Earnings call transcript: Champion Homes Q4 2025 misses EPS, stock drops

Champion Homes Inc. (CHMP) reported its fourth-quarter 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.65, falling short of the anticipated $0.7767, while revenue reached $593.87 million, slightly below the $600.94 million forecast. Following the announcement, the company’s stock experienced a significant decline, dropping 14.21% in premarket trading to $72.29. According to InvestingPro data, the company maintains a robust financial health score of 2.63 (rated as GOOD), with particularly strong cash flow metrics.

Key Takeaways

• Champion Homes’ Q4 2025 EPS and revenue fell short of expectations.
• The company’s stock dropped over 14% in premarket trading.
• Fiscal year 2025 saw a 23% growth in revenue.
• The company maintains a strong cash position with $610 million.
• Consumer confidence and market conditions present ongoing challenges.

Company Performance

Champion Homes reported strong overall performance for fiscal year 2025, with sales reaching $2.5 billion, marking a 23% increase from the previous year. This growth aligns with InvestingPro’s data showing a 22.52% revenue growth in the last twelve months. The fourth quarter presented challenges, with net sales of $594 million, an 11% year-over-year increase, but below market expectations. The company sold 6,171 homes in Q4, a 6% increase, indicating demand remains robust despite market uncertainties. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a healthy current ratio of 2.59x.

Financial Highlights

• Revenue: $593.87 million, 11% year-over-year increase
• Earnings per share: $0.65, down from the forecasted $0.7767
• Net income: $36 million, translating to $0.63 per diluted share
• Adjusted EBITDA: $53 million, representing an 8.9% margin
• Cash and cash equivalents: $610 million

Earnings vs. Forecast

Champion Homes’ Q4 EPS of $0.65 missed the forecast of $0.7767 by approximately 16.3%. Revenue also fell short, coming in at $593.87 million versus the expected $600.94 million. This marks a significant departure from previous quarters where the company typically met or exceeded expectations.

Market Reaction

The market reacted negatively to the earnings miss, with Champion Homes’ stock price dropping by 1.63% in regular trading and a further 14.21% in premarket trading, settling at $72.29. This decline is notable against the backdrop of the company’s 52-week range of $64.82 to $116.49, indicating investor concerns about the company’s near-term prospects. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels, despite its strong fundamentals including a P/E ratio of 37.3x and robust return on equity of 11%. Discover more insights and 8 additional ProTips about CHMP with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, Champion Homes expects Q1 revenue to grow in the low single digits, with gross margins projected between 25-26%. The company is focusing on strategic growth initiatives, including expanding its retail presence and investing in product innovations, despite challenges posed by consumer uncertainty. InvestingPro data shows the company’s strong financial position, with analyst consensus predicting continued profitability and sales growth in the current year. For detailed analysis and comprehensive insights, access the full Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

"We provided over 26,000 homes to customers and families across the U.S. and Canada," stated Tim Larson, CEO, underscoring the company’s commitment to meeting housing demand. CFO Lori Huff added, "Long term, we still expect structural margins to be in the 26% to 27% range," highlighting confidence in the company’s profitability.

Risks and Challenges

• Consumer confidence remains soft, potentially impacting future sales.
• Input cost challenges and tariffs could affect profitability.
• Market saturation and regulatory barriers may hinder growth.
• Economic uncertainties could dampen consumer spending on housing.

Q&A

During the earnings call, analysts inquired about the potential removal of chassis requirements, regional market variations, and strategies to address tariff and input cost challenges. The company also explored consumer financing and lead generation strategies to bolster future growth.

Full transcript - Champion Homes Inc (SKY) Q4 2025:

Sherry, Conference Call Coordinator: Good morning. Welcome to the Champion Homes Fourth Quarter Fiscal twenty twenty five Earnings Call. My name is Sherry and I will be coordinating your call today. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I will now turn the call over to your host, Jason Blair, to begin. Jason, please go ahead.

Jason Blair, Unspecified Executive, Champion Homes: Good morning. Thank you for taking the time to join us for today’s conference call and review of our business results for the fourth quarter and full year ended 03/29/2025. Here to review our results are Tim Larson, Champion Home’s President and Chief Executive Officer and Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer. Earlier this morning, 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 statements 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. On behalf of the Champion team, I’m proud to report that in fiscal twenty twenty five, we provided over 26,000 homes to customers and families across The U. S. And Canada. This represents a 19% increase in homes sold year over year and revenue growth of 23%, resulting in fiscal year twenty twenty five sales of $2,500,000,000 Unit volume increase was driven by higher demand across all channels, including from the Regional Homes acquisition for the entirety of the fiscal year.

