Q4 2026 Champion Homes Inc Earnings Call

May 26, 2026

Rachel Smith: Good morning, welcome to the Champion Homes Q4 fiscal 2026 Earnings Call. My name is Nikki, I will be coordinating your call today. A question and answer session will follow the formal remarks. As a reminder, this conference is being recorded. I will now turn the call over to the company's recently appointed Head of Investor Relations, Ellen Kaleniecki, to begin. Ellen, please go ahead.

Operator: Good morning, welcome to the Champion Homes Q4 fiscal 2026 Earnings Call. My name is Nikki, I will be coordinating your call today. A question and answer session will follow the formal remarks. As a reminder, this conference is being recorded. I will now turn the call over to the company's recently appointed Head of Investor Relations, Ellen Kaleniecki, to begin. Ellen, please go ahead.

Speaker #2: A question-and-answer session will follow the formal remarks. As a reminder, this conference is being recorded. I will now turn the call over to the company's recently appointed Head of Investor Relations, Ellen Kalinecki, to begin.

Speaker #2: Ellen, please go ahead.

Speaker #3: Good morning. Thank you for joining us for today's conference call and review of our business results for the fourth quarter and full year ended March 28, 2026.

Ellen Kaleniecki: Good morning. Thank you for joining us for today's conference call and review of our business results for the Q4 and full year ended 28 March 2026. Here to review the results are Tim Larson, Champion Homes President and CEO, and David McKinstry, Champion Homes Executive Vice President, CFO, and Treasurer. Earlier this morning, Champion Homes issued its earnings release. As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance.

Ellen Kaleniecki: Good morning. Thank you for joining us for today's conference call and review of our business results for the Q4 and full year ended 28 March 2026. Here to review the results are Tim Larson, Champion Homes President and CEO, and Dave McKinstry, Champion Homes Executive Vice President, CFO, and Treasurer. Earlier this morning, Champion Homes issued its earnings release. As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance.

Speaker #3: Here to review the results are Tim Larson, Champion Homes President and CEO, and Dave McKinstry, Champion Homes Executive Vice President, CFO, and Treasurer. Earlier this morning, Champion Homes issued its earnings release.

Speaker #3: As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker #3: These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission.

Speaker #3: Please note that today’s remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release.

Ellen Kaleniecki: Definitions and reconciliations of these measures can be found in the earnings release. I will now turn the call over to Tim Larson.

Speaker #3: I will now turn the call over to Tim Larson.

Speaker #4: Thank you, Ellen. It's great to welcome you to Champion Homes as our new Director of Investor Relations. Good morning, everyone. Fiscal 2026 results reflect a year of strong execution and performance.

Tim Larson: Thank you, Ellen. It's great to welcome you to Champion Homes as our new Director of Investor Relations. Good morning, everyone. Fiscal 2026 results reflect a year of strong execution and performance. We navigated a challenged macro environment by being agile and active across the business, with our customer-centric approach as our North Star. On our call a year ago, we shared our strategic priorities, and we are encouraged by the progress of our team and the impact we are experiencing in the marketplace. This is best reflected in the fact that across Champion, we earned the business of 26,622 customers in fiscal 2026, the record number of homes sold since the company went public in 2018. Off-site built homes continue to be a compelling, affordable solution to the national housing crisis.

Speaker #4: We navigated a challenging macro environment by being agile and active across the business. With our customer-centric approach as our North Star, on our call a year ago, we shared our strategic priorities, and we are encouraged by the progress of our team and the impact we are experiencing in the marketplace.

Speaker #4: This is best reflected in the fact that, across Champion, we earned the business of 26,622 customers in fiscal 2026—the record number of homes sold since the company went public in 2018.

Speaker #4: Offsite-built homes continue to be a compelling, affordable solution to the national housing crisis. With the average price of a home in the U.S. hovering near $500,000, Champion Homes provides today's buyers with a high-quality, attractive, brand-new home at a fraction of that cost.

Tim Larson: With the average price of a home in the US hovering near $500,000, Champion Homes provides today's buyers with a high-quality, attractive brand-new home at a fraction of that cost. That relative value proposition only becomes more powerful in a higher-cost, higher-uncertainty environment, and that's one of the reasons why we are so encouraged by the road ahead at Champion. We are pleased that the ECN transaction closed last month, and we're putting a portion of that capital to work towards our strategic priorities by expanding our retail channel and elevating the customer experience. In support of those strategies, we announced today the acquisition of Homes Direct. Homes Direct is a beacon of the manufactured housing industry, with locations in Arizona, California, Colorado, New Mexico, and Oregon.

Speaker #4: That relative value proposition only becomes more powerful in a higher-cost, higher-uncertainty environment. And that's one of the reasons why we are so encouraged by the road ahead at Champion.

Speaker #4: We are pleased that the ECN transaction closed last month, and we're putting a portion of that capital to work towards our strategic priorities by expanding our retail channel and elevating the customer experience.

Speaker #4: In support of those strategies, we announced today the acquisition of Homes Direct. Homes Direct is a beacon of the manufactured housing industry, with locations in Arizona, California, Colorado, New Mexico, and Oregon.

Speaker #4: This acquisition expands our presence in the West, adding 11 retail locations, and will bring our number of company retail stores in the U.S. to 95.

Tim Larson: This acquisition expands our presence in the West, adding 11 retail locations, and will bring our number of company retail stores in the US to 95. Homes Direct's founder is Ray Gritton, an industry pioneer and well-respected leader. It's personally been a pleasure to work with him on this transaction. He and his team have a business model that's a great fit with our vision and culture, and we look forward to further collaborating with Ray and the Homes Direct team. The 11 retail locations have annualized revenues of approximately $70 million. We see a strong pipeline of local market demand and commercial opportunities. We expect the transaction to close in our fiscal Q2. The Homes Direct transaction demonstrates our commitment to expanding our retail presence and utilizing our capital to support our strategy.

Speaker #4: Homes Direct's founder is Ray Gritten—an industry pioneer and well-respected leader. It's personally been a pleasure to work with him on this transaction. He and his team have a business model that's a great fit with our vision and culture.

Speaker #4: And we look forward to further collaborating with Ray and the Homes Direct team. The 11 retail locations have annualized revenues of approximately $70 million.

Speaker #4: And we see a strong pipeline of local market demand and commercial opportunities. We expect the transaction to close in our fiscal second quarter. The Homes Direct transaction demonstrates our commitment to expanding our retail presence and utilizing our capital to support our strategy.

Speaker #4: Our team's agile execution across our strategic priorities is creating meaningful differentiation in our products and overall customer experience. And that's why we continue to outperform the industry.

Tim Larson: Our team's agile execution across our strategic priorities is creating meaningful differentiation in our products and overall customer experience, and that's why we continue to outperform the industry. Performance that was also recognized this recent quarter with two industry honors that reflect how our homes are evolving and elevating. The team was honored by the National Association of Home Builders with their Best in American Living Gold Award, and the team earned a 12th consecutive Excellence Award from the Manufactured Housing Institute. Each reflects our enduring commitment to innovation and operating excellence. Now I'll review our Q4 and full year performance. Q4 net sales were at $621.3 million, up 4.6% versus the prior year and above our sales expectations for the quarter. Although extreme weather caused some headwinds early in the quarter, our team managed through it effectively.

Speaker #4: Performance that was also recognized this recent quarter with two industry honors. That reflects how our homes are evolving and elevating. The team was honored by the National Association of Home Builders with their Best in American Living Gold Award.

Speaker #4: And the team earned a 12th consecutive Excellence Award from the Manufactured Housing Institute. Each reflects our enduring commitment to innovation and operating excellence. Now I'll review our fourth quarter and full year performance.

Speaker #4: Fourth quarter net sales were $621.3 million, up 4.6% versus the prior year and above our sales expectations for the quarter. Although extreme weather caused some headwinds early in the quarter, our team managed effectively.

Speaker #4: Manufacturing capacity utilization, including idle facilities, was 59% in the fourth quarter, consistent with the third quarter sequentially and slightly below the 60% we reported in the same period last year.

Tim Larson: Manufacturing capacity utilization, including idled facilities, was 59% in Q4, consistent with Q3 sequentially and slightly below the 60% we reported in the same period last year. Manufacturing orders increased 7% year over year in Q4. Manufacturing backlog ended the quarter at $316 million, up $50 million or approximately 19% sequentially. The average backlog lead time was 8 weeks, consistent with both the prior quarter and the same period last year. We continue to pace production with demand in each market, and we are encouraged by where our backlog stands today, having entered into our key spring selling season. As additional context on the quarter, HUD industry shipments were down approximately 9% in the three-month period that ended in March 2026 compared to the prior year.

Tim Larson: Manufacturing capacity utilization, including idled facilities, was 59% in Q4, consistent with Q3 sequentially and slightly below the 60% we reported in the same period last year. Manufacturing orders increased 7% year-over-year in Q4. Manufacturing backlog ended the quarter at $316 million, up $50 million or approximately 19% sequentially. The average backlog lead time was 8 weeks, consistent with both the prior quarter and the same period last year. We continue to pace production with demand in each market, and we are encouraged by where our backlog stands today, having entered into our key spring selling season. As additional context on the quarter, HUD industry shipments were down approximately 9% in the three-month period that ended in March 2026 compared to the prior year.

Speaker #4: Manufacturing orders increased 7% year over year in the fourth quarter. Manufacturing backlog ended the quarter at $316 million, up $50 million, or approximately 19% sequentially.

Speaker #4: The average backlog lead time was eight weeks, consistent with both the prior quarter and the same period last year. We continue to pace production with demand in each market, and we are encouraged by where our backlog stands today, having entered into our key spring selling season.

Speaker #4: As additional context on the quarter, HUD industry shipments were down approximately 9% in the three-month period that ended in March 2026 compared to the prior year.

Speaker #4: Champion Homes outperformed the broader market during this period, only slightly down, low single digits. This further reflects the team's execution tenacity and the strength of our product portfolio.

Tim Larson: Champion Homes outperformed the broader market during this period, only slightly down low single digits, further reflecting the team's execution tenacity and strength of our product portfolio. From a channel perspective, sales to our independent retailers increased year over year. We continue to receive positive feedback and adoption of our dealer portal and its capabilities, reflecting our commitment to invest in the growth of our dealers. This channel worked through inventory levels through the first three quarters and was back to more normal ordering levels through Q4. Our captive retail channel delivered another quarter of year-over-year growth, including continued strong execution as we've integrated Iseman. Captive retail sales represented 37% of consolidated sales in the Q4 versus 35% of the same period last year. The retail team continues to provide timely new homes at the right price value for today's buyers.

Tim Larson: Champion Homes outperformed the broader market during this period, only slightly down low single digits, further reflecting the team's execution tenacity and strength of our product portfolio. From a channel perspective, sales to our independent retailers increased year-over-year. We continue to receive positive feedback and adoption of our dealer portal and its capabilities, reflecting our commitment to invest in the growth of our dealers. This channel worked through inventory levels through the first three quarters and was back to more normal ordering levels through Q4. Our captive retail channel delivered another quarter of year-over-year growth, including continued strong execution as we've integrated Iseman. Captive retail sales represented 37% of consolidated sales in the Q4 versus 35% of the same period last year. The retail team continues to provide timely new homes at the right price value for today's buyers.

Speaker #4: From a channel perspective, sales to our independent retailers increased year over year. We continue to receive positive feedback and adoption of our dealer portal and its capabilities.

Speaker #4: Reflecting our commitment to invest in the growth of our dealers. This channel worked through inventory levels through the first three quarters, and it was back to more normal ordering levels through Q4.

Speaker #4: Our captive retail channel delivered another quarter of year-over-year growth, including continued strong execution as we've integrated Eisman. Captive retail sales represented 37% of consolidated sales in the fourth quarter, versus 35% in the same period last year.

