Q1 2025 Skyline Champion Corp Earnings Call

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Operator: Good morning and welcome to Champion Homes, Inc.'s first quarter fiscal 2025 earnings call. The 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.

Operator: Good morning and welcome to Champion Helms Inc. 1st quarter fiscal 2025 earnings call. The company issued its earning press release yesterday after the close.

Operator: 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, 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 Mark Yost, Champion Helms President and Chief Executive Officer. Please go ahead.

Operator: I would like to remind everyone that today's press release and statements made during this call include forward-looking statements within the 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.

Speaker Change: 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.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections.

Speaker Change: 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.

Operator: 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.

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

Operator: I would now like to turn the call over to Mark Yost, Champion Helms President and Chief Executive Officer. Please go ahead.

Mark Yost: Thank you for joining our earnings call today, and good morning, everyone. I am pleased to be joined by Laurie Hough, our EVP and CFO. On this call, I will first go over the key points from our first quarter, then discuss our progress in the second quarter so far and conclude with thoughts about the balance of the year. I am pleased to report that the positive momentum we carried from our fourth quarter has not only continued but strengthened, primarily due to the traction of our strategic initiatives. Our first quarter results reflect good execution across our business, notably in enhancing our customer channels, advancing the integration of regional homes, and realizing the early benefits from our champion financing joint venture.

Mark Yost: Thank you for joining our earnings call today, and good morning, everyone. I am pleased to be joined by Laurie Hough, our EVP and CFO.

Speaker Change: Thank you for joining our earnings call today and good morning everyone. I am pleased to be joined by Laurie Hough, our EVP and CFO .

Mark Yost: On this call, I will first go over the key points from our first quarter, then discuss our progress in the second quarter so far, and conclude with thoughts about the balance of the year. I'm pleased to report that the positive momentum we carried from our fourth quarter has not only continued, but strengthened, primarily due to the traction of our strategic initiatives. Our first quarter results reflect good execution across our business, notably in enhancing our customer channels.

Speaker Change: I'm pleased to report that the positive momentum we carried from our fourth quarter has not only continued, but strengthened, primarily due to the traction of our strategic initiatives.

Speaker Change: Our first quarter results reflect good execution across our business, notably in enhancing our customer channels, advancing the integration of regional homes, and realizing the early benefits from our Champion Financing Joint Venture.

Mark Yost: Advancing the Integration of Regional Homes and Realizing the Early Benefits from our Champion Financing Joint Venture. These achievements are closely aligned with our strategic focus, which is increasingly critical in addressing the rising demand for affordable housing amid limited supply. The quarter showcased robust growth, with home sales climbing 33% year-over-year to reach 6,705 units. Additionally, organic sale orders increased 60% year over year, underscoring strong market demand. This growth was supported by our strategic acquisition of improving activity in our retail, builder developer, and community channels.

Mark Yost: These achievements are closely aligned with our strategic focus, which are increasingly critical in addressing the rising demand for affordable housing amid limited supply. The quarter showcased robust growth, with home sales climbing 33% year-over-year to reach 6,705 units. Additionally, organic sale orders increased 50% year-over-year, underscoring strong market demand. This growth was supported by our strategic acquisition and improving activity in our retail, older developer, and community channels.

Speaker Change: The quarter showcased robust growth, with home sales climbing 33% year-over-year to reach 6,705 units.

Speaker Change: Additionally, organic sale orders increased 60% year-over-year, underscoring strong market demand.

Mark Yost: Demand in Canada remains soft as inflation and economic uncertainty are weighing on the consumer settlement and enthusiasm for new home purchases in that market. Sequentially, our first quarter saw notable increases in revenue of 91 million, alongside growth in our backlog of 89 million, bringing our backlog to a total of 405 million as of June 29th, driven by improved demand. Backlog read times were on average 11 weeks versus 9 weeks at the end of the March quarter. We are steadily increasing our production rates at our plants to address this backlog. The acquisition of regional homes continues to overperform expectations, successfully integrating and targeting to hit the higher end of the $10 to $15 million synergy range by the end of fiscal 2025, well ahead of expectations and schedule.

Mark Yost: Demand in Canada remains soft as inflation and economic uncertainty are weighing on consumer sentiment and enthusiasm for new home purchases in that market. However, sequentially, our first quarter saw notable increases in revenue, up $91 million, alongside growth in our backlog of $89 million, bringing our backlog to a total of $405 million as of June 29, driven by improved demand. Backlog read times were on average 11 weeks versus nine weeks at the end of the March quarter.

Speaker Change: of $91 million, alongside growth in our backlog of $89 million.

Speaker Change: Backlog lead times were on average 11 weeks versus 9 weeks at the end of the March quarter. We are steadily increasing our production rates at our plants to address this backlog.

Mark Yost: We are steadily increasing our production rates at our plants to address this backlog. The acquisition of regional homes continues to overperform expectations, successfully integrating and targeting to hit the higher end of the $10-15 million synergy range by the end of fiscal 2025, well ahead of expectations and schedule. Champion Financing, our collaboration with Triad Financial, has gained significant momentum recently. In recent quarters, we've launched new floor plan financing options for our independent dealers and consumer financing programs for selected national products and locations.

Speaker Change: The acquisition of regional homes continues to overperform expectations, successfully integrating and targeting to hit the higher end of the $10-$15 million synergy range by the end of fiscal 2025, well ahead of expectations and schedule.

Mark Yost: Champion Financing, our collaboration with Triad Financial, has gained significant momentum recently. Over recent quarters, we've launched new floorplant financing options for our independent dealers and consumer financing programs for selected national products and locations. The early outcomes from these initiatives have been very encouraging, bolstering our confidence that we can provide customers with a comprehensive and appealing home buying solution. This success underscores our commitment to enhancing, financing accessibility, further propelling our growth in the manufactured housing market.

Speaker Change: Champion Financing, our collaboration with Triad Financial, has gained significant momentum recently. Over recent quarters, we've launched new floor plan financing options for our independent dealers and consumer financing programs for selected national products and locations.

Mark Yost: The early outcomes from these initiatives have been very encouraging, bolstering our confidence that we can provide customers with a comprehensive and appealing home buying solution. This success underscores our commitment to enhancing financing accessibility, further propelling our growth in the manufactured housing market. I'm also excited to announce that, following our annual shareholder meeting, we have changed our corporate company name to Champion Homes Inc.

Speaker Change: The early outcomes from these initiatives have been very encouraging, bolstering our confidence that we can provide customers with a comprehensive and appealing home buying solution.

