Earnings call transcript: Champion Homes beats Q1 2025 forecasts, stock rises

Champion Homes Inc., a leader in the manufactured housing industry, reported stronger-than-expected earnings for the first fiscal quarter of 2025. The company exceeded both earnings per share (EPS) and revenue forecasts, leading to a positive market reaction. Champion Homes’ stock rose by 1.08% in after-hours trading, following the announcement. According to InvestingPro data, the company maintains a perfect Piotroski Score of 9, indicating exceptional financial strength, while holding more cash than debt on its balance sheet.

Key Takeaways

• Champion Homes reported an EPS of $1.19, surpassing the forecast of $0.82.
• Revenue reached $701.3 million, exceeding the expected $642.19 million.
• Stock price increased by 1.08% in after-hours trading, reflecting investor optimism.
• The company returned $50 million to shareholders through share repurchases.
• New product launches and strategic acquisitions bolster growth prospects.

Company Performance

Champion Homes demonstrated robust performance in Q1 2025, with net sales increasing by 12% year-over-year to $701 million. The company sold 7,215 homes, an 8% increase from the previous year. This growth is attributed to a strategic focus on affordable housing and first-time homebuyer engagement, as well as the successful launch of new HUD Code and modular homes. The company’s trailing twelve-month revenue growth of 22.65% and strong gross margin of 26.74% underscore its operational efficiency. For deeper insights into Champion Homes’ financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis and 12 additional ProTips.

Financial Highlights

• Revenue: $701.3 million, up 12% year-over-year
• Earnings per share: $1.19, significantly above the forecast of $0.82
• Net income: $65 million, translating to $1.13 per diluted share
• Adjusted EBITDA: $94 million, a 26% increase from the previous year
• Adjusted EBITDA margin: 13.4%, compared to 11.9% last year

Earnings vs. Forecast

Champion Homes reported an EPS of $1.19, surpassing the forecasted $0.82 by 45.12%. Revenue also exceeded expectations, coming in at $701.3 million compared to the anticipated $642.19 million. This strong performance highlights the company’s ability to outperform market expectations, driven by strategic initiatives and increased sales.

Market Reaction

Following the earnings announcement, Champion Homes’ stock rose by 1.08% in after-hours trading, reaching a price of $67. This positive movement reflects investor confidence in the company’s financial health and growth prospects. The stock’s performance is noteworthy given its 52-week range, with a high of $116.49 and a low of $59.44. InvestingPro analysis shows the stock is currently trading at fair value, with a P/E ratio of 19.29 and an attractive PEG ratio of 0.54, suggesting reasonable valuation relative to growth potential. The company’s strong financial health is reflected in its current ratio of 2.41 and Altman Z-Score of 7.23, indicating robust liquidity and low bankruptcy risk.

Outlook & Guidance

Looking ahead, Champion Homes expects Q2 revenue to be flat or increase by low single digits. The company anticipates a gross margin of 25-26% in the near term and plans to continue balancing SG&A spending. Strategic growth priorities include expanding market share in manufactured housing and enhancing product offerings for first-time homebuyers.

Executive Commentary

CEO Tim Larson expressed optimism about customer engagement and market opportunities, stating, "We are encouraged by the customer engagement and quoting activity we’re seeing." CFO Lori Huff highlighted the company’s adaptive pricing strategies, noting, "Our pricing strategy varies by market and geography."

Risks and Challenges

• Consumer uncertainty in the housing market could impact demand.
• Supply chain disruptions and tariffs may affect material costs.
• Competition in the affordable housing segment remains intense.
• Potential moderation in community channel order rates could slow growth.
• Economic downturns could dampen first-time homebuyer interest.

Q&A

During the earnings call, analysts inquired about the impact of delayed shipments from March on Q1 performance. The management addressed pricing strategies and tariff impacts, which account for approximately 1% of material costs. Efforts to attract new manufactured home buyers were also discussed, highlighting the company’s focus on expanding its customer base.

Full transcript - Champion Homes Inc (SKY) Q1 2026:

Mina, Call Coordinator: Good 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.

