Earnings call transcript: Cavco Industries beats Q1 2026 forecasts with strong EPS

Cavco Industries reported robust financial results for Q1 FY2026, significantly surpassing analyst expectations. The company posted earnings per share (EPS) of $6.42, well above the forecast of $5.55, marking a 15.68% surprise. Revenue reached $556.9 million, exceeding the anticipated $524.97 million. Following the earnings announcement, Cavco’s stock rose 3.13%, closing at $403.67. According to InvestingPro data, the company maintains strong financial health with an overall score of "GOOD" and holds more cash than debt on its balance sheet.

Key Takeaways

• Cavco’s Q1 EPS exceeded expectations by 15.68%.
• Revenue increased by 16.6% year-over-year, driven by strong performance in the Factory Built Housing segment.
• The stock price rose 3.13% in post-earnings trading.
• The company announced the acquisition of American HomeStar for $184 million.
• Cavco continues to focus on geographic optimization and expanding consumer lending programs.

Company Performance

Cavco Industries demonstrated strong performance in Q1 FY2026, with a notable increase in net revenue and earnings per share compared to the previous year. The company benefited from increased production rates, a strategic acquisition, and a focused marketing approach. The Factory Built Housing segment, in particular, showed significant growth, reflecting the industry’s trend toward manufactured housing due to affordability concerns. InvestingPro analysis reveals the company’s impressive 16.6% revenue growth and healthy gross profit margin of 22.4% over the last twelve months.

Financial Highlights

• Revenue: $556.9 million, up 16.6% year-over-year.
• Earnings per share: $6.42, compared to $4.11 last year.
• Pre-tax profit: $65.3 million, up 48.9%.
• Gross margin: 23.3%, an increase of 160 basis points.

Earnings vs. Forecast

Cavco Industries delivered a strong earnings performance, with EPS of $6.42 surpassing the forecast of $5.55 by 15.68%. Revenue also exceeded expectations at $556.9 million against a forecast of $524.97 million. This performance indicates a positive trend compared to previous quarters, where earnings surprises were less pronounced.

Market Reaction

Following the earnings report, Cavco’s stock experienced a 3.13% increase, closing at $403.67. This movement reflects investor confidence in the company’s strong financial performance and strategic initiatives. The stock remains within its 52-week range, with a high of $549.99 and a low of $351.28, suggesting room for further growth. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels, though analysts maintain positive targets with upside potential. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

Cavco remains cautiously optimistic about future market conditions. The company plans to focus on geographic optimization and is exploring the expansion of its consumer lending programs. Despite potential tariff impacts, Cavco is committed to maintaining its growth trajectory through strategic investments and market expansion.

Executive Commentary

CEO Bill Bohr emphasized the company’s focus on affordability and strategic investments, stating, "Affordability is coming to the forefront as it has been and should be for the foreseeable future." He also highlighted the company’s capacity expansion efforts: "We’re making some pretty high return investments in our plants, and we’re growing our capacity."

Risks and Challenges

• Tariff Impacts: Estimated to affect costs by $2-5.5 million quarterly.
• Market Saturation: Potential challenges in maintaining growth in a competitive market.
• Supply Chain Issues: Ongoing global supply chain disruptions could impact production.
• Macroeconomic Pressures: Economic downturns may affect consumer purchasing power.
• Input Costs: Fluctuations in raw material prices could impact profitability.

Q&A

During the earnings call, analysts inquired about regional market variations, particularly in the Southeast, and pricing dynamics. Executives addressed concerns about tariff impacts and input costs, reaffirming their strategy to mitigate these challenges through operational efficiencies and strategic pricing.

Full transcript - Cavco Industries Inc (CVCO) Q1 2026:

Conference Operator: Good day, and welcome to the First Quarter Fiscal Year twenty twenty six 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. Instructions will be given at that time.

As a reminder, this call may be recorded. I would now like to turn the call over to Mark Fussler, Corporate Controller, Head of Investor Relations. Please go ahead.

Mark Fussler, Corporate Controller, Head of Investor Relations, Cavco Industries: Good day, and thank you for joining us for Capital Industries’ first quarter fiscal year twenty twenty six earnings conference call. During this call, you’ll be hearing from Bill Bohr, President and Chief Executive Officer Alison Aidan, Executive Vice President and Chief Financial Officer and Paul Bigby, 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. Forward looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are 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 cause its actual results to differ materially from those expressed in any forward looking statements made by or on behalf of Cavco. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, Friday, 08/01/2025. CAPCO 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. Now I’d like to turn the call over to Bill Bohr, President and Chief Executive Officer.

Bill?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Welcome and thank you for joining us today to review our first quarter results for fiscal twenty twenty six. I’m happy to report it was a very strong quarter. Revenue was up 9.5% year over year and 16.6% sequentially. Our operating profit was up about 50% compared to both last quarter and a year ago. All operations contributed to these results and I’ll get into that.

Over the last several quarters, we’ve been executing on a plan to push production up where we have the backlog to support it. Increasing production rates can take some time. So this has been a decision in many of our plants between pressing forward with increases to take advantage of a possible continuation of the positive order trends or holding back out of concern that the trend might not hold in future quarters. We have deliberately chosen to press forward with the confidence of knowing our plants can adjust down if necessary. While uncertainty about future quarter demand remains, quarter our plan paid off.

