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Skyline Champion (SKY)

Participants
Keith Anderson CEO
Laurie Hough EVP & CFO
Daniel Moore CJS Securities
Greg Palm Craig-Hallum
Call transcript
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Operator

[Abrupt Start] During today's call includes forward looking statements within the meaning of the Private Securities and Litigation Reform Act of 1995. These statements are subject to risk and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks and uncertainties include the factor set forth in the earnings release and in their filings with the Securities and Exchange Commission.

Additionally during today's call the company will discuss non-GAAP measures which we believe can be useful in evaluating their performance. A reconciliation of these measures can be found in the earnings release. to conference like to now would turn over the management. I ahead. go Please

Keith Anderson

morning. Skyline morning Anderson, is CEO. Good Keith this Champion's This With me is

Laurie Hough

of earnings call. morning EVP for this Laurie our the CFO joining XXXX me you company. quarter With first Thank is and Hough,

our about to were solved Champion from shareholders to product forming all Champion. million I in two about share on are the momentum $XXX selling you week, the excited company our We the between shares like approximately to equity Skyline would XX.XXX shareholders. secondary and continuing priced you manufacturer to updating an I look know $XX and our like future at number going offering. the appreciate We June to the expanded price business industry interest our to X, performance of welcome raising given our fees and stemming investor million get for share transaction new before strong forward and footprint which per with Skyline would market acknowledge offering fosrward. and last

% on that Before with company for story. results market into the background like the our pro-forma U.S. largest company would manufactured take of and We're XX% few are HUD share factory you new jump second minutes to provide those the the some I of a strategy to housing of industry. housing in we to quarterly the the approximately built

adjusted stemming fiscal is XX margin Western net the combination. X% year report and basis generated of we position for the We sales XXXX. March approximately expected also XX, of forma hold of EBITDA X.X a Canada. synergies This ended On pro from in EBITDA a leading adjusted billion million

Canada Our U.S. of representing approximately sales XX% X%. approximately pro our with the business business net transportation and each forma represents

and and for shipments part the by modular of Manufactured majority broad commercial portfolio price type housing followed home product Our our of is point. model by RVs. housing accounts

well company Our dealers through retail U.S. XX located in our were are as XX strategically to stores more network XXXX manufacturing facilities southern country a sold primarily are customers. of the than that owned close markets the independent operate We located products as across the in quite

attractive MH perspective than from average XX% about will the to but manufactured being built driven the to approach another by recovering growth demand compared combined is long housing We expected the term is term to affordable providing to compared average been it think leading market more Viewed significantly as housing trends secular the market. site with and gap XXXX to industry industry as XXX,XXX. MH that close housing have [ph] expected to historical trends Our Market below compared solutions. financing and this MH volumes year increasingly is to places of XX%. for volumes help growing differentiated longer but be in with term an of units traditional housing new averages family long role remain single options XXX,XXX starts outsized of with important

which in adopted of our accounting Therefore quarter's Xst. and first net for pleased of quarter or reporting sales U.S. very We're ended that the million over X.X% XX.X in months XX and than that sales. and the was results the for sales expansion. quarter the and one results include further Canadian period discuss in some results home million our was Skylines important only in Champion financial with year the more X.X% with began months Champion's tailwinds increase acquirer represented financial talk XX% Champions' of three include in April fiscal homes on it's to We growth of three note since let's for our month more June double by first combination. this about adjusted driven First industry of increase our XX% the results XX% quarter XXXX. with along Highlights This compared June results. the net operating momentum providing that from for to the selling EBITDA then are

Laurie in detail to you. While I've thoughts share a financials few will with discuss our more

dealers, We all Canada. continue as demand strong of continue three our in most well Backlogs company to of as Province the Columbia demand the as channels, through grow see in distribution U.S. markets British to independent with continues needs as and owned and to to stores continue families. quality our view fitting in with communities affordably the attractive accelerate. Consumers today's and the of are built as well homes features priced care as that of

to beginning the chattel us higher of as as programs helping more segments retail and is our our land also for improve are competitive the in past. customers home rates This well order for business. our than priced appear financing helping We qualify homes see both

