Champion Homes, Inc.

Good morning and welcome to Skyline Champion Corporation's fourth quarter and full year fiscal 2021 earnings call. The company has issued an earnings press release yesterday after the close. I would like to remind everyone that yesterday's press release and the 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. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Additionally, during today's call, the company will discuss non-GAAP measures which it believes can be useful in evaluating its performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Mark Yost, Skyline Champions President and Chief Executive Officer.

Please go ahead. Thank you for joining our earnings call, and good morning, everyone. Joining me on the call is Lori Huff, EVP and CFO. Today, I will briefly talk about our fourth quarter and full year highlights, then provide an update on activities so far our first fiscal quarter, and wrap up with thoughts about the balance of the year. I am pleased with the results Skyline Champion delivered in the fiscal 2021. As we continue to make progress in delivering top-line growth, and achieving improved capacity and productivity levels for our customers. For the year, we grew adjusted EBITDA by 18% to 135 million and expanded margins by 120 basis points. I'm extraordinarily proud of our team and the success we achieved during the year despite the challenging and unpredictable operating environment. We started the year with idle facilities and restricted operations, and we finished with strong financial results and expanding production levels. I'm increasingly confident in our ability to capitalize on the growing demand for housing. From an industry standpoint, home builder confidence remains at historically high levels due to low interest rates and lean inventories of new and existing single family homes. Skyline Champion provides high quality and affordable solutions for consumers, and we believe that we can leverage our business model to continue to scale operations to service this robust demand environment. We had an outstanding fourth quarter delivering terrific results across the business as we continue to see robust demand for new housing. As stated earlier, demand is being driven by numerous factors, including favorable financing, historically low inventory levels, and rapidly growing number of millennials looking to become homeowners. Our affordable price point during these inflationary times created strong order demand, and that, along with the acquisition of Scottville, resulted in backlogs growing by 370 million during the fourth quarter to reach 859 million. Fortunately, we were able to increase production during the quarter allowing us to moderate the growth in our delivery times to our customers to 28 weeks at the end of March compared to 18 weeks at the end of the third quarter, despite the surge in orders. As a result of solid production increases, we delivered 6,342 homes, an improvement of 34% from the prior year and up 12% sequentially. We improved our U.S. manufacturing facilities capacity utilization to 77%, During the quarter, an increase of seven percentage points from the third quarter, achieving these production increases despite facing operational challenges caused by supply chain disruptions across our manufacturing operations and the industry. Our improved production efficiencies allowed us to increase daily production rates over the levels achieved in the sequential third quarter due in part to the progress made on streamlining product offerings. While we were able to add people to workforce, labor availability continues to be a challenge. We made progress in our Western Canadian plants as well, as we saw home sales volume increase over 200% from the prior year and 32% sequentially. During the quarter, we also announced the acquisition of Scott Build Homes, which significantly enhanced Skyline's manufacturing and distribution presence in the attractive Mid-South region with two facilities in Georgia. We are thrilled to have the ScottBuilt team on board and look forward to continuing to capture synergies. We are confident in our ability to deliver solid returns and meaningful shareholder value as part of our overall capital allocation strategy. Moving into fiscal 22, we expect that the demand for attainable housing will remain extremely strong for the first and second quarters and then moderate to higher than normal levels as the economy starts to reopen and the stimulus effect starts to fade. At the same time, we believe that we have the raw materials to operate and maintain top-line revenue levels in the first quarter, similar to what we saw in the fourth quarter of fiscal 2021. We then anticipate the compounding challenges of supply chain and labor to cause sequential declines in our second and third quarters. We expect that these challenges will subdue and subside by our fourth fiscal quarter, allowing us to return to first quarter levels. While we will manage through the short-term supply side challenges during our fiscal 22, our focus is in looking outward. With entry-level housing supply hitting a five-decade low and millennial household formations increasing, we continue to gain confidence in our move into digital and turnkey offerings. Inflationary and interest rate pressures will only hasten the transition away from antiquated site-built methods currently performed today to more modern production practices. Therefore, we are focused on expanding our capacity and investing in automation to enhance our processes. We will need to supply more housing to our channel partners and to our customers who need affordable ATTAINABLE HOMES. THE GROWTH AND ORDERS EXPERIENCED DURING OUR FOURTH QUARTER WAS ENHANCED DUE TO OUR INITIAL DIGITAL EFFORTS AND AS WE MENTIONED ON OUR LAST CALL BY SKYLINE BEING NAMED AMERICA'S MOST TRUSTED MANUFACTURED HOUSING BUILDER RECEIVING A FIVE STAR TRUST RATING IN A SURVEY OF MORE THAN 24,000 NEW MANUFACTURED HOME BUYERS. IN FISCAL 22 We are accelerating our investments into our platforms for sustained growth. Today's consumers reward brands that they can trust and that can deliver a simple and seamless experience digitally and at retail. The pandemic has only intensified this expectation. We recently expanded our senior leadership team with the addition of Tim Larson as the company's chief growth officer. as we accelerate our investments into our customer experience strategy and omnichannel digital platform. Tim brings with him significant experience and proven performance in transforming the customer and digital experience across a diverse portfolio of brands and industries. With Tim in this new role, I'm even more confident that Skyline Champion will be able to develop industry-best solutions and experiences for our customers and create growth opportunities for our company. Finally, in fiscal 22, we will continue to demonstrate our commitment to ESG through company-wide and plant-specific programs as well as through our everyday business practices when providing high-quality yet affordable homes to homebuyers. Beginning in fiscal 22, we have launched a program to participate in reforestation, With forestry products central to the construction of homes, we have initiated a program to plant one tree for every tree used in the construction of our homes. Reforestation contributes to the environment by replenishing forests, reducing greenhouse gases, and protecting the watershed. I will now turn the call over to Lori to discuss our quarterly financials in more detail.