Orders increased resulting in an essentially flat sequential backlog even with our increased level of production. Executing this plan resulted in a record of 5,416 homes shipped this quarter. We’re often asked about regional differences on these calls, and I feel that in most cases, there aren’t any headline takeaways. The regions often show differences from quarter to quarter, but they tend to keep pace with each other over time. This quarter, I do want to point out that the Southeast region did lag the orders with Q1 shipments very slightly below the preceding quarter.

Our backlogs in the plants serving the Southeast have dropped and we’ll need to watch closely to see if we’re able to maintain production levels there. We manage this on a plant by plant basis and it just points to the continuing uncertainty in the overall market. Another noteworthy result this quarter was the increase in average selling price. As we’ve discussed before, there are several factors affecting our ASP. First is the proportion of company shipments that go through our owned retail stores.

This quarter, that driver actually had a downward effect on ASP because sales through our stores were relatively flat while wholesale shipments to third parties increased. Next is the mix of single section to multi section homes shipped. We saw the mix shift toward we saw that mix shift toward multi section homes this quarter, which push pushes ASP upward. However, the biggest effect this period was an increase in the average price for both single section and multi section homes sold. This is the best approximation for the price of similar products from period to period.

So we saw true price appreciation this quarter after a very long run of very modest declines. Whether this first upward move in a while becomes a trend depends on the direction of industry orders going forward. I don’t wanna miss the opportunity to point out the strong performance in financial services, which turned a significant loss a year ago into a nice profit this year, driven by better insurance results. It’s never fun to explain that bad weather was the cause of poor insurance results. No one likes to hear that reason.

This quarter, it’s only fair to acknowledge that favorable weather contributed the year over year improvement. It’s also important to understand that on top of the relatively good weather, we have made very meaningful improvements to our underwriting criteria and policy pricing, which are significantly improving the results under any weather conditions. Our insurance operations have done a fantastic job making sure policies are priced right for their risk, and we expect continuing strong results over time. Shifting topics, a few weeks ago, we announced the agreement to purchase American HomeStar. The acquisition, which will use approximately $184,000,000 in cash, is expected to close early in our third quarter.

As previously discussed, this deal brings with it an opportunity for significant cost reduction as well as product and retail optimization benefits. Since the announcement, members of our leadership team have had the opportunity to visit many of the American HomeStar operations. The introductory visits confirmed what we knew in general and from our due diligent work due diligence work. This is the first class organization, and we continue to be very excited about what they will bring to KAVCO. The American HomeStar acquisition along with ongoing investments throughout our operations demonstrates the execution of our capital allocation priorities.

We also continued our four plus year buyback program, repurchasing $50,000,000 of stock this quarter. Cumulatively since the initial repurchase authorization in fiscal twenty twenty one, we’ve bought back 16.6% of our outstanding shares. With strong cash flows and a conservative balance sheet, we remain confident that we can repurchase shares without hindering any strategic opportunities. Now I’ll turn it over to Alison to give more detail on the financial results.

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Thank you, Bill. Net revenue for the 2026 was $556,900,000 up $79,300,000 or 16.6% compared to $477,600,000 during the prior year. Sequentially, net revenues increased $48,500,000 driven by an increase in homes sold and the average revenue per homes sold. Within the Factory Built Housing segment, net revenue was $535,700,000 up $77,600,000 or 17% from $458,000,000 in the prior quarter. The increase was primarily due to a 14.7% increase in homes sold and a 1.9% increase in average revenue per home sold.

The increase in average revenue per home was due to product pricing increases and more multi wides in the mix, partially offset by a lower proportion of homes sold through our company owned stores. Factor utilization for 2026 was approximately 75% when considering all available production days versus 65% in the prior year quarter. Financial Services segment net revenue was $21,200,000 up $1,600,000 or 8.2% from $19,600,000 in the prior year quarter. The increase was due to higher insurance premium rates, partially offset by fewer loan sales and fewer insurance policies in force. Consolidated gross margin in Q1 as a percentage of net revenue was 23.3%, up 160 basis points from 21.7% in the same period last year.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: In the factory built housing segment, the gross profit was 22.6% in 2026, consistent with 2025.

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Financial services gross margin as a percentage of revenue increased to 40.9% in 2026 from a negative 0.6% in 2025. This increase is primarily due to the insurance division having fewer claim losses from storms, as the prior year period was significantly impacted by multiple weather events in Texas and New Mexico. Selling, general and administrative expense in the 2026 was $69,100,000 or 12.4% of net revenue compared to 64,900,000.0 or 13.6% of net revenue during the same quarter last year. The increase was due to higher bonus and commission expenses on higher earnings compared to the prior year. Interest income for the first quarter was $5,100,000 down from $5,500,000 in

Conference Operator: the prior

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: quarter. Pre tax profit was up 48.9% this quarter to $65,300,000 from $43,900,000 in the prior year period. The effective income tax rate was 20.9% for the first fiscal quarter compared to 21.5% in the same period in the prior year. Net income was $51,600,000 compared to net income of $34,400,000 last year, and diluted earnings per share this quarter was $6.42 versus $4.11 in last year’s first quarter. Before we discuss the balance sheet, I’d like to take a minute to talk about capital allocation.

During the first quarter, we repurchased $50,000,000 of common share under our Board authorized share repurchase program, leaving approximately $178,000,000 under authorization for future repurchases. Additionally, we announced our intention to acquire American HomeStar, a transaction expected to utilize roughly $184,000,000 in cash. Our capital deployment will continue to align with our strategic priorities, which include enhancing our plant facilities, pursuing additional acquisitions, and consistently assessing opportunities within our lending operation, with share buybacks serving as a mechanism to prudently manage our balance sheet after considering these initiatives. Now I’ll turn it over to Paul to discuss the balance sheet.

