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Skyline Champion (SKY)

Participants
Mark Yost President and CEO
Laurie Hough Executive Vice President and CFO
Greg Palm Craig-Hallum Capital Group
Daniel Moore CJS Securities
Matthew Bouley Barclays
Mike Dahl RBC Capital Markets
Call transcript
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Operator

Good morning. And welcome to Skyline Champion Corporation’s Fourth Quarter and Full Year Fiscal 2022 Earnings Call. The company issued an earnings press release yesterday after 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. include in set the the Exchange uncertainties earnings in Securities and Commission. and release company’s risks the forth factors the and Such filings with

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

Mark Yost

for joining you our Thank good earnings morning, call, everyone. and

about EVP while on our CFO. about topline me up the balance wrap Skyline make the achieved of I fourth in an with continue Joining call our serve year pleased far and XXXX, growth is capabilities of expanding progress activity with full Champion I talk customers. quarter quarter Laurie fiscal am improving Hough, to in the briefly XXXX on as capacity Then first profitability, provide we update and and and will highlights. and results Today, fiscal to better our delivering so the thoughts year. our our

as year, by XXX%, place provide families to For to by were XXX net margins XX% expanding grew XX,XXX and call customers we the and able adjusted by home, we sales a EBITDA points. basis

operational fourth awareness pressures of our supply greatly strong allowed for higher year levels, for industry has as to and the ongoing a affordable rates our an by convert excellent base site traditional raising The quarter, increased homebuyers ability and remains We despite strong need with housing headwinds to demand housing has pressures. driven enhancing converging inflationary improved expand for affordable at in more and ended interest market note housing of Our supply demand solutions. new were the output on solutions higher housing buyers rising us a and shortages, the demand and results profitability results the buyer by share. experience and growing driven are standpoint, capabilities. increase housing side the environment From our chain current an investments our and our the inflationary

continued during backlogs demand, order point growing during these by million price healthy $X.X inflationary quarter the to times affordable to $XXX generate Our with billion. reach fourth

improve Fortunately, the quarter, to our the we to during were at able times production weeks quarter, our the weeks XX to to us end the to quarter. allowing XX delivery end increase at the third of customers of compared

the prior homes, of XX% we facilities the an by up U.S. to from X,XXX utilization manufacturing We XX% an and improved of disruptions for solid the operations increases, percentage quarter, As production chain facing delivered achieving industry. our the a operational capacity improvement the result year XX% this and despite supply points third gains increase manufacturing production challenges of X caused our across quarter, sequentially. from

production rates. the and helped to improved offerings progress product production our streamlining Our daily increase were us continued efficiencies allowed by

driver to shortages While transportation all of a output, truck across our to remains able availability we workforce, challenge were regions with add country. the cost to

certification Texas and began in plant process its homes our Navasota, Additionally, shipping completed in April. March

again our we builder for homebuyer’s Builders built a interest This top environment. pace a far Genesis Show to a an In builders home multiyear tremendous To Expo stretching their Congress that traditional International than Homes to Orlando rate and the rising with their signed the in for provide to dollar a end, at of in facility. continues we by have MHI at in homes, exhibited value less homes that helps ramping XXX achieve homebuyers recently development. site agreement and We dedication March. the Genesis up team built impress our February, in incredible design and one

able an are affordable they hit to that price So point. profitably

During totals quarter production order and and the specifications typical units. therefore $XXX and entered quarter, XXXX. have FEMA of will The million delivery also selling of Delivery the are fiscal generally FEMA for price. quarter the a higher approximately second first Order more units drive into Relief homes be than Disaster average we and produced in a

as batches be impact of will minimize will these primary at customers. our with We producing our across production the which units help the to in factories several long-term U.S., as efficiencies, well

asset custom excited announce also that homebuilders. closed purchase we to the May maintenance are on We XXth on of

