CVCO - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen and welcome to the Fourth Quarter and Fiscal Year 2018 Cavco Industries' Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. I would now like to turn the conference over to your host, Mr. CEO. and Chairman Stegmayer, Joe Sir, you begin. may

Joe Stegmayer

we'll President Thank conference and a call. Shelby Urness, and Chief Executive then and and cautionary the few declaimer by then welcome quarter fourth our I’ll Vice take and your Officer report our begin to Financial read We’ll statement make to questions. happy Dan our and everyone Dan? asking you, to financial begin and with usual as back come comments,

Dan Urness

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

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

of from net higher increased housing from period services quarter Factory-built for fiscal Now quarters. home The has gross XX.X% previously last year. pace policies sales early cost up sold million fourth million in Cavco’s net price product revenue was from rapid year. was last lending year of under The revenue our more been more and factory-built XX.X% sales year. a million, for higher production this increases and recent net including over home $XX.X revenue financial programs. segment homes and profit the segment, mainly compared and in homes also report, this sales the $XX volume The as quarter Financial loan additional revenue improvement housing to revenue large from gross with pay-offs enforced grew the volume. priced higher backlogs. to X% of $XXX grew affected a the of Nearly loan prior year. better was which labor deferred of the commercial for fiscal up increase compared from inflation quarter same fourth costs, the larger sold proportion Consolidated wholesale net increases where XXXX million of XX% percentage a raw profits was insurance price in gross net margin $XXX delayed kept labor and benefit these from by than adversely material all related

cost continue factories distribution mortgage competitive limitations gained production from The a to as levels. XXXX increased price Selling, has quarter also Our changes although appraisal absorb be base through. additional and and some in have the efficiencies worked was the The the fourth in fixed directly net payoffs previously operations commercial was from of was to gained quarter same percentage early during XX.X% discussed. loan last of from related million from year. revenue net amount higher improvement administrative been expenses product fiscal generally able Income $X.X compared revenues. to leverage general to the operating XX.X% benefited

company rate XX.X% its quarter quarter, effective of quarter The should law. government recent new in is fiscal the the rate had of The fully tax reform. tax realized XXXX income benefit period since the low million year quarter $XX.X this reported Net quarter tax was is of from starting An tax final was enacting act. prior of this same only legislation on versus for $XX.X lower anticipated increased income fourth the comprehensive the result rate income the when of fiscal the net The the year. Net the to referred tax per diluted blended million company in XXXX in be the to compared rate of $X.XX compared last the the commonly of years’ XX.X% the gains in income quarter investments. prior from effective U.S. in fourth was as rate to the effective was fiscal annual share income XXs than fourth fiscal used the $X.X the same within a higher to tax other Additionally, sale quarter primarily quarter. $X.XX year. million for corporate

by planned increase and well raw retail for and and $XXX early earlier. of company-owned sheet The million cash liabilities was all incidents warranty, levels approximately Inventories facility million accrued purchase I’d higher rates. sales net operating corporate commercial as leased the balance sale loan discussed. grew mainly loan home the payoffs operating more loan The process increase in Property, receivable accrued of at production previously increased as improved from presentation. balance XXXX cash to Now production to by increased XX, the from volume was from growth. review March stores material wages Accrued and which the was from compared rebates, $XXX also provided like our year customer mainly Total an projects. various one from early plant including investments. as deposits, decreased activities payoffs commercial and to income net equipment sales higher home

Lastly, stock million up March Joe from report. balance. $XXX as to XXXX grew XX, completes nearly our of holders equity that $XX financial million XXXX X, April approximately

Joe Stegmayer

you, Dan. Thank

are home distribution who are developers and others. can make After our the full are qualify of these mortgage. These year. land/lease buy portion We homes shopping are our is recognize of factory majority it consumers steady average X% retail this relatively to for increasing employment sold, they that to are such because economic may people the and surface. most more outlook decision wholesale likely less pent population more can inflation, high, Cavco’s. through homes demand CoreLogic rate favorably customers. new about and that showed Case-Shiller consists $XXX,XXX. years, as the results XX-City pace operators, value certain to home This the and for month the are to quality their experience challenging is a increases optimism three March. homes community that and can year-over-year basis, of display for gain to with The home of resort prices Business sales them, homebuilders, Price indicate in the S&P Composite a year-over-year it prices report a be trying On a a there’s up starting very they the traffic rose to which high for X.X% and the built of of centers, built confident more is We pleased efficiently. good and general Home we’re median a operators small for Index moving above stated because locations importantly channels proposition the that percentage many buy gratifying levels of quarter is impact the base home the Reducing ready believe in