Speaker #4: The retail team continues to provide timely new homes at the right price value for today's buyers. In the community channel, as anticipated, sales were down in the fourth quarter versus the same period last year.

Tim Larson: In the community channel, as anticipated, sales were down in the Q4 versus the same period last year. This included some impact from the extended weather in the northern markets. Despite the Q4 impact, sales in this channel grew year over year. In the builder developer channel, sales grew year over year, continuing the momentum in a strategically important channel. We recently announced our off-site construction event that will be in June in York, Nebraska. This one-of-a-kind event offers builders an in-person experience to see how off-site construction can help them grow their business. We hosted a similar event last year in Cleveland with over 200 attendees. These events help educate home builders on what's possible with off-site as they hear directly from builders growing their business with Champion.

Tim Larson: In the community channel, as anticipated, sales were down in the Q4 versus the same period last year. This included some impact from the extended weather in the northern markets. Despite the Q4 impact, sales in this channel grew year-over-year. In the builder developer channel, sales grew year-over-year, continuing the momentum in a strategically important channel. We recently announced our off-site construction event that will be in June in York, Nebraska. This one-of-a-kind event offers builders an in-person experience to see how off-site construction can help them grow their business. We hosted a similar event last year in Cleveland with over 200 attendees. These events help educate home builders on what's possible with off-site as they hear directly from builders growing their business with Champion.

Speaker #4: This included some impact from the extended weather in the northern markets. Despite the fourth-quarter impact, sales in this channel grew year over year.

Speaker #4: In the builder-developer channel, sales grew year over year, continuing the momentum in this strategically important channel. We recently announced our offsite construction event that will be in June in York, Nebraska.

Speaker #4: As a one-of-a-kind event, it offers builders an in-person experience to see how offsite construction can help them grow their business. We hosted a similar event last year in Cleveland with over 200 attendees.

Speaker #4: These events help educate homebuilders on what's possible with offsite, as they hear directly from builders growing their business with Champion. Our joint venture with Triad continues to produce strong results and provides diverse financing options for our retailers and consumers.

Tim Larson: Our joint venture with Triad continues to produce strong results and provides diverse financing options for our retailers and consumers. As I noted earlier, an investor group led by Warburg Pincus completed the acquisition of Triad's parent company, ECN. In our current fiscal Q1, we received the proceeds from the sale of our 19% ownership interest at ECN of CAD 189.1 million. We are pleased to continue our joint venture with Triad and to collaborate with the new ECN leadership team. On the legislative and regulatory front, we are very encouraged with the continued progress since our last call. Last week, the House of Representatives passed the 21st Century ROAD to Housing Act with an overwhelming majority supporting the bill. It is now headed back to the Senate for final approval before it will be sent to the White House for signature.

Speaker #4: As I noted earlier, an investor group led by Warburg Pincus completed the acquisition of Triad's parent company, ECN. In our current fiscal first quarter, we received the proceeds from the sale of our 19% ownership interest in ECN of $189.1 million Canadian dollars.

Speaker #4: We are pleased to continue our joint venture with Triad and to collaborate with the new ECN leadership team. On the legislative and regulatory front, we are very encouraged with the continued progress since our last call.

Speaker #4: Last week, the House of Representatives passed the 21st Century Road to Housing Act with an overwhelming majority supporting the bill. It has now headed back to the Senate for final approval before it will be sent to the White House for signature.

Speaker #4: It's clear that bipartisan focus on solving the affordable housing crisis remains strong, including support for manufactured housing. More broadly, we continue to monitor HUD code evolution, chassis rulemaking, and zoning reform activity at the state and local levels.

Tim Larson: It's clear the bipartisan focus on solving the affordable housing crisis remains strong, including support for manufactured housing. More broadly, we continue to monitor HUD Code evolution, chassis rulemaking, and zoning reform activity at the state and local levels. Each of these represent a potential catalyst that could further expand the addressable market for our best-in-class homes. Looking ahead, despite continued macro uncertainty in the market, I remain confident in our team's ability to be agile and evolve while advancing our strategic initiatives. With the spring selling season underway, we're pleased with the order activity we've seen so far, albeit with the backdrop of a dynamic consumer and economic environment. Our team remains focused on driving results and building on the momentum I shared earlier. Our balance sheet is strong, and our capital allocation strategy is disciplined.

Speaker #4: Each of these represents a potential catalyst that could further expand the addressable market for our best-in-class homes. Looking ahead, despite continued macro uncertainty in the market, I remain confident in our team's ability to be agile and evolve.

Speaker #4: While advancing our strategic initiatives, and with the spring selling season underway, we're pleased with the order activity we've seen so far, albeit with the backdrop of a dynamic consumer and economic environment.

Speaker #4: Our team remains focused on driving results and building on the momentum I shared earlier. Our balance sheet is strong, and our capital allocation strategy is disciplined.

Speaker #4: We remain focused on investing in our strategic priorities that support sustainable growth and create shareholder value. I'll now turn the call over to Dave to further discuss our financial performance.

Tim Larson: We remain focused on investing in our strategic priorities that support sustainable growth and create shareholder value. I will now turn the call over to David to further discuss our financial performance.

Speaker #5: Thanks, Tim, and good morning, everyone. I will begin by reviewing our fourth quarter fiscal 2026 financial results, including a discussion on our balance sheet and cash flows.

David McKinstry: Thanks, Tim, and good morning, everyone. I will begin by reviewing our Q4 fiscal 2026 financial results, including a discussion on our balance sheet and cash flows. I'll finish with our outlook for the Q1 of fiscal 2027. Net sales for the Q4 were $621.3 million, an increase of 4.6% compared to the prior year period, coming in slightly ahead of our expectations of low double-digit revenue growth. In the United States, the number of homes sold in the Q4 decreased 0.6% to 5,908, with a total for the full fiscal year coming to 25,718 homes. The average selling price per US home sold in the Q4 increased 4.6% to $98,600. This was driven by a shift towards more multi-section homes and higher prices on homes sold through our company-owned retail sales centers.

Dave McKinstry: Thanks, Tim, and good morning, everyone. I will begin by reviewing our Q4 fiscal 2026 financial results, including a discussion on our balance sheet and cash flows. I'll finish with our outlook for the Q1 of fiscal 2027. Net sales for the Q4 were $621.3 million, an increase of 4.6% compared to the prior year period, coming in slightly ahead of our expectations of low double-digit revenue growth. In the United States, the number of homes sold in the Q4 decreased 0.6% to 5,908, with a total for the full fiscal year coming to 25,718 homes. The average selling price per US home sold in the Q4 increased 4.6% to $98,600. This was driven by a shift towards more multi-section homes and higher prices on homes sold through our company-owned retail sales centers.

Speaker #5: I'll then finish with our outlook for the first quarter of fiscal 2027. Net sales for the fourth quarter were $621.3 million, an increase of 4.6% compared to the prior-year period.

Speaker #5: Coming in slightly ahead of our expectations of low, single-digit revenue growth. In the United States, the number of homes sold in the fourth quarter decreased 0.6% to 5,908.

Speaker #5: The total for the full fiscal year came to 25,718 homes. The average selling price per U.S. home sold in the fourth quarter increased 4.6% to $98,600.

Speaker #5: This was driven by a shift towards more multi-section homes and higher prices on homes sold through our company-owned retail sales centers. Captive retail sales represent 37% of our consolidated sales in the fourth quarter, compared to 35% in the same period last year.

David McKinstry: Captive retail sales represent 37% of our consolidated sales in Q4, compared to 35% in the same period last year. In Canada, homes sold increased to 243 from 230 in the prior year. Canadian revenue increased year over year, benefiting from higher volume and favorable foreign exchange rates. Adjusted gross profit increased 4.6% to $159.4 million, with an adjusted gross margin of 25.7%, which is essentially flat compared to Q4 of last year. The company's effective tax rate for Q4 was 20.3%, versus an effective tax rate of 17.1% for the year ago. Adjusted net income attributable to Champion Homes in Q4 increased 1% to $37.7 million or $0.68 per diluted share, compared to $36.3 million or $0.63 per diluted share in the prior year. Adjusted EBITDA for Q4 increased 6.3% to $55.9 million.

Dave McKinstry: Captive retail sales represent 37% of our consolidated sales in Q4, compared to 35% in the same period last year. In Canada, homes sold increased to 243 from 230 in the prior year. Canadian revenue increased year-over-year, benefiting from higher volume and favorable foreign exchange rates. Adjusted gross profit increased 4.6% to $159.4 million, with an adjusted gross margin of 25.7%, which is essentially flat compared to Q4 of last year. The company's effective tax rate for Q4 was 20.3%, versus an effective tax rate of 17.1% for the year ago. Adjusted net income attributable to Champion Homes in Q4 increased 1% to $37.7 million or $0.68 per diluted share, compared to $36.3 million or $0.63 per diluted share in the prior year. Adjusted EBITDA for Q4 increased 6.3% to $55.9 million.

Speaker #5: In Canada, homes sold increased to 243 from 230 in the prior year. Canadian revenue increased year over year, benefiting from higher volume and favorable foreign exchange rates.

Speaker #5: Adjusted gross profit increased 4.6% to $159.4 million, with an adjusted gross margin of 25.7%, which is essentially flat compared to the fourth quarter of last year.

Speaker #5: The company's effective tax rate for the fourth quarter was 20.3% versus an effective tax rate of 17.1% for the year ago. Adjusted net income attributable to Champion Homes in the fourth quarter increased 1% to $37.7 million, or $0.68 per diluted share, compared to $36.3 million, or $0.63 per diluted share in the prior year.

Speaker #5: Adjusted EBITDA for the fourth quarter increased 6.3% to $55.9 million. Adjusted EBITDA margin increased slightly to 9.0%, compared to 8.9% in the prior year.

David McKinstry: Adjusted EBITDA margin increased slightly to 9% compared to 8.9% in the prior year. Now let's turn to cash flow, which continues to underscore the strength of our operating model. As of March 28, 2026, we had $638.3 million in cash and cash equivalents. For the full fiscal year, net cash provided by operating activities was $303.9 million. This is an increase of 26.2% compared to $240.9 million in fiscal 2025. That strong operating cash flow generation reflects the earnings power of the business and disciplined working capital management. During the Q4, we continued to return capital to shareholders, repurchasing and retiring $50 million of our common stock. For the full fiscal year, we repurchased a total of $200 million worth of shares. Additionally, earlier this month, our board refreshed our share repurchase authorization back to $150 million.

Dave McKinstry: Adjusted EBITDA margin increased slightly to 9% compared to 8.9% in the prior year. Now let's turn to cash flow, which continues to underscore the strength of our operating model. As of March 28, 2026, we had $638.3 million in cash and cash equivalents. For the full fiscal year, net cash provided by operating activities was $303.9 million. This is an increase of 26.2% compared to $240.9 million in fiscal 2025. That strong operating cash flow generation reflects the earnings power of the business and disciplined working capital management. During the Q4, we continued to return capital to shareholders, repurchasing and retiring $50 million of our common stock. For the full fiscal year, we repurchased a total of $200 million worth of shares. Additionally, earlier this month, our board refreshed our share repurchase authorization back to $150 million.

Speaker #5: Now let's turn to cash flow, which continues to underscore the strength of our operating model. As of March 28, 2026, we had $638.3 million in cash and cash equivalents.

Speaker #5: For the full fiscal year, net cash provided by operating activities was $303.9 million. This is an increase of 26.2% compared to $240.9 million in fiscal 2025.

Speaker #5: That strong operating cash flow generation reflects the earnings power of the business and disciplined working capital management. During the fourth quarter, we continued to return capital to shareholders, repurchasing and retiring $50 million of our common stock.

Speaker #5: For the full fiscal year, we repurchased a total of $200 million worth of shares. Additionally, earlier this month, our board refreshed our share repurchase authorization back to $150 million.

Speaker #5: This is part of our broader capital allocation strategy to drive shareholder value. I'll now share a view of our first quarter of fiscal 2027.

