Skyline Champion (SKY)

Mark Yost President and Chief Executive Officer
Laurie Hough Executive Vice President and Chief Financial Officer
Ashley Kim Barclays
Brendan Popson CJS Securities
Mike Dahl RBC Capital Markets
Greg Palm Craig-Hallum Capital Group
Jay McCanless Wedbush
Call transcript
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Good morning, and welcome to Skyline Champion Corporation's First Quarter Fiscal Year 2022 Earnings Call. The company issued an earnings press release yesterday after the close. I would like to remind everyone that yesterday's press release and statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission.

the be discuss performance. useful call, it measures, today's can believes in during company non-GAAP will which Additionally, evaluating its reconciliation can release. measures of in A earnings the be found these call I like Champion's and Executive would Chief Mark to the President now Officer. Yost, over turn Skyline to go Please ahead.

Mark Yost

the on the quarter an we Thank some joining the some activity quarter, Today, CFO. I'll year-end the call, our wrap off with our and our on and With second first morning quarter, on everyone. update and of you call. so on Hough, the far the provide EVP in from for highlights then our me call favorable up earnings with good highlighted trends saw first year. thoughts an acceleration is Laurie of we balance start In

including are our first-time efficiencies. We levels is by output housing robust homeowners. drive affordable rapidly to levels production growing to factors of for financing, experiencing generating driven customers Demand become base and improved are looking of inventory, demand favorable strategic being historically and continue low initiatives as numerous

$XXX affordable during to point sequential Our production times that than resulted first these contributed the in growth. price backlogs inflationary $X.X more by billion order strong quarter growing to during despite demand unit million

production sequential solid As When fourth organic sequentially. the X% the X,XXX homes, extra a adjusting from transaction, for XXXX we in increases, year fiscal was for the result up of unit and an XX%. week the of ScotBilt delivered production quarter improvement prior and of the growth of XX%

in the quarter's supply challenges industry raw ongoing XX% as for result despite reduced material this at operate continue rates. operations availability. about near We U.S. a the our chain operational the X% levels our achieved improved ScotBilt, Excluding facilities across manufacturing by utilization to manufacturing quarter. of disruptions caused prior Utilization from facing capacity

production campus have idle Volumes challenging did a decline basis somewhat in completed quarter, in results this peak production to the efficiencies part increase – production our us in It more healthy In sequential manufacturing by mix production fourth previously benefiting our rates unemployment of offerings. due on housing we achieved quarter, progress quarter. Labor June, capabilities becoming streamlining the fourth in home the made improved expectation the of sequential Canada, on to in sales, the of country. states our has the end the generated governmental year. doubling levels further addition with this prior last weaker one due product our most operational over levels one and Western will over The significant facility improved Navasota, plans Our assistance from this the strengthen but two-plant we to to allowed our facility months a of daily in is of sequential from vacation product we fiscal subsiding. experience to the Texas. In and volume extra as the the year. purchase manufactured production is plants prior of the the availability

continue XX% facilities, acquired our production additional on to Incorporating mentioned considering to-date, and resetting volumes. the at of product As capabilities restated are our flexibility call, all efforts providing levels. the as total the is grow recently our we previous capacity production our with facilities idle capacity now streamlining our we

continue levels consistent and quarter's normal affordable are remainder outpaces upcoming across on earnings will expect supply. in strong near-term material second demand call. be to industry last moderate production challenges govern demand quarters to availability and the to through with stay of the for more and will levels Raw then supply in that housing chain outlook as expected the our elevated but the We quarter continue the

in quarter. chain these supply fourth of second fiscal challenges sequential the will our expect and challenges we to regional that by in anticipate cause third subside labor we our quarters, declines While

drive supply enhance Today's the digital driven to VP ability growth. Manufacturing we The transition at As through a focused simple who investing deliver are we digitally to help affordable our increasing, that by low brands automation of and and to With our past millennial and our short-term gain the seeking in has hitting production and move site-built interest ultimately automation supply In housing the and and challenges His can solutions. fiscal added home. housing turnkey reward our plan we only more deploying we recently pressures housing recently Electric, focused been exciting to Roland few in during the modern our trust efforts. a on developing navigate we at long-term with entry-level for Motors, formations our and platforms growth experience they customers' hasten our into retail. consumers solutions partners – from General excited through in channel experience and our will Technology. and us XXXX, our investments to during I'm supply quarters processes, continue are demand with Menassa, household capacity most General into accelerate away offerings. continued the more fiscal experience remain expanding practices. solutions Inflationary orders side boosting Amazon five-decade enhance XXXX, our to digital buying rate that confidence at and growth customers a our attainable to opportunities. accelerate Therefore, seamless that we and will

