Cavco Industries Q4 2025 Earnings Call Transcript

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May 23, 2025
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Operator

Good day, and thank you for standing by. Welcome to the Cabco Industries Fourth Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mark Bustler, Corporate Controller and Investor Relations. Please go ahead.

Mark Fusler
Mark Fusler
Corporate Controller and Investor Relations at Cavco Industries

Good day, and thank you for joining us for Cavco Industries fourth quarter and fiscal year twenty twenty five earnings conference call. During this call, you'll be hearing from Bill Boor, President and Chief Executive Officer Alison Aidan, Executive Vice President and Chief Financial Officer and Paul Bigby, Chief Accounting Officer. Before we begin, we'd like to remind you that comments made during this conference call by management may contain forward looking statements and non GAAP financial measures. Forward looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are expectations or assumptions about CABCO'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 credit conditions.

Mark Fusler
Mark Fusler
Corporate Controller and Investor Relations at Cavco Industries

All forward looking statements involve risks and uncertainties, which could affect Cavco'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 Cavco. For a discussion of material risks and the important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. The appendix to our press release also contains reconciliations of our non GAAP financial metrics to the most comparable GAAP measure. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, Friday, 05/23/2025. CABCO 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.

Mark Fusler
Mark Fusler
Corporate Controller and Investor Relations at Cavco Industries

Now, I'd like to turn the call over to Bill Bohr, President and Chief Executive Officer. Bill?

William Boor
William Boor
President & CEO at Cavco Industries

Thanks, Mark. Welcome and thank you for joining us today to review our fourth quarter results. Seasonally, the fourth quarter ushers in the spring selling season. In our last call, we talked about the steady increase in orders over several quarters through calendar twenty twenty four and how that has enabled us to increase production rates where our plants had supporting backlogs. The quarter to quarter trend of increasing orders continued in q four boosted by a pickup in March.

William Boor
William Boor
President & CEO at Cavco Industries

This was after unusually challenging weather in February slowed installations in the field and caused some unplanned downtime in several plants. Harsh February weather is obviously expected in northern states, but the weather across the South was unexpected. Specifically, we lost twenty four operating days across our system. The good news is that weather backs up installations and shipments, but it doesn't negate them. Again, in March, we saw the expected spring pickup to close out a solid quarter.

William Boor
William Boor
President & CEO at Cavco Industries

More generally, a lot of economic uncertainty entered the mix in Q4. However, March's uptick indicates that our buyers are out there trying to purchase new homes. Overall, our unit shipments were up almost 29% year over year. The backlog was down sequentially. To dissect that a bit, backlogs were expected to be down in January.

William Boor
William Boor
President & CEO at Cavco Industries

They continued to decline in February for the reasons outlined earlier, and then we saw a healthy increase in March. While there is a range in the individual plants, across the system, we have five to seven weeks of backlog. Market activity across the retail channels is generally positive, and our plants are either holding production levels or looking to increase depending on their specific market conditions. Earlier in Q4, we announced that we renamed our manufacturing plants to the Cavco name. This is part of a rebranding of our homes under product lines that tie directly to the characteristics of the homes rather than the legacy brands of the factories.

William Boor
William Boor
President & CEO at Cavco Industries

Our new and cohesive branding approach will make it easier for homebuyers to quickly narrow their home search to the product lines that match their needs. Clearly, this change will better leverage all of the work we've done in digital marketing over the past few years and will benefit our dealers with improved leads from cavcohomes.com. Our plant investments and marketing improvements have Cavco ready to continue ramping shipments through both industry growth and market share gains. Our steady strategic investment through the downturn in both acquisitions and plan improvements has meaningfully grown our peak to peak capacity. This consistent investment has been enabled by strong cash generation and our debt free balance sheet.

William Boor
William Boor
President & CEO at Cavco Industries

While we've continued investing strategically, we've also continued our four plus year buyback program. This quarter, we repurchased about $33,000,000 of stock. Cumulatively, since the initial repurchase authorization in fiscal twenty twenty one, we bought back 15.5 percent of our outstanding shares. We continue to be confident that we can repurchase shares without hindering any strategic opportunities. With that, I'd like to hand it over to Allison to provide more details around the fourth quarter results.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Thank you, Bill. Net revenue for the fourth fiscal quarter of twenty twenty five was $508,400,000 up $88,200,000 or 21% compared to $420,100,000 during the prior year. Sequentially, net revenue decreased 13,700,000.0 driven by a decline in average revenue per homes sold. Within the factory built housing segment, net revenue was $487,900,000 up $89,400,000 or 22.4% from $398,500,000 in the prior year quarter. The increase was primarily due to a 28.5% increase in homes sold, partially offset by a 4.7% decline in average revenue per home sold.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

