Q3 2024 Cavco Industries Inc Earnings Call
Participants
Mark Fusler; Director of Financial Reporting & IR; Cavco Industries, Inc.
Bill Boor; President, CEO; Cavco Industries, Inc.
Allison Aden; EVP, CFO & Treasurer; Cavco Industries, Inc.
Paul Bigbee; CAO; Cavco Industries, Inc.
Daniel Moore; Analyst; CJS Securities, Inc.
Gregory Palm; Analyst; Craig-Hallum Capital Group LLC
Jay McCanless; Analyst; Wedbush Securities Inc.
Camden Roberts; Analyst; University of South Carolina
Presentation
Operator
Good day, and thank you for standing by, and welcome to the Third Quarter Fiscal Year 2024 for Cavco Industries Inc. Earnings Call Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session to ask a question. During the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker, Mark Butler, Corporate Controller and Investor Relations.
Please go ahead.
Mark Fusler
Good day, and thank you for joining us for Cavco Industries Third Quarter Fiscal Year 2024 earnings conference call. During this call, and you'll be hearing from Bill Boor, President and Chief Executive Officer, Allison Aden, Executive Vice President and Chief Financial Officer, and Paul Dickie, Chief Accounting Officer.
Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward looking statements, including statements of expectations or assumptions about Cavco's financial and operational performance, revenues, earnings per share, cash flow or use cost savings, operational efficiencies, current or future volatility in the credit markets or future market conditions. All forward-looking statements involve risks and uncertainties which could affect Cavco's actual results and could could cause its actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of Cavco encourage you to review Cavco's filings with the Securities and Exchange Commission, including without limitation, the Company's most recent Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in any forward-looking statements in this conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast Friday, February second, 2024. Cavco undertakes no obligation to revise or update any forward-looking statement, whether written or oral to reflect events or circumstances after the date of this conference call, except as required by law.
I will now like to turn the call over to Bill Boor, President and Chief Executive Officer.
Bill.
Bill Boor
Welcome and thank you for joining us today to review our third quarter results. While the earnings release focuses on year-over-year comparisons in this market, I believe that to quarter developments are more relevant to understanding current market dynamics. It's not to disregard any insights and bigger picture takeaways regarding the dynamics a year ago relative to day last year. We were a couple of quarters into the effect of rising interest rates. Industry backlogs were higher than now, but they were declining rapidly and the pace and direction of backlogs is generally more important than the level as we wrapped up this third quarter.
Great. In fact, on a same plant basis, we have now seen five quarters of increasing net orders and backlogs are stabilized, albeit at low capacity utilization. So while economic uncertainty remains, the trends are pointed in the right direction as we emerge from the typically slower winter and holiday months. The positive trending we are seeing in the market is coming from the dealer channel. Their traffic remains healthy and conversions are improving. Buyers are adjusting to the now steadier interest rates and to the reality of how much home they can afford. The underlying need for affordable housing is coming to the forefront and driving modest but meaningful quarter-to-quarter order improvements as discussed over the past few quarters, community orders continued to be off considerably as industry backlogs decreased in the latter part of 2022. Deliveries to communities accelerated, which resulted in excess community inventories going into calendar 2023. The issue is not whether there are buyers or renters once a given unit is put into service, it's how quickly the units can be permitted and set to reduce the inventory and resume more normal orders. In other words, placements are occurring at a much higher pace than orders until balances reestablished the natural question is when will this balance be achieved? Of course, varies by operator and location. However, the outlook for this calendar year is considerably better than last. Based on our discussions with community operators and developers. We expect we will see increased community orders as the year unfolds.
Against that market backdrop, we've stabilized our backlog over the past three quarters by matching production to the pace of orders or capacity utilization remained steady this quarter, about 60%. And while the value of orders in the backlog declined from $170 million last quarter to 160 million in Q three. The number of units in the backlog increased 3%. Quarter Ending backlog represents five to seven weeks of production, consistent with last quarter at stability is an important point coming through the winter months and heading into what we typically would expect to be better selling months. We have a number of plants operating at reduced schedules that are looking to increase when the market supports.
