SKY - Earnings call 2 2024 | Skyline Champion Corporation

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Operator

Good morning, and welcome to Skyline Champion Corporation's Second Quarter Fiscal 2024 Earnings Call. The company issued an earnings press release yesterday after the close. I would like to remind everyone that today's press release and statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections.

Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission.

the be discuss performance. useful call, it measures, today's can believes in during company non-GAAP will which Additionally, evaluating its reconciliation can release. measures of in A earnings the be found these

call I like Champion's and Executive would Chief Mark Please ahead. to the President go now Officer. Yost, over turn Skyline to

Mark Yost

call, joining CFO. by everyone. Laurie EVP good and I on am you for and joined call Thank pleased this our earnings morning, to be Hough,

update of highlights Today, activities I with about talk in then third so on will an our our second far and though provide quarter on the briefly quarter, include the year. balance

This our and saw their placing rechannel through our softness backlog in that sales home pause of We REIT the September captive of Community community expected end the as our of channels. declines were the drove existing production year-over-year through new before in with retail new revenue. demand last healthy in continued quarter ordering, from through absence combined and inventory year worked FEMA-related consumers quarter as the independent second orders. both partners

$XXX of sequential compared were as by increases quarterly was price. quarter the million the XX September at unit to $XXX as in decreases offset end of Backlog million June

range X normalized weeks Average are lead times of to within of our XX with times have the at quarter. of first historical lead X consistent and weeks the end

prices shift again current quarter consumers features increased expected we home the options fewer are in and homes given environment. the interest sequentially, during volume Order smaller as and homes with the decrease rate to or seeing

more volume of new the the while our and believe for our we a Financing. Champion customers end and and recently. by our channel our enable captive On home-buying home Shifting Capital finance to solution deeply growth captive to partner will more our have that XX, who options provide our us key providing we and comprehensive It homes. company, establishment ECN services in of purchase taken unlock companies financing value customers. connected stakeholders becoming of to some with the and investment attractive finance broader our formation closed the will strategic bring consumers actions We September

configuration investment strategic home The to offering buyers. digital longer-term our selling view and on aligns with

to will up a deeper we Champion Financing, and the dealers we As with consumers. believe our ramp continue create benefits connection end

more diversity As that of the ECN, will the we help the of increase drive growth volume will capital to sources to overall. accelerate industry which

the have and in States, acquisition Additionally, hub in long Homes, we manufacturer United of the on the the company admired. October, retailer independent largest we fourth-largest closed Regional the

confident expansion Homes us Champion We our addition the Southeastern Regional United growth are that of to of through profitable allow accelerate distribution manufacturing the across the and Skyline platform States. retail the to will

to aligns years I'm will customer the our for of retail exceptional operations. capabilities, initiatives to but the the industry experience Regional with providing first. leadership exhibits coordination as Homes is most serve selling its excited Heath unwavering of experience. dedicated to the Champion brings welcome experience President commitment with acquisition, In approach has an core and enhance Champion's and customer the customers, value homebuying which Skyline directly closing customer-centric a our strategic with Skyline leadership of he Heath team to strong captive retail an and Jenkins importantly, buying as

leading solutions, housing today. Skyline to as opportunity the a support provider these efforts attainable of for Champion's Altogether, which market the in tremendous we our positioning an growth investments exciting market represent strengthen need solidify long-term is as of and

outlook. Moving third to quarter the

digits as into are seasonally mid- third expect as our to builder we single order rates stronger our to revenue the result. we continuing destock market slower see while up normal the developer channels. returned a from to move continue be retail REIT customers We others quarter some And and have to as to high period,

be We from in orders recent need strengthen duration we housing. quarters housing consumers Reserve. We anticipate have to from growing the this in Federal for for to affordable anticipated row seen indications due the by longer a needs X than initially

this enhancing into long-term is that more increasing housing and us are for our REIT adding long-term and can end value experience tailwinds financing, strategic With partners. of our buying for products potential confidence in growth channel consumer regulatory give our solution. driving Additionally, we digital our the the retail, investments automation, and the

in to discuss now will detail. over I the call financials more our turn Laurie to quarterly

