Q4 2025 Cavco Industries Inc Earnings Call

Operator: Good day and thank you for standing by.

Good day, and thank you for standing by welcome to the Camco industries fourth quarter 2025 earnings call.

Operator: Welcome to the Cavco Industries fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

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Operator: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Mark Fusler: I would now like to hand the conference over to Mark Fusler, Corporate Controller and Investor Relations. Please go ahead.

Speaker Change: I would now like to hand, the conference over to Mark Butler, Corporate controller and Investor Relations. Please go ahead.

William Boor: Good day, and thank you for joining us for Cavco Industries' fourth quarter and fiscal year 2025 earnings conference call.

Speaker Change: Good day, and thank you for joining us for capital industries fourth quarter and fiscal year 2025 earnings conference call. During this call you'll be hearing from Bill Boor, President and Chief Executive Officer.

William Boor: During this call, you'll be hearing from Bill Boor, President and Chief Executive Officer.

William Boor: Allison Aden, Executive Vice President and Chief Financial Officer, and Paul Bigbee, Chief Accounting Officer.

Allison Aden: Allison Aden Executive Vice President and Chief Financial Officer and.

Paul: Paul <unk>, Chief Accounting Officer.

William Boor: Before we begin, we'd like to remind you that comments made during this conference call by management may contain forward-looking statements and non-GAAP financial measures. Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are expectations or assumptions about Cavco's financial and operational performance, revenues, earnings per share, cash flow or use, cost savings, operational efficiencies, current or future volatility in the credit markets, or future credit conditions. All forward-looking statements involve risks and uncertainties, which could affect Cavco's actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of Cavco.

Allison Aden: Before we begin we'd like to remind you that comments made during this conference call by management may contain forward looking statements and non-GAAP financial measures forward. Looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance they are expectations or assumptions about.

Allison Aden: <unk> financial and operational performance revenues earnings per share cash flow or use cost savings and operational efficiencies.

Allison Aden: Current or future volatility in the credit markets or future credit conditions.

Allison Aden: All forward looking statements involve risks and uncertainties, which could affect <unk> actual results.

Allison Aden: Could cause its actual results to differ materially from those expressed in any forward looking statements made by or on behalf of <unk>.

William Boor: For discussion of material risks and the important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our investor relations website and at sec.gov.

Allison Aden: For a discussion of material risks and important factors that could affect our actual results. Please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at SEC Dot Gov.

William Boor: The appendix to our press release also contains reconciliations of our non-GAAP financial metrics to the most comparable GAAP measures.

Allison Aden: The appendix to our press release also contains reconciliations of our non-GAAP financial metrics to the most comparable GAAP measure.

William Boor: This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, Friday, May 23, 2025.

Allison Aden: This conference call also contains time sensitive information accurate only as of the date of this live broadcast Friday May 23 2025.

William Boor: Cavco undertakes no obligation to revise or update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date of this conference call, except as required by law.

<unk> undertakes no obligation to revise or update any forward looking statement, whether written or oral to reflect events or circumstances. After the date of this conference call, except as required by law.

William Boor: Now I would like to turn the call over to Bill Boor, President and Chief Executive Officer. Thanks, Mark. Welcome and thank you for joining us today to review our fourth quarter results. Seasonally, the fourth quarter ushers in the spring selling season. In our last call, we talked about the steady increase in orders over several quarters through calendar 2024, and how that has enabled us to increase production rates where our plants had supporting backlog. The quarter-to-quarter trend of increasing orders continued in Q4, boosted by a pickup in March. This was after unusually challenging weather in February slowed installations in the field and caused some unplanned downtime in several plants.

Allison Aden: Now I'd like to turn the call over to Bill Boor, President and Chief Executive Officer.

Yeah.

Mark.

Speaker Change: And thank you for joining us today to review our fourth quarter results.

Allison Aden: Usually the fourth quarter ushers in the spring selling season in our last call. We talked about the steady increase in orders over several quarters through calendar 2024, and how that has enabled us to increase production rates, where our plants had supporting backlogs.

Allison Aden: But quarter to quarter trend of increasing orders continued in Q4 boosted by a pickup in March.

Allison Aden: This was after unusually challenging weather in February slowed installations in the field and caused some unplanned downtime in several plants.

William Boor: March-February weather is obviously expected in northern states, but the weather across the south was unexpected. Specifically, we lost 24 operating days across our system. The good news is that weather backs up installations and shipments, but it doesn't negate Again, in March, we saw the expected spring pickup to close out a solid quarter.

First February weather is obviously expected in northern states with the weather across the south was unexpected.

Allison Aden: Specifically, we lost 24 operating days across our system.

Allison Aden: Good news is the weather backs up installations in shipments, but it doesn't need data.

Allison Aden: Again in March we saw the expected spring spring pick up to close out a solid quarter.

William Boor: More generally, a lot of economic uncertainty entered the mix in Q4. However, March's uptick indicates that our buyers are out there trying to purchase new homes. Overall, our unit shipments were up almost 29% year over year. The backlog was down sequentially. To dissect that a bit, backlogs were expected to be down in January. They continued to decline in February for the reasons outlined earlier. and then we saw a healthy increase in March. While there is a range in the individual plants, across the system we have five to seven weeks of backwoods. market activity across the retail channels is generally positive and our plants are either holding production levels, we're looking to increase depending on their specific market condition.

More generally a lot of economic uncertainty entered the mix in Q4, however, march's uptick indicates that our buyers are out there trying to purchase new homes.

Overall, our unit shipments were up almost 29% year over year.

Allison Aden: The backlog was down sequentially.

Allison Aden: To dissect that a bit backlogs were expected to be down in January they continued to decline in February for the reasons outlined earlier.

Allison Aden: And then we saw a healthy increase in March.

Well there is a range and the individual plants across the system, we have five to seven weeks of backlog.

Market activity across the retail channels is generally positive and our plants are either holding production levels were looking to increase depending on their specific market conditions.

William Boor: Earlier in Q4, we announced that we renamed our manufacturing plants to the Cavco name. This is part of a rebranding of our homes under product lines that tie directly to the characteristics of the homes rather than the legacy brands of the factory. Our new and cohesive branding approach will make it easier for homebuyers to quickly narrow their home search to the product lines that match their needs. Clearly, this change will better leverage all of the work we've done in digital marketing over the past few years and will benefit our dealers with improved leads from cavcohomes.com.

Allison Aden: Earlier in Q4, we announced that we renamed our manufacturing plants to the Castro Neves. This is part of a rebranding of our homes under product lines that tie directly to the characteristics of the homes rather than the legacy brands of the factories.

Allison Aden: Our new and cohesive branding approach.

It easier for homebuyers to quickly narrow their home search to the product lines that match their needs.

Allison Aden: Clearly this change will better leverage all of the work we've done in digital marketing over the past few years and it will benefit our dealers with improved leads from Casco homes Dot com.

William Boor: Our plant investments and marketing improvements have Cavco ready to continue ramping shipments through both industry growth and market share gains. Our steady strategic investment through the downturn in both acquisitions and plant improvements has meaningfully grown our peak-to-peak capacity. This consistent investment has been enabled by strong cash generation and our debt-free balance sheet. While we've continued investing strategically, we've also continued our four-plus-year buyback program. This quarter, we repurchased about $33 million of stock. Humidly, since the initial repurchase authorization in fiscal 2021, we've bought back 15.5% of our outstanding shares. We continue to be confident that we can repurchase shares without hindering any strategic opportunity.

Allison Aden: Our plant investments and marketing improvements have Castro ready to continue ramping shipments through both industry growth and market share gains are steady strategic investments through the downturn in both acquisitions and plan improvements as meaningfully grown our peak the peak capacity.

This consistent investment has been enabled by strong cash generation and our debt free balance sheet.

Allison Aden: While we've continued investing strategically we've also continued our four plus year buyback program. This quarter, we repurchased about $33 million of stock.

Cumulatively since the initial repurchase authorization in fiscal 2021, we bought back 15, 5% of our outstanding shares.

We continue to be confident that we can repurchase shares without hindering any strategic opportunities.

Allison Aden: With that, I'd like to hand it over to Allison to provide more details around the fourth quarter results. Thank you, Bill. Net revenue for the fourth fiscal quarter of 2025 was $508.4 million, up $88.2 million or 21% compared to $420.1 million during the prior year.

With that I'd like to hand, it over to Alison to provide more details around the fourth quarter results.

Alison: Thank you Bill.

Alison: Net revenue for the fourth fiscal quarter of 2025 was $508 4 million up $88 2 million or 21% compared to $420 1 million during the prior year.

Allison Aden: Sequentially, net revenue decreased $13.7 million, driven by a decline in average revenue per home sold. Within the factory built housing segment, net revenue was $487.9 million, up $89.4 million or 22.4% from $398.5 million in the prior year quarter. The increase was primarily due to a 28.5% increase in home sold, partially offset by a 4.7% decline in average revenue per home sold. The decrease in average revenue per home was primarily due to a lower proportion of homes sold through our company-owned stores, product pricing decreases, and more single wives in the mix. Factory utilization for Q4 of 2025 was approximately between 70% to 75% when considering all available production dates.

