Cavco Industries Q1 2026 Earnings Report

Cavco Industries EPS Results

• Actual EPS: $6.42
• Consensus EPS: $5.81
• Beat/Miss: Beat by +$0.61
• One Year Ago EPS: N/A

Cavco Industries Revenue Results

• Actual Revenue: $556.86 million
• Expected Revenue: $524.97 million
• Beat/Miss: Beat by +$31.89 million
• YoY Revenue Growth: N/A

Cavco Industries Announcement Details

• Quarter: Q1 2026
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 1:00PM ET

Cavco Industries (NASDAQ:CVCO) designs, produces, and retails factory-built homes primarily in the United States. It operates in two segments, Factory-Built Housing and Financial Services. The company markets its factory-built homes under the Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry, and Solitaire brands. It produces park model RVs; vacation cabins; and factory-built commercial structures, including apartment buildings, condominiums, hotels, workforce housing, schools, and housing for the United States military troops. In addition, the company produces various modular homes, which include single and multi-section ranch, split-level, and Cape Cod style homes, as well as two- and three-story homes, and multi-family units. Further, it provides conforming and non-conforming mortgages and home-only loans to purchasers of various brands of factory-built homes sold by company-owned retail stores, as well as various independent distributors, builders, communities, and developers. Additionally, the company offers property and casualty insurance to owners of manufactured homes. It distributes its products through a network of independent and company-owned retailers, planned community operators, and residential developers. Cavco Industries, Inc. was founded in 1965 and is headquartered in Phoenix, Arizona.

Cavco Industries Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Cavco reported 9.5% year-over-year revenue growth and a 50% increase in operating profit, shipping a record 5,416 homes in Q1.
• Positive Sentiment: The average selling price rose for both single- and multi-section homes, reflecting true price appreciation after a period of modest declines.
• Positive Sentiment: Financial Services turned from a loss to profit, driven by enhanced underwriting criteria and the benefit of favorable weather.
• Positive Sentiment: Cavco deployed capital to repurchase $50 million of stock (16.6% of shares since 2021) and committed $184 million to acquire American HomeStar for expected cost savings and synergies.
• Negative Sentiment: Orders and backlog in the Southeast region trailed other areas, leading to potential production adjustments amid ongoing market uncertainty.

Presentation

[Operator]

Good day, and welcome to the First Quarter Fiscal Year twenty twenty six Cavco Industries, Inc. Earnings Call Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time.

[Operator]

As a reminder, this call may be recorded. I would now like to turn the call over to Mark Fussler, Corporate Controller, Head of Investor Relations. Please go ahead.

[Mark Fusler, Corporate Controller and Investor Relations at Cavco Industries]

Good day, and thank you for joining us for Capital Industries' first quarter fiscal year twenty twenty six earnings conference call. During this call, you'll be hearing from Bill Bohr, President and Chief Executive Officer Alison Aidan, Executive Vice President and Chief Financial Officer and Paul Bigby, Chief Accounting Officer. Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward looking statements. Forward looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are expectations or assumptions about Cavco's financial and operational performance, revenues, earnings per share, cash flow or use, cost savings, operational efficiencies, current or future volatility in the credit markets or future market conditions.

[Mark Fusler, Corporate Controller and Investor Relations at Cavco Industries]

All forward looking statements involve risks and uncertainties, which could affect Cavco's actual results and could cause its actual results to differ materially from those expressed in any forward looking statements made by or on behalf of Cavco. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, Friday, 08/01/2025. CAPCO undertakes no obligation to revise or update any forward looking statement, whether written or oral, to reflect events or circumstances after the date of this conference call, except as required by law. Now I'd like to turn the call over to Bill Bohr, President and Chief Executive Officer. Bill?

[William Boor, President, CEO & Director at Cavco Industries]

Welcome and thank you for joining us today to review our first quarter results for fiscal twenty twenty six. I'm happy to report it was a very strong quarter. Revenue was up 9.5% year over year and 16.6% sequentially. Our operating profit was up about 50% compared to both last quarter and a year ago. All operations contributed to these results and I'll get into that.

[William Boor, President, CEO & Director at Cavco Industries]

Over the last several quarters, we've been executing on a plan to push production up where we have the backlog to support it. Increasing production rates can take some time. So this has been a decision in many of our plants between pressing forward with increases to take advantage of a possible continuation of the positive order trends or holding back out of concern that the trend might not hold in future quarters. We have deliberately chosen to press forward with the confidence of knowing our plants can adjust down if necessary. While uncertainty about future quarter demand remains, quarter our plan paid off.

[William Boor, President, CEO & Director at Cavco Industries]

Orders increased resulting in an essentially flat sequential backlog even with our increased level of production. Executing this plan resulted in a record of 5,416 homes shipped this quarter. We're often asked about regional differences on these calls, and I feel that in most cases, there aren't any headline takeaways. The regions often show differences from quarter to quarter, but they tend to keep pace with each other over time. This quarter, I do want to point out that the Southeast region did lag the orders with Q1 shipments very slightly below the preceding quarter.

[William Boor, President, CEO & Director at Cavco Industries]

Our backlogs in the plants serving the Southeast have dropped and we'll need to watch closely to see if we're able to maintain production levels there. We manage this on a plant by plant basis and it just points to the continuing uncertainty in the overall market. Another noteworthy result this quarter was the increase in average selling price. As we've discussed before, there are several factors affecting our ASP. First is the proportion of company shipments that go through our owned retail stores.

