Sign in
SC

Skyline Champion Corp (SKY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 net sales rose 9.1% year over year to $536.4M, but GAAP diluted EPS fell to $0.05 as gross margin contracted 1,040 bps to 18.3% due to a one-time $34.5M water intrusion remediation accrual; adjusted EPS was $0.62 and adjusted gross margin 24.8% .
  • Backlog increased sequentially 8.7% to $315.8M with capacity utilization at 57%, and management guided to low double‑digit sequential revenue growth in Q1 FY2025, signaling demand strength despite near-term margin headwinds .
  • The integration of Regional Homes drove higher U.S. volumes (+15% YoY to 5,652) and contributed ~$108M of net sales in Q4, but consolidated margins were pressured by lower ASPs/mix, ramping new plants, and purchase accounting impacts; synergy target of $10–$15M by end of FY2025 remains intact .
  • The Board approved a new $100M share repurchase program, a potential stock support/catalyst; financing initiatives via the Triad JV (Champion Financing) expanded to floor plan and consumer programs, with pilot rate buydowns under test .
  • S&P Global consensus estimates were unavailable at query time (daily limit exceeded), so beats/misses versus Street cannot be assessed this period.

What Went Well and What Went Wrong

What Went Well

  • U.S. homes sold increased 15.3% YoY to 5,652, aided by Regional Homes (~$108M sales) and added capacity (Bartow FL, Decatur IN) .
  • Backlog rose to $315.8M (+8.7% seq) and management expects low double‑digit sequential revenue growth in Q1 FY2025, underpinned by healthy retail and builder/developer demand .
  • Strategic moves: share repurchase program ($100M) and expanded financing offerings with Triad (Champion Financing), designed to improve liquidity access and customer conversion; “traction has been exceptional” per management .

What Went Wrong

  • Gross margin contracted sharply to 18.3% on the $34.5M water intrusion accrual; adjusted gross margin fell to 24.8% on lower ASPs/mix, ramping idled facilities, and Regional Homes’ lower core margins .
  • SG&A rose to $90.6M (16.9% of sales) primarily from Regional Homes; management flagged sequential gross margin declines ahead (100–150 bps) due to continued mix shift and purchase accounting on Regional inventory .
  • Canada softness: units fell to 189 with revenue $23M as higher rates and economic uncertainties weighed; ASP increased on mix to $121,200, but volumes were weak .

Financial Results

MetricQ2 FY2024Q3 FY2024Q4 FY2024
Revenue ($USD Millions)$464.2 $559.5 $536.4
Diluted EPS ($)$0.79 $0.81 $0.05
Adjusted Diluted EPS ($)$0.82 $0.82 $0.62
Gross Margin (%)25.1% 25.3% 18.3%
Adjusted Gross Margin (%)——24.8%
Adjusted EBITDA Margin (%)12.7% 11.8% 9.9%
SG&A as % of Sales (%)13.9% 15.2% 16.9%
Water Intrusion Accrual ($USD Millions)——$34.5
Segment/KPIQ2 FY2024Q3 FY2024Q4 FY2024
U.S. Homes Sold (units)4,842 5,643 5,652
ASP per U.S. Home ($)$88,400 $92,300 $89,800
Canadian Homes Sold (units)232 249 189
Canadian ASP ($)$126,100 $123,700 $121,200
Canadian Revenue ($USD Millions)$29 $31 $23
Backlog ($USD Millions)$257.8 $290.4 $315.8
Capacity Utilization (%)53% 57% 57%
Cash & Equivalents ($USD Millions)$701.2 $497.9 $495.1
Q4 FY2024 vs EstimatesActualConsensusDelta
Revenue ($USD Millions)$536.4 N/A (S&P Global unavailable)N/A
Diluted EPS ($)$0.05 N/A (S&P Global unavailable)N/A

Note: S&P Global consensus estimates were unavailable at query time due to daily limit constraints; beats/misses cannot be assessed this period.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (sequential)Q4 FY2024 → Q1 FY2025Q4 FY2024 “flat sequentially” Q1 FY2025 “low double‑digit sequential revenue growth” Raised
Gross Margin (sequential)Next 1–2 quartersCompression ~200 bps expected (purchase accounting/mix/ramp) Down 100–150 bps sequentially near term Maintained/slightly improved vs prior range
FY Revenue GrowthFY2025+10–15% YoY (inclusive of Regional) Reiterated ~industry range +10–15% Maintained
SG&ANear termHigher with Regional integration “Closer to new normal”; slight reduction from overlap headcount cuts Lowered vs prior run-rate
Capital AllocationOngoing—New $100M share repurchase program approved New