The decrease in average revenue per home was primarily due to a lower proportion of homes sold through our company owned stores, product pricing decreases and more single wides in the mix. Factor utilization for Q4 of twenty twenty five was approximately between 70% to 75% when considering all available production days. Utilization was approximately 60% in Q4 of the prior year. Financial Services segment net revenue was $20,500,000 down $1,100,000 or 5.2% from $21,600,000 in the prior year. This decline was due to fewer loan sales and fewer insurance policies in force, partially offset by higher insurgency premium rates.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Consolidated gross margin in the fourth quarter as a percentage of net revenue was 22.8%, down 80 basis points from 23.6% in the same period last year. In the factory built housing segment, the gross profit decreased 10 basis points to 22.3% in Q4 of twenty twenty five versus 22.4% in Q4 of twenty twenty four, driven by lower average selling prices. Financial services gross margin as a percentage of revenue decreased to 36.8% in Q4 of twenty twenty five from 45% in Q4 of twenty twenty four, primarily due to reduced revenue from loan sales. Selling, general and administrative expenses in the fourth quarter of twenty twenty five were $77,500,000 or 15.2% of net revenue compared to $61,400,000 or 14.6% of net revenue during the same quarter last year. The increase in SG and A was primarily due to a $10,000,000 write off of intangible trade name values due to our brand realignment.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Additionally, compensation increased as a result of higher bonuses and commission expenses on higher earnings compared to the prior year period. Pretax profit was flat at $42,900,000 this quarter compared to the prior year quarter. The effective income tax rate was 15.4% for the fourth quarter compared to 21% in the same period last year. The decrease in the effective tax rate was due to higher ENERGY STAR tax credits and greater tax benefits from stock option exercises. Net income was $36,300,000 compared to net income of $33,900,000 in the same quarter of the prior year, and diluted earnings per share this quarter was $4.47 versus $4.03 in last year's fourth quarter.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Adjusting for expenses associated with our brand realignment, adjusted net income was 43,900,000.0 compared to $33,900,000 with adjusted diluted EPS of $5.4 per share versus $4.03 per share in last year's fourth quarter. During the quarter, we also repurchased 33,200,000.0 of common shares, and during the full year, we repurchased 150,000,000 of shares. Also, the Board of Directors recently extended the authorization by an additional $150,000,000 reflecting confidence in our strong cash generation, leaving approximately $228,000,000 under authorization for future share repurchases. Now I'll turn it over to Paul to discuss the balance sheet.

Paul Bigbee
Paul Bigbee
Chief Accounting Officer at Cavco Industries

Thanks, Allison. In the quarter, we had a decrease in cash and restricted cash of 3,300,000.0 bringing our balance to 375,300,000.0. Cash provided by operating activities was 38,700,000.0, partially impacted by the increase of current liabilities and accounts receivable. Cash used in investing activities was $10,100,000 and cash used in financing activities was $31,900,000 primarily due to share repurchases. Comparing the 03/29/2025 balance sheet to 03/30/2024, increase in accounts receivable is related to organic growth in the factory built housing segment.

Paul Bigbee
Paul Bigbee
Chief Accounting Officer at Cavco Industries

Unit shipments are up 28.5% in the fourth quarter of fiscal twenty twenty five compared to a year ago. The increase in short term consumer loans receivable is due to higher origination of loans held for sale in excess of actual sales. Inventories increased from higher finished goods inventory at company owned retail lots due to increased demand, as well as higher raw material purchases to support increased production. Goodwill and intangibles decreased from the $10,000,000 write off of intangible trade name values. Current liabilities are up from increased compensation and bonus accruals on higher earnings, increased insurance loss reserves, and higher customer deposits.

Paul Bigbee
Paul Bigbee
Chief Accounting Officer at Cavco Industries

Finally, treasury stock increased 150,000,000 due to buybacks executed in fiscal year twenty twenty five. With that, I'll turn

Paul Bigbee
Paul Bigbee
Chief Accounting Officer at Cavco Industries

it back to Bill.

William Boor
William Boor
President & CEO at Cavco Industries

Okay. Thank you, Paul. Liz, let's go ahead and open up the line for questions.

Operator

Our first question comes from Daniel Moore with CJS Securities.

Justin Ages
Director - Equity Research at CJS Securities

Hi, good morning. This is Justin on for Dan. Can you talk about your expectations for production rates for fiscal first quarter relative to the fourth quarter? And then what can you tell us about your discussions with customers in both retail and community markets and the cadence of order rates in April and thus far in May?

William Boor
William Boor
President & CEO at Cavco Industries

Yes. We don't usually get too far into the current quarter. But I know this when we report on the fourth quarter, quite a bit of time has passed since the quarter end. So I understand the question. The production rate question first, this quarter, we were kind of consistent with the previous quarter, pretty flat in Q4 with Q3.