[William Boor, President, CEO & Director at Cavco Industries]

This quarter, that driver actually had a downward effect on ASP because sales through our stores were relatively flat while wholesale shipments to third parties increased. Next is the mix of single section to multi section homes shipped. We saw the mix shift toward we saw that mix shift toward multi section homes this quarter, which push pushes ASP upward. However, the biggest effect this period was an increase in the average price for both single section and multi section homes sold. This is the best approximation for the price of similar products from period to period.

[William Boor, President, CEO & Director at Cavco Industries]

So we saw true price appreciation this quarter after a very long run of very modest declines. Whether this first upward move in a while becomes a trend depends on the direction of industry orders going forward. I don't wanna miss the opportunity to point out the strong performance in financial services, which turned a significant loss a year ago into a nice profit this year, driven by better insurance results. It's never fun to explain that bad weather was the cause of poor insurance results. No one likes to hear that reason.

[William Boor, President, CEO & Director at Cavco Industries]

This quarter, it's only fair to acknowledge that favorable weather contributed the year over year improvement. It's also important to understand that on top of the relatively good weather, we have made very meaningful improvements to our underwriting criteria and policy pricing, which are significantly improving the results under any weather conditions. Our insurance operations have done a fantastic job making sure policies are priced right for their risk, and we expect continuing strong results over time. Shifting topics, a few weeks ago, we announced the agreement to purchase American HomeStar. The acquisition, which will use approximately $184,000,000 in cash, is expected to close early in our third quarter.

[William Boor, President, CEO & Director at Cavco Industries]

As previously discussed, this deal brings with it an opportunity for significant cost reduction as well as product and retail optimization benefits. Since the announcement, members of our leadership team have had the opportunity to visit many of the American HomeStar operations. The introductory visits confirmed what we knew in general and from our due diligent work due diligence work. This is the first class organization, and we continue to be very excited about what they will bring to KAVCO. The American HomeStar acquisition along with ongoing investments throughout our operations demonstrates the execution of our capital allocation priorities.

[William Boor, President, CEO & Director at Cavco Industries]

We also continued our four plus year buyback program, repurchasing $50,000,000 of stock this quarter. Cumulatively since the initial repurchase authorization in fiscal twenty twenty one, we've bought back 16.6% of our outstanding shares. With strong cash flows and a conservative balance sheet, we remain confident that we can repurchase shares without hindering any strategic opportunities. Now I'll turn it over to Alison to give more detail on the financial results.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Thank you, Bill. Net revenue for the 2026 was $556,900,000 up $79,300,000 or 16.6% compared to $477,600,000 during the prior year. Sequentially, net revenues increased $48,500,000 driven by an increase in homes sold and the average revenue per homes sold. Within the Factory Built Housing segment, net revenue was $535,700,000 up $77,600,000 or 17% from $458,000,000 in the prior quarter. The increase was primarily due to a 14.7% increase in homes sold and a 1.9% increase in average revenue per home sold.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

The increase in average revenue per home was due to product pricing increases and more multi wides in the mix, partially offset by a lower proportion of homes sold through our company owned stores. Factor utilization for 2026 was approximately 75% when considering all available production days versus 65% in the prior year quarter. Financial Services segment net revenue was $21,200,000 up $1,600,000 or 8.2% from $19,600,000 in the prior year quarter. The increase was due to higher insurance premium rates, partially offset by fewer loan sales and fewer insurance policies in force. Consolidated gross margin in Q1 as a percentage of net revenue was 23.3%, up 160 basis points from 21.7% in the same period last year.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

In the factory built housing segment, the gross profit was 22.6% in 2026, consistent with 2025.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Financial services gross margin as a percentage of revenue increased to 40.9% in 2026 from a negative 0.6% in 2025. This increase is primarily due to the insurance division having fewer claim losses from storms, as the prior year period was significantly impacted by multiple weather events in Texas and New Mexico. Selling, general and administrative expense in the 2026 was $69,100,000 or 12.4% of net revenue compared to 64,900,000.0 or 13.6% of net revenue during the same quarter last year. The increase was due to higher bonus and commission expenses on higher earnings compared to the prior year. Interest income for the first quarter was $5,100,000 down from $5,500,000 in the prior quarter. Pre tax profit was up 48.9% this quarter to $65,300,000 from $43,900,000 in the prior year period. The effective income tax rate was 20.9% for the first fiscal quarter compared to 21.5% in the same period in the prior year. Net income was $51,600,000 compared to net income of $34,400,000 last year, and diluted earnings per share this quarter was $6.42 versus $4.11 in last year's first quarter. Before we discuss the balance sheet, I'd like to take a minute to talk about capital allocation.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

During the first quarter, we repurchased $50,000,000 of common share under our Board authorized share repurchase program, leaving approximately $178,000,000 under authorization for future repurchases. Additionally, we announced our intention to acquire American HomeStar, a transaction expected to utilize roughly $184,000,000 in cash. Our capital deployment will continue to align with our strategic priorities, which include enhancing our plant facilities, pursuing additional acquisitions, and consistently assessing opportunities within our lending operation, with share buybacks serving as a mechanism to prudently manage our balance sheet after considering these initiatives. Now I'll turn it over to Paul to discuss the balance sheet.

