CVCO - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Cavco Industries Second Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mark Fusler, Director of Financial Reporting and Investor Relations.

begin. may You

Mark Fusler

thank second and joining for us Good fiscal you year Industries quarter call. XXXX Cavco afternoon, for earnings conference

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

including remind Act we'd the earnings of statements made under operational statements provisions that of during of may this about we begin, and savings flow you management operational forward-looking Before conference and Securities per or contain Reform Litigation Private XXXX, like to assumptions efficiencies. financial or comments call by cash expectations cost share, the use, Cavco's revenues, performance,

with actual recent uncertainties, those actual limitation, could of events Exchange the from risks forward-looking materially review actual the may cause forward-looking differ results Commission, those results Cavco's involve and expressed All in and statements. specific forward-looking its encourage made I affect that in behalf to without which on identify from statements by materially or any XX-K which Forms differ results to and to Cavco's including Securities you factors statements Cavco. cause filings and most described or could Company's the XX-Q,

being officers, extensive government market business, our our demand forces of geographic commercial vertically may consumer receive affect and we manufactured lines business include, concentrated as from of limited a insurance, regulation to, the our litigation adverse federal Some finance, executive potential the the regions, certain fluctuations, suffer Company's of industry housing. factors of in subpoenas under loss housing but inquiry, housing SEC, and manufactured that in damage any risk from integrated shutdowns result arising or affecting may results involvement and are Cavco that the conditions, not of operations regulatory matters including reputational and action finance

Tuesday, live required events to date Cavco October revise of update the as This statements is after that by only as obligation circumstances accurate conference this to this conference call of of law. reflect undertakes also no or contains broadcast, the or XX, forward-looking date except call time-sensitive information any XXXX.

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

William Boor

everyone. results welcome, see from consumer we demand. continuing and quarter, continue you, to the strong In second stemming Thank operating strong

As the drivers and we've manufactured encouraging, both industry very that near-term in discussed economic goes the for past well as fundamental quarters, of drivers long-term are demographics. as housing

forward slowed shipments the into inventory it's to buying quarters occurred this now, shipments it on of the quarters pulled few For during over demand we've the because inventory that made clear calendar to And buildup industry basically overbuild from retail get retailers several factories the been XXXX. retail would throughout that have picture year. a correction. That discussing occurred difficult underlying last home last year factory

So been through more fall, seeing factory as But good expected of worked have system. now during early largely shipment orders for balanced indicator quarters. is data. summer, of correction not has a the we're set several a consumer What late the demand

strong remained time. has throughout is demand perspective Our this homebuyer that

on seeing strong is the seasonality, of two points data Our shipments. indications We're is are industry is actually a last that, Adjusted inventory a months really data is view. dust continued factory not shipment the total Two last the above to for this trend, supporting year's dynamic. showed I'm pace that's shipping but trying make clearing the point demand.

while that slightly effectively reasonable million, allows This to had the weeks ended a production stable in us sequential plan quarter we is on at We still healthy a of about them timeframe. basis. quarter customers average, a to up Cavco, on which backlog the of another seven At getting home is backlogs. $XXX and

well very Destiny and energetic, the since is positive part been the the going strengthens our very This them Southeast are there. and of to as and We've months now just Destiny, people position had plan the three Cavco. closed at addition it's acquisition in product everything great and have

operations services, to contribute the Turning to results. strong continue financial

we insurance, claims and and experienced During not a any lower major have been weather quarter, have this events result, year-over-year. as

We to exposure steadily and grow continue policies. geographic diversify

by been to and about our and lending pessimistic MH be increasingly programs encouraged efforts level. none the getting is lending, may we discussions. such receiving those state at the by slowed the as we directional since intended take tangible GSE be pilot On side, to Still, liquidity and progress to is Advantage be housing support the ChoiceHome and industry broader remain reform although home-only are will for expected to gain positive increase GSE momentum the programs manufactured remain time of This Washington comments has in and local limited.

turn financial With over that, to I'll it to review Dan the results.