William Boor
William Boor
President & CEO at Cavco Industries

Like I said, the quarter started off kind of expectedly with January. And we we knew that we were entering into the year at a higher production rate than the order rates. You know, we talked about that last quarter. That was a decision we made to kind of ramp up in anticipation of the spring selling season. And March picked up and what I'd say about the current quarter that we're in now, first quarter of the fiscal year is that, you know, April has pretty much been consistent with that March positive trend as far as orders and and a little bit of backlog growth.

William Boor
William Boor
President & CEO at Cavco Industries

So I can give you that much and say that from a production perspective, when we talk to all of our plants, you know, we have a range of backlogs in the plants and there are some plants that don't have the backlog really to increase production rate at the moment. But you really could only put our plants in two categories. Those that are holding at this level, anticipating and hoping that they'll get a little backlog and be able to start ramping up. And a good number of our plants that are kinda talking about, hey, our next move will be up in production. So we really don't have any that seem to be, looking at decreasing production rates for any any reason.

William Boor
William Boor
President & CEO at Cavco Industries

So overall, the bias across our plants is for increasing production rates. And and that'll be dependent on what the market gives us for sure. You also asked to think about the different channels. Retail, you know, the dealers have been pretty solid for quite a while now and that continues. And communities almost hate to bring it up because it was such a long discussion.

William Boor
William Boor
President & CEO at Cavco Industries

But with communities for a long time, we were kinda held back on order rates as an industry because of inventory challenges and a little bit of hesitance with the market. We've seen them continue to, I guess, build back up. They got past the inventory. And now I would say the general feeling is they've moved pretty much back toward their proportionate share of order rates. So we feel good about that too.

William Boor
William Boor
President & CEO at Cavco Industries

That's been evolving over quite a bit of time. So really, I think, and when we talk communities, always point out we're talking about both kind of the land lease and rental communities as well as the builder the builder channel. So lumping all those together, they're kinda returning back to their proportionate share of orders, which is a real positive.

Justin Ages
Director - Equity Research at CJS Securities

All right, that's helpful. And then one more if I could. Should we think about gross margin and operating margins in Q1 and over the next quarters relative to the Q4 results?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Yes. Thank you. While we saw some downward impact from, reduced average selling prices of our homes, we saw, lower input costs and reduced cost on service with our factory built gross margins declined only really 10 basis points year over year to 22.3. And what I would say is that this demonstrates a couple of elements that we're gonna that will determine our future margins in the factory built housing versus pricing. And we are seeing regions where pricing is becoming more apparent, pricing pressures are a little bit more apparent and starting to see some competition in pricing in regions.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

The second really component to look to will be cost. The movement in commodities, as you know, can be volatile and hard to predict. It's difficult to say, but we typically see increases this time of year as builders and wholesalers order for the spring building season. And while prices are trending flat at the moment, there is a possibility of another surge soon, and we'll also have to see how tariffs play through. I'd say last point is on the consolidated margins.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Our consolidated margins also depends on the activity in our financial services segment, most notably in our insurance division. Given the recent activity in that division, while we're making strategic structural changes to limit losses, large storm activity can result in increased claims that could impact margins in the future. Does that help?

Justin Ages
Director - Equity Research at CJS Securities

Yeah. Very helpful. Appreciate you taking the questions. Thank you.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Thank you.

William Boor
William Boor
President & CEO at Cavco Industries

Thank you.

Operator

Our

Operator

next question comes from the line of Greg Palm with Craig Hallum.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yes. Good morning. Thanks. I wanted to just start with a little bit on what you saw in February. You mentioned some lost production days.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

What states or what regions exactly did did you see that? And just to be clear, it was it was the month of February. Was that right?

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. February was really unusual. I mean, it seems like long time ago, but February, the weather and it really was kind of, I would say across the Sunbelt, but to be more precise, I think it really Texas got hit with a lot of very unusual weather and the Southeast states. So we did lose, I mean, really there's a couple of effects that I talked about briefly in the opening comments. The, in the field setups really kind of stopped in a period of time in some of those states where they should have been fine from a weather perspective historically.

William Boor
William Boor
President & CEO at Cavco Industries

And then, we did lose some time in some of our plants across the Southeast in Texas. I think I commented that there were about twenty four down days across our our our plants due to just February's weather. And that's pretty unusual. So at that point, you know, we were we're always kinda anxious, all of us. I know you guys as well as us.

William Boor
William Boor
President & CEO at Cavco Industries

We're always kinda anxious to see how spring dates up for us. And February made us wait a little bit to really get an indication of that. Does that help, Greg?

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yes. And just to be clear, did that or I mean, I assume that impacted the margin somewhat, but any way to quantify exactly how sort of those lost production days might have impacted factory margins?

William Boor
William Boor
President & CEO at Cavco Industries

Yeah, I think you're directionally up, take a stab at it, then Allison, maybe you can correct or fill in anything. I think directionally you're right. We've talked in the past while we try to keep our, you know, we focus as an organization on trying to keep our costs as variable as possible. Even above gross margin, there is a component of sticking costs. And so anytime you kinda lose a little bit of volume directionally, there's a downward pressure on gross margin.

