Cavco Industries, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended March 30, 2024 (52 weeks); comparison is with fiscal 2023, ended April 1, 2023. This is an annual filing, not a standalone fourth-quarter report. Cavco manufactures factory-built homes and also provides consumer financing and manufactured-home insurance.
Financial performance
| Metric | FY2024 | FY2023 | Change |
|---|---|---|---|
| Net revenue | $1.795 billion | $2.143 billion | Down 16.2% |
| Gross profit / margin | $426.9 million / 23.8% | $554.9 million / 25.9% | Down $128.0 million / 2.1 percentage points |
| Operating income | $179.0 million | $296.6 million | Down 39.6% |
| Income before taxes | $199.2 million | $306.8 million | Down 35.1% |
| Net income attributable to Cavco shareholders | $157.8 million | $240.6 million | Down 34.4% |
| Diluted EPS | $18.37 | $26.95 | Down 31.8% |
| Cash from operations | $224.7 million | $255.7 million | Down $31.0 million |
- Factory-built housing revenue fell 17.1% to $1.717 billion. Homes sold declined 12.6% to 16,928, and revenue per home sold declined 5.1% to $101,406. The company attributed the segment revenue decline principally to lower volume and selling prices; Solitaire Homes added $128.1 million of revenue in FY2024, versus $28.3 million for its partial-year contribution in FY2023.
- Financial services revenue rose 6.7% to $78.2 million, mainly due to more insurance policies in force. Segment gross profit fell 10.9% to $28.0 million; management cited higher weather-related claims and market fluctuations in the insurance subsidiary’s equity portfolio.
- Factory-built housing gross margin declined to 23.2% from 25.3%; financial services gross margin declined to 35.8% from 42.9%. Consolidated SG&A fell 4.0% to $247.9 million, but rose to 13.8% of revenue from 12.1% as sales declined.
- Interest income increased to $21.0 million from $10.7 million, primarily reflecting higher interest rates. Interest expense was $1.6 million.
- Cash, cash equivalents and restricted cash totaled $368.8 million at year-end, versus $283.5 million a year earlier. Current assets were $851.8 million and current liabilities $273.3 million. The company reported no borrowings on its $50 million revolving credit facility and compliance with its debt covenants.
- Cash used in investing was $31.7 million, including property, plant and equipment purchases and the Kentucky Dream Homes acquisition. Cash used in financing was $107.7 million, principally for $109.3 million of share repurchases. Capital expenditures were $17.4 million.
- Total assets were $1.354 billion and stockholders’ equity was $1.033 billion. The filing reports lease liabilities and other secured financing; it does not report outstanding revolving-credit borrowings at year-end.
Material changes and notable items
- Order backlog decreased to approximately $191 million from $244 million. Orders may be canceled before production starts, so the company does not treat the full backlog as firm orders.
- FY2024 factory-built home sales consisted of 13,047 wholesale and 3,881 retail units, compared with 16,066 wholesale and 3,310 retail units in FY2023.
- Cavco acquired Kentucky Dream Homes in November 2023 for stated consideration of $23.3 million, including $5.4 million of non-cash commercial-loan forgiveness. It also acquired the remaining 30% interest in Craftsman on January 1, 2024. Solitaire Homes, acquired in the prior fiscal year, contributed for a full year in FY2024.
- The board authorized an additional $100 million share-repurchase program in January 2024. The company paid no common-stock dividends in the two most recent fiscal years.
- The SEC’s 2021 action against Cavco was settled in 2022; the company agreed to an injunction and a $1.5 million penalty, which the filing says did not materially affect its financial statements. The filing reports that all remaining SEC claims against the former CFO were settled in May 2024 and the SEC litigation matters were closed.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The warranty reserve, $31.7 million at year-end, was identified as a critical audit matter because it requires significant estimation.
Outlook, risks and contingencies
- Management says housing demand, workforce availability, supply conditions and company performance are difficult to predict. It gives no quantified earnings, revenue or shipment guidance, and expects to balance production and staffing with demand.
- Management believes available cash and operating cash flow will fund operations and obligations for at least the next 12 months and into the foreseeable future. It may consider acquisitions or strategic investments; financing availability and terms are not assured.
- Key sensitivities include consumer and distributor financing availability, interest rates, housing demand, inflation and materials costs, labor availability, supply-chain disruptions, seasonality, competition, and local zoning and regulation. Management warns that cost increases may outpace or precede product-price adjustments.
- CountryPlace must remit scheduled principal and/or interest to certain investors even when some borrowers have not paid. Collections exceeded required payments through FY2024, but extended forbearance could increase cash obligations. The company also notes limited secondary-market access for manufactured-home loans.
- Contingent repurchase exposure on distributor floor-plan financing was approximately $120.5 million before considering resale value of homes; the related reserve was $2.9 million. FY2024 included five demand notices covering 11 homes, which were resold at an immaterial loss.
- Other notable exposures include mortgage-sale representations and warranties, construction-loan funding commitments, interest-rate lock commitments of $39.0 million, and weather-related insurance claims. The company identifies geographic concentration in Texas across retail, consumer lending and insurance operations, as well as reinsurance counterparty exposure.
- The company reports no cybersecurity threat that it believes has materially affected, or is reasonably likely to materially adversely affect, its business or financial condition as of the filing date.
Important facts for investors to verify
- Whether home shipments, selling prices, margins and backlog stabilize or continue to weaken, considering that pre-production backlog can be canceled.
- How much of the year-over-year decline reflects underlying demand and pricing versus acquisition timing and product/channel mix.
- Whether the $368.8 million cash and restricted-cash balance is available for general corporate use; $16.1 million was restricted at year-end.
- Performance and credit quality of consumer and commercial loan portfolios, including geographic and borrower concentrations, and the liquidity impact of servicing advances.
- Adequacy of warranty, insurance-claims, loan-loss and repurchase reserves, along with any developments in litigation or other contingencies.
- Capital-allocation priorities and the pace of repurchases: $109.3 million was spent on repurchases in FY2024, while the board-authorized program may be suspended or discontinued.