Jason, Unspecified Corporate Role, Champion Homes: Good 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 are Tim Larson, Champion Homes’ President and Chief Executive Officer and Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer. Yesterday, after the market closed, we issued our earnings release. As a reminder, the earnings release and statements made during today’s call include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These results are subject to risks and uncertainties that could cause actual results to differ materially from the company’s expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company’s filings with the Securities and Exchange Commission. Please note that today’s remarks contain non GAAP financial measures, which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release. I will now turn the call over to Champion Home’s CEO, Tim Larson.

Tim Larson, President and Chief Executive Officer, Champion Homes: Thank you, Jason, and good morning, everyone. Before we discuss our quarterly results, I want to share an update on the progress we are making on our strategic priorities. These priorities reflect how we are elevating the business for near and long term performance. On our first strategy, Winnie is a customer centric high performance team, we’ve added two highly accomplished executives, one to our Board of Directors, Mary Vitoa and Alan Robertson as Chief Human Resources Officer. Mary is an accomplished leader in the real estate industry with more than thirty years of experience in finance and capital markets.

She co founded STORE Capital, one of the largest and fastest growing real estate investment trust in The U. S. Mary serves as its President and CEO and as a member of its Board of Directors. Alan Robertson joins our executive leadership team at CHRO. He has over fifteen years of human capital leadership experience, including most recently at Pulte Homes, where he led HR across their manufacturing and field operations teams.

Alan’s homebuilder experience and business first leadership style are a great fit to support and develop our 9,000 team members. We continue to invest in our new product strategy that’s bringing in new buyers with home styles and floor plans at the right price point and value. Recently, received national recognition for our newly launched HUD Code and modular homes. You can view the homes on our social platforms. Consistent with our strategy to drive broader awareness to our brands and bring in new buyers to MH, we recently were featured on designing spaces on Lifetime Television.

The program highlights our homes and how they are each delivered with quality, speed and affordability without compromise. From a regulatory perspective, we are pleased with last week’s unanimous partisan vote by the Senate Banking Committee to advance the Road to Housing Act. The bill includes a specific section titled Manufactured Housing for America that highlights Congress’ support for off-site built homes. We are encouraged that it’s advancing to the next step, however, recognize it’s early in the legislative process. We will continue to closely monitor the legislation and work with MHI in support of its advancement.

Now I’ll give an overview of this quarter’s performance, as well as expectations on the near term outlook. The team’s nimble operational execution resulted in a strong 2026, delivering profitable growth in an ever changing environment. First quarter year over year net sales increased 12 to seven zero one million and homes sold during the period increased 8% to a total of 7,215 homes. The increased sales across our channels and effective cost management delivered strong gross margin and earnings growth in the quarter. We are pacing production to the consumer environment in each market.

Plants with larger backlogs increased production rates, while some locations moderated with local market trends. Manufacturing backlog at the June totaled $3.00 2,000,000 down 12% sequentially. The average backlog lead time ended the quarter at seven weeks, which is within our target range of four to twelve weeks. Now I’ll provide some additional commentary from the quarter on each of our sales channels. Sales to our independent retail channel increased compared to the prior year period.

In addition to expanding the adoption of our digital and marketing support for dealers, we are also adding independent distribution points. At captive retail, sales increased versus Q1 the prior year due to an increase in average selling price and a shift in product mix. We also closed on the Eisen acquisition in late May. The combined teams are already making good progress in executing retail and product synergies. Moving to the community channel, our community sales were up in the first quarter versus the same period last year, driven by new products and strong engagement by our sales team to match the offering with the needs of today’s community operators.

Consistent with the consumer environment I mentioned earlier, we anticipate some moderation in the community channel, which may impact near term order rates. Sales to the builder developer channel grew in the first quarter versus the same period last year. Our pipeline in this channel remains solid and is growing. We remain encouraged by the potential of off-site construction being more widely adopted by builders. Champion financing, our joint venture with Tribe Financial Services continues to operate effectively.