Our performance was driven by an unwavering focus on our customers and executing our strategic priorities. We are investing in new products and services for our channel partners and expanding our retail capabilities, including today announcing the acquisition of Eisman Homes, which I will discuss further in a moment. We were very active in the marketplace during the quarter and had a tremendous reception to our new products at the International Builders Show, where we showcased models laser focused on providing builders with relevant and affordable turnkey homes. In March, we had a great response to our Biloxi Show product lineup, reflecting the strength of the Champion Homes family of brands. More recently, we were able to engage with leadership from the Department of Housing and Urban Development.

We are encouraged by the dialogue and the positive feedback we received during their recent visit. We are impressed by U. S. HUD Secretary Scott Turner’s commitment to making homeownership more attainable. I appreciate the time we spent touring our homes and his willingness to learn how we can further expand manufactured housing to address the affordability needs across the country.

The recent spotlight in Congress to reaffirm HUD’s role as the sole regulator and removing the requirement that manufactured homes beyond a permanent chassis are all steps in the right direction. And when combined with zoning reform, we’ll reduce barriers to further grow the market for off-site built homes. A market that we are investing in for growth, as reflected in our strategic priorities and capital allocation, that are all aligned to deliver sustained value across all stakeholders. Given the current overall market uncertainty, we are focused on remaining nimble while thoughtfully advancing our strategy. And that was very evident in the fourth quarter of fiscal twenty five.

Team continued to execute on the fundamentals and deliver profitable growth by navigating an unpredictable environment with tariffs and inflation looming throughout the quarter. Fourth quarter year over year net sales increased 11% to $594,000,000 and homes sold during the period increased 6% to a total of 6,171 units. We experienced normal seasonality in the fourth quarter with a sequential decrease in revenue compared to the third quarter, and orders increased as we progressed through the quarter, and our backlog at the end of the year was three forty three million Backlogs were up 9% from the end of last year and up 10% sequentially. Average backlog lead time ended the quarter at eight weeks, which is within our target range of four to twelve weeks. I’ll provide some additional commentary from the quarter on each of our sales channels.

Sales to our independent retail channel and through our captive retail stores both increased versus the prior year period. For independent retailers, we continue to advance our digital technology and lead management platform, including a phased launch of a dealer portal, which was receiving great reviews from the early adopters. Consistent with our strategy to expand our captive retail presence, we announced today an agreement to acquire Eisen Homes located in the Plains region of The US. We will use the strength of our in house retail and our new Eisen Homes team to drive growth in this region. I’ll touch more on Eisen in a bit.

Moving to the community channel, we remain focused on supporting our community partners by providing timely and relevant products at the right value. Through these efforts, sales in our community channel increased versus the prior year. Our builder developer pipeline remains strong as we continue to grow the network. The projects are in various stages and are being paced somewhat by the market uncertainty. However, we are continuing to invest in this channel and believe over the long term, off-site build homes will become a more widely adopted approach for builders and land developers.

Champion Financing, our joint venture with Triad Financial Services, continues to perform well. Our retail loan programs, when combined with the right home, provide today’s consumers with their optimal monthly payment. Our Floor Plan programs allow us to support growth with our retailers by ensuring they have the right products for each market. We appreciate the collaboration with the ECM Capital and Triad teams and partners. Looking to our first fiscal quarter of ’twenty six, as we thoughtfully navigate the market and consumer uncertainty, we anticipate Q1 revenue to be up low single digits compared to the same period last year.

As we begin fiscal twenty twenty six, demand has been less predictable compared to a normal spring selling season. In addition, we are seeing a shift in consumer trends to smaller floor plans with fewer futures and options. The near term outlook for the community channel varies as we hear mixed use depend on the operator’s geography and expansion pace. Despite the uncertain environment, we remain confident and focused on executing our strategy and leading and managing the variables within our control while remaining nimble in the market. We’re actively managing within the dynamic tariff environment and are executing our playbook as developments unfold.

But so far, the direct cost impact has been limited, although we do believe it is affecting consumer sentiment. Our strategy includes a balanced approach of selective price adjustments and the material sourcing changes to optimally mitigate the impact. We are also being proactive and agile as we navigate the environment, including taking actions to thoughtfully control our fixed costs, while not losing sight of our need to invest in our strategies for the long term. We recently idled one of our production locations in the Florida market by leveraging our remaining nearby facilities for customers in that region. Permitting and demand in Florida has been slow to recover from the twenty twenty four hurricanes.

