Q1 2026 Cavco Industries Inc Earnings Call
Good day and welcome to the first quarter fiscal year 2026 Cavco Industries Inc. earnings call webcast. At this time, all participants are in listen-only mode.
After the speaker's presentation, there will be a question and answer session; instructions will be given at that time.
As a reminder, this call may be recorded.
I would like to turn the call over to Mark Fusler, Corporate Controller and Head of Investor Relations. Please go ahead.
Good day, and thank you for joining us for Capital Industries' first quarter fiscal year 2026 earnings conference call.
During this call, you'll be hearing from William Boor, President and Chief Executive Officer; Allison Aden, Executive Vice President and Chief Financial Officer; and Paul Bigbee, Chief Accounting Officer.
Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward-looking statements. 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 cost savings, as well as operational efficiencies, current or future volatility in the credit markets, or future market 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.
For a discussion of material risks and important factors that could affect our action 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.
This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, Friday, August 1, 2025.
Cavco undertakes no obligation to revise or update any forward-looking statements, whether written or oral, for reflective events or circumstances after the date of this conference call, except as required by law.
Now, I'd like to turn the call over to Bill Boor, President and Chief Executive Officer. Bill.
Welcome, and thank you for joining us today to review our first-quarter results for fiscal 2026.
Our operating profit was up about 50% compared to both last quarter and a year ago.
All operations contributed to these results, and I'll get into that.
Over the last several quarters, we've been executing on a plan to push production up where we have the backlog to support it.
Increasing production rates can take some time, so this has been a decision in many of our plants.
Between pressing forward with increases to take advantage of a possible continuation of the positive order trends or holding back out of concern that the trend might not hold in future quarters.
We have deliberately chosen to press forward with the confidence of knowing our plants can adjust down if necessary.
While uncertainty about future quarters remains, demand this quarter indicates our plan paid off.
Orders increased, resulting in an essentially flat sequential backlog, even with our increased level of production.
Executing this plan resulted in a record of 5,416 homes shipped this quarter.
We're often asked about regional differences on these calls, and I feel that in most cases, there aren't any headline takeaways.
The regions often show differences from quarter to quarter, but they tend to keep pace with each other over time.
This quarter, I do want to point out that the Southeast region did lag in orders with Q1 shipments, very slightly below the preceding quarter.
Our backlogs in the plant serving the Southeast have dropped, and we'll need to watch closely to see if we're able to maintain production levels there.
We manage this on a plant-by-plant basis, and it just points to the continuing uncertainty in the overall market.
Another noteworthy result this quarter was the increase in average selling price.
As we've discussed before, there are several factors affecting our ASP. First is the proportion of company shipments that go through our owned retail stores.
This quarter, that driver actually had a downward effect on ASP because sales through our stores were relatively flat. Well, wholesale shipments to third parties increased.
Next is the mix of single-section to multi-section homes shipped.
We saw the makeshift toward. We saw that in the mixed shift toward multi-section homes this quarter, which pushes ASP upward.
However, the biggest effect this period was an increase in the average price for both single-section and multi-section homes sold.
This is the best approximation for the price of similar products from period to period.
So, we saw true price appreciation this quarter after a very long run of very modest declines.
Whether this first upward move in a while becomes a trend depends on the direction of industry orders going forward.
I don't want to miss the opportunity to point out the strong performance in financial services, which turned a significant loss a year ago into a nice profit this year, driven by better insurance results.
It's never fun to explain. Bad weather was the cause of poor insurance results. No one likes to hear that reason.
This quarter, it's only fair to acknowledge that favorable weather contributed to the year-over-year improvement.
But it's also important to understand that, on top of the relatively good weather.
We have made very meaningful improvements to our underwriting criteria and policy pricing, which are significantly improving the results under any weather conditions.
Our insurance operations have done a fantastic job, making sure policies are priced right for their risk, and we expect continuing strong results over time.
Shifting topics, a few weeks ago, we announced the agreements of purchase for American Homestar.
The acquisition, which we'll use approximately $184 million in cash, is expected to close early in our third quarter.
As previously discussed, this deal brings with it an opportunity for significant cost reduction as well as product and retail optimization benefits.
Since the announcement, members of our leadership team have had the opportunity to visit many of the American HomeStar operations.
The introductory visits confirmed what we knew in general, and from our due diligence work.
This is a first-class organization, and we continue to be very excited about what they will bring to CFCO.
The American Home Store acquisition, along with ongoing investments throughout our operations, demonstrates the execution of our capital allocation priorities.
We also continue our 4-plus year buyback program, repurchasing $50 million of stock this quarter.
Human release since the initial repurchase authorization, and fiscal 2021.
We've bought back 16.6% of our outstanding shares.
Shares without hindering any strategic opportunities.
I'll turn it over to Allison to give more detail on the financial results.
Thank you, Bill.