Our retail loan programs continue to be a key lever in today’s consumer environment as allows our stores to match consumers with the right home and their optimal monthly payment. We are confident that the combination of our joint venture and ongoing access to consumer financing across several lenders provide the diversified portfolio of options for our retailers and consumers. I’ll now turn the call over to Lori, who will discuss our quarterly financial performance in more detail.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Thanks, Tim, and good morning, everyone. I’ll begin by reviewing our financial results for the first quarter followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our near term expectations. During the first quarter, net sales increased 12 to $7.00 $1,000,000 compared to the same quarter last year with U. S.

Factory built housing revenue increasing 10%. The number of homes sold increased 7% to 6,965 homes in The U. S. Compared to 6,538 homes in the prior year period. U.

S. Home volume during the quarter was supported by healthy demand across our community channel and an increase in builder developer sales. The average selling price per U. S. Homes sold increased by 4% to $95,000 due to a shift in mix to more multi section units and increased pricing at our company owned retail sales centers.

On a sequential basis, U. S. Factory built housing revenue increased 18% in the first quarter compared to the 2025. We saw a sequential increase due to expected seasonality as well as a shift of sales from the 2025 into the 2026 from delayed home shipments caused by inclement weather across the South in the March. Manufacturing capacity utilization was 61% compared to 60% in the 2025.

On a sequential basis, the average selling price per U. S. Homes sold increased approximately 1%. Canadian revenue during the quarter was $30,000,000 representing a 50% increase in the number of homes sold versus the prior year period. We saw product mix shift to more single section homes in Canada as well as stronger demand in the Alberta province versus the same period last year.

The average home selling price in Canada decreased 3% to $120,500 primarily due to a shift in product mix. Consolidated gross profit increased 16% to $190,000,000 in the first quarter, and our gross margin expanded 90 basis points from 26.2% in the prior year period. The higher gross margin was driven by higher ASPs on new homes sold through company owned retail sales centers and the unfavorable purchase accounting impact in the prior year related to the increase in the carrying value of inventory acquired in the Regional Homes acquisition that did not recur in fiscal twenty twenty six. Gross margin increased sequentially from our fiscal fourth quarter and was higher than expectations, primarily due to lower than expected material input costs, higher captive retail ASPs and favorable product mix. SG and A in the fourth quarter increased $2,000,000 over the prior year period to $111,000,000 The increase is primarily attributable to higher variable compensation from higher sales as well as $3,900,000 of costs associated with plant closures and the acquisition of Eiseman Homes.

Those factors were partially offset by an $8,000,000 expense in the 2025 related to the acquisition of Regional Homes, which did not recur in the current period. The company’s effective tax rate for the quarter was 21% versus an effective tax rate of 22.5% for the year ago period. The decrease in the effective tax rate is primarily due to an increase in tax credits. Net income attributable to Champion Homes for the first quarter increased by $19,000,000 to $65,000,000 or earnings of $1.13 per diluted share compared to net income of $46,000,000 or earnings of $0.79 per diluted share during the same period last year. The increase in EPS was driven mainly by improved operating income.

Adjusted EBITDA for the quarter was $94,000,000 which is an increase of $19,000,000 or 26% compared to the prior year. Adjusted EBITDA margin was 13.4% compared to 11.9% in the prior year period. This increase in EBITDA margin is mainly driven by higher gross margins. We expect near term gross margin in the 25% to 26% range as we balance cautious consumer sentiment and softer demand in certain markets. As a reminder, our consolidated gross margin fluctuates from quarter to quarter due to changes in product mix as well as the quantity of sales through our independent channels versus sales through our captive retail stores.

As we work through this dynamic market environment, we continue to balance SG and A spending while continuing to drive our strategic growth priorities, including investments in people and technology. As of 06/28/2025, we had six zero five million dollars of cash and cash equivalents and long term borrowings of $24,000,000 with no maturities until December 2026. We generated $75,000,000 of operating cash flows for the quarter. In the quarter, we leveraged our strong cash position and returned capital to our shareholders through $50,000,000 in share repurchases. Additionally, our Board recently refreshed our $150,000,000 share repurchase authority, reflecting confidence in our continued strong cash generation.