Carolina now with throughout along the addition North and XXX,XXX of North to retail foot square our effective, continuing we Eastern anticipate plant. this in the upgrade as in of the approximate Carolina, offerings the We current retool economic existing with able are Carolina, are that product better campus Laurinburg, With to in North campuses, environment. existing its customers location serve portions streamlined backlog cost we the million region greatly out and $XX of build needed

also low and more of availability rising factors. traditional As favorable rates oriented factory seeing housing we homebuyers a built inflation, market are historically into conditions demographics home moving with interest built supply, affordable remain look we migratory site and value With forward, healthy solutions.

demand Additionally, and traffic build-for-rent communities as increasing retail tempers. from we see

regions. rising in and pace increases have in production interest minimal most rates slightly elevated cancellations levels April have in and and orders our few due a so Our kept far been or in with May increased regions to price

-- chain With acquisition expect do become late to to facilities digits of XXXX. plant, of we material in our our our availability we increase our existing and in raw FEMA of Manis our some scarce the quarter period. efforts mid-single mid efforts more first the sequentially production recent Navasota, Despite streamline our summertime the at richest revenue fiscal to addition expect Texas production, supply Homes our and team partners, continued of by to of and

it will with fiscal We increasing of face to through along production may we challenges are These planning production. for to but homes this availability impact and our will some our are of when manage the during transport these XXXX. the challenges, drivers continue

housing housing the Housing showcase innovative the Development built U.S. will the and once built DC solutions and in of promoting excited media policymakers, homes homebuyers. in factory during value the We Urban Washington, hosted is event June. are showcase and This again to factory to early Department affordable be by of

the more becoming successes term, sufficient homebuilding is that meet needs have it’s seen antiquated traditional evident in we to on technology of not day of every to longer early the the system manufacturing, offerings. Focusing Due the both and digital customers.

attainable We to more will financials these our detail. customers. call ramping will homes in Laurie to our areas I in up and be now quarterly our turn affordable more over the make discuss for to investments

Laurie Hough

our by a discussion good the our fourth our followed everyone. financial flows. Thanks, will expectation. Mark, balance I quarter, for morning, also by and results and will cash of discuss sheet near-term briefly begin reviewing I

of decline fiscal compared home. XXXX. XX% homes by increase million in fourth primarily driven driven quarter higher a for XX% year. same selling to built selling The Consolidated price quarter in million during a average the $XXX,XXX revenue in last During homes sold increased quarter, homes XX% XXX homes driven year. The average of year sequential quarter selling rising was offset compared compared due a sold increases for revenue a decline response costs. year homes quarter to total increase, X,XXX by week, The to was increase in price. This per revenue in a the quarter per quarter average versus increased price year, price number material, XX% of offset increase in and units having the during an price number sold pricing or compared U.S. The of labor the increases higher by the quarter, selling quarter and by to the brought operations. sold on and transportation partially segment selling increase quarter increased to due fourth to gross XX% fourth an million the to to an third housing U.S. which We quarter volumes, driven the improved production. revenue the of of sold fiscal an the inflationary increase increase extra Canadian year growth was in the a to the in to increase prior week of last by the of by extra sales homes prior in the U.S. of prior quarter, same despite million $XX Canada the factory in pressures. by the price up number approximately home having fiscal result of built XX% of segment home fourth number $XX $XXX average the average built the a On price, in $XX,XXX, net The was factory by factory the $XXX sold. was in last accounted the in saw $XXX profit inflation basis, increased increased million in sales. to of enacted XX% XX% X% to U.S. X% home and

U.S. points from net segment quarter XX.X% basis of sales the more margins XXX gross fourth housing last Our year. were segment than up

$X.XX improved an share sales in company’s In the quarter effective continued the us expanded year driven last through during increase quarter. to driven the net to to the fixed buying the year expect gross was in by in higher increase customer sales of to key XX.X% leverage quarter $XXX was same of for quarter fourth higher over initiatives and period for tax helped million and strong costs. and Net $XX a The compared production, on and same we XX% improvement $XX year, leverage addition a material in was share, experience sales or improved profitability. efficiencies, in experience. customer primarily due to million, income operating million period and rate in The of The demand and or enabling diluted focused a rationalization costs. increase adjusted XX.X% SG&A fourth per our by profitability. margin year. diluted compensation to quarter to standardization XXXX. increase XXX% The in $XX product the remains higher XXX fiscal SG&A and the $XX margin per increase The to EPS the investments the for variable EBITDA by due tax reflects resulting capacity online effective pricing, fixed additional for Adjusted earnings million to also was of versus volume of $X.XX ago. from continue enhancing same income buying the EBITDA points rate ago increase million basis period initiative investments last incremental an

