Q3 2025 Champion Homes Inc Earnings Call
Thank you, everyone. Have a great day.
Rob: Good morning and welcome to the Champion Homes third quarter fiscal 2025 earnings call. My name is Rob and I'll be coordinating your call today. At this time all participants are in listen-only mode. The question and answer session will follow today's formal presentation.
Rob: If anyone should require operating assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: I'll now turn the call over to your host Jason Blair to begin. Jason, please go ahead.
Jason Blair: Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the third quarter ended December 28, 2024.
Speaker Change: Here to review Champion's results are Tim Larson, Champion Homes President and Chief Executive Officer, and Laurie Hough, Executive Vice President, Chief Financial Officer, and Treasurer.
Yesterday, after the market closed, we issued our earnings release.
Speaker Change: As a reminder, learnings released and statements made during today's 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. 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: Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release.
Speaker Change: I would now like to introduce Champion Homes CEO, Tim Larson, who was appointed CEO and a member of the company's Board of Directors in December.
Speaker Change: Tim is a highly accomplished executive and CEO, with decades of leadership in the consumer products and manufacturing industries, including significant experience transforming a diverse portfolio of businesses via customer-driven innovation and omni-channel retail.
Speaker Change: Tim originally joined Champion Homes in May of 2021 as Chief Growth Officer and led the development and delivery of the company's customer experience growth strategy and omni-channel platform.
Speaker Change: During this time, Tim has worked very closely with Champion's talented employees, customers, and channel partners, as well as working closely with the leadership team. I will now turn the call over to Champion Home CEO, Tim Larson.
Speaker Change: Thank you, Jason. Good morning, everyone. We appreciate you attending today's earnings call. Since joining Champion three and a half years ago, being part of this team and what we do has become core to my purpose.
Speaker Change: I'm honored to serve and lead our collective team as we embark on our next phase of growth. Champion Homes is a company with a talented team, a strong reputation, and a great portfolio of brands and products.
Speaker Change: Each of those attributes were recently recognized nationally. For the fifth straight year, our Skyline brand was named the most trusted manufacturing housing brand by Life Story Research. This reflects our unwavering commitment to provide customers with high-quality homes and experiences.
Speaker Change: In stepping into the role, I've been actively engaging in feedback sessions across our stakeholders. We've already identified opportunities to further capitalize on our strengths and drive additional value.
Speaker Change: I'm committed to building on the effectiveness of our strategy, including the expansion of our retail and direct-to-consumer capabilities, and strategic investments that support the growth of our community, independent retail, and builder-developer customers.
Speaker Change: In my conversations with employees, I'm thrilled by their enthusiasm and willingness to think differently and advance even further as a customer-centric organization. It's already unlocking new ideas and actions to improve and elevate the business.
Speaker Change: I've already been able to connect with numerous customers in my first 50 days and I remain impressed by their passion for the industry and the opportunities ahead.
Speaker Change: In December, I was able to meet with several investors and analysts to share my excitement for the Champion Homes business, and I look forward to building on our conversations.
Speaker Change: including our commitment to drive sustainable profitable growth and long-term value.
Speaker Change: As I look ahead, we will continue to execute our differentiated strategy while remaining nimble in a dynamic market. With that backdrop in mind, I'll now provide an overview of the recent quarter and our expectations for the remainder of the fiscal year.
Speaker Change: Our third quarter performance demonstrates strong execution across the company, including by our sales, retail, and manufacturing teams that have definitely delivered on the market's growing demand.
Speaker Change: In the third quarter, year-over-year net sales increased 15.3% to $645 million. Homes sold during the period increased 13% for a total of 6,646 homes.
Speaker Change: The third quarter saw a sequential increase in the revenue from the fiscal second quarter, up $28 million. Our backlog at the end of the third quarter was $313 million, which is up 8% from the same period last year.