Net revenue for the first fiscal.
2026 was $556.9 million, up $79.3 million or 16.6% compared to $477.6 million during the prior year.
Sequentially, net revenues increased $48.5 million, driven by an increase in homes sold and the average revenue per home sold.
Within the factory-built housing segment, net revenue was $535.7 million, up 77.6% from $458 million in the prior quarter.
The increase is primarily due to a 14.7% increase in homes sold and a 1.9% increase in average revenue per homes sold.
The increase in average revenue per home was due to product pricing increases and more multi-family units in the mix, partially offset by a lower proportion of homes sold through our company-owned stores.
Back to utilization, Q1 of 2026 was approximately 75% when considering all available production days, versus 65% in the prior year quarter.
Financial Services segment net revenue was $21.2 million, up $1.6 million or 8.2% from $19.6 million in the prior year quarter.
The increase was due to higher insurance premium rates, partially offset by pure loan sales and pure insurance policies enforced.
Consolidated growth margin in Q1, as a percentage of net revenue, was 23.3%, up 160 basis points from 21.7% in the same period last year.
In the Factoryville housing segment, the growth profit was 22.6% in Q1 of 2026, consistent with Q1 of 2025.
Financial services growth margin as a percentage of revenue increased to 40.9% in Q1 of 2026.
From a negative 6% in Q1 of 2025, this increase is primarily due to the insurance division. Having fewer clean losses from storms than the prior year, the period was significantly impacted by multiple weather events in Texas and New Mexico.
Selling, general, and administrative expenses in the first quarter of 2026 were $69.1 million, representing 412.4% of net revenue, compared to $64.9 million, or 13.6% of net revenue during the same quarter last year.
The increase was due to higher bonus and commission expenses on higher earnings compared to the prior year.
Interest income for the first quarter was $5.1 million, down from $5.5 million in the prior quarter.
Pre-tax profit was up 48.9% this quarter to $65.3 million, from $43.9 million in the prior year period.
The effective income tax rate was 20.9%.
For the first fiscal quarter compared to 21.5% in the same period in the prior year.
That income is $51.6 million compared to net income of $34.4 million last year. The diluted earnings per share this quarter were $6.42 versus $4.11 in last year's first quarter.
Before we discuss the balance sheet, I'd like to take a minute to talk about capital allocation.
During the first quarter, we purchased $50 million of common shares under our board-authorized share repurchase program, leaving approximately $178 million under authorization for future repurchases.
Additionally, we announced our intention to acquire American HomeStar, a transaction expected to utilize roughly $184 million in cash.
Our capital deployment will continue to align with our strategic priorities, which include enhancing our plant facilities and pursuing additional acquisitions.
And consistently assessing opportunities within our lending operations, with shared buyback serving as a mechanism to prudently manage our balance sheet after considering these initiatives.
Now, I’ll turn it over to Paul to discuss the balance sheet.
Thanks Alison.
In the quarter, we had a decrease in cash and restricted cash of $6.9 million, bringing our balance to $368.4 million.
$0.5 million of cash from operating activities, reflecting solid operating performance for the quarter.
We used $7.7 million in investing cash flows for renewing equipment and certain facilities.
And use $54.7 million in financing activities, primarily due to stock buybacks.
Comparing the June 28, 2025 balance sheet to March 29, 2025.
The increase in accounts receivable is related to organic growth. In the factory belt housing segment, unit shipments were up 7% in the first quarter of 2026 versus the sequential quarter.
Inventory is increased from higher finished goods, the company-owned retail stores, as well as higher raw material purchases to support increased production.
The decrease in prepaid expenses and other current assets.
Is a result of lower federal income tax prepayments primarily related to timing?
The increase in long-term commercial loans receivable is the result of increased lending under these programs, as a result of larger sales volume.
Recruit expenses and other current liabilities are up due to increased compensation and bonuses. Acres on higher earnings have increased insurance loss reserves and higher customer deposits.
And finally, as previously discussed, treasury stock increased as stock buybacks were executed during the quarter.
Now, I'll turn it back to Bill.
Hey, thank you, Paul.
Uh, Michelle, let's go ahead and open up the line for questions.
Thank you. Please press Star 11 again.
And our first question comes from Daniel Moore with CJs Securities. Your line is open.
Thank you, good afternoon. Uh, Bill Allison, Paul Mark, appreciate the questions. Um, I obviously the the plan paid off new orders increased nicely. This quarter is that a level of ordering is that level of ordering continuing thus, far into fiscal Q2, um, accelerating at all or or do you expect that to moderate incoming orders?
Yeah, no real comment on the expectation. I mean, the, uh, you know, you hit these...
Months in the summer, and from a seasonal perspective, it can slow down a little bit, but we feel like it's at a high level. There's kind of a continuation. I mean, there's definitely nothing that I'm seeing in the market or hearing about that says that we're seeing a drop in, I always refer to, as well, even though I know it's a bit of a lagging indicator, I always refer to the HUD Code shipments data on a seasonally adjusted basis, and that has remained strong in recent months.
