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Cavco Industries Reports Fiscal 2023 Third Quarter Results and Provides Business Updates
Source: Nasdaq GlobeNewswire / 02 Feb 2023 16:05:01 America/New_York
PHOENIX, Feb. 02, 2023 (GLOBE NEWSWIRE) -- Cavco Industries, Inc. (Nasdaq: CVCO) ("we," "our," the "Company" or "Cavco") today announced financial results for the third fiscal quarter ended December 31, 2022 and provided updates on other business items.
Third Quarter Highlights
- Net revenue increased to $501 million, or 16.0%, compared to $432 million in the third quarter of the prior year.
- Income before income taxes increased to $76 million, or 29%, compared to $59 million in the prior year period.
- Gross profit as a percentage of Net revenue was 26.4%, with Factory-built housing gross profit as a percentage of Net revenue at 25.5%.
- Net income per diluted share attributable to Cavco common stockholders totaled $6.66 compared to $8.57 in the prior year quarter. The prior year period includes a $3.23 per share favorable benefit from energy efficient home tax credits, which included catch up credits for homes sold between 2018 through 2021.
- Backlogs were $427 million at the end of the quarter, down $224 million sequentially from three months prior.
- Stock repurchases were $34 million, with $73 million repurchased fiscal year to date.
- Operations commenced at our manufacturing facility in Hamlet, North Carolina.
Commenting on the quarter, President and Chief Executive Officer Bill Boor said, "Our team continues to deliver outstanding performance despite rising interest rates, high inflation and uncertainty in the general economy. The market has clearly shifted over the past few quarters, but our manufacturing and retail operators are doing what they do best — staying nimble, keeping costs as variable as possible to tightly manage margins and maintaining strong teams ready for the inevitable return to an under-supplied market."
He continued, "Our balance sheet remains strong with over $280 million in cash after the acquisition of Solitaire Homes, which closed subsequent to quarter end on January 3rd. We remain focused on providing quality affordable homes, and we are well positioned to continue growing and helping more families achieve the dream of home ownership."
Financial Results
Three Months Ended ($ in thousands, except revenue per home sold) December 31,
2022January 1,
2022Change Net revenue Factory-built housing $ 481,193 $ 413,590 $ 67,603 16.3 % Financial services 19,410 18,124 1,286 7.1 % $ 500,603 $ 431,714 $ 68,889 16.0 % Factory-built modules sold 7,544 7,645 (101 ) (1.3 )% Factory-built homes sold (consisting of one or more modules) 4,442 4,424 18 0.4 % Net factory-built housing revenue per home sold $ 108,328 $ 93,488 $ 14,840 15.9 % Nine Months Ended ($ in thousands, except revenue per home sold) December 31,
2022January 1,
2022Change Net revenue Factory-built housing $ 1,613,392 $ 1,067,967 $ 545,425 51.1 % Financial services 52,941 53,712 (771 ) (1.4 )% $ 1,666,333 $ 1,121,679 $ 544,654 48.6 % Factory-built modules sold 25,649 20,219 5,430 26.9 % Factory-built homes sold (consisting of one or more modules) 14,899 11,721 3,178 27.1 % Net factory-built housing revenue per home sold $ 108,289 $ 91,116 $ 17,173 18.8 % - In the factory-built housing segment, the increase in Net revenue for both the three and nine months was due to higher home sales volume and higher home selling prices.
- Financial services segment Net revenue increased for the three months from more insurance policies in force in the current period. For the nine months, Net revenue decreased modestly related to the market performance of the equity securities in the insurance subsidiary's portfolio during the current period and lower interest income earned on the acquired consumer loan portfolios that continue to amortize as expected. These items were partially offset by more insurance policies in force in the current year compared to the prior year.