Paul Bigby, Chief Accounting Officer, Cavco Industries: Thanks, Allison. In the quarter, we had a decrease in cash and restricted cash of $6,900,000 bringing our balance to $368,400,000 We generated $55,500,000 of cash from operating activities, reflecting solid operating performance for the quarter. We used $7,700,000 in investing cash flows for new equipment in certain facilities and used $54,700,000 in financing activities, primarily due to stock buybacks. Comparing the 06/28/2025 balance sheet to 03/29/2025, the increase in accounts receivable is related to organic growth in the factory built housing segment, with unit shipments up 7% in the 2026 versus a sequential quarter. Inventories increased from higher finished goods at company owned retail stores, as well as higher raw material purchases to support increased production.

The decrease in prepaid expenses and other current assets is a result of lower federal income tax prepayments, primarily related to timing. Increase in long term commercial loans receivable is a result of increased lending under these programs as a result of larger sales volume. Accrued expenses and other current liabilities are up from the increased compensation and bonus accruals on higher earnings, increased insurance loss reserves and higher customer deposits. And finally, as previously discussed, treasury stock increased, the stock buybacks executed during the quarter. Now I’ll turn it back to Bill.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Okay, thank you, Paul. Michelle, let’s go ahead and open up the line for questions.

Conference Operator: Thank you. And our first question comes from Daniel Moore with CJS Securities. Your line is open.

Daniel Moore, Analyst, CJS Securities: Thank you. Good afternoon, Bill, Allison, Paul, Mark. Appreciate the questions. Obviously, the plan paid off. New orders increased nicely this quarter.

Is that a level of ordering continuing thus far into fiscal Q2 accelerating at all? Or do you expect that to moderate in coming quarters?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: No real comment on the expectation. I mean, you hit these months in the summer and from a seasonal perspective, it can slow down a little bit. But we feel like at a high level, there’s kind of a continuation. I mean, there’s definitely nothing that I’m seeing in the market or hearing about that says that, we’re seeing a drop. I always referred as well, even though I know it’s a bit of a lagging indicator, I always refer to the, HUD code shipments data on a seasonally adjusted basis and that has remained strong in recent months.

So still feeling like, you know, as I’ve indicated, I mean, we were really happy with the quarter. I think we executed really well as a company. Know, uncertainty continues out there, so we’re gonna have to keep watching.

Daniel Moore, Analyst, CJS Securities: Makes sense. Very helpful. You mentioned the Southeast. I mean, obviously, Florida has been challenged for a while. Are there other where you’re seeing any incremental softness?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. Yeah. Thanks. That’s an opportunity to clarify because I didn’t really think to make that as clear. Florida has been its own situation for quite a while.

And I’d have to say, I really don’t see any improvement there. Just the general, I think the real estate market there has been struggling. You know, so we’re holding our own and hanging in there and feel good about how we’re positioned. But my comments again, Dan, thanks for giving me a chance to clarify. My comments were a little broader than that and almost exclusive of Florida, which acts very separately.

So you kind of you go up through the Southeastern States, and I don’t want to sound like doom and gloom. I mean, it was steady. In our case, as I talked about this direction of let’s go ahead and lean into the backlogs we have. Our plants have done a great job of accelerating production through that region. And compared to the other regions, it was a little you know, a little of a standout lagging region for us this quarter as far as quarter over quarter activity.

So I don’t know how to give the right tone on this. So I’ll just kind of be as straightforward as I can with my comment. It’s not doom and gloom, but it was the slowest of our major regions when we looked at what was generally a pretty positive order quarter.

Daniel Moore, Analyst, CJS Securities: Got it. Okay. I’ll follow-up offline, but ASPs gave great color, greatly appreciated. You know, between the two factors, is it more a function of passing on inflation and input costs, or is the mix meaningfully meaningfully improving as well?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah, mix shifted a little bit to multiple section homes, which of course would kind of be an upward move. But I’ll tell you the biggest biggest factor this time was really that, you know, we same say same product appreciation. We really looked at in aggregate single section homes, did they move up in average selling price on and I’m thinking wholesale right now. And multi section owns, did they move up as well? And this this quarter both moved up.

And it’s been a long time since we’ve seen that kind of price appreciation after correcting for product mix and after correcting for, you know, the proportion that’s sold through our retail stores. So, you know, I did wanna point out because I know there’s been a long discussion about, you know, I keep overusing the term slow leakage that we had seen for a number of quarters in that, let’s call it pure price. And there was a significant upward bump this time. Again, those things can move around a little bit, but it’s nice to see it move that direction. The other question was whether that was I think, Dan, I think your other question was whether that was due to tariff pressure.

You know, I I don’t wanna belabor it. I’ve got a little different view than some when we talk about this. It’s a matter of price moving up where supply and demand for our products was healthy straight. So, we did have an impact from tariffs and Allison commented on that, I believe we can go into that. And, you know, but I don’t, you know, I don’t view us as necessarily being able to say oops, our product right or our cost just went up.

So we’re going to pass through a price increase if the market doesn’t support it. So I look at this price movement kind of as its own data point separate from our cost structure.

Daniel Moore, Analyst, CJS Securities: Okay. Really helpful. I know you don’t give guidance. Financial services had a really solid quarter. Just curious what you’ve seen so far quarter to date in terms of claims.