our from the X.X% US. greater perspective, sales benefits Meanwhile as total, we to or also sequentially to and in home awareness manufactured are generate known builder a of company all April grew working macro nationally homes. the industry, XXX,XXX factory the new Our - of pre-fabricated inherent home

is new basis sales was X.X% market rise robust So while in XX.X%, March year-over-year rose home and rise. not X.X% while housing on February April the there’s a

continue Spike the for of New home X% April about housing Association slight year-over-year, demand is been year-over-year among supply and Homebuilders to The being do [X.X] up year this being XX% sequentially. last range decline, X%, levels. as points housing modest months inventories in with in not sales to at that only and the May and when down part but years rise we supply past has flat is historically. survey start up healthy, is peak sequential levels also two from three single-family due National

we improve as believe at driven led growth next to continue will housing moderate XX fundamentals forward, and XX fairly modestly job recovery continue a unfold easing positive Looking credit we months the expect to by by the conditions. pace, demand to over to market

good expect near-term, for actually expect year to improve in the for next industry. years looking We do to be this, very market out our the the we ahead. three By

motivated who who build and people finance homes market We well. talented provide have our and as of and very insurance services

growth, With begin. your questions. expansion. short and capital well innovation take we full In be have to the that We to to housing glad the of lie ahead please support opportunities take that we’ll Shelby, positioned feel the advantage in market.

Operator

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

now Your open. line is

Daniel Moore

to is fiscal your finish great a start clearly through seems on it Congratulations to pass year. out, Wanted ability rising input costs to improving. the

that us you us what’s in I build, mentioned to there ASPs in more backlog rising and are flexibility the just in types homes you seeing understand to are understand. Given dynamics you the catch faster? of the as a ASPs rising demands, And up, help think alluded changing help can

Joe Stegmayer

because on backlogs, and industry story behind year the increase gradually we materials curve that got environment a really been price backlogs we is pricing. have The our opportunity to up. We growing don’t for last our catching retroactively we’ve and of increases fairly inflationary the and saw somewhat in

price we’ve still we as although parts. the increases us and to is lot are inflation have So commodities purchase done well with backlog a continued and aware expect work through that, most of in and we

us for materials keep continue finally well. strong So with we be be remain in and to we’re both think for inflationary lengthy. of income so, because though rate issue But up matter continuing it an will and a is our that to fairly backlogs issue that order and pressure labor as will somewhat doing

progress. of we’ve So yet I we of up woods made terms but environment, the with are out I keeping think inflationary don’t good think in

Daniel Moore

are we Very restarting units helpful. of are industry well? in do how as the can utilization, capacity, And grow labor you that facilities given where seeing and switching capacity considering gears, constraints, in the you capacity you and adding others are quickly shuttered terms current now

Joe Stegmayer

capacity The bigger a a course Yes do production it to are the are increases should in to I environment in though some lot get question increase at labor a there love seeing we’d say, how I’ll production but increase of to or certainly we rate capacity. able we constraints utilization, of moment. is currently, and which faster is

shuttered up our Austin, opened we have our operation. Texas, a have plant that second adjoining We operating in plant

added square look to more certain and looking that. additional expanded facilities, footage. also at continue We’ll We’re have

We’re existing another plan that’s exploring up facility opening idle a to sister as we speak operation. an

those to trying do sorts of we’re things. So

facility We’re facility larger existing an one at to a location. looking replace in

eliminated kind have I full exactly to So that. we’re that of looking retain as ways systems we’re a different a lot trying of said at and certainly to as trade before it’s a of at curriculum. we’re calls, of and attract employment. ways do It’s in people, looking we can related unfortunate have expansion, we more challenging with some And secondary lot environment virtually these school mentioned

And so not high graduates things. looking building we’re oriented of and the process finding production out familiar with school are coming of that the for jobs people

So that��s an issue.

