CVCO - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Cavco Industries Inc., Fourth Quarter Fiscal Year 2019 Earnings Webcast 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] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Financial of Director Fulser, Reporting. Mark begin. Sir, you may

Mark Fulser

you Thank for us XXXX conference thank and you. afternoon everybody earnings Good for call. Cavco year joining fiscal and Industries quarter fourth

you Urness, Executive President Boor, call, During Barsetti, from and Financial Vice be Chief Executive Dan Chief Accounting and Bill Officer. this Officer; President will Officer and Josh Chief hearing

assumptions of expectations or Cavco's statements operational involve affect performance, operational revenues, savings the Private uncertainties, management cost you per during or this made Litigation we efficiencies. flow we about cash may forward-looking of and financial Before contain comments forward-looking Exchange XXXX, Cavco's begin, actual statements could actual Commission, identify the may would forward-looking any that behalf risks like and share, provisions statements Act All and Reform under earnings call Securities results expressed to described without by of remind that including Cavco. which use, the conference you those recent results most and to or actual on factors specific XX-Q, company's cause XX-K by review its in the with could materially and encourage of or to from differ materially Forms from which cause events filings forward-looking I the made statements. differ those Securities statements and results in Cavco's limitation, including, to

broadcast, investigation, vertically manufactured finance lines consumer a suffer that damage sensitive our of business, market involvement government company's of reputational officers, of but the housing demand regulatory the not certain our commercial result litigation are SEC, related geographical the as and in loss include, in federal only potential operations conference shutdowns accurate regulation call may regulatory potential date Cavco housing. limited integrated to findings, that of its risk results conditions, live the from affecting reflect and affect of finance, fluctuations, forward-looking from arising insurance, circumstances this and except arising concentrated or manufactured as this action after under or matters industry or any investigation may and contains regions, by call, forces revise is any the the events conference statement of law. as date This May adverse business of from no of of information the and time undertakes our to that XX, litigation housing, extensive including factors executive subpoenas or obligation SEC Some required Friday, update begin risk action also the internal to, received XXXX. Cavco

like I'd Officer. President the to over turn Boor, call Now, to Bill and Bill? Executive Chief

Bill Boor

job. month started the a Thank reporting strong you on as I before just fairly and I results welcome period in was everyone. over CEO even unique a position ago, role a Having of my for am

take and for growth to When attractive. are through Interest fundamentals that. so knows cut also an being and cost manufactured walk specific you So as improved process. demand due financing get impact I'll solid where all we're the they will of those There's be let's attention There's going that in long-term indicate formations direct and of quality of time will regulatory cloud and as right, Dan that are we're there's the And appropriate increasing demographics Cavco's about the comparison. improvements manufactured buyers mostly speaking doubt performance value encouraging. affordable need while move rates are and year loosened finally margin rethought unusual Regulatory a manufactured driving comparisons a out their had and of toward I very it. early think do these being into it, nothing and need critical for about -- And with through very housing the be no recognizing and too to everyone on housing. efforts, period to to do critical proudly very assess will the that you year-over-year access to of we homes. the general there's last industry. for doubt But encouraged for all are are a paid no the in items important real household it's of to a drive homes the positive finance in processes lot of own the it. and the and

will talk picture, of part Cavco our addressing the shortage important in to affordable is an the housing well I in about bigger So in play country. short-term very dynamics positioned

differential done margin have Recently have many and the led further costs increases. for has of by of of On compensate cost improvement. job good This been price gone topic a In rates dropped growth input that's have to region. and regions input down order product months. our increasing those several the margin very some last segments to plants over

order a those as manufactured would very home interpret believe which rates of be it indicators to However, demand mistake remains we clear strong.