William Boor
William Boor
President & CEO at Cavco Industries

My sense, but happy if Allison feels differently. My sense is it probably wasn't a huge impact on our gross margin that we reported, but directionally, it would have been a downward pressure. Is that fair, Allison?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Yeah. Well, I think that's balanced, Bill.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

And I I guess maybe looking ahead, you know, as it relates to the kind of the the rebrand, maybe let's unpack or dig into that a little bit more in in in kind of the, you know, number one, the rationale and, you know, maybe the feedback so far and what you really hope to get out of that.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. I appreciate that question because it's so hard to give this justice and we try to be pretty concise in our prepared remarks. Just to give a little bit of history, we've got 31 plants. And and for the most part, those plants have come through a number of acquisitions over the years, really dating back to the Fleetwood acquisition, which was I think 02/2009. What we've done in the past is if we had a plant that came through us to us through Fleetwood, they were, they continue to be called the Fleetwood plant in the market.

William Boor
William Boor
President & CEO at Cavco Industries

And as a result of that, their products tended to be branded as Fleetwood products. And it didn't matter what they were making. So if they were making a lower priced product or even if they were making, you know, a higher price, no matter what the characteristics of the product was that was coming out of that plant, people would refer to it as a Fleetwood helm. And, you know, that was fine for a while. But we're getting to the point now where with the investments we've made in online marketing and the opportunity we see to do more national marketing or programs that are national in scope, that started to not work well, you know, or we saw the opportunity.

William Boor
William Boor
President & CEO at Cavco Industries

And so what we've really done is we've said, okay, all of our plants are Kathco plants. And whatever products they make, we're really not changing the physical product a given plant makes, but no longer is the name of that product tied to the name of that plant. So now we'll have product lines, which are categories of homes that we make. And they'll be named, you know, with that short list of products, you know, think about, you know, maybe four product lines across the nation. And those product those product line names will tie to characteristics of the home.

William Boor
William Boor
President & CEO at Cavco Industries

So if it's a high end customizable, you know, higher priced product, full tape and texture that will fit into a given product line rather than just having the plant's name associated with it. If it's a lower priced BOG vinyl and gypsum product with less customization, that'll be in a different product line. So you can imagine if you're a customer starting your search online, you're gonna be looking at trying to figure out, okay, I think I'm in this category of homes and we're gonna be able to more directly help you say, okay, you're looking for this product line and here are some independent or company dealers that can help you after you're ready to go talk to a dealer. So it's really gonna help improve the leads that go to those dealers and it's gonna help the customer much quickly, much more quickly get their search narrowed down to homes that really fit their needs. So this is a big deal.

William Boor
William Boor
President & CEO at Cavco Industries

It's gonna allow us to, do some interesting things. We've recently, introduced some national products that are gonna be available in all of our markets because plants in every market can produce those. The, ability to do marketing campaigns much more efficiently on kafcohomes.com is greatly improved. So we really think this is gonna add a lot of clarity for folks shopping for our homes. It might've been a little long winded there, Greg, instead of too concise in the opening statements.

William Boor
William Boor
President & CEO at Cavco Industries

Does that do a good job of explaining it?

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yeah. Makes sense. I will, get back in queue. Thanks.

William Boor
William Boor
President & CEO at Cavco Industries

Thanks.

Operator

Our next question comes from the line of Jay McCanless with Wedbush.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Hey, good morning. Thanks for taking my questions. So digging down on the tariffs, I know during the supply chain days, tankless water heaters were an issue, some other things like that. I guess if you think about your cost of goods sold bucket, your input bucket, is there anything in there that we need to really be concerned about from a tariff perspective? I know I know Rennie has a plant in Georgia now, so that should, I think, at least protect them partially.

Jay McCanless
SVP - Equity Research at Wedbush Securities

But are there any other things in the COGS bucket we need to be keeping an eye on?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Jay, if I could, let me just share some key points, Philip, please jump in where you want to add your comments. I think there's really three key points as we think about tariffs and how they could impact our business. The first is that many products we use are exempted really from any recent tariffs, and that includes US lumber and steel. Second, we've been successful managing tariffs on Canadian lumber and have been in place for several years now. Although a few months ago, there was some discussion around potentially increasing this tariff rate associated with Canadian lumber, those discussions have now been set aside, so we don't see any incremental impact there.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Lastly, important to note that we do purchase many lighting, electrical and plumbing components, windows and doors that are sourced from China, therefore, we do expect to see some impact that could reach between, call it, 5% to 8% of our material costs. And just as a reminder, the material costs are roughly about half of the cost of goods sold. Does that help?