Thanks, Mark, and good morning, everyone. I will begin by reviewing our financial results for the fourth quarter, followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our expectations for the fiscal first quarter as well as the long-term outlook. Before reviewing our numbers, I would like to highlight a few dynamics that impacted our results in the quarter compared to the year-ago period. As mentioned in our press release, we had an extra week in our fourth quarter of fiscal year 2021 compared to the fourth quarter of fiscal 2020. The extra week accounted for approximately $31 million in sales during the quarter. In addition, we acquired Scott Built Homes on February 28th and have included its results for the month of March. Finally, we experienced negative impacts from the COVID restrictions, which caused us to temporarily close 20 plants at the end of the fourth quarter last year, reducing overall production levels for that period. Net sales increased by 49% to $448 million in the fourth quarter versus the same quarter last year. We saw revenue growth of $120.6 million in the US factory-built housing segment, as well as growth in our Canadian factory-built housing segment of $23.9 million. The increase in US factory-built revenue was driven by an increase in the number of homes sold and an increase in average selling price. The increase in the number of homes sold was 29% or 1,320 units for a total of 5,923 homes compared to the same quarter last year. The average selling price per U.S. home sold increased by 11.6% to $67,200 due to product mix and price increases in response to rising material costs. We are pleased with the sequential growth in revenue in the US factory built segment, which increased 18% in the fourth quarter compared to the third quarter of fiscal 2021. This increase was driven by an 11% increase in homes sold and a 7% increase in average selling price. Canadian revenue increased 212% to $35.2 million compared to last year, driven primarily by a 222% increase in the number of homes sold to 419 units. The average home selling price in Canada of $84,100 decreased 3% versus the same quarter last year as pricing actions enacted in response to rising material costs were offset by a shift in product mix. Consolidated gross profit increased to $99.1 million, up 65% versus the prior year quarter due to increased sales volume and higher pricing. Our U.S. housing segment growth margins were 21.9% of segment net sales, up 120 basis points from the fourth quarter last year, due to direct labor efficiencies and increased leverage of fixed costs caused by higher sales volumes. SG&A in the fourth quarter increased to $52.5 million from $47.2 million in the same period last year. Lower expenses due to decreased travel and marketing were more than offset by higher variable compensation and investment in the company's online customer experience and other system enhancements, which will continue to accelerate throughout the year. Net income for the fourth quarter was $33.9 million or 59 cents per diluted share compared to net income of $6 million or earnings of 11 cents per diluted share during the same period last year. The increase in EPS was driven by a combination of higher revenue and gross profit. The company's effective tax rate for the quarter was 24.5% versus an effective tax rate of 51.8% for the year-ago quarter. The company's effective tax rate decreased primarily as a result of a fiscal year 2020 increase in a deferred tax asset valuation allowance, partially offset by recognition of certain tax credits. Adjusted EBITDA for the quarter was $51.2 million, an increase of 155% over the same period a year ago. The adjusted EBITDA margin expanded by 470 basis points to 11.4% due to higher sales growth, growth margin improvement, and leverage of fixed costs. Forest product inflation, as well as other building product costs, continue to increase during the fourth quarter and into our fiscal 2022 first quarter. As we discussed during our third quarter conference call, we began seeing an increase in labor inflation during these periods as well. There are several levers we can utilize in response to increasing material and labor costs, including price adjustments, product standardization, raw material substitutions, and further operational improvements. Despite our efforts to continue to pass on inflation and make operational improvements, our production may be impacted by the availability of raw materials due to global supply chain challenges, the availability of qualified labor, as well as the homebuyer's ability to qualify for financing at the higher inflationary rates. As of April 3rd, 2021, we had $263 million of cash and cash equivalents and long-term borrowings of $39 million with no maturities until June of 2023. We generated $154 million of operating cash flow for the year, which doubled from the prior year. The increase in operating cash flow is primarily due to the increase in net income, customer deposits, and deferment of employer payroll taxes allowed by the CARES Act, which were partially offset by an increase in raw material inventory balances. During the fourth quarter, we used $52.5 million of our cash on hand to acquire Scottville. We remain focused on executing on our growth and operational initiatives, and given our favorable liquidity position, plan to utilize our cash to reinvest in the business and support strategic growth. I'll now turn the call back to Mark for some closing remarks.