Mark Yost: I'm also excited to announce that, following our annual shareholder meeting, we have changed our corporate company name to Champion Homes Inc. This marks another milestone in our direct consumer journey and emphasizes our commitment to expanding our market presence and enhancing shareholder value through a cohesive and dynamic grand strategy. We are focused on leveraging the Champion Homes flagship brand as a catalyst for growth and commercial excellence for years ahead. All together, these strategic actions, along with the pace of order growth, support our commitment to strengthening our market position and delivering on our promise of providing accessible, comprehensive housing solutions and creating value for our shareholders.

Speaker Change: I'm also excited to announce that following our annual shareholder meeting, we have changed our corporate company name to Champion Homes, Inc.

Mark Yost: This marks another milestone in our direct consumer journey and emphasizes our commitment to expanding our market presence and enhancing shareholder value through a cohesive and dynamic grant strategy. We are focused on leveraging the Champion Homes flagship brand as a catalyst for growth and commercial excellence for years ahead. Altogether, these strategic actions, along with the pace of order growth, support our commitment to strengthening our market position and delivering on our promise of providing accessible, comprehensive housing solutions and creating value for our shareholders.

Speaker Change: This marks another milestone in our direct consumer journey and emphasizes our commitment to expanding our market presence and enhancing shareholder value through a cohesive and dynamic grand strategy.

Speaker Change: All together, these strategic actions, along with the pace of order growth, support our commitment to strengthening our market position and delivering on our promise of providing accessible, comprehensive housing solutions and creating value for our shareholders.

Mark Yost: As we move into our second fiscal quarter, demand from retailers and builder developers remains solid, reflected in steady ordering patterns that have continued to drive growth. We are also ramping up production in response to these increased orders from community partners. Looking forward, we believe our top line performance for the second quarter is estimated to be flat or possibly down sequentially due to the impacts of weather events that could delay production and/or the timing of shipments. Despite these challenges, we are focused on maintaining our high standards of quality as we scale production. While traditional new home construction has softened with higher inventory levels and reduced orders, we are seeing a rise in demand.

Mark Yost: As we move into our second fiscal quarter, demand from retailers and builder developers remains solid, reflected in steady ordering patterns that have continued to drive growth. We're also ramping up production in response to increased orders from community partners. Looking forward, we believe our top line performance for the second quarter is estimated to be flat or possibly down sequentially due to the impacts of weather events that could delay production and or the timing of shipments. Despite these challenges, we are focused on maintaining our high standards of quality as we scale production.

Laurie Hough: While traditional new home construction has softened with higher inventory levels and reduced orders, we are seeing a rise in demand. This increase is attributed to more affordable pricing and enhanced quality, positioning our homes as an attractive choice for many homebuyers amid the current economic conditions. Such contrasting trends underline the distinct market dynamics affecting different segments of the housing industry and the favorable outlook for housing at the middle class price point. The integration of these solutions has improved our capture rate of our channel partners and end consumers.

Mark Yost: This increase is attributed to more affordable pricing and enhanced quality, positioning our homes as an attractive choice for many home buyers amid the current economic conditions. Such contrasting trends underlying distinct market dynamics, influencing different segments of the housing industry and the favorable outlook for housing at the middle class price point. The integration of these solutions have improved or captured rate of our channel partners and end-to-end consumers.

Speaker Change: This increase is attributed to more affordable pricing and enhanced quality, positioning our homes as an attractive choice for many homebuyers amid the current economic conditions.

Speaker Change: Such contrasting trends underline the distinct market dynamics influencing different segments of the housing industry and the favorable outlook for housing at the middle class price point.

Speaker Change: The integration of these solutions has improved our capture rate of our channel partners and end consumers.

Laurie Hough: The positive feedback at recent events and the early successes of Champion Financing demonstrate the effectiveness of our strategies, sparking considerable market interest in opening new growth avenues within the housing market. I will now pass the discussion over to Laurie, who will delve deeper into our quarterly financial performance.

Mark Yost: The positive feedback at recent events and the early successes of champion financing demonstrate the effectiveness of our strategies, sparking considerable market interests and the opening new growth avenues within the housing market.

Speaker Change: the positive feedback at recent events.

Speaker Change: and the early successes of Champion Financing demonstrate the effectiveness of our strategies sparking considerable market interest and opening new growth avenues within the housing market. I will now pass the discussion over to Laurie who will delve deeper into our quarterly financial performance.

Laurie Hough: I will now pass the discussion over to Laurie, who will delve deeper into our globally financial performance. Thanks, Mark, and good morning, everyone. I'll begin by reviewing our financial results for the first quarter, followed by a discussion of our balance sheet and cash flows.

Laurie Hough: I will also briefly discuss our near-term expectations. During the first quarter, net sales increased 35% to 628 million compared to the same quarter last year, with US factory built housing revenue increasing 40%. The number of homes sold increased 36% to 6,538 homes in the US compared to 4,817 homes in the prior year period. US home volume during the quarter was supported by additional retail and manufacturing capacity, resulting from the regional homes acquisition that contributed approximately 151 million to net sales during the quarter. The average selling price for US homes sold increased by 3% to $91,700 due to a higher mix of retail units sold.

Laurie Hough: US home volume during the quarter was supported by additional retail and manufacturing capacity resulting from the regional homes acquisition that contributed approximately $151 million to net sales during the quarter. The reduction in sales volume can be attributed to a combination of factors, including higher interest rates and economic uncertainty in key markets. On a sequential basis, SG&A increased due to the acquisition-related earn-out charge and variable costs related to higher revenue and profitability.

Laurie 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 $151 million to net sales during the quarter.

Laurie Hough: On a sequential basis, US factory-built housing revenue increased 18% in the first quarter compared to the fourth quarter of fiscal 2024. We saw sequential growth primarily in the community and retail sales channels. On a sequential basis, the average selling price per home increased to 2%, primarily reflecting the higher mix of retail units sold during the quarter. Average selling prices exceeded expectations for the quarter, as we saw healthy demand across most markets and wholesale price stability. Capacity utilization with 58% compared to 57% in the sequential fourth quarter of fiscal 2024. Current utilization rates primarily reflect the increased capacity brought online through recently opened plants.

Laurie Hough: On a sequential basis, U.S. factory-built housing revenue increased 18% in the first quarter compared to the fourth quarter of fiscal 2024. We saw sequential growth primarily in the community and retail sales channels.

Laurie Hough: Canadian revenue during the quarter was 21 million, representing a 24% decline in the number of homes sold, which was partially mitigated by a 5% increase in the average home selling price. The average home selling price in Canada increased to $124,500 due to a shift in product mix.