and that be retailer an short-term high persistent less they of indication that remain system. hampered We As ordered have resulted ability the backups demand this and think corrections the these our to any sold. not challenges retail view weather by inventories In the supports demand to been Where strong. has regions of industry ahead previous where periods, the in factories that was retailers which high are then demand. believe already delivery due exacerbated I seen weather data are and orders, the to slowing backlogs that large had continues dynamic set driven grew has consumer slowing shipment backlogs inventories underlying retailer and and been to and inventory channels houses exposed inventories this business in severely by in primarily the

backlog where quarter by of a increasing and ideal remains which below healthy operations. plant turn the to volume we and deposits comparing coming While wide is rates that view pick at Dan with in demand and system to at over seven inflated levels, to conversion comparing of period strong unusually backlogs, weeks down up our traffic year-over-year the resulted backlog coupled year's retail disaster last backlogs very overall average the rates over to our Urness increasing end level the steady relief discuss in With expect are in is it financial I'll our months. This results. production to supported stood

Dan Urness

Net revenue the XXXX. Bill. was Thanks million year that's quarter $XXX during $XXX fiscal million X.X% fourth compared quarter for the to of fiscal down fourth and

plan net housing $X produced Within built for Factory to FEMA built those homes decreased last year added in On included loan earlier plan year's home reported not this prior count the revenue this $XXX homes up did majority basis, reported to in period, even single internal segment $XX.X even million net the though, the were last in The revenue quarter. from quarters. year's mid a and early and payoffs million occurred in in repeat the of million factory floor of from physical results, $XXX estimate year's shipments year quarter we segment payoffs million quarter. loan approximately floor revenue digits. comparable housing shipment non-FEMA which

the home passthrough $X.X million implemented net year. sales, revenue requirements result on retail services accounting subcontracted includes quarter the of this of Third

year. a profit, revenue gross as the in on percentage XX.X%, in quarter of up fourth Moving period was gross XX.X% consolidated the the net fiscal last to from profit same

And the was overall production higher year's volume events were corporate major our Total prices ended home year, loan The period, increase. gains full includes from significantly of earnings year securitized prior under input period. by gains during income margins the versus from mainly income. payouts gross responses a as quarter the year's compared borrowings balance $XX Inventories prior XXXX held fiscal The $X.X the unrealized declined in $XX insurance and early was Net January cash repurchase million coupled received administrative XXXX Net million required year. XX, experienced investments. was changes resulted included loans to inventories XX.X% March These current the The in other report. the in related equity amortization from earlier. year income $XXX,XXX lower on bonds the additional the mainly profit Bill, revenue liability effective cash as and weather additional lastly, expenses to XXXX as corporate and $XXX investigation year expenses of segment, in compared receivable programs per fourth income cash increased million of of The million repurchase of tax million increased related bonds. quarter. were approximately rate effect of realized diluted $X.X this fiscal effect quarter mainly home XX.X% only to the costs. same additional The XX, of of XX, $XXX.X several on of subsidiary. insurance with higher income quarter balance compared and million on company of same our million year. net from related was from rate higher the D&O prior current Other to Securitized approximately profit deflating the in year's for the year general fourth in million, as balance. income in fiscal financial sheet. than increase fiscal income prior result sale are quarter this helped in premiums quarter was there year the sheet The $X.XX and of now quarter that reported $XX.X XXXX completes Act of purchase XXXX, year. March repurchase by same system reported claims the to $XX.X lower to fiscal during in share was from percentage fourth to net quarter for to During last than of was large million the the company equity working in having the XXXX, offset XX.X% XX.X% insurance material higher the in fourth the was declining This improved last $XXX,XXX year financial million offered. at last as net that XXXX up quarter and year compared XX, the Tax retirement on programs be a and million the further in financings slightly $X.X investments the a with from was in partial owned prior the internal included outlays Selling, balance. in year. purchased capital and $XX.X gross the the balance retail of million outlays reduced statement. Consolidated SEC the the the quarter quarter last last commercial securitized was margins balance $X.XX $XXX.X D&O quarter. March this that services the no $X.X by net our last to Comparing and stockholders' this 'XX March

Bill Boor

Thank you, Dan.