driving and remain persistent further Looking in adjustments, standardization, material increasing of We half improvements. XXXX. raw costs, on building pressures, forward, operational inflation as of to in and substitutions response Despite timeliness inflation to possible on costs first less efforts and pass to which mix our availability the soften the price levers caused by fiscal utilize several by production products, improvements, product continue we economic shifts expect will raw impacted margins. and make as operational including labor be homebuyers our to through transportation to materials, may well smaller homes, optioned product

confident our the margin a remain environment, we in natural of the current create progression. an ability environment to execute does While elongated in on our inflationary headwind impact

given and income increase April and due accounts plan million which Mark an and cash increase X, call remain I strategic increase we to and our focused operating and flows our to We have and position, operational cash for flows cash an business growth. maturities reinvest XXXX, no $XX of the some to support will million capitalized operating by cash XXXX. offset turn to for remarks. executing $XXX of cash million utilize on our million back in partially increase $XXX in costs. is cloud deposits, now long-term We until As to inventory the liquidity year-over-year. year, favorable closing of of with borrowings balances, customer primarily of on net $XX computing initiatives receivable equivalents in generated were the in The long-term the

Mark Yost

business to homes. our strengthened which continue demand position and Thanks, focus by our has being for driven ability is The the we momentum to to affordable execute, our on Laurie. solid customer see the in satisfy

Operator, strong consistently result in want up ability now take to the for you Q&A. work to output and is and I may open of our we moment Champion thank the team Skyline line as Q&A, entire very performance open the a hard And environment. our this challenging for that, a for focus, our Before increase with lines customers

Operator

Greg Group. Craig-Hallum question Instructions] you. proceed. is Please Thank with Our from Palm first Capital [Operator

Greg Palm

and on Thanks morning the execution for Good congrats in the taking the quarter. questions. good

Mark Yost

Good morning, Thank you. Greg.

Greg Palm

bit wanted more, into I worried first dig a to these about consumer environment is days. demand the everyone given the

it like still fairly So strong demand quarter-to-date. sounds remains even

few you attribute are So just years curious the talk maybe ago? the of to, what buyers you seeing that to that some newer a compared of profile about maybe

Mark Yost

Yeah. Thanks, Greg. Demand strong. does remain

Our -- production matching May. new incoming in are orders and now orders right April

the are third than they higher in were quarter. they actually So

So the -- higher are buyer things a down seeing good generally demographic. we demand few payments. overall. a with One, quality it’s remains buyer Really better in

also a larger buyers can’t a as site are home home We better market. afford seeing into in proposition who or value traditional our traditional homes, existing a move built amount coming homebuyers well buying cash the of into

-- I So time I think consider a to we seeing for come would shift what better and are first call homebuyers of definitely quality what us. I the market buyers

Greg Palm

what Makes sense. several on builder, of you volumes is, But been a of I additional as feedback the about, production their going, top with think talk supplier, of the then I maybe and sense terms can in ongoing give developer, you using are And there, some some just there, terms them in of there’s on projects within are how builder shifting behind going out you the completed opportunity they are that have they an know some those disclose win to scenes? potential what’s really that XXX us already. you can offsite,

Mark Yost

success and segment a segment Greg, Genesis Genesis seen of the the market more is, diversified Yeah. our that in very am reason part little excited we we I subdivisions. into of about that have with

there’s that is Advantage is biggest of XX% to we XX% what selling and look on State MH builder. important the subdivision small the less builder the selling builders first at Just recently in completed. Texas what you is is subdivision some to country think that really localized I for is That a But a when about selling comparable Zillow. for a the them are they subdivision, take homes of in

are able good would obviously allow to comparable, builder So point like having scale economies at the without an affordable make to a builder large in have. we that’s that a that of price margin