[Paul Bigbee, Chief Accounting Officer at Cavco Industries]

Thanks, Allison. In the quarter, we had a decrease in cash and restricted cash of $6,900,000 bringing our balance to $368,400,000 We generated $55,500,000 of cash from operating activities, reflecting solid operating performance for the quarter. We used $7,700,000 in investing cash flows for new equipment in certain facilities and used $54,700,000 in financing activities, primarily due to stock buybacks. Comparing the 06/28/2025 balance sheet to 03/29/2025, the increase in accounts receivable is related to organic growth in the factory built housing segment, with unit shipments up 7% in the 2026 versus a sequential quarter. Inventories increased from higher finished goods at company owned retail stores, as well as higher raw material purchases to support increased production.

[Paul Bigbee, Chief Accounting Officer at Cavco Industries]

The decrease in prepaid expenses and other current assets is a result of lower federal income tax prepayments, primarily related to timing. Increase in long term commercial loans receivable is a result of increased lending under these programs as a result of larger sales volume. Accrued expenses and other current liabilities are up from the increased compensation and bonus accruals on higher earnings, increased insurance loss reserves and higher customer deposits. And finally, as previously discussed, treasury stock increased, the stock buybacks executed during the quarter. Now I'll turn it back to Bill.

[William Boor, President, CEO & Director at Cavco Industries]

Okay, thank you, Paul. Michelle, let's go ahead and open up the line for questions.

[Operator]

Thank you. And our first question comes from Daniel Moore with CJS Securities. Your line is open.

[Daniel Moore, Director - Research at CJS Securities]

Thank you. Good afternoon, Bill, Allison, Paul, Mark. Appreciate the questions. Obviously, the plan paid off. New orders increased nicely this quarter.

[Daniel Moore, Director - Research at CJS Securities]

Is that a level of ordering continuing thus far into fiscal Q2 accelerating at all? Or do you expect that to moderate in coming quarters?

[William Boor, President, CEO & Director at Cavco Industries]

No real comment on the expectation. I mean, you hit these months in the summer and from a seasonal perspective, it can slow down a little bit. But we feel like at a high level, there's kind of a continuation. I mean, there's definitely nothing that I'm seeing in the market or hearing about that says that, we're seeing a drop. I always referred as well, even though I know it's a bit of a lagging indicator, I always refer to the, HUD code shipments data on a seasonally adjusted basis and that has remained strong in recent months.

[William Boor, President, CEO & Director at Cavco Industries]

So still feeling like, you know, as I've indicated, I mean, we were really happy with the quarter. I think we executed really well as a company. Know, uncertainty continues out there, so we're gonna have to keep watching.

[Daniel Moore, Director - Research at CJS Securities]

Makes sense. Very helpful. You mentioned the Southeast. I mean, obviously, Florida has been challenged for a while. Are there other where you're seeing any incremental softness?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. Yeah. Thanks. That's an opportunity to clarify because I didn't really think to make that as clear. Florida has been its own situation for quite a while.

[William Boor, President, CEO & Director at Cavco Industries]

And I'd have to say, I really don't see any improvement there. Just the general, I think the real estate market there has been struggling. You know, so we're holding our own and hanging in there and feel good about how we're positioned. But my comments again, Dan, thanks for giving me a chance to clarify. My comments were a little broader than that and almost exclusive of Florida, which acts very separately.

[William Boor, President, CEO & Director at Cavco Industries]

So you kind of you go up through the Southeastern States, and I don't want to sound like doom and gloom. I mean, it was steady. In our case, as I talked about this direction of let's go ahead and lean into the backlogs we have. Our plants have done a great job of accelerating production through that region. And compared to the other regions, it was a little you know, a little of a standout lagging region for us this quarter as far as quarter over quarter activity.

[William Boor, President, CEO & Director at Cavco Industries]

So I don't know how to give the right tone on this. So I'll just kind of be as straightforward as I can with my comment. It's not doom and gloom, but it was the slowest of our major regions when we looked at what was generally a pretty positive order quarter.

[Daniel Moore, Director - Research at CJS Securities]

Got it. Okay. I'll follow-up offline, but ASPs gave great color, greatly appreciated. You know, between the two factors, is it more a function of passing on inflation and input costs, or is the mix meaningfully meaningfully improving as well?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah, mix shifted a little bit to multiple section homes, which of course would kind of be an upward move. But I'll tell you the biggest biggest factor this time was really that, you know, we same say same product appreciation. We really looked at in aggregate single section homes, did they move up in average selling price on and I'm thinking wholesale right now. And multi section owns, did they move up as well? And this this quarter both moved up.

[William Boor, President, CEO & Director at Cavco Industries]

And it's been a long time since we've seen that kind of price appreciation after correcting for product mix and after correcting for, you know, the proportion that's sold through our retail stores. So, you know, I did wanna point out because I know there's been a long discussion about, you know, I keep overusing the term slow leakage that we had seen for a number of quarters in that, let's call it pure price. And there was a significant upward bump this time. Again, those things can move around a little bit, but it's nice to see it move that direction. The other question was whether that was I think, Dan, I think your other question was whether that was due to tariff pressure.