Subsequent to quarter end, we amended our existing $200,000,000 revolving credit facility and extended the term through 07/28/2030. The facility provides the company with available liquidity for its strategic initiatives. We remain focused on executing on our strategic initiatives and given our favorable liquidity position, plan to utilize our cash to reinvest in the business to support strategic growth and return cash to shareholders. I’ll now turn the call back to Tim for some closing remarks.

Tim Larson, President and Chief Executive Officer, Champion Homes: Thank you, Laurie. Looking to our 2026, as we navigate consumer uncertainty and the factors impacting the overall housing market, we anticipate our second quarter revenue to be flat to up low single digits compared to the prior year period. While we are encouraged by the customer engagement and quoting activity we’re seeing, the pace of orders so far in Q2 has been a bit slower than our fiscal second quarter last year. Our teams are being proactive in this environment to ensure production is optimized and our purchasing team has been very effective at navigating the ever changing tariff dynamics. Our backlogs remain within a normal range of four to twelve weeks and we’re taking measured actions to manage fixed costs.

We continue to review internal survey data to understand who is buying our homes. It is encouraging to see that we are consistently attracting first time homebuyers, as well as first time buyers of manufactured homes. This reinforces that our products are a core solution to address the need for affordable housing in The U. S. And Canada.

It’s one of the many reasons the future for Champion is promising and we are confident in the strategies we are executing to deliver value to all stakeholders. Our strategic long term priorities that I’ve shared on previous calls provide a clear vision to execute effectively in today’s environment and the discipline to effectively deploy our capital. In summary, we believe Champion Homes is well positioned to navigate this uncertain market while maintaining a steadfast focus on our long term strategic growth priorities and daily execution, all grounded in our commitment to our customers, team members and shareholders. Thank you everyone for tuning into today’s call and for the Champion Homes team for their continued efforts with a strong start to the fiscal year. I look forward to updating you all in the second quarter later this year.

And now let’s open the line for questions. Operator, please proceed.

Mina, Call Coordinator: Thank you. We will now begin the question and answer session. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

The first question is from the line of Greg Palm with Craig Hallum Capital Group. Please go ahead.

Greg Palm, Analyst, Craig Hallum Capital Group: Yes. Hey, thanks. Good morning. Maybe we can just start with a little bit more commentary on kind of the backdrop, the environment relative to kind of what you talked about in late May. So what maybe just what’s changed geographically, recent it sounds like recent order rates may be softening maybe a little bit more, but just give us a little bit more color on what you’re seeing out there, please?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes. Appreciate it, Greg. So first off, we had stronger community business in Q1. And as we talked to our community customers, they’re seeing some of the same consumer dynamics, so we don’t anticipate that continuing in the near term, but still having steady business with our community customers. We had our plant backlogs in Q1 that the plants with larger backlogs we were able to produce, and those were in the regions of the country that we’ve talked about previously with some strength, whether that be the West as an example.

Some of the softness that we saw in the South that we’ve talked about hasn’t really returned back to some of the robust demand. So overall, those impacts that we factored into Q2. The other driver is, as we look across our channels, we have leading indicators that we look at, and those are some of the drivers that we see from our Q2 view. What I would share is that over the last six months, we’ve been able to grow share in HUD and grow share against single family, which is encouraging in the market environment that we’re in. So it’s more of the consumer indicators, Greg, that we’re seeing that affect our view of Q2.

But I’m pleased with how the team is out there every day driving the business in this environment.

Greg Palm, Analyst, Craig Hallum Capital Group: And just kind of thinking back to what you talked about in late May when you reported Q4 results. I mean, what happened in June specifically? Because you vastly outperformed relative to what you talked about for revenue and gross margin. So can you just give us a little bit of sense on where June was relative to what you thought back in late May?

