Cavco Industries, Inc. (Nasdaq: CVCO) ("we," "our," the "Company"
or "Cavco") today announced financial results for the first fiscal
quarter ended July 1, 2023.
First Quarter Summary
-
Net revenue was $476 million, down 19% compared to
$588 million in the first quarter of the prior year.
-
Factory-built housing Gross profit as a percentage of Net revenue
was 24.8%, compared to 24.4% in the prior year. The current year
period was impacted by purchase accounting adjustments on acquired
inventory related to Solitaire Homes, which reduced Factory-built
housing margins by 40 basis points.
-
Financial services Gross profit as a percentage of Net revenue was
24.0% compared to 32.6% in the prior year. The decrease was the
result of higher insurance claims from weather related events.
-
Income before income taxes was $61 million, down 23% compared
to $79 million in the prior year period.
-
Net income per diluted share attributable to Cavco common
stockholders was $5.29 compared to $6.63 in the prior year
quarter.
-
Backlogs were $177 million at the end of the quarter, down
$67 million from $244 million three months prior.
Commenting on the quarter, President and Chief
Executive Officer Bill Boor said, "Demand during the quarter
continued to show the effects of diminished affordability. Despite
the challenging market environment, strong management across our
businesses generated solid cash flow again this quarter. Our plants
continue to demonstrate their ability to maintain margins by
keeping costs as variable as possible, which is core to our
operating philosophy. Our healthy financial position enables us to
maintain our strategic focus throughout the cycle and we expect to
emerge from this downturn stronger due to our focus on the
undeniable need for affordable housing."
He continued, "I'm also encouraged by the
success of our digital marketplace, www.cavcohomes.com. We recently
surpassed one million visitors in just six months since its launch,
which is enabling us to funnel quality leads to our retailers. This
shows that customers are out there shopping and the platform is
another example of how we are executing our strategy of helping
them buy homes."
Financial Results
|
Three Months Ended |
|
|
|
|
($ in thousands, except revenue per home sold) |
July 1,2023 |
|
July 2,2022 |
|
Change |
Net revenue |
|
|
|
|
|
|
|
Factory-built housing |
$ |
457,109 |
|
$ |
572,597 |
|
$ |
(115,488 |
) |
|
(20.2)% |
Financial services |
|
18,766 |
|
|
15,741 |
|
|
3,025 |
|
|
19.2% |
|
$ |
475,875 |
|
$ |
588,338 |
|
$ |
(112,463 |
) |
|
(19.1)% |
|
|
|
|
|
|
|
|
Factory-built modules sold |
|
7,406 |
|
|
9,242 |
|
|
(1,836 |
) |
|
(19.9)% |
|
|
|
|
|
|
|
|
Factory-built homes sold (consisting of one or more
modules) |
|
4,582 |
|
|
5,346 |
|
|
(764 |
) |
|
(14.3)% |
|
|
|
|
|
|
|
|
Net factory-built housing revenue per home sold |
$ |
99,762 |
|
$ |
107,108 |
|
$ |
(7,346 |
) |
|
(6.9)% |
-
In the factory-built housing segment, the decrease in Net revenue
was due to 14.3% lower home sales volume and lower home selling
prices, partially offset by the addition of Solitaire Homes.
- Financial
services segment Net revenue increased from more insurance policies
in force in the current period compared to the prior year.
|
Three Months Ended |
|
|
|
|
($ in thousands) |
July 1,2023 |
|
July 2,2022 |
|
Change |
Gross
Profit |
|
|
|
|
|
|
|
Factory-built housing |
$ |
113,368 |
|
|
$ |
139,586 |
|
|
$ |
(26,218 |
) |
|
(18.8)% |
Financial services |
|
4,511 |
|
|
|
5,138 |
|
|
|
(627 |
) |
|
(12.2)% |
|
$ |
117,879 |
|
|
$ |
144,724 |
|
|
$ |
(26,845 |
) |
|
(18.5)% |
|
|
|
|
|
|
|
|
Gross profit as % of Net
revenue |
|
|
|
|
|
|
|
Consolidated |
|
24.8 |
% |
|
|
24.6 |
% |
|
N/A |
|
0.2% |
Factory-built housing |
|
24.8 |
% |
|
|
24.4 |
% |
|
N/A |
|
0.4% |
Financial services |
|
24.0 |
% |
|
|
32.6 |
% |
|
N/A |
|
(8.6)% |
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses |
|
|
|
|
|
|
|
Factory-built housing |
$ |
56,021 |
|
|
$ |
60,923 |
|
|
$ |
(4,902 |
) |
|
(8.0)% |
Financial services |
|
5,659 |
|
|
|
5,213 |
|
|
|
446 |
|
|
8.6% |
|
$ |
61,680 |
|
|
$ |
66,136 |
|
|
$ |
(4,456 |
) |
|
(6.7)% |
|
|
|
|
|
|
|
|
Income from
Operations |
|
|
|
|
|
|
|
Factory-built housing |
$ |
57,347 |
|
|
$ |
78,663 |
|
|
$ |
(21,316 |
) |
|
(27.1)% |
Financial services |
|
(1,148 |
) |
|
|
(75 |
) |
|
|
(1,073 |
) |
|
1,430.7% |
|
$ |
56,199 |
|
|
$ |
78,588 |
|
|
$ |
(22,389 |
) |
|
(28.5)% |
-
In the factory-built housing segment, Gross profit as a percent of
Net revenue was up 20 basis points primarily related to lower input
costs. The current year quarter also includes certain purchase
accounting adjustments related to the acquisition of Solitaire
Homes inventory, which negatively impacted margins by 40 basis
points.
