Q4 2024 Skyline Champion Corporation Earnings Call

Operator: Good morning, and welcome to Skyline Champion Corporation's fourth quarter and full year fiscal 2024 earnings conference call. The company issued its earnings press release yesterday after the close. I'd like to remind everyone that today's press release and statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risk and uncertainties that could cause actual results to differ materially from the company's expectations and projections.

Good morning, and welcome to Skyline Champion Corporation's fourth quarter and full year fiscal 'twenty 'twenty four earnings conference call.

Company issued its earnings press release yesterday after the close I would like to remind everyone that today's press release and statements made during this 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 and projections.

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.

Additionally, today during today's call the company will discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance.

Speaker Change: A definition and reconciliation of these measures can be found in the earnings release I would now like to turn the call over to your host Mr. Mark Yost Skyline Champion's, President and Chief Executive Officer. Please go ahead.

Operator: Such risk and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Additionally, during today's call, the company will discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. A definition and reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to your host, Mr. Mark Yost, Skyline Champion's President and Chief Executive Officer. Please go ahead.

Mark J. Yost: Thank you for joining our earnings call and good morning all.

Mark J. Yost: Thank you for joining our earnings call and good morning, all. I am pleased to have Laurie Hough, our EVP and CFO, with me today.

I am pleased to have Laurie Haas, our EVP and CFO with me today.

Mark J. Yost: On this call, I will briefly cover the highlights from the full year and the fourth quarter. I will also update you on our progress in the first quarter of fiscal 2025 and share some insights on our expectations for the remainder of the year. In fiscal 2024, Skyline Champion made significant strides in executing our strategic vision through investments in integrated turnkey solutions for retail, financial services, and home completion. These efforts not only broadened our geographical reach and enhanced our market approach but also upgraded our digital lead management systems, improving service to customers and expanding the market for our products. In line with our investment priorities, we also approved a share repurchase program for up to $100 million of our common stock.

Mark J. Yost: On this call I will briefly cover the highlights from the full year in the fourth quarter I will also update you on our progress in the first quarter of fiscal 2025 and share some insights on our expectations for the remainder of the year.

Mark J. Yost: In fiscal 2020 for Skyline champion made significant strides in executing our strategic vision through investments in integrated turnkey solutions for retail financial services and home completion.

Mark J. Yost: These efforts not only broaden our geographical reach and enhanced our market approach, but also upgraded our digital lead management systems, improving service to customers and expanding the market for our products.

Mark J. Yost: In line with our investment priorities. We also approved a share repurchase program for up to $100 million of our common stock.

Mark J. Yost: This decision reflects our strong balance sheet, robust cash generation while returning excess capital to shareholders after investing in strategic and growth priorities. For the year, we were able to provide 21,845 customers and families with a place to call home and reported over $2 billion in top-line revenue. The year-over-year decrease in unit volume was driven by the community and government channels, as builder-developer and retail unit volumes grew year-over-year based upon the strength of demand for affordable housing. From a market perspective, consumer demand remains healthy in the face of housing shortages and a growing base of potential homeowners. The challenges posed by higher interest rates further highlight the need for accessible housing options.

Mark J. Yost: This decision reflects our strong balance sheet robust cash generation, while returning excess capital to shareholders after investing in strategic growth priorities.

Mark J. Yost: For the year, we were able to provide 21845 customers and families with a place to call home.

Mark J. Yost: And reported over 2 billion in topline revenue.

Mark J. Yost: The year over year decrease in unit volume was driven by the community and government channels.

Mark J. Yost: Builder developer and retail unit volumes grew year over year based upon the strength of demand for affordable housing.

Mark J. Yost: From a market perspective consumer demand remains healthy in the face of housing shortages and a growing base of potential homeowners.

Mark J. Yost: The challenges posed by higher interest rates further highlight the need for accessible housing options are.

Mark J. Yost: Our strategic efforts to enhance the home buying experience have significantly increased the visibility of our solutions in this competitive economic environment. Demand this quarter was reinforced by a 16% sequential increase in orders and a 118% organic rise year-over-year, reflecting sustained demand for affordable housing and the growth in emerging channels like builder-developer, which was our fastest-growing segment. Despite these gains, the quarter presented challenges, including adverse weather conditions and longer cycle times for our regional acquisition, which temporarily reduced net sales and led to higher levels of finished good inventory.

Mark J. Yost: Our strategic efforts to enhance the home buying experience has significantly increased the visibility of our solutions in this competitive economic environment.

Mark J. Yost: Demand this quarter was reinforced by a 16% sequential increase in orders and a 118% organic wise and year over year, reflecting sustained demand for affordable housing and the growth in emerging channels like builder developer sell.

Mark J. Yost: <unk>, which was our fastest growing segment.

Despite these games the quarter presented challenges, including adverse weather conditions and longer cycle times for a regional acquisition.

Mark J. Yost: Which temporarily reduced net sales led to higher levels of finished good inventory.

Mark J. Yost: Our U.S. home sales in the quarter increased year-over-year by 15% to 5,652 units. This growth was supported by our strategic acquisition and enhanced manufacturing capabilities, though our process was tempered by inclement weather, which disrupted the shipping and setting of our homes.

Mark J. Yost: Our U S home sales in the quarter increased year over year of about 15% to 5652 units.

Mark J. Yost: This growth was supported by our strategic acquisition and enhanced manufacturing capabilities.

Mark J. Yost: So our process was tempered by inclement weather, which disrupted the shipping and setting of our homes.

Mark J. Yost: Additionally, weaker demand in Canada contributed to sales figures that did not meet our expectations. Nonetheless, positive trends in organic net water volume growth at our manufacturing plants are driving the future outlook. During the fourth quarter, we recorded $34.5 million in reserve for estimated remediation costs related to a water intrusion issue. This issue was isolated, involving materials that did not perform in accordance with the manufacturer's contractual obligations and was limited to homes constructed at one of our manufacturing facilities.

Mark J. Yost: Additionally, weaker demand in Canada contributed to sales figures that did not meet our expectations.

Mark J. Yost: Nonetheless, the positive trends in organic net order volume growth at our manufacturing plants are driving the future outlook.

Mark J. Yost: During the fourth quarter, we recorded $34 5 million reserve for estimated remediation costs related to a water intrusion issue.

Mark J. Yost: This issue was isolated involving materials that did not perform in accordance with the manufacturers contractual obligations and was limited to homes constructed at one of our manufacturing facilities.

Mark J. Yost: We discontinued the use of this material in our production process in March of 2021. We are actively seeking recoveries from various parties, including the supplier, their insurance provider, and our own insurance provider. Laurie will elaborate on this shortly. Our gross profit margin, adjusted for the water intrusion remediation cost, indicates sustainable profitability as we continue to navigate shifts in product mix driven by consumer affordability. As operations at our new plants ramp up, we expect some margin impact, but the increased volumes should help us maintain our backlog lead times within the usual 4 to 12 week range. Our year-end backlog stood at $316 million, marking a 9% sequential increase, with current lead times averaging nine weeks.

Mark J. Yost: We discontinued the use of this material in our production process in March of 2021.

Mark J. Yost: We are actively seeking recoveries from various parties, including the supplier their insurance provider and our own insurance provider.

Speaker Change: Lori will elaborate on this shortly.

Speaker Change: Our gross profit margin adjusted for the water intrusion remediation costs.

Speaker Change: Indicates sustainable profitability as we continue to navigate shifts in product mix driven by consumer affordability.

Speaker Change: As operations at our new plants ramp up we expect some margin impact, but the increased volumes that should help us maintain our backlog lead times within the usual four to 12 week range.

Speaker Change: Our year end backlog stood at 316 million, marking a 9% sequential increase with current lead times, averaging nine weeks.

Speaker Change: The integration of our recent investments is a top priority.