Alison: Julie net revenue decreased $13 7 million driven by a decline in average revenue per home sold.

Alison: Within the factory built housing segment net revenue was $487 9 million up $89 4 million or 22, 4% and $398 5 million in the prior year quarter.

Alison: The increase was primarily due to 28, 5% increase in homes sold partially offset by a four 7% decline in average revenue per home sold.

Alison: The decrease in average revenue per home.

Alison: We do hit a lower proportion of homes sold through our company owned stores product pricing decreases and more single wide in the mix.

Alison: After utilization for Q4 of 2025 was approximately between 70% to 75%.

Alison: Considering all available production days.

Allison Aden: Utilization was approximately 60% in Q4 of the prior year.

Alison: Utilization was approximately 60% in Q4 of the prior year.

Allison Aden: Financial services segment net revenue was $20.5 million, down $1.1 million, or 5.2 percent from $21.6 million in the prior year. This decline was due to fewer loan sales and fewer insurance policies in force, partially offset by higher insurance premium rates. Consolidated gross margin in the fourth quarter as a percentage of net revenue was 22.8 percent, down 80 basis points from 23.6 percent in the same period last year. In the factory built housing segment, the gross profit decreased 10 basis points to 22.3% in Q4 2025 versus 22.4% in Q4 of 2024, given by lower average selling prices.

Alison: Financial services segment net revenue was $20 5 million down $1 1 million or five 2%.

Alison: One 6 million in the prior year.

Alison: The decline was due to fewer loan sales and fewer insurance policies enforced partially offset by higher insurance premium rates.

Alison: Consolidated gross margin in the fourth quarter as a percentage of net revenue was 22, 8% down 80 basis points from 23, 6% in the same period last year.

Alison: And the factory built housing segment.

Alison: Most profit decreased 10 basis points to 22, 3% in Q4 2025 versus 22, 4% in Q4 FY 'twenty four.

Alison: And by lower average selling prices.

Allison Aden: Financial services gross margin as a percentage of revenue decreased to 36.8% in Q4 of 2025 from 45% in Q4 of 2024, primarily due to reduced revenue from loan sales. Selling, general and administrative expenses in the fourth quarter of 2025 were $77.5 million or 15.2% of net revenue compared to $61.4 million or 14.6% of net revenue during the same quarter last year. The increase in SG&A was primarily due to a $10 million write-off of intangible trade name values due to our brand realignment. Additionally, compensation increased as a result of higher bonuses and commission expenses on higher earnings compared to the prior year period.

Alison: Services gross margin as a percentage of revenue.

Alison: The 36, 8% in Q4 at 2025 and.

Alison: 45% in Q4 of 2024, primarily due to reduced revenue for loan sales.

Alison: Selling general and administrative expenses in the fourth quarter of 2025 were $77 5 million or 15, 2% of net revenue compared to 61 4 million or 14, 6% of net revenues during the same quarter last year.

Alison: The increase in SG&A was primarily due to a $10 million write off of intangible trade name values.

Alison: Through our brand realignment.

Alison: Additionally, compensation increased as a result of higher bonuses and commission expenses on higher earnings compared to the prior year period.

Allison Aden: Pre-tax profit was flat at $42.9 million this quarter compared to the prior year quarter. Effective income tax rate was 15.4% for the fourth quarter compared to 21% in the same period last year. The decrease in the effective tax rate was due to higher ENERGY STAR tax credits and greater tax benefit from stock option exercises. Net income was $36.3 million compared to net income of $33.9 million in the same quarter of the prior year and the loan earnings per share this quarter was $4.47 versus $4.03 in last year's fourth quarter. Adjusting for expenses associated with our brand realignment, adjusted net income was $43.9 million compared to $33.9 million with adjusted diluted EPS of $5.40 per share versus $4.03 per share in last year's fourth quarter.

Alison: Pretax profit was flat at $42 $9 million this quarter as he answered the prior year quarter.

Alison: Effective income tax rate was 15, 4% for the fourth quarter compared to 21% in the same period last year.

Alison: The decrease in the effective tax rate was due to higher energy star tax credits and related tax benefits from stock option exercises.

Alison: Net income was $36 3 million compared to net income of $33 9 million in the same quarter of the prior year and diluted earnings per share this quarter was $4.47 versus $4 three in last year's fourth quarter.

Alison: Adjusting for expenses associated with our brand realignment.

Alison: Adjusted net income was $43 9 million compared to $33 9 million with adjusted diluted EPS of $5 40 per share versus $4 <unk> per share in last year's fourth quarter.

Allison Aden: During the quarter, we also repurchased $33.2 million of common shares. And during the full year, we repurchased $150 million of shares. Also, the Board of Directors recently extended the authorization by an additional $150 million, reflecting confidence in our strong cash generation, leaving approximately $228 million under authorization for future share repurchase.

Alison: During the quarter.

Alison: Also repurchased $33 2 million of common shares and during the full year, we repurchased $150 million of shares.

Alison: Also the board of directors recently extended the authorization by an additional $150 million, reflecting confidence in our strong cash generation, leaving approximately $228 million under authorization for future share repurchases.

Paul Bigbee: Now I'll turn it over to Paul to discuss the balance. Thanks, Allison. In the quarter, we had a decrease in cash and restricted cash of $3.3 million, bringing our balance to $375.3 million. Cash provided by operating activities was $38.7 million, partially impacted by the increase of current liabilities and accounts receivable. Cash used in investing activities was $10.1 million and cash used in financing activities was $31.9 million, primarily due to share repurchase. Comparing the March 29, 2025 balance sheet to March 30, 2024, increase in accounts receivable is related to organic growth in the factory built housing segment.

Alison: Now I'll turn it over to Paul to discuss the balance sheet.

Alison: Thanks Allison.

Paul: In the quarter, we had a decrease in cash and restricted cash of $3 3 million.

Paul: Our balance to $375 3 million cash.

Paul: Cash provided by operating activities was $38 7 million, partially impacted by the increase of current liabilities in accounts receivable.

Paul: Cash used in investing activities was $10 1 million in cash used in financing activities was $31 9 million, primarily due to share repurchases.

Paul: Comparing the March 29, 2025 balance sheet to March 32024 increase in accounts receivable is related to our organic growth in the factory built housing segment.

Paul Bigbee: Unit shipments are up 28.5% in the fourth quarter of fiscal 2025 compared to a year ago. The increase in short-term consumer loans receivable is due to higher origination of loans held for sale and excess of actual. Inventories increased from higher finished goods inventory at company-owned retail lots due to increased demand, as well as higher raw material purchases to support increased production. Goodwill and intangibles decreased from the $10 million write-off of intangible trade name values. Current liabilities are up from increased compensation and bonus accruals on higher earnings. increased insurance loss reserves, and higher customer deposits.

Paul: Unit shipments are up 28, 5% in the fourth quarter of fiscal 2025 compared to a year ago.

Paul: The increase in short term consumer loans receivables due to higher origination of loans held for sale in excess of actual sales.

Paul: Inventories increased from higher finished goods inventory at company owned retail lot due to increased demand as.

Paul: As well as higher raw material purchases to support increased production.

Paul: Goodwill and intangibles decreased from the $10 million write off of intangible trade name values.

Paul: Current liabilities were up from increased compensation and bonus accruals and higher earnings increase.

Paul: Increased insurance loss reserves and higher customer deposits.

Paul Bigbee: Finally, Treasury stock increased $150 million due to buybacks executed in fiscal year 2025.

Paul: Finally, treasury stock increased $150 million due to buybacks executed in fiscal year 2025.

William Boor: Then I'll turn it back to Bill. Okay, thank you, Paul.

Bill Boor: With that I'll turn it back to bill.

Paul: Yes.

Paul: Okay. Thank you Paul.

Operator: Liz, let's go ahead and open up the line for questions. As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchtone phone.

Paul: Well, let's go ahead and open up the line for questions.

Paul: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone phone.

Daniel Moore: Our first question comes from Daniel Moore with CJS Security. Hi, good morning.

Speaker Change: Our first question comes from Daniel Moore with CJS Securities.

Justin: This is Justin on for Dan. Can you talk about your expectations for production rates for fiscal first quarter relative to the fourth quarter? And then what can you tell us about your discussions with customers in both retail and community markets and the cadence of order rates in April and thus far in May? Yeah, we don't usually get too far into the current quarter, but I know this, when we report on the fourth quarter, quite a bit of time has passed since the quarter end. So I understand the question. The production rate question first, this quarter we were kind of consistent with the previous quarter, pretty flat in Q4 with Q3.

Justin: Hi, Good morning, this is Justin on for Dan.

Speaker Change: Can you talk about your expectations for production rates for fiscal first quarter relative to the fourth quarter and then what can you tell us about your discussions with customers in both retail and community markets and the cadence of order rates and <unk>.

Speaker Change: Thus far in May.

Speaker Change: Yes, we don't usually get too far into it.

Speaker Change: The current quarter I know this when we report on the fourth quarter quite a bit of time has passed since the quarter end. So I understand the question.