In addition, in the British Columbia region, we are consolidating two of our Canadian factories into one to improve operating efficiencies and reduce overhead costs. From a growth perspective, as I mentioned earlier, we announced the signing of a definitive agreement to acquire Eisman Homes, including its 10 retail sales centers in the Plains region of The US. This acquisition underscores our long term strategy to expand our retail footprint and deliver market relevant products, all while elevating the home buying experience for our customers. With annualized revenues of approximately $40,000,000 we see a pipeline of local market demand and synergistic opportunities. Champion Homes team is very excited to welcome Eisman Homes, and we look forward to their integration with our Champion family of brands.

We expect the transaction to close by the end of our first fiscal quarter. In summary, we believe Champion Homes is well positioned to weather the uncertain market environment while driving an unwavering focus on our long term strategic growth priorities and day to day execution that are directly centered on our customers and team. I’ll now turn the call over to Laurie, 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 fourth quarter, followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our near term expectations. During the fourth quarter, net sales increased 11% to $594,000,000 compared to the same quarter last year, with U. S.

Factory built housing revenue increasing 10%. The number of homes sold increased 5% to 5,941 homes in The U. S. Compared to 5,652 homes in the prior year period. U.

S. Home volume during the quarter was supported by healthy demand across our retail and community channels. The average selling price per U. S. Homes sold increased by 5% to $94,300 due to product mix, including a higher number of units sold through our company owned retail sales centers.

On a sequential basis, U. S. Factory built housing revenue decreased 8% in the fourth quarter compared to the third quarter fiscal twenty twenty five. We saw a sequential decrease mainly due to expected seasonality as well as an impact from weather across the South. In addition, manufacturing capacity utilization was 60% compared to 63% in the third quarter.

On a sequential basis, the average selling price per home was relatively flat. Canadian revenue during the quarter was $25,000,000 representing a 22% increase in the number of homes sold versus the prior year period. The average home selling price in Canada decreased 9% to $110,600 primarily due to a shift in product mix. Consolidated gross profit increased 55% to $152,000,000 in the fourth quarter, and our gross margin expanded seven forty basis points from 18.3% in the prior year period. The higher gross margin was primarily due to a product liability reserve of $34,500,000 recorded in the fourth quarter of last year that did not reoccur in fiscal twenty twenty five, as well as higher average selling prices and a higher share of sales through our captive retail sales centers.

Gross margin declined sequentially from our fiscal third quarter and was lower than expectations, primarily due higher material input costs relative to flat wholesale ASPs as well as lower capacity utilization causing decreased leverage of fixed overhead costs. SG and A in the fourth quarter increased $20,000,000 over the prior year period to $110,000,000 The increase is primarily attributable to increased sales volumes through our company owned retail sales centers and higher variable costs related to higher revenue. In addition, we increased marketing spend to drive awareness in our brands and homes and continued to make investments in technology to support future growth. The company’s effective tax rate for the quarter was 17.1% versus an effective tax rate of 19.2% for the year ago period. The decrease in the effective tax rate is primarily due to an increase in tax credits and a decrease in state income taxes.

Net income attributable to Champion Homes for the fourth quarter increased by $33,000,000 to $36,000,000 or earnings of $0.63 per diluted share compared to net income of $3,000,000 or earnings of $05 per diluted share during the same period last year. The increase in EPS was driven mainly by the absence of an adjustment to the water intrusion product liability reserve in the current year period. Adjusted EBITDA for the quarter was $53,000,000 which is consistent with the same period a year ago. Adjusted EBITDA margin was 8.9% compared to 9.9% in the prior year period. This decrease in EBITDA margin is mainly driven by higher SG and A.

We expect near term gross margin in the 25% to 26% range as we balance softening consumer confidence, decreased demand in certain markets and inflation. In addition, we’re seeing consumers shifting to homes with fewer or lower priced features and options, which impacts gross margin. To help offset some of this impact, and as Tim mentioned earlier, we’re taking steps to balance SG and A spending while continuing to drive our strategic growth priorities, including investments in people and technology. As of 03/29/2025, we had $610,000,000 of cash and cash equivalents and long term borrowings of $25,000,000 with no maturities until July of twenty twenty six. We generated $46,000,000 of operating cash flows for the quarter compared to $4,000,000 in the prior year period.

