Champion Homes Reports Q1 2027 Results: Full Earnings Call Transcript

Champion Homes (NYSE: SKY ) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered APIs. S.

8%. The company completed its acquisition of Homes Direct, advancing its direct-to-consumer strategy, although financial impacts from this acquisition will be seen in upcoming quarters. 8 million, with manufacturing orders increasing year over year, indicating strong demand in the housing market. 88 per diluted share.

Champion Homes expects mid-single-digit revenue growth in the second quarter, with adjusted gross margins projected to be in the 25% to 26% range. The company highlighted legislative support from the 21st Century Road to Housing Act as a positive regulatory development, potentially expanding market opportunities. Management expressed confidence in the company's positioning to address affordable housing needs, supported by a strong balance sheet and diversified channels. Full Transcript Erica, Operator Good morning and welcome to the Champion Homes first quarter fiscal 2027 earnings call.

My name is Erica and 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 Ellen Kalanicki, Director of Investor Relations.

Ellen, please go ahead. Ellen Kalanicki, Director of Investor Relations Good morning. Thank you for joining us for today's conference call and review of Champion Homes results for the first quarter ended June 27, 2026. Here to review the results are Tim Larson, CEO and Dave McKinstray, CFO.

Yesterday, after the market closed, 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. Definitions and reconciliations of these measures can be found in the earnings release. I will now turn the call over to Tim Larson. Tim Larson, President & CEO Thank you, Ellen and good morning everyone.

The Champion Homes team delivered a solid start to fiscal 2027 with results that aligned with our expectations. We continue to outperform the broader industry, demonstrating the strength of our customer-centric strategy and the team's operational execution. The recent closing of the Homes Direct acquisition marks an important milestone in advancing our direct-to-consumer strategy. The transaction closed on August 1st and we are honored to formally welcome the Homes Direct team to Champion.

While the financial impact in the second quarter will be limited due to timing, we remain excited about the strategic opportunities that we are already seeing as we work with the Homes Direct team. This acquisition reflects how we are allocating our capital to enhance and accelerate our strategic priorities across our channels, product portfolio and operational scale. Champion remains uniquely positioned to help address the need for affordable housing. We remain focused on producing high-quality homes that provide compelling value when compared to traditional site-built alternatives.

We will achieve this by advancing a differentiated customer-centric strategy that supports long-term growth and value creation. Let's turn to our quarterly results. The quarter unfolded largely as we anticipated and we are pleased with the consistency and execution demonstrated by our team in a dynamic economic environment. 2 million.

Manufacturing capacity utilization during the quarter was 62%, up from 59% sequentially and up 1 percentage point compared to the same period last year. As a reminder, our utilization reporting includes our six idled facilities. Champion again outperformed the broader industry. S.

8% versus the same period last year. This performance is against a backdrop of declining HUD industry shipments, which were down year over year approximately 5% during the three-month period ending May 2026. The demand environment was very encouraging for us in the first quarter. 8 million versus 302 million at the end of the first quarter last year.

Manufacturing backlog lead time ended the quarter at approximately 9 weeks, which is within our target range of 4 to 12 weeks. We continue to manage production responsibly and balance customer demand with market conditions. From a channel perspective, we achieved solid results across our portfolio, reinforcing the resiliency of our diversified go-to-market model. Sales to our independent retail channel were up 4% year over year.

We continue to invest in tools and capabilities to support our independent dealers' businesses, including lead management capabilities via our dealer portal, consumer digital engagement initiatives and being nimble with our product offerings. We believe these important investments position both Champion and our dealer network for long-term success. Our captive retail channel continued to perform well. Captive retail represented approximately 35% of consolidated sales during the quarter compared to 34% in the prior year period.

Execution across our retail network remains strong as we leverage our investments across our now 95 captive retail stores, including 11 Homes Direct stores in the Western United States. It's worth noting that our first quarter results do not include Homes Direct, which, as I mentioned, closed Aug. 1. Community orders were up modestly this quarter.

