Champion Homes, Inc.

full-year fiscal 2023 earnings call. The company issued an earnings press release this morning. I would like to remind everyone that today's press release and statements made during this call include forward-linking 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. I'm pleased to be joined on this call by Lori Huff, EVP and CFO. Today, I will briefly talk about our full year and fourth quarter highlights and then provide an update on activities so far in our first quarter of fiscal 2024 and conclude with thoughts about the balance of the year. I'm pleased with the results Skyline Champion achieved in fiscal 2023 as we continue to grow our top line while expanding our profitability and expanding our capacity and capabilities to better serve our customers. Our performance during the year reflects our innovative product offerings, affordable price points, strategic positioning, and the success of our core initiatives. For the year, we were able to provide 25,910 customers and families with a place to call home. Over the past two years, we've delivered more than 50,000 homes, growing net sales by 83% and adjusted EBITDA by over 300%. Our results were driven by the need for affordable housing and our ability to increase output at higher profitability levels while continuing to invest in our business to deliver a future growth. From an industry standpoint, and consumer demand remains healthy as supply side housing shortages, a growing base of home buyers, and higher interest rate pressures increase the need for attainable housing solutions. The current economic environment and our investments in enhancing the home buying experience has increased awareness of our housing solutions. For the quarter, we delivered 5,146 homes as softness from retail inventory destocking was partially offset by expansion in other key channels, such as builder developer and tiny home distribution. In the fourth quarter, the industry experienced delays in setting and finishing homes in certain markets, causing a backlog of inventory, resulting in the postponement of production of existing orders and the placement of future orders. Margins continue to normalize during fiscal 22 levels, reflecting lower volumes and a product mix shift as customers look to maintain affordable monthly payments in the current interest rate environment. We remain steadfast on our key areas of focus, that of enhancing the customer experiencing, streamlining our product offering, and transforming the way homes are built and bought. Over the course of the year, our backlog normalized because of increased production capabilities and the dealer destocking of inventory. Backlog finished the year at $308 million and has reverted to more customary, normal, seasonal lead times. Normal backlog levels of 4 to 12 weeks help the homebuyer lock in both pricing and financing and benefits our direct sales channels to better meet the needs of their customers. While retailer walk-in traffic was down, leads grew over 20% from the prior year in the fourth quarter, driving good credit quality customers to our retail stores. We also saw strong increases in quoting activity at our plants quarter over quarter and a substantial increase in plant orders versus the sequential third quarter. During the quarter, we announced our inaugural build to rent modular subdivision through our partnership with an industry leading provider of sustainable modular housing. This collaboration drives the modular industry forward by serving as a blueprint for increased modular adoption in the home building space. This innovation in community development will demonstrate the full benefits of modular construction in a build for rent residential application, providing developers a turnkey solution at a price point quality, and speed for today's market. Moving to the first quarter outlook, order activity at our manufacturing operations is trending up in May, but was slower than expected in April, given the set and finishing delays. Most industry retailers are through the destocking process and are beginning to order more retail sold units, while many of the community REITs are pausing orders for a short term as they catch up on setting existing inventory. Additionally, one of our builder developer partners has shifted expected orders to the second and third quarters due to permitting timing. Accordingly, our plans have moderated production rates and reduced staffing levels in line with the timing of these incoming orders. As a result, we anticipate a sequential decline in first quarter revenue in the mid single digit range. Mid-term, strong end consumer demand for affordable housing, positive REIT channel outlook, and stable retail placements combined with the near finalization of retail destocking support our confidence in continuing to invest in ramping up our plants in Decatur, Indiana, Bartow, Florida, and Pembroke, North Carolina. This additional capacity will help us serve the upcoming needs from the impacts of Hurricane Ian and the builder developer channel, which is starting to sprout as our pipeline has been expanding rapidly. We continue to drive digital transformation in home building and have made great progress on this journey in fiscal 2023. We made strides in executing our digital product development plan and are making the journey of personalizing a home simpler and more transparent to end consumers. We have seen excellent traction with the consumer since launching our digital tools and home configurator experience. Our social media presence has grown to 875,000 followers, and we have passed over a quarter of a million vetted leads onto our retail partners. Our lead generation platform continues to scale and is up 40% sequentially in April from the month of March. While it will take time to continue to develop and refine these new capabilities for our customers, the initial momentum we have seen gives us the confidence to continue to expand our investment in our digital strategy. It allows us a tighter integration with both the end consumer and our channel partners. The tighter integration will allow us to better utilize our future production automation investments. We will have completed the design and order of our next phase of automation components and await the delivery, installation, and optimization of that equipment. As we do so, we are digitizing the elements of our engineering for automation readiness and advancing the material handling and plant configuration for the process changes that automation will drive. These long-term investments into digital will not only be a better experience for the end consumer, but will drive greater efficiency in our operations and make us the preferred channel partner as we drive more engaged home buyers to our customers. I will now turn the call over to Lori to discuss our quarterly financials in more detail.