We scale and are detail. combined executing call Laurie to will the over the in turn excited about quarter these with as company increased developments I more scope. forward discuss and our a look now to to strategy

Laurie Hough

Thanks, Steve.

additional U.S. result of an two; factors, Skyline selling price. increased operation the XXXX. We net home mix during increased net the pricing impact of product from million the the the of offset quarter year. number one, recent to cost. quarter increase most XX% Net the prior XX% sold U.S. demand, increased which are actions four; per led month in and labor retail average quarter rising increased material sales our and outbreeding and for during generated of of to included XX%. compared in June The XXX sales The sales XXXX was manufacturing increase to centers the one Average main selling pleased first as built by performance XXX to capacity, sales increased improvements a the sold four homes price as operations three; plant output, driven in million market factory increased XX with fiscal home million in

the the prior improved profit volume million XX% period. sales XX%. Canadian $XX by over compared for $XX to our increased addition million In year Gross to up

factory period housing net XX% in gross U.S. increased built Our margins year. XX.X% the segment last from of segment to sales same

recent labor of been have adjustments, rationalization to periods have increases and offset in designs production. continues and able increasing to costs more for margin which prices the operational been price company of those improvements product standardize material Although combination and efficient with product effect allow the the purchase we material

As integration a same of $X.X of in that to Canadian to at been year. related also result equity restructuring has US improve million. volume Primarily segments of SG&A these manufacturing leverage operations for increased better output last transaction due such plant which as and cost. the helped the expense to efforts first allows gross increased margin. The the increase fixed the versus compensation, $XX period million quarter able expenses

increase in and In increased addition profitability. million with $X compensation variable sales the expenses

June rate transaction the due have was grows services legal, Lastly SG&A XXX% capacity net X.X%. first XX, loss due the transaction increase rate tax million additional SG&A XXX% non-deductible expenses ended We're compared strong XX, been the in would XXX company's effective in as was expanded stock for XXXX XXXX the $XXX,XXX higher XXXX. non-cash increased year. company's fiscal items to three X, demand primarily XXXX was quarter. an our expenses seeing driven rate The these tax months ended to compensation the The well operating margin related and and ended compensation effective as by $XX.X first points a an discrete the of related equity and increase early from improvement The to leverage effective during the the an our million results to non-deductible the a as Skyline markets of to over SG&A. was quarter expenses adjusted same or non-cash the $X.X of EBITDA improved the Absent months was XX% to effective improvement July driven the added operations for was Adjusted $XX.X of tax for accounting income due margin June. expense. tax versus The from million for million, in of decline basis increase initiative. June prior rate in number of XX.X%. EBITDA period expense. identified to quarter in same months three X.X operating net our by income month The by volume three the the the

As last million unused year quarter of $XX.X cash of operations cash improved from generated same million million facility. by we borrowing cash June $XXX equivalents, the The improved had XXXX million by during under company and of our credit revolving versus XX, $XX.X profitability. over X has capacity

credit position added business with initiatives. a from to our that flexibility growing liquidity our core We invest provides strong in internal and ample facility our cash have and

to synergies first confident well the months. recognized as our of ability to we to to as We for like opportunities implement target remarks. to and We over operational savings are quarter back million I'd closing fiscal achieve identifying best XXXX of of good continue Keith due remain were call beginning $XX progress synergies close, million in procurement range. the synergy There the the on some to targeted turn the making in minimal but the timing next XX $XX to practices.