I success over that have will the consumer expectation success continued most with more resulted and our builder. see platform we call the as Our Laurie quarterly leading and innovative will detail. financials manufactured and home recent our investments in in early to team turn the discuss in our is it now our to

Laurie Hough

our our begin the balance cash second our of well financial and outlook. will discuss discussion sheet quarter Mark, flows. I expectations as followed results will everyone. for by fiscal morning, for as first reviewing quarter longer-term and I Thanks, a good the by also briefly XXXX of the

U.S. government quarter our shut negatively impacted the price. increase I the sold throughout number increase disruptions were and would sales sold average everyone by homes or was Net fiscal XX% numbers, $XXX homes, some of that down increased homes be for the in quarter growth to to quarter our units increased as a The other segment price the X,XXX reviewing the value quarter increase material in last of to same of to The total generated XXXX compared our our by an in housing due of rising U.S. $XX,XXX to restrictions the product million. and to versus selling million of XX% response COVID-related and year-ago costs. Canadian chain. The by first number average of sold Before the causing million XX% factory-built in last revenue plants remind segment like homes in the price of housing in mix in increase driven in growth factory-built same in selling $XXX X,XXX by to well year. as year. We revenue increases U.S. $XX was per factory-built results an

adjusting the enacted XXX% number revenue Canada of Canadian to compared XXX grew response selling fiscal volume last increased gross by the to factory-built fourth primarily profit organic units. the the sequential U.S. first due increased homes factory-built fiscal transaction, increase the to to with homes the rising was growth year, the in and a which in in pricing increase of normalized by to by to X% revenue XX% higher and XXXX. versus sold increase quarter last of When increased segment, primarily quarter X% increased pleased year, million a and Consolidated material $XX,XXX up quarter increasing the in XX% home pricing. in increase XX% driven to This The prior-year sales fourth price with XXX% homes adjusting XX average XXX% week quarter price. quarter actions an $XX same U.S. driven quarter ScotBilt in are compared sold increased driven by selling for to average in $XXX sold versus revenue We costs. million a XX%. the in

Our first year, primarily the last travel expenses improved to continued quarter increases. to year points investment quarter due XXX online offsetting period were increased $XX enhancements. $XX.X from million housing efficiencies variable than margin more margins million up same net the first basis in sales, to in company's and higher other the [indiscernible] customer and in last as segment in material platform well compensation our price experience and the gross from as leverage U.S. deterioration XX.X% segment operating the due of from

a of to compared diluted driven higher fiscal versus and improvement, pandemic or a quarter of effective enacted last remained points period revenue over year-ago or to for non-deductible tax in a pre-tax gross income not margin company's compensation. in provided was was included sales decreased quarter. the for year. the XXX% by an to was prior expect EBITDA ago. million, throughout We financial this basis earnings quarter that tax leverage the reoccur due share margin as $X.XX fiscal The and Adjusted U.S. remainder fiscal gross the during period expanded XX.X% the The combination subsidies accelerate programs tax $X.XX vested quarter into the to of year per fixed proportion were of benefit Canadian for The effective items versus equity wage to million these of $XX.X assistance of $XX.X while a year and effective increase diluted XXXX. was profit. of constant, same The EBITDA year's rate of government-sponsored Net by and XX.X% per increase growth, the share, income rate and one-time $X.X did investments rate for greater income primarily company's for by an to XXX million the same of first The in costs. XXXX. XX.X% income response EPS of million continue EBITDA net adjusted higher $XX.X the result

products is primarily for combined remains remainder inflation high to of prices other building the with declined challenges of on the chain the widespread supply expected continue and to products first year forest seen we've While for the quarter, due during the certain demand. persistent levels