Speaker Change: The production rate.

Speaker Change: Question first this quarter, we were kind of consistent with the previous quarter pretty flat in Q4 with Q3.

William Boor: Like I said, the quarter started off kind of expectedly with January and we knew that we were entering into the year at a higher production rate than the order rates. You know, we talked about that last quarter, that was a decision we made to kind of ramp up in anticipation of the spring selling season. and March picked up. And what I'd say about the current quarter that we're in now, first quarter of the fiscal year, is that, you know, April has pretty much been consistent with that March positive trend as far as orders and a little bit of backlog growth.

Speaker Change: Like I said the quarter started us kind of expectedly with January and we knew that we were entering into the year at a higher production rates and the order rates, we talked about that last quarter that was <unk>.

Speaker Change: Decision, we made to <unk>.

Speaker Change: A ramp up in anticipation of the spring selling season.

Speaker Change: And March picked up and what I'd say about the current quarter that we're in now first quarter of this fiscal year is that APRA.

Speaker Change: April has pretty much been consistent with that Mark March positive trend as far as orders and a little bit of backlog growth. So I'll give you that much and say that.

William Boor: So I'll give you that much and say that from a production perspective, when we talk to all of our plants, You know, we have a range of backlogs in the plants, and there are some plants that don't have the backlog really to increase production rate at the moment, but you really could only put our plants in two categories. Those that are holding at this level, anticipating and hoping that they'll get a little backlog and be able to start ramping up, and a good number of our plants that are kind of talking about, hey, our next move will be up in production.

Speaker Change: From a production perspective, when we talk to all of our plants.

Speaker Change: We have a range of backlogs in our plants and there are some plants that don't have the backlog really to increase production rate at the moment.

Speaker Change: But you really could only put our plans in two categories. Those that are holding at this level anticipating and hoping that they'll get a little backlog and be able to start ramping up.

Speaker Change: And a good number of our plants that are kind of talking about their next move will be up in production. So we really don't have any of that.

William Boor: So we really don't have any that seem to be looking at decreasing. For more information visit www.casagrandeaz.gov production rates for any any reason. So overall, the bias across our plants is for increasing production rates. And that'll be dependent on what the market gives us for sure. You also have to think about the different channels. Retail, you know, the dealers have been pretty solid for quite a while now, and that continues.

Speaker Change: Seem to be <unk>.

Speaker Change: Looking at decreasing production.

Speaker Change: Production rates for any any reasons. So overall the bias across our plants is for increasing production rates.

Speaker Change: And that will be dependent on what the market gives us for sure.

Speaker Change: You also asked I think about the different channels.

Speaker Change: Tom retail the dealers have been pretty solid for quite a while now and that continues and communities I almost hate to bring it up because it was such a long discussion but with communities.

William Boor: And communities, I almost hate to bring it up because it was such a long discussion, but with communities For a long time, we were kind of held back on order rates as an industry because of inventory challenges and a little bit of hesitance with the market. We've seen them continue to, I guess, build back up. They got past the inventory. And now I would say the general feeling is they've moved pretty much back toward their proportionate share of order rates. So we feel good about that too. That's been evolving over quite a bit of time.

Speaker Change: For a long time, we were kind of held back on order rates as an industry because of inventory challenges and a little bit of hesitance with the market we've seen them continue to.

Speaker Change: I guess build back up they got past the inventory and now I would say the general feeling is Nathan this is pretty much back toward their proportionate share of order rates.

Speaker Change: So we feel good about that too that's been evolving over quite a bit of time.

William Boor: So, really, I think, and when we talk communities, I always point out, we're talking about both kind of the land lease and rental communities as well as the builder, the builder channel. So lumping all those together, they're kind of returning back to their proportionate share of orders, which is a real positive. All right, that's helpful.

Speaker Change: So really I think and when we talk community as I always point out we're talking about both kind of.

Speaker Change: The land lease and rental communities as well as the builder the builder channel. So lumping all of those together, they're kind of returning back to their proportionate share of orders, which is a real positive.

William Boor: And then one more, if I could, how should we think about gross margin and operating margins in Q1 and over the next quarter relative to the Q4 results? Yes, thank you. While we saw some downward impact from reduced average selling prices of our homes, we saw lower input costs and reduced costs on service with our factory built gross margins declining only really 10 basis points year over year to 22.3. And what I would say is that this demonstrates a couple of elements that we're going to that will determine our future margins in the factory built housing.

Speaker Change: Alright, that's helpful. And then one more if I could how should we think about gross margin and operating margins in Q1 and over the next quarters relative to the Q4 Q4 results.

Speaker Change: Yes. Thank you.

Speaker Change: We saw some downward impact from reduced average selling prices of our hose.

Speaker Change: We saw lower input cost and reduced cost of service to their factory build gross margin.

Speaker Change: I, only really 10 basis points year over year to 22 three.

Speaker Change: And what I would say is that this demonstrates a couple of elements that we're going to.

Speaker Change: And that will determine our future margins in the factory built housing.

William Boor: First is pricing. And we are seeing regions where pricing is becoming more apparent. Pricing pressures are a little bit more apparent and starting to see some competition in pricing in regions. The second really component to look to will be cost. The movement in commodities, as you know, can be volatile and hard to predict. It's difficult to say, but we typically see increases this time of year as builders and wholesalers order for the spring building season. And while prices are trending flat at the moment, there is a possibility of another surge soon, and we'll also have to see how tariffs play through.

Speaker Change: Is pricing.

Speaker Change: We are seeing regions with prices, becoming more apparent pricing pressures are a little bit more apparent and starting to see some competition in pricing and regions.

Speaker Change: Second really component to look to be cost and moving and commodity.

Speaker Change: As you know can be volatile and hard to predict.

Speaker Change: It's difficult to say, but we typically see increases this time of year as builders and wholesalers order for the spring building the building season, and while prices are trending flat at the moment there is a possibility of another surge soon.

Speaker Change: And we will set the terrorists.

Speaker Change: Terrorists play through.

William Boor: I think the last point is on the consolidated margins. Our consolidated margins also depends on the activity in our financial services segment, most notably in our insurance division. Given the recent activity in that division, while we're making strategic structural changes to limit losses, large storm activity can result in increased claims that could impact margins in the future. and help. Yeah, very helpful. I appreciate you taking the question. Thanks. Thank you.

Speaker Change: I think last point is on the consolidated margins.

Speaker Change: Consolidated margins also depends on the activity in our financial services segment.

Speaker Change: Most notably in our insurance Division.

Speaker Change: Given the recent activity in that division, while we're making strategic structural changes to limit losses.

Speaker Change: Large storm activity can result in increase in increased claims that could impact margins in the future.

Speaker Change: That helps.

Speaker Change: Yeah very helpful. I appreciate you taking the questions. Thank you.

Speaker Change: Thank you.

Greg Palm: Our next question comes from a line of Greg Palm with Craig Helen. Yeah, morning. Thanks. I wanted to just start with a little bit on what you saw in February, you mentioned some lost production days. What states or what regions exactly did, did you see that? And just to be clear, it was it was the month of February. Was that right? Yeah, February was really unusual. I mean, it seems like a long time ago, but February the weather and it really was kind of I would say across the sunbelt, but to be more precise, I think it really, Texas got hit with a lot of very unusual weather and the southeast.

Speaker Change: Our next question comes from the line of Greg Palm with Craig Hallum.

Greg Palm: Yeah. Good morning. Thanks.

Speaker Change: Wanted to just.

Speaker Change: With a little bit.

Speaker Change: What you saw in February you mentioned, some lost production days, what states or what regions exactly did you see that and just to be clear. It was it was the month of February it was that right.

Speaker Change: Yes February was really unusual I mean, it seems like long time ago, but February the weather and it really was kind of.

Speaker Change: I would say across the sunbelt, but to be more precise I think it really Texas got hit with a lot of very unusual weather in the southeast states. So.

William Boor: So we did lose, I mean, really there's a couple effects that I talked about briefly in the opening comments. The, you know, in the field setups really kind of stopped in a period of time in some of those states where they should have been fine from a weather perspective historically. And then we did lose some time in some of our plants across the Southeast and Texas. I think I've commented that there were about 24. down days across our plants due to just February's weather. And that's pretty unusual. So at that point, we were always kind of anxious, all of us, I know you guys as well as us, we're always kind of anxious to see how spring fates up for us.

Speaker Change: So we did lose I mean really there's a couple of effects that I.

Speaker Change: Talked about briefly in the opening comments.

Speaker Change: In the field.

Speaker Change: Setups really kind of stopped in a period of time and some of those states, where they should've been fine from a weather perspective, historically and then we did lose some time in some of our plants across the southeast and Texas.

Speaker Change: I think I'd commented that there were about 24.

Speaker Change: Down days across our.

Speaker Change: Our plants due to just February weather and Thats pretty unusual so at that point we were.

Speaker Change: We're always kind of anxious all of US I know you guys as well as us were always kind of anxious to see how spring.

William Boor: And February made us wait a little bit to really get an indication of that.