Obviously, there’s been some well documented tragic flooding in Texas. I know it’s isolated and your business is a lot more geographically diverse, but, what are you seeing so far there?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. Yeah, you’ve said it well. I mean, it was tragic what’s gone on there. From a claims perspective, it was not a huge generator of claims. And I think that’s the nature of the, pretty not dense area that a lot of that flooding occurred.

So we’re not seeing a inordinate amount of claims from that event. And I think, you know, things are looking pretty good overall from a business perspective and insurance. And you’re right, we do do it. I think a very thorough job of making sure we diversify geographically and in other ways to spread the risk in our insurance business. But nothing big to note from that event or any others recently.

Daniel Moore, Analyst, CJS Securities: Great. I’ll turn it over. Thanks.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thanks, Dan.

Conference Operator: Thank you. Our next question comes from Greg Palm with Craig Hallum. Your line is open.

Greg Palm, Analyst, Craig Hallum: Hi. Thanks for taking the questions. I wanted just to maybe clarify some of the prior questioning on kind of the regional differences. So going back to your comments on the Southeast Region, I just is it more that you’re seeing increased competition down in that region? Or is it a function of like the actual consumer traffic rates, deposits are slowing?

I was just maybe you can kind of dig into that a little bit more. And then just to be clear, I mean, the Southeast Region is pretty broad. So are there specific states that you’re trying to call out or anything in particular?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. Kind of just look at our plants that serve that area and you know there’s a pretty broad service radius for a plant. So frankly, we’re looking at it all the way up to North Carolina and Virginia. So kind of Georgia through North Carolina and Virginia. And I really do want to I’m glad you guys are asking me the question because I really do want to clarify.

We had a quarter here where, orders moved up considerably. In the Southeast, they were more like flat. So we’re not seeing a big downturn. And I think the context and why I pointed it out is that we have also had this direction

Jesse Liederman, Analyst, Zelman and Associates: on

Bill Bohr, President and Chief Executive Officer, Cavco Industries: a plant by plant basis to increase production, you know, where we think we’ve got the backlog to do it. And so my point really was more about that direction and and I don’t know how it’s gonna play out yet. But what I was trying to point out is we might have, you know, we were gonna have to look plant by plant in that area because its order rates have lagged other regions recently and our backlogs in that area have dropped given the increase in production. And so it’s one that we might have to, pull back a little bit on some of this production increases. I’m honestly not predicting that.

I’m saying that these regions are moving differently. And if there’s one place that we’re keeping a close eye on it to see if our backlogs hold with order rates in the next couple quarters so that we can maintain the increased production level, it would be the Southeast. So it hasn’t been a downturn. It’s been a flat spot in a country where other regions are moving up pretty nicely.

Greg Palm, Analyst, Craig Hallum: Okay. That’s helpful. What are you seeing from the community channel and some of the bigger buyers there? Any change relative to kind of what you’re seeing in the dealer channel?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. I don’t think anything noteworthy. I mean, once we got through the inventory problem that we talked, you know, at length about for a long period of time and that kind of we declared that dead last December, I think. Once we got through that, they’ve kind of taken their place with more of a historical proportion of overall industry shipments from what we can tell. They’ve been about 30% or call it a third, and that’s if you include builders and developers along with communities.

And, there’s some normal bouncing around those numbers, but I feel like they’re kind of in that position right now.

Greg Palm, Analyst, Craig Hallum: Okay. In terms of I want maybe spend a minute on gross margin as well. And maybe you can just comment on input costs and what kind of I don’t know if you’re able to quantify kind of what impact tariffs had, whether it was on steel specifically or whether it was some of the components that you bring in. But was that meaningful at all? Are you able to quantify kind of what impact you saw?

And mostly, this is just in light of kind of much higher production rates on a year over year basis, but factory margins that were relatively flat. So I’m just kind of trying to tie those out.

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Yes, understood. Thanks for the question. Because many of the tariffs have been delayed, plus there’s a timeline before cost hit our COGS, the full effect of tariffs didn’t hit our results in Q1. We estimate that the total impact in q one was about $700,000 of additional expense, and that that would have hit our cost of goods. And if the current you know, for a perspective point, if the currently proposed tariffs take effect, I’d say this will certainly increase in future quarters.

So nothing significant this quarter, but, you know, we really focus on it. In general, input costs, as you mentioned, in total, key components for us that affect the margin are the costs of our commodities that we primarily use, which is lumber and OSB. And while the movements of these commodities, they really can be volatile, have been, recent quarters, been benefiting from a pretty low and stable lumber and OSB price, but there’s always, you know, a possibility of, of there being a price increase ahead. And the way that, we can all, you know, watch that is we watch the indices for these commodities for lumber and for OSB, and any changes that we see rolling through those prices will both of our cause in about sixty to ninety days later. Taking all those factors into account are the cost side of the equation for the margins

Greg Palm, Analyst, Craig Hallum: got it and then maybe just last one shifting gears again just to the regulatory environment can you provide maybe any update I know there was a recent bill that was introduced about chassis removal. So maybe you can just give us some insight and what that potentially could mean and just the overall process of putting that into a law, if that’s the case.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: The senate committee passed a bill or moved a bill forward this past week. I think that’s what you’re referring to. I’ll tell you what was really encouraging about it. They had, I might be off by one or two, but they had about eight subsections under that housing bill. And one of them was literally titled manufactured housing.