So we're still feeling like, you know, as I've indicated. I mean, we're really happy with the quarter. I think we executed really well as a company. You know, uncertainty continues out there, so we're going to have to keep watching.
Makes sense, very helpful. Um, you mentioned the Southeast. I mean, obviously Florida's been challenged for a while. Are there areas where you're seeing any incremental softness?
Yeah, yeah, I think that's an opportunity to clarify because I didn't really think to make that as clear a Florida has been its own situation for quite a while. And I'd have to say, I really don't see any Improvement there. Um, just the general, I think the real estate market there has been struggling. Um, you know, so we're holding our own and hanging in there and feel good about how we're positioned. Uh, but my comments. Again, Dan, thanks for giving me a chance to clarify. My comments were a little broader than that and almost exclusive of Florida which acts very separately. So you kind of you go up through the southeastern states and I don't want to sound like Doom and Gloom, I mean it was steady.
Uh, in our case, as I talked about this direction of, let's go ahead and lean into the backlogs. Our plants have done a great job of accelerating production through that region, and compared to the other regions, it was a little, um,
You know, a little of a standout lagging region for us this quarter, as far as quarter-over-quarter activity.
So, I don't know how to give the right tone on this, so I'll just kind of be as straightforward as I can with my comment. It's not doom and gloom, but it was the slowest of our major regions when we looked at what was generally a pretty positive order quarter.
Yeah, the mix shifted a little bit to multiple-section homes, which, of course, would kind of be an upward move. Uh, but I'll tell you the biggest, biggest factor this time was really that, um,
You know, we say the same product appreciation; we really look at an aggregate single section homes. Did they move up in average selling price? And I'm thinking wholesale right now, and multi-section homes, did they move up as well? This quarter, both moved up, and it's been a long time since we've seen that kind of price appreciation after correcting for product mix and after correcting for, you know, the proportion that sold through our retail stores.
So, you know, I did want to point out because I know there's been a long discussion about, you know, I keep overusing the term "slow leakage" that we have seen for a number of quarters in that, let's call it pure price.
And there was a significant upward bump this time. Um,
Again, those things can move around a little bit, but it's nice to see it move in that direction. Your other question was whether that was.
I think, Dan, I think your other question was whether that was...
Due to tariff pressure, I, you know, I don’t want to belabor it. I’ve got a little different view than some when we talk about this.
It's a matter of.
Of price moving up, where supply and demand for our products was health yesterday. So, we did have an impact from tariffs, and Allison commented on that. I believe that we can go into that.
you know, but I don't
You know, I don't view us as necessarily being able to say, 'Oops, our product or cost just went up, so we're going to pass through a price increase if the market doesn't support it.'
So, I look at this price movement kind of as its own.
data point separate from our cost structure.
Okay, very helpful. I know you don't give guidance financial services at a really solid quarter. Just curious what you've seen so far quarter to date in terms of claims. Obviously, you know, there's been some, um, well, documented tragic, flooding in in Texas, I know it's isolated and your business is, you know, a lot more geographically diverse. But um, what are you seeing so far there?
Yeah. Um,
Yeah, you’ve said it. Well, I mean, it was tragic. What’s going on there? Um, from a claims perspective, it was not a huge generator of claims, and I think that’s the nature of the...
Pretty not dense area. A lot of that, the flooding occurred. So,
We're not seeing an inordinate amount of claims from that.
Event.
And I think, um,
You know, things are looking pretty good overall from a business perspective and insurance. You're right, we do a very thorough job of making sure we diversify geographically and in other ways to spread the risk in our insurance business. But there's nothing big to note from that event or any others recently.
Great. I'll turn it over. Thanks.
Thanks, Dan.
Thank you. Our next question comes from Greg Palm with Greg Hallam. Your line is open.
Hi. Uh, thanks for taking the questions. I wanted just to maybe clarify.
Some of the prior questioning on kind of the regional differences. So, you know, going back to your comments on the Southeast region, I just...
Is it, is it more that you're seeing increased competition down in that region? Or is it a function of, like, the actual consumer traffic rates? Deposits are...
You know, slowing—I was just, maybe you can kind of dig into that a little bit more. And then just to be clear, I mean, the Southeast region is pretty broad. So are there specific states that you're trying to call out or anything in particular?
Yeah, we kind of just look at our plants that serve that area. And, you know, there's a pretty broad spectrum.
Um, service radiance radius for a plant. So, frankly, you know, we're looking at it all the way up to, um, North Carolina and Virginia. So kind of Georgia up through North Carolina and Virginia. And, and I really do want to.
I'm glad you guys are asking me the question because I really do want to clarify. We had a quarter here where, um, orders moved up considerably.