Speaker Change: States up for Us in February made us wait a little bit to really get an indication of that.

William Boor: Did that help Greg? Yeah and just to be clear did that or I mean I assume that impacted the margin somewhat but any way to quantify exactly how you know sort of those lost production days might have impacted factory margins? Yeah, I think you're directionally, I'll take a stab at it. But then Allison, maybe you can correct or fill in anything. I think directionally, you're right. We've talked in the past, well, we try to keep our, you know, we focus as an organization on trying to keep our costs as variable as possible, even above gross margin, there is a component of sticking costs.

Speaker Change: Does that help Greg.

Speaker Change: Yeah.

Speaker Change: Just to be clear did that.

Speaker Change: I mean, I assume that impacted the margin somewhat but any way to quantify exactly how youll sort of those lost production days might've impacted factory margins.

Speaker Change: Yes, I think you're directionally up take a stab at it but the analysis and maybe you can correct or fill in anything I think directionally, you're right. We've talked in the past, while we try to keep our we focus as an organization on trying to keep our cost as variable as possible even above gross margin. There is a component of a sticky cost and so anytime.

William Boor: And so anytime you kind of lose a little bit of volume, directionally, there's a downward pressure on gross margin. My sense, but happy if Allison feels differently, my sense is it probably wasn't a huge impact on our gross margin that we reported, but directionally, it would have been a downward pressure. Is that fair, Allison?

Speaker Change: Can you kind of lose a little bit of volume Directionally. There is a downward pressure on gross margin.

Speaker Change: My sense, but.

Speaker Change: Happy with Alison feels differently my sense is it probably wasn't.

Speaker Change: A huge impact on our gross margin.

Speaker Change: That we reported but directionally it would've been a downward pressure is that fair.

Allison Aden: Yeah, I think that's balanced, Bill.

Speaker Change: Yes, I think thats balanced film.

William Boor: And I guess maybe looking ahead, you know, as it relates to the kind of the rebrand, maybe let's Unpack or dig into that a little bit more and in kind of the you know number one the rationale and You know, maybe the feedback so far and what you really hope to get out of that Yeah, I appreciate that question, because it's so hard to give this justice, and we try to be pretty concise in our prepared remarks. Just to give a little bit of history, we've got 31 plants, and for the most part, those plants have come through a number of acquisitions over the years, really dating back to the Fleetwood acquisition, which was, I think, 2009.

Speaker Change: Yes.

Speaker Change: And I guess may.

Speaker Change: Maybe looking ahead is it.

Speaker Change: It relates to the kind of the rebrand maybe.

Speaker Change: Unpack or dig into that a little bit more in that kind of number one the rationale and <unk>.

Speaker Change: Maybe the feedback so far and what you really hope to get out of that.

Speaker Change: Yes, I appreciate that question because the sword.

Speaker Change: Given this justice.

Speaker Change: Well, we try to be pretty concise in our prepared remarks.

Speaker Change: Just to give you a little bit of history, we've got 31 plants and for the most part those plants have come through a number of acquisitions over the years really dating back to the Fleetwood acquisition, which was I think 2009.

William Boor: What we've done in the past is, if we had a plant that came to us through Fleetwood, they continue to be called the Fleetwood plant in the market. And as a result of that, their products tended to be branded as Fleetwood products, and it didn't matter what they were making. So if they were making a lower priced product, or even if they were making, you know, a higher price, no matter what the characteristics of the product was that was coming out of that plant, people would refer to it as a Fleetwood. And, you know, that was fine for a while, but we're getting to the point now where with the investments we've made in online marketing and the opportunity we see to do more national marketing or programs that are national in scope, that started to not work well, you know, or we saw the opportunity.

Speaker Change: What we've done in the past is.

Speaker Change: If we had a plant that came through to us through Fleetwood They were they continue to be called the Fleetwood.

Speaker Change: Plant in the market.

Speaker Change: And as a result of that their products tended to be branded as Fleetwood products and it didn't matter what they were making so if they were making a lower priced product or even if they were making a higher price no matter what the characteristics of the product was coming out of that plant.

Speaker Change: People would refer to it as a fleet well.

Speaker Change: And that was fine for a while but we're getting to the point now where with the investments we've made in online marketing and the opportunity we see to do more national marketing or programs that are national in scope.

Speaker Change: That started to not work well.

Speaker Change: We saw the opportunity.

William Boor: And so what we've really done is we've said, okay, all of our plants are Cavco plants. and whatever products they make, we're really not changing the physical product a given plant makes. but no longer is the name of that product tied to the name of that plant. So now we'll have product lines, which are categories of homes that we make, and they'll be named, you know, with that short list of products, you know, think about, you know, maybe four product lines across the nation, and those product line names will tie to characteristics of the home.

Speaker Change: And so what we've really done is we said okay. All of our plants are captive plants.

Speaker Change: And whatever products, they make we're really not changing that.

Speaker Change: Physical product a given plant makes.

Speaker Change: But no longer.

Speaker Change: Is the name of that product tied to the name of that plant.

Speaker Change: So now we will have product lines.

Speaker Change: Which are categories of homes that we make.

Speaker Change: And they'll be named <unk>.

Speaker Change: With that short list of products think about maybe four product lines across the nation.

Speaker Change: And those product.

Speaker Change: So as product line names will tie to the characteristics of the home.

William Boor: So if it's a high-end, customizable. you know, higher price product, full tape and texture that will fit into a given product line. rather than just having the plant's name associated with it. If it's a lower priced VOG, vinyl and gypsum product with less customization, that'll be in a different product line. So you can imagine if you're a customer starting your search online, you're going to be looking at I'm trying to figure out, okay, I think I'm in this category of homes, and we're going to be able to more directly help you say, okay, you're looking for this product line, and here are some independent or company dealers that can help you after you're ready to go talk to a dealer.

Speaker Change: So if it's a high end customizable.

Speaker Change: <unk>.

Speaker Change: Higher priced product for Cape and texture that will fit into a given product lines.

Speaker Change: Rather than just having the plant's name associated with it if it's a.

Speaker Change: Lower priced.

Speaker Change: <unk> been on gypsum.

Speaker Change: Product with less customization that'll be in a different product line.

Speaker Change: As you can imagine if you're a customer starting your search online you're going to be looking at.

Speaker Change: Trying to figure out Okay, I think I am in this category as homes, and we're going to be able to more directly help you say, okay youre looking.

Speaker Change: For this product line and here are some.

Speaker Change: Independent or company dealers that can help you. After you are ready to go talk to a dealer. So it's really going to improve the leads that go to those dealers and it's going to help the customer much quickly much more quickly get their search narrowed down to homes that really fit their needs.

William Boor: So it's really going to improve the leads that go to those dealers, and it's going to help the customer much quickly, much more quickly get their search narrowed down to homes that really fit their needs.

William Boor: So this is a big deal. It's going to allow us to do some interesting things. We've recently introduced some national products that are going to be available in all of our markets because plants in every market can produce those. The ability to do marketing campaigns much more efficiently on CavcoHomes.com is greatly improved. So we really think this is going to add a lot of clarity for folks shopping for our homes. It might have been a little long-winded there, Greg, instead of too concise in the opening statements. Does that do a good job of explaining it?

Speaker Change: This is a big deal, it's going to allow us to.

Speaker Change: Do some interesting things, we've recently introduced some national products that.

Speaker Change: We're going to be available.

Speaker Change: All of our markets because plants in every market can produce those.

Speaker Change: The.

Speaker Change: Ability to do marketing campaigns much more efficiently on Casco homes Dot com is greatly improved so.

Speaker Change: So we really think this is going to add a lot of clarity for folks shopping for homes.

Greg Palm: It might've been a little long winded there Greg instead of two concise in your opening statements is does that do a good job of explaining it.

Greg Palm: Yeah, makes sense. I will get back in queue. Thanks.

Speaker Change: Yeah makes sense.

Speaker Change: Get back in queue. Thanks.

Speaker Change: Thanks.

Jay Mccanless: Our next question comes from the line of Jay McCanless with Wedbush. Hey, good morning, everyone. Thanks for taking my questions. So, digging down on the tariffs, I know during the supply chain days, tankless water heaters were an issue, some other things like that. I guess, if you think about your cost of goods sold bucket, your input bucket, is there anything in there that we need to really be concerned about from a tariff perspective? I know we're Nye has a plant in Georgia now, so that should, I think, at least protect them partially, but are there any other things in the COGS bucket we need to be keeping an eye on?

Speaker Change: Our next question comes from the line of Jay Mccanless with Wedbush.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: So digging down on the tariffs I know during the supply chain.

Speaker Change: Tankless water heaters were an issue some other things like that I guess, if you think about your cost of goods sold bucket. Your input bucket is there anything in there that we need to really be concerned about from a tariff perspective, I know I know.

Speaker Change: <unk> has a plant in Georgia now so that should I think at least protect them, partially but are there any other things in the Cogs bucket, we need to be keeping an eye on.