Laurie Hough

Thanks, morning, financial cash our of reviewing also balance results and everyone. discussion followed flow. discuss for a second sheet I by will expectations. good Mark, our I'll our briefly by and the begin quarter, near-term

build. a to a average the carry ASP quarter, second which same sales XX% year-over-year semi-unit which price decreased decline selling in higher in we U.S. to our home in recognized quarter net last per compared the sales. $XXX of net reflects the year, last due million year, decrease core XX% product The million to in sales semi-unit sales due complexity $XXX During to than

addition, and our surcharges. ASP to mix in product In declined due material decrease core product the

in to sold volume period. the the X,XXX basis, down flat. with due factory-built remain year-over-year of in that was expectations reduced was to quarter, During in On production FEMA-related align the compared home line we homes relatively the U.S. with the to sales X,XXX U.S. year order sequential housing schedules homes and with rate. first quarter, consistent absence would U.S. demand a revenue prior

maintain partially the An core average environment. as decrease by rate payments selling sold in increase per smaller was homes price interest the homes monthly in and in home effort less a optioned opt current the for customers in of offset number to affordable an

opened quarter order certain is rates and being fiscal in compared first XX% impacted remain markets plant adversely by utilization rightsizing sequential XX% to faster. XXXX. in decreased of newly of Capacity plants the end production which a serve trends to utilization current that Capacity at

selling compared the the for number primarily $XX year, driven of in Canadian year the demand. translation home a revenue in $XXX,XXX year-over-year the prior period, in the by to period. to sold last $XXX,XXX compared the homes decreased decline million to decreased dollar to Canadian XX% slowing price due quarter due to fluctuation U.S. second average The the primarily to dollar in the of Canada to XX%

Consolidated gross $XXX by XX% second versus and million basis margins XXX On in a margin prior basis points quarter to contracted quarter. basis, year saw the profit XXX declined points. the gross gross decreased sequential we

due were from sales margin basis Our year, U.S. quarter. XX.X% segment in higher quarter margins semi-unit XXX the to last prior the gross housing segment sales net down points primarily of year same

with shift hit options, interest As lower as payment sales point homes well less to allowing given monthly higher and volumes and price a homeowner mix to rates. features core their product the

prepared due were $XX $XX to negatively quickly the as operate Gross also at we million rate order normal production activity. by lower on margins rates to return reduced lower to order primarily upon quarter impacted SG&A be incentive to are in plants expense volume. compensation decreased million, to in second ramp to choosing lower the run sales

quarter operating the Net $XX same decrease income share decline $XXX for diluted last income and in decreased second per reduced driven leverage or The in by compared year. EPS the of diluted of period net XX% $X.XX to was share million to million $X.XX lower earnings during volume. the on sales per or

effective to acquisition for the period. year costs versus compared of includes period margin tax prior approximately tax Homes. this was $X.XX Adjusted the the Diluted million normal quarter EPS quarter year ago prior $XXX the XX.X% EBITDA to in profitability XX.X% XX.X% period. more was quarter reflects for incurred rate an EBITDA the rate for compared XX.X% transaction-related for year Regional of $XX The for to of effective million return Adjusted levels. the the of company's in

we the output. in structural operational of in more channel and regular In order cadence. The business conditions periods maintaining improvements protecting have our our investments focused near return strengthened and capabilities, to profitability activity as remain on efficient made lines lower term, production a improve

mix customers affordable said, fiscal reiterate current for will looking our shift maintain the That expectation remainder in the environment to interest XXXX. of the continue by that payments rate monthly we

fourth margins continuing and to of accounting further third mix Homes production in purchase sequential ramp shifts, to added the capacity the We due compress to expect product newly the acquisition. and Regional quarters implications

