For the quarterly period ended June 28, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting stand ...

Champion Homes (SKY) Q1 2026 Earnings Call August 06, 2025 08:00 AM ET Company ParticipantsJason Blair - Manager - IRTim Larson - President & CEOLaurie Hough - Executive VP, CFO & TreasurerDaniel Moore - Director - ResearchPhilip Ng - Managing DirectorJesse Lederman - Associate DirectorConference Call ParticipantsGreg Palm - Senior Research AnalystMatthew Bouley - Senior Equity Research Analyst - U.S. Homebuilding & Building ProductsMike Dahl - MD, Equity Research - Homebuilders & Building Products AnalystO ...

Champion Homes (SKY) Q1 2026 Earnings Call August 06, 2025 08:00 AM ET Speaker0Good morning, and welcome to the Champion Homes First Quarter Fiscal twenty twenty six Earnings Call. My name is Mina, and I will be the coordinating your call today. I will now turn the call over to your host, Lerick, to begin. Jason, please go ahead.Speaker1Good morning. Thank you for taking the time to join us for today's call and review of our business results for the first quarter ended 06/28/2025. Here to review our results ...

Champion Homes (SKY) came out with quarterly earnings of $1.19 per share, beating the Zacks Consensus Estimate of $0.88 per share. This compares to earnings of $0.91 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +35.23%. A quarter ago, it was expected that this manufactured and modular housing maker would post earnings of $0.75 per share when it actually produced earnings of $0.65, delivering a surprise of -13.33%.Over the l ...

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Financial Performance - The company's revenue reached $2.6 billion[22], with an adjusted EBITDA margin of 21%[22] - Free cash flow amounted to $493 million[22] - The average US home selling price was $98 thousand[22] - Adjusted EBITDA was $545 million[22] - Net income was $402 million[22] Market Position and Production - The company sold 25,910 homes in North America[22] - The company's HUD market share is 20.4% based on shipment data[22] - Gross margin was 31.4%[22] Strategic Initiatives - The company is focused on increasing operating capacity and margin through product design and efficiency improvements[39] - The company is pursuing production automation and enterprise-wide digital technologies to reduce waste and improve decision-making[40] - The company is implementing an organic and acquisition-based growth strategy to expand into new geographies[41]