Tim Larson, President and Chief Executive Officer, Champion Homes: So a big change was certainly the impact of the community business and that drove a lot of the impact in Q1. And then as I mentioned, we look at each backlog by plant and where they can increase production rates. And as Lori mentioned in her remarks, we had some improved pricing relative in our captive retail business. The other driver is our material costs weren’t as significant as they’ve been previously in the quarters that have benefited Q1, which then all of that combined to flow through earnings in a strong quarter. And so as we go into Q2, we don’t have some of those same dynamics and we can already see that.

And so that’s why we have the view that we have for Q1 in terms of the guide that I provided in the revenue earlier. So it’s some of those different drivers that we see is impacting Q1 versus Q2.

Greg Palm, Analyst, Craig Hallum Capital Group: Okay. Okay. And then if I could just sneak one more quick one. Laurie, you mentioned these delayed shipments from the March to the now previously quarter. How many homes was that?

What’s the revenue impact? I don’t recall yet quantifying that last quarter.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yes, we didn’t quantify it, Greg, and we’re not going to quantify it. But we that was part of the certainly part of the difference between our expectations. I think originally, we were thinking that would flow in over the first second quarter of this fiscal year and the majority of it hit all in the first quarter. So that is certainly one of the differences between late May and where the results ended up as well.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes. And I think Greg too, if you look at industry, we were pretty in line with the industry, what we were signaling for Q1. What changed is we got more benefit from those items that weren’t in Q4 of those homes and then the other drivers I mentioned. So from an industry perspective, our Q1 kind of outlook But to your point, we did outperform given the drivers that I mentioned.

Greg Palm, Analyst, Craig Hallum Capital Group: Yes, understood. All right. Appreciate the color. Thanks.

Mina, Call Coordinator: The next question is from the line of Daniel Moore with CJS Securities. Please go ahead.

Daniel Moore, Analyst, CJS Securities: Thank you. Good morning, Tim. Good morning, Laurie. Maybe just pulling on the string in the community channel. You talked about anticipating some moderation.

I think you mentioned, Tim, a little bit in terms of geographic dispersion and the consumer softening, but is it more a function of just not picking up or are things actually softening a little bit? If so, what geographies and what’s sort of holding some of your community partners back? Thanks.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, thanks, Ed. We certainly have seen a robust community orders through the first quarter. What we’re sharing is that rate we we don’t anticipate continuing in Q2. And it says each community operator is looking at where their projects are, where their demand is and balancing that with the consumer environment. And it’s fairly across multiple geographies.

As you know, we have a number of community operators around the country, and so those are on a case by case basis. It’s pretty consistent what we’ve talked about before about various geographies. So it’s not saying that I mean, the community business, there’s some strength there and certainly versus where it was over a few years ago, but it’s more at the growth rate going forward. And so we’re working with each community customer to make sure that the pace of production and the homes that they’re looking for based on that match that. And we’re just signaling that what we saw in Q1, we don’t anticipate continuing into Q2 at the same rate.

Daniel Moore, Analyst, CJS Securities: Got it. That’s helpful. Net new orders, as you just described, up in the quarter, you saw some strength there. The guide flat to upload single digits year over year in Q2. Based on where we’re trending quarter to date in terms of order rates, would that leave backlogs relatively flat sequentially?

Are you sort of operating one in, one out? Or do you anticipate drawing backlogs down a bit more in this quarter?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes, we anticipate being in our normal range and we’ll update you exactly where that lands. And one of the specific things we’re doing is plant by plant looking at what makes most sense in their market for that backlog utilization. As I mentioned for Q1, we had some opportunities in certain locations, we’ll look to do that in Q2. And then also in other markets, we’ll moderate it just based on what makes sense in their environment. But we plan to be in our normal background range for the quarter.

Daniel Moore, Analyst, CJS Securities: Got it. Nice kind of turnaround or pickup in Canada. Is it one specific industry driving that that demand? And what’s the outlook as we look forward? How sustainable is the recovery we saw in the quarter?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, it was strengthened in Alberta and certainly from a overall total business, it’s 4% of our revenue. So you’re going to see some relative movement within that percent. As we’ve mentioned, that market is pretty dynamic. We saw some recovery, but we’re very poised in terms of how we think about that business. They face some of the challenges at the consumer level as well.