In the Southeast, they were more flat.
So, we're not seeing a big downturn, and I think the context—and why I pointed it out—is that we have also had this.
Direction on a plant-by-plant basis to increase production.
And so my point really was more about that direction and.
And I don't know how it's going to play out yet, but what I was trying to point out is we might have.
You know, we were going to have to look plant by plant in that area because its order rates have lagged other regions recently, and our backlogs in that area have dropped given the increase in production.
And so, it's 1 that we might have to.
Um, pull back a little bit on some of his production increases. Um, I honestly am not predicting that.
I'm saying that these regions are moving differently, and if there's one place that we're keeping a close eye on to see if our backlogs hold with order rates in the next couple of quarters so that we can maintain the increased production level, it would be the Southeast. So it hasn't been a downturn; it's been a flat spot in a country where other regions are moving up pretty nicely.
Okay, yeah, that that's helpful. What, what are you seeing from the community Channel and some of the the bigger buyers there, any any any change relative to kind of what you're seeing in in in the dealer Channel?
Yeah, I don't think anything noteworthy. I mean, once we got through the inventory problem that we talked, you know, at length about for a long period of time, and that kind of, we declared that dead last December. I think once we got through that, they've kind of taken their place with more of a historical proportion of overall industry shipments, from what we can tell. Uh, they've been about 30% or so.
A third, and that's if you include builders and developers along with communities. And, you know, there's some.
Normal bouncing around those numbers, but I feel like they're kind of in that position right now.
Okay.
Uh, in terms of, I want to maybe spend a minute on gross margin as well, and maybe you can just comment on input costs and, you know, what kind of, I don’t know if you’re able to quantify kind of what impact, you know, tariffs had, whether it was, you know, on steel specifically or whether it was some of the components that, yeah. Yeah. You bring in, but was that...
Meaningful it, it, it all are able to quantify kind of what impact you, you, you saw on mostly this is just in light of, you know, kind of much higher production rates on a year-over-year basis, but factory margins that were, you know, relatively flat. So I'm just kind of trying to tie those out.
Yes.
Thanks for the question, please. Because many of the terrorists have been delayed, plus there's a time lag before costs hit or COGS.
Uh, the full effect of terrorists didn't hit our results in Q1. Uh, we estimate that the total impact in Q1 was about $700,000.
Of additional expense and that that would have hit our cost of goods. Uh, and if the current, you know, for a prospective point if the currently proposed terrorists, take effect, I'd say this will, you know, certainly increase in future in future quarters.
Um, so, um, nothing of, uh, nothing significant this quarter. But, uh, you know, we, uh, really focus on it and, in general, input costs, as you mentioned in total, uh, you know, with, uh, key components for us that affect, uh, the margins or the cost of our commodities that, uh, we primarily use, which are lumber and OSB.
And while the movements of these commodities, you know, they really can be volatile. We have been, in recent quarters, benefited from a pretty low and stable lumber and OSB price.
Uh, but there's always, you know, a possibility of of of there being a price and increase the head and the way that uh, we can all, you know, watch that is, we watch the indices for these commodities for lumber and and for OSB. Uh, in any changes that we see rolling through those prices will both of our calls in about about 60, 60 to 90 days later.
Um, so, taking all those factors into account, kind of, are the cost side of the equation for the margins.
Got it. And then maybe just last, shifting gears again, just to the regulatory.
Environment. Can you provide maybe any update? I know there was a recent bill that was introduced about chassis removal, so maybe you can just give us some.
You know, insight and what that potentially could mean, and just the overall process of putting that into a law, if that's the case.
Literally titled 'Manufactured Housing,' and so, one takeaway that I took at a high level from that was just, you know, we are.
We are in the discussion. We were people are focusing on manufactured housing as a important part of the solution to the affordable housing issues that we face in the supply issues we face. So that was a high level. Um, as you said, the chassis removal from the federal definition was in there. And so I feel really good about that. That's something. We've talked in the past. You know, it'll take a, it'll take some work and some time, but if we can get that out of the definition, I think it's going to open up a lot of innovation for our industry and that will kind of allow us to do things like penetrate more into urban settings as an example. So that's a big plus. Um, there was some stuff in there about
I'm kind of trying to continue to encourage local municipalities and states to work on zoning. Those statements in the bill were more general and weren't all that specific to manufactured housing. But they're actually, you always like to see that because I think Congress...
Understands, that's a real.
You know, there are barriers to improving the supply of homes and housing units. Uh,
Like, you weren't really asking us if I and this is probably a longer conversation for another day. If I had a disappointment when I read it and talked to folks about it.
it's that, um,
Congress.
We are trying to provide some support and funding for community preservation and community development in general.
But they tend to
Um, be a little bit discriminatory in the ownership of those communities. And so, they're very focused on the idea of residential communities.