Daniel Urness

year's transaction of Net for quarter year up million last million fiscal Bill. Thanks, for second revenue $X.X that months second Homes, occurred operations XX.X%, included results The quarter. occurred $XXX.X of at of at the $XXX.X beginning fiscal which fiscal the quarterly during of XXXX compared to revenue – two was million, Destiny August.

from Excluding organic this growth acquisition, approximately was X% quarter. the revenue contributed

prices. The factory-built segment, $XXX X% increase sold, million improvement units and is increase in prior in housing XX% increased X% the the from sales year home net Within to revenue in from average million approximately $XXX a quarter. a

to from Financial that home loans increased or commercial $X.X revenue increases and interest declines income volume, year offset force were the amortize. higher increased to policies services prior million outstanding. These from loan by segment income XX% on more in in interest net partially portfolios compared continue sales insurance securitized

margin a accounting generally as adjustments partially The was overall combined stability, with year. mainly increase Consolidated home inventory material input price marketplace product goods the home XX.X% last of in percentage purchase period from were same quarter resulted Destiny's acquired. gross low in up the from XX.X%, related costs. The gross raw net offset primarily by to gains revenue finished this profit percentage

a of as percentage improved net revenue. also profit gross services Financial

reinsurance no quarter a there incurring prior The included While premium and period thresholds activity. claim a occur large-scale retention weather this events buyback. exhausting Arizona, in did windstorm in event insurance and was significant year Arizona, Texas also reinsurance

in the general amortization fiscal same a to net several purchased from compared ago approximately and million the revenue premiums insurance last was expenses during and additional in of the administrative of was Selling, $X.X second quarter year. XX.X% to related primarily percentage as insurance SEC quarter D&O The to XXXX XX.X% of expenses increase related the quarters inquiry. $XXX,XXX

to income, million Company this gain to idle in for compared $X.X year's quarter. last a a selling The second $X.X land $X.X net, realized parcel Other million quarter. grew million from

balances cash quarter. the prior loan and realized In year interest versus greater Company the from addition, income increased commercial

this from tax second same benefit XX.X% option quarter, The was period the was income for million, prior rate share was income income compared per effective the XX.X% diluted rate year. Net The of versus exercises. last year. to stock income higher, was compared $X.XX mainly last fiscal to of tax $XX.X million for in net less effective the Net quarter. year's in quarter $X.XX same $XX.X the quarter in second

will discuss the balance sheet. Josh Next, Josh?

Joshua Barsetti

$XX.X by company securitized connection cash months the offset acquisition XXXX, to Thanks, Comparing further from nearly changes quarter. Dan. up million bonds. paid income million, is in $XX.X capital, of Homes the sheet million utilization The the pay cash million XX, the of working cash balance in $XXX.X XXXX, off from company's and $XXX.X to with of net and The six increase earlier. during Destiny the September was balance XX, March

acquired and assets other the taxes, transactions in fair from exchange value-based to current of market the sale increased previously timing higher and assets of income the Homes. Prepaid from addition asset acquisition Destiny prepaid land related mentioned

payable accrued Destiny intangibles, plant and Property, liabilities Homes and from equipment, accounts increased, and goodwill mainly also balances and other purchase. the

as lease beginning standard, was discussed of were this at year. the items line implemented last by sheet the Additionally, balance quarter, new which several accounting affected

financings The declined repurchase current from previously the securitized and bond portion discussed. of other

securitized have We repurchases to the related our completed on the bonds sheet. now balance

approximately to approximately million XXXX, XXXX grew $XXX the balance. million equity XX, $XX stockholders up as XX, September of March from Lastly,

Bill, that completes financial the report.

William Boor

Thank you, Josh.

always local to these calls, drivers end. is While that and the in economic this in tend we industry-level on conscious focus we're trends business a

of of at their our evolve company our that's factory, critical sustained and efforts focused and to a success. product The retail a are job and and Our making people doing sure all the services financial products good clearly managing results competitive, lot stay operations. really are a margins of

I think to turn with it's that, time over So it for questions.