Financial Performance - Champion Homes reported net sales of approximately $2.5 billion for fiscal 2025, maintaining a market share of about 2.5% in the total U.S. housing market[16]. - For fiscal 2025, net sales increased by $458.6 million, or 22.7%, to $2.5 billion compared to fiscal 2024[162]. - U.S. manufacturing and retail net sales rose by $472.4 million, or 25.1%, driven by strong demand and the acquisition of Regional Homes[163]. - The number of U.S. homes sold increased by 20.6% to 25,273 units, with an average home selling price of $93.3 thousand, up 3.7%[162][163]. - The backlog of customer orders at the end of fiscal 2025 was $343.4 million, an increase from $315.8 million in fiscal 2024[157]. - The company's gross profit margin improved to 26.7% in fiscal 2025, up from 24.0% in fiscal 2024[160]. - Total gross profit for fiscal 2025 was $664.0 million, an increase of $178.2 million or 36.7% compared to $485.8 million in fiscal 2024[167]. - Adjusted EBITDA for fiscal 2025 was $285.1 million, representing 11.5% of net sales, compared to 12.1% in fiscal 2024[160]. - Interest (income), net was $(17.0) million in fiscal 2025, a decrease of $11.3 million or 39.9% compared to $(28.3) million in fiscal 2024[175]. - Income tax expense for fiscal 2025 was $53.7 million, representing an effective tax rate of 20.9%, compared to $47.1 million and 23.5% in fiscal 2024[177]. Operations and Manufacturing - The company operates 48 manufacturing facilities across 20 states in the U.S. and three provinces in Canada, employing around 9,000 individuals[16][36]. - The company is expanding its retail presence with 72 active sales centers across the U.S. as of the end of fiscal 2025[18]. - The company maintains a one to three-week supply of raw materials at manufacturing facilities to mitigate supply chain challenges[45]. - The company began production in previously idled facilities in Decatur, Indiana, and Bartow, Florida, to enhance manufacturing capacity[153]. - The company owns or leases six idle manufacturing facilities that could be utilized for additional production capacity, requiring capital investments[132]. Market Trends and Challenges - The housing industry experiences seasonal fluctuations, with demand for single-family new home products typically peaking in spring and summer, leading to decreased traffic during holidays and winter months[69]. - Raw material shortages and price increases, particularly for lumber and steel, could materially impact construction costs and cash flows, especially during high demand periods[72]. - In fiscal 2025, the U.S. imposed increased tariffs on foreign imports, which may lead to higher costs of goods and potential supply chain disruptions, adversely affecting financial results[73]. - Labor shortages and turnover in the homebuilding industry can increase production costs and delays, adversely affecting net sales and operational results[89]. - Increased costs of transportation due to a lack of qualified drivers may impact the cost of goods sold and the ability to meet customer demand timely[90]. - Changes in consumer preferences and the introduction of new product features are critical for maintaining competitiveness in the factory-built housing market[80]. - Regulatory changes related to environmental standards and zoning ordinances could adversely affect the production and sale of factory-built homes, impacting sales and cash flows[85][86]. - Public health issues, such as pandemics, could disrupt operations and have a material adverse effect on business results[84]. Strategic Initiatives - Champion Homes began lending activities through Champion Financing, providing tailored financing products to enhance home ownership accessibility[19]. - The company is focused on enhancing operational excellence and leveraging digital technologies to improve customer engagement and streamline processes[21][24]. - The company is pursuing strategic acquisitions to expand its capabilities efficiently, including retail locations and manufacturing facilities[24]. - The company acquired Regional Homes in October 2023, expanding its manufacturing and retail presence in the Southeast U.S.[152]. Financial Position and Cash Flow - The company had cash, cash equivalents, and restricted cash of $610.3 million at the end of fiscal 2025, up from $495.1 million at the end of fiscal 2024[184]. - The company has a $200.0 million revolving credit facility with no borrowings as of March 29, 2025, and total available borrowings under the credit agreement were $168.5 million as of March 30, 2024[189]. - The company anticipates compliance with its debt covenants and projects cash availability to exceed operational needs for the next year[184]. - Cash used in investing activities significantly decreased to $46.2 million in fiscal 2025 from $485.7 million in fiscal 2024, primarily due to the absence of major acquisitions[187]. - Cash used in financing activities was $73.0 million in fiscal 2025, compared to $10.9 million provided in fiscal 2024, largely due to $80.0 million in common stock repurchases[188]. Risks and Liabilities - The company faces risks from product liability claims and warranty claims, which can be costly and impact financial results[95]. - Increased interest rates and inflation have limited the purchasing power of potential customers, adversely affecting sales and financial results[107][110]. - The availability of wholesale financing for retailers is limited, which could negatively impact inventory levels and sales[111]. - Contingent repurchase obligations related to wholesale financing may incur additional expenses and reduce cash flows[112]. - The company has contingent liabilities totaling $17.5 million in surety bonds and $31.5 million in letters of credit as of March 29, 2025[194]. - The company recorded charges of $34.5 million for a remediation plan related to water intrusion product liability claims during the fourth quarter of fiscal 2024[197]. Corporate Governance and Compliance - The company is subject to extensive regulations affecting the production and sale of factory-built housing, with non-compliance potentially leading to sanctions[87]. - A material weakness in internal control over financial reporting was identified due to ineffective controls in the Regional Homes retail operations acquired in October 2023[117]. - The company has established a comprehensive cybersecurity program overseen by the Audit Committee, focusing on risk management and incident response[122][123]. - The company does not expect any material adverse effects from cybersecurity threats on its business strategy or financial condition[129].