Community operators continually and carefully manage inventory levels and monitor consumer demand. Orders from some of the larger operators were drivers during the first quarter and we are encouraged by community customer engagement trends. Builder developer sales increased year over year with momentum accelerating in this channel during the recent quarter. Our offsite construction event in York, Nebraska attracted more than 150 attendees and showcased the interest in modular and HUD housing solutions.

Developers, builders, municipalities and housing advocates from across the nation attended the event. This reflects the growing interest and demand for affordable and timely home construction solutions. Our joint venture with Triad Champion Financing continued to perform well in the quarter. 1 million Canadian dollars, a portion of which we have reinvested in the Homes Direct transaction.

Turning to the regulatory developments, we are pleased with the continued momentum of policies that expand affordable housing. The 21st Century Road to Housing Act recently passed both chambers of Congress with overwhelming bipartisan support, becoming law on July 10. While implementation will take time and the HUD rulemaking process is ongoing, we believe the legislation represents a meaningful step toward expanding housing opportunities and removing barriers to factory-built housing adoption. Our teams remain actively engaged with HUD and other stakeholders as technical specifications and implementation details continue to evolve.

As you would expect, in addition to the HUD rulemaking, there will be new engineering, transport and set considerations for HUD homes that are not built on a permanent chassis. Our teams are excited to implement this change while also remaining focused on our traditional HUD product that is built on a permanent chassis. We envision over time that both types of construction will be utilized throughout the industry. Additionally, Champion will once again return to the National Mall for HUD's Innovative Housing Showcase in September.

The showcase and legislation demonstrate that federal housing leaders are increasingly supportive of manufactured homes as a central solution to the housing affordability crisis. We continue to monitor zoning reform at the state and local level as well. The Commonwealth of Virginia, for example, recently enacted legislation that allows manufactured housing placement in residential districts where site-built homes are permitted. This represents additional momentum towards the long-term acceptance of offsite-built in parity with site-built.

We believe the continued incremental regulatory progress leads to a favorable long-term outlook for our industry. As we move through the opening weeks of the second quarter, our observations remain consistent with the themes we've discussed today. The macro environment remains dynamic and consumers continue to face broad affordability pressures. However, demand for attainable housing remains strong and our team continues to execute our strategy with excellence.

We are encouraged by the customer engagement trends and the opportunities we are seeing across our channels. We believe Champion is better positioned than ever to help address the housing affordability challenge. With best-in-class products designed for the specific customers and markets we serve, supported by diversified channels and a highly engaged team, our balance sheet remains exceptionally strong, providing flexibility to invest in growth opportunities, pursue disciplined capital allocation and continue creating long-term shareholder value. With that, I'll turn the call over to Dave.

Dave McKinstray, CFO Thanks, Tim, and good morning, everyone. Before I get into the quarter and outlook, I want to briefly welcome the Homes Direct team to Champion Homes. We're excited to have them as part of the company, and we look forward to collaborating together as we continue to expand our retail platform. Now I'll begin by reviewing our first-quarter financial results, followed by our balance sheet and cash flow performance.

I'll then conclude with our outlook for the second quarter of fiscal 2027. Overall, our first-quarter results reflected steady execution in a dynamic operating environment, with demand improving as the quarter progressed. The business performed in line with expectations, and we're pleased with how we're starting fiscal 2027. 2 million.

These results were slightly ahead of expectations, reflecting stronger-than-anticipated overall demand throughout the quarter. 8% to 7,089 units. 6% to approximately $95,600, primarily driven by pricing on homes sold through our company-owned retail locations. In Canada, homes sold declined to 185 from 250 in the prior-year quarter.

The volume decline, which was impacted by weather-related disruptions, was partially offset by higher average selling prices. 2%. This was in line with our expectations and reflected disciplined pricing actions, operational execution, and ongoing efforts to offset higher material costs in a volatile macro environment. As we discussed last quarter, these pricing actions typically lag cost increases.

We expect the benefits to gain momentum in the second quarter. 4% of net sales for the quarter, within our expected range. 88 per diluted share. 4%.