In the right situation, that can be a good solution. Um, sometimes they aren't everything that the name implies.
Kind of implies, and sometimes they're really not working out well. And so the fact that, uh, Congress continued in this bill to kind of leave.
The very successful for-profit community ownership model was a little bit concerning, so probably giving you more than you want. I feel like in total.
It's a very good step forward. It reflects a lot of the lobbying we've done in D.C. to try to get manufactured housing more part of the conversation. I feel like we're really having some success with it.
So I do bet that's more than you're asking for, Greg, but did I leave anything out?
No, it was, uh, the more the better. Appreciate the color. I'll, uh, hop back in the queue. Thanks.
All right. Thank you.
Thank you. Our next question.
From Jay McCanless with Wedbush, your line is open.
Hey, hey everyone, thank you for taking my question. Um
So I guess I want to stick on the gross margin for a minute, because to hear that volume's up, pricing is up on singles and doubles.
And OSB prices at multi-decade lows just really surprised that the gross margin was flat year-over-year. Can you walk us through what drove that? And are you all thinking that if it was sales mix or geographic mix, is the same type of pattern developing for the second quarter?
Um, I mean, so if we go through, uh, you know, we look at the the 3 foot for the quarter to your point, you know, we did we did see um, an uplift that allowed us to leverage some of our factory overhead. Um, you know, as we talked about we did uh absorb some additional costs due to tariffs.
Um, and also, so, uh, you know, our margins are dependent quite a lot, um, on the quarter, um, over the prior year quarter for pricing. So there were some very positive, um, you know,
In our gross profit and gross margins for the quarter, and then also touching on the financial services, we did see an uptick from the prior year.
Okay. Um, so it's more just geographic mix. Are you seeing that in the second quarter, President? Same thing developing?
I think it's probably a little too early to comment on the second quarter. I'd say the 1 thing that we do have. Uh, you know, obviously we're staying extremely close to would be uh, the unfolding tariff situation. We do. Um, as you know, as we've shared before we we um, do have, uh, we do purchase many lighting, electrical and plumbing components.
And windows and doors, which are primarily sourced from China, will be where our focus is as the tariffs continue to unfold.
Started to impact, um, Capco's income statement. Yeah.
Nothing that we can really comment on at this point, nothing significant.
Okay.
Um, and then if we could just talk about chattel mortgage—where are rates right now? And, I guess the other question is, are you guys seeing, with the site builders, have talked about where?
People just aren't as confident as they were this time last year. Maybe we can talk about that and also where rates stand at this point.
And two rates. Yeah, I'll start with the rates, J. So it's actually been really consistent since we last reported our fiscal year end. So it's still in that 8% to 9% range.
Yeah, I think the indicators of confidence are kind of, almost week to week, if not day to day. Um,
It's been kind of in this mode, in my opinion, for quite a while several quarters, right? I mean, people are trying to read the macroeconomics and certainly there's a bit of uncertainty, on the hand side of the um potential buyer. Um, we see that
I think we see that more in closing rates, but we've seen.
You know, traffic does move up and down a bit, but it moves in a pretty tight band, or it's been moving up. Pretty tight, then closing rates.
I think they are the better indicator at any point in time about whether people are willing to pull the trigger, because there are a lot of people out there that need homes and they're generating the traffic numbers. Um, it's whether they feel confident and are able to pull the trigger on actually, you know, making a deposit and following through on the purchase that I think gets hurt when the confidence goes down. So I don't mean to...
Wandering around your question, I think it's men. It's changing all the time, and that's the uncertainty we've been talking about this quarter orders.
Showed a pretty big uptick. Um, so that shows that.
Either over the period of that quarter, there was a little more confidence, or it shows that that pent-up demand for housing is powering through that.
Concerns are hard to tell, but we feel like, you know, we had a nice uptick this time. We're going to continue leaning into it, and we got to be ready to adjust.
It's hard to be more predictive than that.
Got it. Okay, great. Thanks for taking my questions.
Thank you.
Thank you. Our next question comes from Jesse Leaderan with Zelman and Associates. Your line is open.
Hey, thanks for taking the question, and nice job on the quarter. Um, I'd like to ask another question on the tariffs, so I guess.
Just $700,000 of impact in the COGS from tariffs.
Is the expectation still about 5% to 8% of the materials might, uh, be the impact from tariffs?
Yes. And let me just help by putting those in that that into dollars to to make it straightforward. So we would estimate that the overall impact that we could reach. And again, you know, it's Terrace, literally, our kind of unfolding day to day, as we're all seeing it, but we could reach between 2 and 2, uh, 5.5 million a quarter. You know, if the current pairs are fully, uh, implemented,
So, just hopefully that helps provide some clarity. Got it, okay?
Yeah, that is helpful. Okay. Um, so I guess the $2 million.
If, and again, the materials half of the COGS, right?
Yes, they do. So the $2 million I guess would be something like.