Laurie Hough: Canadian revenue during the quarter was $21 million, representing a 24% decline in the number of homes sold, which was partially mitigated by a 5% increase in the average home selling price.

Laurie Hough: The reduction in sales volume can be attributed to a combination of factors, including higher interest rates and economic uncertainty in key markets that have tempered by our enthusiasm of new homes. These conditions are anticipated to continue to impact the housing market dynamics in these regions in the near term. Consolidated gross profit increased 27% to 164 million in the first quarter, and our gross margin contracted by 170 basis points from 27.9% in the prior year period. The lower gross margin was primarily due to lower wholesale average selling prices on new homes sold and changes in product mix to homes with fewer or lower-cost options.

Laurie Hough: that have tempered buyer enthusiasm of new homes. These conditions are anticipated to continue to impact the housing market dynamics in these regions in the near term.

Laurie Hough: In addition, margins were impacted by the effect of purchase accounting increases to the carrying value of the finished goods inventory that was acquired with the regional homes acquisition, which had a negative 50 basis point impact on consolidated gross margin during the quarter. We expect this purchase accounting impact to continue in the near term as we sell off the remaining finished goods inventory acquirer. on a sequential basis, gross margin came in better than anticipated due to the increase in captive retail unit sales, stabilization of average wholesale-felling prices, lower input costs, and synergy capture from the regional homes acquisition.

Speaker Change: In addition, margins were impacted by the effect of purchase accounting increases to the carrying value of the finished goods inventory that was acquired with the regional homes acquisition, which had a negative 50 basis point impact on consolidated growth margin during the quarter.

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

Laurie Hough: SG&A in the first quarter increased $38 million to $109 million. The increase is primarily attributable to the regional homes acquisition. In addition, we incurred a charge of approximately $8 million with the first quarter related to the change in fair value of the earn-out related to the acquisition. It's important to note that the maximum earn-out amount of $25 million remains unchanged. On a sequential basis, SGNA increased due to the acquisition-related earn-out charge and variable costs related to higher revenue and profitability. Net income for the first quarter decreased 11% to $46 million, or $0.79 per diluted share compared to net income of $51 million, or earnings of $0.89 per diluted share during the same period last year.

Laurie Hough: Net income for the first quarter decreased 11% to $46 million, or $0.79 per diluted share, compared to net income of $51 million, or earnings of $0.89 per diluted share, during the same period last year. The decrease in EPS was driven by lower growth margins and higher SG&A, including the impact of the regional homes acquisition. As a reminder, we record the impact of our equity investment in ECN's common shares on a one-quarter leg.

Laurie Hough: The decrease in EPS was driven by lower gross margin and higher SG&A, including the impact of the regional home acquisition. Adjusted net income per diluted share was 91 cents, excluding the fair value adjustment for the regional earn-out accrual, and the company's share of ECN's calendar first quarter loss of $1.2 million. 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 22.5% versus an effective tax rate of 25.2% for the year-ago period. The effective tax rate was positively impacted by an increase in recognition of tax credits related to the sale of energy efficient homes.

Speaker Change: Adjusted net income per diluted share was $0.91, excluding the fair value adjustment for the regional earn-out accrual and the company's share of ECN's calendar first quarter loss of $1.2 million.

Speaker Change: The company's effective tax rate for the quarter was 22.5% versus an effective tax rate of 25.2% for the year-ago period.

Laurie Hough: Adjusted net income per diluted share was 75 million compared to $67 million in the prior year period. Adjusted net income per diluted share was 11.9% compared to 14.4% in the prior year period, which was impacted by lower gross margin and higher SG&A. With demand returning and the stabilization of wholesale product mix, we feel gross margins have returned to more normal levels. Going forward, we expect gross margins will be impacted quarter to quarter by fluctuations in wholesale unit volume sold through our captive retail operations versus independent channels. As of June 29, 2024, we had 549 million of cash and cash equivalents in long-term borrowings of 25 million with no maturities until 2026.

Speaker Change: Adjusted EBITDA for the quarter was $75 million, compared to $67 million in the prior year period. Adjusted EBITDA margin was 11.9%, compared to 14.4% in the prior year period, which was impacted by lower growth margin and higher SG&A.

Laurie Hough: Going forward, we expect gross margins will be impacted quarter to quarter by fluctuations in wholesale unit volume sold through our captive retail operations versus independent. I'll now turn the call back to Mark for some closing remarks.

Speaker Change: As of June 29, 2024, we had $549 million of cash and cash equivalents and long-term borrowings of $25 million with no maturities until 2026.

Laurie Hough: We generated 85 million of operating cash flows for the quarter compared to 75 million for the prior year period. The increase in operating cash flows reflect higher adjusted net income and more favorable working capital changes versus the prior year, partially offset by the gross in our independent dealer floor plan receivables. In the quarter, we leveraged our strong-cast position and returned capital to our shareholders through 20 million in share purchases.

Speaker Change: We generated $85 million of operating cash flows for the quarter compared to $75 million for the prior year period.

Speaker Change: The increase in operating cash flows reflects higher adjusted net income and more favorable working capital changes versus the prior year, partially offset by the growth in our independent dealer floor plan receivables.

Speaker Change: In the quarter, we leveraged our strong cash position and returned capital to our shareholders through $20 million in share repurchases.

Laurie Hough: Additionally, our board approved the replenishment of our $100 million share purchase authority, reflecting confidence in our strong-cast generation.

Speaker Change: Additionally, our board approved the replenishment of our $100 million dollar share purchase authority, reflecting confidence in our strong cash generation.

Mark Yost: I'll now turn the call back to Mark for some closing remarks. Thank you, Laurie. The future looks exceptionally promising for our company, especially in the context of the broader housing market. While traditional new construction and staining challenges, we are seeing strong demand from retailers and builder developers, revitalized ordering volumes from our community partners, and a persistent need for affordable housing solutions. We believe these factors position us well for sustained growth and success.

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

Mark: Thank you, Laurie. The future looks exceptionally promising for our company, especially in the context of the broader housing market.

Mark Yost: Moreover, with our strategic expansions into builder as a service with digital platforms and consumer retail, along with innovative financing solutions, we are set to expand our growth and enhance stakeholder value.

Mark: Moreover, with our strategic expansions into builder-as-a-service with digital platforms and consumer retail, along with innovative financing solutions, we are set to expand our growth and enhance stakeholder value.

