years, and additional an GSEs and real will only move collateral personal for loans direction. Fannie chattel Mae move an but home moving to they it at X,XXX they’re estimated they that some to loans. they’re a $XXX million specifically, year. a contribution going slower to certainly to purchase over like, of finance. on involvement Mac data is availability secured X,XXX financing least start await home indicate in manufactured of think indicates lending, the set a through is little that be than XXXX and home will real the they still XXXX in We we’d its it programs, add of next not lack estate traditional if objectives and they they’ve loans loan specific plans a But actually numbers that. Freddie in but not number and we will Tyler’s of of increase manufactured of Again, the

Daniel Moore

memo controlling if how and and a catalyst you reducing a The could And might. color Housing helpful. published add more, regulatory regulation Urban think regarding you that be? and Developments can I that Very costs. one to Any big recently

Joseph Stegmayer

who you of call that January of homes a the are were a playing a manufactured Yes. to news. HUD’s with that XX homes of not wholesale past familiar public are good built did those for announcement going review housing industry, that, on they you all I kind we our our of We’ve to the Again, question make on do preemptive industry, the manufactured in field code. many in level the welcome rules. to federal mentioned of regulation

materials So homes used, thoroughly inspected. prime are all are

In fact, construction inspected is. arguably, onsite of much more an

but years. Carson look very now review And in or In they thing. that that the role what fact, of is they publicly the And in has regulation in added. thoroughly not vital will Secretary the manufacturing played many they, growth of and country, is be any welcome. XX% I Right and housing think it some no between total that, for needs outdated, the what housing the what’s about negative is what’s HUD in there’s they’ve happening affordable be needs. rules look stated and reinforcement regulation rules, meeting problem higher country’s that a provides HUD think adjustments to has now, the housing stock, flexibility of The I with made HUD manufactured doing reason housing recognized of So manufacturers. single-family cooperation been and not improvements to percent interpretation the a couldn’t

welcome So this. we

think, I our great quality consumer of the also needs the building it’s the a continuing of homes. of and and to indication the listening protection course, of industry,

relationship news many heard that HUD, So move we years. positive feel about regulator to more we this. forward cooperative positive agency. that we’ve and And look It’s very the many, in most with from our a

Daniel Moore

in jump queue. color. back you, Great Joe. Thank I’ll

Joseph Stegmayer

you, Thank Dan.

Operator

our Alvaro from And next from Lacayo comes Gabelli. you. Thank question

Alvaro Lacayo

guys. afternoon, Good

Joseph Stegmayer

Good afternoon.

Alvaro Lacayo

in just sort of at prices that looks know the pricing over be look the and when nine shipment performance you how the three I this change And the a what can accompanied of of vary at I three fairly if unit in puts you you in bit months just lower prices mix, highlight sort what sort Starting past but to So Maybe can it of based evolving preference versus questions. got months in there of price see look the with at we’ve couple six you you there? how you growth, the – and have quarters just, strong the sort to selling terms shipment look straight unit you of takes consumer on quarters and is year? a buying next they’re that’s do see and little of industry. growth a driving do said

Daniel Urness

price and reminder, to happy a predominantly our we of on you’re sales there which what is a that. address higher mix stores, is are The This – Yes, homes naturally retail based of through wholesale course, that sell sell, average our is calculating, Sure. seeing Dan. which price. as homes, retail company-owned a then sales carry

add variability But can can you to of have homes larger to the that’s and gross that higher better the always that So refer often remind provide margin component nonetheless, and variability of. we and for primary us. a priced

gross profit we can homes. more in towards times so And lean like this profitable

And do that. so we’ll

the will. continue to We’ll and But demands that the obviously, well. We our if take paying little to marketplace customers attention and the serve to to have bit done a monitor those as that. do to you all produce needs in longer have we balance,

improvement one that and opposed So that important we’ll as also when I’d add one a unit, on line we that unit remain ship as ship focused double-section bottom counts home when to line counts one And growth. a home single-section unit. reminder top we as shipment

mix So of or be higher quarters growth then as counts will, single-section that is certain we counts, may will if have the unit have that lower higher others that have double-section than you homes, way.

Alvaro Lacayo

the have around what something number exactly expect the in guys to it quarters? to detail years, effective in strongest you guys we are this highlighted you cost had improvement improvement step seems like is on if Maybe – and that then mean, efficiencies could And controls. drive further down the number? we the saw, provide that And doing several SG&A the performance you. the I you cost should in should fixed – Thank and you more SG&A, drive

Joseph Stegmayer

We of sure into ourselves on as With there the respect we’ll some your in address maintaining lot forward, Dan that’s I’m SG&A detail efficient a pride when industries fact, let part cost Well, get question, the our more first to of of not always proprietary. – to there, the to I’ll lowest keeping going compared ever, that. and was in industry among publicly. controls that

Daniel Urness

SG&A yes, just continued naturally higher, in see Sure. the a the we sales. we’d Alvaro, And as percentage go expect see as in leverage improvement to the revenues component of

grow room percentage as would our low all-time or more the bit get more But dollars there SG&A wouldn’t probably are single a we even room there increase. digits. reduce for and yes, continue in though to can lows, I But now, as still single higher think, the now little to we those consolidated the insurance in the included because that there’s to which down reason division. businesses think think have and lower. our retail get mainly we our digits, is, get statements also We there’s into – again, we we wouldn’t our SG&A don’t finance our company, we company,

more leverage the way. we So think statement that together, still there’s that said in being

Alvaro Lacayo

Thank you very much.