Keith Anderson

Thanks, Laurie.

strong can you to year. a As off see to we're start the fiscal

leverage, leading providers call are we driven housing look M&A synergies. demand grow expand prepared our for open our of opportunities As We well consumers. returns Operator operating questions built generate homes positioned incremental we and to remain related could we the to attractive remain healthy remarks. transaction factory increasing business That markets through for and our are to financing and any our by see our organically, affordable that of term we outstanding? forward initiatives for one pursue improving expect Longer to concludes our shareholders. availability and margins the operational

Operator

Instructions]. [Operator

CJS from Our coming Daniel first is today Securities. from Moore question

Your now line live. is

Daniel Moore

in materials? of a driving there? Is through Anything XX% seeing it selling terms bit about in else Are that growth ASPs pure in U.S.? what's path raw little the maybe price favorable In talk mix? average

Laurie Hough

a costs We the in digit little quarter. it's of material see both. inflation bit in our Dan, high first did single

mixed increasing price. certainly that So so but selling to impacting the prices results offset average

Daniel Moore

And from price tease other the that XXX much streamlining a gross it improvement, bucket factors? terms of any how know operations, purchasing, out you -- we if was margin margin basis bit is point Helpful. could in to possible between little of the increase

Laurie Hough

go our I our backlogs the several we which we've in volume and options reducing as base can't mix as ability Yes, operating they then improved offerings number the improve obviously items just of factories the both throughput. also give our and a metals rationalize streamline that product material as factory to well to specific at and the but just we a product with and have to the several combination it’s been working today helps leverage you through then have SKUs

Daniel Moore

Laurie comparable for the year? basis to forma a have you and revenue Do helpful. perhaps quarter pro last EBITDA on Very adjusted quarter

Laurie Hough

week. this be the That in be will will coming later which information Q out

Daniel Moore

just think maybe then And few a XX.X% fine. that I about going a is good modeling adjusted was the said think tax That's rate forward? to questions, you rate

Laurie Hough

It's in the range, yes.

Daniel Moore

think run that then of rate remainder as Got how it. we well And line/ comp year the should you know quarterly about DNA the as and either CapEx or non-cash

Laurie Hough

Yes.

the will I help in think Q you information that. with the

Daniel Moore

get I hearing financing Keith and questions. prepared Got interest remarks you programs there of lot a obviously chattel lot for to might have a will and lately in quickly enough expanding opening see and -- to latest it. institutions mass you're to GSCs warrant you a get the and do know you how we Thanks we credit secondly in about mentioned if secondary up? lastly starting space from talked enter the terms so heard taking has the market those his lending more in are critical private the what's think

Keith Anderson

We've It Dan. for demographic with term products supporting Thanks, industry and a that had business, to products to them to be lenders seems of Sure. with investors. good our and term our really it's work customize GSCs fit is conversations and the lot have collateral both some positive industry really therefore profile. and a niche momentum with a unique short you those and there long

year. successful out introduced the is of land later home their piece Fannie this already On good side be rolling will the programs we a Mae GSCs that feel program.

with XXXX, that our time. think the should credit will institutions and to focused they at other on side performance end the side there excited data and really private institutions on chattel we working the box very a support along this they that good been also, have industries. those expanding On on the our their several in movement resources will come as as be positive market chattel mention improving about secondary for we're that get customer well help that I terms

So both that coming developments should in gain our positive we years. the certainly from

Daniel Moore

years, of so Thanks than your a back percentage see With be would huge few comeback. to it market it a more That's helpful. going again. great

Operator

Greg from Craig-Hallum. question from Our Palm coming next today is

now line live. is Your

Greg Palm

results Skyline the and Champion first combined time as Congrats company. obviously the on

Keith Anderson

Greg. morning, Good

Greg Palm

with of environment some curious two to like home would know commentary of just I the the in start sort demand market the of of is three from standpoint out an a anything builders changing maybe traditional quo seeing last from what status light to still in date you're the from strong? out kind of sort months standpoint or especially a to of you year there from some in order from kind of standpoint, traffic it

Keith Anderson

West you part slow Greg I Florida the a Northeast off our strong last X think rates up the of the come and started would remained order markets in winter has was good early occurred really since the across we've country. really drag Texas know then northeast Yes to months. fiscal seen long that very and the Midwest really and say north little strong, year on it Coast picked the XX pretentiously markets over have all I but and both