David McKinstry: This is part of our broader capital allocation strategy to drive shareholder value. I'll now share a view of our Q1 of fiscal 2027. Looking at the Q1 of fiscal 2027, our team has stayed focused on executing on our strategic priorities. We remain cautiously optimistic while acknowledging several macro uncertainties. The consumer environment reflects ongoing affordability challenges, with CPI remaining elevated and consumer purchasing power under pressure. In this context, Champion Homes value proposition as obtainable housing solution becomes even more compelling. We continue to monitor the macroeconomic environment and its impact on supply chain dynamics, energy costs, and broader consumer sentiment. Our team is actively tracking developments and managing these variables. Looking ahead to the Q1 of fiscal 2027, we expect revenue to be approximately flat versus the prior year as the team continues to constructively manage through a challenging environment for the consumer.

Dave McKinstry: This is part of our broader capital allocation strategy to drive shareholder value. I'll now share a view of our Q1 of fiscal 2027. Looking at the Q1 of fiscal 2027, our team has stayed focused on executing on our strategic priorities. We remain cautiously optimistic while acknowledging several macro uncertainties. The consumer environment reflects ongoing affordability challenges, with CPI remaining elevated and consumer purchasing power under pressure. In this context, Champion Homes value proposition as obtainable housing solution becomes even more compelling. We continue to monitor the macroeconomic environment and its impact on supply chain dynamics, energy costs, and broader consumer sentiment. Our team is actively tracking developments and managing these variables. Looking ahead to the Q1 of fiscal 2027, we expect revenue to be approximately flat versus the prior year as the team continues to constructively manage through a challenging environment for the consumer.

Speaker #5: Looking at the first quarter of fiscal 2027, our team has stayed focused on executing on our strategic priorities. We remain cautiously optimistic, while acknowledging several macro uncertainties.

Speaker #5: The consumer environment reflects ongoing affordability challenges, with CPI remaining elevated and consumer purchasing power under pressure. In this context, Champion Homes' value proposition as an attainable housing solution becomes even more compelling.

Speaker #5: We continue to monitor the macroeconomic environment and its impact on supply chain dynamics, energy costs, and broader consumer sentiment. Our team is actively tracking developments and managing these variables.

Speaker #5: Looking ahead to the first quarter of fiscal 2027, we expect revenue to be approximately flat versus the prior year, as the team continues to constructively manage through a challenging environment for the consumer.

Speaker #5: Looking at adjusted gross margin, we expect near-term adjusted gross margin in the 24 and a half to 25 and a half percent range. As we mentioned last quarter, the market continues to experience inflationary pressures, which accelerated throughout Q4 and now into Q1.

David McKinstry: Looking at adjusted gross margin, we expect near-term adjusted gross margin in the 24.5% to 25.5% range. As we mentioned last quarter, the market continues to experience inflationary pressures, which accelerated throughout Q4 and now into Q1. While we're managing margins through efficiency and value, these initiatives lag input cost inflation. Additionally, we expect modest headwinds from channel and product mix. In the near term, these factors will impact margins, but over the long term, we expect stability as inflation moderates and our margin initiatives are implemented. We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution. In Q1, we expect adjusted SG&A as a percent of sales to be in the 16% to 17% range, which is consistent with our run rate following the Iseman acquisition.

Dave McKinstry: Looking at adjusted gross margin, we expect near-term adjusted gross margin in the 24.5% to 25.5% range. As we mentioned last quarter, the market continues to experience inflationary pressures, which accelerated throughout Q4 and now into Q1. While we're managing margins through efficiency and value, these initiatives lag input cost inflation. Additionally, we expect modest headwinds from channel and product mix. In the near term, these factors will impact margins, but over the long term, we expect stability as inflation moderates and our margin initiatives are implemented. We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution. In Q1, we expect adjusted SG&A as a percent of sales to be in the 16% to 17% range, which is consistent with our run rate following the Iseman acquisition.

Speaker #5: While we're managing margins through efficiency and value, these initiatives lag input costs inflation. Additionally, we expect modest headwinds from channel and product mix. In the near term, these factors will impact margins, but over the long term, we expect stability as inflation moderates and our margin initiatives are implemented.

Speaker #5: We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution. In Q1, we expect adjusted SG&A as a percent of sales to be in the 16 to 17 percent range, which is consistent with our run rate following the Eisman acquisition.

Speaker #5: As a reminder, Energy Star tax credits expire July 1, which is expected to increase the fiscal 2027 effective tax rate by approximately 3 to 4 percent compared to fiscal 2026.

David McKinstry: As a reminder, Energy Star tax credits expire 1 July, which is expected to increase the fiscal 2027 effective tax rate by approximately 3% to 4% compared to fiscal 2026. It's important to note that our outlook does not include the impact of Homes Direct acquisition as we expect that to close in Q2. Lastly, we expect to continue to drive strong operating cash flow, which provides flexibility to deploy capital in a disciplined way to support our strategy. We're investing our balance sheet in growth through our announced acquisition of Homes Direct, while also returning capital to shareholders through our share repurchase program. These actions reflect a balanced approach to maximizing shareholder value. With that, I'll turn the call back to Tim. Thank you, Dave. We appreciate the time to share our results. They reflect the Champion team's unwavering commitment to our customers and executing on our strategic priorities.

Dave McKinstry: As a reminder, Energy Star tax credits expire 1 July, which is expected to increase the fiscal 2027 effective tax rate by approximately 3% to 4% compared to fiscal 2026. It's important to note that our outlook does not include the impact of Homes Direct acquisition as we expect that to close in Q2. Lastly, we expect to continue to drive strong operating cash flow, which provides flexibility to deploy capital in a disciplined way to support our strategy. We're investing our balance sheet in growth through our announced acquisition of Homes Direct, while also returning capital to shareholders through our share repurchase program. These actions reflect a balanced approach to maximizing shareholder value. With that, I'll turn the call back to Tim.

Speaker #5: It's important to note that our outlook does not include the impact of Homes' direct acquisition, as we expect that to close in Q2. Lastly, we expect to continue to drive strong operating cash flow, which provides flexibility to deploy capital in a disciplined way to support our strategy.

Speaker #5: We're investing our balance sheet in growth through our announced acquisition of Homes Direct, while also returning capital to shareholders through our share repurchase program.

Speaker #5: These actions reflect a balanced approach to maximizing shareholder value. With that, I'll turn the call back to Tim.

Speaker #1: Thank you, Dave. We appreciate the time to share our results. They reflect Champion Teams' unwavering commitment to our customers and executing on our strategic priorities.

Tim Larson: Thank you, Dave. We appreciate the time to share our results. They reflect the Champion team's unwavering commitment to our customers and executing on our strategic priorities. We look forward to continue to expand demand for our products, growing the adoption of off-site built homes across the US and Canada, and driving long-term value for our shareholders. Now let's open the line for questions. Operator, please proceed.

Speaker #1: We look forward to continuing to expand demand for our products, growing the adoption of offsite-built homes across the U.S. and Canada, and driving long-term value for our shareholders.

Tim Larson: We look forward to continue to expand demand for our products, growing the adoption of off-site built homes across the US and Canada, and driving long-term value for our shareholders. Now let's open the line for questions. Operator, please proceed.

Speaker #1: Now let's open the line for questions. Operator, please proceed.

Speaker #3: Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two.

Operator: Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, to ask a question, that is star and one. We will pause for a moment to allow everyone a chance to join the queue. We will take our first question from Daniel Moore with CJS Securities. Please go ahead. Your line is open.

Speaker #3: Once again, to ask a question, press star then one, and we will pause for a moment to allow everyone a chance to join the queue.

Speaker #3: We'll take our first question from Daniel Moore with CJS Securities. Please go ahead, your line is open.

Speaker #4: Thank you, Tim, Dave. Thanks for the call and for taking the questions. Maybe just talk a little bit about the cadence of order rates and traffic that you're seeing over the past few months, and thus far into fiscal Q1.

Daniel Moore: Thank you, Tim, Dave. Thanks for the color and taking the questions. Maybe just talk a little bit about the cadence of order rates and traffic that you're seeing over the past few months and thus far into fiscal Q1. Any update on just the general health and outlook as far as community and build-and-developer would be great.

Speaker #4: And any update on just the general health and outlook as far as community and builder-developer would be great.

Speaker #1: Good morning, Dan. I appreciate your question. Yeah, certainly, we reflected in our backlog the momentum we started to see in March, and that was encouraging.

David McKinstry: Good morning, Dan. I appreciate your question. Yeah, certainly we reflected in our backlog the momentum we started to see in March, and that was encouraging. I would say the environment at our captive retail, we can see good traffic. As we progress through the quarter, we've also seen some uptick in aspects of our community channel. As you know, the community channel is pretty broad, but we're encouraged by some of those operators that are looking to have orders filled here. I would say at the consumer level, you're seeing a broad array of consumer dynamics. Part of why we have a good portfolio of products is we can appeal to some of those site-build buyers looking for an affordable home, and that helps us in the environment, albeit with the entry-level consumer maybe under a bit more pressure.

Tim Larson: Good morning, Dan. I appreciate your question. Yeah, certainly we reflected in our backlog the momentum we started to see in March, and that was encouraging. I would say the environment at our captive retail, we can see good traffic. As we progress through the quarter, we've also seen some uptick in aspects of our community channel. As you know, the community channel is pretty broad, but we're encouraged by some of those operators that are looking to have orders filled here. I would say at the consumer level, you're seeing a broad array of consumer dynamics. Part of why we have a good portfolio of products is we can appeal to some of those site-build buyers looking for an affordable home, and that helps us in the environment, albeit with the entry-level consumer maybe under a bit more pressure.

Speaker #1: And I would say the environment at our captive retail—we can see good traffic. As we’ve progressed through the quarter, we’ve also seen some uptick in aspects of our community channel.

Speaker #1: As you know, the community channel is pretty broad, but we're encouraged by some of those operators that are looking to have orders filled here.

Speaker #1: I would say at the consumer level, you're seeing a broad array of consumer dynamics, which is part of why we have a good portfolio of products, as we can appeal to some of those site-built buyers looking for an affordable home.

Speaker #1: And that helps us in the environment, albeit with the entry-level consumer maybe under a bit more pressure. But on balance, we're encouraged as we look at the orders so far within the quarter.

David McKinstry: On the balance, we're encouraged as we look at the orders so far within the quarter. We'll obviously be updating that at our next quarter. Overall, the backlog was helpful as we go into this quarter.

Tim Larson: On the balance, we're encouraged as we look at the orders so far within the quarter. We'll obviously be updating that at our next quarter. Overall, the backlog was helpful as we go into this quarter.

Speaker #1: And we'll obviously be updating that at our next quarter. But overall, the backlog was helpful as we go into this quarter.

Speaker #4: Really helpful, and appreciate the outlook and the color on gross margins. Just talk a little bit more about incremental input cost pressures—what you're seeing, and if we kind of think about the expectations as we sit today, as we move forward.

Daniel Moore: Really helpful. I appreciate the outlook and the color on gross margins. Just talk a little bit more about incremental input cost pressures, what you're seeing, and if we kind of think about the expectations for margins, given where we sit today as we move forward, do we see fiscal Q1 as sort of bottoming and leveling off, obviously dependent on the direction of those factors. Any color beyond the kind of current view would be great.

Speaker #4: Do we see fiscal Q1 as sort of bottoming and leveling off? Obviously, dependent on the direction of those factors. But any color beyond kind of the current quarter would be great.

Speaker #5: Hey, yeah, Dan. So I think, just generally speaking, we're seeing it through the marketplace. We actually signaled on our Q3 call that we had started to see inflation tick up on some of our larger categories: forest products.