Mark Yost: Before we move on to the Q&A session, I would like to extend a warm welcome to our new General Counsel, Laurel Krueger. Laurel brings a wealth of experience and proven leadership to our team, making her a fantastic addition.

Mark Yost: Before we move on to the Q&A session, I would like to extend a warm welcome to our new General Counsel, Laurel Kruger.

Mark Yost: Additionally, I want to express our heartfelt thanks to Bob Smith for his invaluable contributions to the company. We wish him a well-deserved, enjoyable retirement.

Mark: Additionally, I want to express our heartfelt thanks to Bob Spence for his invaluable contributions to the company. We wish him a well-deserved and enjoyable retirement.

Operator: And now operator, please open the line for questioning the answers. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the Q at any time by pressing star two.

Speaker Change: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2.

Greg Palm: And we'll move first to Greg Palm with Craig Halle Capital Group. Your line is open.

Speaker Change: And we'll move first to Greg Palm with Craig Howland Capital Group. Your line is open.

Greg Palm: Yeah, good morning. Thanks for taking the questions, and congrats on the good results here. Yeah, I just, you know, curious if you kind of look back on the quarter, give us a little bit of color around maybe where you saw some of the outperformance on relative to initial expectations.

Mark Yost: Start there. Yeah, I think orders, Greg, were probably stronger than we anticipated in the quarter. You know, I would say what we expected was a little bit more kind of all-color fragmented demands, certain markets, certain geographies better than others. What I think really surprised during the quarter was the consistency of order demand and the strength of it. So, in other words, we saw order demand across all of our channels. So between builder developer, between retail builder developer communities, all of them saw year-over-year order growth between, you know, 40 and 50%. We saw, you know, geographies that were balanced.

Speaker Change: Yeah, I think orders, Greg, were probably stronger than we anticipated in the quarter. You know, I would say what...

Speaker Change: What we expected was a little bit more

Speaker Change: I'll call it fragmented demand, certain markets, certain geographies better than others.

Speaker Change: What I think really surprised during the quarter was the consistency of order demand.

Speaker Change: And the strength of it. So, in other words, we saw order demand across all of our channels. So, between builder-developer, between retail builder-developer communities, all of them saw year-over-year order growth between...

Mark Yost: So all of our geographies, whether it's the South Central, Northeast, everywhere except Canada, we saw consistency of order rate strength in the kind of 20 to 70% type range across all of our geographies. So every geography was strong. Every distribution channel was strong. So I think that was a pleasant surprise during the quarter overall, and then, you know, our team did a very good job on the retail side selling and regional homes, and the acquisition there combined with the fly mill financing is really starting to over-perform our expectations on the acquisition side.

Speaker Change: Everywhere except Canada, we saw consistency of order rate strength in the kind of 20-70% type range.

Speaker Change: across all of our geographies. So every geography was strong.

Speaker Change: Every distribution channel was strong, so I think that was a pleasant surprise during the quarter.

Speaker Change: Overall, and then, you know, our team did a very good job on the retail side selling and regional homes and the acquisition there combined with the flywheel of financing is really starting to overperform our expectations on the acquisition side.

Greg Palm: Yeah, okay, that's great. And you mentioned, you know, Q2, physical Q2 guidance, you know, consistent to maybe a little bit below. It's surprising, a little bit just given kind of the cornering backlog.

Mark Yost: So I guess the question is, is there some built-in conservatism around potential weather events this quarter? Is it based on kind of what you've seen, you know, in July and maybe spots like Texas? Maybe just give us a little bit more color there, please? Yeah, I think it's a little bit looking at potential timing and deliveries, you know, with tropical storm or hurricane, Tropical Storm Debbie and some of the impacts that could have on delivery timing as we go into August and September timing. So it's really just an anticipation of where the storm's headed and how that's going to affect delivery timing in certain geographies, Greg.

Greg Palm: I think order pace continues to be strong through July, so it's really more of a timing issue of how we think through that piece. Yep, okay.

Greg Palm: I'll leave it there for now. Thanks. Best of luck.

Speaker Change: Yep, okay. I'll leave it there for now. Thanks and best of luck.

Operator: Thank you.

Daniel Moore: We'll move next to Daniel Moore with CJS Security.

Daniel Moore: Your line is open. Thank you.

Daniel Moore: Good morning, Mark. Morning, Lori. Morning, Dave.

Mark Yost: I'll start with maybe just the cadence of demand. You know, from parts of your prepared remarks, it sounds like traditional retail, you know, steady at a higher level as we move into fiscal Q2. Is that correct in, you know, or are you seeing kind of continued strength or build there on the retail side? Yeah, retail, I think, has been building through the quarter, still very, very strong. Like I mentioned a few minutes ago, actually we've seen strength in actually all of our channels. So they've actually been all kind of scaling up on the order roadside.

Speaker Change: I'll start with maybe just the cadence of demand, you know, from parsed...

Mark Yost: Yeah, retail, I think it has been, you know, building through the quarter still very, very strong. Like I mentioned a few minutes ago, actually, we've seen strengthened actually all of our channels. So they've actually been all kind of scaling up on the order order growth side. I do expect retail to soften a little bit with the weather conditions, you know, probably in some of the East Coast markets.

Speaker Change: actually all of our channels. So they've actually been all kind of scaling up on the order growth side. I do expect retail to soften a little bit with the weather conditions. You know probably I'm in some of the East Coast markets.

Mark Yost: I do expect retail to soften a little bit with the weather conditions, probably in some of the East Coast markets. For, you know, a few weeks, but other than that, just customer demand has been exceedingly good. Got it.

Mark Yost: And maybe just a little bit more color on the community side. You know, last quarter, I think you described one or two more, you know, builder developers that you signed on. How are those conversations going? And, you know, is that recovery gaining momentum versus, let's say, 90 or, you know, 180 days ago? Yeah, so the community channel, I would say, is healthy. It's not robust. You know, they're coming back in kind of a sequential manner, so not all of them are back. But it's healthy; good demand. Overall, you know, we anticipate that continue to pick up over time.

Speaker Change: Last quarter, I think you described one or two more builder-developers that you signed on. How are those conversations going, and is that recovery gaining momentum versus, let's say, 90 or 180 days ago?

Speaker Change: You know sequential manner, so not all of them are back, but it's it's healthy good demand

Mark Yost: And the builder demand, you know, was probably a little bit of a shining star for the quarter. It was our highest sales channel. You know, builder is up 40% year over year, so we saw strong growth in builders. followed by retail. Organic retail is up like 27% during the quarter, so both of those channels, as far as sales deliveries, were up considerably. We signed up many, many new builders during the quarter, so that pace of new builders sign up is accelerating. It's a multiple of what we signed up last quarter, previous quarter, so that can interaction in an accelerating rate, which is good to see.