Allison Aden: Jay, if I could, let me just share some key points and Bill, please jump in where you want to add your comment. I think there's really three key points as we think about tariffs and how they could impact our business. The first is that many products we use are exempted, really, from any recent tariffs, and that includes U.S. lumber and steel. Second, we've been successful managing tariffs on Canadian lumber that have been in place for several years now. And although a few months ago, there was some discussion around potentially increasing this tariff rate associated with Canadian lumber, those discussions have now been set aside.

Speaker Change: Okay, if I could let me okay.

Speaker Change: Key points in those please jump in.

Lee: Lee you want to.

Speaker Change: Could you comment I think there's really three key points as we think about tariffs and how they could impact our business.

Lee: The first is that many products. We use are exempted really from any recent tariffs and that includes U S lumber and steel.

Lee: Second we've been successful managing tariffs on Canadian lumber that had been in place for several years now.

Lee: And although a few months ago, there was some discussion around potentially increasing this tariff rate associated with Canadian lumber.

Lee: Those discussions have now been set aside so we don't see any incremental impact there.

Allison Aden: So we don't see any incremental impact there. Lastly, important to note that we do purchase many lighting, electrical, and plumbing components, windows, and doors that are sourced from China. And therefore, we do expect to see some impact that could reach between, call it, 5% to 8% of our material costs. And just as a reminder, the material costs are roughly about half of the cost of goods sold. that help. Yeah, so 5-8% on basically 50% of the COGS bucket. Is that the way to think about it, Allison? Yeah, that'd be the way to think about it at this point, Jay.

Lee: Lastly.

Lee: Important to note that we do purchase many lighting electric.

Lee: Electrical and plumbing components windows and doors.

Lee: Also in China.

Lee: And therefore, we do expect to see some impact that could reach between call it 5% to 8% of our material costs and just as a reminder, the material cost of roughly about half of the cost of goods sold.

Lee: That help.

Lee: And yes, so the five.

Speaker Change: So I went to 8% on basically 50% of the Cogs bucket is that the way to think about it Allison, yes that would be the way to think about it at this point Jay.

Allison Aden: Okay, and I'm sorry, Bill, I cut you off. No, no, it's good to clarify that I was gonna say your question. I'm not sure I'm adding a lot of value. But your question really kind of has two components, right? The cost increase, which Allison covered, and also, are we worried about just supply, just the access to the materials. So far, I don't believe we've gotten to the point where we feel like our ability to get the materials we need for a home has been really challenged. I guess the scenario where that might take place is if site building, remodel, repair, remodel, and our business kind of takes off.

Speaker Change: Okay, and I'm, sorry, Bill I cut you off.

Bill Boor: No no. That's good to clarify that I was going to say your question I'm not sure I'm, adding a lot of value, but your question really kind of has two components right the cost increase which Alison covered and also.

Lee: Are we worried about just supplies just the access to the materials. So far I don't believe we've gotten to the point, where we feel like our ability to get the materials. We need for home has been really challenged I guess in a scenario where that might take place as this site.

Lee: Site building remodel of repair remodel and our business kind of takes off.

William Boor: But right now, You know, we'll keep our eye on it, but I don't think we have a high degree of concern about just being able to access the materials we need.

Lee: But right now.

Lee: We will keep our eye on it but I don't think we have a high degree of concern about just being able to access to materials we need.

William Boor: That's great. Thank you, Bill and Allison also.

Speaker Change: Okay. That's great. Thank you bill.

William Boor: So my second question, could you talk about where chattel rates are now and what you guys are seeing on credit availability for consumers? Yeah, I can take the the interest rate. We've seen a little bit of a spread start happening with lenders. So right now the range is about eight to nine percent, but haven't really seen any impact to availability. Good to hear you.

Speaker Change: And also also.

Speaker Change: So my second question could you talk about where travel rates are now.

Speaker Change: What you guys are seeing on credit availability for consumers.

Speaker Change: Yes, I can take the interest rate, we have seen a little bit of a spread start happening with lenders. So right now the range is about 8% to 9%.

Speaker Change: Not really seen any impact to availability.

Speaker Change: Okay.

William Boor: And then more of a broad question on price competition. You talked about, Allison, the prepared remarks. Is it price competition across the board, or is it more focused on lower-priced homes, single wides, any more detail you can give us on that price competition comment would be helpful. Yeah, I can jump in there, Allison. I think You know, I wouldn't say in general, we're seeing a huge pickup in price competition there. There are parts of the country and the one that has stood out for quite a while is Florida where the market's just been down. And it's kind of interesting because you look at the southeast and speaking over the last you know, really one to two years.

Speaker Change: And then more of a broad question on the price competition, you talked about Allison the prepared remarks.

Speaker Change: Is it price competition across the board or is it more focused on lower priced homes single Wides any any more detail you can give us on that price competition comment would be helpful.

Speaker Change: Yes, I can jump in there Allison I think.

Speaker Change: I wouldn't say in general we're seeing a huge pickup in price competition. There there are parts of the country and the one that stood out for quite a while as Florida, where.

Speaker Change: The market has just been down and it's kind of interesting because you look at the southeast and speaking over the last.

Speaker Change: No really one to two years the southeast has been fairly strong, but then Florida stands out as a very challenging market and it continues to be so so it's pretty isolated where we've seen any meaningful price competition and generally I would say we haven't across the country.

William Boor: The Southeast has been fairly strong, but then Florida stands out as a very challenging market and it continues to be so. So it's pretty isolated where we've seen any meaningful price competition. And generally I'd say we haven't across the country.

William Boor: Your comment or your question really hit on an interesting point. We have seen kind of, particularly this quarter, we've seen kind of the product for product pricing on single wides a little more pressure than multi-section. So it seems like it is the low end one that's picking up because we've seen a mixed shift towards single wides, but also that's where we've seen a little bit, relatively a little bit more leakage in product for product pricing. Good to know. So, more competitive on single-section homes.

Speaker Change: Your comment or your question really hit on an interesting point, we have seen kind of particularly this quarter.

Speaker Change: Sin.

Speaker Change: Kind of a product for product pricing on single Wides at a little more pressure than multi section. So it seems like it is the low end.

Speaker Change: One that's picking up because we've seen.

Speaker Change: Mix shift towards single Wides.

Speaker Change: But also that's where we've seen a little bit relatively a little bit more leakage in product for product pricing.

Speaker Change: Yeah.

Speaker Change: Given the more competitive on single section homes.

William Boor: Yeah, we'll keep our eye on that, Jay, because, you know, sometimes... And I think we all do this. I know we do it internally. Sometimes we're. Looking with the magnifying glasses, some of these small number changes, we've commented before, if you look back at the cycle that we've been coming out of, And this industry, pricing has held up pretty well. for a number of quarters we've kind of seen. the true price, true wholesale, same product, what's its price quarter to quarter? It's been a very slow, small decline. Great. Thank you, Bill.

Speaker Change: And we'll keep our eye on that Jay because sometimes and.

Speaker Change: And I think we all do this I know we do it internally sometimes were.

Speaker Change: Looking with a magnifying glass as some of these small number changes.

Speaker Change: We've commented before if you.

Speaker Change: Look back at the cycle that we've been coming out of.

Speaker Change: In this industry.

Speaker Change: The street pricing has held up pretty well and.

Speaker Change: For a number of quarters, we've kind of seen.

Speaker Change: The.

Speaker Change: True price true wholesale.

Speaker Change: <unk> product, which is <unk> quarter to quarter, it's been a very slow small decline.

Speaker Change: Great. Thank you Bill.

William Boor: And I think that, yep, that's it for now. I'll jump back in queue. Thank you.

Speaker Change: And I think that yes.

Speaker Change: Now I'll jump back in queue. Thank you.

Operator: Thanks, Jay.

Jeff: Thanks, Jeff.

Jesse Letterman: Our next question comes from Jesse Letterman with Zellman & Associates. Hey, thanks for taking my question. Bill, I'd love for you to clarify, you made a comment about April being, you know, pretty consistent with March as far as orders. I just want to clarify, are you saying that, like, from an absolute perspective, April is consistent with March? Or are you saying that the momentum you saw in April, in March rather, has continued into April? Because I would have expected, as you continue into the spring selling season and go from March to April, that you would see some lift in activity.

Speaker Change: Our next question comes from Jesse Letterman with Zelman and associates.

Jesse Letterman: Hey, Thanks for taking my question.

Speaker Change: I'd Love for you to clarify you made a comment about April being pretty consistent.

Speaker Change: With March as far as orders I. Just wanted to clarify are you are you, saying that like from an absolute perspective April is consistent with March or are you, saying that the momentum you saw in April and May.

Speaker Change: March rather has continued into April because I would have expected.

Speaker Change: <unk> continue into the spring selling season and go from March to April that you would see some lift in activity. So I'm just trying to clarify what you meant earlier.

William Boor: So I'm just trying to clarify what you meant earlier. Yeah, without parsing it too much, I wasn't trying to imply that it was flat. I was saying that March was an uptick and April has kind of seasonally been consistent with that uptick. We didn't see a reverse course on the trend. Got it. So April, in other words, is following normal seasonality, you would say. Is that right? I think generally. I think generally that's fair. Yeah. I'm not trying to be elusive, but again, seasonality is kind of an interesting thing to track too, because one year the seasonality looks a little different than the next, but we feel good about April kind of continuing the positive momentum that we saw in March.