On the margin side, pricing has been relatively stable while our overall factory based housing gross margin declined 0.8% sequentially. This was driven more by the cost side and how cost of goods sold flowed through our manufacturing and retail sales. Big picture margins remain healthy at 22.4% in our housing segment and prices are continuing to hold for the most part. Overall, our quarterly revenue was down about 1% sequentially to $447 million and pretax income dropped from $52 million last quarter to $44 million before repurchases. And after acquisitions, cash flow was about positive $25 million. We used $50 million to repurchase shares, which resulted in our cash balance being down $24 million relative to last quarter. Before handing the call over, it was good to see many of you at the Louisville show a couple of weeks ago among a number of other innovative homes. We brought our new Anthem series duplex to Louisville, the Anthem as the first nationally available HUD approved multifamily unit. We're very excited about the affordability benefits these homes offer and the interest level has been tremendous, particularly with developers and community operators. I also wanted to recognize and welcome Dustin Ewing and the people from Kentucky dream homes to the Cavco family. Kentucky Dream Homes operates five well-managed sales centers in Kentucky and Florida and we joined forces through an acquisition in the third quarter. Thus and his team are strong operators and great people to be associated with. And we're very excited to be on the same team.
With that, I'd like to turn it over to Alison to discuss the financial results in more detail.
Allison Aden
Thank you, Bill. Net revenue for the third fiscal quarter of 2024 was $446.8 million, down $53.8 million or 10.8% compared to $500.6 million during the prior year. Sequentially, net revenues decreased $5.3 million, driven by a reduction in units sold, partially offset by higher revenues in financial services within the factory-built housing segment net revenue was $427 million, down $54.2 million or 11.3% from $481.2 million in the prior year quarter. The decrease was primarily due to a 13.7% decline in base business unit volume and a 5.3% decline in average revenue per home sold, partially offset by the Solitaire acquisition, which contributed $33 million during the quarter. The decrease in average revenue per home revenue per home was primarily due to more single wides in the mix and to a lesser extent, a decline in product pricing sequentially.
For the factory-built housing segment, net revenue was down $7.1 million or 1.6% from $434.1 million. The decrease was primarily due to a 2.1% decline in units sold, partially offset by higher average revenue per home, primarily due to more double wides in the mix and a higher proportion of homes sold through our Company owned stores. Factory utilization for Q3 of 2024 was approximately 60% when considering all available production days, but with nearly 70% excluding scheduled downtime for market or whether this utilization level was consistent with the past three quarters.
Financial Services segment net revenue increased 2.1% to $19.8 million from $19.4 million, primarily due to more insurance policies in force, partially offset by fewer loan sales.
Consolidated profit in the third fiscal quarter as a percentage of net revenue was 23.1%, down 330 basis points from 46.4% in the same period last year. In the factory-built housing segment, the gross margin decreased 310 basis points at 22.4% in Q3 of 2024 versus 25.5% in Q3 of 2023, driven by lower average selling prices and volumes, partially offset by lower input costs per floor comparing to the sequential fiscal Q2 of 2024, while average selling prices increased due to a higher proportion of homes sold through company-owned retail stores, cost per unit sold also increased with a net effect in an 80 basis point reduction in factory built housing gross margin. Gross margin as a percentage of revenue in financial services decreased to 36.8% in Q3 of 2024 from 46.6% in Q3 of 2023 from higher insurance claim activity.
Financial services gross margin increased sequentially 90 basis points to 36.8% from 35.9% due to higher net insurance premiums earned, selling, general and administrative expenses in Q3 of 2024 were $63.3 million or 14.2% of net revenue compared to $58.9 million or 11.8% of net revenues during the same quarter last year. Sequentially, SG&A increased $1.8 million increase in both periods is primarily due to higher costs in Q3 of 2024 related to the ongoing litigation between indemnified former officer of the NESCC., as well as higher compensation expense from acquisitions.