David McKinstry: Hey. Yeah, Dan. I think just generally speaking, we're seeing it through the marketplace. We actually signaled on our Q3 call that we had started to see inflation tick up on some of our larger categories. Forest products, we've seen it on lumber, we've seen it on OSB. As we moved through Q4, what we saw ultimately was some more inflation on things like steel, obviously we're seeing it on petroleum products as well. A lot of our portfolio is starting to see some of those input cost pressures, which, as I mentioned in the prepared remarks, we're taking actions to offset, whether it be through efficiency or value or mix and how we drive that to the consumer. Those actions are lagging the rate of inflation that we're seeing.

Dave McKinstry: Hey. Yeah, Dan. I think just generally speaking, we're seeing it through the marketplace. We actually signaled on our Q3 call that we had started to see inflation tick up on some of our larger categories. Forest products, we've seen it on lumber, we've seen it on OSB. As we moved through Q4, what we saw ultimately was some more inflation on things like steel, obviously we're seeing it on petroleum products as well. A lot of our portfolio is starting to see some of those input cost pressures, which, as I mentioned in the prepared remarks, we're taking actions to offset, whether it be through efficiency or value or mix and how we drive that to the consumer. Those actions are lagging the rate of inflation that we're seeing.

Speaker #5: We've seen it on lumber. We've seen it on OSB. As we move through Q4, what we saw ultimately was some more inflation on things like steel.

Speaker #5: And then, obviously, we're seeing it on petroleum products as well. So a lot of our portfolio is starting to see some of those input cost pressures, which then, as I mentioned in the prepared remarks, we're taking actions to offset—whether it be through efficiency, value, or mix—and how we drive that to the consumer.

Speaker #5: But those actions are lagging the rate of inflation that we're seeing. So as we think about it, we know that it'll probably have an outsized impact—that difference, if you will—on Q1.

David McKinstry: As we think about it, we know that it'll have probably an outsized impact, that difference, if you will, on Q1. It's hard to say how we get beyond that. That will obviously have an impact. The other thing that I'd mention is the mix impact. Beyond just inflation, just the mix impact Tim mentioned just a moment ago about the community channel. As we see that come back, that's a little bit of a headwind to us. The other thing that I'd mention, obviously the consumer being a little bit more maybe price-conscious. We're seeing them manage that, which has an impact on our mix as well. Those are the things that I'd call out in margin here in Q1.

Dave McKinstry: As we think about it, we know that it'll have probably an outsized impact, that difference, if you will, on Q1. It's hard to say how we get beyond that. That will obviously have an impact. The other thing that I'd mention is the mix impact. Beyond just inflation, just the mix impact Tim mentioned just a moment ago about the community channel. As we see that come back, that's a little bit of a headwind to us. The other thing that I'd mention, obviously the consumer being a little bit more maybe price-conscious. We're seeing them manage that, which has an impact on our mix as well. Those are the things that I'd call out in margin here in Q1.

Speaker #5: It's hard to say how we get beyond that, but that will obviously have an impact. The other thing that I'd mention is the mix impact.

Speaker #5: So, beyond just inflation, just the mix impact Tim mentioned just a moment ago about the community channel—as we see that come back, that's a little bit of a headwind to us.

Speaker #5: And then the other thing that I'd mentioned, obviously, is the consumer being a little bit more, maybe, price conscious. We're seeing them manage that, which has an impact on our mix as well.

Speaker #5: So those are the things I'd call out in margin here in Q1. And then, as we think about it going forward, obviously we're just going to have to monitor all those different factors that drive it.

David McKinstry: As we think about it going forward, obviously, we're just going to have to monitor all those different factors that drive it.

Dave McKinstry: As we think about it going forward, obviously, we're just going to have to monitor all those different factors that drive it.

Speaker #4: Really helpful. Last one—I'll jump back out, but any additional color on the Homes Direct acquisition of 11 retail locations, purchase price, expected accretion, and whether or not that's an area—those regions—or an area where you expect to continue to look to build out organically or via M&A as we move forward.

Daniel Moore: Really helpful. Actually, I want to jump back out, but just any additional color on the Homes Direct acquisition of 11 retail locations, purchase price, expected accretion, and whether or not that's an area, those regions are an area where you expect to continue to look to build out organically or via M&A as we move forward. Thank you, Dan.

Speaker #4: Thanks again.

Speaker #1: Yeah, thanks, Dan. No, the Homes Direct acquisition is a really great opportunity for us and the collective Homes Direct team. If you think about the West Coast for us, we've got great plant locations, including a great plant in Chandler, Arizona.

David McKinstry: Yeah. Thanks, Dan. The Homes Direct acquisition is a really great opportunity for us and the collective Homes Direct team. If you think about the West Coast for us, we've got great plant locations, including a great plant in Chandler, Arizona, that today works with Homes Direct, which is right adjacent to the plant. Gives us the model that we can replicate across those other 10 locations as those locations now work even more with our plants. We do business with them today, and that's been a key part of the relationship, but they still have other products that they carry, other brands. We're going to migrate those over time like we have with Iseman, and obviously, we've had success there that you've seen in our results. We're very encouraged by it.

Tim Larson: Yeah. Thanks, Dan. The Homes Direct acquisition is a really great opportunity for us and the collective Homes Direct team. If you think about the West Coast for us, we've got great plant locations, including a great plant in Chandler, Arizona, that today works with Homes Direct, which is right adjacent to the plant. Gives us the model that we can replicate across those other 10 locations as those locations now work even more with our plants. We do business with them today, and that's been a key part of the relationship, but they still have other products that they carry, other brands. We're going to migrate those over time like we have with Iseman, and obviously, we've had success there that you've seen in our results. We're very encouraged by it.

Speaker #1: That today works with Homes Direct, which is right adjacent to the plant. It gives us the model that we can replicate across those other 10 locations.

Speaker #1: As those locations now work even more with our plants, we do business with them today, and that's been a key part of the relationship.

Speaker #1: But they still have other products that they carry, other brands. We're going to migrate those over time, like we have with Eisman, and obviously we've had success there that you've seen in our results.

Speaker #1: So we're very encouraged by it. The other great thing about Homes Direct is they have a really great customer experience. And post-sale experience on the service side—they're highly rated for that.

David McKinstry: The other great thing about Homes Direct is they have a really great customer experience and post-sale experience on the service side. They're highly rated for that. That just speaks to the strength of their team, their people, and their processes. When you combine that with what we've been able to do on our other captive retail integrations and the playbook that's being built, we really see opportunity as we go forward in accretively growing that business. We've demonstrated that with Iseman, obviously with Regional, so we're really encouraged by adding another 11 stores to our West Coast operating and our overall retail footprint.

Tim Larson: The other great thing about Homes Direct is they have a really great customer experience and post-sale experience on the service side. They're highly rated for that. That just speaks to the strength of their team, their people, and their processes. When you combine that with what we've been able to do on our other captive retail integrations and the playbook that's being built, we really see opportunity as we go forward in accretively growing that business. We've demonstrated that with Iseman, obviously with Regional, so we're really encouraged by adding another 11 stores to our West Coast operating and our overall retail footprint.

Speaker #1: That just speaks to the strength of their team, their people, and their processes. And when you combine that with what we've been able to do on our other captive retail integrations and the playbook that's being built, we really see opportunity as we go forward in creatively growing that business.

Speaker #1: We've demonstrated that with Eisman, obviously with Regional. So we're really encouraged by adding another 11 stores to our West Coast operations and our overall retail footprint.

Speaker #4: Perfect. Thanks again.

Daniel Moore: Perfect. Thanks again.

Speaker #1: Thanks, Dan.

David McKinstry: Thanks, Dan.

Tim Larson: Thanks, Dan.

Speaker #6: Thank you. We will move next with Greg Palm with Craig-Hallum. Please go ahead. Your line is open.

Operator: Thank you. We will move next with Greg Palm with Craig-Hallum. Please go ahead. Your line is open.

Speaker #7: Yeah, thanks. Good morning, everybody. I wanted to follow up on gross margin commentary a little bit, because it seems like you're—I understand some of the input costs, inflation—but you're getting at least, sequentially, obviously much higher utilization. I forget if you said mix was going to be a headwind sequentially, but you've also got JV flow-through income, which presumably was a pretty big tailwind in Q4. I'm guessing that continues.

Greg Palm: Yeah. Thanks. Good morning, everybody. I wanted to follow up on gross margin commentary a little bit because it seems like I understand that some of the input cost inflation, you're getting at least sequentially, obviously much higher utilization. I forget if you said mix was going to be a headwind sequentially, you've also got JV flow-through income, which presumably was a pretty big tailwind Q4, I'm guessing that continues. Can you quantify maybe how much is directly from input cost? Just to be clear, is there anything else going on? I mean, I don't know, competitively, is there anything that's a little bit more of a concern now versus three or six months ago?

Speaker #7: So, can you just—I mean, can you quantify maybe how much is directly from input costs? And just to be clear, I mean, is there anything else going on?

Speaker #7: I mean, I don't know—competitively, is there anything that's a little bit more of a concern now versus three or six months ago?

Speaker #5: Yeah, I think we hit on a large majority of that. The biggest piece is going to be the input costs. But the mix piece is another factor that we're seeing drive through in Q1.

David McKinstry: Yeah. I think we hit on a large majority of that. The biggest piece is going to be the input cost. The mix piece is another factor that we're seeing drive through in Q1. The largest portion of our gross margin headwind is going to be the input cost inflation. As I mentioned, those actions that we're taking to offset it will lag just a little bit, the mix impact is going to be the kind of secondary item. From an overall competitive, we mentioned the consumer and where the consumer's at and that impact on mix. As we look at the other variables, we don't see anything that'll be significant. As we look at price, we expect our price to be relatively sequentially flat as we move forward in time.

Dave McKinstry: Yeah. I think we hit on a large majority of that. The biggest piece is going to be the input cost. The mix piece is another factor that we're seeing drive through in Q1. The largest portion of our gross margin headwind is going to be the input cost inflation. As I mentioned, those actions that we're taking to offset it will lag just a little bit, the mix impact is going to be the kind of secondary item. From an overall competitive, we mentioned the consumer and where the consumer's at and that impact on mix. As we look at the other variables, we don't see anything that'll be significant. As we look at price, we expect our price to be relatively sequentially flat as we move forward in time.

Speaker #5: So, the largest portion of our gross margin headwind is going to be the input cost inflation. As I mentioned, those actions that we're taking to offset it will lag just a little bit.

Speaker #5: And then the mix impact is going to be the kind of secondary item. From an overall competitive, we mentioned the consumer and where the consumer's at, and that impact on mix.

Speaker #5: But as we look at the other variables, we don't see anything that will be significant. As we look at price, we expect our price to be relatively sequentially flat.

Speaker #5: As we move forward in time, again, the mix impact may impact that a little bit. But there isn't anything out of those things that is going to be really big drivers to the sequential impact.

David McKinstry: Again, the mix impact may impact that a little bit, but there isn't anything out of those things that are going to be really big drivers to the sequential impact.

Dave McKinstry: Again, the mix impact may impact that a little bit, but there isn't anything out of those things that are going to be really big drivers to the sequential impact.

Speaker #7: Okay. And sorry, is the mix from less homes going through captive, or is it just more homes going through the community channel? What exactly is the mix impact?

Greg Palm: Okay. Sorry, is the mix from less homes going through captive or is it just more homes going through community channel? What exactly is the mix impact?

Speaker #5: Yeah, so it's going to be a couple of things. We did talk about the community channel. The community channel will be a little bit of a headwind for us as we think about Q1.

David McKinstry: Yeah. It's going to be a couple things. We did talk about the community channel. The community channel will be a little bit of a headwind for us as we think about Q1. The other one isn't as much of a channel dynamic but more of a product mix dynamic.

Dave McKinstry: Yeah. It's going to be a couple things. We did talk about the community channel. The community channel will be a little bit of a headwind for us as we think about Q1. The other one isn't as much of a channel dynamic but more of a product mix dynamic.