We incentives vacation peak labor impacted in by challenging expect in the near-term be government that months. the will

price and adjustments, and several due improvements, ability the materials reminder, material availability to a standardization, the the make impacted labor, increasing qualified may buyer's As response and rates. there pass operational product continue raw inflationary costs to efforts challenges, by of production our qualify substitutions, at to home to our labor operational for financing raw including to supply higher the we chain be of improvements. on further material levers Despite utilize and are inflation in availability

quarter no with maturities prior-year quarter, in had line As equivalents generated facility June cash of $XXX our flow XXXX, and credit the cash XXXX, with XXXX. subsequent Skyline end and million X, million long-term $XXX We until operating July entered the July a million X, Champion of cash during fiscal of to revolving quarter. of facility. our into borrowings $XXX existing replacing of million the we million $XX On $XX

part support to for growth to available liquidity I'll executing and and the for of remarks. outstanding As favorable our hand. our back turn the new our Mark a now remain plan cash to $XX.X we business growth. and on million some paid in We and given the expands totaling The revolver strategic balance reinvest cash initiatives closing to on liquidity operational our acquisitions. initiatives call the utilize company's credit using facility on opportunistic refinancing, focused position, company's off the strategic

Mark Yost

the Thanks, and during business encouraged Laurie. momentum solid in delivered results the with quarter. we our I'm the

that may and homes. strong our demand capacity to growing efforts have expand confident our our lines us now the productivity the in open increase I ability Our forward to our you well-positioned after And to extraordinary to with quarter. am execute strategy more going even Q&A. for this respond for and backlog our operator,


Thank you.

from will now question We Our Matthew go the ahead. of Instructions] [Operator begin Bouley Please session. first question-and-answer comes Barclays.

Ashley Kim

levels revenue XQ indicated Matt enough only Kim you improvement. think raw XQ, was actually materials I on for seeing to Hi, this Last today. quarter, to is it sequential maintain, saw a but similar Ashley

that us just drove what allowed So, color that give some more or uptick? could better material or Was labor you this? there on availability simply maybe pricing

Mark Yost

Good morning, Ashley. Yes.

the chain. think additional to from supply benefited quarter our materials a I ability first from source

we to additional I think get. were was that able stock there

of the the So, is the as there's we especially in what currently on see happening. we last had vision that that earnings de-stocking chain, I freight side think now call a same supply the

material quarterly So, estimates. a bit allowed were to we quarter able our outpace and the get little us to fortunately extra it during

Ashley Kim

further? in place on align any from control put that just any Have then just restrict orders And measures better production to forward swelling the helpful. to that's you Great, backlogs. with to going

Mark Yost

No. It and shows frankly attainable affordable in it gives buy the direction technology investments It homes. Actually, confidence housing, significantly we're in really to for are that for making strategic backlogs I demand to very future people our really encouraging. strong and also think is easier to. me going the

in for backlogs line to putting which not call. anticipate calendar our last XX still of still said in is chain which earnings currently, delivery we're controls. supply So, the terms continue is at time, as manageable to year is we grow very I weeks throughout customers. in We're with what challenged,

for were by little good than I think think just I So, seeing anticipated, that customers attainable think what need have are quality very strong, orders I the home. we we expected, driven really but a stronger we the

Ashley Kim

leave will it I much. very there. Thanks

Mark Yost

you. Thank


Securities. of question Our ahead. next Moore from go comes CJS Please Dan

Brendan Popson

on Good is morning. Brendan This Popson Dan. for

spent talking could then capacity if could guys will incremental specific how I'm examples. you to to to long And there. you some automation. it if provide get about take wondering time and much some achieve, just you speak You how hope And

Mark Yost

Good Brendan. morning, Yes.

about very and about technology. automate with GE experience Menassa those companies with board we and GM what Amazon excited excited coming I he's been their in with Dr. automation and to at head where think his on able at drive can that. Very and –

were really our solutions. the companies are. on there the call, I think limitations what I have, have automation of tried the early it's in as certain to but off-the-shelf last too capabilities mentioned industry, understand Many

really over solving housing I some developing further that months, process that going already will making in demand things have, So, which it is testing doing challenges automating attainable to to place XX the customer, next and end is labor what for drive of we in the to we're automation the more lead such think really to the XX pilots also start a have those, better to to and now. and really we high which work

So, it. look to forward we

Brendan Popson

Great. margins And in reversed the an line course much higher. prices, to and that lumber how on to opportunity there recent then wondering is speak pricing they've just if just could you drive seems it weeks. And of hold some