Speaker Change: We saw a normal seasonal slowdown in order rates throughout the quarter, contributing to the 27% potential decline in backlog. An average backlog ended Q3 at 10 weeks, which is on the higher side of our 4 to 12 week norms.
Speaker Change: Now I'll provide some additional commentary from the quarter on each of our sales channels.
Speaker Change: Sales to our independent retailer channel grew during the quarter and we anticipate that to continue, enabled by our direct-to-consumer and digital capabilities, combined with new products and flooring support.
Speaker Change: Sales through our captive retail channel continues to grow. We are very pleased with the organic growth of the regional homeless business and the creative nature of the overall transaction.
Speaker Change: The success of the regional acquisition is a testament to the combined organizations, including the tenacity and customer-centric approach of the regional team.
Speaker Change: We're developing new products with communities in mind and are encouraged by the response of the new homes we feature at the recent Louisville show.
Speaker Change: In our Build-A-Developer channel, homes sold increased year-over-year and the project pipeline interest continued to grow. We recently delivered homes to projects across several markets and we've had very positive feedback from customers and the local community on the design and value of the homes.
Speaker Change: With each project, we capture the proof points and the insights that benefit future developments.
Speaker Change: That includes working with federal, state, and local officials to expand zoning and accelerate the often long lead times associated with these projects.
Speaker Change: Across our channels, we are pleased with the progress of Champion Financing, our joint venture with Tribe Financial Services.
Speaker Change: We are seeing early benefits consistent with our vision to serve consumers across their home purchase experience.
Speaker Change: Our floor plan programs ensure our retailers have the right mix and value of products for today's consumers. And our retail loan programs further drive increased affordability and value.
Speaker Change: We look forward to continued collaboration with the ECM Capital and Triad teams and partners.
Speaker Change: Before touching on Q4, I want to express our heartfelt concerns for all those affected by the devastating California fires.
Speaker Change: We have three plants in Southern California. Unfortunately, there was no direct damage to our facilities or retailers in the area. We are committed to supporting the region and working closely with the community on rebuilding efforts.
Speaker Change: Looking to our fiscal fourth quarter, demand from our customers remains within our expectations. We anticipate fourth quarter revenue to be up low double digits from the same quarter last year and in line with pre-earnings fourth quarter consensus.
Speaker Change: A sequential moderation from the third quarter is anticipated and in line with her typical floral winter selling season.
Speaker Change: We are still early in the spring selling season and are prepared to further scale production with order demand. As I mentioned, we received a very strong response at the Louisville show and anticipate that will positively contribute to our fiscal fourth quarter and into fiscal 2026.
Speaker Change: In summary, affordable housing remains a pivotal need across our US and Canadian markets, reflected in the recent trends and our anticipation for strong medium-term and long-term demand.
Speaker Change: I will now turn the call over to Laurie, who will discuss our quarterly financial performance in more detail.
Laurie Hough: Thanks, Tim, and good morning everyone. I'll begin by reviewing our financial results for the third quarter, followed by a discussion of our balance sheet and cash flows. I'll also briefly discuss our near-term expectations.
Laurie Hough: During the third quarter, net sales increased 15% to $645 million compared to the same quarter last year, with U.S. factory built housing revenue increasing 17%.
The number of homes sold increased 14%.
Laurie Hough: to 6,437 homes in the U.S. compared to 5,643 homes in the prior year period.
Laurie Hough: U.S. home volume during the quarter was supported by healthy demand across our sales channels as well as an additional two weeks of sales from our regional homes acquisition, which closed mid-October of last year.
Laurie Hough: The average selling price per U.S. home sold increased by 2.8% to $94,900 due to a higher mix of units sold through our company-owned retail sales centers.
Laurie Hough: We saw a sequential increase, mainly due to increased shipments after hurricane delays at the end of our fiscal second quarter, both in our plan's ability to ship homes, as well as our company-owned retail location's ability to close home sales.
Laurie Hough: In addition, manufacturing capacity utilization was 63% compared to 60% in the sequential second quarter.