So more our feel to vendors, same I competitors which doing everybody in-house we them have ever, some is group, talk to making we challenges obviously issue. creates and I more thing, our training think the we talk we’re same constraints. But progress. are the time than peer having

So the of do of get keep opportunities because opportunities we kinds management to means we are and in they all good interest (inaudible) substantial, the they people which offer for in can as we’re in have people skilled. them production motivated our career find company within, right kind trying from and

Dan Urness

facility add that location would and have Dan mentioned that some XX%. and utilization that brick Joe currently plant That’s currently. doesn’t that And include in we the just so capacity for opening replacement sister things another also of at our mortar is larger a I have we of considering

exist it’s XX%. right as So we now at

Daniel Moore

access and helpful. of I’ll bit you’re And terms seeing financing. what Maybe one a and back. both talk to Very more about in little jump legislation

the or folks anything that for other to meaningful received positioned in some you’re I they best or Dodd-Frank regulations are loan. that changes landscape specific any mentioned that impactful You a seeing? qualify be rollback, know could

Joe Stegmayer

estimated there then much President the And to a one was of the on people that very according might important bill home. because Dodd-Frank industry can that provisions. and restrictions particularly buyers for and many I of industry at reform points from in That signed was the say they adjusting that’s a recently budget sales various distribution how restricted for a is them some impacted of our win being good our come payments and

really what home quote an that’s be product month, it stores, estimate our advertise XXX and and now sales So a understanding, is (inaudible) be. quote going $XXX can help the should industry the that owing it payments there bit since of in Dodd-Frank can the them, do that they give not fixed here them. or month, our and is payments. should to We XXX, might our problem and to people’s be a industry not was our could That the hampered a how payment was before people always $XXX industries understanding in could implemented, of affordable in other car value potentially a because for not and proposition quite through

in country. trying have of are determine I We that hear in from taking more expect the than it the closer helpful it need could we all that other most in a constituencies period regulations to work look help how common doing from need are in that’s but they who productive, not of be and and it are well, think some homes has not our and that is very us to to new currently are tremendous this standpoint, that how in Congress a secretary many finding efficient in providing is sorts they and a consideration was if those industry Personally, is recent place comments at the regulatory bills one. the affordable a years as

Operator

it a from Hollenden like have we question Brian [Operator Instructions] from Sidoti. And does look

now open. is line Your

Brian Hollenden

How quarter much margin the many homes FEMA did the quarter? add FEMA this of the orders sold to the orders were how operating and in

Dan Urness

out the of number well. homes, those during build this helpful The enough, but break as wasn’t it didn’t and We large most FEMA the orders quarter the that was it December winter recent we months. quarter

quarter quarter them. last both this and So we had

similar basis, but the helpful a So fairly contribution just on would I note margin that you if it’s the home-for-home winter is during will months.

slowdown consistent slowdown their of So, periods this factories business. we add our in in are of some by it’s that helpful to when and some region winter

our it margins So standpoint. utilization did from help overall

Joe Stegmayer

and FEMA the we for the and had built. so of had participate. term victims Brian, serve and we be consumers hurricanes, the And didn’t backlogs existing we as and certainly their also lengthy our that to wanted homes But help to customers to we waiting challenge long our well were

we many orders as in not and was orders might So take Dan FEMA in months. we did where as we winter areas says have those there produced as capacity otherwise, those

Brian Hollenden

FEMA the all been orders have point, this delivered? at So

Dan Urness

March I when fourth the this point, have. it’s all XX. actually within say They Yes. by And contained quarter ended

So to any build not expecting anywhere. we’re currently

Brian Hollenden

millennials baby homes the And sold quarter, sold then what color the what you Are similar percent percent provide to from some demographics? can to in of you as were and boomers? demand seeing sold were to both

Joe Stegmayer

stores wholesaler We we data have we of because direct part fairly that is than – on sell our small other to to very really consumers a Brian overall. again sold accurate through sales are are basically, don’t company-owned which our our don’t portion

season, plus, Sun the don’t accounts number, of winter probably solid more fast the a age our of and XX it’s hard we business, guestimate. in the the go So empty have a to Historically, a people retirees, in statistics. not that’s mid-XX% nesters, but Belt season livers, very for

Dan Urness

millennials the far applies. go As same thing as

and are of We our sure they centers we’re standpoint entity, don’t group exactly and a an financing process But communities. on once we – Application the seeing all not and visiting getting involved buyers, are their we that data. it. again the of see not seeing again of in ages anecdotal are we store but from age come millennial they’re is from course, all such more sales third

Brian Hollenden

regionally or pockets of And the sort you demand just seeing are demand is strong of on part, this strength nationwide.