Interest income for the third quarter was $5.2 million, up 46.2% from the prior year quarter and down 9.9% over the sequential quarter. The increase over the prior year is primarily due to higher interest rates, whereas the sequential decrease is related to a lower average cash balance over the period.
Interest expense this quarter was $0.8 million compared to $0.2 million in the prior year quarter. Interest relates to adjustments of our redeemable non-controllable interest in Craftsman home LLC. Net other expense this quarter was $0.2 million compared to $0.3 million in the prior year quarter. Pretax profit for Q3 2024 was $43.9 million, down $32.2 million from the prior year period. Effective income tax rate was 18% for the third fiscal quarter compared to 21.7% in the same period last year. The change between periods is primarily the result of higher benefits from stock option exercises.
Net income attributable to Cavco shareholders was $36 million compared to net income of $59.5 million in the same quarter of the prior year. And diluted earnings per share in Q3 of 2024 was $4.27 per share versus $6.66 per share in last year's third quarter.
Before we discuss the balance sheet, I'd like to take a minute to talk further about capital allocation. As announced with our press release, the Company's Board of Directors approved a new $100 million stock repurchase program that can be used to purchase its outstanding common stock. This increases the total available to $139 million, including the amount remaining under the program announced in 2023 after our purchase of $50 million this quarter, our strategic capital allocation priorities remain an improvement, further acquisitions and ongoing evaluation of the opportunities in our lending operation. We continue to use stock buybacks as a tool to responsibly manage our balance sheet. Now I'll turn it over to Paul to discuss the balance sheet.
Paul Bigbee
And Callison.
So I'm going to cover the changes in the December 30th, 2023 balance sheet from April first, 2023, our cash balance was $352.8 million, up $81.4 million or 30% from $271.4 million at the end of the prior fiscal year. The increases are primarily due to net income adjusted for noncash items such as depreciation and stock compensation expense and working capital adjustments, including the following inventory decreases, which provided $51.2 million from lower balances of raw materials at our production facilities and finished goods at our retail locations, decrease in accounts receivable of $18.2 million. Prepaid, another asset decreases provided $9.9 million. Primary uses of cash for the nine months. Offsetting the above include decreases in accounts payable, accrued expenses and other liabilities of approximately $23 million, our acquisition of five retail stores and associated inventory for $19.7 million in share repurchases for $96.8 million outside of cash, consumer and commercial loans decreased from the paydown of the associated loans that were greater than the amount of new loan originations, prepaid and other assets was lower due to lower prepaid income taxes and a reduction in delinquent Fannie Mae loans. The remaining change is due to normal amortization of prepaid property, plant and equipment net is down from the sale of unutilized equipment acquired with Solitaire home accrued expenses and other current liabilities are down from lower accrued bonuses, customer deposits and commission taxes.
Lastly, stockholders' equity exceeded $1 billion, up $32.4 million from $976.3 million as of April first, 2023.
Now I'll turn it back to Bill.
Bill Boor
Thanks.
Thanks, Paul. Tony, why don't we just go ahead and turn it over for questions.
Question and Answer Session
Operator
Certainly, ladies and gentlemen, if you do have a question at this time please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. And one moment for our first question, which will come from Daniel Moore, CG. and securities. Your line is open.
Daniel Moore
Good morning, Bill Allison, Paul.
Good afternoon. I should say off the East Coast, but thanks for the time and taking the questions on maybe start with your kind of outlook, what are your expectations for sequential growth in production and shipments in terms of both modules as well as the number of homes as we look to the March quarter relative to December and a similar question, what are your expectations for average selling price.
Bill Boor
And then um, so you know, we don't give guidance. And I guess every time we get asked that question, I always feel like we're in a at a point. It always feels like we're in a point where it could go one way or the other rate. I think of you probably took from some of my comments that the general feeling is pretty positive going into the spring, the that's mostly coming from just how well the dealer channels going. And so we feel like we're in a position to respond to the upside and that's where most of our most of our energies are at this point is getting ready for that upside. But we don't have the specifics and our expectation to share at this point.