While there's to want by of on a MH our lot segment. financial the side, the services contribution strong I attention do acknowledge

results very as disciplined in back meaningful business. delivered Throughout been of and quarter the to long very in this to retail delivering strategic had for an I results and clear seen of gained XXXX, being are strong with public years, Cavco dates done before and three its these on Harbor to Directors. success. over as company run insurance bottom-line. organization. a cost well to we XX, companies and Board outstanding philosophy plants our well Our last those very was it had association has this the the company year with evolution, as spun-off insurance both company the have mortgage the efficiency been And company privilege tenants that from and the acquisition, our of as and I've of of lending the decentralization of the company serving in grow approach have did risk and the Palm a XX an I've job our parts outstanding mortgage

we'll management see national meaningful the contribute team. further continue I'm the strengthen play be footprint exploiting Ashley, for forward going our we stay where have focus advantages for to solution opportunities we part alert and while partners will ability that, And role community Cavco's to services, opportunities the turn believe be financial and because while philosophies acquisition to the investing dealers access to in that our That's to to and shortage. very a improving Our those housing affordable to it's industry company's and think we of financing. and excited to with country's time I work serve it over questions. And of

Operator

Thank you. the our Securities. from CJS question first Daniel comes And with of [Operator Instructions] line Moore

now open. is line Your

Daniel Moore

taking morning, Dan, the questions. thanks for good Bill,

Bill Boor

Dan. Good morning. Hi,

Daniel Moore

you little where post we the the and bit and start seeing level. Bill, fourth terms you're month to rates, on elaborate this Can maybe quarter just what quarter a traffic terms half retail with of month, over were order to and kind the relative in stage? of in at in a of last

Bill Boor

Yes.

a good of rates retail of people in concern seeing that order generally, I really just at perspective, pretty our seeing and making they're conversions a looking last influenced But that operations year have deposits the inventory year. comment, definitely when plants Just by overall when broadly. at last areas retailers, to guess a you sense, picture on receiving it's from and had general and seen -- we've up these we from they're the order been from have the we're are part traffic that what focused about seen retailers' discussed look it But comparable rates. lot general all some in are the both only concerns

So industry is that's level, what I is really available I a folks consumer the less think to data demand of indicator on was generally just true referencing. us which including an closer while

Daniel Moore

bit, Very sequentially, to basis that declining much it of bit, sustainable a And are much and maybe we than was price, how in much materials possible mix, level? helpful. is bucket type XXX points margin you little certainly little up was how switching better was a of expected. raw had terms gross Is how how margin, gears down

Bill Boor

Sure. Happy Dan. to

have the building given mix. to the yes, our given several the we're we pleased initiatives quarters gross the and over our taken products the cost, in with that marketplace So, results and pricing is margin sure past that not we're given make but only appropriate

benefit and mentioned continue we're of So several the work And to work continue as we do we and going area. that in materials declining we're last expect getting this general we well that think that that we'll to that in months. were

products So some the lumber-related of benefit lower and this quarter, in certainly so we past lows XX-month particular and reaching in in than had cases. got lumber quarters that prices

for margin. necessarily We we be forward. predict So going don't predict expect to will and what well, that's doing good can't our prices those

us So labor to able going to like and as forward. to past, continue we'll another is have labor unless to component, we'll and The back materials that we've margins think we'll seen is But we in that, And the we is that and forth though. good we make one I think plan have one and cost we monitor is that. pressure accordingly for continuing report to sure that have give continue that well. be significant swings price

Daniel Moore

as And Got out helped it. is then far as services financial margin concerned. obviously

are claims far, in terms you of so the services what in Just quarter-to-date piece? seeing financial QX, and in trends

Bill Boor

And margin the margins June have tend we that this from more of where weather Texas quite some this season the be quarter reported. we'll continue quarter, was activity quarter time caused monitor but as amount watch where watch as we'll period in storm the to that good unpredictability sector. gross the the contributor the a well. our see just of areas, has in March we services, and will because mainly, on that So, through thing it services good Spring be continue is that that'll certain key of the and you our to past And was a financial to financial it, one and that you that'll for

Daniel Moore

a jump back in more. couple I'll you. with it. Thank Got queue

Bill Boor

Dan. Thanks,

Operator

line Craig-Hallum. Thank question Palm our the next you. And with Greg from of comes

open. now line Your is

Greg Palm

Congrats welcome aboard, good Bill, the guess I officially. results, and Thanks. really Yes. on

Bill Boor

you. Thank

Greg Palm

communities? was about owned little hoping start, I through whether bit the to results commentary on a looking channel, just could company by talk we the really maybe independents sales, stores, for So that's the and

Dan Urness

Sure.