Earnings Call Themes & Trends

TopicQ2 FY2024 (Sep Q)Q3 FY2024 (Dec Q)Q4 FY2024 (Mar Q)Trend
Community/REIT channelContinued destocking; softness persists Gradual re‑entry expected; pockets returning “Most started to return”; strong YoY community orders; backlog likely to grow Improving
Builder/DeveloperCapacity added; strong pipeline (Bartow FL) Fastest‑growing segment; top‑100 builder orders Multiple new awards; momentum increasing Strengthening
Financing JV (Triad/Champion Financing)Closed; programs launching Jan’24 Launched; early traction Expanded to floor plan/consumer; pilot rate buydowns; integration done Scaling
ASP/mixShift to fewer options lowers ASP Mixed: sequential ASP up on captive mix, but underlying ASP down ASP down 3% seq; expect continued impact from lower options Pressured
MarginsCompression ahead; ~200 bps Further sequential declines; purchase accounting ~60 bps Water intrusion accrual; adj. margin 24.8%; −100–150 bps seq guide Near-term down
Capacity utilization53% 57% 57%; ramp with demand Stabilizing/up
Macro ratesHigher-for-longer view Higher-for-longer view Expect sustained higher rates; chattel ~8.5% best Unchanged
Digital lead managementStrategic priority Enhanced systems/digital configuration 30%+ faster response; higher conversion Improving
Regulatory/legal——HUD remediation plan for water intrusion; recoveries pursued Active remediation

Management Commentary

  • “Fiscal 2024 was a transformative year… we are better equipped with enhanced capabilities to capitalize on growth opportunities” — CEO Mark Yost .
  • “We are excited to launch our inaugural share repurchase program, underscoring our dedication to enhancing shareholder value” — CEO Mark Yost .
  • “We anticipate low double‑digit sequential revenue growth [in Q1 FY2025]… driven by order growth” — CEO Mark Yost .
  • “We recorded $34.5 million reserve for estimated remediation costs related to a water intrusion issue… limited to homes constructed at one facility” — CEO Mark Yost .
  • “Adjusted EBITDA margin was 9.9%… impacted by lower gross margins and higher SG&A” — CFO Laurie Hough .

Q&A Highlights

  • Demand cadence and spring seasonality: weather elongation drives finished goods build; recovery expected through the quarter; retail demand remains strong .
  • Community/REIT return: most are returning with strong YoY order growth; backlog may grow further; rental-focused customers solid .
  • Water intrusion remediation: actuarial range $34.5–$85M; recorded low end; HUD approval then customer outreach, inspections, repairs; recoveries pursued; cash impacts over several years .
  • Margin outlook: sequential declines of 100–150 bps near term on mix shift, Regional purchase accounting, and ramping new plants; input cost inflation modest (~2%) and passable .
  • Financing JV and rate environment: pilot rate buydowns underway; chattel rates ~8.5% for healthy customers; JV widens liquidity access and supports turnkey offerings .

Estimates Context

  • S&P Global consensus estimates for Q4 FY2024 were unavailable at query time due to daily limit constraints, so we cannot assess beats/misses versus Street expectations this period.
  • Given management’s Q1 FY2025 low double‑digit sequential revenue guide and margin compression commentary, Street models may need to reflect stronger near-term top line with lower gross margin trajectory before recovering as synergies and mix normalize .

Key Takeaways for Investors

  • Backlog and order trends support near-term top‑line acceleration; management’s low double‑digit sequential revenue guide for Q1 FY2025 is a positive demand signal despite recent weather noise .
  • Expect near‑term margin pressure: continued mix down (fewer options), Regional purchase accounting headwind, and new plant ramp; guidance implies −100–150 bps sequential gross margin before longer‑term recovery toward mid‑20s structural targets .
  • The $100M buyback is a potential support/catalyst amid margin headwinds and integration noise; balance sheet remains strong with ~$495M cash at FY year‑end .
  • Community/REIT re‑engagement and builder/developer wins should bolster volumes across FY2025; watch backlog trajectory and lead times (target 4–12 weeks) as production ramps .
  • Financing JV (Champion Financing/Triad) expands liquidity access (floor plan and consumer) and may improve conversion; pilot rate buydowns could enhance demand sensitivity in selected products .
  • Regional Homes integration is accretive to volumes but dilutive to margins near term; synergies of $10–$15M targeted by end of FY2025 should narrow the margin gap vs legacy .
  • Monitor remediation execution and potential recoveries related to the water intrusion issue; actuarial range suggests possible future adjustments (up or down) depending on inspection outcomes .