Speaker Change: Yeah without parsing it too much I wasn't trying to imply that it was flat I was saying that March was an uptick in April.

Speaker Change: Seasonally been consistent consistent with that uptick we didn't see a reverse course on the trend.

Speaker Change: Got it so April in other words is following normal seasonality of USA is that right I think generally I think generally that's fair yeah, I'm not trying to be against it but again seasonality is kind of the interesting thing to track two because one year the seasonality looks a little different in the next but we feel good about.

Speaker Change: Or kind of continuing the positive momentum.

Speaker Change: The momentum that we saw in March.

William Boor: Okay, great. But even still, it sounds like pricing is flattish, maybe down incrementally on an apple to apples basis, just because of pressure in some region like Florida specifically. Would you normally see an increase in kind of the spring months as you enter the spring selling season, which is typically stronger from a demand perspective, or do you not normally have seasonality and pricing from that standpoint? I don't think we've ever really noted seasonality and pricing, because the industry kind of knows what's coming. And so, If orders are hard to come by, you might see some price pressure and if orders are flowing pretty good to everyone, you might see it tick up.

Speaker Change: Okay great.

Speaker Change: But even still it sounds like.

Speaker Change: Pricing is flattish may be down incrementally on an apples to apples basis, just because of pressure in some region like Florida specifically.

Speaker Change: Would you normally see an increase in kind of the spring months.

Speaker Change: As you enter the spring selling season, which is typically stronger from a demand perspective or do not normally have seasonality in pricing from that from that standpoint.

Speaker Change: I don't think we've ever really noted seasonality in pricing because the industry kind of knows what's coming and so.

Speaker Change: If orders are hard to come by you might see some price pressure and if orders are falling pretty good day, everyone you might see it tick up but it doesn't seem.

William Boor: But it doesn't seem This is kind of my sense because it's not something I've looked at that closely, but we don't generally go into a seasonally stronger season and expect to see price jump up, for example. I think it's pretty. Pricing does not seem to be feasible. Okay. I think, you know, where we are in the pricing is kind of interesting because we've had, as I said, we've had a number of quarters now. I probably should keep track of the number where we just saw this nice... that incremental growth in orders quarter to quarter. And yet we've continued to see that very slow thing product price leakage, I call it because it's not really dropped.

Speaker Change: This is kind of my sense, because it's not something I've looked at that closely but we don't generally go into a seasonally stronger season and expect to see price jump up for example, I think it's pretty.

Speaker Change: It's not pricing does not seem to be seasonal.

Speaker Change: Okay.

Speaker Change: We are in the pricing is kind of interesting because we've had as I said, we've had a number of quarters now I, probably should keep track of the number where we just saw this nice.

Speaker Change: Yes.

Speaker Change: <unk> growth in orders quarter to quarter.

Speaker Change: And yet we've continued to see that very slow same product price leakage I call. It because it is not really dropping.

William Boor: At some point, if the market continues to strengthen, that's going to flatten out and maybe increase. as we would normally see. But there's always the economic, you know, macroeconomic risks and interest rates and all those things. If it reverses the trend that we're kind of seeing in March-April, and volume goes down, then you could see continued leakage or even acceleration. We know it's volatile. It's a cyclical industry, but it's really a question of of whether the orders continue to strengthen, and if they do, I think we'll see that pricing at least steady and start to increase.

Speaker Change: Some point if the market continues to strengthen that's going to flatten out and maybe increase.

Speaker Change: As we would normally see.

Speaker Change: But theres always the economic macroeconomic risks and interest rates and all those things and this.

Speaker Change: Is it reverses the trend that we're kind of see in March April and.

Speaker Change: Volume goes down then you could see continued leakage or even an acceleration we know it's volatile.

Speaker Change: The cyclical industry, but it's really a question of.

Speaker Change: Of whether the orders continue to strengthen and if they do I think we'll see that pricing at least steady and start to increase.

Allison Aden: Fair enough. Yeah, that makes sense. And then just to clarify, the fiscal 4Q margin did not include yet any impact from tariffs. Is that correct? And if so, when do you expect to see that flow through? In other words, if pricing is relatively stable and then you get kind of a 2 to 3 percent increase in the overall cost of the home, presumably margin could come under pressure. Can you talk a little bit more about maybe the timing currently of. with if tariffs were in that 4Q number, and if not, when that may expect to come through.

Speaker Change: Fair enough, yeah that makes sense.

Speaker Change: And then just to clarify the fiscal <unk> margin did not include yet any impacts from tariffs is that correct and if so when do you expect to see that flow through in other words, if if pricing is relatively stable and then you get kind of a.

Speaker Change: 2% to 3% increase in the overall cost of the home presumably margin could come under pressure can you talk a little bit more about maybe the timing.

Speaker Change: Currently of.

Speaker Change: With if tariffs were in that four key number and if not when that may expect to come through.

Allison Aden: So Terrace really didn't have an impact in Q4, and consistent with the way that we talked about materials working their way through our cause, from the time that we see the pricing in commodities to the time that it's actually within the cost of goods, it's about 60 to 90 days. So as Terrace just kind of now began to take effect, it'd probably be another 60 days. So, you know, if you put those elements together, it suggests maybe some limited impact in the end of Q1, and then maybe a little bit heavier impact in Q2. But again, I think we're very keenly focused on a tight level and a tight number of products or input costs that it will affect for us.

Speaker Change: So it really didn't have impact in Q4 and two.

Speaker Change: Consistent with the way that we talked about materials working their way through our Cogs.

Speaker Change: The time that we see the pricing and commodities.

Speaker Change: This time the taxi within cost of goods is about 60 to 90 days.

Speaker Change: No.

Speaker Change: As Tara is just kind of now begin to take effect probably be another 60 days.

Speaker Change: No.

Speaker Change: If you put those elements together suggest maybe some limited impact.

Speaker Change: Our.

Speaker Change: Q1, and then maybe a little bit heavier impact in Q2.

Speaker Change: And again I think we're very keenly focused on.

Speaker Change: Tight level type number of products or input cost it will is that for us.

Allison Aden: We've been very successful in managing supply chain shortages in the past, and we stay keenly aware of and very close to our vendor relationships. So we believe that we're going to be able to be very proactive in the management of the impacts of the Terrace in the quarters to come.

Speaker Change: We've been very successful in managing <unk>.

Speaker Change: Apply chain shortages.

Speaker Change: The past and we stay keenly.

Speaker Change: Aware of and very close to our vendor relationships.

Speaker Change: So we believe that we are going to be able to be very proactive in the management.

Speaker Change: Of the impacts of the tariffs in the quarters to come.

William Boor: Awesome. Thanks, Allison. And last one for me, Bill, you did a really great job at the House Subcommittee hearing last week. It'd be great to just get your thoughts on, you know, what you think the key takeaway was from the hearing. And... Yeah, if you could give some color on that, that'd be great. Thanks so much. I appreciate your comments on it. It's, you know, things happen slowly in that town. And every opportunity is an opportunity for politics to creep in. And I think we saw that even on a discussion about affordable housing, which clearly is something, you know, both sides of the aisle agree about trying to improve the supply.

Speaker Change: Awesome, Thanks, Allison and last one for me.

Speaker Change: You did a really great job at the House Subcommittee hearing last week.

Speaker Change: It would be great to just get your thoughts.

Speaker Change: What you think the key takeaway was from the hearing and.

Speaker Change: Yes, if you could give some color on that that'd be great. Thanks, so much.

Speaker Change: Appreciate your comments on it.

Speaker Change: It's.

Speaker Change: Things happen slowly in that town.

Speaker Change: And every opportunity is an opportunity for politics to creep in and I think we saw that even on a discussion about affordable housing, which clearly is something.

Speaker Change: Both sides of the aisle agree about trying to improve the supply I think it was good that the discussion focused on supply we've talked in the past that.

William Boor: I think it was good that the discussion focused on supply. We've talked in the past that if the government steps in and tries to put more money in people's hands to buy homes. To me, that's just inflationary on the price of the homes. It doesn't really help the true root cause problem, which is a supply problem. And I think the conversation did focus on supply, which was encouraging. There are two two house bills that are in place. that I think would be important. I'm not gonna go too long on this because I know it's, you know, I have a risk of doing that.

Speaker Change: If the government steps in and tries to.

Speaker Change: Put more money in People's hands to buy homes.

Speaker Change: To me, that's just inflationary on the price of the homes. It doesn't really help the true root cause problem, which is a supply problem.

Speaker Change: And I think the conversation did focus on supply, which was encouraging there too.

Speaker Change: Two house bills that are in place.

Speaker Change: I think would be important and I'm not going to go too long on this because I know, it's you know.

Speaker Change: I have a risk of doing that.