In the quarter, we leveraged our strong cash position and returned capital to our shareholders through $20,000,000 in share repurchases. Additionally, our Board recently refreshed our $100,000,000 share repurchase authority, reflecting confidence in our continued strong cash generation. 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. While we anticipate near term order rates to vary by channel and geography, the need for affordable housing remains ever present across The U. S. And Canada. The long term outlook for Champion is strong, and we have the strategies in place to deliver for all our stakeholders.

Strategies that we are thoughtfully executing as we evolve the team with a combination of internal advancement, new talent, and select engagement of outside resources. Our guiding priorities are not only for the long term, they provide a clear roadmap for today’s environment and deploying our capital, including winning as a customer centric, high performance agile team, innovating and differentiating with products and services that bring in new buyers, expanding and elevating our go to market channels, including delivering experiences before, during, and after the sale that earn new customers and their referrals increasing awareness, demand, and advocacy for our brands and homes and leveraging our costs, capacity and investments in people and technology. Finally, I would like to recognize the entire Champion Homes team for their exceptional efforts to grow revenue and earnings in fiscal twenty twenty five and as we work together to continue to execute our strategic initiatives for all our stakeholders. And now let’s open the line for questions. Operator, please proceed.

Sherry, Conference Call Coordinator: Thank Our first question is from Daniel Moore with CJS Securities. Please proceed.

Daniel Moore, Analyst, CJS Securities: Thank you. Good morning, Tim. Good morning, Laurie. Maybe could you start with just elaborating on the discussions with customers in both retail and community markets and the cadence of order rates into April and thus far in May and maybe a little bit more bifurcation by geography. Obviously, Florida by all accounts has been soft, but where you’re seeing pockets of strength, pockets of weakness, etcetera?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, good morning, Dan. Encouraging wise, we’re seeing digital leads are up across a lot of our regions. But then when we talk to the retail teams, the in store traffic has been mixed and certainly by region of the country. And as I talked to our independents, they’re seeing similar impacts in terms of certain areas where there’s strong traffic, others that are a little weaker. But what I would say in general, what’s encouraging is that there’s more buyers, active buyers, and those buyers are ones that are more motivated to obviously purchase a home and our financing programs are helping that.

So I would say there’s more serious buyers in the market and that’s why we reflected our low single digit growth for Q1 versus somewhat you’re seeing in the broader market. But I would say, it’s been mixed traffic this spring, but we’ve been driving more leads, certainly driving more of that engagement with our consumer at our retail stores. But it is more mixed and that’s why we signaled a more low single digit rate for the quarter.

Daniel Moore, Analyst, CJS Securities: Sorry, that’s on mute. Helpful, Tim. And on the community side, little bit of continued interest, but maybe kind of a slow burner holding off for now. I’m trying to remember your exact commentary in your prepared remarks, but any elaborate there would be great. Thank you.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, we were up in the quarter year over year in the community segment and we’ve certainly certainly seen some returns with key customers there. But I would say it’s mixed. There’s some projects and some community developers that are pacing a bit. But we’ve been pleased with the growth of the community segment over their last year. They’re now at 28% of our overall units, which is strong.

And so we’re pleased with how that’s going. But we’re just balanced about the community segment given that they face some of the dynamics with the consumer as well.

Daniel Moore, Analyst, CJS Securities: Got it. And then on the SG and A side, increased sequentially despite the decline in sequential decline in revenue. Can you maybe just break out a little bit about how much was incentive comp versus investments in marketing and technology? Just trying to get a sense for how much SG and A in Q4 could be temporary versus kind of permanently higher cost structure.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Good morning, Dan. I would say, we should remember in the fourth quarter that we have quite a few of our industry shows. That’s kind of a cyclical timing issue for us in the fourth quarter. So that won’t reoccur quite as strongly, going into the first half of next of this fiscal year. So, but we aren’t going to break out the components individually.

Daniel Moore, Analyst, CJS Securities: Understood. Okay. And then just last one for me, continue to utilize buybacks as an arrow and a quiver in terms of capital allocation. With shares indicating where they are this morning, just your thoughts about being more aggressive. Cash continues to grow, but despite buying back shares more aggressively.

So any thoughts on that front? And thanks again for the color.

Tim Larson, President and Chief Executive Officer, Champion Homes: Well, obviously, we have go ahead, Laurie.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: No, that’s okay. Yes, we have a really balanced capital allocation profile. So we’ll keep an eye on that and obviously be opportunistic if the shares allow and just make judgment calls based on our overall strategy, Dan.