- In the financial
services segment, Gross profit and Income from operations were
negatively affected by higher insurance claims from weather related
events.
- Selling, general
and administrative expenses decreased primarily as a result of
lower incentive compensation on reduced sales and lower legal and
professional expenses.
- Income before
income taxes in the financial services segment decreased
$1.1 million from the same period last year. The net decline
was directly caused by high claims volume in the insurance
subsidiary generated by multiple weather events.
|
Three Months Ended |
|
|
|
|
($ in thousands, except per
share amounts) |
July 1,2023 |
|
July 2,2022 |
|
Change |
Net Income attributable
to Cavco common stockholders |
$ |
46,357 |
|
$ |
59,602 |
|
$ |
(13,245 |
) |
|
(22.2)% |
Diluted net income per
share |
$ |
5.29 |
|
$ |
6.63 |
|
$ |
(1.34 |
) |
|
(20.2)% |
Items ancillary to our core operations had the
following impact on the results of operations:
|
|
Three Months Ended |
($ in
millions) |
July 1,2023 |
|
July 2,2022 |
Net
revenue |
Unrealized gains (losses) recognized during the period on
securities held in the financial services segment |
$ |
0.3 |
|
|
$ |
(1.2 |
) |
Selling,
general and administrative expenses |
|
|
Expenses incurred in engaging third-party consultants in relation
to the non-recurring energy efficient home tax credits |
|
— |
|
|
|
(2.6 |
) |
Legal and other expense related to the Securities and Exchange
Commission inquiry |
|
(0.3 |
) |
|
|
(1.4 |
) |
Other
income (expense), net |
Corporate unrealized gains (losses) recognized during the period on
securities held |
|
0.1 |
|
|
|
(1.1 |
) |
2023 Stock Repurchase
Program
On August 1, 2023, the Company's Board of
Directors approved a new $100 million stock repurchase program that
may be used to purchase its outstanding common stock. This
increases the total available to $135.7 million including the
amount remaining under the program announced in 2022.
The purchases may be made in the open market or
one or more privately negotiated transactions in compliance with
applicable securities laws and other legal requirements. While
there is no expiration date, the actual timing, number and value of
shares repurchased under the program will be determined by the
Company in its discretion and will depend on a number of factors,
including market conditions, applicable legal requirements and
other strategic capital needs and opportunities. The plan does not
obligate Cavco to acquire any particular amount of common stock and
may be suspended or discontinued at any time. The Company expects
to finance the program from existing cash resources.
Conference Call Details
Cavco's management will hold a conference call
to review these results tomorrow, August 4, 2023, at 1:00 p.m.
(Eastern Time). Interested parties can access a live webcast of the
conference call on the Internet at https://investor.cavco.com or
via telephone. To participate by phone, please register here to
receive the dial in number and your PIN. An archive of the webcast
and presentation will be available for 90 days at
https://investor.cavco.com.
About Cavco
Cavco Industries, Inc., headquartered in
Phoenix, Arizona, designs and produces factory-built housing
products primarily distributed through a network of independent and
Company-owned retailers. We are one of the largest producers of
manufactured and modular homes in the United States, based on
reported wholesale shipments. Our products are marketed under a
variety of brand names including Cavco, Fleetwood, Palm Harbor,
Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny,
Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and
Solitaire. We are also a leading producer of park model RVs,
vacation cabins and factory-built commercial structures. Cavco's
finance subsidiary, CountryPlace Mortgage, is an approved Fannie
Mae and Freddie Mac seller/servicer and a Ginnie Mae
mortgage-backed securities issuer that offers conforming mortgages,
non-conforming mortgages and home-only loans to purchasers of
factory-built homes. Our insurance subsidiary, Standard Casualty,
provides property and casualty insurance to owners of manufactured
homes.