Operator

[Operator with Securities. the Moore Instructions] Daniel CJS line question of from Our first comes

Your line is open.

Daniel Moore

Good should gentlemen. out say there, morning questions. afternoon. I taking good Thanks the for

William Boor

morning. Good

Daniel Urness

Dan. Hi,

Daniel Moore

from product, and revenue price, How with was up of it much was material prior or pass-through how Start increases? raw of of XX%, of much mix about X% benefit price-related that that growth price.

William Boor

more in seen multi-section Dan. half, and product general. homes, more half toward Probably We've amenitized a shift mix homes, just larger homes in certainly

well. general it, as of So increases I answer think much that's are price the as just as part

Daniel Moore

more change, margins pass-through Homes? I of operating year-over-year. one, impact less quantify guess, timing me remind segment versus of this impact the And second, the factory-built prior the And Helpful. inventory from slightly revenue Was if of Destiny could the pass-through step-up or was the accounting you What the there last? of, down year revenue?

William Boor

I But question, to to that finished last think, us value the accounting essence. place. do be those had fair was. homes we just mark the we inventory for, have it in we with with back that the with to on Destiny first of up goods take up XXX purchased when in recognition come ready I'll part requirements maybe to then and revenue are respect part purchase historic that, Homes, can we them And sold change that

And no it two enough enough two to make we out them, time activity So meaningful there is the was we to a margin. of there was in not months only quarter, when months. of there sell of purchased those end With since piece, insignificant. really get

was it results. Destiny to fact, stand-alone pretty In of the meaningful

the So piece. biggest that's

we've the any built homes as purchase normal the purchase a them. sold margins didn't accounting. number completed accounting margin adjustments. on had good sold have There Homes were acquisition other of But result and the that of after and the

Daniel Moore

that can quantify offline? we follow-up can And you or

William Boor

it. we We the We think most to it. should plan quantify quantify into next us. say, but of trickle quarter, be little other some it's can't there'll I that than, of don't behind

Daniel Moore

sorry. helpful. That's Got it. I'm Got ahead.

Daniel Urness

part Dan, just to the year. about that started of year, actually terms beginning in of talked revenue question that of last your at answer we the had all last pass-through other fiscal the

are pass-through a last So on apples apples, year from par with we standpoint. to

Daniel Moore

or an benefits then That's function it. simply strong Got really helpful. more or claims? a unusual very and interest of fewer Any items financial activity, out quarter on more services, there. And obviously,

William Boor

there, continue to that's it. good I Yes, it's think both I mean business grow.

sure concentrations. that certainly we it's We're a fantastic job. So making out responsibly watch growth, teams The managed. watching do there

Daniel Moore

jump Got it. in two Thank follow-ups. But queue. One back I'll or you.

Operator

you. Thank

Our line Palm the next question with of Greg Craig-Hallum comes from Capital.

is line open. Your

Greg Palm

the taking for Thanks questions Yes. here.

in little anything of any the quarter, can talk in other you stretched a Maybe demand with start whether little are the more to Maybe activity wanted relative terms orders bit cadence bit think through of to outperforming? I environment. out on then where the that and some areas? So a backlogs and geographies color jumped are

William Boor

things conversions, And and is positive. about. strong I we our villages, honestly, I of traffic One geographically why – pretty our good at retail by been indicator that been they are look have talked I you what It's Yes. traffic a that just I we Harbor there. very touch although mean, and can buildup that on. driven and inventory are generally operation. it's of tell few kind is few for Palm quarters kind concentrated confidence can deposits And experiencing really last was had which we pretty that throughout,

our We is than looked in of Regionally, a about areas. and in I think well. any region of dropping the at is we concern the have as not by that there line, other getting changes news kind backlogs positive out really backlogs more pretty region,

across board So we've seen of part. demand most the solid the for kind consistent

their talked very That past believe business slightly, the We the high. in down the Southwest backlog by so so that that's came strong but driven is has backlogs, probably I community high there.

is I probably kind other it slightly down that think real came during healthy of the it's quarter, increased slightly regions a and which sign. positive

not point at that perspective. particularly this from worried we're region about any So