Laurie Hough: On a sequential basis, the average selling price per home increased 2.7% due to a higher mix of units sold through our company-owned retail sales centers.
Laurie Hough: Canadian revenue during the quarter was $26 million representing a 16% decline in the number of homes sold versus the prior year period.
Laurie Hough: The reduction in Canadian sales volume can be attributed to a combination of factors, including higher interest rates and economic uncertainty in key markets, that have tempered buyer enthusiasm for new homes.
Laurie Hough: These conditions are anticipated to continue to impact the housing market dynamics in Canada in the near term.
Laurie Hough: Consolidated gross profit increased 28 percent to 181 million in the third quarter and our gross margin expanded 280 basis points from 25.3 percent in the prior year period.
Laurie Hough: The higher gross margin was primarily due to higher average selling prices on new homes sold through our company-owned retail sales centers, which also generated a greater percentage of total revenue.
Laurie Hough: In addition, lower input costs in Acquisition Synergy Capture also contributed to higher gross margins versus the prior year period.
Laurie Hough: On a sequential basis, gross margin came in better than anticipated due to lower input costs and higher captive retail sales.
Laurie Hough: STNA in the third quarter increased $23 million over the prior year period to $108 million.
Laurie Hough: The increase is primarily attributable to increased sales volumes through our company-owned retail sales centers and higher variable costs related to higher revenue and profitability. In addition, we continue to make investments in people and technology to support for future growth.
Laurie Hough: The company's effective tax rate for the quarter was 21.1% versus an effective tax rate of 21.4% for the year-ago period.
Executive, Laurie Hough, Mark Yost
Laurie Hough: The increase in EPS was driven mainly by higher operating income in the third quarter.
Laurie Hough: Adjusted EBITDA for the quarter was $83 million compared to $66 million in the prior year period. Adjusted EBITDA margin was 12.9% compared to 11.8% in the prior year period, which was driven by higher gross margins.
Laurie Hough: as the benefit of lower forest product costs dissipates relative to ASPs and as we experience fluctuations in the percentage of sales running through our company-owned retail sales centers and overall product mix.
Laurie Hough: As of December 28, 2024, we had $582 million of cash and cash equivalents and long-term borrowings of $25 million with no maturities until 2026. We generated $50 million of operating cash flows for the quarter compared to $90 million in the prior year period.
Laurie Hough: In the quarter, we leveraged our strong cash position and returned capital to our shareholders through $20 million in share repurchase.
Tim Larson: I'll now turn the call back to Tim for some closing remarks.
Tim Larson: Thank you, Laurie. It's an exciting time at Champion and I'm honored to be collaborating with such a talented team.
Tim Larson: While the word champion certainly conveys the excellence we are driven to deliver, we are also embracing the meaning of champion as a verb, to champion our customers and to champion off-site built homes.
Tim Larson: In summary, after a bit over 50 days in the new role, we have the team highly focused on a core set of priorities.
Tim Larson: Executing the fundamentals including leveraging our capacity, innovating with product to grow and bring in new buyers to the category, evolving the experience for today's and tomorrow's customers with solutions before, during, and after the sale.
Tim Larson: elevating the awareness of the benefits of off-site built homes, driving a customer-centric culture, and strategically deploying our capital.
Tim Larson: I look forward to updating you on these initiatives on our next earnings call.
Speaker Change: And now, I'd like to open the floor for questions. Operator, please proceed.
Speaker Change: Thank you. We will now be conducting a question and answer session.
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One moment please while we poll for questions. Thank you.
Speaker Change: Thank you. And our first question is from the line of Craig Palm with Craig Allen. Please proceed with your questions.
Craig Palm: Yeah, thanks, Morden, everybody, and congrats on the good results here.
Thanks, Rick.
Bye.
All right.
