Cavco Industries, Inc.

Good day and thank you for standing by. Welcome to the third quarter fiscal year 2024 CAFCO Industries, Inc. Earnings Call Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mark Fusler, Corporate Controller and Investor Relations. Please go ahead.

Good day, and thank you for joining us for Capco Industries' third quarter fiscal year 2024 earnings conference call. During this call, you'll be hearing from Bill Bohrer, President and Chief Executive Officer, Allison Aden, 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 Capco'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 CAFCO. I encourage you to review CAFCO'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 any forward-looking statements. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, Friday, February 2nd, 2024. CAPCO 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. Now I'd like to turn the call over to Bill Bohr, President and Chief Executive Officer.

Bill? Welcome and thank you for joining us today to review our third quarter results. While the earnings release focuses on year-over-year comparisons, in this market, I believe the quarter-to-quarter developments are more relevant to understanding current market dynamics. It's not to disregard any insights and bigger picture takeaways regarding the dynamics a year ago relative to today. Last year, we were a couple quarters into the effect of rising interest rates. Industry backlogs were higher than now, but they were declining rapidly, and the pace and direction of backlogs is generally more important than the level. As we wrapped up this third quarter, rates of... In fact, on a same-plant basis, we have now seen five quarters of increasing net orders, and backlogs are stabilized, albeit at low-capacity utilization. So while economic uncertainty remains, the trends are pointed in the right direction as we emerge from the typically slower winter and holiday months. The positive trending we're seeing in the market is coming from the dealer channel. There, traffic remains healthy and conversions are improving. Buyers are adjusting to the now steadier interest rates and to the reality of how much home they can afford. The underlying need for affordable housing is coming to the forefront and driving modest and meaningful quarter-to-quarter order improvements. As discussed over the past few quarters, community orders continue to be off considerably. As industry backlogs decreased in the latter part of 2022, deliveries to communities accelerated, which resulted in excess community inventories going into calendar 2023. The issue is not whether there are buyers or renters once a given unit is put into service. It's how quickly the units can be permitted and set to reduce the inventory and resume more normal orders. In other words, placements are occurring at a much higher pace than orders until balance is reestablished. The natural question is, when will this balance be achieved? Of course, varies by operator and location. However, the outlook for this calendar year is considerably better than last, based on our discussions with community operators and developers. We expect we will see increased community orders as the year unfolds. Against that market backdrop, we've stabilized our backlog over the past three quarters by matching production to the pace of orders. Our capacity utilization remains steady this quarter, about 60%. And while the value of orders in the backlog declined from $170 million last quarter to $160 million in Q3, the number of units in the backlog increased 3%. The quarter ending backlog represents five to seven weeks of production consistent with last quarter. That stability is an important point coming through the winter months and heading into what we typically would expect to be better selling months. We have a number of plants operating at reduced schedules that are looking to increase when the market supports. On the margin side, pricing has been relatively stable. While our overall factory-based housing gross margin declined 0.8% sequentially, this was driven more by the cost side and how cost of goods sold flowed through our manufacturing and retail sales. Big picture, margins remained healthy at 22.4% in our housing segment, and prices are continuing to hold for the most part. Overall, our quarterly revenue was down about 1% sequentially to $447 million, and pre-tax income dropped from $52 million last quarter to $44 million. Before repurchases and after acquisitions, cash flow was about positive $25 million. We used $50 million to repurchase shares, which resulted in our cash balance being down $24 million relative to last quarter. Before handing the call over, it was good to see many of you at the Louisville show a couple weeks ago. Among a number of other innovative homes, we brought our new Anthem series duplex to Louisville. The Anthem is the first nationally available HUD-approved multifamily unit. We're very excited about the affordability benefits these homes offer, and the interest level has been tremendous, particularly with developers and community operators. I also wanted to recognize and welcome Dustin Ewing and the people from Kentucky Dream Homes to the Cavco family. Kentucky Dream Homes operates five well-managed sales centers in Kentucky and Florida, and we joined forces through an acquisition in the third quarter. Dustin and his team are strong operators and great people to be associated with, and we're very excited to be on the same team. With that, I'd like to turn it over to Allison to discuss the financial results in more detail.