So to Bill families. areas lining the in are Sunshine doing we side a especially been business and businesses, our areas. local we will with are and We retail community general, seeing states play that, business the been a in has there us. bit demographic geographic community all that Southern feel still side group on work are and for to retiree the that and in has through certainly up industry And for our fact mentioned, we're standpoint. the strength the and and underlying fair there's factors well those per And in good. with the do strong economic from regarding reference in have street factors core well Greg, demand at probably expecting the that national that, serve very continue core the favor, that some overall,

feel we pretty good So overall. about things

Bill Boor

going our retail inventory they're independent what the as the seeing in and the the months, we we compared given think but and don't death, that's beaten feel over different the I rates expect for real, consumer that to country, side. like but up I on seeing again of next do far demand the will we're pick is as dealers think issue order parts necessarily I'm to back factories is to ease the up couple of significant

Greg Palm

Okay.

Bill Boor

communities a strength without been a real And doubt.

Greg Palm

Yes.

good Do on any floor demand, you growth your this year. on That's industry units calendar guess maybe Okay. have that? potential opinion color. plan overall What's basis rate I or on either for a thought the

Dan Urness

just better. little us months out think looks are from but standpoint, from take necessarily, We probably From positive. but good, year Well, last this FEMA out. think reported behind already how a year, shouldn't standpoint, prediction I comparable start three see that the not a tough we'll I good, have it probably I a withstanding pretty that up straight we've the to you don't year, think got things if play now the that a comp and

we're that double an versus the the single play industry year. the the the swing look out think down digits for estimate. rest if you as you positive other FEMA, should at digits. months But year I well. out that's reasonably an And be nine described, took of they for things way we've then and only and Now, It

Greg Palm

good point. That's is comments think or that Yes. broad of specifically mentioned something a general of those programs. financing Anything you to I sort do looking the industry-wise? to you about, Cavco talked Bill, along more access lines increasing

Bill Boor

to trying trying it. stay We're that. connected We're to to

my mortgage the the a I I guess think programs has of was from choice reference been of about where everyone some opportunities talking the job does MH business kind MH advantage and to are. the our good programs, GSEs. seeking

to support Chattel, for you a market Chattel a all. really pessimism keep closed but We're point that get not Some try eye on to secondary to too it's to trying lending would stuff. impacts, I at tangible going. early at that's tell

we're going to things think optimistic, are I those helpful. be

show the choice product and that and advantage we gears programs to shifting what MH on homes. trained all opportunities and this hearing those we're programs, the We're rolling and MH get the about new people on fits going retail they On is to getting hearing wheel should really retailers And have really is the sales there. that's expect. what's channel sell to are

positive going we some, and seen a I haven't big activities start to directionally going it's So been lot a of really the There has for very the lending be industry yet. forward. it's but think actual

eye but So coming be on it. will It interesting to talk we're quarters. about keeping in to early the tell,

Greg Palm

program terms for programs, sub-divisions in case with opportunity in looking [indiscernible] partnering for or of of or are to looking kind that relates start years? at those Advantage you couple folks of that a scenario of as your Home, Choice MH to maybe developers those new Specifically that out placing and it what's product some

Dan Urness

that, style certainly it's We're because well-suited home at that is required developers. Yes. question, from standpoint Dan. And for an specification interesting is looking this a is Greg, that

on as certainly yeah, on just with talking basis retailer unit plans look so, well. participate those street standpoint them have And And from the opportunities a they on developers that also larger hopefully and in a to one-off to we'll we're -- working forward ventures.

to working those be of both good yes, of are we're So we them. going channels, both think and

Greg Palm

more for looking the going to color. forward. with closely working And you All right. Thanks all forward Bill,

Bill Boor

you, well. Thank as

Operator

the And our line Alvaro you. of Thank Research. G. from Lacayo with question next comes