During the quarter, it would have resulted in about a 1% increase to overall COGS from tariffs, which seems a little bit lower, I guess, than you were expecting.
Last uh, last quarter.
That's true. I mean, uh, I'd say specifically again, $700,000 was the amount of the impact of increased cost of goods from Q1's, uh, from tariffs. If you think about the tariffs, they seem to, you know, be uh.
Perhaps as we progress through time, and yet, you know, it's an unfolding situation, it could reach up to about $5.5 million. I would say that if we had to think about it as far as where the majority of that is coming from, it's likely to be coming from the lighting, electrical, and plumbing components, which are part of all of our units, and those are sourced out of China.
Okay.
That's really helpful, caller. Thank you. I wanted to ask with you.
Through Country Place. Um Bill do you guys have any read on or even you know through Country Place and or just through, you know, those that are buying at your captive retail of the household income over time of people that are purchasing or maybe even quarter to quarter that could give some insight into mixed shifts. So for example if maybe this quarter you had more uh you know a higher household income at retail or through Country Place that would suggest maybe some people mix shifting from an existing home or buying you know a a new home to a manufacturer home. Is that something you you guys have insight into
Yeah, obviously, when you're originating, you know, all that information. So it exists; it's not something that we've tracked very closely at a macro level. So it's an interesting thought and something we'll think about. Um, but I don't have any statistics for you right now on that.
Okay.
got it, and then
Yeah, yeah, of course. I think that'd be pretty interesting. Um,
Allison, you kind of talked from a capital deployment perspective. One of the initiatives you're looking into is assessing some opportunities within the lending operations. Could you maybe provide a little bit more color into what that opportunity might be?
Yes. I mean, strategically we, we, uh, look at our country place which is our, um, mortgage origination component of our of our organization to be able to provide, uh, expanded, uh, consumer based lending programs. Um, so we continue to look at that. And on, as part of that, we um, that growth would would probably be a combination of somewhere strategically to have, uh, an ability to, uh, deliver into a, a forward flow agreement. Uh, we have a commitment that we would not carry consumer-based loans on our balance sheet, nor have we so, uh, you know, if we embarked on, um, on that type of a longer term strategy, our balance sheet would still very much, stay in OEM balance sheet, but this would give us an opportunity to serve a wider base of consumers, to help them be able to obtain affordable housing.
Yeah, I'd like to I mean, let me just reiterate that I'm not saying anything different. I mean we're our model is to originate and sell, right? We don't want to carry Consumer loans on our balance sheet. Um, we retain the servicing rights and so we get an annuity stream in that sense, um, that's our base model over the last couple years. The traditional investors have really kind of
You know, dramatically reduced the amount of loans, they're buying, and so that left us with a decision to make and we have been willing to and we put some new loans on our balance sheet. Uh, we do that in a way where we know that we're still under rating to the standards that an an outside investor would buy those loans. And so our our game plan really is let's not stop the machine. Let's keep supporting the operations as an originator to a point.
Um, with the intent that in different times and maybe through finding more consistent investors, we will be able to clean those loans off the balance sheet and get back to the base model again. We haven't committed very much money in the scheme of our balance sheet to that, but it is something we just highlight for folks that, you know, strategically, we will do that from time to time. We'll take some on our balance sheet with the intent that when the day comes, they're very sellable ones.
Got it, that's helpful. Yeah, I think, you know, in a lower rate environment, those um,
Those loans would be an attractive opportunity for an investor for you to get those off the balance sheet. But it makes sense; sounds like you're willing to continue to underwrite those to keep the machine moving from a financing availability perspective.
Last one for me? Yeah, go ahead. Go ahead.
Just say 1 of the things. Sorry. Yeah, this is a side. The side note, extending on that. It's interesting when you do find an investor that wants to start buying those loans, they, um, often is the moment they make that decision, they say, what do you got for me right now? And so, so, having a few on the balance sheet doesn't hurt when you're trying to develop those relationships.
About over the last couple of years, in terms of making improvements to your underwriting criteria and pricing, and some of those nuances are coming to fruition with kind of a 40% gross margin. If I look historically, you were kind of in the even 50% to 55% percentage range. So, is there any reason why the gross margin for financial services shouldn't at least remain around current levels, if not continue to grow, you know, a little bit higher toward maybe 50%?
Something around there.
Yeah, it's very choppy, right? I mean, is the insurance business. Not to minimize the financial or the lending business component of that, but when you're in the insurance business quarter to quarter, it can be choppy. Um, but yeah, I don't see any structural reasons why we shouldn't be able to maintain pretty much historic margins with that business.
So, yeah, I appreciate the question because it is hard for you all to.
Um, keep your bearings with us in financial services. When quarter to quarter, we can see pretty dramatic changes. But I've said in the past, and I still believe that these businesses give us a solid return on invested capital, and they are complementary to our core business. So we're committed to them.