Daniel Moore, Analyst, CJS Securities: Thanks again.

Tim Larson, President and Chief Executive Officer, Champion Homes: Was going to add, Dan, that we’re pleased we refreshed our commitment to share repurchase, and we’ve added $100,000,000 of cash versus last year, which certainly gives us options across our capital allocation.

Sherry, Conference Call Coordinator: Our next question is from Greg Palm with Craig Hallum Capital Group. Please proceed.

Greg Palm, Analyst, Craig Hallum Capital Group: Yes, good morning. Thanks. Going back to the quarter, I think you maybe talked or mentioned about some unfavorable weather conditions. Just based on order rates and any backlog, was there any inability to ship homes from retail to end customers? I know you had a dynamic in the year ago period that came into play, but just curious if that was impacted at all this quarter as well?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes. The Texas market and part of the South was a bit slower than typically would be. So there is some impact there and we factor that into the first quarter of fiscal twenty twenty six. But I think that plus some of the consumer dynamics I mentioned are factoring in. But we feel like we’re in a good position now with where we are with our inventory and the opportunity to move in a nimble way given consumers demand that if that continues to grow.

So I think we’re pretty balanced there.

Greg Palm, Analyst, Craig Hallum Capital Group: Yes. Okay. And I guess it’s not a secret that housing overall is pretty soft, but I know activity here has held up maybe better than stick built, if you want to call it that. But I’m just curious, if you just take a step back and talk a little bit about manufactured housing specifically in the customer base and the demographics and what gives you hope that maybe this is a time for more meaningful share gains? Maybe you can talk a little bit about sort of deregulation in there as well because there’s obviously some important things going on behind the scenes.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes, for sure. There’s a few different levers there. One of our commitments to have captive retail is that where you really can drive the customer experience and the speed with the customer, and you combine that with our consumer financing program. So that’s why we’re expanding with Eisman. Second, another area you mentioned is the regulation elements.

We’re encouraged by the focus on reducing the chassis meet requirements, looking at different approach in terms of, the reformer on zoning potentially so that more local municipalities are supportive. Obviously removing the chassis is going to help that in certain markets. The other driver is just an overall awareness. When we had the HUD secretary walk through our homes, his feedback was positive. Wow, these are beautiful homes, so well built.

Just getting that advocacy out there so more consumers are aware of it. You see that with our investment in marketing spending obviously what we’re doing digitally. Then in terms of the consumer, really making sure they’re aware of the price points that you can get in a brand new home. And that’s obviously the key with our financing programs. You can get a customer matched to the right product with that right price point.

Just getting more awareness in the market and pulling in new consumers, and we’re putting our digital spend to work there. We’re using social media to attract people who typically would maybe be aware of our products and pull them into our retail. So those are all drivers. Now that’s against the backdrop that there’s more challenges with the consumer in terms of some of the uncertainty we’re seeing. So that’s why we’re investing to make sure that we’re getting into their mindset in terms of a consideration purchase.

The combination of those things, think, really are what’s going to be in the near term key. But then from a longer term, our product innovation spend is to make sure that we have a range of products for those range of customers that are looking for the different types of homes and needs. And you saw that at the show, many of you have been at our shows where you see the type of new products that we’re coming out with. And I think those are all keyed in terms of growth and the strategic priorities that I laid out in my remarks.

Greg Palm, Analyst, Craig Hallum Capital Group: Yeah. Okay. Makes sense. Thanks for the color.

Sherry, Conference Call Coordinator: Our next question is from Matthew Bouley with Barclays. Please proceed.

Matthew Bouley, Analyst, Barclays: Good morning, everyone. Thank you for taking the questions. I’ll ask on the gross margin. The change to the near term guide, I think you said 25% to 26%. I think previously it was in that 26% to 27% range.

So my question is, if some of the, I guess, pressures that you’re seeing today, if your view is there sort of more temporary and that the 26% to 27% is still realistic over time? Or is it that you’re kind of still, I guess, looking for what the structural gross margins of the business should be going forward as obviously the business mix has shifted over the years? Thank you.

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Good morning, Matt. Thanks for the question. We do think that the lowering to the 25%, twenty six % range is just for the short term based on softening consumer confidence and decrease in demand in certain markets as well as some inflation that we’re seeing in material costs. Long term, we still expect structural margins to be in the 26% to 27% range based on the improvements that we’ve made across the platform.

