Q4 2025 Champion Homes Inc Earnings Call
Good morning, welcome to the champion homes fourth quarter fiscal 2025 earnings call. My name is Sherry I will be coordinating your call today, a question and answer session will follow the formal presentation.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Speaker Change: Remind you. This conference is being recorded I will now turn the call over to your host Jason Blair to begin Jason. Please go ahead.
Jason Blair: Good morning, Thank you for taking the time to join US for today's conference call and review of our business results for the fourth quarter and full year ended March 29 2025.
Tim Larson: To review our results are Tim Larson Champions, President and Chief Executive Officer, and Laurie <unk> Executive Vice President and Chief Financial Officer and Treasurer.
Jason Blair: Earlier. This morning, we issued our earnings release as a reminder, the earnings release and statements made during today's call include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Jason Blair: These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations.
Jason Blair: Risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission.
Jason Blair: Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance definitions and reconciliations of these measures can be found in the earnings release I will now.
Jason Blair: I'll turn the call over to champion Homes' CEO, Tim Larson.
Tim Larson: Thank you, Jason and good morning, everyone on behalf of the champion team I'm proud to report that in fiscal 2025, we provided over 26000 homes to customers and families across the U S and Canada.
Tim Larson: This represents a 19% increase in home sold year over year revenue growth of 23%, resulting in fiscal year 2025 sales of $2 5 billion.
Jason Blair: Unit volume increase was driven by higher demand across all channels, including from the regional homes acquisition from the entirety of the fiscal year.
Speaker Change: Performance was driven by an unwavering focus on our customers and executing our strategic priorities.
Speaker Change: We are investing in new products and services for our channel partners and expanding our retail capabilities, including today announcing the acquisition of eisman homes, which I will discuss further in a moment.
Speaker Change: We were very active in the marketplace during the quarter.
Speaker Change: <unk> had a tremendous reception to our new products at the international builder show, where we showcased models laser focused on providing builders with relevant and affordable turnkey homes in March we had a great response for our Black Sea show product lineup, reflecting the strength of the champion homes family of brands.
Speaker Change: Recently, we were able to engage with leadership from the department of housing and urban development.
Speaker Change: We are encouraged by the dialogue and the positive feedback we received during their recent visit.
Speaker Change: We are impressed by U S HUD Secretary, Scott Turner's commitment to making homeownership more attainable.
Speaker Change: I appreciate the time, we spent train our homes and his willingness to learn how we can further expand manufactured housing to address the affordability needs across the country.
Speaker Change: The recent spotlight in Congress to reaffirm Huntsville, as the sole regulator and removing the requirement that manufactured home is beyond the permanent chassis are all steps in the right direction.
Speaker Change: And when combined with zoning reform will reduce barriers to further grow the market for off site built homes.
Speaker Change: A market that we are investing in for growth as reflected in our strategic priorities and the capital allocation that are all aligned to deliver sustained value across all stakeholders.
Speaker Change: Given the current overall market uncertainty we are focused on remaining nimble, while thoughtfully advancing our strategy and that was very evident in the fourth quarter of fiscal 'twenty five.
Speaker Change: He will continue to execute on the fundamentals and deliver profitable growth by navigating the unpredictable environment with tariffs and inflation looking throughout the quarter.
Speaker Change: Fourth quarter year over year, net sales increased 11% to $594 million in homes sold during the period increased 6% to a total of 6171 units.
Speaker Change: We experienced normal seasonality in the fourth quarter with the sequential decrease in revenue compared to the third quarter and orders increased as we progressed through the quarter and our backlog at the end of the year was $343 million back.
Speaker Change: Backlogs are up 9% from the end of last year and up 10% sequentially.
Speaker Change: Average backlog lead time ended the quarter at eight weeks, which is within our target range of four to 12 weeks.
Speaker Change: I'll provide some additional commentary from the quarter on each of our sales channels.
Speaker Change: Sales to our independent retail channel.
Speaker Change: Through our captive retail stores, both increased versus the prior year period.
Speaker Change: For independent retailers, we continue to advance our digital technology and lead management platform, including the phased launch of a dealer portal, which was receiving great reviews from the early adopters.
Speaker Change: Consistent with our strategy to expand our captive retail presence, we announced today an agreement to acquire island homes located in the Plains region of the U S.