Jay McCanless
SVP - Equity Research at Wedbush Securities

Yeah. So five to five to 8% on basically 50% of the COGS bucket. Is that the way to think about it, Allison?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Yeah. That'd be the way to think about it at this point, Jay.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Okay. And I'm sorry, Bill,

Jay McCanless
SVP - Equity Research at Wedbush Securities

I cut you off.

William Boor
William Boor
President & CEO at Cavco Industries

No. No. It's good to clarify that. I I was gonna say your question.

William Boor
William Boor
President & CEO at Cavco Industries

I'm not sure I'm adding a lot of value, but your question really kinda has two components, right? The cost increase, which Allison covered. And also, are we worried about just supply, just the access to the materials. So far, I don't believe we've gotten to the point where we feel like our ability to get the materials we need for a home has been really challenged. I guess the scenario where that might take place is if site building, remodel, repair, remodel and our business kind of takes off.

William Boor
William Boor
President & CEO at Cavco Industries

But right now, we'll keep our eye on it, but I don't think we have a high degree of concern about just being able to access the materials we need.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Okay, that's great. Thank you, Bill. And I also also, said my second question, could you talk about where chattel rates are now and what you guys are seeing on credit availability for consumers?

Mark Fusler
Mark Fusler
Corporate Controller and Investor Relations at Cavco Industries

Yeah, I can take the interest rate. We've seen a little bit of a spread start happening with lenders. So right now, the range is about 8% to 9%, but haven't really seen any impact to availability.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Good to hear. And then more of a broad question on the price competition you talked about, Allison, in the prepared remarks. Is it price competition across the board? Or is it more focused on lower priced homes, single wides? Any more detail you can give us on that price competition comment would be helpful.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. I can jump in there, Allison. I think Thank you. Yeah. I wouldn't say in general, we're seeing a huge pickup in price competition.

William Boor
William Boor
President & CEO at Cavco Industries

There there are parts of the country and the the one that has stood out for quite a while is Florida where, the market's just been down. And it's kinda interesting because you look at the Southeast and speaking over the last, you know, really one to two years, the Southeast has been fairly strong. But then Florida stands out as a very challenging market and it continues to be so. So it's pretty isolated where we've seen any meaningful price competition. And generally, I'd say we haven't across the country.

William Boor
William Boor
President & CEO at Cavco Industries

Your comment or your question really hit on an interesting point. We have seen kind of particularly this quarter, we've seen, kind of the product for product pricing on single wides had a little more pressure than than multi section. So it seems like it is the low end, one that's picking up because we've seen a a mix shift towards single wides. But also that's where we've seen a little bit relatively a little bit more leakage and product for product pricing.

Jay McCanless
SVP - Equity Research at Wedbush Securities

That's good enough. So more competitive on single section homes.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. And we'll keep our eye on that, Jake, because I you know, sometimes, and I think we all do this. I know we do it internally. Sometimes we're, looking with the magnifying glasses, some of these small number changes. We we've commented before if you look back at the cycle that we've been coming out of, you know, this industry pricing has held up pretty well.

William Boor
William Boor
President & CEO at Cavco Industries

And, for a number of quarters, we've kinda seen the, true price, you know, true wholesale, same product, what's its price quarter to quarter. It's been a very slow, small decline.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Great. Thank you, Bill.

Jay McCanless
SVP - Equity Research at Wedbush Securities

And I think that yep.

Jay McCanless
SVP - Equity Research at Wedbush Securities

That's it for now. I'll jump

Jay McCanless
SVP - Equity Research at Wedbush Securities

back in queue. Thank you.

William Boor
William Boor
President & CEO at Cavco Industries

Thanks, Jay.

Operator

Our next question comes from Jesse Letterman with Zelman and Associates.

Jesse Lederman
Associate Director at Zelman & Associates

Hey, thanks for taking my question. Bill, I'd love for you to clarify. You made a comment about April being pretty consistent with March as far as orders. I just want to clarify, are you saying that like from an absolute perspective, April is consistent with March? Or are you saying that the momentum you saw in April in March rather has continued into April?

Jesse Lederman
Associate Director at Zelman & Associates

Because I would have expected as you continue into the spring selling season and go from March to April that you would see some lift in activity. So I'm just trying to clarify what you meant earlier.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. Without parsing it too much, I wasn't trying to imply that it was flat. I was saying that March was an uptick, and April has kind of seasonally been consist consistent with that uptick. We didn't see a reverse course on the trend.

Jesse Lederman
Associate Director at Zelman & Associates

Got it. So April, in other words, is following normal seasonality, you would say. Is that right?

William Boor
William Boor
President & CEO at Cavco Industries

I think generally I think generally, that's fair. Yeah. I'm not trying to be evasive, but, again, seasonality is kind of a interesting thing to track to because one year, the seasonality looks a little different than the next, but we feel good about April kinda continuing the positive, momentum that we saw in March.