Mark J. Yost: The integration of our recent investments is a top priority; we are focusing on capturing synergies and aligning cultures and systems capabilities. We have made significant progress in achieving operational and purchasing efficiencies at the regional manufacturing facilities and are on track to achieve the upper end of our original synergy target of $10 to $15 million by the end of fiscal 2025 ahead of schedule. This quarter, we also expanded our financial services through our partnership with Triad, introducing new programs that include floor plan financing for our independent dealers and consumer financing for selected national products.

Speaker Change: We are focusing on capturing synergies and aligning the cultures and systems capabilities.

Speaker Change: We have made significant progress in achieving operational and purchasing efficiencies at the regional manufacturing facilities and are on track to achieve the upper end of our original synergy target of 10 to 15 million by the end of fiscal 2025 ahead of schedule.

Speaker Change: This quarter, we also expanded our financial services through our partnership with triad, introducing new programs that include floor plan financing for our independent dealers and consumer financing for selected Nashville products.

Mark J. Yost: Although these initiatives are in the early stages, they have been well received in the market and show great potential for attracting new home customers and meeting the comprehensive needs of homebuyers. These strategic actions, supported by our order growth, affirm our commitment to strengthening our market position and delivering on our promise of accessible, comprehensive housing solutions. Moving into our first fiscal quarter, we are seeing healthy demand from both retailers and builder developers.

Speaker Change: Although these initiatives are in the early stages. They have been well received in the market and show great potential and attracting new home customers and meeting the comprehensive needs of homebuyers.

Speaker Change: These strategic actions supported by our order growth.

Speaker Change: Firm, our commitment to strengthening our market position and delivering on our promise of accessible comprehensive housing solutions.

Speaker Change: Moving into our first fiscal quarter, we are seeing healthy demand from both retailers and builder developers.

Mark J. Yost: Their consistent ordering patterns are key drivers of our growth. Additionally, with a year-over-year increase in orders from our community partners, we are starting to ramp production in our manufacturing facilities. Looking ahead, we anticipate low double-digit sequential revenue growth.

Speaker Change: They're consistent ordering patterns are key drivers of our growth. Additionally.

Additionally, with a year over year increase in orders from our community partners, we are starting to ramp production in our manufacturing facilities.

Speaker Change: Looking ahead, we anticipate low double digit sequential revenue growth.

Mark J. Yost: This will be driven by the order growth we have seen, partially tempered by a growing backlog, and as we balance between increasing production while maintaining our high standards of quality. On the macroeconomic front, job and wage growth remain strong, especially in critical sectors like healthcare, manufacturing, and retail, which are foundational to our customer base, given recent inflationary pressures and robust employment data. We anticipate the Federal Reserve will maintain higher interest rates for an extended period.

Speaker Change: This will be driven by the order growth, we have seen partially tempered by a growing backlog.

Speaker Change: And as we balance between increasing production, while maintaining our high standards of quality.

Speaker Change: On the macroeconomic front job and wage growth remains strong, especially in critical sectors like health care manufacturing and retail which are foundational to our customer base.

Speaker Change: Given the recent inflationary pressures and robust employment data.

Speaker Change: We anticipate the federal reserve will maintain higher interest rates for an extended period.

Mark J. Yost: These dynamics support the stability of future demand for our products. Higher income levels coupled with sustained high interest rates and a shortage of affordable housing align well with our pricing and product offerings. As we continue to integrate our acquisitions and enhance our integrated turnkey solutions across retail, financial services, and home completion, we are not only broadening our geographical reach but also reinvesting and reinventing our approach to the market. A pivotal aspect of this progress is strengthening our digital lead management system.

Speaker Change: These dynamics support the stability of future demand for our products higher income levels, coupled with sustained high interest rates and a shortage of affordable housing aligned well with our pricing and product offerings.

As we continue to integrate our acquisitions and enhance our integrated turnkey solutions across retail financial services and home completion, we are not only broadening our geographical reach but also investing in reinventing our approach to the market.

Speaker Change: A pivotal aspect of this progress strengthening our digital lead management system. This enhanced play out for them is now more robust better introducing our customers to our products and expanding our total market presence.

Mark J. Yost: This enhanced platform is now more robust, better introducing our customers to our products, and expanding our total market presence. The successful integration of these turnkey solutions has increased our capture rate of both channel partners and end consumers. The positive reception at recent industry events, coupled with the launch and early capture rates of Champion Financing, highlight the effectiveness of our strategies. These achievements have ignited conservative market interest, opened new paths for growth, and further expanded our opportunities in the housing market. I will now hand the call over to Laurie, who will provide more detail and insights into our quarterly financial performance.

Speaker Change: The successful integration of these turnkey solutions has increased our capture rate of both channel partners and end consumers.

Speaker Change: The positive reception at recent industry events, coupled with the launch and early capture rates of champion financing highlights the effectiveness of our strategies.

Speaker Change: These achievements have ignited considerable market interest open new paths for growth and further expanded our opportunities in the housing market.

Speaker Change: I will now hand, the call over to Lloyd who will provide more detail.

Lloyd: And insights into our quarterly financial performance.

Laurie M. Hough: Thanks, Mark, 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 9% to $536 million compared to the same quarter last year, with U.S. factory built housing revenue increasing 12%. The number of homes sold increased 15% to 5,652 homes in the U.S. compared to 4,900 homes in the prior year period.

Thanks, Mark 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.

Lloyd: I'll briefly discuss our near term expectations.

Lloyd: During the fourth quarter net sales increased 9% to 536 million compared to the same quarter last year with U S factory built housing revenue increasing 12%.

Lloyd: The number of homes sold increased 15% to 5652 homes in the U S compared to 4900 homes in the prior year period.

Laurie M. Hough: U.S. home volume during the quarter was supported by additional retail and manufacturing capacity resulting from the regional homes acquisition that contributed approximately $108 million to net sales during the quarter, as well as the opening of our Bartow, Florida, and Decatur, Indiana facilities earlier this year. The average selling price per U.S. home sold decreased by 3% to $89,800 due to changes in product mix and reduced material surcharges compared to the prior year.

Lloyd: U S home volume during the quarter was supported by additional retail and manufacturing capacity, resulting from the original homes acquisition that contributed approximately $108 million to net sales during the quarter as well as the opening of our South, Florida and Decatur, Indiana facility earlier this.

Lloyd: Sure.

Lloyd: Average selling price per U S homes sold decreased by 3% to $89800.

Lloyd: Changes in product mix and reduced material surcharges compared to the prior year.

Lloyd: And a sequential basis U S factory built housing revenue decreased 3% in the fourth quarter compared to the third quarter of fiscal 'twenty 'twenty four.

Laurie M. Hough: On a sequential basis, U.S. factory built housing revenue decreased 3% in the fourth quarter compared to the third quarter of fiscal 2024. Interest rates continue to have an impact on our core product ASPs as consumers are focused on maintaining affordable monthly payments. On a sequential basis, the average selling price per home decreased 3%, and going forward, we expect revenue and ASPs to continue to be impacted by a mix of lower-optioned homes. Capacity utilization was 57%, which was flat compared to the sequential third quarter of fiscal 2024.

Interest rates continue to have an impact on our core product asking if as consumers are focused on maintaining affordable monthly payments.

Lloyd: Sequential basis, the average selling price per home decreased 3% and going forward, we expect revenue and S piece to continue to be impacted by a mix of lower option costs.

Lloyd: Capacity utilization was 57%, which was flat compared to the sequential third quarter of fiscal 2020 four.

Lloyd: Current utilization rates, primarily reflects the increase capacity brought online through acquisition and newly opened plants.

Laurie M. Hough: Current utilization rates primarily reflect the increased capacity brought online through acquisitions and newly opened plants. Canadian revenue during the quarter was $23 million, representing a 23% decline in the number of homes sold, which was partially mitigated by a 4% increase in the average home selling price. The average home selling price in Canada increased to $122,200 due to a shift in product mix. However, the reduction in sales volume can be attributed to a combination of factors, including higher interest rates that have tempered buyer enthusiasm. In addition, economic uncertainties driven by the current drought in the prairies in western Canada are causing rural homebuyers to delay their purchases.