William Boor: One of them is to clarify HUD as the sole regulator of our industry. And some of you might remember that we've been working through a situation with the Department of Energy where they've. proposed rules on energy efficiency that really weren't well-tuned to our processes. and that's created some dysfunction in the regulatory environment. And so getting the HUD clarity that HUD is the sole regulator, I think, is a big deal. And I do believe there's a good chance that that'll happen legislatively. The other is interesting, too, and it's removing the chassis. from the definition of a manufactured house under the HUD code.

Speaker Change: One of them is to clarify HUD has done.

Speaker Change: So regulator of our industry.

Speaker Change: And some of you might remember that we've been working through.

Speaker Change: Situation with the department of energy where are they.

Speaker Change: Proposed rules on energy efficiency that really werent.

Speaker Change: Well tuned to our processes.

Speaker Change: And that's created some dysfunction in the regulatory environment.

Speaker Change: And so getting the HUD.

Speaker Change: Clarity that HUD as the sole regulator I think it's a big deal and I do believe there's a good chance that that'll happen legislatively.

Speaker Change: The other is interesting too and it's removing the chassis.

Speaker Change: The definition of a manufactured house under the HUD code.

William Boor: And the way I think about this is pretty simple. We would still make a lot of homes that have a permanent chassis affixed to the home, but just removing that from the definition of a manufactured home just opens up innovation opportunities for our industry. It opens up the possibility of more easily being able to do multi-story homes. A lot of the innovation it could take, it opens up the possibility of more easily setting at ground level. Or at or near ground level and not having the elevation that's required by the chassis in certain ways that we set up homes.

Speaker Change: And the way I think about this is pretty simple we will we would still make a lot of homes.

Speaker Change: That have a permanent chassis are fixed to the home, but just removing that can the definition of a manufactured home just opens up innovation opportunities for our industry. It opens up the possibility of more.

Speaker Change: More easily being able to do multi story homes.

Speaker Change: A lot of the innovation that could take place it opens up the possibility of more easily setting at ground level or at or near ground level and not having the elevation thats required by.

Speaker Change: The chassis in certain ways that we set up homes.

William Boor: And if you think about those kind of opportunities, you start to see the opportunity for product innovation for urban and suburban markets. And that opens up a whole new market opportunity for this industry. So those things will not, I always will caution, like, let's say, take the chassis removal. That won't open up opportunities overnight. There's a lot of work that has to happen at the state level once the federal definition is improved. But all of these things are aimed toward. More supply of factory bill housing, which is the supply the country needs at the lower end of the affordability discussion.

Speaker Change: And if you think about those kind of opportunities you start to see the opportunity for product innovation for urban and suburban markets.

Speaker Change: And that opens up a whole new market opportunity for this industry. So those things will not I always caution like let's say take the chassis removal that wont open up opportunities overnight. There's a lot of work that has to happen at the state level. Once the federal definition is has improved but all of these things are aimed toward.

Speaker Change: More supply of factory built housing, which is the supply the country needs at the lower <unk>.

Speaker Change: And of the affordability discussion. So I appreciate the question I'll try not to ramble on too much with those are actions those are things that.

William Boor: So, appreciate the question. I'll try not to ramble on too much, but those are actions. Those are things that are really active right now in Congress, and if we can kind of push them through, I think that's real good momentum for the industry.

Speaker Change: A really active right now in Congress and if we can kind of pushing through I think thats real good momentum for the industry.

William Boor: Great to hear. Thanks so much again for all the color. Thanks, Jess.

Speaker Change: Great to hear thanks, so much again for all the color.

Speaker Change: Thanks Jesse.

Greg Palm: As a reminder, that is star 1-1 to ask a question. We have a follow-up question from Greg Palm with Craig Helm. Yeah, thanks. I guess just on the tariffs, and whether that's on some of the inputs that you alluded to, or even something like steel, I guess the question is, how are you and some of your peers acting like there are there surcharges that are being put in place in case or how would you expect to sort of counter if things actually get bad from here? that we take a shot at that we've seen in some markets, different manufacturers propose that they're going to increase price or add surcharges for the terrorists.

Speaker Change: As a reminder, that is star one to ask a question.

Speaker Change: We have a follow up question from Greg Palm with Craig Hallum.

Greg Palm: Yeah. Thanks, I guess just on the tariffs.

Greg Palm: And whether thats on some of the inputs that you alluded to or even something like steel I guess the question is how are you in some of your peers.

Speaker Change: Like are there surcharges that are being put in place in case or how would you expect to sort of counter.

Speaker Change: If things actually get bad from here.

Speaker Change: That will take.

Speaker Change: Take a shot at that we've seen in some markets.

Speaker Change: Different manufacturers.

Speaker Change: Proposed that theyre going to increase price, where add surcharges for the tariffs.

William Boor: And we've seen ... A lot of manufacturers, including us, saying to our customers, hey, you know, this is happening, so we're not going to try to be preemptive, but understand that our pricing is going to be, you know, it could be more volatile. We could be week to week, or we could put a price increase in because of tariffs. So our position has been more skewed toward that, just telling people in an open, transparent way, you know, just understand that if the tariffs do have a meaningful impact on our cost structure, that price could be affected.

Speaker Change: And we're seeing.

Speaker Change: A lot of manufacturers, including us sand to our customers Hey, you know.

Speaker Change: This is happening so we're not going to try to be preemptive, but understand that our pricing is going to be.

Speaker Change: It could be more volatile we could do.

Speaker Change: The week to week, or we could put a price increase sand.

Speaker Change: Because of tariffs so our position has been more skewed toward that just telling people in an open transparent way.

Speaker Change: Just understand that if the tariffs do you have a meaningful impact on our cost structure that.

Speaker Change: This could be affected.

William Boor: I don't know if that's helpful in the sense that people can't really plan for it, but we're just setting the stage to try to be very reactive to what the cost structure might be impacted.

Speaker Change: I don't know if thats helpful. In the sense that people can't really plan for it but we're just setting the stage to try to be.

Speaker Change: Very.

Speaker Change: Reactive.

Speaker Change: But the cost structure might be impacted now having said that I have always talked that.

William Boor: Now, having said that, I've always talked that... Cost and price. and our industry have, over the years, have become more independent, in my mind. So whether we can push through a cost increase in a given location is really a function more of the supply demand dynamics in that region. So, you know, I could envision if we see some meaningful impact of tariffs, there'll be markets where we can increase price and kind of push it through and try to maintain our margins. But if we have other areas, you know, I mentioned Florida earlier, we've got other areas where the demand's just not there, then the price will probably not be affected by the tariffs.

Speaker Change: Cost and price.

Speaker Change: In our industry.

Speaker Change: Over the years have become more independent in my mind.

Speaker Change: So whether we can push through a cost increase in a given location is really a function more of the supply demand dynamics in that region. So I can envision if we.

Speaker Change: See some meaningful impact of tariffs there will be markets, where we can increase price and kind of push it through and try to maintain our margins, but if we have other areas I mentioned, Florida earlier, we've got other areas, where the demand is just not there then the price will probably not be affected by the tariffs.

William Boor: So I hope that's not a non-answer, but I think people are more in the mode of just being ready to be fluid with this whole situation. And we've seen more with us, and I think also with our competitors, we've seen more open discussion about, you know, the potential reality of this and be ready than we have seen a lot of preemptiveness. Yeah, I guess what I was asking is, you know, whether you expect to pass it along or take the hit yourself and the way I understand it is, it depends on the market, but for the most part, it sounds like you're still focused on maintaining that margin to some extent.

Speaker Change: That's not a non answer but I think people are more in the mode of just being ready to be fluid with this whole situation and we've seen more.

Speaker Change: With us and I think also with our competitors we've seen more open discussion about.

Speaker Change: The potential reality of this and be ready then we have seen a lot of preempted news.

Speaker Change: Yes, I guess, what I was asking is whether you expect to pass it along or take the hit yourself in the way I understand it is it depends on the market, but for the most part it sounds like you are still focused on maintaining that margin to some extent.

William Boor: Yeah, I'm kind of I'm kind of a bit of a econ 101 thinker on a lot of this stuff. And if, if we have a market that demands really exceeding supply, then the market price of our homes is going to go up. really regardless of what's going on in the cost side. So I really do think of the pricing of our products being somewhat independent from the cost. Yep, okay.

Speaker Change: I'm kind of I'm kind of a bit of a econ 101 finger on a lot of this stuff.

Speaker Change: If we have a market that demands really exceeding supply than the market price of our homes is going to go up.

Speaker Change: Regardless of what's going on in EMEA.

Speaker Change: The cost side, so I really do think of the pricing of our products being somewhat independent from the costs.

William Boor: And I guess just maybe a follow up on just sort of the, you know, the activity in March or April, because I think what you're seeing is definitely quite a bit better than, you know, call it general housing. So, any thoughts on whether that's a byproduct of the customer base, a byproduct of maybe the financing market and, you know, it not being as important to manufacturer housing? I'm just curious if you've got any theories why, you know, demand is holding up at least better on a relative basis. And Greg, your question is really in comparison to the site builder dynamics?

Speaker Change: Yes, okay.

Speaker Change: I guess, just maybe a follow up John just sort of the activity in March or April because I think what youre seeing is definitely quite a bit better than.