Operator

[Operator Instructions] Hollenden next Our from Brian question Sidoti. with comes

open. is line Your

Brian Hollenden

my Hey, questions. Yes. taking thanks guys, for

Joseph Stegmayer

bet. You

Brian Hollenden

that more Can million $X.X some cash recoveries? provide to receipt? you settlement, favorable color that insurance This dispute is related on

Daniel Urness

Well, we resolution. a a specifically dealing one-time an it’s color just – because favorable resolution a it’s for with while event. been really, got settlement, we’ve provide and didn’t It��s issue

just but called any we so no. that, specific for add it what we sure, to And have wanted we out was, make it color on don’t to

Joseph Stegmayer

previous only The favorable – so that we the that, it’s would feel our is we Dan’s expense something and it we’ve comment were wasn’t responsibility, add reflects we to quarters I settlement. And was response that incurred our thing in to got result that, didn’t received belief our obviously, it responsibility.

working as on something, and we’ve that’s an but one-time So for event. it’s unusual sometime, said, Dan been

Brian Hollenden

planning moving so, are cost in in And by of pricing excess if you fiscal Thanks. how inflation much? on – XXXX? then about And

Daniel Urness

increasing the serve to do shooting produce. to are obviously, the price long-term that. the in sensitive But room you business have gross Well, in also we don’t have do to we we’ve And demand our and the worked do based we towards prices we benefit to points the of that all to we levels give our towards percentage, over that the cost on a and be able want marketplace think we we that demands get margin. can being nature

short to in the yes, is benefit that just much without good answer business long-term at is, market and as price as us in our factors losing the to times products able tougher be turning we’ll we to business can when in points addition away for set to So times. look there possibly cost continue business for or good in we

Brian Hollenden

capacity backlog like? where and the your second is quarter, it sequentially stand? Did does increase What look from utilization

Daniel Urness

XX% utilization, equivalent are utilization over numbers recent of is and now And reported roughly our our the ago. running brick-and-mortar a most backlogs that capacity a Our will. $XXX million, around little with quarter if you is

note more the homes we that factories of what our all build in a – have capacity on generally. means Just to speaking is, that, our in

is Our were ability limitation the and as Hence, up producing to quickly current like market homes. the would to if about we the a labor higher we what Joe demand. talked reason we have in than typically meet backlog more as ramp we’d

are that. build the each and now right number hire. but to really the is want of two we other just related know So But sure kind to need labor numbers. we people more brick-and-mortar more of with by constrained kind homes make directly, you we’re I XX% a to

Brian Hollenden

for color of any last does your And you there and Is one there then business much? that combination Thanks. affect Champion me, helpful? would be Skyline the can provide

Joseph Stegmayer

We any changes wouldn’t They’re Yes, and good really companies. significant expect I there. don’t No. think both it know will. competitors,

Brian Hollenden

Thank you.

Operator

Daniel do Moore question have And a you. Thank from we CJS of follow-up Securities.

open. is line Your

Daniel Moore

far the putting forward, increasing any you. on may sizing How are specifically. just lending, your have Maybe you’re going? I any thinking you may mean, how your as that’s allocation update I have going update et just water, in sort know of Thank cetera? toe that as about capital you you

Daniel Urness

will investing whole be operation, invest lending. our continue our things. capital modest the a also of We’ll facilities. that in in to allocation-wise, mortgage be scheme Well, but fairly in We’ll

we’ll comments, and there’s because to I We’ll too some some in As it – activities reduce be a effort I cases, building expansions. But make also at will, you two don’t can ways facilities, my be the in automate, there’s imply, and that homes might robotics be of adding if look more certainly, of want industry. to lifting looking mentioned to not kind strong ways try in a not ergonomically-friendly. we at and to our word,

materials around and investment. we’re methods the require will conveyance So we that looking way some move

spending be continue will somewhat be and our up But cash in up flow. from it think, to years, think, I prior ways I as So capital It to somewhat. we to facilities will will improve look be still modest, at maximize our relation throughput. our

Daniel Moore

the appreciate on great it. Got a color. Thank you Congrats and quarter.

Joseph Stegmayer

you. Thank

Operator

remarks. any Thank this to at like showing further would time. to I’m for you. not Stegmayer questions back turn Joe further over I now the And call any

Joseph Stegmayer

you good and and provide on Thank and thank be to the look call information, the quarter Well, and months. being again we we’ll speaking forward to in any you happy questions, to a follow-up appreciate and you. three

Operator

for thank wonderful may This Ladies and does conclude you conference. have today’s and program, in you disconnect. participating today’s a Everyone, gentlemen, all day.

Cavco Industries (CVCO) 7 Feb 182018 Q3 Earnings call transcript