Daniel Moore
Understood. I guess what would it maybe talk about when you would expect to have a better sense of the true underlying demand right now?
It's been improving sequentially and certainly strong kind of seasonal perspective. But you know, by April May, when do you have a better sense for whether you might be in position to start to ramp production?
Bill Boor
Yes, absolutely are. We're sitting here beginning of February, always making very general statements when we do a market locally, as I always remind everyone. But I think internally we're kind of looking until late February, March timeframe, too. And we see an uptick see the normal selling season and how that develops. And so we garner in that waiting mode right now coming out of the winter and the holidays. So in the next couple of months, we'll know whether we saw the meaningful improvement that we're hoping for in the spring or whether there's some other issues online up. I feel like as I said in my comments, I think the buyers there via interest rates have stabilized and they're higher than they were a bit ago and that's hard for people, but they are kind of acclimating to that. In some cases. I think we've got good room for good indications there, and they recognize they can't buy as big at home as they could have, but if they had done so a couple of years ago, but they're adjusted to all that. So the underlying demand and I would include, as my comments said, I would include the communities as well. And as you can get a home said they've got a renter or a buyer for that home. So we should see some improvement from or we're hoping we'll be watching to see some improvement in the selling season. And as the year end skews and as the year unfolds.
We're also looking for that community order pattern to start improving.
Daniel Moore
And just based maybe it's more anecdotal bill, but based on your conversations with some of the community operators and where are we now fits the baseball analogy in that, you know, getting through the inventory trouble issues or the set and finish challenges? Or I know it's market by market, but Tom?
Yes, in general, we have quarters to go. We know getting to tag ends and waiting on orders. What are you hearing?
Bill Boor
Yes, this is completely anecdotal and field based on those discussions and your I'll make an analogy. You remember when we were coming out of the retail inventory issue, it wasn't sudden, right? I mean, it just kind of happens individually and it builds off the next thing. You know, you're not talking about the problem anymore. So I think it's going to feel like that. But in our discussions in my discussions with folks that the larger community operators, they definitely are projecting higher order rates for calendar year '24 than '23. And so I think in order for that to take place, we should see some improvement in the next couple of quarters.
Daniel Moore
Helpful. Last one, I'll jump out. Thanks for the color, Alison as well on gross margin front and the timing of kind of how COGS are rolling through on kind of current levels, just speak to your confidence around holding gross margins where we are at these levels and what kind of potential upside we might have on if and when as the demand comes back and capacity utilization improves?
Thanks again.
Allison Aden
Yes, sure, Dan. Thanks for the question. Is just you know, as we said big picture, the factory-built housing margins remain very healthy at 22.4% this quarter. And prices are continuing really to hold for the most part and well we know as ground based on our products for the comments, it's really hard to speculate on price as a company and as the pricing and costs are obviously going to be the key elements determining future margins and from a company and the price we're seeing some regions for pressure is becoming more apparent and some where it's not. So it's some mixed bag. Also the from a cost perspective, we've seen the movement in commodities can be a little volatile and hard to predict. And so we continue to watch lumber and OSB as we said last quarter, we believe that we're doing a good job of really merit now managing on our cost of sales. And if we see the top line increase, we certainly have leverage still of absorption costing within our cost of goods and also added SG&A level.
Daniel Moore
Pedro back with any follow-ups. Thank you.
Bill Boor
Thanks, Dan.
Operator
And one moment front question and our next question will be coming from Greg Palm of Craig-Hallum Capital Group. Your line is open.
Gregory Palm
Thanks. This is Danny acreage on for Greg today. I'm hoping to just kind of go back and touch on on what you're seeing in fiscal Q4 again. And can you maybe just remind us, I know it's kind of jumped during the past the seasonality from December to March quarter? And maybe on top of that on any impacts that you felt from maybe adverse weather in the month of January?
