Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skyline Champion Corp (SKY, Financial) reported a 33% year-over-year increase in home sales, reaching 6,705 units.
- Organic sale orders increased by 60% year-over-year, indicating strong market demand.
- The acquisition of Regional Homes is overperforming expectations, targeting the higher end of the $10 to $15 million synergy range by the end of fiscal 2025.
- Skyline Champion Corp (SKY) saw a notable increase in revenue of $91 million and a backlog growth of $89 million, bringing the total backlog to $405 million.
- The company's collaboration with Triade Financial has gained significant momentum, enhancing financing accessibility and propelling growth in the manufactured housing market.
Negative Points
- Demand in Canada remains soft due to inflation and economic uncertainty, impacting consumer sentiment and enthusiasm for new home purchases.
- Net income for the first quarter decreased by 11% to $46 million, or $0.79 per diluted share, compared to the same period last year.
- Gross margin contracted by 170 basis points from 27.9% in the prior year period, primarily due to lower wholesale average selling prices and changes in product mix.
- SG&A expenses increased by $38 million to $109 million, primarily due to the Regional Homes acquisition and a charge related to the earn-out.
- The company's effective tax rate for the quarter was 22.5%, down from 25.2% in the prior year period, impacting net income.
Q & A Highlights
Q: Can you give us a little bit of color around where you saw some of the outperformance relative to initial expectations?
A: Orders were stronger than anticipated across all channels and geographies, except Canada. We saw consistent order demand and strength across builder developer, retail, and community channels, with year-over-year order growth between 40% and 60%. The acquisition of regional homes and the integration of financing options also overperformed expectations. β Mark Yost, President, Chief Executive Officer
Q: You mentioned Q2 guidance being consistent to maybe a little bit below. Is there some built-in conservatism around potential weather events this quarter?
A: Yes, the guidance considers potential timing and delivery impacts from tropical storm or hurricane events, particularly in August and September. Order pace continues to be strong through July, so it's more of a timing issue. β Mark Yost, President, Chief Executive Officer
Q: How is the cadence of demand, particularly in the retail and community channels, as we move into fiscal Q2?
A: Retail demand has been building and remains strong. The community channel is healthy but not robust, with sequential recovery. Builder demand was a standout, up 40% year-over-year, and we signed up many new builders, accelerating traction. β Mark Yost, President, Chief Executive Officer
Q: Can you discuss the gross margins and the impact of input costs?
A: Gross margins will fluctuate quarter-to-quarter based on wholesale unit volumes sold through captive retail versus independent channels, as well as product mix. We saw stabilization in option content and lower input costs, contributing to better-than-expected gross margins. β Laurie Hough, Executive Vice President, Chief Financial Officer
Q: What drove the better performance out of captive retail?
A: Strong geographies and gaining market share in those areas. The integration of products from legacy Champion plants to regional retail locations and enhanced marketing efforts also contributed. Additionally, the timing of shipments from the previous quarter played a role. β Mark Yost, President, Chief Executive Officer
Q: How should we think about sales progression seasonally through the rest of the year?
A: We expect the second quarter to be higher than initially anticipated, with the first half of the year being stronger. The second half may be slightly down due to maintenance outages and holiday seasonality, but overall stronger than previously expected. β Mark Yost, President, Chief Executive Officer
Q: Can you rank order the gross margins from highest to lowest among different product types and revenue sources?
A: Gross margins are relatively consistent across wholesale product types, with fluctuations mainly due to option content. β Laurie Hough, Executive Vice President, Chief Financial Officer
Q: What is a good fixed SG&A number to use going forward, considering the new businesses and synergies from regional homes?
A: With the exception of the $7.9 million earn-out adjustment, we are at a new normal for SG&A levels, which run around 35% variable. Champion financing will be consolidated, with results recorded on a one-quarter lag. β Laurie Hough, Executive Vice President, Chief Financial Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