Thanks, guys. I really appreciate the color, as always.
Thank you. Thank you.
Our next question comes from Daniel Moore with CGS Securities. Your line is open.
Thank you again. Um, a couple of one or two more, but obviously, if you look at your shipments, you look at HUD Code, MH data, it's clear that MH, you know, at least over the last couple of quarters in particular, this quarter is diverging, um, you know, in a more material way from traditional site-built growth rates. So is that?
Do you think this bill represents more of a normalization of the builder and developer channel coming back? Or do you see that occurring kind of across all of your key customer bases, you know, REITs, traditional retail, etc.?
And you're talking about—I think I'm with you—you’re talking about how...
Um, you know, HUDs. What we have good data on, you're talking about how HUD code.
Shipments have changed through the recent year or two compared to how site-built.
Has changed. Yeah, and obviously, a 15% growth in your shipments is another data point there as well relative to, you know, flat today. Traditional site, we've moved relative to the HUD. Yeah, you're right. I mean, it's always hard to know what point in time to index off of, but we have been looking at that pretty closely. And to your point, you know, over the last probably year and a half, that was one of the points. I looked at HUD has dramatically outperformed.
Um you know I track a lot of times new home sales thinking, you know we're shipping this kind of put in service pretty quickly and the new home sale is similar to putting service pretty quickly and HUD has really outperformed site. Build during that period, I think.
You know, at the highest level, there's probably a lot of factors to that. I think, um, one is...
I've tried to point out in a lot of investor discussions that.
While we're driven by some of the same macro effects, like interest rates,
The.
The cycle for manufactured housing and homes can divert and site. Build can diverge, uh, if you think back to a year and a half ago or so, we were held back by an inventory. But in our retail channels, after the run-up in an interest rates, conversely, I think Site, Builders were kind of getting a Tailwind from the fact that, um, you know, people had low interest rates and and previously owned homes, weren't on the market, in inventory. So they were kind of making hay at a time that we were pulled back from a wholesale perspective. I think that's reversed right now. I think right now we've got the inventory out of the way and affordability is coming to the Forefront as it has been and should be for.
In my opinion, for the foreseeable future, and you know, we're serving a different price point for sure. They can't touch.
What I would consider a first-time home buyer.
Price levels.
So, you know, I think it's a real shift, and if the macroeconomy supports it, I think that relative share of new housing units, if you want to think about it that way, should really go in favor of manufactured housing.
Um, you know, too, and I won't believe this point because if you pick different time periods of discussion, it would be different. We've certainly done pretty well relative to the index of.
Effective national sales group in the wholesale business that our competitors had previously, and we didn't have. I think they've been making a big impact. We've done a ton in digital marketing, and we followed that up with the branding that we talked about.
last quarter.
To try to make the customer experience better, I really feel like we've done a lot to position ourselves better and better on a competitive basis within manufactured housing. I'd like to think that's showing itself in some of that movement of us compared to the industry shipments.
Very helpful. My last long-winded question of the day, I promise. I missed the American HomeStar conference call. So, you know, you're expanding in what is already a strong presence in Texas.
Obviously, Texas has always been a big, important market for MH, but it's been a little choppier of late. So, you know, what are you seeing or hearing from retailers and community developers in that market, and what are your expectations for growth in that market—not next quarter, but over the next, you know,
2 to 4 years. Thanks again.
Yeah, I think my answers have been long waited. Not your questions, but, uh, Texas. You know, everyone knows how big of a market that is for manufactured housing, and we do have a pretty good presence there.
In the call and otherwise, I've talked about, you know, you've got some deals where you are going into new geographies or trying to round out your geographic presence, and you've got others like this one where, you know, you're just going to get stronger where you are. I'm really excited about it from that perspective. We have a lot of confidence in Texas, uh, over any strategic time frame. So we really don't do these kinds of deals worrying too much about what's going on right now, and what's going on right now in Texas isn't bad; they've been growing. Um, so we're going to have a lot of opportunities for value creation in that deal through, um, cost benefits as well as product and retail optimization. Uh, so we're really excited about it. I'm not sure if I'm really hitting hard on your question, and I'm happy to take another shot, Dan. But, um, that's a, that's a stab at it.
No, it's helpful. Um, you know, right now the market's holding up pretty well, and you see continued growth. Uh, that's what I was getting at. Thanks again for the caller. Um, I appreciate it very much.
Thanks, Dan.
Thank you. Our next question comes from Ian Leapy with Gabelli Funds. Your line is open.
Hi, Bill and team, congratulations on a great quarter. I just had one quick question regarding the $9 million in capex.
For the quarter, was that driven by the brand realignment?
And then would you expect capex to return to the more typical level of around $4 to $5 million per quarter for the last couple of years? Thank you. Yeah. Um, thanks for the question. And the $9 million was not driven by the brand realignment. In fact, ...