Three Months Ended ($ in thousands) December 31,
2022January 1,
2022Change Gross Profit Factory-built housing $ 122,923 $ 104,119 $ 18,804 18.1 % Financial services 9,045 11,089 (2,044 ) (18.4 )% $ 131,968 $ 115,208 $ 16,760 14.5 % Gross profit as % of Net revenue Consolidated 26.4 % 26.7 % N/A (0.3 )% Factory-built housing 25.5 % 25.2 % N/A 0.3 % Financial services 46.6 % 61.2 % N/A (14.6 )% Selling, general and administrative expenses Factory-built housing $ 54,127 $ 55,735 $ (1,608 ) (2.9 )% Financial services 4,777 4,587 190 4.1 % $ 58,904 $ 60,322 $ (1,418 ) (2.4 )% Income from Operations Factory-built housing $ 68,796 $ 48,384 $ 20,412 42.2 % Financial services 4,268 6,502 (2,234 ) (34.4 )% $ 73,064 $ 54,886 $ 18,178 33.1 % Nine Months Ended ($ in thousands) December 31,
2022January 1,
2022Change Gross Profit Factory-built housing $ 412,174 $ 252,691 $ 159,483 63.1 % Financial services 22,117 26,458 (4,341 ) (16.4 )% $ 434,291 $ 279,149 $ 155,142 55.6 % Gross profit as % of Net revenue Consolidated 26.1 % 24.9 % N/A 1.2 % Factory-built housing 25.5 % 23.7 % N/A 1.8 % Financial services 41.8 % 49.3 % N/A (7.5 )% Selling, general and administrative expenses Factory-built housing $ 176,690 $ 131,579 $ 45,111 34.3 % Financial services 15,244 14,947 297 2.0 % $ 191,934 $ 146,526 $ 45,408 31.0 % Income from Operations Factory-built housing $ 235,484 $ 121,112 $ 114,372 94.4 % Financial services 6,873 11,511 (4,638 ) (40.3 )% $ 242,357 $ 132,623 $ 109,734 82.7 % - In the factory-built housing segment, the gross profit percentage and total Gross profit for both the three and nine months increased from higher home sales prices.
- In the financial services segment, Gross profit and Income from operations for the three and nine months were negatively affected by higher insurance claims from Arizona and North Texas weather related events compared to the same period last year.
- Selling, general and administrative expenses for the three months decreased as the prior year quarter included higher contractor fees related to the claiming of the energy efficient home credits. This was partially offset by higher incentive compensation on improved earnings. For the nine months, Selling, general and administrative expenses increased from higher compensation on improved earnings and higher legal and professional fees.
Three Months Ended ($ in thousands, except per share amounts) December 31,
2022January 1,
2022Change Net Income attributable to Cavco common stockholders $ 59,524 $ 79,419 $ (19,895 ) (25.1 )% Diluted net income per share $ 6.66 $ 8.57 $ (1.91 ) (22.3 )% Nine Months Ended ($ in thousands, except per share amounts) December 31,
2022January 1,
2022Change Net Income attributable to Cavco common stockholders $ 193,242 $ 144,075 $ 49,167 34.1 % Diluted net income per share $ 21.55 $ 15.54 $ 6.01 38.7 % - For the three and nine months ended January 1, 2022, income taxes resulted in a benefit of $20.7 million and $0.9 million, respectively, due to $34.4 million of net tax credits related to the construction and sale of energy efficient homes in the calendar years 2018 through 2021. The current year periods include $2.4 million and $5.1 million, respectively, for homes sold during calendar year 2022 as the program was extended in the Consolidated Appropriations Act of 2021.
Items ancillary to our core operations had the following impact on the results of operations:
Three Months Ended Nine Months Ended ($ in millions) December 31,
2022January 1,
2022December 31,
2022January 1,
2022Net revenue Unrealized gains (losses) recognized during the period on securities held in the financial services segment $ 0.7 $ 0.5 $ (0.5 ) $ 0.4 Selling, general and administrative expenses Expenses incurred in engaging third-party consultants in relation to the non-recurring energy efficient home tax credits (0.6 ) (5.8 ) (5.1 ) (6.2 ) Legal and other expense related to the SEC inquiry, net of recovery (0.8 ) (0.6 ) (3.6 ) (1.2 ) Acquisition related deal costs (0.5 ) — (0.6 ) (2.4 ) Other income, net Corporate unrealized (losses) gains recognized during the period on securities held (0.1 ) 2.3 (1.2 ) 4.0 Gain on consolidation of equity method investment — — — 3.3 Income tax (expense) benefit Energy efficient home tax credits, net 2.4 34.4 5.1 34.4 Tax benefits from stock option exercises 0.4 0.6 0.4 1.3 Housing Demand and Production Updates
Our backlog at December 31, 2022 was $427 million compared to $651 million last quarter, a decrease of $224 million or 34%. This was largely due to lower home order rates net of cancellations. Order rates are down from the extreme highs we saw during the summer of 2020 to the summer of 2021. For the third fiscal quarter of 2023, our capacity utilization was approximately 65% over all available production days, but was approximately 80% excluding market and weather driven downtime.