So I think we’re balanced in terms of how we think about Canada, but we’re pleased by the progress we saw in Q1 in the Alberta region.

Daniel Moore, Analyst, CJS Securities: Okay. And last for me, Laurie, sense for what Eisman Homes contributed to revenue in the quarter as well as backlog at quarter end?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: So we closed on Eiseman on May 30. So it was one month of revenue that was included in the results for the first quarter. Backlog, Dan, is really our manufacturing backlog. So our captive retail has no impact on our backlog numbers.

Daniel Moore, Analyst, CJS Securities: Great. Okay. That’s helpful. Thank you again. I’ll circle back with my follow ups.

Mina, Call Coordinator: The next question is from the line of Matthew Bouley with Barclays. Please go ahead.

Matthew Bouley, Analyst, Barclays: Good morning everyone. Thank you for taking the questions. On the gross margin, so I think in Q1 there you spoke to some of these, I guess surprising positives that led to the beat, maybe better input costs and some pricing in captive retail. But I’m just trying to understand sequentially into Q2 going back to 25% to 26% if I heard you correctly. I guess what sequentially would be a little softer to drive that?

And I just want to understand, we still thinking 25 to 26% is kind of where you’ll be for the beyond the quarter? Or how are you thinking about getting back to that longer term range of 26% to 27%? Thank you.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Matt, thanks for the question. In 2Q, we’re really balancing cautious consumer sentiment and softer demand in certain markets. And as a reminder, our gross margins can fluctuate pretty significantly actually from quarter to quarter due to product mix, including single wide versus multi section mix, option content and products as well as the mix between manufacturing volume going through captive retail versus independents. So that can drive a significant shift from quarter to quarter. We do think that 25% to 26% gross margins are going to continue in the near term.

Matthew Bouley, Analyst, Barclays: Okay, got it. And then I guess just on SG and A as well, obviously showed some leverage there in Q1 on the strong revenue growth and but as you’re talking about kind of flattening out, I guess year over year in the second quarter, I mean, any thoughts on how SG and A leverage might shape up as we go through this year? Thank you.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yes. We’re going to continue to balance SG and A based on what we’re seeing from a demand perspective.

Matthew Bouley, Analyst, Barclays: Okay. Thanks, Laurie. Good luck, guys.

Mina, Call Coordinator: The next question comes from the line of Michael Dahl with RBC Capital Markets. Please go ahead.

Michael Dahl, Analyst, RBC Capital Markets: Hi, thanks for taking my questions. First question on some of

Phil Ng, Analyst, Jefferies: the pricing dynamics. I think the mix side is pretty clear, but you mentioned price increases on new products and your captive retail. So can you speak a little more to what those like for like pricing dynamics were, where you took price, the rationale for taking price and what the response has been?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Thanks, Mike, for the question. Our pricing strategy varies by market and geography. So we’re really trying to more broadly across all geographies, balance volume and price, given the local demand environment in each region.

Phil Ng, Analyst, Jefferies: Okay. Could you put an order of magnitude on what that like for like increase contributed?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: We’re not going to separately disclose that. It’s all part of wrapped up in segment housing. So we did see at manufacturing that wholesale prices remained relatively flat, but we did see an increase in retail pricing. It had been a while since our captive retail locations had taken some price. So they were able to take advantage of that in certain geographies this quarter.

Jesse Leilerman, Analyst, Zelman and Associates: Got it.

Phil Ng, Analyst, Jefferies: Okay. Then in terms of, I guess going back to Greg’s question around visibility. So the guide you gave was two months into the quarter at the time you gave it. And I understand that things can fluctuate quite a bit, but at any given point in time, you do have half a quarter’s worth of backlog, give or take, to give you some visibility. So my question is more around internal processes, and whether there’s anything that you are working on or can work on that help give you a little better visibility into refining some of those near term guideposts.