Forward-Looking Statements
Certain statements contained in this release are forward-looking
statements. In general, all statements that are not historical in
nature are forward-looking. Forward-looking statements are
typically included, for example, in discussions regarding the
manufactured housing industry; our financial performance and
operating results; and the expected effect of certain risks and
uncertainties on our business, financial condition and results of
operations. All forward-looking statements are subject to risks and
uncertainties, many of which are beyond our control. As a result,
our actual results or performance may differ materially from
anticipated results or performance. Factors that could cause such
differences to occur include, but are not limited to: the impact of
local or national emergencies including the COVID-19 pandemic,
including such impacts from state and federal regulatory action
that restricts our ability to operate our business in the ordinary
course and impacts on (i) customer demand and the availability of
financing for our products, (ii) our supply chain and the
availability of raw materials for the manufacture of our products,
(iii) the availability of labor and the health and safety of our
workforce and (iv) our liquidity and access to the capital markets;
labor shortages and the pricing and availability of transportation
or raw materials; increased health and safety incidents; our
ability to negotiate reasonable collective bargaining agreements
with the unions representing certain employees; increases in the
rate of cancellations of home sales orders; our ability to
successfully integrate past acquisitions or future acquisitions;
involvement in vertically integrated lines of business, including
manufactured housing consumer finance, commercial finance and
insurance; information technology failures or cyber incidents; our
ability to maintain the security of personally identifiable
information of our customers, suppliers and employees; our
participation in certain financing programs for the purchase of our
products by industry distributors and consumers, which may expose
us to additional risk of credit loss; our exposure to significant
warranty and construction defect claims; our exposure to claims and
liabilities relating to products supplied to the Company or work
done by subcontractors; our contingent repurchase obligations
related to wholesale financing provided to industry distributors; a
write-off of all or part of our goodwill; our ability to maintain
relationships with independent distributors; our business and
operations being concentrated in certain geographic regions;
taxation authorities initiating or successfully asserting tax
positions which are contrary to ours; governmental and regulatory
disruption, including (i) prolonged delays by Congress and the
President to approve budgets or continuing appropriations
resolutions to facilitate the operation of the federal government
or (ii) shutdowns or delays at the Mexico border; curtailment of
available financing from home-only lenders and increased lending
regulations; the effect of increasing interest rates on our
customer's ability to finance home purchases; availability of
wholesale financing and limited floor plan lenders; market forces,
rising interest rates, fluctuations in exchange rates and housing
demand fluctuations; the cyclical and seasonal nature of our
business; competition; general deterioration in economic conditions
and turmoil in the financial markets; unfavorable zoning
ordinances; extensive regulation affecting the production and sale
of manufactured housing; potential financial impact on the Company
from the recently settled regulatory action by the SEC against the
Company, including potential higher insurance costs as a result of
such action, potential reputational damage that the Company may
suffer and the Company's potential ongoing indemnification
obligations related to ongoing litigation not involving the
Company; losses not covered by our director and officer insurance,
which may be large, adversely impacting financial performance; loss
of any of our executive officers; liquidity and ability to raise
capital may be limited; and organizational document provisions
delaying or making a change in control more difficult; together
with all of the other risks described in our filings with the SEC.
Readers are specifically referred to the Risk Factors described in
Item 1A of the Company's Annual Report on Form 10-K for the year
ended April 1, 2023 as may be updated from time to time in
future filings on Form 10-Q and other reports filed by the Company
pursuant to the Securities Exchange Act of 1934, which identify
important risks that could cause actual results to differ from
those contained in the forward-looking statements. Cavco expressly
disclaims any obligation to update any forward-looking statements
contained in this release, whether as a result of new information,
future events or otherwise, as required by law. Investors should
not place undue reliance on any such forward-looking
statements.