And so one one takeaway that I took at a high level from that was just, you know, we are we are in the discussion. We’re people are focusing on manufactured housing as a important part of the solution to the affordable housing issues that we face in the supply issues we face. So that was a high level. As you said, the chassis removal from the federal definition was in there. And so I feel really good about that.

That’s something we’ve talked in the past. It’ll take a it’ll take some work and some time. But if we can get that out of the definition, I think it’s gonna open up a lot of innovation for our industry. And that will kind of allow us to do things like penetrate more into urban settings as an example. So that’s a big plus.

There was some stuff in there about kind of trying to continue to encourage local municipalities and states to work on zoning. Those statements in the bill were more general and weren’t all that specific to manufactured housing. But directionally, you always like to see that because I think congress understands that’s a real, you know, barrier to improving the supply of homes and housing units. You weren’t really asking us if I and this is probably a longer conversation for another day. If I had a disappointment when I read it and talked to folks about it, it’s that congress is trying to provide some support and funding for community preservation and community development in general.

But they tend to be a little bit discriminatory in the ownership of those communities. And so they’re very focused on this idea of resident owned communities. In the right situation, that can be a good solution. Sometimes they aren’t everything that the name kind of implies, and sometimes they’re really not working out well. And so the fact that, congress continued in this bill to kind of leave the very successful for profit community ownership model out was a little bit concerning.

So I’ve given you more than you want. I feel like in total, it’s a very good step forward. It reflects a lot of the lobbying we’ve done in DC to try to get manufactured housing more a part of the conversation. I feel like we’re really having some success with it. So I do bet that’s more than you’re asking for Greg, but did I leave anything out?

Greg Palm, Analyst, Craig Hallum: No, it was the more the better. Appreciate the color. I’ll hop back in the queue. Thanks.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Alright. Thank you.

Conference Operator: Thank you. Our next question comes from Jay McCanless with Wedbush. Your line is open.

Jay McCanless, Analyst, Wedbush: Hey, everyone. Thanks for taking my question. So I guess I want to stick on the gross margin for a minute because to hear that volumes up, pricing is up on singles and doubles and OSB is at multi decade lows. Just really surprised that the gross margin is flat year over year. Can you walk us through what drove that?

And are you all thinking and if it was sales mix or geographic mix is the same type of pattern developing for the second quarter?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: So if we go through we look at the throughput for the quarter, to your point, we did see an uplift that allowed us to leverage some of our factory overhead. As we talked about, we did absorb some additional costs due to tariffs, and also our margins are dependent quite a lot on over prior year quarter for pricing. So there were some very positives in our gross profit and gross margins for the quarter. And then also touching on financial services, we did see an uptick from from prior year.

Jay McCanless, Analyst, Wedbush: Okay. So it’s it’s more just geographic mix. And also, are you seeing that in the second quarter, probably that same thing developing?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: I think it’s probably a little too early to comment on the second quarter. I’d say the one thing that we do have, obviously, we’re staying extremely close to, would be the unfolding tariff situation. We do, as we shared before, we do have we do purchase many lighting, electrical and plumbing components and windows and doors, and those are primarily sourced from China. So that’ll be where our focus is as the tariffs continue to unfold.

Jay McCanless, Analyst, Wedbush: Okay. And then I know that there’s been a couple of price increases announced for roofing. Has that started to impact capital income statement yet?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Nothing that we can really comment on at this point nothing significant.

Jay McCanless, Analyst, Wedbush: Okay and then if we could just talk about chattel mortgage, where rates right now? And I guess the other question is, are you guys seeing what the site builders have talked about where people just aren’t as confident maybe as they were this time last year? And maybe talk about that. And then also where rates stand at this point.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: And say rates? Yeah, I’ll start with

Mark Fussler, Corporate Controller, Head of Investor Relations, Cavco Industries: the rates, Jay. So it’s actually been really consistent since we last reported our fiscal year end. So it’s still on that eight to 9% range.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: I think the indicators of confidence are kind of almost week to week, if not day to day. It’s been kind of in this mode, in my opinion, for quite well, quarters, right? I mean, people are trying to read the macroeconomics and certainly there’s a bit of uncertainty on the side of the potential buyer. See that I think we see that more in closing rates, but we’ve seen no traffic does move up and down a bit. It moves in a pretty tight band or it’s been moving a pretty tight band.

Closing rates, I think are the better indicator at any point in time about whether people are willing to pull the trigger. Because there’s a lot of people that are out there that need homes and they’re generating the traffic numbers. It’s whether they feel confident and are able to pull the trigger on actually, know, making a deposit and falling through on the purchase that I think it gets hurt when the confidence goes down. So I don’t mean to wander around your question. I think it’s man is changing all the time and that’s the uncertainty we’ve been talking about.

This quarter orders showed a pretty big uptick. So that shows that either over the period of that quarter, there was a little more confidence or it shows that that pent up demand for housing is powering through that concern. Hard to tell, but we feel like, you know, we had a nice uptick this time. We’re gonna continue leaning into it and we gotta be ready to adjust. It’s hard to be more predictive than that.

Jay McCanless, Analyst, Wedbush: Okay, great. Thanks for taking my questions.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thank you.

Conference Operator: Thank you. Our next question comes from Jesse Liederman with Zelman and Associates. Your line is open.