Greg Palm

color. good Yes. That's

of and and I terms segments company-owned let's In combined independent one. various guess, the just,

community the dynamics meaningful versus of there? So changes in business, sort any looking retail demand of the the side at

William Boor

the that Nothing all really noteworthy kind was I Looking quarter room, head, around from think of shaking kind we're of our a perspective. no. consistent very

Greg Palm

it. Got

Okay. – one Dan probably for And is this then, Dan.

more. little Following the is were If factory-built the September a accounting below, we purchase of would that gross quarter to been Can into on fair you the previous just in ballpark? about, margins in Digging the similar, saw we what say you a talked little above just margins June? give have sort I say, that let's impact bit the up exclude mean, it to, question. us

Daniel Urness

you work that Yes, and the our and other we overall, about have piece, I which And mix margins quarter-to-quarter. But overall, we accounting to pretty purchase them, continue feel Well, good grow bet. to obvious to Sure. out are mean, component. was things good. want margins and we call we product our impacts obviously, think

So at long-term. look we it

of These quarterly in. impacted by numbers the has were also, tariff kicked activity some I think that

did have core impact material commodities. that we increases So have also from other some the costs aside an seen and in

Just far flooring, those we as doors, increases have roofing, that types lumber have lumber-related of the our things interior panels, we've somewhat instance, offset seen for product have some seen goes. pricing as of that and lows

some is there of that on. So going

in didn't company-owned as normal the it have consistent higher watching also closely. we're reduction they levels that would So course. and that overall marketplace with on pretty inventory We margins had the stores reduced as

these responsive we and are our just None your things they're and through. work But and to currently. gross there continue where question, are we margins there about of large. feel pretty Greg, to are some So at they factors impact be where But overall, are that is good to there. there going

Greg Palm

like healthy. it? Is puts but variables, of it pricing overall environment right way about sounds with pretty a overall some lot and that kind and margin to still So takes environment think of

Daniel Urness

It Then is. We closely. we'll believe all watch things it is, yes. those

William Boor

levels. been at your it seeing pretty we And great we at healthy any degree. pressure haven't year-over-year to I'd with look agree You price statement are and yes, that

kind like puts just takes, of you So and said.

Greg Palm

good. sounds Yes,

or of sense? some appetite mean for an for feel is out there. you on this point. kind where what acquisitions additional there curious than I is more – at your like buyers environment one just details what's Okay, And do the there Thanks Destiny. is your there, of sellers

William Boor

keeping know say and I'd there. interested more we of buyers. on opportunities don't our are I sellers kind always eye we're I and first always if mean,

on. under surface constantly of it's is kind So an we'd activity the to buying. that love going And continue

more of get two companies that or they sell to We're the buyers when is on now. real as a ready sense to buyers kind their operations toward sellers and ready kind and trend firstly get know my of I plant XXs number perspective on I people of one low right it. to don't and as and sellers down in far industry sell

anything Dan, add would you there?

Daniel Urness

survivors, those lot will than accordingly experienced great all good find in that years the ago be Yes. will The and different are be we marketplace hope able mean No, to to there ways, if I I in we you good and act good. through operations downturn general continue where we and out think to it's a environment fit of are and companies the in companies, we a the continue.

business make expand We're can as chase better for want just to just grow contribute that that these and for growth going not we're we anything. multiple good But us their of We're to We on looking fits in going to not not sake. topline. help any bring the ways are to well.

good we that look are the So for. those fits

Greg Palm

few probably a that the are bit founded public quite builders okay. about it, one few interesting a have me, Last construction of talk would to a now for site starting years than more offsite they ago. Got

curious of yourself early whether as potential what you partner, So too sort on JV make planning that, exactly of it's see what doing? they're or to a if tell you