Our effective tax rate was approximately 25% compared with 21% in the prior-year quarter, reflecting the expiration of Energy Star—related tax incentives, which we spoke about on our Q4 call. 3 million at fiscal year-end. The increase was primarily due to the proceeds received from the ECN transaction. 5 million during the quarter, demonstrating the strong cash generation characteristics of the business.

We also continued to return capital to shareholders, repurchasing and retiring $50 million of common stock during the quarter. In July, the Board refreshed the share repurchase authorization back to the $150 million level. Since the inception of our share buyback program in fiscal 2025, we have repurchased $330 million, or 8%, of our total outstanding shares. Overall, we continue to maintain a highly flexible balance sheet that supports organic growth, investment, strategic acquisition, and shareholder returns.

Looking ahead, our outlook reflects both the current operating environment and our confidence in our ability to execute. Our second-quarter guidance excludes Homes Direct, given the timing of the transaction close. Consumer purchasing power remains under pressure, and interest rates remain elevated relative to historical levels. Despite these headwinds, we believe Champion Homes is well positioned given the value and breadth of our product portfolio and the broad reach of our channel network.

Material costs remain elevated across the industry, though the rate of inflation has slowed from what we saw earlier in the fiscal year, and we continue to execute strategies to mitigate the impact. Looking toward the second quarter of fiscal 2027, we expect revenue to grow mid-single digits compared to the prior year. This reflects the demand increases we saw in Q1 and resulting increases to backlog across our channels. We expect near-term adjusted gross margin in the 25% to 26% range, as the actions we have taken to mitigate material cost pressures are beginning to take hold, and we expect those benefits to build as we move through the second quarter.

We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution in Q2. We expect adjusted SG&A as a percent of sales to be 16% to 17%, consistent with Q1 and our run rates following the Eisman acquisition. As a reminder, Energy Star tax credits expired on July 1st, which is expected to increase the fiscal '27 ETR to approximately 25%. In summary, we remain disciplined in our near term while we continue to invest in our long-term strategy, generate strong cash flow, and allocate capital in ways that will create sustainable shareowner value.

I'll now turn the call back to Tim. Tim Larson, President & CEO Thank you, Dave. Our first-quarter results demonstrate that despite a dynamic operating environment, Champion Homes continues to execute its strategy with excellence. The progress we've made over the last several years starts with our people, who we believe are the best in the industry.

It is also reflected in our channel diversification, retail expansion, product innovation, and our direct-to-consumer platform. Each of these position us favorably relative to the broader market, as demonstrated by our performance in Q1. With that, operator, let's open the line and proceed with questions. Erica, Operator Thank you.

As a reminder, at this time, if you would like to ask a question, it is star then one on your touchtone telephone. If at any point you find your question has been answered, you may remove yourself from the queue by pressing 2. Again, that is star one to ask a question. And we'll take our first question from Dan Moore with CJS Securities.

Please go ahead. Willem, Analyst at CJS Securities Hi, this is Willem for Dan. Thanks for taking our questions. Can you update us on the cadence of retail traffic and orders through May and June as well as early Q2 in July?

Tim Larson, President & CEO Good morning. Yeah, we saw good momentum through the quarter, and that's reflected in our backlog growth and certainly our outlook for Q2. And that traffic was both digitally as well as through the stores. And I would say the traffic at retail also indicates broader traffic that we're seeing with our independent dealers.

And you saw the strength of that in our quarter as well as in our guide. So we've been pleased with the traffic, and we're looking forward to seeing that go throughout the summer months here into the rest of the year. Willem, Analyst at CJS Securities Thank you. It's very helpful.

Inside the plants, where are you increasing production given the uptick in backlog, where are you holding steady, and how should we think about production in Q2 relative to the quarter you just reported? Tim Larson, President & CEO Yeah, we began ramping production in the key markets where we saw the growth in Q1, and we'll continue to do that through Q2. We do that very thoughtfully by plant location and looking at what their backlog is, what market conditions they're operating in. But we have been increasing production.

You saw that through our utilization. We'll do so where it makes sense by each region. Willem, Analyst at CJS Securities Thank you. And then just one more: ASPs ticked lower sequentially.

Was that a function of mix, fewer homes sold through captive retail, both?