Jesse Liederman, Analyst, Zelman and Associates: Hey, thanks for taking the question and nice job on the quarter. I’d to ask another question on the tariffs. So I guess just $700,000 of impact in the COGS from tariffs, is the expectation still about 5% to 8% of the materials might be the impact from tariffs?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Yes, and let me just help by putting that into dollars to make it straightforward. So we would estimate that the overall impact that we could reach and again, tariffs literally are kind of unfolding day to day as we’re all seeing it, but we could reach between 2 and 5,500,000.0 a quarter, you know, if the current tariffs are fully implemented. Just hopefully that helps provide some

Jesse Liederman, Analyst, Zelman and Associates: Got it. Okay. Yeah. That is helpful. Okay.

So I guess the $2,000,000 if and, again, the material is half of the COGS. Right?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Yes, they do.

Jesse Liederman, Analyst, Zelman and Associates: So the $2,000,000 I guess, would be something like during the quarter would have been like a 1% increase to overall COGS from tariffs, which seems a little bit lower, I guess, than you were expecting last quarter.

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: That’s true. I’d say specifically, again, 700,000 was the amount of the impact of increased cost of goods from Q1 from tariffs. If you think about the tariffs, they seem to be moving quite a bit, but obviously I think when one listens to the rhetoric out there, there’s an indication that they will go up at some rate. And certainly if we compare the way we think about it now versus say just a quarter ago, the tariffs would be coming in as slower or delayed and a little bit more choppy. So I think that’s what we stay very close to.

And if we take a step back, the two probably per quarter would be 2,000,000 per quarter would be on the lower end and perhaps as we progress through time and yet it’s an unfolding situation it could reach up to about 5,500,000.0. And I would say that if we had to think about it as far as where is the majority of that coming from, it’s likely to be coming from the the lighting, electrical, and plumbing components, which are, part of all of our units and those we source, out of China.

Jesse Liederman, Analyst, Zelman and Associates: Okay. That’s really helpful color. Thank you. I wanted to ask with through Country Place, Bill, do you guys have any read on or even, you know, through Country Place and or just through, those that are buying at your captive retail of the household income over time of people that are purchasing or maybe even quarter to quarter that could give some insight into mix shifts. So for example, if maybe this quarter you had more you know, higher household income at retail or through country place that would suggest maybe some people mix shifting from an existing home or buying, know, a new home to a manufactured home.

Is that something you guys have insight into?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. Obviously, when you’re originating, you know all that information, so it exists. It’s not something that we’ve tracked very closely at a at a macro level. So it’s interesting thought and something we’ll think about. But I don’t have any statistics for you right now on that.

Jesse Liederman, Analyst, Zelman and Associates: Okay. Got it. And then yeah, yeah, of course. I think that’d be pretty interesting. Allison, you kind of talked from a capital deployment perspective.

One of the initiatives you’re looking into is assessing some opportunities within the lending operations. Could you maybe provide a little bit more color into what that opportunity might be?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Yes. Strategically, we look at our country place, which is our mortgage origination component of our organization, to be able to provide expanded consumer based lending programs. So we continue to look at that. As part of that growth would probably be a combination of somewhere strategically to have an ability to deliver into a forward flow agreement. We have a commitment that we would not carry consumer based loans on our balance sheet nor have we.

If we embark on that type of a longer term strategy, our balance sheet would still very much stay an OEM balance sheet. This would give us an opportunity to serve a wider base of consumers to help them be able to obtain affordable housing.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Let me just reiterate that. I’m not saying anything different. Our model is to originate and sell. We don’t want to carry consumer loans on our balance sheet. We retain the servicing rates and so we get an annuity stream in that sense.

That’s our base model. Over the last couple of years, the traditional investors have really kind of, dramatically reduced the amount of loans they’re buying. So that left us with a decision to make. And we have been willing to and we put some new loans on our balance sheet. We do that in a way where we know that we’re still underwriting to the standards that an outside investor would buy those loans.

And so our our game plan really is, let’s not stop the machine. Let’s keep supporting the operations as an originator to a point with the intent that in different times and maybe through finding more consistent investors will be able to clean those loans off the balance sheet and get back to the base model again. We haven’t committed very much money in the scheme of our balance sheet to that, but it is something we just highlight for folks that, you know, strategically will will do that from time to time. We’ll take some on our balance sheet with the intent that when the day comes, they’re very sellable ones.

Jesse Liederman, Analyst, Zelman and Associates: Got it. That’s helpful. Yeah, I think in a lower rate environment, loans would be an attractive opportunity for an investor for you to get those off the balance sheet, but it makes sense. Sounds like you’re willing to continue to underwrite those just to keep the machine moving from a financing availability perspective. Yeah.

Last one from yeah. Go ahead. Just say one of the Oh, no. Sorry. Yeah.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: This is a side side note extending on that. It’s interesting when you do find an investor that wants to start buying those loans. They, often is the moment they make that decision, they say, what do you got for me right now? And so so having a few on the balance sheet doesn’t hurt when you’re trying to develop those relationships.

Jesse Liederman, Analyst, Zelman and Associates: Right? Makes sense. Last one on the financial services, it sounds like a lot of the initiatives that you talked about over the last couple of years in terms of making improvements to your underwriting criteria and pricing and some of those nuances are coming to fruition with kind of a 40 ish percent gross margin. If I look historically, you were kind of in the even like 50% to 55% range. So is there any reason why the gross margin for financial services shouldn’t at least remain around current levels, if not continue to grow a little bit higher toward maybe 50% ish, something around there?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah, it’s very choppy, right? I mean, it’s the insurance business, not to minimize the financial or the lending business component of that. But when you’re in the insurance business quarter to quarter, it can be choppy. But, yeah, I don’t see any structural reasons why we shouldn’t be able to maintain pretty much historic margins with that business. So, yeah, I appreciate the question because it is hard for you all to keep your bearings with us in financial services.