Jesse Lederman
Associate Director at Zelman & Associates

Okay. Great. Yeah. But even still, it sounds like pricing is flattish, maybe down incrementally on an apples to apples basis just because of pressure in some region like Florida specifically. Would you normally see an increase in kind of the the spring months, as you enter the spring selling season, which is typically stronger from a demand perspective, or or do

William Boor
William Boor
President & CEO at Cavco Industries

you not normally have seasonality and pricing from that from that standpoint? I don't think we've ever really noted seasonality and pricing because the industry kinda knows what's coming. And so, if if orders are hard to come by, you might see some price pressure. And if orders are flowing pretty good to everyone, you might see it tick up, but it doesn't seem this is kinda my sense because it's not something I've looked at that closely, but we don't generally go into a seasonally stronger season and expect to see price jump up, for example. I think it's pretty, it's not pricing does not seem to be seasonal.

William Boor
William Boor
President & CEO at Cavco Industries

Okay. I think, you know, the pricing is kinda interesting because we've had, as I said, we've had a number of quarters now. I probably should keep track of the number where we just saw this nice day incremental growth in orders quarter to quarter. And yet we've continued to see that very slow same product price leakage, I call it, because it's not really dropping. At some point, if the market continues to strengthen, that's gonna flatten out and maybe increase, as we would normally see.

William Boor
William Boor
President & CEO at Cavco Industries

But there's always the economic, you know, macroeconomic risks and interest rates and all those things. And if if it reverses the trend that we're kinda seeing in March, April and and volume goes down, then, you know, you could see continued leakage or even acceleration. We know it's volatile. You know, it's a cyclical industry, but it's really a question of of whether the orders continue to strengthen. And if they do, I think we'll see that pricing at least steady and start to increase.

Jesse Lederman
Associate Director at Zelman & Associates

Fair enough. Yeah. That makes sense. And then just to clarify, the the fiscal 4Q margin did not include yet any impact from tariffs. Is that correct?

Jesse Lederman
Associate Director at Zelman & Associates

And if so, when do you expect to see that flow through? In other words, if pricing is relatively stable and then you get kind of a 2% to 3% increase in the overall cost of the home, presumably margin could come under pressure. Can you talk a little bit more about maybe the timing currently of if tariffs were in that 4Q number, and if not, when that may expect to come through?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

So tariffs really didn't have an impact in Q4. And consistent with the way that we talked about materials working their way through our COGS. From the time that we see the pricing in commodities, the time that it's actually within the cost of goods is about sixty to ninety days. So as tariffs just kind of now begin to take effect, it'd probably be another sixty days. So if you put those elements together, suggest maybe some limited impact in the end of Q1, and then maybe a little bit heavier impact in Q2.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

But again, I think we're very keenly focused on a tight level of a tight number of products or input costs that it will affect for us. We've been very successful in managing supply chain shortages from the past, we stay keenly aware of and very close to our vendor relationships. We believe that we're going to be able to be very proactive in the management of the impacts of the tariffs in the quarters to come.

Jesse Lederman
Associate Director at Zelman & Associates

Awesome. Thanks, Allison. And last one for me. Bill, you did a really great job at the House subcommittee hearing last week. It'd be great to just get your thoughts on, you know, what you think the the key takeaway was from the hearing.

Jesse Lederman
Associate Director at Zelman & Associates

And, yeah, if if you could give some color on that, that'd be great. Thanks so much.

William Boor
William Boor
President & CEO at Cavco Industries

Appreciate your comments on it. It's you know, things happen slowly in that town. And every opportunity is an opportunity for politics to creep in. And I think we saw that even on a discussion about affordable housing, which clearly is something, you know, both sides of the aisle agree about trying to improve the supply. I think it was good that the discussion focused on supply.

William Boor
William Boor
President & CEO at Cavco Industries

We've talked in the past that if the government steps in and tries to, put more money in people's hands to buy homes, to me that's just inflationary on the price of the homes. It doesn't really help the true root cause problem, which is a supply problem. And I think the conversation did focus on supply, which was encouraging. There are two, two house bills that are in place that I think would be important. I'm not gonna go too long on this because I know it's, you know, I have a I have a risk of doing that.

William Boor
William Boor
President & CEO at Cavco Industries

One of them is to clarify HUD is the sole regulator of our industry. And, some of you might remember that we've been working through a situation with the Department of Energy where they've proposed rules on energy efficiency that really weren't, well tuned to our processes. And that's created, you know, some dysfunction in a regulatory environment. And so getting at the HUD clarity that HUD is the sole regulator, I think is a big deal. And I do believe there's a good chance that that'll happen legislatively.

William Boor
William Boor
President & CEO at Cavco Industries

The other is interesting too, and it's removing the chassis from the definition of a manufactured house under the HUD code. And the way I think about this is pretty simple. We would still make a lot of homes, that have the permanent chassis affixed to the home, But just removing that from the definition of a manufactured home, just opens up innovation opportunities for our industry. It opens up the possibility of more, more easily being able to do multi story homes. A lot of the innovation that could take place, it opens up the possibility of more easily setting a ground level or at or near ground level and not having the elevation that's required by the chassis in certain ways that we set up homes.

