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Cavco Industries Reports Fiscal 2024 First Quarter Results and Announces New $100 Million Stock Repurchase Program
Source: Nasdaq GlobeNewswire / 03 Aug 2023 15:05:01 America/Chicago
PHOENIX, Aug. 03, 2023 (GLOBE NEWSWIRE) -- 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,
2023July 2,
2022Change 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,
2023July 2,
2022Change 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,
2023July 2,
2022Change 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,
2023July 2,
2022Net 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,
2023April 1,
2023ASSETS (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,
2023July 2,
2022Net 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,
2023July 2,
2022Capital expenditures $ 4,183 $ 25,007 Depreciation $ 4,174 $ 3,438 Amortization of other intangibles $ 392 $ 508 For additional information, contact:
Mark Fusler
Corporate Controller and Investor Relations
investor_relations@cavco.comPhone: 602-256-6263
On the Internet: www.cavcoindustries.com
