Cavco Industries, Inc.

We're standing by and welcome to the Capco Industries fourth quarter fiscal year 2023 earnings call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Mark Fusler, Corporate Controller and Investor Relations. Please go ahead, sir.

Good day, and thank you for joining us for Capco Industries' fourth quarter and fiscal year 2023 earnings conference call. During this call, you'll be hearing from Bill Bohr, President and Chief Executive Officer, Allison Aiden, Executive Vice President and Chief Financial Officer, and Paul Bigby, Chief Accounting Officer. Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward-looking statements, including statements of expectations or assumptions about CAFCO's financial and operational performance, revenues, earnings per share, cash flow or use, cost savings, operational efficiencies, current or future volatility in the credit markets, or future market conditions. All forward-looking statements involve risks and uncertainties, which could affect Capco's actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of Capco. I encourage you to review Capco's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, Friday, May 19, 2023. CAFCO undertakes no obligation to revise or update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date of this conference call, except as required by law. I would like to turn the call over to Bill Bohr, President and Chief Executive Officer. Bill?

Thanks, Mark. Welcome, and thank you for joining us today to review our results for the fourth quarter of 2023. This quarter saw the full impact of the economic pressures and retail inventory issues we've been experiencing through the latter months of calendar 2022 and into this year. Volume's were down 10% year-over-year. Revenue dropped approximately 6%, or $29 million, and pre-tax profit was down about 15%. So it's clearly been a challenging operating environment. On the positive side, we have seen improvement in order rates with net orders up meaningfully compared to the last two quarters. In fact, on the same plant basis, net orders were about double what we saw in Q3. We spoke last quarter about watching orders as we entered the seasonally stronger selling season, and it's a good sign that we also saw that order rate improve throughout the fourth quarter. And while average selling price is off sequentially, pricing has held up well despite the drop in industry shipment. Overall, our average selling price was down about 6% sequentially. However, the majority of that decline was mixed-driven as opposed to price reduction. A very important component of our business model and something we focus on in downturns is keeping our cost structure as variable as possible so we can maintain profit and cash flow at lower volumes. This is something that can be seen in this quarter's results. Factory-built gross margins remained high at 24.4%, essentially flat year-over-year despite the negative impact of solitary purchase accounting. Certainly, this was helped by pricing and commodity cost improvement compared to last year. However, it's also due to outstanding cost management in our plants as they transition to reduced schedules. Despite same-plant production rates being off 24% from the peak last summer, gross margins have held, and on a comparable basis, excluding one-time items and solitaire, SG&A was lower than last year's quarter. Our leaders have adjusted quickly and very well, and we're demonstrating the focus on cost and efficiency we consider to be key to our success. The bottom line is that in a challenging demand environment, we posted operating income of $54.3 million in similar free cash flow generation. I'm very proud of these results that demonstrate the expertise, resilience, and nimbleness of our operating teams. Regarding market conditions, it's difficult to generalize across the system in an environment like this, but I'll try. For some time, we've been facing a retail inventory issue that has kept wholesale orders below actual industry retail sales. We're nearing the end of that issue and getting closer to a one-to-one ratio of home buyer demand and manufacturer orders. I've commented before that this issue will not go away suddenly, and my comment here is not to say that every local area and dealer has gotten to their target inventory. However, in general, this issue is largely behind us, and that's a positive for order rates going forward. As I've kept in touch with both independent retailers and our own stores, there's a lot of optimism. Retailers are seeing healthy traffic. Quotes have remained at a high level, frankly higher than we saw over the previous two years. We watch quotes as a leading indicator of future deposits. The traffic and quote data support the view that, to the extent interest rates and macroeconomic factors allow, the fundamental need for our homes is building positive pressure for future order improvements. We've seen in the total housing industry that new home sales are starting to improve, further indicating that buyers are adjusting to the interest rate changes, and in many cases, adjusting their expectations of the home they can afford. Supporting this view after several years of product mix shifting toward multi-section homes, we're now seeing that trend reverse toward single-section homes. As Alison will cover in more detail, this quarter we completed the Solitaire acquisition and continued share repurchases while maintaining a strong cash balance. So our capital allocation approach remains unchanged by the current order environment. I want to express my sincere appreciation to all the folks at Solitaire and within CAFCO who have worked on various aspects of the integration. It's hard work and they've made really great progress. I've spoken in the past about the very real benefit of rounding out product offerings, both in the Solitaire and Capco-owned stores. Our retail team has moved quickly, and this is well underway. We're also focused on product updates and product development, particularly aimed at lower price point homes. So, through a lot of hard work, everything is moving forward with a very good combination. Let me switch gears. Last quarter, I talked about the milestone achieved in January. when we went live with capcohomes.com, our new customer-facing digital home marketplace. I won't repeat all the aspects involved in this game-changing improvement in how we support our dealers and our prospective homebuyers, but I do want to give a sense of our progress. Early traffic and lead generation has been strong and is expected to continue growing. We've been very happy with the reaction of our retailers. Particularly, our smaller retailers have been enthusiastic about having an easy-to-use website they can update with prices, photos, and videos. And all retailers are benefiting from the additional exposure and leads being funneled to them for follow-up. With the site now in place and fully functional, we will be continuing the process of adding more Capco brands and expanding the suite of customization options to support our retailers and homebuyers. With that, I'd like to turn it over to Alison to discuss the financial results in more detail.