Skyline Champion Corporation (NYSE:SKY) Q3 2023 Earnings Call Transcript

Mark Yost: Yes, thanks, Matt. I think there’s, a few things. 1, the order cancellations that we saw earlier in the year, I think even going into December, we saw cancellations improved by 60% going into December. And then here in January, it’s improved another 10%. So cancellations are improved by 70% from where they were earlier in the year. That is mainly on the retail channel side. I would say a majority of that was. And that was really as retailers were trying to right-size their floor plan credit limits. They were needing to cancel orders just to get basically in compliance with our credit facilities. Some of the orders in terms of cancellations were done by some of the REITs. But those were really more cancellations in terms of I don’t need it until June. So they’re still out there, but they’re not in our buildable backlog in terms of the foreseeable future. So, we’ll reput those in when they need them in June.

Operator: Our next question is from Mike Dahl with RBC Capital Markets.

Mike Dahl: A few follow-ups here, when we think about Laurie, the product mix impacts, you’re coming off some periods where you had a lot of price inflation, mix was a tailwind now you’re calling out kind of normalizing lower or just a shift towards lower product mix. When you think about in a long-term context, when you look at what’s coming through the backlog in the next couple of quarters in terms of that lower product mix, do you view that as the normalized product mix or is that a mix that would represent now kind of a below normal smaller than normal mix than what you’d expect over the medium to long-term?

Laurie Hough: That’s a good question, Mike. I think that it differs by geography, but it’s certainly lower — the mix is going to be lower than what we’ve seen over the last couple of years. I also think that as the builder developer channel grows, that will impact our ASPs, not necessarily margins, but ASPs to go up a bit because those typically can be larger homes with more features and amenities in the longer term. As we’ve talked about, those types of supply agreements take a bit longer to develop and materialize.

Mike Dahl: Yes, okay. All right, that makes sense. And maybe also diving into the retail side again, I think if we look at historically, the difference like the retail sales price of the unit, at least grew up census numbers might be 120, 130k. Your wholesale price has been ex the FEMA, somewhere in the 80s to low 90s. But as you kind of mix into that retail vertically, integrated model a little bit more? I think last quarter you might have made a comment that you’d expect ASP to come back down into the 80s as some of the surcharges rolled off. But I’m wondering that retail dynamic, how we should think about that as an ongoing impact to ASP? And if that helps support a higher ASP than you would have previously expected?

Laurie Hough: Yes, certainly, at a retail level, the ASPs are higher than wholesale. It really depends on the relative mix. So as we add manufacturing capacity, we’re going to add manufacturing units, right, over the medium to long-term. And it’s just — it’s a dependency on how much of the units being sold in U.S. manufacturing are manufacturing versus retail. If that percentage goes — leans more toward retail because of acquisitions or internal organic growth, then certainly we’ll see a shift in the ASP to a higher ASP relatively. Does that make sense?

Mike Dahl: Okay, right. Yes and I guess maybe more specifically the fourth quarter, how should we be thinking about ASP because if you did kind of drop back into the 80s it seems like that alone would be kind of a high single-digit quarter-on-quarter decline, which then may imply that you don’t expect unit down much sequentially at all so maybe a little more color on the unit versus ASP dynamic in the fourth quarter?