[William Boor, President, CEO & Director at Cavco Industries]

You know, I I don't wanna belabor it. I've got a little different view than some when we talk about this. It's a matter of price moving up where supply and demand for our products was healthy straight. So, we did have an impact from tariffs and Allison commented on that, I believe we can go into that. And, you know, but I don't, you know, I don't view us as necessarily being able to say oops, our product right or our cost just went up.

[William Boor, President, CEO & Director at Cavco Industries]

So we're going to pass through a price increase if the market doesn't support it. So I look at this price movement kind of as its own data point separate from our cost structure.

[Daniel Moore, Director - Research at CJS Securities]

Okay. Really helpful. I know you don't give guidance. Financial services had a really solid quarter. Just curious what you've seen so far quarter to date in terms of claims.

[Daniel Moore, Director - Research at CJS Securities]

Obviously, there's been some well documented tragic flooding in Texas. I know it's isolated and your business is a lot more geographically diverse, but, what are you seeing so far there?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. Yeah, you've said it well. I mean, it was tragic what's gone on there. From a claims perspective, it was not a huge generator of claims. And I think that's the nature of the, pretty not dense area that a lot of that flooding occurred.

[William Boor, President, CEO & Director at Cavco Industries]

So we're not seeing a inordinate amount of claims from that event. And I think, you know, things are looking pretty good overall from a business perspective and insurance. And you're right, we do do it. I think a very thorough job of making sure we diversify geographically and in other ways to spread the risk in our insurance business. But nothing big to note from that event or any others recently.

[Daniel Moore, Director - Research at CJS Securities]

Great. I'll turn it over. Thanks.

[William Boor, President, CEO & Director at Cavco Industries]

Thanks, Dan.

[Operator]

Thank you. Our next question comes from Greg Palm with Craig Hallum. Your line is open.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Hi. Thanks for taking the questions. I wanted just to maybe clarify some of the prior questioning on kind of the regional differences. So going back to your comments on the Southeast Region, I just is it more that you're seeing increased competition down in that region? Or is it a function of like the actual consumer traffic rates, deposits are slowing?

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

I was just maybe you can kind of dig into that a little bit more. And then just to be clear, I mean, the Southeast Region is pretty broad. So are there specific states that you're trying to call out or anything in particular?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. Kind of just look at our plants that serve that area and you know there's a pretty broad service radius for a plant. So frankly, we're looking at it all the way up to North Carolina and Virginia. So kind of Georgia through North Carolina and Virginia. And I really do want to I'm glad you guys are asking me the question because I really do want to clarify.

[William Boor, President, CEO & Director at Cavco Industries]

We had a quarter here where, orders moved up considerably. In the Southeast, they were more like flat. So we're not seeing a big downturn. And I think the context and why I pointed it out is that we have also had this direction on a plant by plant basis to increase production, you know, where we think we've got the backlog to do it. And so my point really was more about that direction and and I don't know how it's gonna play out yet. But what I was trying to point out is we might have, you know, we were gonna have to look plant by plant in that area because its order rates have lagged other regions recently and our backlogs in that area have dropped given the increase in production. And so it's one that we might have to, pull back a little bit on some of this production increases. I'm honestly not predicting that.

[William Boor, President, CEO & Director at Cavco Industries]

I'm saying that these regions are moving differently. And if there's one place that we're keeping a close eye on it to see if our backlogs hold with order rates in the next couple quarters so that we can maintain the increased production level, it would be the Southeast. So it hasn't been a downturn. It's been a flat spot in a country where other regions are moving up pretty nicely.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. That's helpful. What are you seeing from the community channel and some of the bigger buyers there? Any change relative to kind of what you're seeing in the dealer channel?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. I don't think anything noteworthy. I mean, once we got through the inventory problem that we talked, you know, at length about for a long period of time and that kind of we declared that dead last December, I think. Once we got through that, they've kind of taken their place with more of a historical proportion of overall industry shipments from what we can tell. They've been about 30% or call it a third, and that's if you include builders and developers along with communities.

[William Boor, President, CEO & Director at Cavco Industries]

And, there's some normal bouncing around those numbers, but I feel like they're kind of in that position right now.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. In terms of I want maybe spend a minute on gross margin as well. And maybe you can just comment on input costs and what kind of I don't know if you're able to quantify kind of what impact tariffs had, whether it was on steel specifically or whether it was some of the components that you bring in. But was that meaningful at all? Are you able to quantify kind of what impact you saw?

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

And mostly, this is just in light of kind of much higher production rates on a year over year basis, but factory margins that were relatively flat. So I'm just kind of trying to tie those out.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Yes, understood. Thanks for the question. Because many of the tariffs have been delayed, plus there's a timeline before cost hit our COGS, the full effect of tariffs didn't hit our results in Q1. We estimate that the total impact in q one was about $700,000 of additional expense, and that that would have hit our cost of goods. And if the current you know, for a perspective point, if the currently proposed tariffs take effect, I'd say this will certainly increase in future quarters.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

So nothing significant this quarter, but, you know, we really focus on it. In general, input costs, as you mentioned, in total, key components for us that affect the margin are the costs of our commodities that we primarily use, which is lumber and OSB. And while the movements of these commodities, they really can be volatile, have been, recent quarters, been benefiting from a pretty low and stable lumber and OSB price, but there's always, you know, a possibility of, of there being a price increase ahead. And the way that, we can all, you know, watch that is we watch the indices for these commodities for lumber and for OSB, and any changes that we see rolling through those prices will both of our cause in about sixty to ninety days later. Taking all those factors into account are the cost side of the equation for the margins

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

got it and then maybe just last one shifting gears again just to the regulatory environment can you provide maybe any update I know there was a recent bill that was introduced about chassis removal. So maybe you can just give us some insight and what that potentially could mean and just the overall process of putting that into a law, if that's the case.