Speaker Change: We use the strength of our in house retail and our New Island home team to drive growth in this region I'll touch more on I've been in a bit.
Speaker Change: Moving to the community channel, we remain focused on supporting our community partners by providing timely and relevant products at the right value.
Speaker Change: Through these efforts sales channel increased versus the prior year.
Speaker Change: Our builder developer pipeline remains strong as we continue to grow the network.
Speaker Change: The projects are in various stages and are being paid somewhat by the market uncertainty. However, we are continuing to invest in this channel and believe over the long term off site built homes will become a more widely adopted or coach for builders and land developers.
Speaker Change: In financing our joint venture with Triad financial services continues to perform well.
Speaker Change: Our retail loan programs when combined with the right home provide today's consumers with their alcohol monthly payment.
Speaker Change: Our floorplan programs allow us to support growth with our retailers by ensuring they have the right products for each market.
Speaker Change: We appreciate the collaboration with the ECM capital and try it teams and partners.
Speaker Change: Looking to our first fiscal quarter of 26, as we thoughtfully navigate the marketing consumer uncertainty, we anticipate Q1 revenue to be up low single digits compared to the same period last year.
Speaker Change: As we begin fiscal 2026, the ban has been less predictable compared to a normal spring selling season.
Speaker Change: In addition, we are seeing a shift in consumer trends to smaller floor plans with fewer features and options.
Speaker Change: And near term outlook for the community channel Dairies as we hear mixed use depending on the operators geography expansion pace.
Speaker Change: Despite the uncertain environment, we remain confident and focused on executing our strategy and leading and managing the variables within our control while remaining nimble in the market.
Speaker Change: We're actively managing within the dynamic tariff environment and are executing our playbook as developments unfold.
Speaker Change: So far the direct cost impact has been limited.
Speaker Change: But we do believe it is affecting consumer sentiment.
Speaker Change: Our strategy includes a balanced approach of selected price adjustments and material sourcing changes the absolutely mitigate the impact.
Speaker Change: We're also being proactive and agile as we navigate the environment, including taking actions to thoughtfully control our fixed cost.
Speaker Change: Not losing sight of our need to invest in our strategy for the long term.
Speaker Change: He recently idled one of our production locations in the Florida market by leveraging our remaining nearby facilities for customers in that region.
Speaker Change: Permitting in demand in Florida has been slow to recover from the 2024 Hurricanes.
Speaker Change: In addition in the British Columbia region, we are consolidating two of our Canadian factories into one to improve operating efficiencies and reduce overhead costs.
Speaker Change: From a growth perspective, as I mentioned earlier, we announced the signing of a definitive agreement to acquire eisman homes, including its 10 retail sales centers in the plains region of the U S.
Speaker Change: This acquisition underscores our long term strategy to expand our retail footprint and deliver market relevant products.
Speaker Change: Elevating the home buying experience for our customers.
Speaker Change: With annualized revenues of approximately $40 million, we see a pipeline.
Speaker Change: Line of local market demand and synergistic opportunities.
Speaker Change: Champion homes team is very excited to welcome Eisma homes, and we look forward to their integration with their champion family of brands.
Speaker Change: We expect the transaction to close by the end of our first fiscal quarter.
Speaker Change: In summary, we believe champion the homes is well positioned to weather the uncertain market environment, while driving an unwavering focus on our long term strategic growth priorities and day to day execution.
Speaker Change: Our directly centered on our customers and team.
Speaker Change: I'll now turn the call over to Lori, who will discuss our quarterly financial performance in more detail.
Lori: Thanks, Tim and good morning, everyone I'll begin by reviewing our financial results for the fourth quarter, followed by a discussion of our balance sheet and cash flows and will also briefly discuss our near term expectations during.
Lori: During the fourth quarter net sales increased 11% to 594 million compared to the same quarter last year with U S factory built housing revenue increasing 10%.
Lori: The number of homes sold increased 5% to 5941 homes in the U S compared to 5652 homes in the prior year period.
Lori: You asked some volume during the quarter was supported by healthy demand across our retail and community channels.
Speaker Change: The average selling price per U S homes sold increased by 5% to $94300 due to product mix, including a higher number of units sold through our company owned retail sales centers.
Speaker Change: On a sequential basis U S factory built housing revenue decreased 8% in the fourth quarter compared to the third quarter fiscal 2025 leased.