Speaker #5: The other one isn't as much of a channel dynamic, but more of a product mix dynamic. And that's going to be more as the consumer's looking to hit price points that maybe are a little bit lower.

Tim Larson: That's going to be more as the consumer's looking to hit price points that maybe are a little bit lower from a monthly payment perspective. What that does is essentially says, Okay, this is the price point I have to hit. This is the product that goes with it. That's going to be the secondary impact, is more that product mix as the consumer manages their overall spend.

Dave McKinstry: That's going to be more as the consumer's looking to hit price points that maybe are a little bit lower from a monthly payment perspective. What that does is essentially says, Okay, this is the price point I have to hit. This is the product that goes with it. That's going to be the secondary impact, is more that product mix as the consumer manages their overall spend.

Speaker #5: From a monthly payment perspective—and what that does is essentially say, 'Okay, this is the price point I have to hit. This is the product that goes with it.' And that's going to be the secondary impact: more that product mix, as the consumer manages their overall spend.

Speaker #7: Yeah, okay, makes sense. And then I guess, in light of the Road to Housing Act, Tim, I'd love to just get some more of your comments on kind of the longer-term benefits, how long some of this stuff might take to play out.

Greg Palm: Yeah. Okay. Makes sense. I guess in light of the ROAD to Housing Act, Tim, I'd love to just get some more of your comments on the longer-term benefits, how long some of this stuff might take to play out. There's obviously some pretty sizable opportunities going on behind the scenes. Just kind of curious to get more thoughts around that.

Speaker #7: But there are obviously some pretty sizable opportunities going on behind the scenes, so I'm just kind of curious to get more thoughts around that.

Speaker #1: Yeah, thanks, Greg. I mean, big picture, it's encouraging to see the bill pass in the House. And obviously, we look forward to it continuing with the legislative process.

Tim Larson: Yeah. Thanks, Greg. Big picture, it's encouraging to see the bill pass in the House, and obviously we look forward to it continuing with the legislative process. We'll see how long that time takes. I would say the activity that's going on, not only at the federal level, but we are seeing in some states. We've talked about Kentucky, Texas. Recently we had Montana that's deployed an approach that gives more parity to off-site built homes. You like to see those proof points and hopefully that extends to other states with even greater populations. In terms of the timing, that's going to come down to how long do we get through the legislative process, the rulemaking, and ultimately HUD, their ability to put it into the regs. That process we're anticipating. We're working through as much as we can proactively, but we know that's going to take some time.

Speaker #1: We'll see how long that time takes. I would say the activity that's going on, not only at the federal level, but we are seeing it in some states as well.

Speaker #1: We've talked about Kentucky, Texas, and recently we had Montana. That's deployed an approach that gives more parity to offsite-built homes. You'll like to see those proof points, and hopefully that extends to other states with even greater populations.

Speaker #1: In terms of the timing, that's going to come down to how long we get through the legislative process. The rulemaking, then ultimately HUD, their ability to put it into the regs.

Speaker #1: And that process we're anticipating—we're working through as much as we can proactively. But we know that's going to take some time. In advance of that, not only are we working on, certainly from a product perspective and on readiness, we continue to work, for example, on our builder-developer channel with local municipalities to have more proof points to demonstrate how offsite-built homes can solve affordability.

Tim Larson: In advance of that, not only are we working on certainly from a product perspective and a readiness, we continue to work, for example, on our builder developer channel with local municipalities to have more proof points to demonstrate how off-site built homes can solve affordability and then get the benefit of the tailwinds as these things roll out. It's encouraging. We've been very active on the policymaking front, not only the things that I've mentioned, but obviously you heard about the potential for the institutional investor impact, and that was really key that we advocated on behalf of our community customers and the critical element that they provide on renting and affordability solutions for a range of consumers. Greg, I look at it as it's positive. It's just going to be a question of how long and time does it take.

Speaker #1: And then get the benefit of the tailwinds as these things roll out. So it's encouraging. We've been very active on the policy-making front—not only things that I've mentioned, but obviously you heard about the potential for the institutional investor impact, and that was really key. We advocated on behalf of our community customers and the critical element that they provide on renting and affordability solutions for a range of consumers.

Speaker #1: So Greg, I look at it as it's positive. It's just going to be a question of how long and what time it takes. And we're certainly preparing for those aspects and are encouraged by the progress that we're seeing.

Tim Larson: We're certainly preparing for those aspects and are encouraged by the progress that we're seeing.

Speaker #7: Understood. Appreciate the color. Thanks.

Greg Palm: Understood. Appreciate the color. Thanks.

Speaker #1: Thanks, Greg.

Tim Larson: Thanks, Greg.

Speaker #6: Thank you. We will move next to Matthew Bulley with Barkley. Please go ahead.

Operator: Thank you. We will move next with Matthew Bouley with Barclays. Please go ahead.

Speaker #8: Morning, everyone. Thank you for taking the questions. Maybe just one here on the guide for Q1. I think you said flat revenue year-over-year.

Matthew Bouley: Morning, everyone. Thank you for taking the questions. Maybe just one here on the guide for Q1. I think you said flat revenue year over year. Just wanted to unpack that a little bit. It sounds like you have positive order rates. Price mix has obviously been positive. I think you said it's going to be consistent sequentially, I guess that would still be up year over year, correct me if I'm wrong. You've got the Homes Direct acquisition. I guess, how much does that acquisition contribute to the quarter? Is that included in that guide? Just maybe if you could break out those pieces of volume and price mix then why the revenue would end up flat. Thank you.

Matthew Bouley: Morning, everyone. Thank you for taking the questions. Maybe just one here on the guide for Q1. I think you said flat revenue year-over-year. Just wanted to unpack that a little bit. It sounds like you have positive order rates. Price mix has obviously been positive. I think you said it's going to be consistent sequentially, I guess that would still be up year-over-year, correct me if I'm wrong. You've got the Homes Direct acquisition. I guess, how much does that acquisition contribute to the quarter? Is that included in that guide? Just maybe if you could break out those pieces of volume and price mix then why the revenue would end up flat. Thank you.

Speaker #8: I just wanted to unpack that a little. It sounds like you have positive order rates. Price mix has obviously been positive. I think you said it's going to be consistent sequentially.

Speaker #8: So I guess that would still be up year over year, and correct me if I'm wrong. And then you've got the Homes Direct acquisition.

Speaker #8: So, I guess, how much does that acquisition contribute to the quarter? Is that included in that guide? And then, just maybe if you could kind of break out those pieces of volume and price/mix, and kind of why the revenue would end up flat.

Speaker #8: Thank you.

Speaker #1: Yeah, thanks. So first, Homes Direct is not in the guide. We don't expect to close that until our fiscal second quarter. So Homes Direct is not included in that guide.

Tim Larson: Yeah, thanks. First, Homes Direct is not in the guide. We don't expect to close that until our fiscal second quarter. Homes Direct is not included in that guide. From a net sales perspective in the flat guide, what I did say on prices, we expect it to be relatively flat sequentially. Now what that means from a year-on-year perspective is the amount of growth in our rate of price will be not as high as it was in Q4. Recall, and we've mentioned this in the past, that we took price within our captive retail. We've now lapped that as we head into Q1. While we'll still realize price year on year, it won't be at the same rate that we did in Q4. That's an important thing to keep in mind.

Dave McKinstry: Yeah, thanks. First, Homes Direct is not in the guide. We don't expect to close that until our fiscal second quarter. Homes Direct is not included in that guide. From a net sales perspective in the flat guide, what I did say on prices, we expect it to be relatively flat sequentially. Now what that means from a year-on-year perspective is the amount of growth in our rate of price will be not as high as it was in Q4. Recall, and we've mentioned this in the past, that we took price within our captive retail. We've now lapped that as we head into Q1. While we'll still realize price year on year, it won't be at the same rate that we did in Q4. That's an important thing to keep in mind.

Speaker #1: From a net sales perspective, in the flat guide—so what I did say on price is we expect it to be relatively flat sequentially.

Speaker #1: Now, what that means from a year-on-year perspective is the amount of growth in our rate of price will not be as high as it was in Q4.

Speaker #1: So recall, and we mentioned this in the past, that we took price within our captive retail. So we've now lapped that as we head into Q1.

Speaker #1: So while we'll still realize price year-on-year, it won't be at the same rate that we did in Q4. So that's an important thing to keep in mind.

Speaker #1: The other thing that I would note here is, as we look at, especially in our year-ago comp, we shipped a little bit heavier in Q1 as opposed to Q4.

Tim Larson: The other thing that I would note here is we look at, especially in our year ago comp, we ship a little bit heavier in Q1 as opposed to Q4. There is kind of a benefit, if you will, of some of the production that we had in Q4 of last year that went into Q1. We think about then this year, really, we're managing ramping up our production with the orders or producing with the orders that we see in hand and then matching it to our shipments. Whereas again, we got a little bit of a benefit of production in Q4, helping Q1 shipments in the year ago. Those are the two things that I would call out to watch on the flat year-on-year guide going forward.

Dave McKinstry: The other thing that I would note here is we look at, especially in our year ago comp, we ship a little bit heavier in Q1 as opposed to Q4. There is kind of a benefit, if you will, of some of the production that we had in Q4 of last year that went into Q1. We think about then this year, really, we're managing ramping up our production with the orders or producing with the orders that we see in hand and then matching it to our shipments. Whereas again, we got a little bit of a benefit of production in Q4, helping Q1 shipments in the year ago. Those are the two things that I would call out to watch on the flat year-on-year guide going forward.

Speaker #1: So, there was kind of a benefit, if you will, of some of the production that we had in Q4 of last year that went into Q1.

Speaker #1: As we think about them this year, really, we're managing ramping up our production with the orders, or producing with the orders that we see in hand.

Speaker #1: And then matching it to our shipments. Whereas, again, we got a little bit of a benefit of production in Q4, helping Q1 shipments in the year ago.

Speaker #1: So, those are the two things that I would call out to watch on the flat year-on-year guide, going forward.

Speaker #8: Okay, perfect. No, thank you for that. Thank you for clarifying on Homes Direct. I had missed that you said that. And then, so maybe just another one here on the numbers.

Matthew Bouley: Okay, perfect. Thank you for that. Thank you for clarifying on Homes Direct. I had missed that you said that. Maybe just another one here on the numbers. You had mentioned the petroleum impact. Obviously, you guys own your own fleet. I'm curious, in some cases, does that actually advantage you competitively versus if someone, let's say, has to use common carrier? Specifically in terms of your own costs, do you use surcharges? Do you try to build petroleum and fuel into the price of the product? How do you actually mechanically go about offsetting this kind of headwind? Thank you.

Speaker #8: You had mentioned the petroleum impact. Now, obviously, you guys own your own fleet. I'm curious—I mean, in some cases, does that actually advantage you competitively versus if someone, let's say, has to use a common carrier?

Speaker #8: And then, specifically, in terms of your own costs, I mean, do you use surcharges? Do you try to build petroleum and fuel into the price of the product?

Speaker #8: How do you actually, kind of mechanically, go about offsetting this kind of headwind? Thank you.

Speaker #7: Yeah, so a couple of things. I'd start with, as we think about the fleet, the petroleum costs are typically built into the rates that are charged from a competitive lane rate perspective.

Tim Larson: Yeah. A couple of things. I'd start with, as we think about the fleet, the petroleum costs are typically built into the rates that are charged from a competitive lane rate perspective. While the advantage wouldn't come necessarily within the fuel price, it comes more from a service and everything else. Now as you think about petroleum and the input cost of petroleum, it's not just diesel fuel. I think there's petroleum that goes into a ton of the products that we put into our homes every day.

Dave McKinstry: Yeah. A couple of things. I'd start with, as we think about the fleet, the petroleum costs are typically built into the rates that are charged from a competitive lane rate perspective. While the advantage wouldn't come necessarily within the fuel price, it comes more from a service and everything else. Now as you think about petroleum and the input cost of petroleum, it's not just diesel fuel. I think there's petroleum that goes into a ton of the products that we put into our homes every day.