Really, the only meaningful material impact you guys should see from that, I think, was the last quarter. When we reported the non-cash $10 million charge, that was related to writing off some intangible value.
Um, but going forward, you know, we shouldn't really have a meaningful impact to the P&L from that shift. Um, I want to take a stab at it, and Allison and others can build on this. The $9 million is a good story because what we've been doing is investing in our plants.
And we've had a string of.
Very successful smaller investments in our plants—I say small in the scheme of the company—but they add up. We've done a number of plant modernizations that have been very successful, and that's what's driving that.
Um, you know, non-acquisition capital expenses are expected to go up a little bit.
So, uh, I'd ask you to feel good about that. We're we're making some pretty high return investments in our plants and we're growing. Our capacity. Is that do you have something to add to that? Yeah, that's a, that's what, um, obviously, a very good character characterization. So, um, it will, our cap spend will be a little bit lumpy but within a, a pretty tight band and it will, you know, move quarter to quarter based on, you know, um, the upgrades and expansion for, uh, efficiencies and if um, in the plants in our internal plants. Um, but there's nothing in that particular number for the quarter that would signal an upward Trend or of any type, and it's not like a pen up sustaining Capital that's coming due or anything like that or plants from pretty good shape.
Okay, great and uh, congratulations again. Thank you.
Thanks again.
Thank you. Our next question comes from Allison Aden.
With red, wish, your line is open.
Hey, thanks for taking my follow-up. Um, I was just looking at the last course transcript, and I think the one thing we haven't talked about is the price competition that you all were seeing last quarter. I'm just wondering if that's re-emerged, either what you saw in the first quarter or if you’re seeing any signs of your competitors being a little more aggressive on price in the second quarter to try and drive some volume.
I would generally say no. Um,
You know, if there's kind of a...
You know, dial on this, there's more. This is kind of my field based on the monthly detailed conversations we have with every one of our plants.
There is more of an upward bias that I'm hearing in the local markets than downward. And I will say that, uh,
For this quarter, I want to emphasize this because these things can shift on you, right? We're not calling a trend after one data point for this quarter that we saw. This pretty nice increase in both single-section and multi-section homes.
That was pretty much across the board regionally, so we really don't have hotspots where we're seeing an undue amount of price competition right now.
Okay, that's great. Thanks for taking my follow-up.
Thank you.
Thank you. And our next question comes from Jesse Leaderner with Zooming Associates. Your line is open.
Hey, thanks for taking the follow-up. Uh, real quick, just want to give you kudos for, uh, the SG&A. Uh, looks like as a percent of revenue, it's among the lowest levels since going to be fiscal 2023. Just wanted to kind of understand if that kind of expense management on the SG&A line is kind of a conscious decision, or if there have been expenses over time that you've been able to pull out of that line. You know, anything, any color you can give there would be great. Thanks.
So, it's, uh, with regards to...
DNA overarching lie, you know?
Approaching to their business model has always been to maintain the good part, part of that sdna to to be variables. And so the largest components there that moves with volume as an increase is sales commission, uh, and variable compensation. Um, we do very carefully, watch the fixed costs, so it's, uh, the sgn general leverages quite a lot. Um, as we increase the top line, so our approach has been consistent. Um, we also want to continually inputting Pro, you know, in instituting processes and procedures that add to our shared services. Uh, so that when we continue to grow both,
Organically and inorganically is shared services in the back office. Um, conserve the the, the field at a lower, um, at a lower, uh, per unit, uh, cost.
So, um, you know, it's more of a continuation of our commitment to maintain a very low fixed cost component for SG&A.
Yeah, we definitely got up to that shared, sir. Yeah.
No, we definitely want to see what we saw. I mean, get that leverage on the fixed costs as we grow. So I appreciate you raising the question.
Yeah, of course. So the fixed costs you're talking about are the kind of shared services, back office type stuff, right?
That's correct.
Okay cool. Thanks a nice job.
Thank you. Thank you.
Thank you. There are no further questions. I would like to turn the call back over to Billboard President and CEO for closing remarks.
Thank you. We're nearly at the top of the hour. A lot of good discussion; I appreciate the interest. I really want to acknowledge the execution across our organization that enabled these results this quarter, you know, over the last several quarters.
We underwent a major ERP upgrade, which is always stressful and full of challenges. We rebranded our plants and aligned our product branding in ways that enable the customer experience to improve and allow us to generate better leads for our retail partners.
We executed a thorough due diligence process and ultimately reached an agreement to purchase American Homestar.
So, with all this change happening in the organization, and despite the ongoing uncertainty in the economy, our operations really delivered the results we've had the pleasure to discuss today. I really want to thank everyone for joining us, and if you're interested in Cavco, we look forward to continuing to keep you updated. Thank you.
This class includes the program. You may now disconnect. Good day.