Speaker Change: Maybe start with just a little bit more of a recap on the quarter and kind of the outlook. I was hoping maybe you could give us a little bit more color on kind of how orders trended throughout the quarter. And then just in terms of what you're kind of seeing in January and more importantly, what you're hearing from your customers in terms of outlook for 2025 in general.
Speaker Change: Yeah, Greg, as far as Q3 goes in that recap, you know, our plant shipments and retail recovered a little quicker on the hurricane outcomes than expected, so that was some tailwinds.
Speaker Change: And then we were able to increase capacity, as you heard, in lawyers marks up to that 63%. So that allowed us to produce more during the Q3.
Speaker Change: And then as Q3 went on towards the back half, you know, when seasonality started to come into play or slowed a bit.
Speaker Change: but as we noted you know we still have a strong Q4 ahead of us and we expect a low double-digit growth versus last fourth quarter.
Speaker Change: And what's driving that is, you know, we're seeing healthy traffic at our stores.
Speaker Change: and we're hearing that from independents as well. Quoting activity has picked up here recently.
and we certainly had a strong response at Louisville.
Speaker Change: Now, there have been a few geographies that were impacted a bit by the temps and snow, so that's a consideration, so that's a bit of the basis for why we shared what we did in terms of the fourth quarter view. But all in all, we're optimistic as we start the spring selling season.
Yeah, okay, that makes sense.
And Tim, I think all of us would.
Speaker Change: probably appreciate a little bit more, you know, color on kind of what you think the company, you know, has done has done well, or maybe could do better just kind of any change in kind of direction or strategic focus.
Speaker Change: you know, going forward, you know, just, you know, given, given that you're now at the at the CEO seat now.
Speaker Change: Yeah I mean strategically because I've been here three and a half years I've been a part of building the strategy and executing the key priorities so it's major strategic themes you know I don't see changing. What we're really doing is as I mentioned in my remarks really focusing on the fundamentals, the things that we see work well on the market across our retail operation, how do we expand those.
Speaker Change: From a product perspective, you're going to continue to see innovating and evolving. You know, we got to be nimble for today's consumer and make sure we can also invite new buyers into the category with product.
Speaker Change: And from a customer experience, you know, if you think about digital as the front door, then at retail, and then what happens post-sale, really executing on that experience.
Speaker Change: and then really being smart with our capital and deploying it across strategic priorities. So, I think it's really those themes and it's really driving the execution across those themes.
Speaker Change: Yeah, okay. We'll look forward to getting progress updates over time. Best of luck.
Sounds good. Thanks, Rick.
Speaker Change: Our next question comes from the line of Daniel Moore with CJS Securities. Please proceed with your questions.
Yes, thank you. Good morning, Tim. Good morning, Laurie.
Speaker Change: I dipped into backlog a little during the quarter, but still healthy at 10 weeks. Just talk about the confidence and trajectory of order rates as we look to Q4 and early fiscal 26, and should we expect production to roughly align with the trajectory of order rates going forward? How do you think about managing backlogs? Thanks.
Speaker Change: Yeah, from a backlog perspective, you mentioned the 10 weeks and that was at the end of Q3. What I would say as we go forward, we're feeling good about our orders.
Speaker Change: It's really early in the selling season from the full F26 view.
Speaker Change: and we certainly are seeing some signs with our retail, as I mentioned, that are promising.
Speaker Change: We obviously got a look at the broader housing market, if you think about F25, you know, from an economy perspective, there's mixed signals. You know, some are saying some flat, a little up. Now, we're very, you know, optimistic about our products and our price points as an advantage.
Speaker Change: And so, as we develop our fiscal year 26 plans, we're planning for continued profitable growth, leveraging our capacity, and we're going to update you further in our next call. But the early signs would indicate, you know, we're feeling good about those rates and we're going to execute accordingly.
Speaker Change: Great, and one of the themes over the last several years has been
Speaker Change: penetration of those, you know, kind of top 100 community developers.