$XXX with of long-term operating equivalents As $XXX of $XX for lower million to flows XXXX. generated We the due to prior of the of income the and million XX, the primarily cash prior cash net million until for The is flows borrowings compared XXXX, we cash year maturities had capital quarter million operating impact period. year. working September decrease semi-units and $XX in no and in producing of cash

used $XXX to and shares preferred the ECN million end, purchase of purchase Capital. to quarter of we homes. for common $XXX allocated quarter, of strategic million the capital Subsequent During of cash regional we our

assumed plan primarily we related debt, addition, floor $XX In inventory liabilities. to of million

favorable our given and initiatives, support for the cash utilize opportunities operational our on position executing and on reinvest focused to to remain long-term in strategic We plan growth. business liquidity that our

ECN working retail our of Financing as been programs community investment, to the Since plan the as channel Financial closing branded we've rollout on develop with the loan plan retail partnership and partners including floor for for retail strategic Champion Services, Triad our programs well the tailored business network. for

We are targeting launching January XXXX. these programs in

Triad's and a on and institutional Skyline is servicing investors and with Unity risk ECN's asset-light the structure, leveraging As origination with sheet. include the Champion capabilities, existing banks infrastructure no relationships an reminder, loan funding partnership leading which balance

on and a the common results the lag. quarterly impact reporting will partnership of stock the be We ECN financing of captive investment the

began been integration and to homes closing The the of practices meeting capture to We share have synergies. of upon the mid-October. transaction begin regional best teams in to

years procurement and synergies, of to productions from reminder, of a capture $XX we $XX sharing As anticipate best X national sales. manufacturing the million across and leveraging including million operational over improvements our next synergy practices footprint

fair next The sheet, be sold. company's in homes to quarters consolidated and goods retail revalued are negatively several its inventory gross will retail the margin regional the impact finished will including as balance those value

amortization assets will the acquisition. SG&A of increase addition, generated the for from In intangible

to some Mark I'll remarks. the closing now call for turn back

Mark Yost

Laurie. Thanks,

price channels, with our for through partners initiatives. opportunities REIT, manufacturer builder positioned positioning changes outlook helping believe affordable we our consumer supported well we due developer manage well our demographics. the As in channel rebalancing Champion as to and The our as and of adapt community rent strategic by is Skyline long-term retail the core demand points, growth is

traditional continues will buyers In our need day, addition, cost more we state-built housing every to grow each homes. to affordable believe housing drive the of that elevated for and the and

of the a team Skyline that open we as a has result I strong and want The day. people. every may Q&A, consistently moment performance line things our Before each our take to to thank amazing entire happen the Champion for

you that, now may open for the with lines operator, Q&A. So

Operator

[Operator is Greg question Instructions] Craig-Hallum Palm Group. Our Capital from coming with first

Greg Palm

or competition margin, function was more plant to of maybe result weaker-than-expected maybe like discounting. costs wanted start versus a sounds it these gross of I some the increased with quarter, the in of operating

that of going So sure just then Is bit forward, gross in just more the going thought stay why in preparation shifts term? more keeping that of a the you to is on keeping wanted reasons that return why process to I sort to one maybe make of right. for was or employees little you're And that near margin maybe the demand? is subdued

Laurie Hough

think it pretty Greg, summed Yes, that up I you well.

We that seeing, shift mix addition anticipating, that are product a to product to you things the mentioned definitely degree but in we as a well. were greater -- that

So yes.

Greg Palm

the in quarter, or little expect bit just to two? of over a we quarter terms compression of kind this should And what more quantify maybe relative previous next

Laurie Hough

Yes.