[William Boor, President, CEO & Director at Cavco Industries]

The senate committee passed a bill or moved a bill forward this past week. I think that's what you're referring to. I'll tell you what was really encouraging about it. They had, I might be off by one or two, but they had about eight subsections under that housing bill. And one of them was literally titled manufactured housing.

[William Boor, President, CEO & Director at Cavco Industries]

And so one one takeaway that I took at a high level from that was just, you know, we are we are in the discussion. We're people are focusing on manufactured housing as a important part of the solution to the affordable housing issues that we face in the supply issues we face. So that was a high level. As you said, the chassis removal from the federal definition was in there. And so I feel really good about that.

[William Boor, President, CEO & Director at Cavco Industries]

That's something we've talked in the past. It'll take a it'll take some work and some time. But if we can get that out of the definition, I think it's gonna open up a lot of innovation for our industry. And that will kind of allow us to do things like penetrate more into urban settings as an example. So that's a big plus.

[William Boor, President, CEO & Director at Cavco Industries]

There was some stuff in there about kind of trying to continue to encourage local municipalities and states to work on zoning. Those statements in the bill were more general and weren't all that specific to manufactured housing. But directionally, you always like to see that because I think congress understands that's a real, you know, barrier to improving the supply of homes and housing units. You weren't really asking us if I and this is probably a longer conversation for another day. If I had a disappointment when I read it and talked to folks about it, it's that congress is trying to provide some support and funding for community preservation and community development in general.

[William Boor, President, CEO & Director at Cavco Industries]

But they tend to be a little bit discriminatory in the ownership of those communities. And so they're very focused on this idea of resident owned communities. In the right situation, that can be a good solution. Sometimes they aren't everything that the name kind of implies, and sometimes they're really not working out well. And so the fact that, congress continued in this bill to kind of leave the very successful for profit community ownership model out was a little bit concerning.

[William Boor, President, CEO & Director at Cavco Industries]

So I've given you more than you want. I feel like in total, it's a very good step forward. It reflects a lot of the lobbying we've done in DC to try to get manufactured housing more a part of the conversation. I feel like we're really having some success with it. So I do bet that's more than you're asking for Greg, but did I leave anything out?

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

No, it was the more the better. Appreciate the color. I'll hop back in the queue. Thanks.

[William Boor, President, CEO & Director at Cavco Industries]

Alright. Thank you.

[Operator]

Thank you. Our next question comes from Jay McCanless with Wedbush. Your line is open.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Hey, everyone. Thanks for taking my question. So I guess I want to stick on the gross margin for a minute because to hear that volumes up, pricing is up on singles and doubles and OSB is at multi decade lows. Just really surprised that the gross margin is flat year over year. Can you walk us through what drove that?

[Jay McCanless, MD - Equity Research at Wedbush Securities]

And are you all thinking and if it was sales mix or geographic mix is the same type of pattern developing for the second quarter?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

So if we go through we look at the throughput for the quarter, to your point, we did see an uplift that allowed us to leverage some of our factory overhead. As we talked about, we did absorb some additional costs due to tariffs, and also our margins are dependent quite a lot on over prior year quarter for pricing. So there were some very positives in our gross profit and gross margins for the quarter. And then also touching on financial services, we did see an uptick from from prior year.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Okay. So it's it's more just geographic mix. And also, are you seeing that in the second quarter, probably that same thing developing?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

I think it's probably a little too early to comment on the second quarter. I'd say the one thing that we do have, obviously, we're staying extremely close to, would be the unfolding tariff situation. We do, as we shared before, we do have we do purchase many lighting, electrical and plumbing components and windows and doors, and those are primarily sourced from China. So that'll be where our focus is as the tariffs continue to unfold.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Okay. And then I know that there's been a couple of price increases announced for roofing. Has that started to impact capital income statement yet?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Nothing that we can really comment on at this point nothing significant.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Okay and then if we could just talk about chattel mortgage, where rates right now? And I guess the other question is, are you guys seeing what the site builders have talked about where people just aren't as confident maybe as they were this time last year? And maybe talk about that. And then also where rates stand at this point.

[William Boor, President, CEO & Director at Cavco Industries]

And say rates?

[Mark Fusler, Corporate Controller and Investor Relations at Cavco Industries]

Yeah, I'll start with

[Mark Fusler, Corporate Controller and Investor Relations at Cavco Industries]

the rates, Jay. So it's actually been really consistent since we last reported our fiscal year end. So it's still on that eight to 9% range.

[William Boor, President, CEO & Director at Cavco Industries]

I think the indicators of confidence are kind of almost week to week, if not day to day. It's been kind of in this mode, in my opinion, for quite well, quarters, right? I mean, people are trying to read the macroeconomics and certainly there's a bit of uncertainty on the side of the potential buyer. See that I think we see that more in closing rates, but we've seen no traffic does move up and down a bit. It moves in a pretty tight band or it's been moving a pretty tight band.