Speaker Change: Overall, we anticipate that to continue to pick up over time. The builder demand was probably a little bit of a shining star for the quarter.

Speaker Change: It was our highest.

Speaker Change: followed by retail, organic retail was up like 27% during the quarter. So both of those channels, as far as sales, deliveries were up considerably. We signed up many, many.

Operator: Excellent.

Mark Yost: And then you discussed early on kind of managing that, you know, weeks of backlog. I'm just trying to understand, it sounded like you would be ramping production to make sure the backlog doesn't get too much higher, but kind of how do you think about where we are today? Is that a comfortable level? You know, would you like to let them continue to build a little bit? Any thoughts there?

Mark Yost: And then you discussed early on, kind of managing that weeks of backlog. I'm just trying to understand that it sounded like you would be ramping production to make sure backlog doesn't get too much higher, but how do you think about where we are today? Is that a comfortable level? Would you like to let them continue to build a little bit, than it's off there? Yeah, I think getting backlogs to 8 to 12 weeks is normal. I think given the timing of the year, given the election cycle, all those things, and the volatility on that, it's generally better to be a little bit on the higher side of backlog than lower, just given uncertainty what the Fed's going to do in other things.

Speaker Change: you know, weeks of backlog.

Speaker Change: Yeah, I think getting backlogs to, you know, 8 to 12 weeks is normal.

Mark Yost: But we continue to monitor the order pace, and as I mentioned, our backlogs have grown even since our June and quarter end. So, we've seen continued order pace accelerated, which is surprising for July because of the holiday. Usually, that July holidays order pace slows down, and it's been strong through July thus far. So I think increasing production to run through that is going to be important, so we don't have too long of backlogs overall for our customers. Makes sense.

Speaker Change: Laurie Yost, Laurie Hough

Laurie Hough: And then, Gloria, appreciate the color. It sounds like we're back to a new norm with obviously fluctuations around the mix, but 26% a reasonable place to think about over the next quarter or two from gross margin perspective. The gross margins are going to, we're going to expect to see them impacted quarter to quarter by the fluctuations and wholesale unit volume pulled through our captive retail versus independent channels, as well as our wholesale product mix, single-wide versus double-wide and action content. So hard to predict based on all of those different variables, but could fluctuate by a hundred or two hundred basis points.

Speaker Change: Makes sense. And then, Laurie, appreciate the color. It sounds like we're back to a quote, kind of new norm.

Laurie Hough: Got it.

Daniel Moore: That's it for me. I'll jump back when you follow up. Thank you.

Michael Dahl: Thank you, Dan. What was next to Mike Dull with RBC Capital Markets?

Speaker Change: Got it. That's it for me. I'll jump back with any follow-ups. Thank you.

Michael Dahl: Your line is open. Hi, thanks for taking my question. Nice to see the progress here.

Laurie Hough: Hi, thanks for taking my question. It's nice to see the progress here. Laurie, I want to start with the margins. A quarter ago, I think that the near-term guidance was for a gross margin that was kind of in the mid-23s, and now we're sitting here at 26 and calling that normal, you know, 250 basis points. That's a pretty material difference over a short period of time in terms of how to think about near-term expectations.

Laurie Hough: Gloria, I want to stick with the margins. I feel like a quarter ago that the near-term guidance was for a gross margin that was kind of in the mid-23s, and now we're sitting here at 26 and calling that normal, you know, 250 basis points. That's a pretty material difference over a short period of time in terms of how to think about near-term expectations. You mentioned now a few times the mix impact. You also mentioned the input cost in your opening remarks.

Speaker Change: Thanks for taking my question. I see the progress here. Laurie, I want to start with the margins. Like a quarter ago, the near-term guidance was for

Speaker Change: Pauling that normal, you know, 250 basis points, that's a pretty material difference over a short period of time in terms of how to think about near-term expectations you mentioned.

Laurie Hough: You mentioned now a few times the mixed impact. You also mentioned the input costs in your opening remarks. Can you maybe just buck it out? You know, I'm interested specifically in terms of how some of the lower wood products costs impacted the margins and how that's expected to flow through the next quarter or two as well, and then maybe just put some...

Speaker Change: Now, a few times the mixed impact, you also mentioned the input costs in your opening remarks. Can you maybe just buck it out?

Laurie Hough: Can you maybe just fuck it out on the interest specifically in terms of what some of the lower wood products cost impacted the margins and how that's expected to flow through the next quarter or two as well and then maybe just put some, you know, if you can put some quantifiable buckets around the other pieces that would be helpful as far as what actually drove the 2Q upside back up to this 26 or 1Q upside is. Same like, thanks for the question. Yeah, we're not going to really bucket the components. I would say that, you know, going forward the retail versus wholesale product mix and how much is going through our captive retail versus directly to independence is certainly going to impact margins as well as option content going forward.

Speaker Change: You know, if you can put some quantifiable buckets around the other pieces, that would be helpful as far as what actually drove the 2Q upside back up to this 26.

Laurie Hough: Hi Mike, thanks for the question. Yeah, we're not going to really bucket the components. I would say that, you know, going forward.

Speaker Change: or 1Q upside, I guess.

Speaker Change: Hi Mike, thanks for the question. Yeah, we're not going to really bucket the components. I would say that, you know, going forward,

Speaker Change: The retail versus wholesale product mix and how much is going through our captive retail versus directly to independents is certainly going to impact margins, as well as option content going forward. During the quarter, we did see the option content kind of level off. So we stopped the decline that we had been seeing of less features and options and lower price features and options that we had been seeing in prior quarters. So we feel comfortable that we've hopefully hit a trough in that mix component, but we are seeing a great deal of mix in single wide versus double wide at the wholesale.

Laurie Hough: During the quarter, we did see the option kind of level off. So we stopped the decline that we had been seeing: less features and options, and lower price features and options that we had been seeing in prior quarters. So we feel comfortable that we've hopefully hit a trough in that mix component, but we are seeing a great deal of mix and single wide versus double wide at the wholesale level. And from quarters to quarter, how much is flowing through captive versus independence? So, unfortunately, I can't give you a clearer answer other than there's a variability.

