Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cavco Industries Inc (CVCO, Financial) reported a 12.3% increase in net revenue for the second fiscal quarter of 2025, reaching $507.5 million compared to the previous year.
- Units shipped in the quarter increased by 15.7% over the same period last year, indicating strong demand and operational efficiency.
- The company experienced a 20% growth in backlogs, representing about 8 to 10 weeks of production, suggesting sustained demand.
- Cavco Industries Inc (CVCO) has been authorized an additional $100 million for share repurchases, highlighting a commitment to enhancing shareholder value.
- The company generated $54.7 million in cash from operating activities, reflecting strong cash flow management.
Negative Points
- Hurricane Helene caused a delay in net revenue of approximately $4 million, impacting the second to third quarter transition.
- The company experienced a decrease in average revenue per home sold by 3.1% from the prior year quarter, affecting overall profitability.
- Consolidated gross margin decreased by 80 basis points to 22.9% compared to the same period last year, primarily due to losses in financial services and lower average selling prices.
- Financial Services gross margin as a percentage of revenue decreased significantly from 35.9% to 21.8%, impacted by hurricane-related losses.
- Factory utilization was at 70%, which, although improved, indicates there is still room for operational efficiency gains.
Q & A Highlights
Q: Can you provide more color on the demand perspective, particularly geographically, and how production is ramping in different areas?
A: William Boor, CEO: Inventories are under control, and we're getting back to a 1:1 ratio of setting a home and getting a resident in. Wholesale shipments have been a drain, but there's a developing tailwind. In the Southeast, we lost 15 to 20 production days due to storms, but we're optimistic about retail activity bouncing back.
Q: How are you thinking about production and shipment growth in Q3 relative to Q2, considering the disruptions in Florida and Georgia?
A: William Boor, CEO: We lost production days in Florida and Georgia, but we have healthy backlogs in Georgia. We'll work overtime to catch up. The bigger question is the bounce back of retail activity, which is showing early signs of recovery.
Q: Are there any recent changes in HUD code or zoning that could create a tailwind for the industry?
A: William Boor, CEO: Recent HUD code changes are positive, enabling multifamily to be coded HUD. This facilitates innovation and opens up more urban areas to factory-built housing. The trend is positive, but the pace of change is uncertain.
Q: Can you discuss the volume numbers and whether Cavco is gaining market share?
A: William Boor, CEO: Quarter-to-quarter shares can vary, but we've been ramping production and added a national sales team. We've focused on rehiring and planning optimistically for market growth. While numbers can fluctuate, we're seeing positive trends.
Q: How are you approaching capital allocation, particularly regarding M&A and share buybacks?
A: Allison Aden, CFO: Recent acquisitions include Kentucky Dream Homes and Solitaire Homes. We prioritize improving capacity and efficiencies. The Board authorized an additional $100 million for share repurchases, and we're open to future acquisitions and expanding lending operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