Speaker Change: We saw a sequential decrease mainly due to expected seasonality as well as an impact from weather across the south and.
Speaker Change: In addition, manufacturing capacity utilization was 60% compared to 63% in the third quarter on a sequential basis, the average selling price per home was relatively flat.
Speaker Change: Canadian revenue during the quarter was $25 million, representing a 22% increase in the number of homes sold versus the prior year period.
Speaker Change: Average home selling price in Canada decreased 9% to $110600, primarily due to a shift in product mix.
Speaker Change: Consolidated gross profit increased 55% to 152 million in the fourth quarter and our gross margin expanded 740 basis points from 18, 3% in the prior year period.
Speaker Change: Gross margin was primarily due to a product liability reserve of $34 5 million recorded in the fourth quarter of last year that did not reoccur in fiscal 2025, as well as higher average selling prices and a higher share of sales through our captive retail sales centers.
Speaker Change: Gross margin declined sequentially from our fiscal third quarter and was lower than expectations, primarily due to higher material input costs relative to flat wholesale a S piece as well as lower capacity utilization, causing decreased deleverage of fixed overhead costs.
Speaker Change: SG&A in the fourth quarter increased $20 million over the prior year period to $110 million.
Speaker Change: The increase is primarily attributable to increased sales volumes through our company owned retail sales centers and higher variable costs related to higher revenue.
Speaker Change: In addition, we increased marketing spend to drive awareness in our brands and homes and continue to make investments in technology to support future growth.
Speaker Change: The company's effective tax rate for the quarter was 17, 1% versus an effective tax rate of 19, 2% for the year ago period the.
Speaker Change: The decrease in the effective tax rate is primarily due to an increase in tax credits and a decrease in state income taxes.
Speaker Change: Income attributable to champion homes for the fourth quarter increased by 33 million to $36 million or earnings of 63 cents per diluted share compared to net income of $3 million or earnings of five cents per diluted share during the same period last year.
Speaker Change: The increase in EPS was driven mainly by the absence of an adjustment to the water intrusion product liability reserve in the current year period.
Speaker Change: Adjusted EBITDA for the quarter was 53 million, which is consistent with the same period a year ago.
Speaker Change: Adjusted EBITDA margin was eight 9% compared to nine 9% in the prior year period.
Speaker Change: The decrease in EBITDA margin is mainly driven by higher SG&A.
Speaker Change: We expect near term gross margin in the 25% to 26% range as we balance softening consumer confidence decreased demand in certain markets and inflation.
Speaker Change: In addition, we're seeing consumers shifting to homes with fewer or lower priced features and options, which impacts gross margin.
Speaker Change: To help offset some of this impact and as Tim mentioned earlier, we're taking steps to balance SG&A spending while continuing to drive our strategic growth priorities, including investments in people and technology.
Speaker Change: As of March 29, 2025, we had 610 million of cash and cash equivalents and long term borrowings of $25 million with no maturities until July of 2026.
Speaker Change: We generated $46 million of operating cash flows for the quarter compared to 4 million in the prior year period.
Speaker Change: In the quarter, we leveraged our strong cash position and returned capital to our shareholders through 20 million and share repurchases.
Speaker Change: Additionally, our board recently refreshed, our $100 million share repurchase authority, reflecting confidence in our continued strong cash generation.
Tim: I'll now turn the call back to Tim for some closing remarks.
Tim: Thank you Laurie.
Tim: While we anticipate near term order rates that vary by channel and geography, the need for affordable housing remain ever present across the U S and Canada, but long term outlook for champion is strong and we have the strategies in place to deliver for all our stakeholders.
Tim: The strategies that we are thoughtfully executing as we evolve the team with a combination of internal advancement new talent intellect engagement of outside resources are guiding priorities are not only for the long term they provide a clear roadmap for today's environment and deploying our capital.
Tim: Clothing, winning as a customer centric high performance agile team.
Tim: Innovating and differentiating with products and services that bring in new buyers.
Tim: Expanding and elevating our go to market channels, including delivering experiences before during and after the sale that earned new customers and their referrals.
Tim: Increasing awareness demand and advocacy for our brands in homes, and leveraging our cost capacity and investments in people and technology.
Tim: Finally, I would like to recognize the entire champion homes team for their exceptional efforts to grow revenue and earnings in fiscal 2025, and as we work together to continue to execute our strategic initiatives for all our stakeholders.