Speaker Change: How is that trending from your perspective, you know, how do you think about the opportunity set there and more generally for, you know, Champion and MH to take share from SiteBuilt, where the biggest opportunities over the next, say, two to three years?
Speaker Change: Yeah, in the near term, we were able to have the growth in that channel up year over year. It's obviously a smaller channel for us today, but we see over time that really building.
Speaker Change: And as I mentioned, we executed projects in a number of markets that give us the proof points that we're learning on how do you evolve those, make them go faster, and that includes working with the local municipalities. Those particular projects require zoning support, they require the local involvement, and we're learning how to accelerate that.
Speaker Change: And so, I would say from an opportunity, we're really strong in terms of the long-term view of it, in the near term, it's just working through those realities by market.
Speaker Change: but we're pleased with the response that we have in those markets to the quality of the homes, the price value, the acceptance in those communities. We just have to have more communities see that and learn from those and embrace those as we go forward, and so our strategy is going to continue to grow the Build-A-Developer channel.
Speaker Change: helpful. Last one for me, I'll jump back in queue, but SG&A ticked higher as a percentage of revenue despite strong top-line growth. How much of that spend or increase would you say reflects incremental investments including technology and personnel to support growth?
Speaker Change: And more generally, you gave good color, you know, in terms of outlook for revenue and gross margin. How do we think about SG&A, you know, in Q4 relative to Q3, and what's a good run rate going forward? Thank you again.
Speaker Change: Hi Dan, so SG&A you know is usually about 35% variable so as revenue increases or decreases that 35% variability is going to
is going to change relative to revenue.
Speaker Change: So, that's what we saw this quarter as revenue went up, our variable cap structure went up.
Speaker Change: We are making investments in people to drive our strategy forward, including our captive retail organization. And then also investing in technology to support our direct-to-consumer platform.
Speaker Change: and other IT capabilities to support our captive retail as well as back office enhancements. So those are going to continue at the pace we saw in the third quarter for the next several quarters.
Speaker Change: Our next question is from the line of Phil Lang with Jeffries. Please proceed with your questions.
Phil Lang: Hey guys, Tim, congrats to the new role. Looking forward to working with you more going forward.
Phil Lang: I guess the first question I have is, obviously, from your previous remarks, you said it's a pretty fluid situation, but tariffs are top of mind for a lot of investors.
Speaker Change: How does that impact you? Certainly you guys do use a lot of wood products, some of that comes from Canada, but just kind of help us think through the impact in terms of operationally and what that could mean from an inflation standpoint and your ability to kind of manage that and kind of sustain that gross margin framework, Laurie, you kind of highlighted earlier.
Speaker Change: Yeah, Phil, obviously it is very dynamic and we're monitored very closely. And what I would say is we do have a playbook that has elements from what we learned from COVID that can apply.
Speaker Change: Now, you know, we've seen some scenarios where maybe there'll be less of that impact as we think about some of the different supply elements. And that's why we have to take a really, you know, piece by piece approach for all the different drivers.
Speaker Change: But our team's already on it and really anticipating that we prepared in the event we see some of those things come back after this immediate state. So we'll keep you posted as we go along and we're obviously going to be very thoughtful about how we approach across those three drivers.
Speaker Change: Operationally, I mean, you guys have a business in Canada, but operationally, from a manufacturing and whatnot.
Speaker Change: Canada versus US, is there any trade flow in any color to kind of size up in terms of your supply base in terms of materials and stuff that would could be impacted from from tariffs? Have you taken a stab at quantifying that?
Speaker Change: But really, I think the team's prepared to execute given different scenarios. So we're just watching very closely and making sure that we continue to run operations at the levels we need. So at this point, you know, we're just managing it from that perspective.
Speaker Change: And then this regional home acquisition has been a home run for you guys, having your own captive retailer has been quite additive.
Speaker Change: Is there a game plan to do more of that, whether it's organically and M&A? And have you gotten any pushback given some of the channel conflict dynamics?
