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Skyline Champion Corporation (NYSE:SKY), a manufactured home and park model RV builder, saw a net sales decrease of 9.1% during the fiscal second quarter, which ended on Sept. 26, according to financial results released on Thursday (Oct. 29).

Second Quarter Fiscal 2021 Highlights (compared to Second Quarter Fiscal 2020)

  • Net sales decreased 9.1% to $322.4 million. On a sequential basis compared to first-quarter 2021, net sales increased 18%.
  • U.S. factory-built homes sold decreased by 6.7% to 4,689. On a sequential basis compared to first quarter 2021, U.S. factory-built homes increased 16.4%.
  • Total backlog increased 126.8% to $390.1 million. On a sequential basis compared to first-quarter 2021, backlog increased 103%.
  • Gross profit as a percent of sales declined by 140 basis points to 19.5%.
  • Net income decreased by 1.3% to $17.5 million.
  • Earnings per share (“EPS”) remained flat at $0.31.
  • Excluding non-recurring expenses, Adjusted EPS decreased to $0.31 from $0.34.
  • Adjusted EBITDA decreased 10.9% to $28.9 million.
  • Adjusted EBITDA margin decreased by 20 basis points to 9.0%.
  • Net cash provided by operating activities improved by 24.7% to $31.6 million.

“I am encouraged by the improvement in the homebuilding industry as we moved through our second quarter, and the growth and business development opportunities we see in the marketplace. I am also proud of the team’s agility in navigating the evolving market dynamics, and their commitment to work diligently to provide customers with our innovative housing solutions. I am pleased with the sequential improvement in net sales, and U.S. factory-built home volume, as well as our ability to continue to generate solid margins and profitability, and strong cash flow growth,” said Mark Yost, Skyline Champion’s president and CEO. “We have seen an exceptional rebound in demand and order levels during the quarter, which has resulted in a record level of backlog. As we look forward, we are focused on increasing production levels to meet the increase in demand, which will allow us to leverage our variable cost structure to expand our margins and generate strong returns on our investments.”

Second Quarter Fiscal 2021 Results

Net sales for the second quarter fiscal 2021 decreased 9.1% to $322.4 million compared to the prior-year period. The number of U.S. factory-built homes sold in the second quarter fiscal 2021 decreased 6.7% to 4,689 compared to the prior year second quarter, as a result of slightly reduced production levels resulting from labor availability and intermittent shutdowns due to COVID-related absenteeism. The average selling price (ASP) per U.S. home sold decreased 2.9% to $60,400. ASP decreased primarily due to a shift in product mix to more single-section homes, and customers selecting less expensive upgrade option packages.

The number of Canadian factory-built homes sold in the quarter declined slightly to 302 homes compared to 311 homes in the prior-year period due to the same constraints experienced in the U.S. operations. Total backlog for Skyline Champion was $390.1 million as of Sept. 26, compared to $172.0 million as of September 28. Backlogs increased $198.1 million during the quarter compared to $19 million in the fiscal second quarter of 2020 driven by strong order levels that have outpaced production levels.

Gross profit decreased by 15.2% to $62.8 million in the second quarter of fiscal 2021 compared to the prior-year period. Gross profit was 19.5% of net sales, a 140-basis point reduction compared to 20.9% in the second quarter fiscal 2020. Gross profit compression was due to increased material costs as a percent of sales caused by market volatility in certain commodities including forest products.

Selling, general, and administrative expenses (SG&A) in the second quarter fiscal 2021 decreased to $41.4 million from $48.4 million in the same period last year due to reductions in variable incentive compensation, as well as decreases in spending on travel and marketing-related expenses.

Net income for the second quarter fiscal 2021 was $17.5 million, compared to net income of $17.7 million during the same period of the prior year. The decrease in net income was mainly driven by the decline in sales and gross profit, which was partially offset by the reductions in SG&A. Net income benefited from other income of $2.6 million related to Canadian government sponsored wage subsidy programs enacted as a result of the COVID-19 pandemic as well as a reduction of income tax expense.

Adjusted EBITDA for the second quarter fiscal 2021 decreased by 10.9% to $28.9 million compared to the second quarter fiscal 2020. The decrease was primarily driven by lower sales volumes and reduced gross profit from increases in raw material costs. As a result, the Adjusted EBITDA margin declined by 20 basis points to 9%.

As of Sept. 26, Skyline Champion had $264.3 million of cash and cash equivalents, and no significant long term debt maturities until June 2023.