Tim: And now let's open the line for questions.
Speaker Change: Operator. Please proceed.
Speaker Change: Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: Our first question is from Daniel Moore with CJS Securities. Please proceed.
Speaker Change: Thank you good morning, Tim Good morning, Lori.
Daniel Moore: Maybe just start with just elaborating on the discussions with customers in both retail and community markets and the cadence of order rates into April and thus far in May and maybe a little bit more bifurcation by geography, obviously, Florida by all accounts has been soft, but you know where you're seeing pockets of strength pockets of weakness et cetera.
Dan: Hey, good morning, Dan.
Speaker Change: Encouraging wise, we're seeing digital leads are up across a lot of our regions, but then when we talk to the retail teams. The in store traffic has been mixed and certainly by our region of the country and as I talked to her independence, they're seeing similar impacts in terms of certain areas, where there's strong traffic others that are a little weaker, but what I would say in general whats encouraging.
Speaker Change: Is that there is more buyers active buyers and those buyers are ones that are more motivated to obviously purchase a home and our financing programs are helping that so I would say theres more serious buyers in the market and that's why we reflected in our low single digit growth for Q1 versus some of what you're seeing in the broader market, but I would say it's been mixed traffic. This spring.
Speaker Change: But we've been driving more leads certainly driving more of that engagement with our consumer at our retail stores, but it is more mixed and that's why we signaled a more of a low single digit rate for the quarter.
Speaker Change: Sorry, if I was on mute helpful. Tim and I are on the community side, you know a little bit of a continued interest but.
Speaker Change: Maybe a kind of a slow burn or holding off for now.
Speaker Change: Trying to remember your exact commentary your prepared remarks, but any any elaborate there would be great. Thank you.
Speaker Change: Yeah, Yeah, we were up in the quarter year over year in the community segment and we've certainly seen some returns with key customers there, but I would say its mixed there are some projects and some community developers that are pacing a bit but we've been pleased with the growth of the community Eh second over the last year.
Speaker Change: They're now at 28% of our overall units.
Speaker Change: The strong and so we're pleased with how that's going but I. We're just balanced about the community segment given that they face some of the dynamics of the consumer as well.
Speaker Change: Got it and then on the SG&A side increased sequentially. Despite the decline in sequential decline in revenue can you, maybe just break out a little bit about how much was incentive comp versus investments in marketing and technology, just trying to get a sense for how much SG&A in Q4 could be temporary versus.
Speaker Change: Kind of permanently higher cost structure.
Dan: Good morning, Dan I.
Speaker Change: I would say you know if we should remember in the fourth quarter that we have quite a few of our industry shows that's kind of a cyclical timing issue for us in the fourth quarter, so that won't reoccur quite as strongly.
Speaker Change: Going into the first half of next year.
Speaker Change: Fiscal year, so, but we aren't going to breakout the components individually.
Speaker Change: Understood. Okay, and then just last one for me continues to utilize buybacks as a.
Speaker Change: Hum.
Speaker Change: You know an arrow in the quiver in terms of capital allocation.
Speaker Change: With the shares indicating you know where they are this morning, just your thoughts about being more aggressive cash continues to grow but despite buying back shares more aggressively so any thoughts on that front and thanks again for the color.
Speaker Change: Yeah. Obviously, we have go ahead Laurie that's okay, yeah, well, we have a really balanced capital allocation profile. So we'll keep an eye on that and obviously be opportunistic as some if the share is low and you know just make judgment calls based on our overall strategy dance.
Speaker Change: Thanks, again, and I was gonna add Dan that we're pleased we refreshed our commitment to share repurchase and we've added $100 million of cash versus last year, which certainly gives us options across our capital allocation.
Speaker Change: Our next question is from Greg Palm with Craig Hallum Capital Group. Please proceed.
Greg Palm: Yeah. Good morning, thanks going.
Speaker Change: Going back to the quarter I think you maybe talked or mentioned about some unfavorable weather conditions, just based on order rates and ending backlog was there any inability to ship homes from from retail to end customers. I know you had a dynamic in the year ago period that came into play, but just curious if that was.
Speaker Change: Packed it at all this quarter as well.
Speaker Change: Yeah, the the Texas market and part of the South was a bit slower than typically would be so there is some impact there and we factored that into the.