So independent a stores. lot traffic of and at there good our our retail out locations

momentum to think the is certainly continue. I here

Greg Palm

sort some I of sort of the do take back that rate obviously over growth to think something Skyline sustainable If of mean what growth confirm year for guess, the one ask, month that north substantial thought out I maybe XX% I going of getting [indiscernible] was still all I'm that's I of was year over we're can so and I if envelope in forward get what there. I standalone that? may revenue contribution I pretty at is I guess quarter. of how just the Champion type you

Laurie Hough

spot Dan's helped response so the and throughput is volume obviously and math earlier. couple a and items in the mentioned to by those through being we on that Your that's right of questions we're factory

is right helping. strong have and we backlogs capacity now So increasing

Greg Palm

it to do great levels XXX, how a ago to pro the and either or plan plants? idle terms on plants? on some at What's that a the importantly a the of about more Is number standalone throughput Do more then of guess Yes. it maybe That’s the on have I just there? the compares backlog that opening existing and compares that in Champion of you off. working how improving you strategy basis forma year

Laurie Hough

plans. numbers including not that basis put Yes. is pretty Backlog with you the comparable a out consistent know in year-over-year on we've XX% prior the Skyline

Keith Anderson

completing road opportunities can plant another that looking got add as our expansions is are strategy. growth as as working the way that off production we'll to And current array future capacity that around know growth. internal well are organic you a product at we are that some backlogs Greg, see denominator the of down if on know champion longer streamlining or plants of looking far obviously on but in we'd have further like improve the that We've than as we're markets certain market country. other also for well few We're productivity our you at focused be to

pieces together. So will come all these

Greg Palm

demand that problem off pretty sort guess good high on coming and lastly is here. just be kind the high. quarter of will from work to its probably an problem have you've generation I in when cash industry is of your Keith need clearly probably a is but The this first to given going capacity this Yes the years. public this that a issue to standpoint got

love what would term are. allocation kind of just I So to a priorities sense near capital your of get

Keith Anderson

after next integrate that be build early going importantly mean we that or successfully mentioned to to our growth operation aspects year Yes. continue focused in one foundation a for our other the as in of this synergies first and future be maximize so may is number that means on to year strong under but concentrated foremost I grow feel a industry. that have stronger we're today in to I markets we will later most priority to all Skyline that

opportunities if we're some in other at be in should expanding of need look also the distribution We our and retail of markets today and/or we see markets.

that's of an will capacity continue cash this one will meet future some view go for to but rates. prudent I capital conservative allow and that our So to a ingredient in success exceed industry and manner where important as growth allocation company

Operator

is question from a Moore Daniel Securities. follow-up from next Our CJS

now Your live. line is

Daniel Moore

Thanks again.

You of raise assets how better margin of a great operations to gave compare opportunity the some get them incremental and the or terms profile to streamlining Skyline at color color there? you in you've would on improvements and the had efficiencies to operational a now know to that and any month Champion's little Champion two

Keith Anderson

there and that We've the PVA modular that producing homes in may early the geographic can or the away facility. one to identified plants some any customer on production that part [ph] days we foremost the impressed they've are at combine company. and on can a at first going through and we decision very the value a win close moving Skyline, areas be that adding the change practices could Skyline by become that Sure, while with just are other in their been allow focused eight the like that and increase the discussions and of that some really may of improve gone whereby the models open to so overlaps both we're all taking We simplify making already. we're and team incremental margins identified us to They're game Dan. product the not better best or lot to We've Well they've value. going those plants locations really side to the to plants. features savings think management teams all eight productivity

board. the really and Dan forward the So look coming I'm putting the days the to teams made together and with numbers we've on impressed the in early progress

Daniel Moore

color the in Very of to some first-hand good. for and seeing operations forward look September. the Thanks here

Keith Anderson

Yes we to that, look forward Dan.

Operator

you. Thank

would management or have any back comments. the of to session. further to We the our reached end for answer and closing question floor like I over turn

Keith Anderson

Well your to thank and interest again Take you all for today Bye. care look quarter. next expressing joining forward talking in time. us We now.

Operator

conclude you. That today's teleconference. does Thank

disconnect your for line you may and You time We a at today. have thank your participation this day. wonderful