Speaker #7: So while the advantage wouldn't come necessarily within the fuel price, it comes more from service and everything else. Now, as you think about petroleum and the input cost of petroleum, it's not just diesel fuel.

Speaker #7: I think there's petroleum that goes into a ton of the products that we put into our homes every day. So, as we mentioned, that drives the input costs on the materials that go into our homes.

Tim Larson: drives the input costs on the materials that go into our homes, it's not necessarily the cost of the diesel fuel itself, though as you think about it, we are seeing those weighing rates go up, and that's part of how we think about the overall cost of our homes as we go forward and how we manage that, of course, is how do we drive efficiency within our supply chain to make sure that we're delivering homes and building homes that have the right quality, the right cost, and everything that goes with it. As we think about all the other levers, how do we manufacture most efficiently in our plants, and then how do we balance making sure that we're competitive and offering the right value to our consumers in each of the markets we serve? Got it. All right, well, thanks for the color. Good luck, guys.

Dave McKinstry: Drives the input costs on the materials that go into our homes, it's not necessarily the cost of the diesel fuel itself, though as you think about it, we are seeing those weighing rates go up, and that's part of how we think about the overall cost of our homes as we go forward and how we manage that, of course, is how do we drive efficiency within our supply chain to make sure that we're delivering homes and building homes that have the right quality, the right cost, and everything that goes with it. As we think about all the other levers, how do we manufacture most efficiently in our plants, and then how do we balance making sure that we're competitive and offering the right value to our consumers in each of the markets we serve?

Speaker #7: It's not necessarily the cost of the diesel fuel itself. Though, as you think about it, we are seeing those lane rates go up. And that's part of how we think about the overall cost of our homes as we go forward, and how we manage that, of course, is how do we drive efficiency within our supply chain to make sure that we're delivering homes and building homes that have the right quality and the right cost and everything that goes with it?

Speaker #7: As we think about all the other levers, how do we manufacture most efficiently in our plants? And then, how do we balance making sure that we're competitive in offering the right value to our consumers in each of the markets we serve?

Speaker #8: Got it. All right. Well, thank you for the color. Good luck, guys.

Matthew Bouley: Got it. All right, well, thanks for the color. Good luck, guys.

Speaker #1: Thanks.

David McKinstry: Thanks.

Dave McKinstry: Thanks.

Speaker #6: Thank you. We will move next with Mike Doll with RBC Capital Markets. Please go ahead.

Operator: Thank you. We will move next with Mike Dahl with RBC Capital Markets. Please go ahead.

Speaker #9: Good morning. Thanks for taking my questions. The first one is a follow-up on cost dynamics. There are obviously a lot of moving pieces, but can you bucket for us or quantify—roughly speaking—kind of (A), the total percentage that you're facing in terms of inflation on a year-over-year basis?

Mike Dahl: Morning. Thanks for taking my questions. The first one is a follow-up on cost dynamics. Obviously a lot of moving pieces, but can you bucket for us or quantify, roughly speaking, kind of, A, the total percentage that you're facing in terms of inflation on a year-on-year basis, and then if there's any way to break down what's kind of wood-based versus things like plastics or steel. I think that would be helpful. On the offset side, I think when things were really stretched during the COVID boom period. You also had some tools like escalator clauses. Maybe that's not as applicable when you have shorter lead times and backlogs today, but just remind us if there's any other levers like that that could kind of kick in and help to quickly mitigate.

Speaker #9: And then, if there's any way to break down what's kind of wood-based versus things like plastics or steel, I think that would be helpful.

Speaker #9: And then on the offset side, I think when things were really stretched during kind of the COVID boom period, you also had some tools like escalator clauses. Maybe that's not as applicable when you have shorter lead times and backlogs today.

Speaker #9: But just remind us if there are any other levers like that which could kind of kick in and help to quickly mitigate.

Speaker #1: Yeah, I'll first hit kind of the big-picture pieces. As we think about the pricing in this market, we're going to work with our dealers, our communities, appropriately.

David McKinstry: Yeah, I'll first hit kind of the big picture pieces. As we think about the pricing in this market, we're going to work with our dealers, our communities appropriately, but we've got to be balanced to that from a consumer perspective because they're looking to get the home that's the best value for their consumer. We do have those levers if needed. The macro picture is how do we balance volume, price, margin, capacity utilization for the best outcome? We have to be thoughtful in those drivers, and I'll let Dave speak a little bit to your questions and some of the cost inputs.

Tim Larson: Yeah, I'll first hit kind of the big picture pieces. As we think about the pricing in this market, we're going to work with our dealers, our communities appropriately, but we've got to be balanced to that from a consumer perspective because they're looking to get the home that's the best value for their consumer. We do have those levers if needed. The macro picture is how do we balance volume, price, margin, capacity utilization for the best outcome? We have to be thoughtful in those drivers, and I'll let Dave speak a little bit to your questions and some of the cost inputs.

Speaker #1: But we've got to be balanced with that from a consumer perspective, because they're looking to get the home that's the best value for their consumer.

Speaker #1: So we do have those levers if needed. But the macro picture is: how do we balance volume, price, margin, and capacity utilization for the best outcome?

Speaker #1: And so we have to be thoughtful in those drivers. And I'll let Dave speak a little bit to your questions and some of the cost input.

Speaker #7: Yeah, and we won't get into the specifics of each of the cost buckets. But I think if you look at the year-on-year pressure we have in gross margin, the majority of that's going to come through the cost increase we're seeing, with a couple of other smaller drivers in there that I've already mentioned.

David McKinstry: We won't get into the specifics of each of the cost buckets, but I think if you look at the year-on-year pressure we have in gross margin, the majority of that's going to come through the cost increase we're seeing with a couple other smaller drivers in there that I've already mentioned. If you think about then the size of our spend categories, the forest products is going to be the largest of our spend categories. We know we're seeing cost pressure in that. You can see that through any public market data as well. That can give you an idea of what we're seeing on the forest product side. Steel's not going to be near the size of our forest product spend, but we're definitely seeing the rate of inflation within the steel category.

Dave McKinstry: We won't get into the specifics of each of the cost buckets, but I think if you look at the year-on-year pressure we have in gross margin, the majority of that's going to come through the cost increase we're seeing with a couple other smaller drivers in there that I've already mentioned. If you think about then the size of our spend categories, the forest products is going to be the largest of our spend categories. We know we're seeing cost pressure in that. You can see that through any public market data as well. That can give you an idea of what we're seeing on the forest product side. Steel's not going to be near the size of our forest product spend, but we're definitely seeing the rate of inflation within the steel category.

Speaker #7: But if you think about it, then the size of our spend categories—forest products is going to be the largest of our spend categories.

Speaker #7: We know we're seeing cost pressure in that. You can see that through any public market data as well, and so that can give you an idea of what we're seeing on the forest product side.

Speaker #7: Steel's not going to be near the size of our forest product spend, but we're definitely seeing the rate of inflation within the steel category.

Speaker #7: And then, as I mentioned, the petroleum price impact and what it has on the rest of our spend buckets—that’s kind of across the board, if you will.

David McKinstry: Then, as I mentioned, the petroleum price impact and what it has on the rest of our spend buckets, that's kind of across the board, if you will, or maybe more widespread is probably better said. You're going to see that impact across many different smaller categories within our spend buckets. I think the thing to keep in mind is the timing of these elements. As Dave mentioned earlier, the actions we take around there, whether it be price related or operational efficiency, those can be a little bit paced post this immediate impact. Bigger picture, as we go forward longer term, whether it's our product portfolio, our various channels, we've got the opportunity to continue to have strong margins and things that you've seen historically.

Tim Larson: Then, as I mentioned, the petroleum price impact and what it has on the rest of our spend buckets, that's kind of across the board, if you will, or maybe more widespread is probably better said. You're going to see that impact across many different smaller categories within our spend buckets. I think the thing to keep in mind is the timing of these elements. As Dave mentioned earlier, the actions we take around there, whether it be price related or operational efficiency, those can be a little bit paced post this immediate impact. Bigger picture, as we go forward longer term, whether it's our product portfolio, our various channels, we've got the opportunity to continue to have strong margins and things that you've seen historically.

Speaker #7: Or maybe 'more widespread' is probably better said. So you're going to see that impact across many different, smaller categories within our spend buckets.

Speaker #1: And I think the thing to keep in mind is the timing of these elements. As Dave mentioned earlier, the actions we take around there, whether it be price-related or operational efficiency, those can be a little bit post this immediate impact.

Speaker #1: But bigger picture, as we go forward longer term—whether it's our product portfolio or our various channels—we've got the opportunity to continue to have strong margins and the things that you've seen historically.

Speaker #1: It's just that, as we work through this window, we've got to balance that and manage it for the factors that I mentioned.

David McKinstry: It's just through as we work through this window, we've got to balance that and manage that for the factors that I mentioned.

Tim Larson: It's just through as we work through this window, we've got to balance that and manage that for the factors that I mentioned.

Speaker #9: Got it. Okay, that's helpful. Just shifting gears to the Homes Direct acquisition—a two-part here. First, you did mention that you already do some business through Homes Direct.

Mike Dahl: Got it. Okay. That's helpful. Just shifting gears to the Homes Direct acquisition, a two-parter here. First, you did mention that you already do some business through Homes Direct or with Homes Direct. Of the $70 million in annualized run rate revenue, is that incremental or could you help us understand what portion of that is incremental versus what you already sell through them? The second part is, you mentioned a couple things that seem kind of unique about this specific business within the retail landscape. I was hoping you could go into a little more detail about some of those dynamics in terms of, it looks like how they deal with the customers. It's more of an end-to-end kind of support platform. Maybe just talk a little more about what's unique and how portable some of that will be to the rest of your locations.

Speaker #9: Or with Homes Direct. So, of the $70 million in annualized run rate revenue, is that incremental, or could you help us understand what portion of that is incremental versus what you already sell through them?

Speaker #9: And the second part is, you mentioned a couple of things that seem kind of unique about this specific business within the retail landscape. And I was hoping you could go into a little more detail about some of those dynamics in terms of—it looks like how they deal with the customers, it's more of an end-to-end kind of support platform.

Speaker #9: So maybe just talk a little more about what's unique, and how portable some of that will be to the rest of your locations.

Speaker #1: Yeah, great question. And I'll start where you ended. So Homes Direct really does look at it end-to-end. And when I met Ray a few years ago, we got introduced to have a few-minute conversation.

David McKinstry: Great question, and I'll start where you ended. Homes Direct really does look at it end to end. When I met Ray a few years ago, we got introduced to have a few-minute conversation. It turned into an hour because we were talking about the customer experience and where that could go. It's because they really see the opportunity to help that customer all the way from when they're online through their living in their home and that end to end. They take care in both their team's training and the ways the homes are displayed in retail. Some of you have been to the Chandler location. You know what I'm talking about in terms of the overall experience. The other element you asked about is what percent of volume are we today?

Tim Larson: Great question, and I'll start where you ended. Homes Direct really does look at it end to end. When I met Ray a few years ago, we got introduced to have a few-minute conversation. It turned into an hour because we were talking about the customer experience and where that could go. It's because they really see the opportunity to help that customer all the way from when they're online through their living in their home and that end to end. They take care in both their team's training and the ways the homes are displayed in retail. Some of you have been to the Chandler location. You know what I'm talking about in terms of the overall experience. The other element you asked about is what percent of volume are we today?

Speaker #1: It turned into an hour because we were talking about the customer experience and where that could go. And it's because they really see the opportunity to help that customer all the way from when they're online through their living in their home, and that end-to-end.

Speaker #1: And they take care in both their team's training and the ways the homes are displayed in retail. Some of you have been to the Chandler location.