CAVCO INDUSTRIES,
INC.CONSOLIDATED BALANCE SHEETS(Dollars
in thousands, except per share amounts)
|
July 1,2023 |
|
April 1,2023 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
352,234 |
|
|
$ |
271,427 |
|
Restricted cash, current |
|
13,560 |
|
|
|
11,728 |
|
Accounts receivable, net |
|
84,877 |
|
|
|
89,347 |
|
Short-term investments |
|
14,173 |
|
|
|
14,978 |
|
Current portion of consumer loans receivable, net |
|
13,477 |
|
|
|
17,019 |
|
Current portion of commercial loans receivable, net |
|
48,772 |
|
|
|
43,414 |
|
Current portion of commercial loans receivable from affiliates,
net |
|
1,491 |
|
|
|
640 |
|
Inventories |
|
253,986 |
|
|
|
263,150 |
|
Prepaid expenses and other current assets |
|
76,117 |
|
|
|
92,876 |
|
Total current assets |
|
858,687 |
|
|
|
804,579 |
|
Restricted cash |
|
585 |
|
|
|
335 |
|
Investments |
|
17,967 |
|
|
|
18,639 |
|
Consumer loans receivable,
net |
|
25,891 |
|
|
|
27,129 |
|
Commercial loans receivable,
net |
|
51,612 |
|
|
|
53,890 |
|
Commercial loans receivable from
affiliates, net |
|
3,584 |
|
|
|
4,033 |
|
Property, plant and equipment,
net |
|
223,663 |
|
|
|
228,278 |
|
Goodwill |
|
115,498 |
|
|
|
114,547 |
|
Other intangibles, net |
|
29,398 |
|
|
|
29,790 |
|
Operating lease right-of-use
assets |
|
26,162 |
|
|
|
26,755 |
|
Total assets |
$ |
1,353,047 |
|
|
$ |
1,307,975 |
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
28,634 |
|
|
$ |
30,730 |
|
Accrued expenses and other current liabilities |
|
264,742 |
|
|
|
262,661 |
|
Total current liabilities |
|
293,376 |
|
|
|
293,391 |
|
Operating lease liabilities |
|
22,114 |
|
|
|
21,678 |
|
Other liabilities |
|
7,909 |
|
|
|
7,820 |
|
Deferred income taxes |
|
5,702 |
|
|
|
7,581 |
|
Redeemable noncontrolling interest |
|
1,120 |
|
|
|
1,219 |
|
Stockholders' equity |
|
|
|
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No
shares issued or outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value; 40,000,000 shares authorized; Issued
9,347,220 and 9,337,125 shares, respectively |
|
93 |
|
|
|
93 |
|
Treasury stock, at cost; 671,801 shares |
|
(164,452 |
) |
|
|
(164,452 |
) |
Additional paid-in capital |
|
272,175 |
|
|
|
271,950 |
|
Retained earnings |
|
915,667 |
|
|
|
869,310 |
|
Accumulated other comprehensive loss |
|
(657 |
) |
|
|
(615 |
) |
Total stockholders' equity |
|
1,022,826 |
|
|
|
976,286 |
|
Total liabilities, redeemable noncontrolling interest and
stockholders' equity |
$ |
1,353,047 |
|
|
$ |
1,307,975 |
|
CAVCO INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
July 1,2023 |
|
July 2,2022 |
Net revenue |
$ |
475,875 |
|
|
$ |
588,338 |
|
Cost of sales |
|
357,996 |
|
|
|
443,614 |
|
Gross profit |
|
117,879 |
|
|
|
144,724 |
|
Selling, general and administrative expenses |
|
61,680 |
|
|
|
66,136 |
|
Income from operations |
|
56,199 |
|
|
|
78,588 |
|
Interest income |
|
4,618 |
|
|
|
1,314 |
|
Interest expense |
|
(266 |
) |
|
|
(161 |
) |
Other income (expense), net |
|
126 |
|
|
|
(431 |
) |
Income before income taxes |
|
60,677 |
|
|
|
79,310 |
|
Income tax expense |
|
(14,266 |
) |
|
|
(19,616 |
) |
Net income |
|
46,411 |
|
|
|
59,694 |
|
Less: net income attributable to redeemable noncontrolling
interest |
|
54 |
|
|
|
92 |
|
Net income attributable to Cavco common stockholders |
$ |
46,357 |
|
|
$ |
59,602 |
|
|
|
|
|
Net income per share attributable to Cavco common stockholders |
|
|
|
Basic |
$ |
5.35 |
|
|
$ |
6.68 |
|
Diluted |
$ |
5.29 |
|
|
$ |
6.63 |
|
Weighted average shares outstanding |
|
|
|
Basic |
|
8,670,434 |
|
|
|
8,918,280 |
|
Diluted |
|
8,758,080 |
|
|
|
8,988,929 |
|
CAVCO INDUSTRIES,
INC.OTHER OPERATING DATA(Dollars in
thousands)(Unaudited)
|
Three Months Ended |
|
July 1,2023 |
|
July 2,2022 |
Capital expenditures |
$ |
4,183 |
|
$ |
25,007 |
Depreciation |
$ |
4,174 |
|
$ |
3,438 |
Amortization of other
intangibles |
$ |
392 |
|
$ |
508 |
For additional information, contact:
Mark FuslerCorporate Controller and Investor
Relationsinvestor_relations@cavco.com
Phone: 602-256-6263On the
Internet: www.cavcoindustries.com
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