-- -- parts. next the of quarters, few be lot going it's to we're there's For moving definitely a

margin. consumer product that the with trying the see regional as the impact monthly to of mix where shift today. then continue and to to purchase they And the are reach rates affordable accounting with payment ramping a as well going plants interest we're gross more on So

basis it XXX So probably points. we're expecting around

Greg Palm

purchase the was to basis points, accounting correct? of And kind XX XX

Laurie Hough

I working last quarter. sheet. the Yes, through balance the did based numbers mention We're all closing on still that

Greg Palm

Yes.

partner little they've can of a $XX years? And expectation JV in then that more and publicly of Financing Champion income I what about pretax bit contributing the know if next to looks the don't like calendar you X partner stated I Okay. know million per the maybe here, 'XX. X that over ECN, talk

that they maybe right. if what to remember at think Is something well? like as years? might that $XX if that's want I the look curious couple bless over just I of And case, the said kind least million, next ramp you of

Mark Yost

out the think is I Greg, there. Yes, ramp

mentioned for ECN XX their XX I XX%. think to

excited about That I The is a position. given So that. JV we're the seeing obviously at piece looking that's great for today. where very especially think that conditions in that. We're you're that, banking

and or I that the X customers. We've in banks to partners think the exit community X has Carlyle start flow regional fact of space and from -- start ECN banks is capital today's seen Blackstone out already market. lending our to tremendous

obviously, banks, have to further further liquidity sure pressure a and we as of important matter community customers and is and for community partners some anticipate our making very on as regional developers builder fact. our our pressure And there's access dealers and

think I ECN Blackstone with having an So have they capital. especially worth who with vital, with is committed relationships additional $X.X that partnership billion and strong the of Carlyle,

So infusing liquidity community into with and the regional market banks.

-- a like is forward us. strong really that So to

mentioned, So the right up things as things go have systems now. January getting anticipate we're and period. by set to Laurie other time We ready we'll

of ramp we'll so 'XX. to it year And really the start in calendar

And to teams that. And well track together. are working I think evening's the so on very --

Greg Palm

talking be calendar to I just clear, was And 'XX.

'XX. Is they that I right? think mentioned in to XX XX calendar

Mark Yost

correct. that's Yes,

Operator

next is Our Daniel coming with Moore from Securities. question CJS

Dan Moore

comments, clarify to First off, want just Mark.

single QX And inclusive Is have you said that digits high so, you regional? think if sequentially. organically is to revenue or up correct? mid- that of I some

Mark Yost

that regional, least of expect single the high at in in number. inclusive sequentially. range, somewhere that quarter Yes, mid- for we digits, Dan, That's to least at

Dan Moore

it And versus returning, like of is it. destocking. community community? identify? more there by Are or can community Got differences, sounds be regional you any Or it some that sort some other discernible still it communities

Mark Yost

more They've in normal a get destocking It's handful and We've community on Others still a that by starting are order returns. community. to communities seen actually really of process. back cadence. been

kind -- but starting I in communities So are to it's, between mode. it's want a it's don't pause move that are XX-XX, split and say others Dan, still definitely to that there's of

Dan Moore

say of your of recognize builders, even kind solution in of sort terms the just takes Genesis cadence making? but those not momentum longer-term on it years, you And focus the sort solution. in that to what's of We what of that dialogues? can it. progress or top Got I quarters, is XXX of those terms but converting beyond

Mark Yost

phenomenal, actually. momentum The is

It's a stayed to think bit builders look the now at I according a take outlook up forecasted they're rates really to longer have is. to little up Fed. little that stay interest and a that what causing

loans that's their we Right now, volumes. our growth sequentially to really down of volumes. no a I majority of real incentives at year-over-year our no and buying and grew look -- quarter, at had orders XX% builders by to And are drive with I order look drive buydowns, XXX%.

development. months to can incentive XX% that their builders cost So save and kind of them for them the I switch ranging That think affordable cost X capital, solutions really there time. capital drive huge to for to small of price points with in mid-tier to to a range of can XX for our where we

So it's tremendous.