William Boor
William Boor
President & CEO at Cavco Industries

And if you think about those kinds of opportunities, you start to see the opportunity for product innovation for urban and suburban markets. And that opens up a whole new market opportunity for this industry. So those things will not, I always will caution, like, let's say take the chassis removal that won't open up opportunities overnight. There's a lot of work that has to happen at the state level once the federal definition is improved. But all of these things are aimed toward, more supply of factory built housing, which is a supply the country needs at the lower end of the affordability discussion.

William Boor
William Boor
President & CEO at Cavco Industries

So appreciate the question. I'll try not to ramble on too much, but actions. Those are things that are really active right now in congress. And if we can kind of push them through, I think that's real good momentum for the industry.

Jesse Lederman
Associate Director at Zelman & Associates

Great to hear. Thanks so much again for all the color. Thanks, Jesse.

Operator

We have a follow-up question from Greg Palm with Craig Hallum.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yes, thanks. I guess just on the tariffs and whether that's on some of the inputs that you alluded to or even something like steel. I guess the question is, how are you and some of your peers acting? Like, are there surcharges that are being put in place in case? Or how would you expect to sort of counter if things actually get bad from here?

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. We I'll take take a shot at that. We've seen in some markets, different manufacturers, propose that they're going to increase price or add surcharges for the tariffs. And we've seen a lot of manufacturers, including us saying to our customers, hey, you know, this is happening. So we're not gonna try to be preemptive, but understand that our pricing is going to be, you know, it could be more volatile.

William Boor
William Boor
President & CEO at Cavco Industries

We could be week to week or we could put a price increase in because of tariffs. So our position has been more skewed toward that. I was just telling people in an open transparent way, just understand that if the tariffs do have a meaningful impact on our cost structure, that price could be affected. I don't know if that's helpful in the sense that people can't really plan for it, but we're just setting the stage to try to be very reactive to what the cost structure might be impacted. Now having said that, I've always talked that cost and price in our industry have over the years, become more independent in my mind.

William Boor
William Boor
President & CEO at Cavco Industries

So whether we can push through a cost increase in a given location is really a function more of the supply demand dynamics in that region. So, you know, I could envision if we see some meaningful impact of tariffs, there will be markets where we can increase price and kind of push it through and try to maintain our margins. But if we have other areas, you know, I mentioned Florida earlier, we've got other areas where the the demand is just not there, then the price will probably not be affected by the tariffs. So I hope that's not a non answer, but I think people are more in the mode of just being ready to be fluid with this whole situation. And we've seen more, with us and I think also with our competitors, we've seen more open discussion about, you know, the potential reality of this and be ready than we have seen a lot of preemptive moves.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yeah. I I guess what I was asking is, you know, whether you expect to pass it along or take the hit yourself. And and the way I understand it is it depends on the market. But for the most part, it it sounds like you're still focused on maintaining that margin to to some extent.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. I'm kinda I'm kinda a bit of a econ one zero one thinker on a lot of this stuff. And if if we have a market that demands really exceeding supply, then the market price of our homes is gonna go up really regardless of what's going on in the in the cost side. So, you know, I really do think of the pricing of our products being somewhat independent from the cost.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yes. Okay. And I guess just maybe a follow-up on just sort of the activity in March or April because I think what you're seeing is definitely quite a bit better call it, general housing. So any thoughts on whether that's a byproduct of the customer base, a byproduct of maybe the financing market and it not being as important to manufactured housing. I'm just curious if you've got any theories why demand is holding up at least better on a relative And

William Boor
William Boor
President & CEO at Cavco Industries

Greg, your question is really in comparison to the site builder dynamics?

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Correct. Yeah.

William Boor
William Boor
President & CEO at Cavco Industries

Yeah. Saying I'm gonna try to keep myself from being long winded because you guys are hitting on questions I can talk a lot about. I think it's been interesting and and, you know, I don't consider myself an expert on this, but I'll give you my view. The the site builders, actually got a a period of a boost when the mortgage lock in effect on people who already owned houses at 3% rates kept people kept, you know, previously owned homes or, you know, the, the previously owned home market, the inventory was really low. And so if people will needed a new home or needed a home, they were probably gonna be buying a new home because that's what was available for a while.

William Boor
William Boor
President & CEO at Cavco Industries

Now, if you look at the stats on the broader housing market, the average mortgage rate is starting to move up and we're starting to see more inventory of not new homes in the market. And so it seems to me like they got a period where their market opportunity was expanded by the lack of used homes on the market, and now they're getting kind of compressed back into a more historic proportion of home sales. And so you've seen, you know, I don't think it's really thought their market be seeing the growth opportunity kind of compressed down a little bit. We're not as subject to those dynamics. Our buyers, I think are completely not completely, but a large segment of our buyers are really about monthly price.