Speaker Change: Laurie Yost, Laurie Hough

Laurie Hough: Okay. I guess in just a follow-up to the 2Q question, you do have backlog that gives you some indication of mix and mark. You called out some of the weather potentially impacting retail dynamics in the quarter. So based on what your expectation is for the near term mix of shipments and 2Q. You know, calling it 100 to 200 basis points fluctuation quarter quarter, I appreciate that can that can be the range, but can you help us understand, you know, more specifically for 2Q, what you'd expect to fall out against that? Yeah, I think Mike, if you look at the quarter, you know, depending obviously on the specific geographies that the weather comes in, you know, probably somewhere around 150 basis points would be, you know, a fair barometer to think about, you know, depending on how things shake out.

Speaker Change: Okay, I guess then just as a follow-up to

Speaker Change: Thank you question you do have backlog that gives you some indication of

Speaker Change: Mix, and Mark, you called out some of the weather potentially impacting retail dynamics in the quarter. So based on

Speaker Change: Based on what your expectation is for the near-term mix of shipments in 2Q, you know, calling it 100 to 200 basis points.

Speaker Change: fluctuation quarter-to-quarter I appreciate that can that can be the range but can you help us understand you know more specifically for 2Q what you where you'd expect to fall out against that?

Speaker Change: Yeah, I think, like, if you look at the quarter, you know, depending, obviously, on the specific geographies that the weather comes in, you know, probably somewhere around 150 basis points would be, you know, a fair barometer to think about.

Laurie Hough: 150 basis points would be, you know, a fair barometer to think about.

Laurie Hough: I think it's a little too early to tell, to be honest with you, because it's just all the data coming in. But I think there would be a safe kind of area to be in. Mike, I think overall in the first quarter, we saw more captive retail sales than we were expecting and that we would expect to continue based on seasonality and the weather events that Mark is talking about.

Speaker Change: You know, depending on how things shake out, it's a little too early to tell, to be honest with you, because it's just all the data coming in, but I think that would be a safe kind of area to be in.

Speaker Change: Mike, I think overall, in the first quarter, we saw more captive retail sales than we were expecting, and that we would expect to continue based on seasonality and the weather events that Mark is talking about.

Laurie Hough: So sorry if I can just respond to that one. So in terms of the captive retail mix, it's so understand that the weather could be a headwind, but as far as, you know, you've also built out that part of the business. So on a more go forward basis, beyond the very near term, are you saying that 1Q was elevated in terms of that captive mix, even relative to what you might expect later in the year. Yeah. Got it. Okay, thank you.

Speaker Change: So, understand that the weather could be a headwind, but as far as, you know, you've also built out that part of the business, so on a more go-forward basis beyond the very near term, are you saying that 1Q was...

Mike: elevated in terms of that captive mix even relative to what you might expect later in the year.

Operator: Yep.

Speaker Change: Yeah.

Philip Ng: We'll move next to Philip Ng with Jeff Reenis.

Philip Ng: Your line is open. Hey guys, I guess in an environment where the consumer is certainly weakening, especially the low end, a trapeistick Bill starts environments. It's pretty impressive the momentum you're seeing, guys. So I guess what's driving some of that took up into activity in your perspective and cares to get your latest thoughts on how chatter rates have kind of been behaving with rates coming down lately.

Speaker Change: Your line is open. Hey guys. I guess in an environment where the consumer is certainly weakening, especially the low end,

Speaker Change: A choppy stick-bill-starts environment. It's pretty impressive, the momentum you're seeing, guys. So I guess, what's driving some of that pickup and activity in your perspective? And curious to get your latest thoughts on how chattel rates have kind of been behaving with rates coming down lately.

Mark Yost: Yeah, so, and good morning. I think, you know, overall, we're seeing the customer base that's coming to retail and other channels is really looking for an affordable price point, and I think we can fill that need. So really, we're seeing that buyer who's disenfranchised with slight bills and what they can get the value trade-off for what they can get, and I think we're starting to see more and more of that. And that's really facilitated by a few things. Our direct consumer marketing programs and online shoppers have picked up significantly. So we're getting a much higher capture rate than we were before.

Speaker Change: Yeah, so and good morning. I think, you know, overall, we're seeing the customer base

Speaker Change: that's coming to retail and other channels.

Speaker Change: is really looking for an affordable price point home.

Speaker Change: And I think we can fill that need. So really, we're seeing that buyer who's disenfranchised with site builds.

Speaker Change: and what they can get, the value trade-off for what they can get.

Speaker Change: And I think we're starting to see more and more of that. And that's really facilitated by a few things. Our direct consumer marketing programs and...

Mark Yost: Online shoppers have picked up significantly, so we're getting a much higher capture rate than we were before that's allowing us to capture those customers. Additionally, some of the drivers with Champion Financing and obviously our retail footprint and what we're able to do with the combination of those two is creating a flywheel momentum that we've got in that channel. So I think it really is, you're seeing customers, you know, short supply and high costs come to a better alternative. So we're starting to see that momentum.

Speaker Change: online shoppers have picked up significantly so we're getting a much higher capture rate than we were before that's allowing us to capture those

Mark Yost: That's allowing us to capture those customers additionally. Some of the drivers with champion financing and our obviously retail footprint and what we're able to do with the combination of those two is creating a fly momentum that we've got in that channel. So I think it really is. You're seeing customers you know, amidst, you know, short supply and high costs come to a better alternative. So we're starting to see that momentum.

Speaker Change: Drivers with Champion Financing and our obviously our retail footprint and what we're able to do with the combination of those two is creating a flywheel momentum that we've got in that channel. So I think it's it really is it's you're seeing customers

Speaker Change: you know, amidst, you know, short supply and high costs, come to a better alternative. So we're starting to see that momentum.

Mark Yost: Any color on on channel rates are late. I mean, 30-year six week worries come down quite a bit last few weeks. So the channel rates were relatively flat during the quarter, averaging around 9%. So they do have a tendency to lag the 30-year fix.

Speaker Change: Any color on channel rates of late? I mean, 30-year fixed rate mortgage has come down quite a bit in the last few weeks.

Mark Yost: Thanks, Phil. So the chattel rates were relatively flat during the quarter, averaging around nine percent. So they do have a tendency to lag the 30-year period.

Speaker Change: So the chattel rates were relatively flat during the quarter, averaging around nine percent, so they do have a tendency to lag for the year first.

Mark Yost: Okay, that's helpful. And in March, you gave some color on perhaps two Q being down sequentially due to the weather, but backlogs and orders sound pretty robust. Can you kind of help us think about sales? How that could progress seasonally through the rest of the year? Yeah, so I think, you know, overall versus where our expectations were last quarter, fill, I think we expect the second quarter, third quarter, and fourth quarter all to be higher than what we were thinking probably last quarter. You know, generally from the second quarter or the first half of the year to the second half, we have more maintenance outages.