Financial Data and Key Metrics Changes - In fiscal year 2025, the company sold over 26,000 homes, a 19% increase year over year, with revenue growth of 23%, totaling $2.5 billion [5] - Fourth quarter net sales increased 11% to $594 million, with homes sold increasing 6% to 6,171 units [9][17] - Consolidated gross profit rose 55% to $152 million, with gross margin expanding by 740 basis points to 25.6% [20] - Net income for the fourth quarter increased by $33 million to $36 million, or earnings of $0.63 per diluted share [22] Business Line Data and Key Metrics Changes - U.S. factory-built housing revenue increased by 10%, with homes sold rising 5% to 5,941 homes [18] - Canadian revenue was $25 million, representing a 22% increase in homes sold, although the average selling price decreased by 9% to $110,600 [20] - Sales to independent retail channels and captive retail stores both increased compared to the prior year [10] Market Data and Key Metrics Changes - The backlog at the end of the year was $343 million, up 9% from the previous year and 10% sequentially [9] - Average backlog lead time was eight weeks, within the target range of four to twelve weeks [9] Company Strategy and Development Direction - The company is focused on expanding retail capabilities and investing in new products and services, including the acquisition of Eisman Homes [6][15] - The strategy includes navigating market uncertainties while maintaining a focus on customer-centric growth and operational efficiency [8][26] - The company aims to leverage regulatory changes to enhance market opportunities for manufactured housing [46] Management's Comments on Operating Environment and Future Outlook - Management noted that demand has been less predictable compared to a normal spring selling season, with a shift towards smaller floor plans [13] - The company anticipates low single-digit revenue growth for Q1 of fiscal 2026, reflecting mixed consumer sentiment and demand [12][25] - Management remains confident in the long-term outlook, emphasizing the need for affordable housing across the U.S. and Canada [25] Other Important Information - The effective tax rate for the quarter was 17.1%, down from 19.2% in the prior year, primarily due to increased tax credits [21] - The company returned $20 million to shareholders through share repurchases and refreshed its $100 million share repurchase authority [24] Q&A Session Summary Question: Can you elaborate on discussions with customers in retail and community markets? - Management noted mixed in-store traffic but an increase in digital leads, indicating more serious buyers in the market [28][29] Question: What is the impact of SG&A increases despite revenue decline? - Management indicated that the increase was due to cyclical industry shows and would not recur as strongly in the first half of the fiscal year [35] Question: How is the company approaching share repurchases? - Management expressed a balanced capital allocation strategy and indicated they would be opportunistic based on share performance [38][40] Question: Were there any shipping issues due to weather conditions? - Management acknowledged slower markets in Texas and parts of the South, impacting shipping and order fulfillment [42] Question: What are the dynamics of manufactured housing and potential share gains? - Management highlighted the importance of customer experience and regulatory changes that could enhance market opportunities [46][48] Question: What is the outlook for gross margins? - Management expects near-term gross margins in the 25% to 26% range but anticipates structural margins to return to 26% to 27% in the long term [56] Question: How will the removal of the permanent chassis requirement impact costs? - Management indicated it would allow for more flexible designs and potentially lower transport costs, enhancing product offerings [59][60] Question: What is the status of FEMA orders? - Management confirmed no orders from FEMA yet but is prepared for future opportunities [97] Question: How is credit availability for chattel loans? - Management reported stable credit availability, with rates still higher than traditional fixed-rate mortgages [98]