One quarter to quarter, we can see pretty dramatic changes. What I’ve said in the past and I still believe is that these businesses give us a solid return on invested capital, and they are complementary to our core business. So we’re committed to them.

Jesse Liederman, Analyst, Zelman and Associates: Thanks, guys. Really appreciate the color as always.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thank you. Thank you.

Conference Operator: Thank you. Our next question comes from Daniel Moore with CJS Securities. Your line is open.

Daniel Moore, Analyst, CJS Securities: Thank you again. One or two more, but obviously if you look at your shipments, you look at HUD code MH data, it’s clear that MH, at least over the last couple of quarters, in particular this quarter, is diverging in a more material way from traditional site build growth rates. Is that do you think bill that’s more a normalization of the builder developer channel coming back or do you see that occurring kind of across all of your key customer bases, you know, REITs traditional retail, etcetera?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: And you’re talking about, I think I’m with you. You’re talking about how, you know, HUD’s what we have good data on. You’re talking about how HUD code shipments have changed through the recent year or two compared to how site built has changed?

Daniel Moore, Analyst, CJS Securities: Yeah. And obviously, you know, 15% growth in your shipments is another data point there as well relative to, you know, flat to now we’ve moved

Bill Bohr, President and Chief Executive Officer, Cavco Industries: relative to HUD. Yeah, you’re right. I mean, yeah, I it’s always hard to know what point in time to index off of, but we have been looking at that pretty closely. And to your point, over the last call a year and a half, that was one of the points I looked at. HUD has dramatically outperformed.

I track a lot of times new home sales thinking, you know, we’re shipping and it’s kind of put in service pretty quickly and the new home sale is similar, put in service pretty quickly. And HUD has really outperformed site built during that period. I think, you know, at the highest level, there’s probably a lot of factors to that. I think, one is I’ve tried to point out in a lot of investor discussions that the while we’re driven by some of the same macro effects like interest rates, But the cycle for manufactured housing and homes can divert and site built can diverge. If you think back to a year and a half ago or so, we were held back by an inventory, but in our retail channels after the run up in interest rates.

Conversely, I think site builders were kind of getting a tailwind from the fact that people had low interest rates and previously owned homes weren’t on the market and inventory. So they were kind of making hay at a time that we were pulled back from a wholesale perspective. I think that’s reversed right now. I think right now we’ve got the inventory out of the way and affordability is coming to the forefront as it has been and should be for, in my opinion, for the foreseeable future. And we’re serving a different price point for sure.

They can’t touch what I would consider first homebuyer price levels. So, know, I think it’s a real shift. And if the macro economy supports it, I think that that relative share of new housing units, if you wanna think about it that way, should really go in favor of manufactured housing. You know, and I won’t belabor this point because if you pick different time periods, the discussion would be different. We’ve certainly done pretty well relative to the index of head code shipments that are reported on a national basis.

I think that a lot of that is due to some things we’ve worked hard over the last couple of years to put in place. I’ve mentioned them before, but we’ve got what I think is a very effective national sales group in the wholesale business that our competitors had previously and we didn’t have and I think they’ve been making a big impact. We’ve done a ton in digital marketing and we followed that up with the branding that we talked about last quarter to try to make the customer experience better. So I really feel like we’ve done a lot to position ourselves better and better on a competitive basis within manufactured housing. And and I’d like to think that’s showing itself in some of that movement of us compared to the industry shipments.

Daniel Moore, Analyst, CJS Securities: Very helpful. My last long winded question today, I promise. But just I missed the American HomeStar conference call. So, you know, you’re expanding in what is already a strong presence in Texas. Obviously, Texas has always been a big important market for MH, but a little choppier of late.

What are you seeing or hearing from retailers, community developers in that market and your expectations for growth in that market, not next quarter, but over the next two to four years? Thanks again.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah, I think my answers have been long winded, your questions. But Texas, everyone knows how big of a market that is for manufactured housing. And we do have a pretty good presence there. And in the call and otherwise, I’ve talked about, you got some deals where you are going into new geographies or trying to round out your geographic presence. And you’ve got others like this one where, you know, you’re just going to get stronger where you are.

And I’m really excited about it from that perspective. We have a lot of confidence in Texas over any strategic time frame. So really don’t do these kind of deals worry too much about what’s going on right now. And what’s going on right now in Texas isn’t bad, it keeps growing. So we’re gonna have a lot of opportunities for value creation in that deal through cost benefits as well as product and retail optimization.

So we’re really excited about it. I’m not sure if I’m really hitting hard on your question and I’m happy to take another shot, Dan, but that’s a that’s a stab at it.

Daniel Moore, Analyst, CJS Securities: No. That’s it. It’s helpful. You know, right now, the market’s holding up pretty well and, you know, you see continued growth. That’s what I was getting at.

Thanks again for the color. I appreciate it very much.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thanks, Dan.

Conference Operator: Thank you. Our next question comes from Ian Lapie with Gabelli Funds. Your line is open.

Ian Lapie, Analyst, Gabelli Funds: Hi, Bill and team. Congratulations on a great quarter. I just had one quick one. The $9,000,000 in CapEx for the quarter, was that driven by the brand realignment? And then would you expect CapEx to return to the more the level of more like 4,000,000 to $5,000,000 of the last per quarter for the last couple years?