Greg Palm: First quarter of fiscal 'twenty six.
Greg Palm: But I think that plus some of the consumer dynamics I've mentioned are factoring in.
Greg Palm: But we feel like we're in a good position now with where we are with our inventory and the opportunity to move them in and nimble way given consumers' demands that if that continues to grow so I think we're pretty balanced there.
Greg Palm: Yep, Okay, and then I guess, it's not a secret that you know housing overall is pretty.
Greg Palm: Pretty pretty soft, but I I know activity or has held up maybe.
Greg Palm: It may be better than than you know stick built if you want to call it that but I'm. Just curious if you just take a step back in and talk a little bit about you know manufactured housing specifically and in the customer base and the demographics in.
Greg Palm: What what gives you hope that maybe you know this is a time for more meaningful share gains maybe you can talk a little bit about sort of deregulation on there as well because there's obviously some important things going on behind the scenes.
Speaker Change: Yeah for sure there's a few different levers there one of our commitments to have captive retail is that's where you really can drive the customer experience and the speed with the customer and you combine that with our consumer financing program. So that's why we're expanding with Iceland.
Greg Palm: Second another area you mentioned is the regulation elements, we're encouraged by the focus on reducing the chassis you can meet requirements looking at different approach in terms of the reformer own zoning potentially set up more local municipalities are supportive. Obviously, we're moving to chassis is going to help that in certain markets. The other driver is just an overall awareness.
Greg Palm: When we had the HUD secretary walked through our own peer feedback was positive. While these are beautiful homes, so well bill just getting that advocacy out there. Some more consumers are aware of it you see that with our investment in marketing spending and obviously, what we're doing digitally.
Greg Palm: Then in terms of the consumer really making sure. They are aware of the price points that you can get into brand new home and that's obviously the key with our financing programs you can get a customer match to the right spot with that right price point, just getting more awareness in the market and pulling in new consumers and we're putting our digital spend to work there, we're using social media to attract people.
Greg Palm: If you would maybe aware of our products and pull them into our retail. So those are all drivers now that's against a backdrop that theres more challenges with the consumer in terms of some of the uncertainty we're seeing so that's why we're investing to make sure that we're getting into their mindset in terms of the consideration purchase the combination of those things I think are really are what's going to be in the near term key but.
Greg Palm: And then from a longer term our product innovation spend is to make sure that we have a range of products for those range of customers that are looking for the different types of homes and need and you see you saw that at the show many of you've been at our shows where you see the type of new products that we're coming out with and I think those are all key to in terms of growth and the strategic priorities that I laid out in my remarks.
Speaker Change: Yeah, Okay makes sense, thanks for the color.
Speaker Change: Our next question is from Matthew Bouley with Barclays. Please proceed.
Matthew Bouley: Good morning, everyone and thank you for taking the questions I'll ask on the gross margin you know the change to the the near term guide I think you said, 25% to 26% I think previously it was in that 26 to 27 range. So my.
Matthew Bouley: My question is if some of the I guess pressures that you're seeing today.
Matthew Bouley: If your view is there sort of more temporary and that the 26 to 27 is still realistic over time or or is it that you're kind of still I guess looking for what the structural gross margins of the business. You know should be going forward is obviously the business mix has shifted over the years. Thank you.
Speaker Change: Good morning, Matt. Thanks for the question, we do think that the lowering to the 25, 26% range is just for the short term based on softening consumer confidence and decrease in demand in certain markets as well as some inflation that we're seeing in material cost long term we still.
Speaker Change: <unk> structural margins to be in the 26% to 27% range based on the improvements that we've made across the platform.
Speaker Change: Got it okay. Thanks for that Lori and then yeah secondly.
Speaker Change: Interesting discussion at the top there around some of your just got discussions with the new HUD Secretary, maybe just around that that potential removal of the permanent chassis requirement any color on sort of what that would do for your own costs. You know how realistic is that actually happening and you know I guess how would you.
Speaker Change: You then react around either passing that through to consumers or maybe just impacting other designs. You know it just kind of giving you more flexibility in the product design, just how would that all play out. Thank you.
Speaker Change: Yeah first off from a consumer perspective. It allows you to do maybe two stories more effectively give some elevation because you can do more slab on grade.
Speaker Change: It grew up that benefit from a curb appeal and then there are some municipalities that are still hung up on having a chassis on her arm. So it helps with the zoning support from.