Lloyd: Canadian revenue during the quarter was 23 million, representing a 23% decline in the number of homes sold which was partially mitigated by a 4% increase in the average home selling price.

Lloyd: The average home selling price in Canada increased to $121200 due to a shift in product mix.

Lloyd: The reduction in sales volume can be attributed to a combination of factors, including higher interest rates. So that's tempered by our enthusiasm.

Lloyd: In addition, economic uncertainty driven by the current drought in the prairies in Western Canada are causing rural homebuyers to delay their purchases.

Lloyd: These conditions are anticipated to continue to impact the housing market dynamics in these regions in the near term.

Laurie M. Hough: These conditions are anticipated to continue to impact the housing market dynamics in these regions in the near term. Consolidated gross profit decreased 30% to $98 million in the fourth quarter, and our gross margin contracted by 1,040 basis points from 28.7% in the prior year period. The change in gross profit and gross margin reflects the impact of the estimated liability of $34.5 million recorded in the fourth quarter of fiscal 2024 related to the remediation costs for water intrusion issues in homes produced at one of our plants from 2016 to early 2021.

Lloyd: Consolidated gross profit decreased 30% to 98 million in the fourth quarter and our gross margin contracted by 1040 basis points from 28, 7% in the prior year period.

Lloyd: The change in gross profit and gross margin reflects the impact of the estimated liability of $34 $5 million recorded in the fourth quarter of fiscal 2024 related to the remediation costs for water intrusion that <expletive> in homes produced at one of our plants from 2016.

Lloyd: <unk> to early 2020 one.

Lloyd: We've developed a remediation plan that calls for inspection and repair or mitigation of the fact that home.

Laurie M. Hough: We've developed a remediation plan that calls for inspection and repair or mitigation of affected homes. We estimated the charges by establishing a range of total expected costs using an actuarial analysis. The analysis resulted in a range of losses between $34.5 million and $85 million. We were not able to determine a value in the range that was more likely than any other value, and as prescribed by accounting guidance, we recorded the charge based on the low end of the range. We will monitor the results of the inspection and repair activities and may revise the amounts of the estimated viability, which could result in an increase or decrease in the estimated viability in future periods.

Lloyd: We estimated the charges by establishing a range of total expected costs.

Lloyd: Same actuarial analysis.

Lloyd: The analysis resulted in a range of losses between 34, and a half million dollars and $85 million.

Lloyd: We were not able to determine a value and the range that was more likely than any other value and as prescribed by the accounting guidance recorded the charge based on the low end of the range.

Lloyd: We will monitor the results of the inspection and repair activities and may revise the amounts of the estimated liability, which could result in an increase or decrease in the estimated liability in future period.

Speaker Change: As Mark mentioned, we're pursuing recovery from the manufacturer the distributor and the related insurance companies, but cannot estimate or a card those potential recoveries and less period.

Laurie M. Hough: As Mark mentioned, we're pursuing recoveries from the manufacturer, the distributor, and the related insurance companies but cannot estimate or record those potential recoveries in this period. Adjusted gross profit decreased by 6% to $133 million. An adjusted gross margin of 24.8% of net sales, a 390 basis point contraction compared to the prior year period. The contraction and adjusted growth margin were primarily due to lower average selling prices in the U.S. and the shift in product mix to less optioned homes, as well as the ramping of previously idled facilities and the impact of the regional homes acquisition. Regional homes' core product growth margins are generally lower than the legacy Skyline Champion margins.

Speaker Change: Adjusted gross profit decreased five 6% to 133 million and adjusted gross margin was 24, 8% of not fail, a 390 basis point contraction compared to the prior year period.

That contraction in adjusted gross margin was primarily due to lower average selling prices in the U S and the shift in product mix to less absent homes as well as the ramping of our previously idle facilities and the impact of the regional homes acquisition reached.

Speaker Change: All homes core product gross margins are generally lower than the legacy Skyline champion Maritimes.

Laurie M. Hough: In addition, consolidated margins were impacted by the effect of purchase accounting increases to the carrying value of regional finished goods inventory, which had a negative 80 basis point impact on consolidated growth margins during the quarter. We expect this purchase accounting impact to continue in the near term as we sell off the finished goods inventory acquired. SG&A in the fourth quarter increased $18 million to $91 million, primarily due to the regional homes acquisition, partially offset by lower variable compensation at existing operations.

Speaker Change: In addition, consolidated margins were impacted by the effect of purchase accounting increases to the carrying value of regionals finished goods inventory, which had a negative 80 basis point impact on consolidated gross margin during the quarter.

Speaker Change: We expect this purchase accounting impact to continue in the near term as we sell off the finished goods inventory acquired.

SG&A in the fourth quarter increased 18 million to 19 1 million, primarily due to the regional homes acquisition, partially offset by lower variable compensation at existing operations.

Speaker Change: Net income for the fourth quarter decreased to 95% to $3 million or five cents per diluted share compared to net income of 58 million or earnings of a dollar per share during the same period last year.

Laurie M. Hough: Net income for the fourth quarter decreased 95% to $3 million, or 5 cents per diluted share, compared to net income of $58 million, or earnings of $1 per share, during the same quarter last year. The decrease in EPS was driven by a decline in sales and gross profits, including the impact of the estimated remediation costs for the water intrusion issue. Adjusted net income per diluted share was $0.62, excluding the estimated remediation costs for the water intrusion liability and the company's share of ECN's calendar fourth-quarter loss of $7 million.

Speaker Change: The decrease in EPS was driven by the decline in sales and gross profit, including the impact of the estimated remediation costs for the water intrusion that's true.

Adjusted net income per diluted share with fixed 60, Tucson, excluding the estimated remediation costs for the water intrusion liability and the company's share of Easter calendar fourth quarter loss of $7 million.

Laurie M. Hough: As a reminder, we record the impact of our equity investment in ECN's common shares on a one-quarter leg. The company's effective tax rate for the quarter was 19.2% versus an effective tax rate of 24.5% for the year-ago period; the decrease in the effective tax rate is primarily due to equity compensation and tax credit.

Speaker Change: As a reminder, we record the impact of our equity investment in <unk> common shares on a one quarter lag.

Speaker Change: The company's effective tax rate for the quarter was 19, 2% versus an effective tax rate of 24, 5% for the year ago period.

Speaker Change: The decrease in the effective tax rate is primarily due to equity compensation and tax credits.

Laurie M. Hough: Adjusted EBITDA for the quarter was $53 million, compared to $76 million in the prior year period. Adjusted EBITDA margin was 9.9% compared to 15.5% in the prior year period, which was impacted by lower gross margins and higher SG&A. As we've noted in previous quarters, we expect a continued decline in our gross margin in the near term. This trend is influenced by homebuyers increasingly selecting homes with fewer options driven by inflationary pressures and persistently high interest rates.

Speaker Change: Adjusted EBITDA for the quarter was $53 million compared to 76 million in the prior year period.

Speaker Change: Yesterday, but the EBITDA margin was nine 9% compared to 15, 5% in the prior year period, which was impacted by lower gross margins and higher SG&A.

Speaker Change: As we've noted in previous quarters, we expect a continued decline in our gross margin in the near term.

Speaker Change: This trend is influenced by homebuyers increasingly selecting home so with fewer options driven by inflationary pressures and persistently high interest rates. Additionally.

Laurie M. Hough: Additionally, the ramp-up of our new plant operations and the sale of finished goods inventory from the acquisition of regional homes for retail sales centers contribute to this outlook. Collectively, these dynamics are likely to push our gross margins down in the short term by 100 to 150 basis points versus the sequential fourth quarter. Despite these headwinds, we remain confident in reaching our long-term structural margin targets, bolstered by ongoing enhancements in our operational capabilities and strategic investments in the business.

Speaker Change: Additionally, the ramp up of our new plant operations and the sale of finished goods inventory from the acquisition of regional homes to retail sales centers contributed to this outlook.

Actively these dynamics are likely to push our gross margins down in the short term 100 to 150 basis points versus the sequential fourth quarter.