Thanks, Mark, and good morning, everyone. I'll 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 near-term expectations. During the fourth quarter, net sales decreased 23% to $492 million compared to the same quarter last year. U.S. factory-built housing revenue decreased 21% quarter over quarter, which was driven by a decrease in home sales volume partially offset by an increase in average selling price per home. We sold 4,900 homes in the U.S. during the quarter, compared to 6,580 in the prior year period. U.S. home volume during the quarter was supported by additional retail and manufacturing capacity resulting from the acquisitions earlier this year, as well as the opening of our Pembroke, North Carolina facility this quarter. However, volumes were down year-over-year due to reduced production schedules at plants located in certain markets where demand softened or retailer inventory destocking. The average selling price per U.S. home sold increased by 6% to $92,700 due to product mix and year-over-year price increases on our core products to offset material, labor, and transportation inflation. On a sequential basis, revenue in the U.S. factory built segment decreased 16% in the fourth quarter compared to the third quarter of fiscal 2023. The decrease was due to a 15% decline in the number of homes sold and a 2% decrease in average selling price per home. In the current environment, we continue to see a decrease in our core product ASPs sequentially due to a shift in product mix to smaller homes and a reduction in our material surcharges on a per-home basis. As mentioned earlier, some markets experienced softening demand because of retailer destocking during the quarter, resulting in reduced production, which caused our capacity utilization levels to decrease to 59% during the quarter compared to 66% in the prior quarter. Capacity utilization was negatively impacted by the newly opened Pembroke North Carolina facility as well. Canadian revenue decreased 37% to $29 million compared to the fourth quarter last year, driven by a 39% decline in the number of homes sold, partially offset by an increase in the average selling price per home. The average home selling price in Canada increased 2% to $116,600 and was driven by previously enacted price increases in response to inflation. The decline in volume was caused by softening demand. Consolidated growth profit decreased 26% to $141 million in the fourth quarter, and gross margins contracted by 120 basis points versus the prior year quarter, as lower sales volume was partially offset by higher average selling prices. Our U.S. housing segment gross margins were 28.4% of segment net sales, down 120 basis points from the fourth quarter last year, primarily due to the decrease in volume and a mixed shift to smaller, less optioned homes. SG&A in the fourth quarter decreased to $72 million from $75 million in the same period last year due to lower incentive compensation expense and reduced sales activity, partially offset by additional SG&A costs from plant startups and acquisitions closed earlier this year. Net income for the fourth quarter decreased 33% to $58 million or $1 per diluted share compared to net income of $87 million or earnings of $1.51 per diluted share during the same period last year. The decrease in EPS was driven by the decline in sales and reduced operating leverage on lower volume. The company's effective tax rate for the quarter was 24.5% versus an effective tax rate of 24.8% for the year-ago period. The decrease in the effective tax rate was primarily due to lower state tax expense and results of foreign operations. EBITDA for the quarter was $76 million compared to $121 million in the prior year period. The EBITDA margin normalized to 15.5% compared to 19.0% in the prior year period. The structural improvements in our business over the last few years have strengthened our operational capabilities, leading to increased profitability. These improvements also enhance our ability to navigate periods of economic uncertainty while continuing to service our customers protect our margin profile, and generate strong free cash flow. As we move further into fiscal 2024, we reiterate our expectations of margins landing near fiscal 2022 levels as we face headwinds to our product mix with consumers moving to smaller homes with less options to offset inflation and interest rate increases and to maintain more affordable monthly payments. In addition, we continue to expect some margin compression from the ramp of three new manufacturing facilities in North Carolina, Indiana, and Florida. We are closely monitoring fixed SG&A spend and have identified several levers to pull if order volume does not continue its recent trend upward. As of April 1, 2023, we had $747 million of cash and cash equivalents and long-term borrowings of $12 million with no maturities until 2029. We generated $52 million of operating cash flows for the quarter compared to $60 million for the prior year period. The decrease in operating cash flows is primarily due to the decrease in net income partially offset by favorable net working capital changes versus the prior year fourth quarter. We remain focused on executing on our operational initiatives and given our favorable liquidity position, plan to utilize our cash to reinvest in the business and for opportunities that support strategic long-term growth. I'll now turn the call back to Mark for some closing remarks.