Speaker Change: From a cost perspective, certainly not having the chassis I E. You need it for transport different types of transport that maybe lower cost. So there is some opportunity there as far as how we would approach. It our goal is to create the right product price value and if we have any chance to do that for a consumer that this allows it great. But obviously, we want to continue to drive margins, we'd have to look at the balance there, but it's encouraging.
Speaker Change: That is actually now in discussion and there's progress in terms of regulators and I think because of the strength of the quality of our homes and the way that we can deliver them. It really gives us the confidence that this should happen and likely will happen, but also have somebody that has to go through the bills process, which is well underway at this point. So we're encouraged by it and we're also looking at product innovations.
Speaker Change: With leverage from it so we'll keep you posted as it evolves, but it's an encouraging sign.
Speaker Change: Alright, Thanks, Tim Good luck guys.
Speaker Change: Yeah.
Speaker Change: Our next question is from Mike Dahl with RBC capital markets. Please proceed.
Mike Dahl: Good morning, Thanks for taking my questions a couple of follow ups here.
Mike Dahl: First on the gross margin dynamics.
Mike Dahl: Be more specific about what role the input costs are playing in the near term because if I look at kind of wood products, even those numbers up a little OSB down a lot. So I would think your blended wood basket is actually kind of.
Mike Dahl: But maybe just give us a sense of what's impacting what what's the cost impact versus the mix or mix down impact in your near term margin expectations.
Mike Dahl: Hey, Mike Good morning, I would say that we're obviously, we're not going to break out components, but we we do have portions of our wood products that we buy at the spot rate and also portions that we buy them on contract. So the mix of those don't necessarily align <unk>.
Mike Dahl: <unk> percent with the spot rate activity. So we need to keep that in mind. We're also seeing some increases in some other components. Some other component costs across the board so and and then we are seeing some pricing pressure in certain regions of the country.
Speaker Change: Based on consumer confidence.
Speaker Change: Okay got it.
Speaker Change: I appreciate that and then just a follow up on that response to Matt's question on the permanent chest chassis requirement in Europe with builder developers specifically as you as you have kind of rolled out and tried to promote the Genesis brand and build those relationships has that been a hang up.
Speaker Change: In your discussions with builders because that is a limiting factor or how would you describe that when you think about the.
Speaker Change: The potential to unlock that part of your business or further that part of your business specifically.
Speaker Change: Specifically and then if I could just ask more broadly when you talk about kind of some more measured pace on that side of the business recently.
Speaker Change: Your standard ball, but maybe just put some put some numbers around that.
Speaker Change: Yeah, Yeah, great question in terms of the chassis yet that isn't a key opportunity with those developers because oftentimes those developers are going into numerous capacity new land zoning and that certainly would help if theyre looking for that more single family you know slab on grade look odd.
Speaker Change: The other factor is those builders at times, we're looking for two storey projects, which this would be an advantage for that approach.
Speaker Change: In terms of the overall build a developer you know the pipeline is continuing to build and we've had really good response to the new products that we've come out with.
Speaker Change: One of the realities of that business and given us a smaller size than our total portfolio is the time. It takes for those projects. They can be anywhere from 12 months to 24 months, so that pace does impact when those more orders really materialize, but we're encouraged by the pipeline and we're working directly with those builders and I think the pacing also as with the macro not kind of environment.
Speaker Change: All of them are looking at the phases and how quickly they deploy but we're working with them directly to make sure that we can help and support that and move those projects along and we're leveraging what we've learned from the projects that we've done so far.
Speaker Change: So again, that's a longer term development channel for us, but it's one that both the regulatory opportunities and the way. We're pacing industry is really help himself I. Appreciate the question on builder developer.
Speaker Change: Thanks, Tim.
Speaker Change: Our next question is from Phil <unk> with Jefferies. Please proceed.
Phil: Hey, guys.
Speaker Change: I guess question for Lori.
Speaker Change: Your near term margin guidance is pretty steady from Q4, which is great, but certainly we're still seeing impacts from tariffs. It doesn't sound like it's masses, but help us kind of think through how that could impact margins and do you have to take incremental price because you've got alluded to perhaps some pricing pressures in certain markets.
Phil: Hey, Phil Good morning, Yeah. So we're not seeing a significant increase from tariffs currently we are watching and monitoring.