Speaker Change: In terms of our ability to operate our retail, when we talk about direct-to-consumer, it really is both supporting our captive, but it's really been supporting our independent. Because as we make investments in digital, we're sending lead to our independents. We're supporting that. And so we look at it on a market-by-market basis.
Speaker Change: And one of the benefits of having a family of brands is we can have multiple brands in the market which allows us to support multiple retail approaches and we're going to continue to do that. So we really see it as a strength because some of the things we learn in CAPTIV, we apply to our independents and vice versa. And so it's really an additive approach to the business and we're going to continue to do that.
Speaker Change: And just one last one for me really quickly. On the FEMA order side, I know the hurricanes obviously was very devastating in the south, particularly in the Carolinas area.
Speaker Change: the wildfires in California right now. Is that an opportunity? Have you seen any orders come from FEMA particularly in the Carolinas thus far?
Speaker Change: You know, there's been a lot of conversations in our outreach, both at the federal and local level, but there's not yet any specific orders.
Speaker Change: We're certainly managing our capacity and anticipation of that and we're really eager to serve those in the Carolinas as well as in California. So we'll keep you posted as that evolves.
Okay. Thank you. Appreciate it, Calum.
Speaker Change: Thank you. Our next questions are from the line of Mike Dowell with RBC Capital Markets. Please proceed with your questions.
Mike Dowell: Thanks for taking my questions and echo the congrats to Tim.
Mike Dowell: Tim, I guess just picking up on one of Phil's questions, in terms of the captive retail, can you give us a sense, just update us on what percentage of your U.S. sales are going through captive retail at this point today, and do you have a target or a vision for what that mix ultimately gets to?
So it's currently 35% of our sales.
Mike Dowell: But obviously we have our independent channel, our community, our builder developer. And so I would look at it as by market where we see opportunities, we're going to prioritize the right channels. And so we continue to grow it. It's obviously been successful for us, but we're going to take a balanced approach across our channels, including with CAPTIV.
Laurie Hough: Okay, that's helpful. And then shifting gears to the gross margin side, Laurie.
Laurie Hough: mentioned the moving pieces both in the quarter and then go back to the kind of 26 to 27 range. If you buck it out then what contributed to the upside in
Laurie Hough: in this quarter and and then kind of guide back 100 to 200 basal points lower, how would you ballpark that in terms of the the wood product costs?
versus an assumption of near-term mixed dynamics.
Laurie Hough: Mike we're not going to bucket that publicly so but you know certainly input costs was favorable versus our guide at the end of the second quarter in the third quarter and I really do not expect to see that continuing based on what forest products are doing and then obviously we need to
Laurie Hough: Look at the dynamics of the tariffs and how they're going to impact pricing.
Laurie Hough: And then also, you know, product mix plays a big piece in our gross margin overall. How much is running through our captive retail versus how much is single wide versus multi-section homes and then option content as well.
Laurie Hough: So all of that is contributing to, you know, our structural margins of 26 or 27 percent.
Speaker Change: Okay, got it. I guess just to be clear, in that comment of 26 to 27, is that meant to be...
Speaker Change: You'll be back there in the fourth quarter, and then are you including a prospective tariff impact in that, or that's just based on kind of what you can already see, given the way you...
Speaker Change: you purchase and kind of flow through with the lag on your wood costs.
Speaker Change: Yeah, so that's what I expect to see in the fourth quarter. And that does not necessarily include the impact of tariffs.
Okay, got it. Thank you.
Speaker Change: Our next question is from the line of Matthew Boyle with Barclays. Please proceed with your questions.
Matthew Boyle: Hey, good morning, everyone. Welcome, Tim, and thank you for taking the questions.
Speaker Change: Wanted to go back to California. I guess you know putting FEMA aside, but just you know thinking about the tragic events you guys have
Speaker Change: for a footprint down there with with the three plants, you know, I know you participate a lot in AD use especially over there so just
Speaker Change: as you kind of think about that rebuild and how are some of those conversations going and how do you guys kind of plan on participating in that rebuild down there? Thank you.