Speaker Change: Despite these headwinds we remain confident in reaching our long term structural margin targets bolstered by ongoing enhancements in our operational capabilities and strategic investments in the business as of March 30th 'twenty 'twenty four we had nearly 500 million of cash and cash equivalents and long term.

Laurie M. Hough: As of March 30, 2024, we had nearly $500 million of cash and cash equivalents and long-term borrowings of $25 million with no maturities until 2026. We generated $4 million of operating cash flows for the quarter compared to $52 million for the prior year period. Operating cash flows were adversely impacted by the growth in our captive retail inventory balances and growth in our independent dealer floor plan receivables. On May 16, 2024, our Board of Directors approved a share repurchase program for up to $100 million of our common stock.

Speaker Change: Borrowings of 25 million with no maturities until 2026.

Speaker Change: We generated $4 million of operating cash flows for the quarter compared to 32 million for the prior year period.

Speaker Change: Operating cash flows were adversely impacted by the growth in our captive retail inventory balances and growth in our independent dealer floor plan receivables.

Speaker Change: On May 16th 2024, our board of directors approved a share repurchase program for up to $100 million of our common stock.

Laurie M. Hough: The Sherry Purchase Program may be amended, suspended, or terminated by the Board of Directors at any time. We plan to fund the program from existing cash on hand and future cash generation. This program represents a logical evolution of our capital allocation strategy as our strong balance sheet and cash generation allow us to maintain a balanced approach to returning capital to shareholders, reinvestment, and growth initiatives. I'll now turn the call back to Mark for some closing remarks.

Speaker Change: This share repurchase program may be amended suspended or terminated by the board of directors at any time.

Speaker Change: We plan to fund the program from existing cash on hand, and future cash generation.

Speaker Change: This program represents a logical evolution of our capital allocation strategy as our strong balance sheet and cash generation allows us to maintain a balanced approach to returning capital to shareholders reinvestment in growth initiatives.

Speaker Change: I'll turn the call back to Mark for some closing remarks.

Mark J. Yost: Thanks, Laurie. The long-term outlook for our company looks bright. With demand from retailers and builder developers, the return of more normal ordering volumes from our community partners, and the enduring need for affordable housing, we are well positioned for continued growth and success. Furthermore, our strategic expansions into digital and consumer retail, along with financing, are poised to further enhance our competitive edge and drive value for our stakeholders. We remain steadfast in our commitment to deliver sustainable growth and value creation, and we're excited about the opportunities that lie ahead.

Mark J. Yost: Thanks, Laurie the long term outlook looks bright for our company.

Mark J. Yost: With demand from retailers and builder developers the return of more normal ordering volumes from our community partners.

Mark J. Yost: And the enduring need for affordable housing, we are well positioned for continued growth and success.

Mark J. Yost: Furthermore, our strategic expansion into digital and consumer retail along with financing are poised to further enhance our competitive edge and drive value for our stakeholders.

Mark J. Yost: We remain steadfast in our commitment to deliver sustainable growth and value creation and we're excited about the opportunities that lie ahead.

Mark J. Yost: Before we move on to the Q&A section, I would like to express our gratitude to the entire Skyline Champion team for their exceptional effort this year as we drive for long-term success. And with that operator, you may now open the lines for Q&A. Thank you.

Before we move on to the Q&A section I would like to express our gratitude to the entire skyline champion team for their exceptional efforts. This year as we drive for long term success.

Mark J. Yost: And with that operator, you may now open the lines for Q&A.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Our first question comes from Phil Ng on Jefferies. Please proceed with your question.

Speaker Change: Thank you at.

Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Speaker Change: Our first question comes from Phil <unk> with Jefferies. Please proceed with your question.

Philip H. Ng: Hey, guys. Appreciate the color that Mark you provided; perhaps that weighed on results from a top-line perspective, weather and stuff of that nature. And the low double-edged sequential growth is actually quite strong, but, you know, given some of the noise you saw in the fourth quarter, is the spring selling season kind of shaping up as you thought? And the elongated cycle time you called out, the dynamic you called out in this past quarter, is that largely flushed out at this point?

Phil: Hey, guys.

Speaker Change: I appreciate the color that Mark you provided perhaps that weighed on results from a topline perspective, whether and stuff of that nature.

Speaker Change: And the low single low double digit sequential growth is actually quite strong, but you know given some annoys you saw in the fourth quarter.

Speaker Change: As the spring selling season kind of shaping up as you start.

Speaker Change: And the elongated cycle time, you called out dynamic you called out this past quarter was that largely flushed out at this point.

Speaker Change: Yeah, Phil Thank you and good morning.

Mark J. Yost: Yeah, Phil, thank you and good morning. I think the spring selling season and demand wise are shaping up, as we thought, with very healthy demand overall. The tie-up with weather and other things is really just a timing issue. So if you look at our inventory balances on the balance sheet, you'll see an increase sequentially, quarter over quarter. That was largely driven by just the timing of retail inventory getting delivered but not yet set and finished.

Speaker Change: I think the spring selling season and demand wise is shaping up.

Speaker Change: As we thought very.

Speaker Change: Very healthy demand overall.

Speaker Change: The tie up with weather and other things is really just a timing issue. So if you look at our inventory balances on the balance sheet, you'll see an increase sequentially quarter over quarter.

Speaker Change: That was largely driven by just timing of retail inventory getting delivered and not yet certain finished so that that cycle time is a little longer than we expected I expect that this quarter, we'll work through some of that.

Mark J. Yost: So that cycle time is a little longer than we expected. I expect that this quarter we'll work through some of that, but I think demand at retail is very strong, so it'll probably be rather balanced through the quarter.

Speaker Change: But you know I think demand at retail is very strong so it would probably be.

Speaker Change: Builds through the quarter.

Mark J. Yost: And then you talked about the REIT channel, perhaps activity picking up a little bit, Mark. There have been lots of hits and goes in that channel. Can you provide a little more color on what you're seeing on that front and how your customers are reacting? Have you started seeing them kind of step up order activity and how they're managing that business?

Speaker Change: And then you talked about the the REIT channel, perhaps activity picking up a little bit Mark it's been lots of the person goes in that channel can you just provide a little more color what you're seeing on that front and how your customers are reacting and have you started seeing them and.

Speaker Change: Our order activity and where were they kind of how do we manage that business.

Mark J. Yost: Yeah, so I think the REIT customers are starting to return to market in a decent way, actually, some of our plants. You'll see backlogs probably grow this quarter in addition to the sequential growth in revenue just because those customers are starting to return this quarter, kind of in the March-April time period. [inaudible] I think the ones that are focused on rentals are very strong and actually given the champion financing, partnership with Triad, and some of the other turnkey services we're offering, we've actually signed up some new communities that are now approaching us because of those additional offerings.

Speaker Change: Yeah. So I think the REIT customers are starting to return to market.

Speaker Change: In a decent way actually some of our plants.

Speaker Change: You'll see backlogs probably grow this quarter. In addition to the sequential growth in revenue.

Speaker Change: Just because those customers are starting to return. This this quarter kind of in the April March April time period.

Speaker Change: Going forward not everybody has returned but I would say most of them have started to return to ordering.

Speaker Change: And so I would expect that volume to ramp up into our second first and second quarters it'll ramp through interest rates are not really impacting them through a great deal most of them.

Speaker Change: I think it's really.

Speaker Change: The ones that are focused on rentals are very strong and actually <unk>.

Speaker Change: Given the champion financing them.

Speaker Change: Partnership with triad and some of the other turnkey services, we're offering we've actually signed up some new communities that are now approaching us because of those additional offerings.

Speaker Change: Gotcha.

Mark J. Yost: Gotcha. And on that note, Mark, how are you set up on Triad? I know, early on, as you kind of integrated, you were kind of working through that. How are you set up, perhaps now, as you kind of head to a very busy time of the year, and appreciate any color in terms of opportunities and wins you've seen with this acquisition you guys made or partnership you've made?

Speaker Change: Mark.

Speaker Change: How are you set up untried I know.

Speaker Change: Early on as you kind of integrated you you were kind of working through that.