Speaker Change: As it changes on a daily basis, so keeping track of that and understanding where our products come from and what the impact will be and then just being proactive about.
Speaker Change: Sourcing from other other locations and so forth so.
Speaker Change: Where we have an active playbook of things that we can do when that comes up but we're not quantifying what that will be.
Speaker Change: Okay.
Speaker Change: Let's say if you do see a little more inflation just given that the current demand backdrop do you feel comfortable that you have the ability to take some price or you're going to have to manage through that I guess in the near term.
Speaker Change: I think it depends on the region of the country. So keeping in mind that our plants ship within a 500 mile radius generally without being too cost prohibitive and transportation. So ultimately the decision still lies on price with with and at the plant level, we give them.
Speaker Change: Guidance, but they have to measure a competitively what's happening in their markets relative to consumer demand and pricing more broadly.
Speaker Change: Okay Super.
Speaker Change: I guess a question for you Tim on the island transaction certainly you guys had great success with regional Homed can you give us a little color on the opportunity here in terms of driving gross margins higher and some of the synergies and then the 40 million number is that all incremental I just wasn't sure. If you guys are selling through them already.
Speaker Change: Yes in terms of the 40 million. We are there are key customers today, but there's still meaningful opportunities to bring existing volume that theyre doing with other providers to us and we'll do that over time.
Speaker Change: In terms of the opportunities beyond that you know one of the things. We've learned this last year regional is in addition to the synergies. We can also drive accretive growth, which we did with regional and we certainly are prepared to do with eisman, Ken and his team they're a great team. There is an opportunity to collaborate with both of our organizations from what we've learned and now we can bring some of the tools directly.
Speaker Change: To them that team and directly to the consumer.
Speaker Change: So we're excited about that and opportunities with product and so we've got a lot to build on with the success of regional but also in a in a broader market in the Midwest and strategically obviously when you see we've had a presence in the south and South East we're excited to expand that in the Midwest.
Speaker Change: So those are opportunities for us.
Speaker Change: Would it be accretive to gross margins out of the gate Tim.
Speaker Change: You know I think we will get through that we're just obviously announced today, we're going to work through integration. We're seeing some things that are encouraging on that front, but we'll be back to you as you work through the acquisition, but we're excited to move to that integration phase next and we are anticipating closing this at the end of June.
Speaker Change: Okay appreciate the color.
Speaker Change: Our next question is from Jesse Lederman with Zelman and Associates. Please proceed.
Jesse Lederman: Hi, Thanks for taking the questions.
Speaker Change: Laura I just wanted to clarify so it sounds like in the 25 to 26 gross margin guide you're not seeing any impact from tariffs yet does that number include any baked in conservatism from potential inflation from tariffs are now.
Jesse Lederman: It does not no.
Jesse Lederman: Okay.
Speaker Change: Thanks for clarifying that.
Speaker Change: I'm curious when you talk about where youre seeing mix shifts lower too.
Speaker Change: At our size homes or less options and upgrades are you also seeing or you are able to quantify mix shift from maybe buyers that would otherwise be buying an existing home that are now considering a manufactured home even a single section or do you is that something you can track is that something that you expect maybe can you talk a little bit about.
Speaker Change: But what youre seeing at the.
Speaker Change: Larger sized homes.
Speaker Change: Yeah, I think in terms of the market trends, we are seeing that smaller size and thats driven more by price point and monthly payment, which speaks to the consumer environment as far as new consumers coming into the category I mentioned, our efforts to Poland. Those consumers and certainly those first time homebuyers are buyers that are looking for entry level button.
Speaker Change: New home that gives us the opportunity. So we're starting to see that but I would say as an industry. One of the things we have to be focused on is how we attract even more new consumers and that's why the actions with the administration and what we're doing with new products and certainly the messaging around awareness are key.
Speaker Change: But now is a good environment to be doing that.
Speaker Change: Yeah.
Speaker Change: Absolutely and it sounds like there is some opportunity even just as industry could use some consumer education from a you know buying process perspective, or a financing perspective and kind of how the manufactured housing home buying process work. So hopefully that's something that can be a tail.
Speaker Change: And as well one more.
Speaker Change: For you Tim in the that you talked about the dealer portal that you've started to rollout can you talk a little bit about how that may work in practice and you know maybe some signs youre seeing into the effectiveness of that program. Thank you yeah. So it ties in tandem with our consumer platform of champion on Dotcom that we launched that allows then there.