Whether it’s communicating externally or I assume operating internally, having this type of variance probably isn’t optimal. So you just give us a sense of anything that you guys are doing to try to refine that internally?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yeah, Mike. So a lot of it has to do with the closing of end consumer transactions at the end of any given month or quarter, and that’s dependent on a lot of different factors. So as we mentioned earlier, we were able to pull forward a lot of the pent up inventory that we weren’t able to close in the fourth quarter into the first quarter. And so it’s dependent on weather, it’s dependent the consumer’s financing and what of those transactions can happen to get an order counted as a sale at end any given month or quarter. So we do obviously have financial forecasting tools and methodologies, but there’s a lot of moving pieces when it comes to the end consumer closing of transactions as of a specific date.

Phil Ng, Analyst, Jefferies: Got it. Okay. Thank you.

Mina, Call Coordinator: The next question is from the line of Phil Ng with Jefferies. Please go ahead.

Michael Dahl, Analyst, RBC Capital Markets: Hey, guys. Congrats on another really strong quarter. So Tim, if I heard you correctly, it sounds like your REIT channel, community channel business is still growing, but perhaps its pace is slowing down a touch. But when you kind of look at order trends by different channels, it’d be helpful to kind of give us a little color whether it’s independent, direct builder, how that’s kind of shaping up from an order trend perspective? And any color from a channel inventory level, any risk that there’s too much inventory and you got to destock in any pockets?

Tim Larson, President and Chief Executive Officer, Champion Homes: Appreciate that, Phil. So on the builder developer side, we’ve had some new projects come online that are encouraging. As I’ve mentioned before, those go through quite a process from where they are at zoning all the way through execution. So we’ll work through that process with those customers. And then in terms of our independent channel, what the the overall guide that I mentioned factors in what we’re seeing there, which is we’ve had really good quoting activity with our independents.

But, you know, part of the order trend we’re looking at is how does that conversion really, you know, work through the q two results. And right now, we’re not seeing as strong conversions we saw in q two of last year, but still, you know, decent quoting activity with our independents. In terms of our captive retail, as I mentioned, we did see growth in that channel on the revenue side. Part of what the team was working through there is we anticipated, you know, last fall a pretty significant opportunity going into Q1 and Q2 of this year. And with not a stronger consumer environment, we’ve had to work through some inventory in that channel, and they’re doing that.

And so I think from our perspective, that’s part of a prudent approach we’re taking with our captive retailers to work through that inventory. As far as the other channels go on inventory, I think we’re pretty balanced on an overall basis, but we certainly work with our dealers on a case by case basis to make sure we’re having the right inventory for their customers. And beyond just aggregate inventory, it’s the right products in this environment, given the consumer price points that we wanna hit and the payments we wanna hit. So from our perspective, think, you know, each channel, it’s really relative to the q one growth rate, but we’re encouraged by the quoting activity across our channels and the progress. It’s just relative to the growth rate we saw in q one is more where we’re seeing the moderation.

Michael Dahl, Analyst, RBC Capital Markets: And then on the inventory that you’re kind of working through on your captive retail, should we expect that to be largely flushed out this quarter or it’s going take one more time?

Tim Larson, President and Chief Executive Officer, Champion Homes: At this point, we’re working that week by week and location by location. We have over 80 retail stores. So, you know, I’m pleased with the progress the team’s making there, they’re doing it very thoughtfully. But we’ll give you an update on that in in q two.

Michael Dahl, Analyst, RBC Capital Markets: Okay. And a question for Lori. Gross margins were great. You mentioned lower input costs help, and I suspect part of that is lumber and OSB prices falling. Should we still expect input costs to be a good guy in this current quarter?

And not to say you have clarity, but certainly a little more on tariffs. Can you give us some color on how you’re thinking about just inflation broadly as it relates to tariffs? Do you need to go out and raise prices to kind of offset that? Certainly, lumber duties, think coming out of Canada will start to pick up over the course of the year.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yes, Phil. So from I do think that lower material costs will continue to help margins. They seem to be staying relatively stable. Other than forest products, we are seeing some increases in some components. And then as far as tariffs are concerned, we have evaluated the tariff impact.