Speaker #1: You know what I'm talking about in terms of that overall experience. The other element you asked about is, what percent of volume are we today?

Speaker #1: We don't break it out specifically. But what I can share with you is that at each of those other 10 locations, there's a number of other brands on the store and on the lot.

David McKinstry: We don't break it out specifically, what I can share with you at each of those other 10 locations, there's a number of other brands on the store and on the lot. There's meaningful opportunities for us over time to migrate those to all of our Champion brands and portfolio of products across the plants in the West. You'll see that over time come through, and obviously, we've had the benefit you've seen in our eyes

Tim Larson: We don't break it out specifically, what I can share with you at each of those other 10 locations, there's a number of other brands on the store and on the lot. There's meaningful opportunities for us over time to migrate those to all of our Champion brands and portfolio of products across the plants in the West. You'll see that over time come through, and obviously, we've had the benefit you've seen in our eyes and aqcuisition how we've added our own products over time. There is accretive opportunity and upside there as we go forward. Obviously, the $70 million they do today is in those 11 stores, and we're a portion of that, but we're certainly not all of it.

Speaker #1: And so, there's meaningful opportunities for us, over time, to migrate those to all of our Champion brands and portfolio of products across the plants in the West.

Speaker #1: So you'll see that over time come through. And obviously, we've had the benefit—you've seen it in our Eisman acquisition—how we've added our own products over time.

Tim Larson: Position how we've added our own products over time. There is accretive opportunity and upside there as we go forward. Obviously, the $70 million they do today is in those 11 stores, and we're a portion of that, but we're certainly not all of it.

Speaker #1: So there is a creative opportunity and upside there as we go forward. And obviously, the $70 million they do today is in those 11 stores.

Speaker #1: And we're a portion of that, but we're certainly not all of it.

Speaker #9: Got it. Okay. Thank you.

Mike Dahl: Got it. Okay. Thank you.

Speaker #10: Thank you. We will move next with Philip Inc. with Jefferies. Please go ahead.

Operator: Thank you. We will move next with Philip Ng with Jefferies. Please go ahead.

Speaker #11: Hey, guys. Any color on how we should think about the margin profile from a homes direct standpoint? Will this be additive, whether it's gross margins or EBITDA?

Philip Ng: Hey, guys. Any color on how we should think about the margin profile from a Homes Direct standpoint? Will this be additive, whether it's gross margins in EBITDA? When we think about cost synergies, any more color in terms of what are the big buckets here?

Speaker #11: And when we think about cost synergies, any more color in terms of what are the big buckets here?

Speaker #1: Hey, Phil. In terms of Homes Direct, it certainly is going to be positive. We get the benefit of the retail margin, in addition to the manufacturing margin.

Tim Larson: Hey, Philip. In terms of Homes Direct, it certainly is going to be positive. We get the benefit of the retail margin in addition to the manufacturing margin. As we move more products that they today get from other sources to our sources, that helps the plant because you get better utilization. There's a positive element on the margin side from those drivers. In terms of the cost side, for us, they're a retail operator. They don't have manufacturing, some of those traditional synergies we see, we don't see in that aspect. What we do see is the opportunity to build on the playbook of our retail and sharing the best practices, not only with Homes Direct, they're going to be sharing with us, that affects our other 83 locations. There's some synergies in terms of the effectiveness of retail.

Speaker #1: As we move more products that they today get from other sources to our sources, that helps the plant because you get better utilization. So there's a positive element on the margin side from those drivers.

Speaker #1: In terms of the cost side, for us, they're a retail operator. They don't have manufacturing, so some of those traditional synergies we see, we don't see in that aspect.

Speaker #1: But what we do see is the opportunity to build on the playbook of our retail and share the best practices, not only with Homes Direct—they're going to be sharing with us—that affects our other 83 locations.

Speaker #1: So there's some synergies in terms of the effectiveness of retail. And then, because we've added retail stores over the years, we do have some cost benefit because we can have some common capabilities around marketing and our overall staff levels that support retail.

Tim Larson: Because we've added retail stores over the years, we do have some cost benefit because we can have some common capabilities around marketing our overall staff levels that support retail. It's more about the organic growth and the growth in the West that's the opportunity versus a cost play.

Speaker #1: But it's more about the organic growth, and the growth in the West. That's the opportunity versus a cost play.

Speaker #11: Okay, that's helpful. Once this is properly integrated, Tim, what percentage of your sales mix is captive retail?

Philip Ng: Okay, that's helpful. Once this is properly integrated, Tim, what percentage of your sales mix is captive retail?

Philip Ng: Okay, that's helpful. Once this is properly integrated, Tim, what % of your sales mix is captive retail?

Speaker #1: Yeah, certainly. Right now, you see us in that mid to upper 30s, depending on the quarter. So this is going to benefit that. But we're also growing our other channels, whether it be builder, developer, and depending on the cycle, community.

Tim Larson: Yeah, certainly right now you see us in that mid to upper 30s, depending on the quarter. This is going to benefit that. We're also growing our other channels, whether it be builder, developer, and depending on the cycle, community. That's going to move around, but ultimately we see it as growing our captive retail.

Speaker #1: So that's going to move around. But ultimately, we see it as growing our captive retail.

Speaker #11: Okay, helpful. A question for Dave. I mean, you gave some color, Dave, for Q1 gross margins in that 24 to 25.5% range.

Philip Ng: Okay. Helpful. A question for Dave. You gave some color, Dave, for 1Q gross margins in that 24% to 25.5% range. Appreciating some of the continuous improvement and cost out initiatives you're looking to ramp up hasn't kicked in yet, is there a path perhaps in H2 where margins get back in that 26% to 27% range? Is taking price, especially on your captive retail side of things, a consideration right now?

Speaker #11: Appreciating some of the continuous improvement in cost-out initiatives you're looking to ramp up, hasn't kicked in yet. But is there a path, perhaps in the back half, where margins get back in that 26, 27 percent range?

Speaker #11: And is taking price, especially in your captive retail side of things, a consideration right now?

Speaker #1: Yeah. So I think, as we think about it, there are a lot of variables going into beyond Q1, right? So, what is the rate of inflation we're going to see beyond the quarter from where we're at today?

David McKinstry: I think as we think about it, a lot of variables going into the beyond Q1, right? What is the rate of inflation we're going to see beyond the quarter from where we're at today? What are we going to see from all the different dynamics within our mixed portfolio and really the impact that is happening to the consumer because of the general macro trends. Those are some of the unknown questions. As we think about it, obviously, you mentioned some of the efficiency things that we spoke about we're going to start implementing here as we move through the quarter and into the back half of the year. The other thing that I would mention, you asked about the price side of things. We're always trying to balance the competitive side on pricing.

Dave McKinstry: I think as we think about it, a lot of variables going into the beyond Q1, right? What is the rate of inflation we're going to see beyond the quarter from where we're at today? What are we going to see from all the different dynamics within our mixed portfolio and really the impact that is happening to the consumer because of the general macro trends. Those are some of the unknown questions. As we think about it, obviously, you mentioned some of the efficiency things that we spoke about we're going to start implementing here as we move through the quarter and into the back half of the year. The other thing that I would mention, you asked about the price side of things. We're always trying to balance the competitive side on pricing.

Speaker #1: What are we going to see from all the different dynamics within our mixed portfolio? And really, the impact that is happening to the consumer because of the general macro trends.

Speaker #1: So, those are some of the unknown questions. As we think about it, obviously you mentioned some of the efficiency things that we spoke about—we're going to start implementing those here as we move through the quarter and into the back half of the year.

Speaker #1: The other thing that I would mention—you asked about the price side of things—we're always trying to balance the competitive side on pricing.

Speaker #1: So that's really a regional, by-market discussion that we're always constantly having—what is the right price point to meet the demand for our consumer?

David McKinstry: That's really a regional by-market discussion that we're always constantly having is what is the right price point to meet the demand for our consumer, manage our overall margin profile with the capacity within our plants, the products that we offer, all those different levers that go into it. Something that we're always looking at, but it's a more dynamic discussion as we think about it. As we think about it, we'll see how all those factors come together in the back half of this calendar year and really update you as we go forward.

Dave McKinstry: That's really a regional by-market discussion that we're always constantly having is what is the right price point to meet the demand for our consumer, manage our overall margin profile with the capacity within our plants, the products that we offer, all those different levers that go into it. Something that we're always looking at, but it's a more dynamic discussion as we think about it. As we think about it, we'll see how all those factors come together in the back half of this calendar year and really update you as we go forward.

Speaker #1: We manage our overall margin profile with the capacity within our plants, the products that we offer, and all those different levers that go into it. So that's something that we're always looking at.

Speaker #1: But it's a more dynamic discussion as we think about it. So, as we think about it, we'll see how all those factors come together in the back half of this calendar year and really update you as we go forward.

Speaker #11: Okay. A follow-up, I guess. Is the expectation—I mean, it’s very dynamic—but based on what you know today, should we expect inflation peaking in Q1?

Philip Ng: Okay. A follow-up, I guess. Is the expectation, it's very dynamic, but based on what you know today, should we expect inflation peaking in Q1 and then you kind of build off of that? That inflation dynamic actually could pick up even more as the year progresses based on what you know today? On the freight side of things, is that a pure pass-through or do you have to take price there?

Speaker #11: And then you kind of build off of that? Or that inflation dynamic actually could pick up even more as the year progresses, based on what you know today.

Speaker #11: And on the freight side of things, is that a pure pass-through? Or do you have to take price there?

Speaker #1: Yeah, so—dynamic market, you said it. It's a dynamic market, so it's hard to say exactly where it'll be beyond Q1 as we head into Q2 and Q3.

David McKinstry: Yeah. Dynamic market. You said it. It's a dynamic market, so it's hard to say exactly where it'll be beyond Q1 as we head into Q2 and Q3. From a freight perspective, it is mostly a pass-through, but it's part of the broader cost side of things that we're looking at with each of our partners as we go forward and ultimately the consumer. Yes, it's broadly a pass-through, but again, it impacts the total price of our homes.

Dave McKinstry: Yeah. Dynamic market. You said it. It's a dynamic market, so it's hard to say exactly where it'll be beyond Q1 as we head into Q2 and Q3. From a freight perspective, it is mostly a pass-through, but it's part of the broader cost side of things that we're looking at with each of our partners as we go forward and ultimately the consumer. Yes, it's broadly a pass-through, but again, it impacts the total price of our homes.

Speaker #1: From a freight perspective, it is mostly a pass-through. But it's part of the broader cost side of things that we're looking at with each of our partners as we go forward.

Speaker #1: And ultimately, the consumer. So yes, it's broadly a pass-through. But again, it impacts the total price of our homes.

Speaker #11: Okay. Appreciate the color, guys. Thank you.

Philip Ng: Okay. Appreciate the color, guys. Thank you.

Speaker #1: Thanks, Phil.

Tim Larson: Thanks, Phil.

Speaker #10: Thank you. We will move next with Jesse Leaderman with Zellman & Associates. Please go ahead, your line is open.

Operator: Thank you. We will move next with Jesse Lederman with Zelman & Associates. Please go ahead. Your line is open.

Speaker #12: Hey, good morning, and thanks for taking the question. Dave, it sounded like when you talked about mixed shift from a price point perspective in fiscal Q1 '27 coming up here, you expected kind of a shift back to more single-section homes.

Jesse Lederman: Good morning, and thanks for taking the question. David, it sounded like when you talked about mix shift from a price point perspective in fiscal Q1 2027 coming up here, you expected kind of a shift back to more single-section homes, whereas that momentum has been shifting more toward multi-section, perhaps as the lower end of the income spectrum's priced out or people are mixing down to a larger manufactured home, perhaps. Can you just talk through maybe what you've seen the last couple of quarters and how that's trending so far in Q1?

Speaker #12: Whereas that momentum has been shifting more toward multi-section, perhaps as the lower end of the income spectrum is priced out or people are mixing down to a larger manufactured home, perhaps.