to builders. a to XX-year now is, according value speaks a we situation goes proposition have So and recently the just I really mortgage for the think there for I it average the what’s $XX,XXX back I Redfin. that important think to the rate But is mortgage, also that year, think seen demand

equates for so, it of customer customer off costing is which of everything that $X,XXX. if can the amount, we to XX% XX% savings else inflation $X,XXX the customer, cost food, the to And average about today that roughly electricity, happening, save with of gas,

put can and meaningful can offset product So other inflationary get their $X,XXX if in Genesis they into average another our which all their save think $X,XXX, pocket, and costs customer. they I is for today’s

this have future. developer So that seeing with, and are that meaningful multiyear a us. definitely developer we more in a add for in the our of channel will product we It signed product to builder amount interest agreement builder it’s growth

three for definitely not will good next years to are a disclosing five and right years. the We years of but It’s deal amount it’s good now. four add the -- a revenue company portion or over the

Greg Palm

follow-up guys a of… that. a last is guess one Do to just sense a is And I this you

Mark Yost

Okay.

Greg Palm

get …whether I to levels, to you biggest initially space? pushback like pretty developer the sense in from you because start come mean, ramp things that that well going for or do a of opportunity starts off? are at sounds get, if what’s builder it whether backlogs constraint current least down kind

Mark Yost

Yeah.

timing I with subdivisions comfortable it. of and builders think getting

in today’s I important it’s to diversified. market be think

FEMA the channel. contract. signed That’s government we the So,

genesis. the up We building are

is market strong. ADU is Our channel building. The very community

I temporary So on retail I will with and little in bit the short-term, things. or call a channel the other payments really down of, see it, just softness

rent developer significant in out are demand seeing -- large and the the then, interest So and both REIT’s is increases builder obviously there. from but for from REITs, we increases more, it’s

Greg Palm

in will and I back luck. hop Thanks Okay. Great. All the good queue. right.

Mark Yost

Greg. you, Thank

Operator

Please with is next Daniel Securities. from Our question Moore CJS proceed.

Daniel Moore

in you, Thank on and Mark first, we numbers. them have a heard congrats Laurie. Yes. Again while. first solid just FEMA really Maybe from

Sometimes needs would tranches. satisfy this it this -- likely from additional multiple is orders their in in short-term? Do you expect comes what the gather would least behind you or at you

Mark Yost

future I are and are heading U.S. say, what We But season as of Dan. inventories hurricane don’t is the know any the I will typically orders, low. indications we in have viewed into

So there it future be currently. no some could really of indication for housing, there’s -- but that need

Daniel Moore

Got a margin it. perspective. And appreciate from color the

for more mid next, single-digit of about normal near-term we margins over new quarter least. vis-à-vis that think the or two? guidance, your QX How growth sequentially the gave should out we say, the performance in You mid-to-high sort going on looking at then, are topline. the Laurie, And is a in the mid-term, XXs, sort of

commentary helpful? you If put margin be around gross can perspective, from any a some just really your granularity of more would there

Laurie Hough

be expect in move relatively then to you quarters as I the margins Yeah. compress optioned sequentially less homes couple range, next through gross start Dan. the flat the of later to backlog. to and you, the somewhat mentioned, smaller Thank in as year

Daniel Moore

on. And a years Mac -- supply in then proposals and to a it one the affordable move of others Freddie will the more maybe little there housing. bit proposals or I be other there demand the gap that some Got could and help chattel adminis to it. of duty serve think recently series Thanks. the But for proposals between in you loans close past? more it than of pass the Are current have -- administration outlined specific needle maybe and or some Biden

Mark Yost

anything don’t there’s definitely some good what long-term mean, near-term. very the Yeah. think they in it have I traction will impact proposed. in I

getting really it’s take about action what Chattel, think in passed the getting could impact channel, and if rates of traction, that done a Some cap that on -- proposals and could their that’s right, refurbishment bond on. of gained XX% impact. actually things. stock the other that have builds see Congress, between That -- existing interim, and through good limits things in hurdle I could are new they but

little to in too and a benefits a upon it’s affordable I the more count. and we and going But see are to or it’s term relief, regulatory because longer housing. definitely early for the tailwind more So need rely of on great cycle think emphasis

that things to things the definitely So zoning and more rate. like like passed there’s accelerated relief be going a ADU at

opportunity, So near-term. anything going there’s in very definitely impact the it’s longer but not to very, term

Daniel Moore

follow the back Thanks. circle up Makes follow-ups. I will color. -- Appreciate if sense. with any

Mark Yost

Thank you.

