Cavco Industries, Inc. (NASDAQ:CVCO) Q1 2021 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 01:00 pm ET

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Cavco Industries, Inc. (NASDAQ:CVCO) Q1 2021 Earnings Conference Call - Final Transcript

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Presentation
Executive
William C. Boor

taking time with us today. It would be great to have a simple, straightforward summation of the market and operations this quarter and I'm sure you all understand that it just wasn't that kind of quarter. Any general statement about the quarter would fail to capture the fluidity of both our market environment and our operations. Having said that, and considering the disruption and challenges over the past months, we're proud to report on what we feel is a very strong quarter for Cavco.

Of course, the quarter began as we are very quickly approaching the initial peak of disruption. Local authorities were putting directives in place and we are working hard simply to understand whether we were considered an essential service and therefore even had the option to operate. For our office-based operations, we are quickly moving to a work-from-home approach. We covered much of that early part of the quarter during our year-end comments in May when we explained that we quickly resolved to only operate if we could do so safely, meaning while adhering to the health authority guidelines.

From the beginning, we have been fully committed to safely operate for our employees, for independent dealers that rely on us and for the home buyers. In those early April days, it wasn't clear that there would even be any orders, but if there were, we wanted to be there to provide homes because we believe what we do, produce, sell, fund and ensure people's homes is very essential work. Again, we were unsure whether there would be sufficient demand to operate and as has been communicated previously, orders did initially drop by approximately 30% in April. It's been really remarkable over the past months as how strongly the demand bounced back and eventually exceeded pre-COVID and even year-over-year levels.

The general housing recovery has been widely reported and is seen in the June seasonally adjusted annual rate of new home sales, which was the highest since 2007 and up almost 7% year-over-year. It's also seen in our orders which at quarter end were above last year's levels. So rather than the concerns at the beginning of April that orders would drop and stay down, we're now managing the opposite dynamic where our manufacturing operations have been unable to keep pace with demand and backlogs are increasing at both where we would ideally like them to be.

Manufacturing continues to be a day-to-day dynamic. All of our plants have had challenges with absenteeism, the lack of job applicants and supply disruptions. Just as the pandemic hotspots have moved and changed, the environment and our plants evolves and plants that struggled one week stabilized the next and vice versa.

Standing back from that detail, we ended the quarter operating at about 70% utilization compared to approximately 80% a year ago. I want to pause and take a moment to really recognize the commitment and the fortitude of our production coworkers who have been showing up every day, despite being