Bill Boor
Let me take the second part first. We did have on some pretty isolated down days due to the weather. I know in Texas, we had some in the Northwest, but I think it was to an extent that we're hoping we can make it up and over the course of this quarter, if that makes sense because we are running at a reduced overall rate. And so while we did have some down days. It shouldn't really knock us off where we would end the quarter otherwise on a production basis.
If that makes sense on the seasonality, I know we've looked at that Mark might have a comment on the percentages. But what I'll say before we say that is we look at seasonality over a long period of time in many years and you can kind of glean from that what a average seasonal change will be. And yet I think when you look at any given year, it never really plays out that way. Because the macroeconomic factors probably weigh heavier than the seasonality at times. But given that markup checkmark, my recollection at most 10%.
Yeah. As I say, around 5%, probably.
5% to 10%. But again, we are hitting the better part of that from a seasonality perspective.
Gregory Palm
Okay, got it. And then maybe just touching on ASPs again, you kind of commented that within the backlog, you're seeing some lower ASPs. So I guess is that a good proxy for this current quarter on ASPs and And within that, is that just kind of mix then? Or what are we seeing there?
Bill Boor
Yes. What I would say is on we've kind of had a movement and we've talked about in previous quarters that if you looked on a year over year basis, we're selling more single section units and multi-section units. So I would suggest and I look around I see your reaction to I would suggest that our lower value in the on the backlog is more driven by that change than it is by the fundamental pricing that we've given you.
I think that's your question, but let me note.
And as I said to your question.
Gregory Palm
Yes, yes, you just kind of mentioned that pricing was holding steady, but but backlogs ASPs were kind of coming down. So I was just wondering if that was mix or what says.
Yes, to answer that.
Bill Boor
Yes, the backlog moves more to a character. It's gotten more single wides and multi-section than you're going to naturally see that value per unit go down, right. Yes.
Gregory Palm
Okay. That makes sense.
And maybe just one last more on on maybe the Anthem product arm, just kind of initial interest and you're showing that off of the Louisville show and and how big you think that could be and what the market could potentially be like that for that a certain product.
Bill Boor
Yes, we're obviously really excited about.
I mean, this is a change has been made after a lot of work at the industry level, basically with HUD to allow multifamily units to be coded under the HUD code and we are excited about it. We had a launch event, one of our lead, basically our lead plan on this is the Rocky Mountain Virginia plant. And we had a launch event in early December. And I was there and I was really impressed by the support we're getting not only from dealers and community operators, but also from municipalities showing up looking for solutions to their density and affordability issues. And so we've talked about as being a nationally available, we're going to produce that variations of the Anthem product and there's more than one floor plan, the variations that we're going to produce in plants across the country. So yet I don't have any numbers for you to share at this point, but we've been really excited about the interest level. And if you think about it, if you're running, let's just take the example, the community operator, the opportunity to get some density, you're going to get more revenue essentially from a given life. And at the same time, those two residences or households are going to both benefit from the density with lower cost. And so that's what that's what solving the affordability issues all about.
So I appreciate you asking because obviously, we're pretty excited about it.
Gregory Palm
Yes.
Sounds like sounds like a lot of good stuff. So I'll leave it there. Thanks.
Bill Boor
Thank you.
Operator
And one moment for our next question. And our next question will be coming from Jay McCanless of Wedbush Your line is open.
Andre.
Jay McCanless
Good morning and warm. So Bill, could you maybe talk about the Kentucky dream acquisition? How many owned stores is that take Capco to now? And what's kind of your outlook for more acquisitions like this come in the coming year?
Bill Boor
Yes, we had a bit of an increase in our total owned stores, some and it came a big chunk of that came through the Solitaire acquisition a year ago, and we were in the low 40s before that solitary, I think brought us 22. And then with a few greenfields. And then the Kentucky Dream Homes acquisition were 72 now. And so I think you're asking for a little more detail on those assets as they reach it.
Jay McCanless
We are just yes.
Are there are there other larger dealer change out there that you might be looking at from an M&A perspective? And if there are what kind of is the goal to get to 100, 150.
What's what's kind of your long-term vision for the retail stores.