Mark Yost: That's helpful. And then, Mark, you gave some color on perhaps 2Q being down sequentially due to the weather, but backlogs and orders sound pretty robust. Can you kind of help us think about sales, how that could progress seasonally through the rest of the year?

Mark: That's helpful. And then Mark, you gave some color on perhaps 2Q being down sequentially due to the weather, but backlogs and orders sound pretty robust. Can you kind of help us think about sales, how that could progress seasonally through the rest of the year?

Speaker Change: Yeah, so I think, you know, overall, versus where our expectations were last quarter, Phil.

Speaker Change: Than what we were thinking probably last quarter. You know, generally from second quarter, or the first half of the year to the second half, we have more maintenance outages.

Mark Yost: So I think, you know, generally things are slightly down in the last two quarters of the year from just a time and holiday standpoint. So we'll watch orders as they come in and see how aggressively we ramp, but I think that's our take right now. First half is going to be stronger with this quarter's results and second quarter being higher, kind of in this flat to down from where we are today. And then third and fourth coming any stronger than we anticipated last quarter, but maybe slightly down from, you know, the first half just due to timing of production.

Speaker Change: So, I think, you know, generally things are slightly down in the last two quarters of the year from just a time in holiday season.

Mark Yost: We'll watch orders as they come in and see how aggressively we ramp up, but I think that's our take right now is the first half is going to be stronger with this quarter's results and the second quarter being higher, kind of in this flat to down from where we are today, and then third and fourth coming in stronger than we anticipated last quarter, but maybe slightly down from the first half just due to timing and production.

Speaker Change: So we'll watch orders as they come in and see how aggressively we ramp. But I think that's our

Speaker Change: Our take right now is first half is going to be stronger with this quarter's results and second quarter being higher, kind of in this flat to down from where we are today. And then third and fourth coming in stronger than we anticipated last quarter.

Speaker Change: but maybe slightly down from you know the first half just due to timing and production.

Mark Yost: Mark, would you see like a bigger normal seasonal bump in 3Q, just given how 2Q's depressed due to weather, or that's not spending you envision? Yeah, I mean, we could, so it's a little too early. I want to see how the election cycle and demand fathers out and how we kind of phase in the backlog. I mean, obviously, if order rates continue with this pace, you know, then obviously we have to relook at things and how aggressively we produce. But, you know, right now, we're kind of keeping it slow and steady, ramping up the backlog with a little extra as we get into the election cycle and then, you know, feather that into the second half year. And if orders come in and continue to come into the pace there, then we're going to have to rethink about getting more aggressive with ramping up top line.

Speaker Change: Mark, would you see like a bigger normal seasonal bump in 3Q just given how 2Q's depressed due to weather or that's not something you envision?

Mark Yost: You know, obviously, we have had to relook at things and how aggressively we produce. But, you know, right now, we're kind of keeping it slow and steady, ramping up the backlog with a little extra as we get into the election cycle and then, you know, feathering that in for the second half of the year. And if orders come in and continue to come in at the pace they are, then we're going to have to rethink about getting more aggressive with ramping up the top line.

Mark Yost: Okay, super. Appreciate the color.

Matthew Dooley: Thank you. Move next to Matthew Dooley with Barclays.

Operator: We'll move next to Matthew Dooley with Barclays. Your line is open.

Matthew Dooley: Your line is open.

Mark Yost: Hey guys, good morning. I want to go back to the discussion around captive retail versus wholesale. What do you think drove the sort of better performance out of captive retail? Was it just geographic differences? Or, as we think about the June quarter, I mean, is this really going to be kind of a typical seasonality that we now see for you guys owning this business that, hey, look, there is going to be a big kind of seasonal bump there in the June quarter? Thank you.

Matthew Dooley: Hey guys, good morning. I want to go back to the discussion around the cap of retail versus wholesale. You know, so obviously regional revenues were up, I guess, 40% or so sequentially, and Legacy Champion was up more like 10%. You know, so kind of thinking about the June quarter here, you know, presumably there's going to be geographic differences, of course. So I'm in a town to like you were a little surprised by how strong the captive retail business was overall. So what I'm trying to get at is, you know, what do you think drove the sort of better performance out of captive retail?

Speaker Change: Hey guys, good morning. I want to go back to the to the discussion around the captive retail versus wholesale.

Speaker Change: I guess 40% or so sequentially, and Legacy Champion was up more like 10%.

Matthew Dooley: Was it just geographic differences, or as we think about the June quarter? I mean, is this really going to be kind of a typical seasonality that we now see for you guys owning this business that, hey, look, there is going to be a big kind of seasonal bump there in the June quarter.

Speaker Change: You know, what do you think drove the sort of better performance out of captive retail? Was it just geographic differences or, as we think about the June quarter, I mean, is this really going to be kind of a typical seasonality that we now see for you guys?

Speaker Change: owning this business that, hey, look, there is going to be a big kind of seasonal bump there in the June quarter. Thank you.

Mark Yost: Thank you. Yeah, good morning, Matt. Thank you. I think overall a few things are driving the captive business. One, their geographies are strong. I will also say, in those geographies, we are gaining share. So, so we've got good geographies, and we're accelerating the gain of share in those geographies. So it's kind of a win-win on the captive retail. And a lot of that is coming from the acceleration of the synergies and bringing products from legacy champion plants to the regional retail locations and the success we're having with that expanded product offering. And also to just the enhanced marketing, the, you know, the culture of regional is phenomenal.

Mark Yost: Yeah, good morning, Matt, and thank you. Also, too, just the enhanced marketing, the culture of regional is phenomenal, the people, and leadership are phenomenal. So I think overall, we're just very pleased with that acquisition and the integration, and the teamwork between the teams in taking care of the customer. So I think all of that has been very strong, which is why it was so healthy.

Speaker Change: I will also say in those geographies we are gaining share.

Mark Yost: The people and leadership is phenomenal. So I think overall we're just, you know, very pleased with that acquisition and integration and the teamwork between the teams in taking care of the customer. So I think all of that has been very strong, which is why it was so healthy. If you remember the prior quarter, we had a lot of our shipments go into inventory, and now those are going through that funnel of retail and to the end consumer. So we had somewhat of a pickup there because of just the timing. If you recall last quarter, a lot of it was tied up in finished good inventory.