Your open. is now line

Alvaro Lacayo

Good afternoon, the thanks Bill call taking the and for or Dan, question.

one Just question. quick

them. and but material could If it secondly, when the the then the on percentage number how us you down, up, lumber specifically a was have to down that terms of year-on-year things. presumably, you other repeat you just backlog cost inputs, actually might missed of magnitude give been saved angle? different much mentioned can things And numbers in you But inflation, of I from that maybe

Josh Barsetti

This is I'll the So, first there. Alvaro. question take Josh.

was of Our last that million as million to backlog compares of and year's $XXX March at the end March. $XXX

Bill And down as working of so it's ideal perspective. our to and down, more mentioned it's weeks from but level X, around X.X a production

Dan Urness

is weren't percentage our we this certainly And highlight the large to just that's being they as have our meaningful. that it's Alvaro, material that respond were also have go a one lower about Dan. lumber to prices. the I'll Don't but an and down lumber-related it of question certainly enough for can attention a home, lumber materials pay create up homes that just swings you, dynamic, And your component other And to a to we so product offset not substantially but costs up materials. into yes, wanted on, or in impact.

those in would I how something The benefit prices predict it related continued we're the of kick that non-commodity got the works it benefit. now, the say, to the prices this have impact we in through half our I of We'll certainly. for be there some of impacts In do a really other impact and and an point. general, rest and words, we we see materials, that that if quarter haven't seen of also XXXX. that but tariffs, we can't what the quarter we've see that through is on seen calendar any probably substantial of of bulk guess the So the out, see would impact will last we've material

from So a we to have accordingly product pricing standpoint. adjust may

the at there look the market but will to cost that paying bear have dynamic. to well, and we're what as we attention course, market see Of

Alvaro Lacayo

then it. what's the to or Got the business Okay. And between and And was you already taken mean, remind when core took of some price, time services been financial announced? that business. profit pricing the I me in have you the last you can would when gross lap recently differential you begin manufacturing terms

Dan Urness

the report So, two were just out, between financial not about question, of services talked your But also the reside. here, well consolidated expected. very want being in broken strong present as broken our margins a, We've had good margins areas good calm a we have the as contributors, well have to answer on this we not first are that but because some and segments. Obviously, some policies our are doing both businesses strong. we to out fortune the weather picture

So outline well XX-K. in our that and be pretty forthcoming piece will

some sure, you. segment just to result So your me And part the tell then, explanations our don't in there impact of question, that good of on reporting with want other was area. sideways make layout and I the -- of to go respect

Alvaro Lacayo

want an time lap some understanding Just these to taken and do that pricing, price to the begin last you pricing, of increases? of when I get you've when were

Dan Urness

our three the the something that I think the regional product or as it's largest you four just respect a say to I to prior good were would issue. that and up, in quarter good that, period is way of -- ever it's we costs. period I managing that part a clarify as with really The it's materials, rapidly. have regional. input for that were we've a on where to we also we report best certainly we properly always comparison catch pretty quarters designed that's mix market than the play that trying So, prices four I more dynamics a because It's well that guess, issue so the think certainly regard, and now, and that pricing had I we couldn't escalating would, But had it's where we're

So helps. I hope that

Alvaro Lacayo

It does.

versus that be -- going guess, for continues very mix that had do going line see a price I I you you've mean you've part I forward. that top does last the how said, the evolves strong So driver to big is like forward four of mean, mix. quarters, Cavco? for how price

Dan Urness

The price. and tape footages, homes in way more And the demand more for texture, slightly and often, footages, when can, generally that and we that homes and monetized is more We're amenities bodes square added margins with bring up as have well. features seeing general large with homes. a larger so we even square more more for we larger can

in So is that think price we to mid is There the right now. point good trend. demand high product that

Alvaro Lacayo

right. you very much. All Thank

Operator

a our Instructions] And with Thank you. the Daniel from next [Operator of is question follow-up Securities. line Moore CJS

Your now open. line is

Daniel Moore

consumer Thank your you priorities debt? beyond do out to which maybe and but the see to terms allocation, it's in that, you this, the some opportunities more what first bit alluded you, of additional are again. specificity side Bill, capital priority is expand continue some lending your little of a still that take securitized to to look