Bill Boor
Yet on updating back and tell you how we think about retail real quickly. We have not generally had a strategy is trying to grow retail for its own sake. We've had a strategy has been very clear that we want to look at every one of our plants in a local market and make sure we've got the right access to market. So if we look down the road and we see, for example, others on integration by competitors and that increases our risk of distribution. That's when we tried to figure out a good solution. That solution could be a good thing from developing a closer partnership with the existing dealer independent dealer two on greenfield and two acquisitions in the example that Kentucky dream on. So we don't have a goal to reach a certain level we're not pushing growth in the retail segment necessarily. We're only happy to make a good acquisition when it's on both the good investment and improves our distribution, Kentucky dream. And this is a great example of that. I mean, does run a great business. They've built a great business and really thrilled at the fact that he stay on board and as management team stay on board because they're here what they do. They have five stores in Kentucky and in Florida and some that we folded them or we purchase them during the third quarter.
Jay McCanless
Got you.
And the other thing I wanted to ask about is what you're talking about before, Allison, with the increased cost of goods sold, is it still just OSB.? Or are you starting to see some some wage inflation kick in? Maybe what are the drivers that are driving the COGS line?
Allison Aden
Yes. So from the coast is largely the commodities, as we mentioned last quarter with the focus, of course on that would be in lumber and we ship pretty close to it. And now currently, it looks like it's up similar trends to what we talked about last quarter.
Jay McCanless
That's all I had, thank you.
Bill Boor
Thank you.
Operator
Then one moment for our next question. And our next question will be coming from Camden Roberts of the University of South Carolina. Camden. Your line is open.
Camden Roberts
Hey, guys. Thank you for the great earnings call. I'm calling from South Carolina. We were actually just at the Hamlet factory in North Carolina, and we had a great tour. And I just wanted to ask you what are you what should we be looking at in 2024, are you optimistic about Anthem and those duplex sales? I'm sure there's a lot of pent-up demand for that, or should we be looking more at the recent Solitaire acquisition? What are you most optimistic about? And what should we be focusing on in 2024?
Bill Boor
Big question, I'm glad to hear you're at him, Pamela knew that that was a good tour. We're pretty proud of that new plant and now it's come up and we think that's targeted at the right point in the market for what's going on from an industry dynamics perspective, they're making kind of at a lower price point products and on bottom, and they really come out very quickly towards most excited. I mean, we talked about Anthem. We think that's I think that's going to be good business for us also, to be honest, I also think that from a broader perspective, those are the kinds of solutions that can move the ball forward on affordability. So I'm really excited about the potential of the industry, taking advantage of those changes and code could get better solutions for affordability.
You touched on Solitaire. We've had a year now with Solitaire. We're excited about that acquisition. We told folks when we announced that acquisition that we bought some really good plants and they've got a great brand in the market. That's kind of in a particular niche. And we think that's going to Florida acquisition is going to be a great one for us overall, again, you asked a broad question and I could probably talk all day. Overall, I'm excited to see the industry start picking up as community orders start to pick up. The dealer channel has been it's gotten back on its feet, and I think it's doing pretty well. If you could almost look at the difference in the peak of sales to this industry compared to the most recent seasonally adjusted level in December based on higher shipments and pretty much can be explained by the drop-off in community orders this past year. So I think as we as the year unfolds. I'm not able to make predictions about it, but as the year unfolds and we see communities get their inventory behind them and start resuming their orders, I think it's a lot of good positive upside for the industry, silico ramping their ability to handle.
Yes, yes, yes, your open-ended questions.
Daniel Moore
Thank you.
Camden Roberts
Very.
I mean, I know it is open-ended. I mean, there's a lot to be excited about. So I just wanted to know what where the midpoint is down, but those read up the community sales, two of those have exciting. So thank you very much.
Bill Boor
Alright, thank you.
Operator
And again, if you'd like to ask a question, please press star one one on your touchtone telephone. And our next question will be a follow up from Daniel Moore of CJS Securities. Daniel, your line is open.