Mark Yost: See, if you remember the prior quarter, we had a lot of our shipments go into inventory, and now those are going through that funnel of retail and to the end consumer. So we had somewhat of a pickup there because of just the timing. If you recall, last quarter, a lot of it was tied up and finished good inventory. Now it's actually going through.

Speaker Change: and now those are going through that funnel of retail.

Mark Yost: Now it's actually telling through. So I do think there's always going to be a seasonal pickup in retail. In generally the, I'll call it spring summer month. You usually have a great pickup and retail. I'll call it post tax return time. A lot of people use tax returns as a down payment. So you'll get a bump usually coming in there, and then as you get into the August, you know, September timeframe, normal seasonality starts to decline a little bit in retail and then go through the holiday season where things are a little slower. So you will see seasonality.

Mark Yost: So I do think there's always going to be a seasonal pickup in retail in generally the – I'll call it spring and summer months. You usually have a great retail sales increase. I'll call it post-tax return time because a lot of people use tax returns as a down payment.

Speaker Change: I'll call it Pulse.

Mark Yost: So you'll usually get a bump coming in there, and then as you get into the August, you know, September time frame, normal seasonality starts to decline a little bit in retail and then go through the holiday season where things are a little slower. So you will see seasonality. Yes.

Speaker Change: Interview. We're going to give Q and A and Ryan is going to answer some of your questions.

Laurie Hough: Yes. Got it. That's super helpful color. Yeah. Kind of a combination there of your initiatives and the seasonality there. Because then, you know, then it goes back to the gross margin and ASP question. You know, is it crazy to think that OK, as you do have, you know, maybe a greater wholesale mix going into the, you know, latter half of the calendar year that perhaps the ASP would then reflect that. So kind of this, you know, surprising improvement and in this quarter, maybe we could kind of see that give back a little in the second half from an ASP perspective and maybe just higher level.

Speaker Change: You know, is it crazy to think that, okay, as you do have, you know, maybe a greater wholesale mix going into the, you know, latter half of the calendar year, that perhaps the ASP would then reflect that?

Mark Yost: And so kind of this, you know, surprising improvement in this quarter, maybe we could kind of see that give back a little in the second half from an ASP perspective, and maybe just a higher level. I mean, if there is going to be more seasonality in the business, should we also think that gross margins, of course, will therefore be more seasonal than we have seen in years past?

Laurie Hough: I mean, if there is going to be more seasonality in the business, should we also think that the gross margins, of course, will therefore be more seasonal than we have seen in years past.

Laurie Hough: Thank you. Hi, Matt. Yeah, your analysis of ASP's is fine. So, as that mix of wholesale versus retail shifts, we're going to see a shift in the SP along with, you know, the number of single wide versus double wise and option content. So it all goes into that. All of that variability will impact ASP and margins.

Speaker Change: Hi, Matt. Yeah, your analysis of ASPs is spot-on. So as that mix of wholesale versus retail shifts, we're going to see a shift in ASP along with, you know, the number of single Ys versus double Ys and the option content. So it all goes into that, all of that variability will impact ASPs and margins.

Laurie Hough: Okay.

Operator: Thanks, Larry. Thanks, Mark.

Operator: Good luck, guys.

Operator: Thank you.

Speaker Change: Okay. Thanks, Laurie. Thanks, Mark. Good luck, guys.

Jay Mccanless: We'll move next to Jay McCannless with Wet Bush.

Operator: We'll move next to Jay McCanless with Wedbush. Your line is open.

Jay Mccanless: Your line is open.

Speaker Change: We move next to Jay McCanless with Wetbush. Your line is open.

Jay Mccanless: Morning, everyone. So with all these new different product types are selling builder developer parts, et cetera, could you maybe bring order from top to lowest, what, what are your highest to lowest gross margin sales between these different pieces and revenue sources in the business. Yeah, Jay, the gross margins out of our wholesale, you know, our wholesale gross margins out of the plants are relatively consistent from product types of products. Okay. The fluctuations come with action content. And then also just kind of you talked about the synergies from regional being at the top end of the range.

Jay Mccanless: Morning, everyone. So, with all these new different product types you're selling, builder, developer, parts, et cetera, could you maybe rank order?

Speaker Change: Fluctuations come with action content.

Laurie Hough: I guess what's a good fixed SNA number for us to use going forward, just to kind of think about the new businesses all brought on and some of the other things that have been happening. And also, is there going to be a breakout at some point for Champion Financial, or how should we model that going forward? So the synergy capture from regional is going to be primarily coming through the cost of sales gross margin line. And the SNA, I would say, with the exception of the $7.9 million earn-out adjustment, we're kind of at the new normal for SNA level.

Speaker Change: new businesses y'all brought on and and some of the other things that have been happening and and also is there going to be a breakout at some point for Champion Financial or how should how should we model that going forward?

Speaker Change: So the synergy capture from regional is going to be primarily coming through the cost of sales gross margin line. And the SG&A, I would say,

Speaker Change: With the exception of the $7.9 million earn out adjustment, we're kind of at the new normal for SG&A levels, and our SG&A runs, you know, around 35% variable.

Laurie Hough: And our SNA runs, you know, around 35% variable. From a champion financing perspective, we have concluded with our auditors that we're going to be consolidating the joint venture, so the majority of that is going to be running through revenue with an offset to a minority interest line on the face of the PNL representing the TRIAS 49%. Okay, that sounds great; it's all ahead, thank you.

Speaker Change: From a champion financing perspective, we have concluded with our auditors that we're going to be consolidating the joint venture, so the majority of that is going to be running through revenue with an offset to a minority interest line on the face of the P&L representing Triad's 49%.

Jay Mccanless: Oh, sorry, Jay. I just wanted to remind you that we record those results on a one-quarter leg. Okay, thanks for your push of it. Thanks, Jay.

Speaker Change: Okay, that sounds great. It's all good. Thank you. Oh, sorry, Jay. I just wanted to remind you that we record those results on a one-quarter leg.

Jay: Okay. Thanks, Floyd. Appreciate it.

Mark Yost: It does appear that there are no further questions at this time. I would now like to turn back to Mark for any additional or closing remarks. I want to thank everyone for your attention this morning, and we look forward to updating you on our progress on our fiscal second quarter earnings call.

Speaker Change: And it does appear that there are no further questions at this time. I would now like to turn it back to Mark for any additional or closing remarks.

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

Mark: I want to thank everyone for your attention this morning, and we look forward to updating you on our progress on our fiscal second quarter earnings call. Thank you, and have a great day.

Mark Yost: Thank you, and have a great day.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon. Thank you very much.

Speaker Change: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.

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