Operator

Matthew Our proceed. is Bouley from with question Barclays. next Please

Matthew Bouley

most as the that we taking day little to regions, that in worsen you low a actually everyone. become does have standpoint? cancellation here, places. elevated you case, the results. with take I mark because Should given at congrats production that what’s said on for that’s Thank financial going could morning, you guys a ask the and rates, cancellations question, the questions Good signal top in the you and have kind of although impact lighted a cancellations and a efficiency how from if that on few

Mark Yost

Yeah. Thanks, Matt. No.

happening think cancellations. related by both Really driven cancellations are there’s rates I really things to two rates. and

first interest The are for stock becomes retailers plan increase, rates our carry not it and rates more our is costly units. interest plan also just with floor inventory, rates as consumer so to retail floor elevating, end

just of rates we the bay see to will at destocking channel So largest up. some tick keep interest kind expense as of their

terms rate just going retail of to because carry stabilization the are rates -- at our then on are up for consider going country piece one-time really adjustment to in and I interest less you would the about a customer. inflation they of So what a accelerate. the to and are across inventory interest less, rates as going see retail stock kind are loss second hold their And they interest going is

a customer, to really rates. little fact can when up kind to allows due loan, inflation price which going think the it another can due I increase which the see bit to you open end are then lender that of change So cancellations their the for the increased is trigger, we of to interest

magnitude think of we I of though, not scheme see backlog. kind of going So overall our in to are is cancellation. The that a batch the material, of

a concern. So it’s not

would somewhat Like to lower as expected rates incoming it’s rate, some because going have some qualify destocking want interest increase. carrying going two, increases we on not end we think might customer as are with said, cancellations, cost. they interest I cleanup not have the just orders because to focused laser very a the I retailers because rates inflation we to be expected happen, just and one-time to both are happen the interest new

Matthew Bouley

Got it.

of helpful quarters But of customers. of sort the the there, customers sort is color then just Thank there there retail Okay. missing And developer demand Mark. absorb wanted because builder community had that destocking of had those away your previously the in sort on secondly, orders that few room think big one-time builder to there otherwise to a sufficient you Just you I from either and those to away, on turning from build-to-rent where follow-up focus or on orders for spoken pressure, the one-off No. consumer to trying retail rest been or for of might That’s really of the of you and the channel is some sort be in that. really turning market I what developer be long-term could channel? discussion order channel? some past now

Mark Yost

Yeah. Definitely.

are much we seeing the developers. think builder from interest REITs community and the larger to I a

retail potential It softness. more than offset has I meaningful. definitely So the think the to that’s

and activity will geography some honest, very is geography think and into of geographically be the builder just bit, I because transparent developer play a focused. to little that REIT

to So make over we that levels accommodate production the to to in adjust time. will have sure regions right

Matthew Bouley

you thank guys. right. luck, you. and good Got Well, All

Mark Yost

Thank you.

Operator

next [Operator Capital Dahl Instructions] proceed. Markets. with Our is Mike from Please question RBC

Mike Dahl

Mark Thanks, questions. the to questions. the want follow-up some morning. Good of taking on for demand and I Laurie

the orders does in units some if tough and bit. if but just first -- the down because for was you it I back out of year-on-year dollar May, in down seem wondering one, the April in envelope, year-on-year, were terms a down I change and could comps, units order, and your back maybe obviously, FEMA quite like you both making provide comments are terms The orders quarter of

orders in to that about with May. matching supply reconcile and your trying April So comments then am I

So commentary would be great? year-on-year unit any

Mark Yost

sequentially comps, but I don’t unit production increased Yeah. rates our XX%. Mike, quarter-over-quarter give order quarter-over-quarter we say or is that, our by by rates shipment what would increased the and

So the we successfully very dramatically production you increase I is the and able fact backlog part were of delta seeing are think quarter-over-quarter. that to

looking you those I the production that think to I the orders today, orders point elevated and So are have is today. numbers consideration think that at are matching into incoming take you that that as our we rates are new at are we new seeing higher

are kind production we on in with par of So running orders.