Speaker Change: Yeah, we're very eager to help and we've already had conversations there from a local level and also with the team.
on various products that we think are a good fit.
Speaker Change: I would say that they're really focused right now on some of the initial work to get the sites prepared, and that's gonna take some time. But we're proactively working with them when they're ready for those homes to support them. And so we're eager to do that, but as you know, these things do take some time based on the logistical elements that they're working through.
Speaker Change: Got it. Okay. Thank you for that, Tim. And then secondly, just kind of zooming into the very near term, you mentioned a bit of an order slowdown during the third quarter. I'm just curious if that was just sort of...
Speaker Change: you know, normal winter seasonality or, you know, for example, the rise in interest rates or anything else kind of sort of impacted demand a little bit more than you would typically see during the third quarter. Thank you.
Speaker Change: Yeah, no, we saw it as seasonality. And as we've come out of that season, we're starting to see things pick up consistent with, you know, the early spring selling season. So at this point, we're seeing it as a seasonal impact and are encouraged with the early spring selling season.
Perfect. Well, thanks, Tim, and good luck, guys.
Thanks.
Speaker Change: Our next question is from the line of Jesse Lederman with Zellman & Associates. Please issue your questions.
Jesse Lederman: Hey, thanks for taking my questions. A strong quarter, and congrats, Tim, on the new role. First question is about the new administration. Curious if you've heard anything about maybe potential initiatives or regulatory changes from the top down that may be a tail end for the sector.
Jesse Lederman: So obviously over the years there's been a lot of conversation on the importance of affordable housing and that's
to share a few thoughts.
Jesse Lederman: But what I would say is part of the benefit of these Build-A-Developer projects we're doing is we can show examples of what can happen in the community.
Jesse Lederman: and we're hopeful that at the federal level, the state level, there are more folks taking and embracing our approach there and are optimistic that those proof points will encourage other municipalities to do the same.
Jesse Lederman: But you know, there's a lot of actions going on today in the administration And so, you know, we're certainly having those conversations and sharing how we can be a solution for affordable housing
Speaker Change: Got it. Makes sense. Thanks for that color. On capacity utilization, so up sequentially, up year-over-year, it seems like demand has been solid across all end channels.
Speaker Change: What would you like to see to move that even higher? So are there things that you're waiting for? Are there certain indicators across any of the channels in particular or just holistically that you're waiting for looking for before you push that number higher and increase output?
Speaker Change: So as I mentioned, we have all of our key channels. And in each of those channels, we have leading indicators that we can see how the quotes are coming, how the activity. And that really is our cue to look at our production rates.
Speaker Change: And so we'll continue to do that. I think we have a very good balance of how we approach that to make sure that we're optimizing our margin and our cost based on how we run the operation.
Speaker Change: and we're going to continue to do that. So it's really those leading indicators.
Speaker Change: And our capacity utilization that we shared includes our idle plants. So while it's 63%, that includes, you know, half a dozen plants we're not even operating. So if you look at the actual number, it's a little bit higher than that. And I feel good about how we're approaching our operational capacity. And as I mentioned, in some markets we'll look to increase that as we go forward.
Speaker Change: Got it. And so is there any thought to increasing capacity or turning the capacity on in any of those idled plants in the foreseeable future?
Speaker Change: It's really based on those local markets and not at this time. We've got great plants in many of our key markets that are in a good position with our backlog, so we continue to watch that, but we're fortunate to have that flexibility if need be.
Great. That's all for me. Thanks so much.
Thank you.
Speaker Change: Thank you. At this time, I'll turn the call back to Tim Larson for closing remarks.
Speaker Change: Thanks everybody for joining today and your continued interest in Champion Homes. We look forward to updating your progress and have a great rest of your day. Thanks so much.