Matthew Bouley, Analyst, Barclays: Got it. Okay. Thanks for that, Laurie. And then, yes, secondly, interesting discussion at the top there around some of your discussions with the new HUD secretary. Maybe just around that potential removal of the permanent chassis requirement.

Any color on sort of what that would do for your own costs? How realistic is that actually happening? And I guess how would you then react around either passing that through to consumers or maybe just impacting other designs, just kind of giving you more flexibility in the product design? Just how would that all play out? Thank you.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, first off, from a consumer perspective, it allows you to do maybe two stories more effectively, give some elevations because you can do more slab on grade. So it gives that benefit from a curb appeal. And then there’s some municipalities that are still hung up on having a chassis under home, so it helps with the zoning support. From a cost perspective, certainly not having the chassis underneath. You you need it for transport, different types of transport that may be lower cost, so there is some opportunity there.

As far as how we would approach it, our goal is to create the right product price value. And if we haven’t a chance to do that for a consumer that disallows it, great. But obviously, we want to continue to drive margins, so we’d have to look at the balance there. But it’s encouraging that it’s actually now in discussion and there’s progress in terms of regulators. And I think because of the strength of the quality of our homes and the way that we can deliver them, it really gives us the confidence that this should happen and likely will happen, but also often that it has to go through the bills process, which is well underway at this point.

So we’re encouraged by it and we’re also looking at product innovations that would leverage from it. So we’ll keep you posted as it evolves, but it’s an encouraging sign.

Jesse Liederman, Analyst, Zelman and Associates: All right. Thanks, Tim. Good luck, guys.

Sherry, Conference Call Coordinator: Our next question is from Mike Dahl with RBC Capital Markets. Please proceed.

Mike Dahl, Analyst, RBC Capital Markets: Good morning. Thanks for taking my questions. A couple of follow ups here. First on the gross margin dynamics, I guess, you be more specific about what role the input costs are playing in the near term? Because if I look at kind of wood products, though lumber is up a little, OSB is down a lot.

So I would think your blended wood basket is actually kind of flattish, but maybe just give us a sense of what’s impacting what’s the cost impact versus that mix or mix down impact in your near term margin expectations?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Hey, Mike. Good morning. I would say that obviously, we’re not going to break out components, but we do have portions of our wood products that we buy at the spot rate and also portions that we buy on contract. So the mix of those don’t necessarily align 100% with the spot rate activity. So we need to keep that in mind.

We’re also seeing some increases in some other component costs across the board. So and then we are seeing some pricing pressure in certain regions of the country based on consumer confidence.

Mike Dahl, Analyst, RBC Capital Markets: Okay, got it. Appreciate that. And then just a follow-up on that response to Matt’s question on the permanent chassis requirement. In your with builder developers specifically, as you’ve kind of rolled out and tried to promote the Genesis brand and build those relationships, has that been a hang up in your discussions with builders? Because that is a limiting factor?

Or how would you describe that when you think about the potential to unlock that part of your business or further that part of your business specifically? And then if I could just ask more broadly when you talk about kind of some more measured pace on that side of the business recently, understandable, but maybe just put some numbers around that.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah. Yeah. Great question. In terms of the chat, yeah, that is opportunity with builder developer because oftentimes those developers are going into new municipality, new land zoning, and that certainly would help if they’re looking for that more single family, slab on grade look. The other factor is those builders at times are looking for two story projects, which this would be an advantage for that approach.

In terms of the overall builder developer, you know, the pipeline is continuing to build and we’ve had really good response to the new products that we’ve come out with. One of the realities of that business, given it’s a smaller size in our total portfolio, is the time it takes for those projects. They can be anywhere from twelve months to twenty four months. So that pace does impact when those orders really materialize. But we’re encouraged by the pipeline and we’re working directly with those builders.

And I think the pacing also is with the macro and macro environment, some of them are looking at the phases and how quickly they deploy, but we’re working with them directly to make sure that we can help and support that and move those projects along and we’re leveraging what we’ve learned from the projects that we’ve done so far. So again, that’s a longer term development channel for us, but it’s one that both the regulatory opportunities and the way we’re pacing it is really helping. I appreciate the question on builder developer.

Mike Dahl, Analyst, RBC Capital Markets: Thanks, Tim.

Sherry, Conference Call Coordinator: Our next question is from Phil Ng with Jefferies. Please proceed.