Financial Data and Key Metrics Changes - In fiscal year 2025, the company sold over 26,000 homes, a 19% increase year-over-year, with revenue growth of 23%, totaling $2.5 billion [4] - Fourth quarter net sales increased 11% to $594 million, with homes sold increasing 6% to 6,171 units [8][18] - Consolidated gross profit rose 55% to $152 million in the fourth quarter, with gross margin expanding by 740 basis points to 25.6% [21] - Net income for the fourth quarter increased by $33 million to $36 million, or earnings of $0.63 per diluted share [23] Business Line Data and Key Metrics Changes - U.S. factory-built housing revenue increased by 10%, with homes sold rising 5% to 5,941 homes [18] - Canadian revenue during the quarter was $25 million, representing a 22% increase in homes sold, although the average selling price decreased by 9% to $110,600 [21] - Sales to independent retail channels and captive retail stores both increased compared to the prior year [10] Market Data and Key Metrics Changes - The backlog at the end of the year was $343 million, up 9% from the end of the previous year [9] - Average backlog lead time ended at eight weeks, within the target range of four to twelve weeks [9] - The company noted mixed traffic in retail stores, with some regions showing strong buyer engagement while others were weaker [30] Company Strategy and Development Direction - The company is focused on expanding its retail capabilities and has announced the acquisition of Eisman Homes to enhance its market presence [5][15] - The strategic priorities include investing in new products and services, enhancing customer experience, and navigating market uncertainties [7][28] - The company is optimistic about the long-term outlook for affordable housing and is actively managing costs while investing in growth [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unpredictable demand environment and noted a shift towards smaller floor plans with fewer features [13] - The company anticipates low single-digit revenue growth for Q1 of fiscal 2026, reflecting mixed consumer sentiment [12] - Management expressed confidence in the company's ability to navigate current challenges while focusing on long-term strategic growth [27] Other Important Information - The company has a strong cash position with $610 million in cash and cash equivalents and plans to continue share repurchases [24][25] - The effective tax rate for the quarter was 17.1%, down from 19.2% in the prior year, due to increased tax credits [22] Q&A Session Summary Question: Can you elaborate on discussions with customers in retail and community markets? - Management noted that digital leads are up, but in-store traffic is mixed across regions, with more serious buyers in the market [30][31] Question: What is the status of the community segment? - The community segment saw year-over-year growth, now representing 28% of overall units, but remains cautious due to market dynamics [33] Question: Can you break down the increase in SG&A expenses? - Management indicated that the increase was due to industry shows and higher sales volumes, but specific components were not disclosed [37] Question: Thoughts on share buybacks? - Management expressed a balanced capital allocation strategy and indicated they would be opportunistic with share repurchases [40][42] Question: Were there any shipping issues due to weather? - Management confirmed that weather conditions in Texas and the South impacted order rates, but they feel balanced regarding inventory [44] Question: What are the dynamics of manufactured housing and potential share gains? - Management highlighted the importance of captive retail and consumer financing, as well as regulatory changes that could support growth [48][49] Question: Can you clarify the near-term gross margin guidance? - Management stated that the guidance reflects short-term pressures but expects structural margins to return to the 26% to 27% range in the long term [57] Question: How would the removal of the permanent chassis requirement impact costs? - Management noted that it would allow for more flexible designs and potentially lower transport costs, but would need to balance product pricing [61] Question: What is the current state of credit availability for chattel? - Credit availability remains stable, with rates still higher than traditional fixed rates for well-qualified buyers [100]

Company Performance - Champion Homes reported quarterly earnings of $0.65 per share, missing the Zacks Consensus Estimate of $0.75 per share, but showing an increase from $0.62 per share a year ago, resulting in an earnings surprise of -13.33% [1] - The company posted revenues of $593.87 million for the quarter ended March 2025, which was 1.22% below the Zacks Consensus Estimate, but an increase from $536.36 million year-over-year [2] - Over the last four quarters, Champion Homes has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Stock Outlook - Champion Homes shares have declined approximately 4.4% since the beginning of the year, compared to a decline of 1.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.97 on revenues of $666.6 million, and for the current fiscal year, it is $3.89 on revenues of $2.66 billion [7] Industry Context - The Building Products - Mobile Homes and RV Builders industry, to which Champion Homes belongs, is currently ranked in the bottom 20% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Champion Homes' stock performance [5]