Bill Boor

on but sheet much that's looking debt, I'll financing yes, how and areas, on and Dan because actually hand comment then the use said. to you evaluating to I securitized coming, Yes. it I'll balance certainly, love we're

our early, tried as out and I But things get I've to spend some and that time efficiency. operations. time, We're pretty opportunities feel other at The our GMs in it's but same improve more efficient job. we around We get really they they clear plants the to do are good have that feel a and operators. like

had always to we'll opportunities. to with we're And has in that make a to We're won't change. that interested continuing going look put our forward into that the in plants company I'm So at sure that expecting that. is regard. we'll The invest capital improving continuously acquisition try acquisitions. great in and success other thing

So might on want Dan, comment the securitizations? you to

Dan Urness

we in just Q paid obligation in do plan cash. January, do that I option quarter. The -- that $XX to in thing back with want And that and mentioned down just utilization so. had September as securitized I of the to note, in we as a Yes. about have was debt to the reaffirm bonds, a connection our part of reminder, the we decrease we a And an guess before same million

we bonds quarter, sheet coming that So that's and expect our decrease use securitized million cash another another of on in our balance $XX up.

Daniel Moore

Got it. Thank you.

Operator

you. next with line question Thank Palm is of And our the follow-up from Greg Craig-Hallum. a question

open. now is line Your

Greg Palm

Yeah, thanks.

follow-ups at well. comment the or are whether on Did all timeline you ongoing on Just any a and you few update to me SEC is as comment investigation willing anything there for there? or

Bill Boor

to the this SEC's unfortunately, get resolution is is to the hopefully that. on and we'll audit have trying point, are. for just and resolution That's process and know but of And we calendar that and process We investigation didn't shared control pretty lot we support that, independent timing information all late news. at to, the concluded. started committee can do there's as their really not what we you I independent support you. a news are was We year we've know. And there point But of willing share disclosed, last -- anxious this a any at really the we them what investigation don't really don't from room all in the as to the with we're we'll this we previously everyone with quickly.

Greg Palm

this to least at investigation not at results at you're internal looking the least disclose that from presumably, And point?

Bill Boor

I process Yeah, and us aren't do to a do it so. SEC position appropriate for in that. we wouldn't be really the to again, mean,

Greg Palm

the looking all of least ongoing at least you the structure know near at that. the associated think costs related mean, whether enough. point we're where At cost cost can with term is least a at you and Fair at to the Okay. investigation. us let cost structure increasing the in the in not I terms

Bill Boor

Josh. ahead, Go

Josh Barsetti

Yes.

a for reminder here, that we're call, have we million related in costs during had for the going on a This going the quarter. So, the other to quarters forward in $XXX,XXX quarter few Greg and SEC-related as a quarter, to last about expenses. D&O some just folks $X.X

investigation completed was it. And so large part being with of that internal a the

investigation we're based of on know of predict think going the we specifically we related in but what's in now. what place the the of SEC to good can't Going forward, I this, part, most for terms expenses come component probably a pretty out to

Greg Palm

was something one, sort materials Okay. you That's the think XX%? least helpful. your And to is Dan, a related XX% do have you around build proportion to tariffs I at of tariffs, curious, mentioned then the that I just of and last

Dan Urness

meaningful. be plumbing, and internally how go that isolate have we're and other we be about impacted the business we what we mean, thinking I And that. some into watching It's if be it's and that at to of would think in But pass those identified the components increase go having looking had to will We've do, to level become and closely. taken home through. various cabinetry, We it's that next we'd in. this that tariffs we've more we already I

Greg Palm

Thanks. enough. Fair in queue. All back Okay. the hop I'll right.

Dan Urness

Thank you.

Operator

today's ladies call I turn to remarks. over the this for like And concludes back Thank and you. to Bill Boor gentlemen, now Q&A session. would closing any

Bill Boor

Nothing I Okay. you. here. Thank to call. really everybody the add appreciate on being

Operator

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

Cavco Industries (CVCO) 24 May 192019 Q4 Earnings call transcript