Phil Ng, Analyst, Jefferies: Hey, guys. I I guess question for Laurie. Your near term margin guidance is pretty steady from Q4, which is great, but certainly we’re still seeing impacts from tariffs. It doesn’t sound like it’s massive, but help us kind of think through how that could impact margins and do you have to take incremental price because you kind of alluded to perhaps some pricing pressures in certain markets?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Hey, Phil. Good morning. Yes. So we’re not seeing a significant increase tariffs currently. We are watching and monitoring, as it changes on a daily basis.

So keeping track of that and understanding where our products come from and what the impact will be and then just being proactive about sourcing from other locations and so forth. So we have an active playbook of things that we can do when that comes up, but we’re not quantifying what that will be.

Phil Ng, Analyst, Jefferies: Okay. But let’s say if you do see a little more inflation just given the current demand backdrop, do you feel comfortable that you have the ability to take some price or you’re to have to manage through that I guess in the near term?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: I think it depends on the region of the country. So keeping in mind that our plants ship within a 500 mile radius generally without being too cost prohibitive on transportation. So ultimately, the decision still lies on price with and at the plant level. We give them guidance, but they have to measure competitively what’s happening in their markets relative to consumer demand and pricing more broadly.

Phil Ng, Analyst, Jefferies: Okay, super. I guess question for you Tim, on the Eisman transaction, certainly you guys had great success with regional homes. Can you give us a little color on the opportunity here in terms of driving gross margins higher And then the $40,000,000 number, is that all incremental? Just wasn’t sure if you guys were selling to them already.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes. In terms of the $40,000,000 we are there are key customers today. But there’s still meaningful opportunities to bring existing volume that they’re doing with other providers to us. And we’ll do that over time. In terms of the opportunities beyond that, one of the things we’ve learned this last year at Regional is in addition to the synergies, we can also drive accretive growth, which we did with Regional and we certainly are prepared to do with Eisman.

Canada team there are a great team. There’s an opportunity to collaborate with both of our organizations from what we’ve learned. And now we can bring some of the tools directly to that team and directly to the consumer. So we’re excited about that and opportunities with product. And so we’ve got a lot to build on with the success of regional, but also in broader market in the Midwest.

And strategically, obviously, we see we’ve had a presence in the South and Southeast. We’re excited to expand that in the Midwest. So those are opportunities for us. Would it be accretive

Phil Ng, Analyst, Jefferies: to gross margins out of the gates, Tim?

Tim Larson, President and Chief Executive Officer, Champion Homes: I think we’ll get through that. We’re just obviously announced today, we’re going to work through integration. We’re seeing some things that are encouraging in that front, but we’ll be back to you as we work through the acquisition. But we’re excited to move to that integration phase next, we’re anticipating closing this at the June.

Phil Ng, Analyst, Jefferies: Okay, appreciate the color.

Sherry, Conference Call Coordinator: Our next question is from Jesse Liederman with Zelman and Associates. Please proceed.

Jesse Liederman, Analyst, Zelman and Associates: Hi, thanks for taking the questions. Laurie, want to clarify. So it sounds like in the 25% to 26 gross margin guide, you’re not seeing any impact from tariffs yet. Does that number include any baked in conservatism from potential inflation from tariffs or no?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: It does not. No.

Jesse Liederman, Analyst, Zelman and Associates: Okay. Thanks for clarifying that. I’m curious, when you talk about you’re seeing mix shifts lower to either smaller sized homes or less options and upgrades. Are you also seeing or able to quantify mix shift from maybe buyers that would otherwise be buying an existing home that are now considering a manufactured home, maybe even a single section? Is that something you can track?

Is that something you expect? Maybe can you talk a little bit about what you’re seeing at the larger size homes?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yes. I think in terms of the market trends, we are seeing that smaller size and that’s driven more by price point and monthly payment, which speaks to the consumer environment. As far as new consumers coming in the category, I mentioned our efforts to pull in those consumers. And certainly those first time homebuyers or buyers that are looking for entry level but a new home, that gives us the opportunity. So we’re starting to see that.

But I would say as an industry, one of the things we have to be focused on is how we attract even more new consumers. And that’s why the actions with the administration, what we’re doing with new products, and certainly the messaging around awareness are key. But now is a good environment to be doing that.

Jesse Liederman, Analyst, Zelman and Associates: Absolutely. And it sounds like there’s some opportunity even just as industry to do some consumer education from a buying process perspective or financing perspective and kind of how the manufactured housing home buying process works. So hopefully that’s something that can be a tailwind as well. One more for you, Tim. You talked about the dealer portal that you’ve started to roll out.