Speaker Change: Are you set up.

Speaker Change: Perhaps now as you kind of had to a very busy time of the year end.

Speaker Change: I appreciate any color in terms of.

Speaker Change: Opportunities and wins, you've seen them with this.

Speaker Change: Acquisition, you guys made ochsner partnership you've made obsolete.

Mark J. Yost: Yeah, it's been, you know. I think that the system integration or kind of setup is behind us. That's done. Their team at Triad has done a great job on that. I think we've rolled out some new programs. Those have been very well received; early endings on that, but the traction has been exceptional. And actually, I think one of the key surprises, or maybe not surprises, but good, good conclusions coming from that is, given that we have this partnership, we're getting the kind of customers that we couldn't attract previously are now looking to do business with us or more business with us because of those relationships.

Speaker Change: Yeah. It's been you know I think that the system integration or kind of set up is behind us that's done their team at triad has done a great job on that I think we've rolled out some new programs. So those have been very well received.

Speaker Change: Early innings on that but the traction has been exceptional in actually I think one of the key surprises or maybe not surprises but.

Speaker Change: Good good conclusions coming from that is given that we have this partnership we're getting kind of customers that we couldn't attract previously or are now looking to do business with us or more business with us because of those relationships.

Philip H. Ng: Okay, I appreciate all the color guys. Thank you. Thank you.

Speaker Change: Okay I appreciate all the color guys. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Mike Dahl with RBC capital markets. Please proceed with your question.

Operator: Our next question comes from Mike Dahl with RBC Capital Markets. Please proceed with your question.

Chris: Hi, This is actually Chris on for Mike, maybe just going back to the.

Christopher Frank Kalata: It's actually a croissant for Mike. Um, maybe just going back to, um, the volume. Outlook results this quarter, I think the industry kind of came up below double digits. You guys, it looks like on an organic basis. So could you just help us bridge the gap, I know weather was an issue, but just maybe put some quantification around the relative underperformance versus the industry?

Speaker Change: Volume.

Speaker Change: How about this quarters results this quarter I think the industry kind of came up low double digits you guys. It looks like on a organic basis.

Speaker Change: Salt volumes down mid single digits. So could you just help us bridge the.

Speaker Change: The GAAP I know whether it was just it was an issue, but just maybe put some quantification around the relative under performance versus the industry.

Speaker Change: Yeah, I think if you if you take a look at our top line and if you just adjust it for the finished good inventory build during the quarter, you'll see that we're right on par.

Mark J. Yost: Yeah, I think if you take a look at our top line, and if you just adjust it for the finished goods inventory bill during the quarter, you'll see that we're right on par. So it's really just a timing issue with its cycle time through the inventory channel and through the retail channel.

Speaker Change: It's really just a timing issue.

Speaker Change: With its cycle time through the.

Speaker Change: Through the.

Speaker Change: Inventory channel and through the retail channel.

Speaker Change: They're really created that got it.

Christopher Frank Kalata: Got it. So, does that imply that next quarter... you're seeming to outperform the market, just given that timing dynamic?

Speaker Change: Got it so does that imply that next quarter.

Speaker Change: You're certainly outperformed the market just given that timing dynamics.

Mark J. Yost: Yeah, I think if you take a look, it depends on the timing and backlog as well as that, Chris. But yes, I think if you look at kind of how we're talking about sequential growth, I think you'll see some of that freed up demand coming through in how we think about this upcoming quarter.

Chris: Yeah, I think if you take a look it depends on the timing of backlog as well on that Chris, but yes, I think if you look at kind of how were talking.

Chris: Talking sequential growth I think youll see some of that freed up demand coming through.

Chris: How we're thinking about this upcoming quarter.

Speaker Change: I appreciate that and then just on the.

Christopher Frank Kalata: I appreciate that. And then just on the...

Laurie M. Hough: The Water Intrusion Remediation Costs. I know you guys said you're expecting some recoveries to cover that. And just given the wide range of outcomes, I know it's still early on, but is your base case expectation today that the recovery you'll get from suppliers will kind of cover the potential range of outcomes on the liability side, or is it just some help in understanding the ultimate cash flow impacts to expect from you guys?

Speaker Change: The water intrusion and remediation costs I know you guys said, you're you're expecting.

Speaker Change: Some recoveries.

Alan: Cover that Alan just going into the wide range of outcomes and I know, it's still early on but is your base case expectation today that you'll.

Alan: The recoveries, you'll get from suppliers will cover the potential range of outcomes on the liability side or is it just some help on understanding that.

Speaker Change: Ultimate Castle impacts, especially you guys.

Speaker Change: Hi, Chris.

Laurie M. Hough: Hi Chris. Yeah, so we're really in the early stages of development of understanding what the total impact is going to be and what the recoveries are. So at this point, we're, you know, we just want to see how the repairs and communications develop.

Speaker Change: Yeah. So we're really in the early stages of development of understanding what the total impact is going to be and what the recoveries ourselves at this point. We're we just wanted to see how how the repairs and communications development.

Christopher Frank Kalata: And I guess timing of that clarity; you have a sense of kind of when you'll have a better sense of it.

Speaker Change: And then I guess timing of that clarity just you have a sense of kind of when you'll have a better sense of that.

Laurie M. Hough: Yeah, so the first step was our communication to HUD, and that happened recently, and so they need to come back to us and give us approval for our plan for remediation, and then the next step after that will be communication to the customers of the homes. And then we need to understand what the response rate we get is, and from there, you know, we'll go out and inspect the homes and do whatever the appropriate level of mitigation is.

Speaker Change: Yeah.

Speaker Change: Or as was our communication to hard and.

Speaker Change: And that happened.

Speaker Change: And so they need to come back to us and give us approval on our on our plan for remediation and then the next step after that will be communication to the customers of the homes and then we need to understand what reply rate we get.

Speaker Change: And from there, we'll go out and inspect the homes and do whatever the appropriate level of risk mitigation.

Speaker Change: Understood I appreciate the color.

Christopher Frank Kalata: I understand. I appreciate the call.

Speaker Change: Our next question is from Daniel Moore with CJS Securities. Please proceed with your question.

Operator: Our next question is from Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Joseph Moore: Yes, thanks, Mark. Thanks, Laurie. Good morning. I touched on that, obviously, but maybe just drill down into the cadence of kind of retail traffic and demand through the quarter, as well as, you know, overall orders, including community business. And how that's trended thus far in April and May, you know, as we get more into the spring selling season, as they continue to kind of tick higher sequentially, what do you see at the ground level?

Daniel Joseph Moore: Yes, thanks, Mark Thanks, Laurie good morning.

Daniel Joseph Moore: You touched on it obviously, but maybe just drill down into the cadence of kind of retail traffic and demand through the quarter.

Daniel Joseph Moore: As well as you know overall overall orders, including community business.

Daniel Joseph Moore: And how that's trended thus far in April and May as we get more into the spring selling season as it continued to kind of tick higher sequentially. What are you seeing there at the ground level.

Dan: Yeah, the the ground level and good morning, Dan the ground level has been has been good and healthy.

Mark J. Yost: Yeah, the ground level, and good morning, Dan. The ground level has been good and healthy. I would say that through the first calendar quarter, our fourth fiscal quarter, we saw demand kind of steadily increasing in the quarter, as you would normally see during kind of the spring ramp. I will say January was a little slower than expectations, mainly driven by the weather, which kind of created a backlog of some activity, you know, flowing through our retail orders.

Dan: I'd say that the through the.

Dan: Through the first calendar quarter, our fourth fiscal quarter, we saw demand kind of steadily increasing in the quarter as you would normally see during kind of the spring ramp.

Dan: I will say January was a little slower than expectations, mainly driven by the weather, which kind of created a backlog of kind of some activity flowing through our retail orders.

Mark J. Yost: But, you know, as far as demand activity is concerned, builder is very good. Communities, like I said earlier, are starting to ramp. So I think we'll see not only the sequential revenue growth that I mentioned earlier, but we'll see an increase in backlog as well. So I think the order rates are fairly good.