Fed momentum So extending last at are now up, and fact I'd the the especially say buy-downs that looking the can't people is definitely is forever, that longer. picking

they a I it motivation an for builders look do otherwise. can't is think to because alternative really at that

Dan Moore

see. bps it. I conservative, Got we'll last of And commentary. little XX% margin. and circling range, kind just maybe color for down to XXX the me, back back to the gross the a appreciate

points, about off, for utilization, lower terms accounting see norm leveling get new talk, XX% where purchase cetera, if this in you over see X say, you of even off et we when let's Just new, longer and a margins back of mix, a maybe the to it's to sort the period leveling next time quarters? of XX%, to X Laurie, get where at through us price

Laurie Hough

range. think still the that for margin that our thanks targets question. We Dan, structural are in Yes, mid-XX% long-term

believe targets quarters. So talked going historically. that few bumpy back be I to the do next get to the for It's to we about that we're going

Operator

the from with Our Ng Jefferies. next question is of line Phil coming

Philip Ng

capacity to some of the backdrop. kind a What's there more Is or facilities? right direct-to-builder that sound you front serve anything fuller? pivot got you little softer with channel a now on ability labor Mark, about this pretty your Certainly, to to excess you demand channel. have excited the do

Mark Yost

think for at Thanks we is choosing reason part of to utilization. we this the reason ran XX% running run less point. we're in that just No. be to get to optimal lot quarters. do short capacity I utilization available it question, pressure to Right of few at need down doing for to it a their really make keep that that have a Phil. builders been a now the would And They buying sales that the than through have capacity enter view is of to we're capacity rates, quarter channel. of that Part term. up. sure kind No,

I buy-downs, I think now reconsider. they're that marathon, a it's starting more rate less to a sprint than of of think

in think infrastructure move is for this shaping got is it we've think channel I up quickly, why to in I pipeline us. very is the to which place the So way that

Philip Ng

And ECN season. big out call then it, helpful. mile this XX X selling see rolling ahead the months? do progressing, to That's of to in spring how Okay. marks want you and the achieved you next integration Any

partnership consumers access And where in out the partnership tougher. previously? credit competitive have especially as versus now side you get it well? more how have you called is gives better of having on Do didn't you this to Does now right liquidity, things a this you help rate an little when environment

Mark Yost

Yes.

done that that Phil. So drive in to we're at, benefits, solutions terms different anything can turnkey we especially with rates I offering, our look partners our way. haven't to are think, a There rate we of in some

services, in I think if us, I volume from at DVD it buying look other definitely can discount them help they're if they're some our our they're will we and if using they're a that floor -- basis overall, a plan construction think from or ways. using using things,

the One, them going a the that be to fewfold. speed is it Two, to to going think really is for it's liquidity. access I we're deliver. benefit

deliver I And piece I ECN services a terms in think of like is faster in can really what turnaround what times, just, where experience, the Champion really And deliver to suite the only have third it's competitive we great with needs. to to one end hand-in-hand then rates the they partner for offerings, with they said, can multiple consumer is customer to them. about. working So we're deal better of obviously, program Financing all

Philip Ng

to do of of get kind of Super. expect some just year half? me. How year, back would Or And here? You helpful the kind XQ. noisy just wrapping last And the stabilize cadence for see the talked degradation sales shape quarter? perspective and be so up you to on one it further kind kind you one how of the of It's about fourth of kind up. a in wraps do could there mix be your pricing your

Mark Yost

Yes.

I bring see the spring continue revenue market think bit to the of here. as a to mean have continue grow that I and little we come some in a in there's things going right? ramps to choppiness be They then going integrate I noise, But and to regional. the would and point have sequentially community as different price of have customers we're we'll other back. to up some

really be are with is to going of volatility which or honest, really think as will oriented, in noise, positioned to it's earlier. price in be you're bit to Laurie deterioration I more kind be because mix of all very just it the see terms of noisy, it a manufacturing, increases, versus retail going ASPs mix mentioned well. little of rates just not

Philip Ng

make integrating mix is flesh I that sure to regional regional. want then just some to up? you down sure comment I about just made out. want or And Or I make

Laurie Hough

Yes.

all more regional So of the across plants. broadly shift mix we're seeing has that the seen

where year, prices well. their as they down are last had higher coming So prices,

customer Just monthly points payment due in mix price writing. the the that shift is the to

ASPs expect next do second range down that as the and the the we come stay of leveling in through mix. third to probably just work that quarter sequentially to quarter from few generally quarters we So for

Operator

RBC is Our coming next Dahl from question with Mike Capital.