William Boor
William Boor
President & CEO at Cavco Industries

Many more historically, a larger proportion of all the manufactured home purchases are new manufactured homes. So it really is a different customer base and it's a different market dynamics. And I don't think we're as affected by the concept of how many, you know, how many days of inventory are there on the market for for home sales. So

William Boor
William Boor
President & CEO at Cavco Industries

I

William Boor
William Boor
President & CEO at Cavco Industries

don't know if that made sense, but I really think the dynamics are completely different and the site builders are growing a bit slower than we are right now because the previously owned homes are coming back on the market and inventory is rising.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Got it. Okay. Yeah. That's that's good color. Alright.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Thank you.

William Boor
William Boor
President & CEO at Cavco Industries

Alright. Thanks, Greg.

Operator

We have a question from Jay McCanless with Wedbush. Jay, you may be on mute.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Sorry about that, everyone. Thanks for taking my follow-up. Two questions for me. The the first one, since you talked so much about Florida, could you give us any sense of what Florida is for annual shipments for capital or percentage of annual revenue? Just so we have a a sense of of what's going on there.

William Boor
William Boor
President & CEO at Cavco Industries

And I'm not sure I have an actual number. I mean, we've got we've got two plants in Florida. So you can get a if you just do a ratio of two out of 31, I think that's at a very high level about rates for the production capacity we have down there. And certainly the market's not entirely gone. So those plants while they're running with pretty low backlogs and have been for quite a while, their production levels down, but obviously we haven't shut either one of those lines.

William Boor
William Boor
President & CEO at Cavco Industries

So, you know, overall, I don't think when you look at it on in comparison to the total company, I don't think it's a huge amount and it's been the case for quite a while.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Okay. That's good to know. And then specifically on OSB prices, we've seen those come down pretty dramatically. It seems like they keep going down every week. Do you guys expect that to be a tailwind on your first quarter, your second quarter gross margin, just given how much OSB you typically use in a home?

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

I think you're right. You know, we did we have seen prices in March that reflected a kind of a steady demand that's almost back to the lows that we saw in 2020. I'd just say, Jay, from a history and experience perspective, that picture can change pretty quickly. We do, going back to my earlier comment, we do typically see increases in builders and wholesaler orders in the spring building season. So I think this is just something a specific factor we'll have to stay close to.

Jay McCanless
SVP - Equity Research at Wedbush Securities

Okay. Great. Thanks. Appreciate it.

Operator

That concludes today's question and answer session. I'd like to turn the call back to Bill Bohr for closing remarks.

Mark Fusler
Mark Fusler
Corporate Controller and Investor Relations at Cavco Industries

Bill, I think you're on mute.

William Boor
William Boor
President & CEO at Cavco Industries

Oh, thanks. Thanks for the heads up. Sorry, folks. Thanks, Liz. In a cyclical industry like ours, clearly macroeconomic drivers can have a big impact on demand.

William Boor
William Boor
President & CEO at Cavco Industries

And we've talked about that a lot in the call. And so, you know, we're very focused on the key to success being making real time adjustments across our system. I think our results continue to reflect both a positive view about the general direction of the industry's volume opportunity, but at the same time, an organization that stays very nimble. And we're able to react accordingly to whatever the market gives us. We feel very well positioned to react to market shifts and to continue to get solid results for our shareholders.

William Boor
William Boor
President & CEO at Cavco Industries

I want to thank you for joining us today and for your interest in Cavco, and we look forward to keeping you updated on our progress. Thank you.

Allison Aden
Allison Aden
EVP and CFO at Cavco Industries

Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Mark Fusler
      Mark Fusler
      Corporate Controller and Investor Relations
    • William Boor
      William Boor
      President & CEO
    • Allison Aden
      Allison Aden
      EVP and CFO
    • Paul Bigbee
      Paul Bigbee
      Chief Accounting Officer
Analysts
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Key Takeaways

  • Unit shipments rose nearly 29% year-over-year in Q4 despite weather-related delays, with backlogs at 5–7 weeks and plants positioned to further increase production.
  • Net revenue reached $508.4 million, up 21% year-over-year, and adjusted EPS was $5.40 versus $4.03 a year ago, driven by higher home sales volumes.
  • The company repurchased $33 million of stock in Q4—bringing total buybacks to 15.5% of shares since FY 2021—with $228 million of authorization remaining.
  • Consolidated gross margin fell 80 bps to 22.8%, factory-built margin dipped 10 bps, and SG&A rose due to a $10 million rebranding write-off and higher compensation costs.
  • Launched a new plant renaming and product line–based branding strategy to enhance digital marketing efforts and improve lead generation for dealers.
AI Generated. May Contain Errors.
Earnings Conference Call
Cavco Industries Q4 2025
00:00 / 00:00

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