Thank you.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yeah. Thanks for the question. And the 9,000,000 was not driven by the brand realignment. In fact, really, the only meaningful material impact you guys should see from that, I think was the last quarter when we reported the non cash $10,000,000 charge that was related to writing off some intangible value. But going forward, you know, we shouldn’t really have a meaningful impact to the p and l from that shift.

I I wanna take a stab and then Allison and others can build onto this. The 9,000,000 is a good story because what we’ve been doing, is investing in our plants. And we’ve had a string of very successful smaller investments in our plants. I say small in the scheme of the company, but they add up. And we’ve done a number of plant modernizations that have been very successful, and that’s what’s driving that, you know, non acquisition capital ex capital expense to go up a little bit.

So, I’d ask you to feel good about that. We’re we’re making some pretty high return investments in our plants, and we’re growing our capacity. Is that do you have something to add to that?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Yeah. That’s a that’s, obviously a very good character characterization. So, it will our cap spend will be a little bit lumpy, but within a pretty tight band, and it will move quarter to quarter based on the upgrades and expansion for efficiencies in the plant, in our internal plants. But there’s nothing in that particular number for the quarter that would signal an upward trend of any type.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: And it’s not like a pent up sustaining capital that’s coming due or anything like that. Our plants are in pretty good shape.

Ian Lapie, Analyst, Gabelli Funds: Okay, great. And congratulations again. Thank you.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thanks, Ian.

Conference Operator: Thank you. Our next question comes from Jay McCanless with Wedbush. Your line is open.

Jay McCanless, Analyst, Wedbush: Hey, thanks for taking my follow-up. I was just looking at last quarter’s transcript. And I think the one thing we have talked about is the price competition that you all were seeing last quarter. And just wondering if that’s reemerged either either what you saw in

Bill Bohr, President and Chief Executive Officer, Cavco Industries: the first quarter or have

Jay McCanless, Analyst, Wedbush: you seen any signs of your competitors being a little more aggressive on price in the second quarter to try and drive some volume?

Bill Bohr, President and Chief Executive Officer, Cavco Industries: I would generally say no. The if there’s if you kinda had a dial on this, there’s more this is kinda my field based on the monthly detailed conversations we have with every one of our plants. There is more of an upward bias that I’m hearing in the local markets than downward. And I will say that, for this quarter, and I only want to emphasize that because these things can shift on your rate. We’re not calling a trend after one data point.

For this quarter that we saw this pretty nice increase in both single section and multi section homes, that was pretty much across the board regionally. So we really don’t have hotspots where we’re seeing an undue amount of price competition right now.

Jay McCanless, Analyst, Wedbush: Okay. That’s great. Thanks. Thanks for taking my follow-up.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thank you.

Conference Operator: Thank you. And our next question comes from Jesse Liederman with Zelman and Associates. Your line is open.

Jesse Liederman, Analyst, Zelman and Associates: Hey, thanks for taking the follow-up. Real quick, just want to give you kudos for the SG and A. Looks like as a percent of revenue, it’s among the lowest levels since maybe fiscal twenty twenty three. Just wanted to kind of understand if that kind of expense management on the SG and A line is kind of a conscious decision or if there has been expenses over time that you’ve been able to pull out of that line? Color you can give there would be great.

Thanks.

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: Sure. Donna, with regards to SG and A, overarchingly, our approach to our business model has always been to maintain a good part of that SG and A to be variable. So the largest component there that moves with volume as an increase is sales commission and variable compensation. We do very carefully watch the fixed costs, so the SG and in general leverages quite a lot as we increase the top line. So our approach has been consistent.

We also are continually instituting processes and procedures that add to our shared services so that when we continue to grow both organically and inorganically, the shared services in the back office conserve the field at a lower per unit cost. So, you know, it’s more of a continuation of our commitment to maintain a very low fixed cost component for SG and A.

Jay McCanless, Analyst, Wedbush: Yeah.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Yep. We definitely wanna see what we saw. I mean, get that leverage on the fixed costs as we grow. So appreciate you raising the question.

Jesse Liederman, Analyst, Zelman and Associates: Yeah. Of course. So the fixed costs really you’re talking about are this kind of shared services back office type stuff. Right?

Alison Aidan, Executive Vice President and Chief Financial Officer, Cavco Industries: That’s correct.

Jesse Liederman, Analyst, Zelman and Associates: Okay, cool. Thanks and nice job.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thank you. Thank you.

Conference Operator: Thank you. There are no further questions. I’d to turn the call back over to Bill Bohr, President and CEO, for closing remarks.

Bill Bohr, President and Chief Executive Officer, Cavco Industries: Thank you. We’re nearly at the top of the hour. A lot of good discussion. Appreciate the interest. I really want to acknowledge the execution across our organization that enabled these results this quarter.

Over the last several quarters, we underwent a major ERP upgrade, which is always stressful and full of challenges. We rebranded our plants and aligned our product branding in ways that enable the customer experience to improve and enable us to give better lead generation for our retail partners. And we executed a thorough due diligence process and ultimately reached agreement to purchase American OwnStar. So with all this change happening in the organization and despite the ongoing uncertainty in the economy, our operations really delivered the results we’ve had the pleasure to discuss today. So really want to thank everyone for joining us and for your interest in Cavco, and we look forward to continuing to keep you updated.

Thank you.

Conference Operator: This does conclude the program. You may now disconnect. Good day.

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