Mike Dahl

Okay. Right. And the remarks had as opening other follow up topic, I being had regional think in just I your it it somewhat on the you cancellation characterized specific.

are most the regions cancellations now? what pronounced So right seeing you in

Mark Yost

Generally product. I that’s end sell or they lower the predominantly, and a would say ASP lower generally mid-south because region

So inflationary are those stock other words, more generally of lower have those ASP, most customer as to prohibitive go the one, kind stocking to the units. lower interest probably on customer of because lower And the the In retailer’s is rates margin end profile pressure meaningful impact, base, that going ability interest secondly, well. is one their that more as that’s up. most cost rates floor plan of feeling

going as higher see inflation to see ability that cancellations rates retail So a lower passed to will probably you customer, are are and on you to qualify. interest

generally lower mid-south value. So sales were end

Mike Dahl

sense. makes That Okay.

Mark Yost

Okay.

Mike Dahl

it. Got

that indicative of takes you we comments on will wasn’t the already just or Okay. of happening should to in how question, Laurie are as while Mark, being backlog last One your incoming sure I or that’s a kind mix take around with of what’s given and it comments a flow through order that if and the just things lower seeing expectation just rates those endless progress rates. optioned prices just the for mix, models

hedging expectations? seeing on future or already of that’s kind So are you bit just that a

Laurie Hough

a we in bit well geographic point is see order. mix as earlier, but of Mark’s to starting Mike to kind are that

timing that’s backlog. So through issue coming a

Mike Dahl

Appreciate you. it. Okay. Thank

Mark Yost

you. Thank

Operator

is question Daniel with next proceed. Please CJS Securities. Moore from Our

Daniel Moore

Maybe in in one we Can just we sequentially, customer commentary how investing technology have whether you on to give in that Any you aggressively likely that facing should -- helpful. we Thank SG&A, be of been would incremental us obviously, you dollar and terms is really about again. to of growth, do that, sense I just saw grow. and continue platforms. spend a the that level think guess, modeling more spend QX there

Laurie Hough

the remember Dan, what Yeah. I number don’t in was specifically QX.

few running expect to We dollar quarters I range fiscal over through XXXX. incrementally think expense. that it’s in in historically increase the million a operating last few do

Daniel Moore

that And number we to of then the at that additional recently the expected they strength that a locations of it. one our ears, demand. kind many real in Got quick, given spoke to dealers That struck back here. bit that of counter you are obviously you you well some a of too, looking Thanks. sounds expansion? seeing seeing little versus as on described adding so of the pressures or Is that were something are sort inventory more pulling

Mark Yost

No. Yeah.

geographic in more that I think sense. it’s

to to really are the dealers think looking closer to their customer. expand be I location, So

we costs of elevated because Transportation an is slightly as gas think, prices. mentioned, I trucking issue. are becoming

those more is, So of we locations, I what can looking maybe a a think, what do curated I of there’s locations. at, on dealers to inventory up would handful who more expect are have set but open

one of that because visit, the of customer coming coming online. more lead their transportation is So and more to the generation

who customers are XXX miles because lead coming generation have the might away, online they that’s So from. where is

So the more can it think, have, they some the be retailers the making more closer to convenient. I can of distribution points customer the

units, of then the it. by there’s few build things with up might time. XX a bring time. have same inventory. that down a another They but units But on They both sales open might So kind and that happening sales center center at will take

short-term, be impact. So long-term there’s kind a to going of

Daniel Moore

the again. Appreciate color Makes sense.

Mark Yost

you. Thank

Operator

conference reached have to the turn like end back closing for I management the our would We of session. over question-and-answer to comments.

Mark Yost

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

Operator

today’s conclude conference. does This you. Thank

your for may at and time your you You disconnect thank lines this participation.