Mark Yost

quarter Yes, actually the with were materials. we saw margin pressures able actually We pricing. compression inflationary cover during to not

actually So, we a margin quarter materials. took hit the during from

we've other freight other all seen has in commodities frankly, down, but lumber country. across price. come cost increase overall, really think I what the the goods of and increasing and the is is materials Transportation

have So, lines that companies the credit fruition. that transportation compress supply. started is away coming things to and going to In limit take certain shipping shipping industry, to the other from forwarders and are

board. offset think then that of across actually be inflationary and seen. goods I to see cost seen pressures other we've freight that on is declines something the and have resins So, the And the going that lumber we steel we've

least to place just XX months. because I So, inflationary expect for and the in remain foreseeable happening at staying prices for future foresee these next the we increases many to high of six

Brendan Popson

Okay. you. Great. Thank

Mark Yost

you. Thank


Please Capital ahead. of Our question from RBC Dahl comes go Markets. Mike next

Mike Dahl

I for wanted But you and Thanks you levels around the to to – are that's and new capacity. conversation these I production in there curious at mix, you backlogs recalculation to but go your outlined when Texas doing expect capacity? are you bring to more aren't I on some limitations questions. with Hi. my back good backlogs acting why of product grow and of what about new practical to a I'm geographies aggressively think further, and know it taking have. understand capacity, problem around

Mark Yost

in marketplace at I part well is have Yes. effectively. that down as And materials really looked chain, run available more comes we Mike, the or of it if more to a labor it frankly, had supply we Overall, supply think. as today. to

to with part – think are that That in holiday I July incentives during the kind creating situation labor there two-month combined peak these find very primarily. in period months right due labor. seeing and now challenges, an – are of U.S. August to uptick in government months we're a the a the I are the it's difficult think, out where summer and

as and and down. to the So, will to we fall, head holidays start But ability into supply the chain that to challenges continue freight increase wane I think back vacation continues limit to school, get people overall subside output.

rest least to expect actually I the hopefully them. the calendar then to backlog So, continue grow of through year at and to moderate look

affordable I the that some is is I to So, buy. it to the backlogs It expect is provide the encouraging opportunities by would. out actually it to continue to for way playing what easier fact grow. And making we meant housing thought of people

for add sign further. to So, I and capacity that's an encouraging grow and ability long-term think our more

Mike Dahl

it. Got

my profile. buyer disclosure Okay. didn't then about boilerplate the something limitations, you if comments And then qualification. supply Laurie, the or that you're comment being buyer second made and one factor question I is And that seeing. being there's or chain a if think around specific one I some know risk was

to in what about gauge tracking So, buyer now the seeing you terms – can up are follow right you're I How ask of buyer and you bear what what and you that? like anything to help wanted qualifications. metrics

Laurie Hough

Mike. Yes,

anecdotal So, that information metrics tracking. any than it's specific we're more

what delay qualifying really, pace a for see number and financing than from else. purchases, can in have our certain and buyers land/home we really anywhere with buyers the camps primarily more on of and you is qualification than a the captive So, price. a standpoint aren't what that the And And retail have because it's keeping increase appraisals of else. just to anything more purchases land/home drove seeing the we're at fact the demographic I the think comment how are

is. prices period XX to time, or in of the order months qualification up. an think I just in haven't the last extended have whatever at caught the So, They those higher for comps

more what of buyer are qualify The rather it's home. to is still for – the than about really that's the demographic the able So, buyer.

Mike Dahl

slow price given little have Okay. when door your bit at the by or play And is a length do increases caught that XX increases weeks to comps you next that your the leading against you backlog is price customer the in and How that? balance up maybe looking your time, of for appraisals. the

Laurie Hough

price we really about really look – no, and input our demand. Yes, are cost increases

Mike Dahl

it. Got

Thank you. Okay.


go comes question next Group. of Our Craig-Hallum Capital Please Greg from Palm ahead.

Greg Palm

sequential curious, rates really the congrats And All guess, right. assume high what the that's digits, either about volumes, July? and the in are the to the going quarter been have thinking first to production on what decrease I'm when to be I'm mid-single maybe thinking I daily in lever me. going better you relative or you digits? single that on results. drives good – expecting? comment off, What's you're currently worse key can the this

Mark Yost

Greg. off, in we think morning, shutdown – typical Yes, have July Good our July. first I seasonal in that

the July of location So, or holiday the guess, plant the weeks frankly, on take week early for month depending maintenance for refurbishment purposes. will I down slight and for part just

definitely we'll holiday maintenance this in current outage periods and see is So, quarter, those normal. very which a for weak