Speaker #12: Can you just talk through maybe what you've seen the last couple of quarters and how that's trending so far in the first quarter?

Speaker #1: Yeah, I’d say bigger picture, longer term, we have seen more trend to the multi-section. I do think as we go forward here in Q1—we mentioned the community channel—and maybe some more optimistic outlook.

David McKinstry: Yeah. I'd say bigger picture, longer term, we have seen more trend to the multi-section. I do think as we go forward here in Q1, we mentioned the community channel and maybe some more optimistic outlook. Obviously, it's a little bit mixed, but They tend to be more single unit. That will have an impact. That's a channel mix. As we think about the product mix, it's not necessarily multi versus single. There's a lot of dynamics with it, right? There's going to be options and all the different customizations that consumers can make. Those are choices that they're making to manage the overall price point. It's not necessarily as easy as single versus double. As we think about going forward, our consumer's a broad spectrum. It's not just a single consumer.

Dave McKinstry: Yeah. I'd say bigger picture, longer term, we have seen more trend to the multi-section. I do think as we go forward here in Q1, we mentioned the community channel and maybe some more optimistic outlook. Obviously, it's a little bit mixed, but They tend to be more single unit. That will have an impact. That's a channel mix. As we think about the product mix, it's not necessarily multi versus single. There's a lot of dynamics with it, right? There's going to be options and all the different customizations that consumers can make. Those are choices that they're making to manage the overall price point. It's not necessarily as easy as single versus double. As we think about going forward, our consumer's a broad spectrum. It's not just a single consumer.

Speaker #1: Obviously, it's a little bit mixed. But they tend to be more single unit, so that will have an impact. That's kind of a channel mix.

Speaker #1: As we think about the product mix, it's not necessarily multi versus single. There's a lot of dynamics with it, right? There's going to be options, and all the different customizations the consumers can make.

Speaker #1: Those are choices that they're making to manage the overall price point. So it's not necessarily as easy as single versus double. But as we think about going forward, our consumers are a broad spectrum.

Speaker #1: It's not just a single consumer. And so, we are seeing more consumers who step in from traditional site-built, who are buying more of the multi-section.

David McKinstry: We are seeing more consumers who step in from traditional site-built who are buying more of the multi-section. At the same time, you have community operators who tend to be more single section, and then you have all the in between, right? That's going to be a mix of both single, multi, but then again, back to the different product variations that we have and the options that we offer our consumer. I think that's really a testament to the strength of our overall portfolio and the different products and options that we can offer to the consumers.

Dave McKinstry: We are seeing more consumers who step in from traditional site-built who are buying more of the multi-section. At the same time, you have community operators who tend to be more single section, and then you have all the in between, right? That's going to be a mix of both single, multi, but then again, back to the different product variations that we have and the options that we offer our consumer. I think that's really a testament to the strength of our overall portfolio and the different products and options that we can offer to the consumers.

Speaker #1: At the same time, you have community operators who tend to be more single-section. And then you have all the in-between, right? And that's going to be a mix of both single and multi, but then again, back to the different product variations that we have and the options that we offer our consumer.

Speaker #1: And I think that's really a testament to the strength of our overall portfolio and the different products and options that we can offer to the consumers.

Speaker #12: Awesome. Appreciate that. With the triad of JV, and based on some commentary the team has made in the past, it sounds like you have a really good grasp on the potential home buyers and their different metrics and qualification.

Jesse Lederman: Awesome. Appreciate that. Based on some commentary the team has made in the past, it sounds like you have a really good grasp on the potential homebuyers and their different metrics and qualification. Is there anything you could share from that perspective on what you're seeing over time the last few quarters, maybe quarter to date, on the health of the prospective buyer? Anything you can quantify would be great. Thank you.

Speaker #12: Is there anything you could share from that perspective on what you're seeing over time, the last few quarters, maybe quarter to date, on the health of the prospective buyer? And anything you can quantify would be great.

Speaker #12: Thank you.

Speaker #1: Yeah, great question, Jesse. So, big picture, we know that the industry in the first three months of the calendar year was down 9%. So, obviously, you had some pressure at the consumer levels that affected year-over-year.

Tim Larson: Yeah, great question, Jesse. Big picture, we know that the industry in the first three months of the calendar year was down 9%. Obviously you had some pressure at the consumer levels that affected year over year. On the positive side, we outperformed that pretty significantly. Part of the benefit was we were to bring in consumers that were maybe traditional site-built buyers. We see that in our data and the product portfolio Dave just mentioned. Now that group of customers obviously is against 100,000 annual units. It's going to take time over time to bring more of those customers in as we grow the overall addressable market.

Tim Larson: Yeah, great question, Jesse. Big picture, we know that the industry in the first three months of the calendar year was down 9%. Obviously you had some pressure at the consumer levels that affected year-over-year. On the positive side, we outperformed that pretty significantly. Part of the benefit was we were to bring in consumers that were maybe traditional site-built buyers. We see that in our data and the product portfolio Dave just mentioned. Now that group of customers obviously is against 100,000 annual units. It's going to take time over time to bring more of those customers in as we grow the overall addressable market.

Speaker #1: On the positive side, we outperformed that pretty significantly. And part of the benefit was we were able to bring in consumers that were maybe traditional site-built buyers.

Speaker #1: We see that in our data and the product portfolio Dave just mentioned. Now, that group of customers obviously is against 100,000 annual units. So, it's going to take time, over time, to bring more of those customers in as we grow the overall addressable market.

Speaker #1: But one of the things we're seeing on the entry-level consumer is, you can imagine, as inflation is going to more disproportionately impact that entry-level buyer—because when they look at their monthly payment, their cash flows, when things like gas prices jump up, etc.—there's some more pressure there.

David McKinstry: One of the things we're seeing on the entry-level consumer, as you can imagine, is inflation is going to more disproportionately impact that entry-level buyer because when they look at their monthly payment, their cash flows, when things like gas prices jump up, et cetera, there's some more pressure there. What we've been doing is making sure we have the right entry-level price point product. At times, that means a little less options. As David McKinstry mentioned, there's that trend in the community channel as well. That's why we want to continue to have a broad portfolio of products, a range of channels to reach those customers. Our online and marketing digital efforts, we're creating a broader reach to engage a broader set of buyers.

Tim Larson: One of the things we're seeing on the entry-level consumer, as you can imagine, is inflation is going to more disproportionately impact that entry-level buyer because when they look at their monthly payment, their cash flows, when things like gas prices jump up, et cetera, there's some more pressure there. What we've been doing is making sure we have the right entry-level price point product. At times, that means a little less options. As Dave mentioned, there's that trend in the community channel as well. That's why we want to continue to have a broad portfolio of products, a range of channels to reach those customers. Our online and marketing digital efforts, we're creating a broader reach to engage a broader set of buyers.

Speaker #1: So what we've been doing is making sure we have the right entry-level price point product. At times, that means a little less options. And then, as Dave mentioned, there's that trend in the community channel as well.

Speaker #1: So that's why we want to continue to have a broad product range of channels to reach those customers, and then our online and marketing digital efforts were creating a broader reach to engage a broader set of buyers.

Speaker #1: And those buyers are tying back to the various segments that you referenced, so we can start to learn from that data and really look at how we make sure that we are matching to the broader set of buyers in the market.

Tim Larson: Those buyers are tying back to the various segments that you referenced, that we can start to learn from that data and really look at how we make sure that we are matching to the broadest set of buyers in the market. That's why these nuanced elements are so key, because you're working in a very multifaceted environment across channels, across consumers, and we're very fortunate to have better data now to drive that.

Speaker #1: So that's why these nuanced elements are so key, because you're working in a very multifaceted environment—across channels, across consumers—and we're very fortunate to have better data now to drive that.

Speaker #12: Thanks, Dave. Really helpful. Last one from me—I’d love to get a little bit more color on the community channel. Maybe if you have a better sense now than the last couple of quarters of what kind of caused the slowdown.

Jesse Lederman: Thanks, Dave. Really helpful. Last one from me. Love to get a little bit more color on the community channel. Maybe if you have a better sense now than the last couple of quarters of what caused the slowdown later last year and what your confidence is for the recent inflection higher to maintain into the balance of the year here. Thanks again.

Speaker #12: Kind of later last year, and what your confidence is for the recent inflection higher to maintain into the balance of the year here. Thanks again.

Speaker #1: Yeah, thanks, Jesse. So, as we think about the community channel, you've got a range of operators, and each of them have various portfolios of projects.

Tim Larson: Yeah. Thanks, Jesse. As we think about the community channel, you've got a range of operators and each of them have various portfolios of projects, some new builds and expansions, more lots in their communities. Some are this change out of existing homes. They also have the factors, which is are they heavy rental or are they more land lease? Those all have factors in terms of their cycles. Are they upgrading existing homes rather than purchasing new? When we work with each of those operators, we're working with their plans and their build-outs relative to those factors. We are seeing some operators that are more in adding of those lots and new homes or those replacements. We do have some operators that are more just managing their portfolio and doing more of the updates.

Speaker #1: Some new builds and expansions, more lots in their communities. Some are just changeouts of existing homes. They also have the factors, which are: are they heavy rental or are they more land lease?

Speaker #1: And those all have factors in terms of their cycles. Are they upgrading existing homes rather than purchasing new? So when we work with each of those operators, we're working with their plans and their build-outs relative to those factors.

Speaker #1: And we are seeing some operators that are more in adding of those lots and new homes or those replacements. We do have some operators that are more just managing their portfolio and do more of the updates.

Speaker #1: And so, what we're signaling is this quarter we saw more of an uptick, whereas in previous quarters they were managing more inventory or coming off of, if you will, the growth that they had throughout the pandemic.

David McKinstry: What we're signaling is this quarter we saw more of an uptick, whereas in previous they were managing more inventory or coming off of, if you will, the growth that they had throughout the pandemic. I would say it's encouraging, but it's mixed depending on the community operator. Obviously we're working closely with them by regions of the country. What I'm encouraged by our plan teams, et cetera, is how they're working with them on specific products to really hit the need for their price points and their initiatives within each of those operators.

Tim Larson: What we're signaling is this quarter we saw more of an uptick, whereas in previous they were managing more inventory or coming off of, if you will, the growth that they had throughout the pandemic. I would say it's encouraging, but it's mixed depending on the community operator. Obviously we're working closely with them by regions of the country. What I'm encouraged by our plan teams, et cetera, is how they're working with them on specific products to really hit the need for their price points and their initiatives within each of those operators.

Speaker #1: So, I would say it's encouraging, but it's mixed depending on the community operator. And obviously, we're working closely with them by regions of the country.

Speaker #1: And what I'm encouraged by, our plant teams, etc., is how they're working with them on specific products to really hit the need for their price points and their initiatives within each of those operators.

Speaker #12: Thanks so much.

Jesse Lederman: Thanks so much.

Speaker #1: Thanks, Jesse.

Tim Larson: Thanks, Jesse.

Speaker #13: Thank you. And at this time, there are no further questions in the queue. I will now turn the meeting back to Tim for closing comments.

Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Tim for closing comments.

Speaker #1: Yeah, we appreciate everybody joining, and just want to congratulate the Champion Homes team on a really strong FY26. Obviously, a record number year of homes.

Tim Larson: I appreciate everybody joining, and just want to congratulate the Champion Homes team on a really strong F2026. Obviously record number year of homes and we're carrying that momentum. We really appreciate all of you joining us today and the continued interest. Obviously there's so much opportunity ahead with the broader housing market as we navigate the current environment, and we look forward to updating you on our next quarter call. Thanks so much.

Speaker #1: And we're carrying that momentum, and we really appreciate all of you joining us today and the continued interest. Obviously, there's so much opportunity ahead with the broader housing market as we navigate the current environment.

Speaker #1: And we look forward to updating you on our next quarter call. Thanks so much.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.