William Boor

see down have urban really manufactured don't it's component I mean significantly to some personally affordable a innovation. settings. road. closer the – interested the a going of and aspect and everyone's of out. just the situation urban is And very where whole in, increased closer affordability in a of think world end topic kind to it an work of I require trying particularly figure I I'm housing don't it, level We

an builders trying able house to going is the we site-built be what it the And hybrid going really it to of or up with to of be innovation Is point. to price factory be is So to don't end their hit built are hit in somewhere completely a between? are a They seem going question just with? techniques. to traditional kind

We're keep think trying then like but out spur of ground think to people other ear talking a all I to see we on entry, And say figure to. nothing going to we're we to our – that. we're And I'd it. of to trying just folks, have trying to are. I to the lot the need

think I whole be going just manufactured a new growth. housing, to it's the of direction market really for not incremental

of see I to things kinds with So location saying to yes, think And dependent. – attune happen really all to it's it. we're I going going think be we're

make going look the for of factory what good to situations bit XXX% typically components, that's and product someone site. doesn't on manufactured like that call built are call other going Some doing we into for are come situations to a work probably

from to So land at perspective, it interesting largely development. it's participate. an we looking and developers They're as really want their certainly

Greg Palm

Yes, for makes Thanks it. appreciate sense. All right, the I time.

Operator

Thank you.

from Moore. a have Daniel We follow-up question

Your line is open.

Daniel Moore

again. you, Thank

Just of you is Bill, seasonally levels work the decline or period the of of around expect likely year? to flash kind these modest in to do we more softer we backlogs stay the terms as forward, into see as

William Boor

Seasonality by is very and industry right. a that talking the something trying other. we way it's or is usually and right obviously one the get we've different order mean rates right now that. been the for doesn't feels to I we're backlogs, now It just region, But forever. last as think feel balanced here, about seeing

unlike see we're might overall unfolds. by it areas pretty winter you, we're And year. backlogs the be but of that's effect to are northern order a impacted strong in But going at kind muted a our to how seeing this we the rates, see seasonally Your season, heavily with more moment. going feeling –

Daniel Moore

much expenses? legal incur any expensed, down, remind us to you would just expect insurance and as to D&O amortization winds commentary then how And longer Helpful. when

Daniel Urness

Sure.

D&O So I end will The on QX that QX is expire. of year. it's of the question, when next believe

William Boor

We got more. four

Daniel Urness

Yes, cooperating through SEC we're and that working four it. more the whole with then quarters And of still process.

So we to how long on it comes will don't a have up. as it we'll continue, continue report really gauge that but

William Boor

expense the accordingly. with be It's very if down drop will difficult is And driving going And on because for point. this period, legal side activity, if for there it a at SEC involved slows us speculate we're costs to to the process is the them. the

to So – how riding on they and we're of based kind it proceed. want

Daniel Moore

me. from lastly and Understood,

MH securitization that, follow you backed two. of maybe And first how you week expect first the step? loans make you What that a over Bill? others do last a chattel mainly think as or I of the do do significant and occurred to see

William Boor

Generally, I'd the those say, the there out different from and do anything need But is seasoned, highly securitization I fact it's loans loans completely hard but with lending. with guess, those that ages that look about word to at chattel are feel positive it, the time. a people to were

we when So securitization real and will develop be around the get an the industry, more as on lending breakthrough start data recent to that.

the it, the So country opened about place, see we order with aggregating to and point up we will market that kind I we're Through to positive about lot is people buyers just What that again. have a securitization. discussions that talking are the time also of securitizations. but back to in don't as of do continue

Dan. We energy the guess the we're is again, and the think just direction, tell call anxious best as really we it right will And headed really in open the I you, can't motion we can I but up, as when anyone.

Daniel Moore

you, again. Thank helpful. Very

Operator

for not any Executive further I I'm Officer like to call Chief now over Bill Thank the to showing and would turn President remarks. questions. closing Boor, you.

William Boor

else. anything I think don't really I have

and the everyone's be look continued today I on you Thank forward discussion. interest much. very to So and to appreciate time call, we

Operator

conference. gentlemen, Thank and Ladies today's concludes for participating. you this

day. disconnect. wonderful Everyone You may have a now

Cavco Industries (CVCO) 29 Oct 192020 Q2 Earnings call transcript