Dan: But you know as far as demand activity.

Dan: Retail is is very healthy.

Dan: Builders.

Dan: Very good communities like I said earlier are starting to ramp so.

Dan: I think we will see not only the sequential revenue growth that I mentioned earlier, but we will see.

Dan: The increase in backlog as well.

Dan: So I think the order rates are.

Dan: Fairly healthy.

Daniel Joseph Moore: Okay, and I know this is a little bit of a crystal ball and early, but, you know, in the past, you've sort of given a little bit of a, you know, maybe a one or two quarter look. Are you given current trends? Would you expect, at this stage, to continue to ramp production through at least kind of the September quarter at this stage or TBD?

Speaker Change: Okay and I know this is a little bit crystal ball in early but.

Speaker Change: In the past, you've sort of given a little bit of a.

Speaker Change: Maybe one or two quarter look.

Speaker Change: Given current trends would you expect.

Speaker Change: Yeah, two to continue to ramp production through at least kind of the September quarter at this stage or a TBD.

Speaker Change: No I think that's that's you know a fair depiction of how we would do it.

Mark J. Yost: No, I think that's, you know, a fair depiction of how we would do it. You know, we're slow and steady in our ramping and production. I think we're very focused on quality, especially with the traction we've made in our branding processes and our social media followings now up to 1.5 million, so across our brands. So we're really getting that end consumer buyer who's not our traditional customer. So we want to make sure to really emphasize the slow and steady ramp and keep our backlogs in that, you know, four to 12 week range.

Speaker Change: Were slow and steady and our ramping in production I think we're very focused on quality, especially with the traction we've made and in our branding processes.

Speaker Change: Our social media followings now up to $1 5 million, so I think across our brands. So we're really getting the end consumer.

Speaker Change: Buyer who's not our traditional customer so we want to make sure to really emphasize.

Speaker Change: Emphasize you know slow and steady ramp and.

Keep our backlogs in that.

Speaker Change: To 12 week range.

Speaker Change: Very good and then.

Daniel Joseph Moore: Very good. And then, obviously, you're excited about, you know, I feel like you've got your DTC initiatives in a better position at this point. Any metrics that you can share or even anecdotes of how that's starting to drive demand from clients that you would not necessarily reach otherwise directly to your company at retail, but as well as your kind of retail partners. Thanks again.

Speaker Change: Obviously, you're excited about you know you feel like you've got your DTC initiatives.

Speaker Change: In a better position at this point.

Speaker Change: Any metrics that you can share or.

Speaker Change: Even anecdotes of.

Speaker Change: How that's starting to drive.

Kent: Demand from our clients that you would not have necessarily reached otherwise directly to your company on retail, but as well as your kind of retail partners. Thanks, Kent.

Mark J. Yost: Yeah, thanks, Dan. I don't necessarily have specific metrics. I will say, you know, certain indicators such as phone call return time and other things like that or contact return time, email contact return time has, you know, drastically improved, 30 plus percent from our independent retailers and captives as we've driven these leads to them, and it's turning into higher conversion rates. So I think those kinds of signs are really healthy, and I think some of the things we're implementing in terms of our call centers and other things are really impacting customers to take away the confusion of how to buy our homes and help hand them off to a retailer who can drive that customer home.

Dan: Yeah. Thanks, Dan I I don't have specific muscle necessarily metrics I will say you know certain indicators such as.

Speaker Change: Phone call return time, and other things like that or contact return time.

Speaker Change: Even though contact return time has.

Speaker Change: Prove.

Speaker Change: Drastically.

Speaker Change: 30 plus percent.

Speaker Change: From our independent retailers and captives as we've driven these leads to them and it's turning into higher conversion rates.

Speaker Change: So I think those kind of signs are really healthy and I think you know some of the things we're implementing in term of our call centers and other things are really impacting the customers to take away the confusion of how to buy our homes and help them help hand them off to a retailer.

Speaker Change: Drive that customer home.

Daniel Joseph Moore: All right, I'll jump back when it falls. Thank you.

Speaker Change: Alright, I'll jump back with follow ups. Thank you.

Speaker Change: Yeah.

Speaker Change: Our next question is from math, Matthew Bouley with Barclays. Please proceed with your question.

Operator: Our next question is from Matthew Bouley with Barclays. Please proceed with your question.

Elizabeth: Hi, Good morning, you have Elizabeth laying on for Matt today. Thank you for taking the questions.

Elizabeth Langan: Good morning. You have Elizabeth Langan on for a mat today. Thank you for taking the questions. I was wondering if you could just kind of speak to how you're thinking about industry volumes, you know, as we head into fiscal 25.

Elizabeth: I was wondering if you could just kind of speak to how you're thinking about industry volumes as we head into fiscal 'twenty five.

Speaker Change: Yeah, I think industry volumes as a whole you know I think should should pick up really driven by the community channel.

Mark J. Yost: Yeah, I think industry volumes as a whole, you know, I think they should pick up really driven by the community channel and healthy retail activity. So the community channel was off significantly in fiscal 2024 and, you know, calendar last year.

Speaker Change: And healthy retail activity. So the community channel was off significantly in fiscal 2024 and <unk>.

Mark J. Yost: So they were down, you know, significantly in volume, which is really the whole driver of the industry's year-over-year decreases in absolute volume that we saw. So I think as they return, you know, you'll see the industry get back to where it was, probably gradually. So maybe not on a full year basis, but gradually towards, you know, the late half of the year, we should get back to kind of a normal cadence in terms of demand activity versus what we saw last year.

Speaker Change: Calendar last year or.

Speaker Change: So they were down.

Speaker Change: You know significantly in volume, which is really the whole driver.

Speaker Change: Industries year over year decreases.

Speaker Change: In absolute volume.

Speaker Change: That we saw so I think as they return.

Speaker Change: You know, you'll see kind of the industry to get back to.

Speaker Change: Where it was.

Speaker Change: In probably gradually so maybe not on a full year basis the gradually towards.

Speaker Change: The late half of the year, we should get back to kind of a normal cadence in terms of demand activity.

Versus what you saw last year.

Speaker Change: Okay.

Speaker Change: And then on the builder developer channel.

Mark J. Yost: And then on the Builder Developer Channel, have you kind of seen anything, you know, any, I know that you mentioned that the demand has been good so far this year, but have you won any like incremental business? I know you have won business from a top 100 builder previously. Is there anything, you know, kind of in the works or any momentum around, you know, any more wins like that coming forward? Yeah, there is. I think, you know, this quarter.

Speaker Change: And have you kind of seen anything you know.

Speaker Change: Any I know that you mentioned that the demand has been good.

Speaker Change: So far this year.

Speaker Change: Have you won any incremental business I know you have won business from like a top 100 people. There previously and is there anything kind of in the works or any momentum around any more wins like that coming forward.

Speaker Change: Yeah. There is I think you know this quarter.

Mark J. Yost: Yeah, there is. I think, you know, this quarter, we won awards from several builders in several subdivision developments. So I think that momentum is starting to increase. It takes a little bit of time for those orders to process through. They're not as quick as one might think just because of the cycle time of land development and other things, but we're starting to get traction and actually conversion.

Speaker Change: We won awards from sulfur are builders.

Speaker Change: Several subdivision development, so I think eating that momentum is starting to increase.

Speaker Change: It takes a little bit of time for those orders to process through theyre not as quick as one might think just because of the <unk>.

Speaker Change: Cycle time of land development and other things, but we're starting to gain.

Speaker Change: Getting traction and actually conversion.

Speaker Change: With our builder channel.

Speaker Change: Thank you very much thank.

Speaker Change: Thank you Elizabeth.

Speaker Change: Yes.

Speaker Change: Our next question is from Greg Palm with Craig Hallum Capital Group. Please proceed with your question.

Operator: Our next question is from Greg Palm with Craig Hallam Capital Group. Please proceed with your question.