Daniel Moore
Thank you again. And just wanted a quick question or two on kind of update on on financing and availability. So any meaningful change in spreads over the last 90 plus days, both for chattel as well as land home versus traditional stick-built mortgage rates? And how would you describe the lending environment today relative to a year ago, are you seeing more community banks exit from stable or others backfilling? Any kind of color you might give there would be helpful.
Thank you.
Bill Boor
Okay.
Daniel Moore
Yes, I'll start with the expanse of the rates for just home only. Loans quoted rates are in the high 8%, low 9% range. Still and that's pretty in pretty consistent these past 90 days.
Bill Boor
And picking up on your question that I hope I rephrase it accurately kind of the investors in MH loans, for example, community banks and are and like regional banks and credit unions type investors, they going to be finicky. And and I tell you that I don't want this to be alarmist at all because it shouldn't be, but it's tightened up a little bit, but I think we'll work through that. I don't think it's a major issue from the perspective of lending availability to the consumers. And why I say it is there are a lot of folks in that market and they're not all heavily dependent on those on those outlets or those final investors. And one thing we've talked about over the past, I'm losing track of time, but it's been a while is that for a while, GSE loans, the conforming loans had really kind of gone out of the market. And basically what happened is GSEs raised their their requirements, raised their terms and interest rates. And the investors we're talking about is that the regional banks, credit union type investors really didn't respond as quickly. I think that's because they had a lot of capital put in place. Now what we're seeing is that the regional the calm, the nonconforming investors as increased their requirements. But what happens is GSEs become more competitive in the market, and we'll probably see a swing back to that.
That final funding source for the loans as usual?
I think I'm giving a long answer to a short question, but we are not we'll watch those dynamics, but we are not really seeing anything it gives us concern about the consumers access to reasonably priced loans.
Daniel Moore
No, that's good color. I appreciate it. And I'm going to ask one more and maybe it's maybe it's a variation on the prior question, maybe not let you judge, but and at this stage, we're stable pretty stable at 60 percent-ish capacity utilization, plus or minus. Would you be looking to add capacity. When you think about the opportunity set and the lack of affordability, no availability in terms of affordable homes over the next two, three, five years or we do more let's kind of stick where we are wait and see and see how the demand builds over the coming quarters.
Thanks.
Bill Boor
Yes, that's a really good question, actually, on I guess I would say it's the latter or the announcement. It's the former customers or restated, um, I would not I don't think Cameco would hesitate to add capacity in this industry, given what we see strategically when you look at a strategic timeframe, which I define as three plus years from now, it takes time to put capacity in place. This country has depending on your favorite economist, a f housing unit deficit to be filled and so long strategically, we look great through the many cycles like the one we're operating in right now. And we know that there's an opportunity to continue doing more to bring down to it, increase the availability of affordable housing.
Daniel Moore
Very helpful.
And thanks again, and look forward to catching up soon.
Allison Aden
Thanks, Dan.
Bill Boor
Thanks, Dan.
Operator
I would now like to turn the conference back to Bill for closing remarks.
Bill Boor
Thank you.
From I mentioned Louisville show in my opening comments. We showcased 15 homes from nine Cavco plants at the show. We also had our lending company, CountryPlace Mortgage there. They were there to talk to customers about how we can meet their commercial and consumer lending needs. So it was a great effort to trying to get out there and and so we can do from a partnership perspective.
I want to take a quick moment to thank everyone at Cavco who has been involved in our development and launch of the Anthem duplex line. And in all that went into the Louisville show from the folks who are designing and building these homes for the marketing and sales teams. The commitment and teamwork have really been outstanding at both events. It was great to see the strength of our organization coming to the forefront. Our drive during this downturn has been to keep focused on getting better in every way. So we're ready to run when the inevitable market upswing occurs. And I'm very confident we're doing just that.
So I want to thank you as always, for your interest in Cavco, and we look forward to keeping you updated on our progress.
Operator
If this concludes today's conference call. Thank you for participating. You may now disconnect.