Speaker Change: Call It general housing so.

Speaker Change: Any thoughts on whether that's a byproduct of the customer base, a byproduct of maybe the financing market.

Speaker Change: It not being as important to manufactured housing I'm just curious if you've got any theories why demand is holding up better.

Speaker Change: Better.

Speaker Change: A relative basis.

Greg Palm: And Greg Your question is really in comparison to the site builder dynamics correct.

William Boor: Correct, yeah. Yeah, I'm saying I'm going to try to keep myself from being long winded because you guys are hitting on questions I can talk a lot about.

Greg Palm: Yeah.

Sam: Sam I'm going to try to keep myself from being long winded because you guys are hitting on questions I can talk a lot about.

William Boor: I think it's been interesting and You know, I don't consider myself an expert on this, but I'll give you my view. The site builders actually got a period of a boost when The mortgage lock-in effect on people who already owned houses at 3% rates. kept people, kept, you know, previously owned homes or yeah, the previously owned home market, the inventory was really low. And so if people needed a new home, or needed a home, they were probably going to be buying a new home, because that's what was available for a while. Now, if you look at the stats on the broader housing market, the average mortgage rate is starting to move up.

Greg Palm: I think it's been interesting.

Greg Palm: I don't consider myself an expert on this but I'll give you my view of.

Greg Palm: The site builders.

Greg Palm: <unk> actually got a.

Greg Palm: A period of a boost when.

Greg Palm: Mortgage lock in effect on people, who are already owned houses at 3% rates.

Greg Palm: People kept.

Greg Palm: No.

Greg Palm: Previously owned homes.

Greg Palm: Yeah.

Greg Palm: Previously owned home market, the inventory was really low and so if people will needed a new home or needed at home. They are probably going to be buying a new home because that's what was available for a while.

Greg Palm: Now if you look at the stats on the broader housing market.

Greg Palm: The average mortgage rate is starting to move up and we're starting to see more inventory.

William Boor: And we're starting to see more inventory of not new homes in the market. And so it seems to me like they got a period where their market opportunity was expanded by the lack of use homes on the market. And now they're getting kind of compressed back into a more historic proportion of home sales. And so you've seen, I don't think it's really stopped their market, but you've seen the growth opportunity kind of compressed down a little bit. We're not as subject to those dynamics. Our buyers, I think are completely, not completely, but a large segment of our buyers are really about monthly price.

Greg Palm: Not new homes.

Greg Palm: In the market and so it seems to me like they got a period, where their market opportunity was expanded by the lack of used homes on the market and now theyre getting kind of compressed back into our more historic proportion of home sales and so you've seen I don't think it's really.

Greg Palm: Their market <unk> seen the growth opportunity kind of compressed down a little bit we're not as subject to those dynamics.

Greg Palm: Our buyers I think are completely Dr.

Greg Palm: I'm not completely but a large segment of our buyers are early about monthly price.

William Boor: many more. historically, a larger proportion of all the manufactured home purchases are new manufactured homes. So it really is a different customer base, and it's a different market dynamics. And I don't think we're as affected by the concept of how many How many days of inventory are there on the market for home sales? So, I don't know if that made sense, but I really think the dynamics are completely different and the site builders are growing a bit slower than we are right now because The previously owned homes are coming back on the market and inventories rising.

Greg Palm: Many more.

Greg Palm: Historically, a larger proportion of all the manufactured home purchases are new manufactured homes.

Greg Palm: So it really is a different customer base and it's a different market dynamics and I don't think we're as affected by the <unk>.

Greg Palm: Concept of how many.

Greg Palm: How many days of inventory are there on the market for for home sales.

Greg Palm: So I don't know if that made sense, but I really think the dynamics are completely different and in site builders are growing a bit slower than we are right now because.

Greg Palm: Previously owned homes are coming back on the market and inventories rising.

Greg Palm: Got it. Okay. Yeah, that's a good caller. All right. Thank you. All right. Thanks, Greg.

Greg Palm: Yeah.

Greg Palm: Got it okay.

Greg Palm: Alright, thank you.

Greg Palm: Alright, Thanks, Greg.

Jay Mccanless: We have a question from Jay McCanless with Wedbush. Jay, you may be on. Sorry about that, everyone. Thanks for taking my follow-up. Two questions for me.

Greg Palm: We have a question from Jay Mccanless with Wedbush.

Speaker Change: Jay you may be on mute.

Greg Palm: Oh, sorry about that everyone. Thanks for taking my follow up.

William Boor: The first one, since you talked so much about FARTR, could you give us any sense of what FARTR is for annual shipments for Cavco or percentage of annual revenue, just so we have a sense of what's going on there? And I'm not sure I have. an actual number. I mean, we've got we've got two plants in Florida. So you can get a If you just do a ratio of 2 out of 31, I think that's at a very high level, about right for the production capacity we have down there. And certainly the market's not entirely gone.

Speaker Change: Two questions from me the first one since you talked so much about Florida could you give us any sense of what Florida as for Indian shipments for cap percentage of annual revenue just we have a sense of what's going on there.

Greg Palm: And I'm not sure I have.

Greg Palm: An actual number I mean, we've got we've.

Greg Palm: We've got two plants in Florida.

Greg Palm: So you can get to.

Greg Palm: Can you just do a ratio of two out of 31, I think that's a very high level about rates. The production capacity, we have down there and certainly the market is not entirely done so those plants, while they're running with pretty low backlogs and have been for quite a while.

William Boor: So those plants, while they're running with pretty low backlogs and have been for quite a while, their production level's down, but obviously we haven't shut either one of those lines.

Greg Palm: Their production levels down, but obviously, we haven't shut either one of those lines. So.

William Boor: So, you know, overall, I don't think when you look at it in comparison to the total company, I don't think it's a huge amount and it's been the case for quite a while. Good to know.

Greg Palm: Overall I don't think when you look at it in comparison to the total company I don't think it's a huge amount and it's been the case for quite a while.

Greg Palm: Okay.

William Boor: And then specifically on OSB prices, we've seen those come down pretty dramatically, and seem like they keep going down every week. Do you guys expect that to be a tailwind on your first quarter, your second quarter gross margin, just given how much OSB you typically use in a home? I think you're right, you know, we did, we have seen prices in March that reflected a kind of a steady demand that's almost back to the lows that we saw in 2020. I just say, Jay, from a history and experience perspective, that picture can change pretty quickly.

Greg Palm: Great.

Greg Palm: And then specifically on OSB prices, we've seen those come down pretty dramatically and it seemed like it keeps going down every week.

Greg Palm: Expect that to be a tailwind on Europe.

Greg Palm: First quarter your second quarter gross margin just given how much OSB typically used in the home.

Greg Palm: Yes, I think youre right.

Greg Palm: We have seen prices in March.

Greg Palm: Reflected a kind of a steady.

Greg Palm: Thats almost back to the lows that we saw in 2020.

Greg Palm: I would just say Jason.

Speaker Change: History and experience perspective that picture can change pretty quickly.

William Boor: And we do, going back to my earlier comment, we do typically see increases in builders and wholesaler orders in the spring building season. I think this is just something, a specific factor, we'll have to stay close. Okay, great. Thanks. Appreciate it.

Speaker Change: And we do go back to my earlier comment we do see typically see increases in buildings and wholesaler orders in the spring building season I think this is just something.

Speaker Change: Specific back to we'll have to stay close to.

Speaker Change: Okay, great. Thanks appreciate it.

Operator: That concludes today's question and answer session.

Bill Boor: That concludes today's question and answer session I would like to turn the call back to Bill <unk> for closing remarks.

William Boor: I'd like to turn the call back to Bill Boor for closing remarks. Bill, I think you're on mute. Oh, thanks. Thanks for the heads up. Sorry, folks. Thanks, Liz. In a cyclical industry like ours, clearly macroeconomic drivers can have a big impact on demand. And we've talked about that a lot in the call. And so, you know, we're very focused on the key to success being making real-time adjustments across our system. I think our results continue to reflect both a positive view about the general direction of the industry's volume opportunity, but at the same time, an organization that stays very nimble.

Speaker Change: So I think I mean.

Speaker Change: Thanks, Thanks for the heads up sorry folks.

Liz: Thanks Liz.

Liz: In a cyclical industry like ours, clearly macroeconomic drivers can have a big impact on demand and you've talked about that a lot in the call and so we're very focused on the key to success being making real time adjustments across our system.

Liz: I think our results continue to reflect both the positive view about the general direction of the industry volume opportunity, but at the same time.

Liz: An organization stays very nimble.

William Boor: and we're able to react accordingly to whatever the market gives us. We feel very well positioned to react to market shifts and to continue to get solid results for our shareholders.

Liz: We're able to react accordingly to whatever the market gives us and we feel very well positioned to re back react to market shifts and to continue to get solid results for our shareholders.

Operator: I want to thank you for joining us today and for your interest in Cavco, and we look forward to keeping you updated on our progress. Thank you.

Liz: Thank you for joining us today and for your interest in <unk> and we look forward to keeping you updated on our progress.

Liz: Thank you.

Liz: Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].