[William Boor, President, CEO & Director at Cavco Industries]

Closing rates, I think are the better indicator at any point in time about whether people are willing to pull the trigger. Because there's a lot of people that are out there that need homes and they're generating the traffic numbers. It's whether they feel confident and are able to pull the trigger on actually, know, making a deposit and falling through on the purchase that I think it gets hurt when the confidence goes down. So I don't mean to wander around your question. I think it's man is changing all the time and that's the uncertainty we've been talking about.

[William Boor, President, CEO & Director at Cavco Industries]

This quarter orders showed a pretty big uptick. So that shows that either over the period of that quarter, there was a little more confidence or it shows that that pent up demand for housing is powering through that concern. Hard to tell, but we feel like, you know, we had a nice uptick this time. We're gonna continue leaning into it and we gotta be ready to adjust. It's hard to be more predictive than that.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Okay, great. Thanks for taking my questions.

[William Boor, President, CEO & Director at Cavco Industries]

Thank you.

[Operator]

Thank you. Our next question comes from Jesse Liederman with Zelman and Associates. Your line is open.

[Jesse Lederman, Associate Director at Zelman & Associates]

Hey, thanks for taking the question and nice job on the quarter. I'd to ask another question on the tariffs. So I guess just $700,000 of impact in the COGS from tariffs, is the expectation still about 5% to 8% of the materials might be the impact from tariffs?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Yes, and let me just help by putting that into dollars to make it straightforward. So we would estimate that the overall impact that we could reach and again, tariffs literally are kind of unfolding day to day as we're all seeing it, but we could reach between 2 and 5,500,000.0 a quarter, you know, if the current tariffs are fully implemented. Just hopefully that helps provide some

[Jesse Lederman, Associate Director at Zelman & Associates]

Got it. Okay. Yeah. That is helpful. Okay.

[Jesse Lederman, Associate Director at Zelman & Associates]

So I guess the $2,000,000 if and, again, the material is half of the COGS. Right?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Yes, they do.

[Jesse Lederman, Associate Director at Zelman & Associates]

So the $2,000,000 I guess, would be something like during the quarter would have been like a 1% increase to overall COGS from tariffs, which seems a little bit lower, I guess, than you were expecting last quarter.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

That's true. I'd say specifically, again, 700,000 was the amount of the impact of increased cost of goods from Q1 from tariffs. If you think about the tariffs, they seem to be moving quite a bit, but obviously I think when one listens to the rhetoric out there, there's an indication that they will go up at some rate. And certainly if we compare the way we think about it now versus say just a quarter ago, the tariffs would be coming in as slower or delayed and a little bit more choppy. So I think that's what we stay very close to.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

And if we take a step back, the two probably per quarter would be 2,000,000 per quarter would be on the lower end and perhaps as we progress through time and yet it's an unfolding situation it could reach up to about 5,500,000.0. And I would say that if we had to think about it as far as where is the majority of that coming from, it's likely to be coming from the the lighting, electrical, and plumbing components, which are, part of all of our units and those we source, out of China.

[Jesse Lederman, Associate Director at Zelman & Associates]

Okay. That's really helpful color. Thank you. I wanted to ask with through Country Place, Bill, do you guys have any read on or even, you know, through Country Place and or just through, those that are buying at your captive retail of the household income over time of people that are purchasing or maybe even quarter to quarter that could give some insight into mix shifts. So for example, if maybe this quarter you had more you know, higher household income at retail or through country place that would suggest maybe some people mix shifting from an existing home or buying, know, a new home to a manufactured home. Is that something you guys have insight into?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. Obviously, when you're originating, you know all that information, so it exists. It's not something that we've tracked very closely at a at a macro level. So it's interesting thought and something we'll think about. But I don't have any statistics for you right now on that.

[Jesse Lederman, Associate Director at Zelman & Associates]

Okay. Got it. And then yeah, yeah, of course. I think that'd be pretty interesting. Allison, you kind of talked from a capital deployment perspective.

[Jesse Lederman, Associate Director at Zelman & Associates]

One of the initiatives you're looking into is assessing some opportunities within the lending operations. Could you maybe provide a little bit more color into what that opportunity might be?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Yes. Strategically, we look at our country place, which is our mortgage origination component of our organization, to be able to provide expanded consumer based lending programs. So we continue to look at that. As part of that growth would probably be a combination of somewhere strategically to have an ability to deliver into a forward flow agreement. We have a commitment that we would not carry consumer based loans on our balance sheet nor have we.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

If we embark on that type of a longer term strategy, our balance sheet would still very much stay an OEM balance sheet. This would give us an opportunity to serve a wider base of consumers to help them be able to obtain affordable housing.

[William Boor, President, CEO & Director at Cavco Industries]

Let me just reiterate that. I'm not saying anything different. Our model is to originate and sell. We don't want to carry consumer loans on our balance sheet. We retain the servicing rates and so we get an annuity stream in that sense.

[William Boor, President, CEO & Director at Cavco Industries]

That's our base model. Over the last couple of years, the traditional investors have really kind of, dramatically reduced the amount of loans they're buying. So that left us with a decision to make. And we have been willing to and we put some new loans on our balance sheet. We do that in a way where we know that we're still underwriting to the standards that an outside investor would buy those loans.