It wasn’t substantial, actually not very significant at all in the first quarter. And as you know, they’re constantly evolving. Our current estimate is that our unmitigated impact on our material cost is approximately 1% of our material costs for tariffs. And we will use a combination of alternative sourcing as well as price where demand allows.

Michael Dahl, Analyst, RBC Capital Markets: Okay, super. Appreciate the color. Thank you.

Mina, Call Coordinator: The next question is from the line of Jesse Leilerman with Zelman and Associates. Please go ahead.

Jesse Leilerman, Analyst, Zelman and Associates: Hey, thanks for taking the question and nice job in the quarter. A follow-up question, Laurie, on the tariff impact of 1%. Is that already contemplated within the reiterated 25% to 26% near term range? Or will that be an incremental impact on top?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: It is considered in that 25% to 26% based on known tariffs today.

Jesse Leilerman, Analyst, Zelman and Associates: Okay. Got it. And then were there any are you able to quantify the impact from tariffs? You said it was like basically not significant at all, I guess. Was it like a couple dozen basis points or something in the first quarter?

Or just to kind of understand like how that might change from fiscal 1Q to 2Q?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: It was not material in fiscal 1Q primarily because of the flow of our inventory. We do have inventory on hand in our factories, Jesse. So that’s the primary impact.

Jesse Leilerman, Analyst, Zelman and Associates: It. So basically, no impact in 1Q and then can go up to 1% of COGS in 2Q, but already contemplated within the guidance?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: 1% of material costs.

Jesse Leilerman, Analyst, Zelman and Associates: Of material costs, Yes. Yes, got it. Which is about half of the overall COGS, is that right?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: In that range.

Jesse Leilerman, Analyst, Zelman and Associates: Okay, thanks. And then last question, through the new JV, the financing JV, are you or even just through captive retail, are you able to track or measure the average household income of those that are purchasing homes or applying for loans, and whether that’s increased or decreased over time?

Tim Larson, President and Chief Executive Officer, Champion Homes: So Jesse, mentioned reviewing the internal survey data of our customers and there are elements in there. And part of that is where where the buyer’s coming from, what their previous home ownership, what type of dwelling they’re in. And we’re seeing a lot of first time home buyers. We’re seeing people new to manufactured homes from a demographics, from a socioeconomic income. That’s some of the cross checks that we’re doing.

And right now, we’re not gonna be sharing that publicly because some of that’s where we’re pricing our approach and some of our consumer approaches. So I would say we’re encouraged by what we’re seeing there. We’re encouraged by the ability for that consumer to pay, and we’re also encouraged by how we’re attracting new customers to manufactured housing.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Okay. That’s great. Yeah.

Jesse Leilerman, Analyst, Zelman and Associates: I was curious if maybe you were seeing higher household income could be reflective of consumers that are mixing lower from site built housing, if that’s something you’re willing to disclose. But otherwise, appreciate all the color.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah. What I can say is we are seeing people come from previously owning a site built home to manufactured housing, and so that is encouraging. What I do think we have to recognize is, and this is the consumer environment, is those consumers are impacted by the general impact of the economy and inflation. So it’s an opportunity for us, and certainly part of the tailwind we anticipate over time, which is why we’re doing the marketing to bring in new consumers, the new products that we’re doing. But that’s certainly shifting that over time.

But so far, we’re encouraged by what we’re seeing from those efforts and bringing in those new buyers.

Jesse Leilerman, Analyst, Zelman and Associates: Great. Thanks so much for the color, Tim and Laurie.

Mina, Call Coordinator: This concludes our question and answer session. I would like to turn the conference back over to Tim Larson for any closing remarks.

Tim Larson, President and Chief Executive Officer, Champion Homes: As I mentioned earlier, it’s encouraging to been able to grow share the last six months and it reflects the team’s commitment to innovating with products and engaging our customers. And, we appreciate your time today and your questions and your interest in Champion and our strategy going forward. So with that, we’ll wrap it up and look forward to updating you next quarter. Thanks so much.

Mina, Call Coordinator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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