Acquisition of Solitaire Homes
As announced on January 3, 2023, we completed the acquisition of the business of Solitaire Homes, including its four manufacturing facilities, twenty-two retail locations and its dedicated transportation operations. The addition of Solitaire Homes strengthens our position in the Southwest, with high quality products that complement our existing home offerings. The purchase price totaled $93 million, before certain customary adjustments, and was funded with cash on hand.
Conference Call Details
Cavco's management will hold a conference call to review these results tomorrow, February 3, 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 prolonged delays by Congress and the President to approve budgets or continuing appropriations resolutions to facilitate the operation of the federal government; 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 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 2, 2022 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)December 31,
2022April 2,
2022ASSETS (Unaudited) Current assets Cash and cash equivalents $ 376,148 $ 244,150 Restricted cash, current 9,911 14,849 Accounts receivable, net 80,062 96,052 Short-term investments 16,607 20,086 Current portion of consumer loans receivable, net 13,763 20,639 Current portion of commercial loans receivable, net 33,899 32,272 Current portion of commercial loans receivable from affiliates, net 298 372 Inventories 215,458 243,971 Prepaid expenses and other current assets 86,408 71,726 Total current assets 832,554 744,117 Restricted cash 335 335 Investments 21,822 34,933 Consumer loans receivable, net 26,903 29,245 Commercial loans receivable, net 40,727 33,708 Commercial loans receivable from affiliates, net 3,049 2,214 Property, plant and equipment, net 194,329 164,016 Goodwill 100,577 100,993 Other intangibles, net 26,948 28,459 Operating lease right-of-use assets 17,230 16,952 Total assets $ 1,264,474 $ 1,154,972 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 26,788 $ 43,082 Accrued expenses and other current liabilities 251,635 251,088 Total current liabilities 278,423 294,170 Operating lease liabilities 13,058 13,158 Other liabilities 7,898 10,836 Deferred income taxes 8,663 5,528 Redeemable noncontrolling interest 932 825 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 9,319,700 and 9,292,278 shares, respectively 93 93 Treasury stock, at cost; 556,344 and 241,773 shares, respectively (134,270 ) (61,040 ) Additional paid-in capital 268,423 263,049 Retained earnings 821,998 628,756 Accumulated other comprehensive loss (744 ) (403 ) Total stockholders' equity 955,500 830,455 Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 1,264,474 $ 1,154,972 CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)Three Months Ended Nine Months Ended December 31,
2022January 1,
2022December 31,
2022January 1,
2022Net revenue $ 500,603 $ 431,714 $ 1,666,333 $ 1,121,679 Cost of sales 368,635 316,506 1,232,042 842,530 Gross profit 131,968 115,208 434,291 279,149 Selling, general and administrative expenses 58,904 60,322 191,934 146,526 Income from operations 73,064 54,886 242,357 132,623 Interest expense (216 ) (209 ) (610 ) (576 ) Other income, net 3,233 4,258 6,455 11,387 Income before income taxes 76,081 58,935 248,202 143,434 Income tax (expense) benefit (16,492 ) 20,680 (54,721 ) 910 Net income 59,589 79,615 193,481 144,344 Less: net income attributable to redeemable noncontrolling interest 65 196 239 269 Net income attributable to Cavco common stockholders $ 59,524 $ 79,419 $ 193,242 $ 144,075 Net income per share attributable to Cavco common stockholders Basic $ 6.71 $ 8.66 $ 21.72 $ 15.68 Diluted $ 6.66 $ 8.57 $ 21.55 $ 15.54 Weighted average shares outstanding Basic 8,870,565 9,174,224 8,897,405 9,187,828 Diluted 8,936,075 9,270,438 8,969,104 9,270,855 CAVCO INDUSTRIES, INC.
OTHER OPERATING DATA
(Dollars in thousands)
(Unaudited)Three Months Ended Nine Months Ended December 31,
2022January 1,
2022December 31,
2022January 1,
2022Capital expenditures $ 7,662 $ 4,267 $ 40,850 $ 8,938 Depreciation $ 3,389 $ 3,037 $ 10,663 $ 5,888 Amortization of other intangibles $ 501 $ 523 $ 1,511 $ 862 For additional information, contact:
Mark Fusler
Corporate Controller and Investor Relations
investor_relations@cavco.comPhone: 602-256-6263
On the Internet: www.cavcoindustries.com