I So, overall, it's we'll on dependent to the But very be think see going that. definitely chain. supply

I than larger anticipated. will or So, it we decline be volumes we better be – will I the than don't in think revenues think

think remember mentioned, we last last the call, if X%, call, I thought X%. On you I

a quarter. we'll mitigate the will think for little think that us we'll just see bit. impact a weak But I outage I

Greg Palm

your and maybe volumes of what's in vastly you? terms doing. being I look I they're at And what not supply the outpacing industry mean it. is – Got chain worse. is surprised

are peers? anything some getting are relative orders or stocking just So, you better to of differently your doing you

Mark Yost

– people. problems. level honest. I'm honest, away, be solving things really is the to people Greg, plant to Yes. at I think, amazed I'm actually innovation that our be it's blowing – at making The happening just me just are and happen our

the coordination, I think, we to quarter. really what this think innovation I suppliers we a there saw with need driving, communication, problem-solving, and when make multiple performance what's is we that that some sure resourcefulness working get can of disruption, is

the shortages moving in related we're the very tightening outage freight along So, and disruptions supply it's seeing we're more more from in the materials, But now I others. shortages shift areas. from encouraging. in improvements to supply with in actual chain in certain do for think seeing major timing-related and some chain commodities a areas

Greg Palm

coming last of by I Are the to don't nine, sense. levels from? six, drivers XX get channel, really curious terms last then you're community? renters? any insights Are some what further the versus mean the in to site-build? retail are what high-level one – know Who just Just note on demand thoughts out on have whether where and Makes on Anything of do I they? are the seeing coming you in are dominated And looking And months, there. it's terms from they demand these they be out there? back still buyers

Mark Yost

captive Yes, conversations then as Greg, retail, well. have financing we our retailers insight I and which have think we have with operators independent to. we own And with entities also our the community

of points are all think that I that looking people to home. attainable the an for fact

gotten the of for homes have of site-built price think home I many first-time out reach buyers.

homes are from many millennials household that multiple reports that to that starter seen a create looking formations. are low at the time five-decade You've

So, to that to enough model. from geographies is kind from a high. for are into. At people pricing or urban same work very rural, hybrid-type move of supply for supply not the time, available the many home there's And them moving

demand volume driving I for attainable factors think it. housing. That into So, all are playing the of are those really in

So, I factors just are really good those all think tailwinds. of

Greg Palm

Thanks Good. forward. Okay. going of for Alright. the color. Best luck


McCanless [Operator next Please Wedbush. of go question Our Jay from ahead. comes Instructions]

Jay McCanless

Good questions. Thanks. taking Thanks morning. my for

are first as as The pricing And well for seeing going talk or those? flatten where still yet out about that price is those copper-driven for you you is going goods? one had I Could goods up on steel.

Mark Yost

metals those the in elevated, inflation goods are still material in still strong. think I No,

of as of seen reductions jump seen we already. I majority we've But really a yet. haven't the think any

material across it's think just I the with inflation. board So,

Jay McCanless

team hopefully to of is the little and had, more the three take get not a the market? these I type grow chain of type if but what see do you a demand-driven Supply I What backlogs question – frenetic, this management And large hypothetical, as this share bit in the very better. two normal but new next guess you gets years? second positive for and to steps

Mark Yost

Yes, so. idle us start chain allows supply across U.S. we've reopen we I think feasibly to to the that got facilities would when do

and think our I we'd open factories So, output. more increase capacity definitely supply up to

automation our investments capacity streamlining at freed enhance our quarter. the only to and other offerings actually some this up will with product we've quarter. Our capacity ability our utilization In utilization our in during And scale given combination things production that the another facilities. actually products, of fact and with of this streamlined existing and those additions XX% capacity and we've

excited So, supply supply I open the up have capacity chain. think it's chain... We confident the the efforts, as opening that really additional because plants we're efforts, as those time right in automation point at we soon feel debottlenecking several that the of in to

Jay McCanless

Thanks Great. my taking for question.

Mark Yost

you. Thank


This the closing I over to would question-and-answer turn session. concludes Yost like for remarks. any the Mr. to conference back

Mark Yost

continued safe. on call. your you progress We We time and call. today's the on care next interest. continuous and for in our be participating to and look appreciate our you Thank innovation forward Take updating our


conference This concludes today’s call.

a for your disconnect you day. may lines. You And Thank participating. have pleasant