Daniel Joseph Moore: Hi, this is Danny Agarich on for Gregg today. Thanks for taking the questions. I was hoping to kind of dig in on now that we have more regional inclusion, maybe just how the strategy shifts a little bit more towards pushing homes through company-owned stores. Just any kind of progress update on that and how you think about that moving forward and how, if anything, it kind of shifts the strategy in the business.

Danny: Hi, This is Danny <unk> on for Greg today, Thanks for taking the questions.

Speaker Change: Was hoping to kind of dig in on now that we have more regional inclusion maybe.

Speaker Change: Maybe just how.

Speaker Change: The strategy shifts a little bit more towards pushing homes through company owned stores, just any kind of progress update on that and and how you think about that moving forward and how are you.

Speaker Change: Anything it it kind of shifts the strategy in the business.

Dan: Thanks, Dan I don't know that it shifts the strategy of the business you know we have excellent independent retail partners throughout the country.

Mark J. Yost: Thanks, Dan. I don't know that it shifts the strategy of the business. You know, we have excellent independent retail partners throughout the country. I think, you know, in the parts of the country I'll call Mississippi, Alabama, that region, we had a very small presence, generally speaking.

Dan: I think in the parts of the country I'll call, Mississippi, Alabama that region.

Dan: We had a very small.

Dan: Generally speaking so having.

Mark J. Yost: So having retail in that area or that distribution area is critically important. I do think over time we will see an expansion of our captive retail. There are several or many retail independent retailers who will look in the next few years to retire and maybe exit the business, so we want to have a strategy to make sure to capture those conversion rates with our captive versus independents being, you know, a higher conversion at a captive store.

Dan: Retail in that.

Dan: Area or that distribution area is as critically important I do think over time, we will see expansion.

Dan: Of our captive retail theres, several or many retail independent retailers, who will look in the next few years to retire and maybe exit the business. So we want to have a strategy to make sure to capture those.

Dan: And given the success and traction we've had with our digital lead management.

Dan: The conversion rates with our captive versus independent.

Dan: B higher conversion.

Mark J. Yost: With that digital channel, I think it bears some fruit for us and really drives that synergy between them. But, you know, we're seeing the independents really adapt to the digital strategy as well. So I think it's a win-win.

Speaker Change: I had a captive store.

Speaker Change: With that digital channel I think it does bear some fruit for us.

Speaker Change: It really drives that synergy between them, but you know.

Speaker Change: We're seeing independents really adapt to the digital strategy as well so I think it is.

Speaker Change: It's a win win.

Speaker Change: Got it that's that's helpful and I think last quarter, you'd kind of mentioned maybe expectation for fiscal year 'twenty five of maybe 10% to 15% revenue growth anything over the last couple of months that that has kind of changed that outlook or are you still feel confident in that kind of growth this year.

Daniel Joseph Moore: Got it, that's helpful. And I think last quarter, you kind of mentioned maybe an expectation for fiscal year 25 of maybe 10 to 15% revenue growth. Anything over the last couple months that has kind of changed that outlook, or do you still feel confident in that kind of growth this year?

Speaker Change: Yeah, I I think general industry growth should be in that range and we.

Mark J. Yost: Yeah, I think general industry growth should be in that range, and we should be in line with that kind of industry growth as well.

Speaker Change: We should be in line with that kind of industry rates as well.

Speaker Change: Okay, Great and then maybe one last one in terms of kind of SG&A. Another step up in the quarter I know you mentioned is.

Daniel Joseph Moore: Okay, great. And then maybe one last one in terms of kind of SG&A, another step up in the quarter, I know you mentioned. Is that kind of the new level to go off of, or was there anything in there that kind of makes it one-timey, or how should we think about that as we move throughout the year?

Speaker Change: Is that kind of the new level to go off of or was there anything in there that kind of makes it one timey or how should we think about that as we move throughout the year.

Laurie M. Hough: So sequentially, we did see SG&A pick up because we had an additional couple of weeks for the full impact of the regional given the timing of the close in mid-October. And then, in addition to that, in the March quarter, we also had our two large industry shows, Louisville in January and Biloxi in March. So that's something that occurs annually, but sequentially, it was an add for the quarter. Closer to the new normal.

Speaker Change: So sequentially, we did see SG&A pickup because we had an additional couple of weeks.

Speaker Change: For the full impact of regional and given the timing of the close in mid October.

Speaker Change: And then in addition to that and more.

Speaker Change: <unk> quarter, we also have our two large industry shallow blue Bell on January and Biloxi and Marcelo.

Speaker Change: Something that occurs annually, but sequentially it was less an add for the quarter.

Speaker Change: But barring those couple of items.

Speaker Change: Closer to the new normal we are going to see.

Laurie M. Hough: We are going to see a slight reduction in fixed FG&A. We did do some headcount reductions for overlap related to the regional acquisition at the end of the March quarter that we will see the benefit of in subsequent quarters.

Speaker Change: Reduction in fixed SG&A, we did do some head count reductions for overlap.

Speaker Change: Related to the regional acquisition at the end of the March quarter that we will see.

Speaker Change: Set of coming into subsequent quarters.

Speaker Change: Okay very helpful. Thank you.

Daniel Joseph Moore: Okay, very helpful, thank you.

Speaker Change: Okay.

Operator: Our next question comes from Jay McCanless with Wedbush Securities. Please proceed with your question.

Speaker Change: Our next question comes from Jay Mccanless with Wedbush Securities. Please proceed with your question.

Jay McCanless: Hey, good morning, everyone.

Jay McCanless: Hey, good morning, everyone. So I wanted to ask, with the community business potentially coming back, excuse me, and but at the same time, it sounds like in the retail channel, you're selling maybe homes with less options and less thrills on them. What does that gross margin differential look like now between the retail channel and the community channel?

So wanted to ask with the community business potentially coming back.

Speaker Change: Excuse me and but at the same time it sounds like in the retail channel youre selling them, maybe homes with less options less froze on them.

Speaker Change: What does that gross margin differential look like now between the retail channel and the community channel.

Mark J. Yost: Not significantly different, really.

Speaker Change: Not significantly different day.

Speaker Change: Okay.

Speaker Change:

Jay McCanless: And I guess Mark, could you quantify how much community orders are up? I mean, we're talking low single-digit gains. What are we talking about here?

Speaker Change: And I guess Mark could you quantify how much community orders are up I mean, we're talking low single digit gains what are we talking about here because I'd say this is probably second or third quarter, where people think the communities are coming back.

Mark J. Yost: Because I'd say this is probably the second or third quarter where people think the communities are coming back, and it turns out to be a head fake. So what type of numbers are we seeing? I don't have, I'm not gonna give specific numbers, Jay, but I think if you just look at the combination of our revenue during the quarter, our backlog growth, and combine that with the finished goods inventory growth that we see on the balance sheet.

Speaker Change: It turns out to be a head fake so what type of numbers are we seeing.

Okay.

Speaker Change: You know I I don't have I'm not going to give.

Jay: Specific numbers, Jay, but I think if you just look at the <unk>.

Speaker Change: The combination of our revenue during the quarter our backlog growth.

Speaker Change: And combine that with the finished good inventory growth that we see on the balance sheet.

Mark J. Yost: Just kind of add those few numbers up and understand that, you know, a good portion of that, or a decent portion of that, is driven by community value, and that gives us a lot of confidence that they're returning. But yeah, I would say it.

Speaker Change: As those few numbers up and understand that.

Speaker Change: <unk>.

Speaker Change: A good portion of that or a decent portion of that.

Speaker Change: This is driven by the community value and can that gives us a lot of confidence that.

Speaker Change: They're they're returning but yeah I would say it's.

Jay McCanless: It's been strong growth and orders for the community on a year-over-year basis. Great. And then, could you tell us where chattel rates are sitting right now? And also, is the manufactured housing industry starting to see any type of interest rate buy-downs like we've seen from the stick builders? So they're, you know, I'd say rates right now for a good, healthy customer are about 8.5% today. We really have not seen any industry-rate buy-downs.

Speaker Change: It's been a strong growth in orders for our communities.

Speaker Change: On a year over year basis.

