• Net Revenue: $522 million, up 16.8% from $446.8 million in the prior year.
• Factory-Built Housing Revenue: $500.9 million, up 17.3% from $426.9 million in the prior year.
• Financial Services Revenue: $21.2 million, up 6.8% from $19.8 million in the prior year.
• Gross Margin: 24.9%, up 180 basis points from 23.1% in the prior year.
• Factory-Built Housing Gross Margin: 23.6%, up 120 basis points from 22.4% in the prior year.
• Financial Services Gross Margin: 55.5%, up from 36.8% in the prior year.
• Net Income: $56.5 million, up from $36 million in the prior year.
• Diluted EPS: $6.96 per share, up from $4.27 per share in the prior year.
• Pre-Tax Profit: $69.3 million, up 57.9% from $43.9 million in the prior year.
• Effective Tax Rate: 18.6%, down from 20.3% in the prior quarter.
• Cash and Cash Equivalents: $378.6 million, with a decline of $7.6 million in the quarter.
• Share Repurchases: $42 million in the quarter, with cumulative repurchases at $389 million.

• Warning! GuruFocus has detected 2 Warning Sign with WT.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cavco Industries Inc (NASDAQ:CVCO) reported a 30% sequential increase in EPS to $6.90, driven by improved results in financial services and factory-built housing.
• The financial services segment recorded its best quarterly profit in four years, primarily due to improved insurance operations and lower weather-related claims costs.
• Factory-built housing showed higher volume and gross margin, with a 3.4% increase in volume and a 70 basis point improvement in gross margin.
• The company maintained a healthy backlog of six to eight weeks, positioning it well for future quarters.
• Cavco Industries Inc (NASDAQ:CVCO) repurchased $42 million of stock during the quarter, maintaining a strong balance sheet with cash and cash equivalents remaining flat.

Negative Points

• The average revenue per home sold decreased by 3.5%, primarily due to a lower proportion of homes sold through company-owned stores.
• The financial services segment experienced volatility, with previous quarters showing poor returns before the recent improvement.
• Florida's market remains challenging, with slower demand compared to other regions like the Southeast and Texas.
• There is ongoing market uncertainty, and if demand weakens, Cavco Industries Inc (NASDAQ:CVCO) may need to adjust production accordingly.
• The company faces potential risks from tariffs and immigration policies that could impact input costs and labor availability.

Q & A Highlights

Q: Can you provide insights into customer discussions and order rates across various markets, especially as you increased production during a typically slow period? A: William Boor, CEO, noted that while the call comes at a transitional time of year, industry shipments on a seasonally adjusted basis have been trending upward. Retail traffic remains healthy, and conversion rates are improving, indicating consumer adjustments to higher interest rates. Community inventories are under control, providing a tailwind for demand. While economic uncertainty remains, Cavco is confident in its ability to adjust production as needed.

Q: How do you view the sequential production rates from Q3 to Q4, considering holidays and other factors? A: William Boor, CEO, stated that there are more operating days in Q4 compared to Q3, providing potential upside to production. Plant decisions are unique to their backlogs, and the company is prepared to adjust production rates based on market support.

Q: Can you elaborate on the changes made in the financial services segment and provide guidance on long-term margin expectations? A: William Boor, CEO, explained that the third quarter is typically stronger due to lower weather-related claims. The company has been diligent in adjusting premiums and underwriting policies to ensure profitability. While the segment is volatile, it historically provides strong returns. Financial services margins are expected to remain significantly above those of the factory-built housing segment.

Q: What are the geographic demand trends, and are there any regions showing particular strength or weakness? A: William Boor, CEO, highlighted that the Southeast and Texas continue to show strength, while Florida remains challenging. The Southwest is improving but at a slower pace. These regional differences are more observational than indicative of broader trends.

Q: How is Cavco approaching capital allocation and cash flow management, particularly regarding share repurchases? A: Allison Aden, CFO, emphasized that the primary focus is on expanding plant capacity and pursuing M&A opportunities. Share repurchases are used to manage the balance sheet responsibly, with historical activity serving as an indicator of future actions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.