[William Boor, President, CEO & Director at Cavco Industries]

And so our our game plan really is, let's not stop the machine. Let's keep supporting the operations as an originator to a point with the intent that in different times and maybe through finding more consistent investors will be able to clean those loans off the balance sheet and get back to the base model again. We haven't committed very much money in the scheme of our balance sheet to that, but it is something we just highlight for folks that, you know, strategically will will do that from time to time. We'll take some on our balance sheet with the intent that when the day comes, they're very sellable ones.

[Jesse Lederman, Associate Director at Zelman & Associates]

Got it. That's helpful. Yeah, I think in a lower rate environment, loans would be an attractive opportunity for an investor for you to get those off the balance sheet, but it makes sense. Sounds like you're willing to continue to underwrite those just to keep the machine moving from a financing availability perspective. Yeah.

[Jesse Lederman, Associate Director at Zelman & Associates]

Last one from yeah. Go ahead. Just say one of the Oh, no. Sorry. Yeah.

[William Boor, President, CEO & Director at Cavco Industries]

This is a side side note extending on that. It's interesting when you do find an investor that wants to start buying those loans. They, often is the moment they make that decision, they say, what do you got for me right now? And so so having a few on the balance sheet doesn't hurt when you're trying to develop those relationships.

[Jesse Lederman, Associate Director at Zelman & Associates]

Right? Makes sense. Last one on the financial services, it sounds like a lot of the initiatives that you talked about over the last couple of years in terms of making improvements to your underwriting criteria and pricing and some of those nuances are coming to fruition with kind of a 40 ish percent gross margin. If I look historically, you were kind of in the even like 50% to 55% range. So is there any reason why the gross margin for financial services shouldn't at least remain around current levels, if not continue to grow a little bit higher toward maybe 50% ish, something around there?

[William Boor, President, CEO & Director at Cavco Industries]

Yeah, it's very choppy, right? I mean, it's the insurance business, not to minimize the financial or the lending business component of that. But when you're in the insurance business quarter to quarter, it can be choppy. But, yeah, I don't see any structural reasons why we shouldn't be able to maintain pretty much historic margins with that business. So, yeah, I appreciate the question because it is hard for you all to keep your bearings with us in financial services.

[William Boor, President, CEO & Director at Cavco Industries]

One quarter to quarter, we can see pretty dramatic changes. What I've said in the past and I still believe is that these businesses give us a solid return on invested capital, and they are complementary to our core business. So we're committed to them.

[Jesse Lederman, Associate Director at Zelman & Associates]

Thanks, guys. Really appreciate the color as always.

[William Boor, President, CEO & Director at Cavco Industries]

Thank you.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Thank you.

[Operator]

Thank you. Our next question comes from Daniel Moore with CJS Securities. Your line is open.

[Daniel Moore, Director - Research at CJS Securities]

Thank you again. One or two more, but obviously if you look at your shipments, you look at HUD code MH data, it's clear that MH, at least over the last couple of quarters, in particular this quarter, is diverging in a more material way from traditional site build growth rates. Is that do you think bill that's more a normalization of the builder developer channel coming back or do you see that occurring kind of across all of your key customer bases, you know, REITs traditional retail, etcetera?

[William Boor, President, CEO & Director at Cavco Industries]

And you're talking about, I think I'm with you. You're talking about how, you know, HUD's what we have good data on. You're talking about how HUD code shipments have changed through the recent year or two compared to how site built has changed?

[Daniel Moore, Director - Research at CJS Securities]

Yeah. And obviously, you know, 15% growth in your shipments is another data point there as well relative to, you know, flat to now we've moved

[William Boor, President, CEO & Director at Cavco Industries]

relative to HUD. Yeah, you're right. I mean, yeah, I it's always hard to know what point in time to index off of, but we have been looking at that pretty closely. And to your point, over the last call a year and a half, that was one of the points I looked at. HUD has dramatically outperformed.

[William Boor, President, CEO & Director at Cavco Industries]

I track a lot of times new home sales thinking, you know, we're shipping and it's kind of put in service pretty quickly and the new home sale is similar, put in service pretty quickly. And HUD has really outperformed site built during that period. I think, you know, at the highest level, there's probably a lot of factors to that. I think, one is I've tried to point out in a lot of investor discussions that the while we're driven by some of the same macro effects like interest rates, But the cycle for manufactured housing and homes can divert and site built can diverge. If you think back to a year and a half ago or so, we were held back by an inventory, but in our retail channels after the run up in interest rates.

[William Boor, President, CEO & Director at Cavco Industries]

Conversely, I think site builders were kind of getting a tailwind from the fact that people had low interest rates and previously owned homes weren't on the market and inventory. So they were kind of making hay at a time that we were pulled back from a wholesale perspective. I think that's reversed right now. I think right now we've got the inventory out of the way and affordability is coming to the forefront as it has been and should be for, in my opinion, for the foreseeable future. And we're serving a different price point for sure.

[William Boor, President, CEO & Director at Cavco Industries]

They can't touch what I would consider first homebuyer price levels. So, know, I think it's a real shift. And if the macro economy supports it, I think that that relative share of new housing units, if you wanna think about it that way, should really go in favor of manufactured housing. You know, and I won't belabor this point because if you pick different time periods, the discussion would be different. We've certainly done pretty well relative to the index of head code shipments that are reported on a national basis.