Speaker Change: Dealer to visibly see the leads that are coming through and to quickly respond to those and engage with those and then also manages downstream in the process with order status and being able to connect that to our plants. We also were able through that portal to give them. The latest digital marketing tools and our capabilities that we can do nationally to support them and so it starts to organs.
Speaker Change: Around the hub of how they work with champion as a retailer and leverage the effectiveness and so we're rolling it out in phases. The early response has been really good but we see it at Heathrow integrating the digital experience from the consumer to the retailer and to us as the OEM in an integrated way.
Speaker Change: Awesome sounds very exciting thanks a lot.
Speaker Change: Our next question is from Jay Mccanless with Wedbush Securities. Please proceed.
Jay Mccanless: Hey, good morning to everyone. Barry was was hoping you could drill down more on the price competition what market specifically are seeing the price competition in and is it more focused on single section or double searching homes.
Speaker Change: Yeah. It is very say, we are seeing a pickup actually in activity out west we are seeing a little bit of slowness and in.
Jay Mccanless: Florida as we mentioned and then also in the northeast we are seeing a shift to more single lines and smaller homes, a smaller footprint home with less features and options.
Jay Mccanless: And as we mentioned that'll have an impact and on margins because our apps and content generally.
Jay Mccanless: It comes in at higher margins than the base price of the house.
Jay Mccanless: Alright. Thanks.
Speaker Change: And then the second question still Havent heard FEMA I think ordering any homes have you all heard anything recently from them.
Jay Mccanless: It would be out west or or some of the stuff in the Carolinas.
Jay Mccanless: Yeah, nor orders have yet obviously, we're working with them and to prepare for whenever they are ready for that but.
Jay Mccanless: We certainly are supportive of whenever that occurs but in orders at this point.
Jay Mccanless: Okay.
Jay Mccanless: And then the last question for me just kind of talk about where travel rates went up this quarter versus last year and anything positive or negative you guys are seeing on credit availability for travel.
Jay Mccanless: Yeah credit availability is it's pretty stable J and as far as rates you know, there's still about 150 to 200 basis points higher than the 30 year fixed for a while you know well qualified buyer.
Jay Mccanless: Yeah.
Jay Mccanless: Okay. Thanks I appreciate it.
Speaker Change: As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from Daniel Moore with CJS Securities. Please proceed.
Daniel Moore: Thank you again my fault follow up was on Iseman, our was answered, but maybe just talk a little about the level of discussions with other regional dealer groups and maybe the M&A pipeline more generally.
Jay Mccanless: Yeah.
Jay Mccanless: Yeah, I mean, we're not gonna talk about specifics, but bigger picture you look at our strategy and we've laid out those five priorities at the end of my remarks, those are aligning how we're thinking about M&A capital allocation.
Jay Mccanless: And certainly we're excited about is we're going to focus on that execution and integration, but certainly our strategy reflects where we want to put our capital going forward.
Jay Mccanless: Okay. Thanks again.
Tim Larson: There are no further questions at this time I would like to turn the floor back over to Tim for closing remarks.
Jay Mccanless: Well, obviously you can see in our first months here of operating in the agility and action orientation that we have I mean, if you think about we had 26000 homes wrapped up last year, which is the highest ever outside of one year of the pandemic. The acquisition of Eisman homes, we executed an idling a couple of our plants, which is always a tough decision, but the right decision for fixed cost launched or.
Jay Mccanless: Get a digital platform that we talked about today, and we talked a bit about purchasing but we strengthened that team pretty notably and that allows us to navigate this environment, we're advocating in advancing MH policy.
Jay Mccanless: And we had another $100 million your balance sheet and obviously you have that's in addition to the stock that we repurchased so as we go forward here, we were in a really strong position with our strategy and our team we're going to continue to build on that and navigate this environment and we really look forward to updating our progress and thank you for your continued interest and thank you for joining us. This morning. Thank you.
Jay Mccanless: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Jay Mccanless: Okay.
Jay Mccanless: [music].
Jay Mccanless: Uh huh.
Jay Mccanless: Yeah.
Jay Mccanless: Okay.
Jay Mccanless: [music].
Jay Mccanless: Okay.
Jay Mccanless: [music].