Joe Stegmayer

as quite deep the first country but are is are indication Florida demand Texas, interest are the and as south the some are most support mentioned, doing and But strong in country. that have doing well, pretty California, Midwest, of quite very orders. well, the southeast, east, the particular. Northwest stronger strong that pockets very been group not perhaps the course those I There fortunate strong of the we’re and of Well strong is across

Brian Hollenden

me, we financing touched in Freddie that would of improvement back think to there last the catalyst one from since and announced that have is sort a noticed If it, GSEs helpful. then in any XXX,XXX availability? but program, pilot sustain brings you you And Fannie be market? color units their to get the on Any the and I

Joe Stegmayer

Well just their have they the still GSE in are started program, not rollout really stage. the

going or the but financing So I their it which don’t manufacturing were to other What’s (inaudible) how they new their are volume. And pilot to they is homes manufacturing issue provided allowed homes buying be compare site-built not were if with know entities here looking and has where there at will impact create as homes, not homes enabling any maybe homes pay create, other programs, and that comparable some yet. that weren’t to the through as GSEs we pre-fabricated sure much in some challenges homes use to. (inaudible) markets to such site-built appraised, comps, will

new impact. of we very it GSEs new this. accurate including it appraisals, direction; in programs, the the an for number their area, be step able is the enable moving be will to by are of not that, and build to from being again they the but at a salute homes right to both will enough allowed comparables more yet appraisal That get are the created products comped just because to appraisals allow mortgage. sufficiently these site-built high compare will allow know at will a issues to get looking with to if to fair addressed appraisals which in. new GSEs in homes and site be standpoint more standpoint all consumer allowing and So favorably opportunity a appraisal an are a comparison. very do from These on But homes indications no their We our they

and that address not for help and it’s obligation you that’s it’s and around housing trying think finally of country. to a it’s increase over but that only, this a will to are to the certainly affordable number and recognized that I think anything need by entities, address proven for regulated in quality, being not really for the largely duty do think known years, I been to awareness their And critical industry. safe long entities time and high our and they governmental a one homes could serve quasi-governmental XX I homes source major are manufacture

Operator

we Securities. Daniel Moore question have from last of And CJS one

now line open. Your is

Daniel Moore

Joe remarks, last to on you in Just doing specific it that that you touching awareness. point in the mentioned can incremental terms is your point of prepared the anything industry

Joe Stegmayer

Yes, we product, specialize long get that to ad affiliated our that the sort decorating for more product press, in an kind are national our trying in home publications. We’ve about and talked magazine thing similar to housing to and industries of especially feature effort campaign. and to of of

from that We good the elected of have show ads and industry gotten of some been from produced The or support our some think the those at to benefit level. running both home, benefits very for and see think some again nationally well one and make factory product and some federal very is officials the living more haven’t we’ll trying I all in and maybe state aware in this possibility. I a been TV a members. company has that particular industry at full which think point Meanwhile But companies I individual built ads.

just our create a really awareness. efforts stepped So, greater up to

product accepted areas it not well but for be is in many in used. where where been its’ the is could great areas just awareness very that So this a years, used

something in that such that’s yet, can think dollar next to and multi-million other campaign to that XX we institutions continue a Got don’t quite the anticipate major done Milk we’re GoRVing we’re you start push have like there tell I But don’t we’ll campaign going be wish the months. as and for. I campaign. some I And so ad there we'll the

Daniel Moore

capital $XX loans so sheet, I it But look over with on a just apologize. other and at and allocation on one the I Fair share every quarter, ask potential cash know you’ll balance cash up to continues our whether of from balance enough. Last as sheet opportunities the now me build? more uses say that take maybe I

Joe Stegmayer

Our relation but still capital up cash biased with our generation. expenditures to will flow fairly somewhat, step

systems trying we’ll plants, So you expand hopefully adding to and move as talked be to call to more through capabilities existing production on this about earlier production upgrading spending of capacity faster. we facilities, new

and step as we investment originate that entity, CountryPlace probably will in that try acquisition money invest business, to our from securitization building loans that either operation, novo in own the standpoint. continue capital of mortgage or from in for will our we geographically fact So in will invest De opportunities to look core and sources have and up our our facilities some we some for our to in continue to develop roll we’ll business an we

Operator

the Thank would you. further this I’m like time. at showing questions now to over And I back conference turn no to Joe Stegmayer.

Joe Stegmayer

Thank forward you reporting Okay. to Thank joining you move future. We ahead, with the as Thank in to look much. quarter and you to all we very forward talk we you to excellent us. continuing look for in Shelby. you, forms the for

Operator

Ladies a and you. today’s conclude you great may gentlemen, this have all program, disconnect. Thank day. Everyone does

Cavco Industries (CVCO) 30 May 182018 Q4 Earnings call transcript