Speaker Change: Great.

Speaker Change: And then could you tell us where chattel rates are sitting right now and also are is the manufactured housing industry is starting to see any type of interest rate buy downs like we've seen from the stick builders.

Speaker Change: So there.

Speaker Change: No I'd say rates right now for a good healthy customers about eight 5% today.

Speaker Change: We really have not seen industry rate buy downs.

Mark J. Yost: You know, I will tell you that we have some national products that we've launched very selectively with our partnership with Triad, that we are doing a test pilot rate buy-down just to see the difference in traction between, you know, does that really draw that consumer in versus doesn't it? So we're kind of getting some data from a test pilot program to do that, but as a whole, the industry really has not done that in any meaningful way.

Speaker Change: I'll tell you that we have some national products.

We've launched very selectively with our partnership with Tri Ed.

Speaker Change: We are doing a test.

Speaker Change: Test pilot rate buy down just to see the difference in traction between you know does that really draw that consumer in versus doesn't it.

So we're kind of getting some data from a test pilot program to do that but as a whole the industry really has not done that.

Speaker Change: Any meaningful way I think the price point that we have.

Mark J. Yost: I think the price point that we have as an industry is really helping the consumer in getting that step-down buyer who's kind of disenfranchised with site-built homes, rent, or other price points. With that trial with Triad, are you writing only... pristine customers, or are you trying to maybe ride across the FICO spectrum to see what kind of results you get? What customers are you targeting with that trial? Now, it's really just that it's no different in the FICA scores than Triad's normal customer base.

Speaker Change: As an industry is really helping the consumer and getting that step down buyer.

Speaker Change: Who's kind of disenfranchised with site built homes.

Speaker Change: Or other price points.

Speaker Change: With that trial with triad.

Speaker Change #100: Are you writing only.

Speaker Change #101: Christine customers or are you trying to maybe right across the FICO spectrum to see what kind of results you get how what customers are you targeting with that trial.

Speaker Change #102: No. It's really just it's no different in the FICO score has been triad's normal customer base.

Mark J. Yost: We're really just doing test pilots to say, you know, with these products, we're going to do a small buy-down, with these we're not, and just see the incremental difference between those trajectories. It's really not a—Triad sells or passes their loans through to Blackstone, Community Banks, Carlisle, others, so they already have a defined risk matrix and FICA score matrix. So we're just fitting in with that matrix box and just doing test pilots in conjunction with them to see how that goes. And then, Laurie, could you remind me what you said in terms of the gross margin in the first quarter? Did you say down 100 to 150 basis points sequentially?

Speaker Change #102: Were really just doing tests pilots to say you know with these products, we're going to do a small buy down with these were not and just see the incremental difference between those trajectories, it's really not.

Speaker Change #102: Triad cells or passes their loans through to Blackstone community banks Carlisle others. So they already have a defined risk matrix and FICO score matrix. So we're just fitting in with that matrix box and just doing test pilots in conjunction with them to see how that goes.

Speaker Change #103: Gotcha, and then could you remind me what you said in terms of the gross margin in the first quarter did you say down 100 to 150 basis points sequentially.

J: Yeah over the next couple of quarters J, we're going to see some declines in gross margin and we've got to continue to work through the.

Laurie M. Hough: Yeah, over the next couple of quarters, Jay, we're going to see some declines in gross margin. And, you know, we've got to continue to work through the regional inventory that we purchased as part of the acquisition that was marked to fair value.

J: Regional inventory that we purchased as part of the acquisition that was marked to fair value.

J: So we're going to continue to see that but also we're seeing more.

J: A larger decrease in options as interest rates remained higher so thats. The primary impact so we expect <unk> to come down a bit as well as gross margin.

Laurie M. Hough: So we're going to continue to see that, but also we're seeing more, a larger decrease in options as interest rates remain higher. So that's the primary impact. So we expect AFCs to come down a bit. As well as gross margin.

Jay McCanless: And then the last one I have, just thinking about the input cost, OSB looks like it's rolled over a little bit. Could you maybe talk about what you're seeing on the lumber front as well as some of the other major inputs and if those could be a tailwind or a headwind to that gross margin over the next couple of quarters?

Speaker Change #105: Okay and then the last one I have I'm, just thinking about the input cost in OSB.

Speaker Change #106: OSB it looks like it's it's rolled over a little bit could.

Speaker Change #107: Could you maybe talk about what youre seeing on the lumber front as well as some of the other major inputs and if those can be a tailwind or headwind to that gross margin over the next couple of quarters.

Laurie M. Hough: Yeah, no, we're really expecting pretty modest inflation, you know, in the 2% range when we feel that we can pass that on as it comes in. So not big movers from an inflation perspective on inputs.

Speaker Change #108: Yeah, no, we're really expecting pretty modest inflation.

2% range and we feel that we can pass that on.

Speaker Change #108: It comes out and so not a big mover from from an inflation perspective on input.

Speaker Change #109: That's all I had thank you.

Jay McCanless: That's all I have. Thank you.

Speaker Change #110: Thanks James.

Speaker Change #111: Our next question is from Daniel Moore with CJS Securities. Please proceed with your question.

Operator: Our next question is from Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Joseph Moore: Thanks again. Quick follow-up or two. Just to clarify on the remediation, how many homes are we talking about between 2016 and 2021? And I assume whatever the net cash impact is, net of recovery, it's fair to assume that'll be over several years rather than several quarters.

Daniel Joseph Moore: Thanks, again quick follow up or two just housekeeping on the remediation. How many homes are we talking about between 2016, and 2021 and I assume whatever the net cash impact is a.

Daniel Joseph Moore: Net of recoveries fair to assume that'll be over several years rather than several quarters.

Laurie M. Hough: So we're not disclosing the homes at this point, Dan, and the recoveries yet, several years.

Speaker Change #112: So we're not disclosing the homes at this point Dan.

Speaker Change #113: And the recoveries, yes several years.

Daniel Joseph Moore: Okay, and then just capital allocation, are you still looking at M&A right now or more focused on ramping capacity utilization as demand returns at their existing footprint? And then just how you're thinking about deploying the buyback, is that kind of a one-year time frame in your mind or more open-ended?

Speaker Change #114: Okay, and then just capital allocation are you still looking at M&A right now or most of it more focused on ramping capacity utilization.

Speaker Change #115: As demand returns with your existing footprint and then just how you're thinking about deploying the buyback is that kind of a one year time frame in your mind are up more open ended thank you again.

Dan: Yeah, Dan. Thank you I think you know our M&A pipeline is still healthy and robust I think.

Mark J. Yost: Yeah, Dan, thank you. I think, you know, our M&A pipeline is still healthy and robust. I think, you know, we still have good cash generation. [inaudible] factors play into it, as well as the success of our integration with regional and champion financing. So I think M&A is definitely always on the table. And then, as far as the share buyback, you know, it's open-ended as far as the timing of that.

Daniel Joseph Moore: Thank you again. Yeah, Dan, thank you. I think, you know,

Dan: We still have good cash generation.

Dan: Happening in probably as you're noting kind of an increased outlook going forward.

Dan: So I think those those.

Dan: Factors play into it as well as the success with our integration with regional.

Dan: And champion financing.

Dan: So I think M&A is definitely always on the table and then as far as the share buyback.

Dan: There's it's open ended.

Speaker Change #116: Is the time to get that.

Speaker Change #117: Thanks again.

Speaker Change #118: Thank you.

Speaker Change #117: Okay.

Mark J. Yost: We have reached the end of the question and answer session. I'd now like to turn the call back over to Mark Yost for closing comments.

Speaker Change #117: We have reached the end of the question and answer session I'd now like to turn the call back over to Mark Yost for closing comments.

Mark J. Yost: I want to thank everyone today for your attention and we look forward to updating you on our progress on our first fiscal quarter earnings call. Thank you and have a great day.

Mark J. Yost: I want to thank everyone today for your attention, and we look forward to updating you on our progress during our first fiscal quarter earnings call. Thank you, and have a great day.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change #119: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.