Cavco Industries Reports Fiscal 2023 Fourth Quarter and Year End Results
Cavco Industries, Inc. (“Cavco”) announced financial results for the fourth quarter and fiscal year ended April 1, 2023.
On January 3, 2023, we completed the acquisition of Solitaire Homes, which operates four manufacturing lines and twenty-two retail locations. Since the acquisition date, the results of Solitaire Homes are included in Cavco’s consolidated financial statements.
- Net revenue and Net income of $476 million and $47 million, respectively. Solitaire Homes contributed $28 million of Net revenue and had a pre-tax loss of $0.8 million, which includes expected purchase accounting adjustments.
- Gross profit as a percentage of Net revenue was 25.3% with factory-built housing gross profit as a percentage of Net revenue at 24.4%, down30 bps and 10 bps, respectively, from last year’s fourth quarter.
- Purchase accounting adjustment related to Solitaire Homes reduced factory-built housing gross margins 40 bps in the current period.
- Earnings per diluted share was $5.39 compared to $5.80 in last year’s fourth quarter.
- Returned nearly $30 million to shareholders through stock repurchases.
Full Fiscal Year Highlights
- Thirteenth straight year of revenue and earnings growth, with Net revenue up 32% and Income before income taxes up 45% compared to last year.
- Gross profit as a percentage of Net revenue increased 80 bps to 25.9%, with factory-built housing gross profit as a percentage of Net revenue increasing 140 bps to 25.3%.
- Earnings per diluted share was $26.95 compared to $21.34 last year.
- Backlogs at April 1, 2023 were $244 million, compared to $1.1 billion at April 2, 2022 and $427 million three months ago.
Commenting on the results, Bill Boor, President and Chief Executive Officer, said, “Despite rising interest rates and increased economic challenges the last few quarters, our team has delivered another year of outstanding growth. In addition to solid operating results, we expanded our capacity through the Solitaire acquisition and the Hamlet and Glendale plant startups. The affordable housing problem only worsened over the past year; however, our ability to serve the need for our homes has never been stronger.”
Three months ended April 1, 2023 compared to three months ended April 2, 2022
- In the factory-built housing segment, the decrease in Net revenue was primarily due to lower sales volume, partially offset by higher home sales prices and the Solitaire Homes acquisition which contributed $28.3 million.
- Financial services segment Net revenue increased primarily from higher policy premium rates and more insurance policies in force in the current quarter compared to the prior year quarter, partially offset by lower interest income on the securitized portfolio that continues to amortize as expected.
- In the factory-built housing segment, Gross profit decreased from lower sales volume, partially offset by lower input costs. The Solitaire acquisition was a positive contributor to gross profit; however, purchase accounting adjustments decreased their contribution by $1.8 million. Selling, general and administrative expenses increased due to higher consultant fees related to the claiming of the energy efficient home credits and higher legal and other expenses related to the ongoing litigation between an indemnified former officer and the SEC.
- In the financial services segment, Gross profit decreased primarily due to higher weather related events in the fourth quarter and lower interest income earned on the acquired consumer loan portfolios as they continue to amortize as expected and lower unrealized gains on marketable equity securities in the insurance subsidiary’s portfolio.
- Interest income increased $2.7 million due to higher interest received on cash balances and increased lending under our commercial loan programs.
- Other income (expense), net for the period was income of $0.7 million versus an expense of $2.5 million primarily due to gains on corporate marketable equity securities in the current period, compared to losses on securities in the prior year.
- Income taxes totaled $11.2 million, resulting in an effective tax rate of 19.1% compared to $15.2 million and an effective tax rate of 22.1% in the prior year period. The lower effective tax rate in the current year period primarily relates to additional tax credits received for the sale of energy efficient homes available under the Internal Revenue Code §45L.
Twelve months ended April 1, 2023 compared to twelve months ended April 2, 2022
- In the factory-built housing segment, the year-over-year increase in Net revenue was primarily due to higher home selling prices, higher home sales volume and the Solitaire Homes acquisition, which provided $28.3 million.
- Financial services segment Net revenue increased primarily due to more insurance policies in force in the current year compared to the prior year and higher volume in home loan sales and servicing, partially offset by lower interest income earned on the acquired consumer loan portfolios that continue to amortize as expected.
- In the factory-built housing segment, Gross profit increased from higher home sales prices, partially offset by higher input costs. Selling, general and administrative expenses increased from higher salary and incentive compensation expense on improved earnings, the addition of Solitaire Homes and higher legal and other expenses related to the SEC inquiry. As announced on September 23, 2022, the United States District Court for the District of Arizona approved the settlement of the SEC action against the Company. The settlement resolves all claims in the action against the Company, but we remain obligated for ongoing indemnification for a former officer of the Company.
- In the financial services segment, Gross profit decreased primarily due to higher weather related claims, lower interest income earned on the acquired consumer loan portfolios and unrealized losses on marketable equity securities compared to unrealized gains in the prior year period.
- Interest income increased $7.1 million due to higher interest rates on our cash balances and increased lending under our commercial loan programs.
- Other income (expense), net decreased primarily as a result of a non-recurring gain of $3.3 million on the consolidation of a non-marketable equity investment in the prior year. Additionally, the current year includes $0.8 million of gains on marketable equity securities held at Corporate compared to $1.3 million gains in the prior year. Partnership income decreased $0.7 million year-over-year mostly due to the consolidation of one of our joint ventures, as previously discussed. The remaining decrease is due to sales and other dispositions of property, plant and equipment during the year.
- For the year ended April 1, 2023, Income tax expense included $8.1 million of net tax credits related to the sale of energy efficient homes available under the Internal Revenue Code §45L, which resulted in an effective income tax rate of 21.5%. The year ended April 2, 2022 included $35.7 million of such credits, which resulted in an effective income tax rate of 6.7%.
For the full fourth quarter results, click here.
Cavco Industries, Inc., headquartered in Phoenix, Arizona, designs and produces factory-built housing products primarily distributed through a network of independent and Company-owned retailers. We are one of the largest producers of manufactured and modular homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and Solitaire. We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. Cavco’s finance subsidiary, CountryPlace Mortgage, is an approved Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Our insurance subsidiary, Standard Casualty, provides property and casualty insurance to owners of manufactured homes.
Mark Fusler – Corporate Controller and Investor Relations – firstname.lastname@example.org – (602) 256-6263
Source: Cavco Industries, Inc.