Christopher Kalata

Kalata Chris for on actually It's Mike.

of a just Just have into on the now terms and given you there the color more specifics discussion could expected regional is in closed, contribution that XQ, the follow-up now? deal additional next you any provide unit quarter is in

Mark Yost

don't question. for We Yes. in separately out We the -- Chris, don't the of thank guidance. terms you break regional

if how in I overall quarter the think we up they're third our safe see shaping wrapped up.

Christopher Kalata

on provide order how in shifting I -- the just seen then move the today last many weeks has the changes in in any of move response MH expanded? change core in month like few mean the up have financing relative to towards or changes? a dynamics And And core trends a the health consumer you environment two, the following Understood. shifting it. rates. have Got the on higher our the to financing back spreads higher and customer shifted you color the could spreads

Mark Yost

you, Yes. Thank Chris.

think picked our and said, very at the one XXX I I confident think, without like like seen I We've have unit our is and fairly that's consumer said in earlier, -- XX% thing that now. directly rates sequentially. right I'm actually the volumes order I fact year-over-year -- percent, we're incentives. look And I up

So better capture I drive we don't that to that We're we're seeing customers And alternative. drive incentives that huge customer a look affordability. financial base. seeing think for to have to really

I So that. that think for terms us shaping very of outlook is in well up

now are closer rates we're X%, if probably channel XX.X%. right XX%, -- best X.X%. is in the now probably rates, we're for about right credit, XX%, I are seeing average they're they're probably say would Our the X%, poor to customers seeing seeing,

cases, XXX channels, seeing for marketplace XX, a in -- right points in competitive some great the today. now, which we're So basis spread it's but very is

consumers. great So for value our it's a

Operator

question We do Group. have Craig-Hallum line of with Palm the coming Greg a from Capital follow-up

Greg Palm

are gross margin? apart they whether you've excluding mid-XX's of line kind -- remind this talked from the kind gross Can I us. you -- of about will before, maybe Or can be with accounting, margins accretive? Regional's that in but purchase that forget

Laurie Hough

Yes, Greg, a they're bit little lower.

years we've to in capture the next that work got So bring of bringing to the up. synergy over on couple

Greg Palm

Okay. Got it.

in XX% that's it previously but were of getting kind mentioned thinking in higher you it's XXs. back somewhere whether wouldn't range then about XX% or maybe why I kind the just that know, the shift well. talking higher, term, longer as that mid-XXs, even to mix of to part be And of you Laura, So

to if could. normal capture. just wanted flesh mentioned It I utilization synergy more, out levels, bit more under but feels like, that just capacity the a you I little maybe Just

Laurie Hough

obviously, XX%, Greg, capacity at as is the too. upside increase, some And normal volumes there's XX% Yes, levels. potential still there, doable certainly

we XX% it XX%, to in see So that whatever. range,

Greg Palm

Yes.

Okay.

to we quarter? sort were in of last getting So it anything changed term that of or doesn't thinking level terms sound long what like versus back

Laurie Hough

long-term Not No. perspective. from a

Operator

we have questions appears no It further time. this at

So I'd back closing the Yost like to pass floor Mr. additional remarks. any for over to

Mark Yost

I'd thank forward We for quarter interest. your great today's the to We day. time our participating like . you, to everyone call. in you appreciate on continued a updating look call. have third and Thank progress and on our

Operator

conclude Thank Once you. we at this Ladies participation, today's this you you your time. thank and lines disconnect gentlemen, teleconference. does your again, may and for

Skyline Champion (SKY) 1 Nov 232024 Q2 Earnings call transcript