Can you talk a little bit about how that may work in practice and maybe some signs you’re seeing into the effectiveness of that program? Thank you.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah. So it ties in tandem with our consumer platform at championhomes.com that we launched. That allows then their dealer to visibly see the leads that are coming through and to quickly respond to those and engage with those, and then also manages downstream in the process with order status and being able to connect that to our plans. We also are able through that portal to give them the latest digital marketing tools and our capabilities that we can do nationally to support them. And so it starts to organize around the hub of how they work with Champion as a retailer and leverage the effectiveness.

And so we’re rolling it out in phases. The early response has been really good, but we see it as key to integrating the digital experience from the consumer to the retailer and to us as the OEM in an integrated way.

Jesse Liederman, Analyst, Zelman and Associates: Awesome. Sounds very exciting. Thanks a lot.

Sherry, Conference Call Coordinator: Our next question is from Jay McCanless with Wedbush Securities. Please proceed.

Tim Larson, President and Chief Executive Officer, Champion Homes: Hey, good morning, everyone.

Jason Blair, Unspecified Executive, Champion Homes0: Laurie, I was hoping you could drill down more on the price competition. What markets specifically are seeing the price competition? And is it more focused on single section or double section homes?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yes, it varies, Jay. We are seeing a pickup actually in activity out West. We are seeing a little bit of slowness in Florida, as we mentioned, and then also in the Northeast. We are seeing a shift to more single wides and smaller homes, a smaller footprint home with less features and options. And as we mentioned, that will have an impact on margins because our option content generally comes in at higher margins than the base price of the house.

Jason Blair, Unspecified Executive, Champion Homes0: Great. Thanks. And then the second question, still haven’t heard FEMA, I think, ordering any homes. Have you all heard anything recently from them, whether it be out West or some of the stuff in the Carolinas?

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah. No orders of yet. Obviously, we’re working with them and to prepare for whenever they’re ready for that. But we certainly are supportive whenever that occurs, but no orders at this point.

Jesse Liederman, Analyst, Zelman and Associates: Okay. And

Jason Blair, Unspecified Executive, Champion Homes0: then the last question for me, kind of talk about where chattel rates went this quarter versus last year and anything positive or negative you guys are seeing on credit availability for chattel?

Lori Huff, Executive Vice President, Chief Financial Officer and Treasurer, Champion Homes: Yes, credit availability is pretty stable, Jay. And as far as rates, they’re still about 150 basis to 200 basis points higher than the thirty year fixed for a well qualified buyer.

Jason Blair, Unspecified Executive, Champion Homes0: Okay. Thanks. Appreciate

Sherry, Conference Call Coordinator: Our next question is from Daniel Moore with CJS Securities. Please proceed.

Daniel Moore, Analyst, CJS Securities: Thank you again. My follow-up was on Eisman was answered, but maybe just talk a little bit about the level of discussions with other regional dealer groups and maybe the M and A pipeline more generally.

Tim Larson, President and Chief Executive Officer, Champion Homes: Yeah, mean, we’re not going talk about specifics, but bigger picture, you look at our strategy and we’ve laid out those five priorities at the end of my remarks. Those are aligning how we’re thinking about M and A, capital allocation. And certainly, we’re excited about Eisman and we’re going to focus execution and integration. But certainly our strategy reflects where we want to put our capital going forward.

Daniel Moore, Analyst, CJS Securities: Okay, thanks again.

Sherry, Conference Call Coordinator: There are no further questions at this time. I would like to turn the floor back over to Tim for closing remarks.

Tim Larson, President and Chief Executive Officer, Champion Homes: Well, obviously, you can see in our first months here of operating the agility and action orientation that we have. I mean, if you think about, we’ve had 26,000 homes wrapped up last year, which is the highest ever outside of one year of the pandemic. The acquisition of Eisman Homes. We executed in idling a couple of our plants, which is always a tough decision, but the right decision for fixed cost. Launched our integrated digital platform that we talked about today.

And we talked a bit about purchasing, but we strengthened that team pretty notably and that allows us to navigate this environment. We’re advocating and advancing MH policy. And we had another $100,000,000 of balance sheet and obviously have that in addition to the stock that we repurchased. So as we go forward here, we’re in a really strong position with our strategy and our team. We’re going continue to build on that and navigate this environment.

And we really look forward to updating your progress. And thank you for your continued interest. And thank you for joining us this morning. Thank you.

Sherry, Conference Call Coordinator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.

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