[William Boor, President, CEO & Director at Cavco Industries]

I think that a lot of that is due to some things we've worked hard over the last couple of years to put in place. I've mentioned them before, but we've got what I think is a very effective national sales group in the wholesale business that our competitors had previously and we didn't have and I think they've been making a big impact. We've done a ton in digital marketing and we followed that up with the branding that we talked about last quarter to try to make the customer experience better. So I really feel like we've done a lot to position ourselves better and better on a competitive basis within manufactured housing. And and I'd like to think that's showing itself in some of that movement of us compared to the industry shipments.

[Daniel Moore, Director - Research at CJS Securities]

Very helpful. My last long winded question today, I promise. But just I missed the American HomeStar conference call. So, you know, you're expanding in what is already a strong presence in Texas. Obviously, Texas has always been a big important market for MH, but a little choppier of late.

[Daniel Moore, Director - Research at CJS Securities]

What are you seeing or hearing from retailers, community developers in that market and your expectations for growth in that market, not next quarter, but over the next two to four years? Thanks again.

[William Boor, President, CEO & Director at Cavco Industries]

Yeah, I think my answers have been long winded, your questions. But Texas, everyone knows how big of a market that is for manufactured housing. And we do have a pretty good presence there. And in the call and otherwise, I've talked about, you got some deals where you are going into new geographies or trying to round out your geographic presence. And you've got others like this one where, you know, you're just going to get stronger where you are.

[William Boor, President, CEO & Director at Cavco Industries]

And I'm really excited about it from that perspective. We have a lot of confidence in Texas over any strategic time frame. So really don't do these kind of deals worry too much about what's going on right now. And what's going on right now in Texas isn't bad, it keeps growing. So we're gonna have a lot of opportunities for value creation in that deal through cost benefits as well as product and retail optimization.

[William Boor, President, CEO & Director at Cavco Industries]

So we're really excited about it. I'm not sure if I'm really hitting hard on your question and I'm happy to take another shot, Dan, but that's a that's a stab at it.

[Daniel Moore, Director - Research at CJS Securities]

No. That's it. It's helpful. You know, right now, the market's holding up pretty well and, you know, you see continued growth. That's what I was getting at.

[Daniel Moore, Director - Research at CJS Securities]

Thanks again for the color. I appreciate it very much.

[William Boor, President, CEO & Director at Cavco Industries]

Thanks, Dan.

[Operator]

Thank you. Our next question comes from Ian Lapie with Gabelli Funds. Your line is open.

[Ian Lapey, Portfolio Manager at Gabelli Funds]

Hi, Bill and team. Congratulations on a great quarter. I just had one quick one. The $9,000,000 in CapEx for the quarter, was that driven by the brand realignment? And then would you expect CapEx to return to the more the level of more like 4,000,000 to $5,000,000 of the last per quarter for the last couple years? Thank you.

[William Boor, President, CEO & Director at Cavco Industries]

Yeah. Thanks for the question. And the 9,000,000 was not driven by the brand realignment. In fact, really, the only meaningful material impact you guys should see from that, I think was the last quarter when we reported the non cash $10,000,000 charge that was related to writing off some intangible value. But going forward, you know, we shouldn't really have a meaningful impact to the p and l from that shift.

[William Boor, President, CEO & Director at Cavco Industries]

I I wanna take a stab and then Allison and others can build onto this. The 9,000,000 is a good story because what we've been doing, is investing in our plants. And we've had a string of very successful smaller investments in our plants. I say small in the scheme of the company, but they add up. And we've done a number of plant modernizations that have been very successful, and that's what's driving that, you know, non acquisition capital ex capital expense to go up a little bit.

[William Boor, President, CEO & Director at Cavco Industries]

So, I'd ask you to feel good about that. We're we're making some pretty high return investments in our plants, and we're growing our capacity. Is that do you have something to add to that?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Yeah. That's a that's, obviously a very good character characterization. So, it will our cap spend will be a little bit lumpy, but within a pretty tight band, and it will move quarter to quarter based on the upgrades and expansion for efficiencies in the plant, in our internal plants. But there's nothing in that particular number for the quarter that would signal an upward trend of any type.

[William Boor, President, CEO & Director at Cavco Industries]

And it's not like a pent up sustaining capital that's coming due or anything like that. Our plants are in pretty good shape.

[Ian Lapey, Portfolio Manager at Gabelli Funds]

Okay, great. And congratulations again. Thank you.

[William Boor, President, CEO & Director at Cavco Industries]

Thanks, Ian.

[Operator]

Thank you. Our next question comes from Jay McCanless with Wedbush. Your line is open.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Hey, thanks for taking my follow-up. I was just looking at last quarter's transcript. And I think the one thing we have talked about is the price competition that you all were seeing last quarter. And just wondering if that's reemerged either either what you saw in the first quarter or have you seen any signs of your competitors being a little more aggressive on price in the second quarter to try and drive some volume?

[William Boor, President, CEO & Director at Cavco Industries]

I would generally say no. The if there's if you kinda had a dial on this, there's more this is kinda my field based on the monthly detailed conversations we have with every one of our plants. There is more of an upward bias that I'm hearing in the local markets than downward. And I will say that, for this quarter, and I only want to emphasize that because these things can shift on your rate. We're not calling a trend after one data point.

[William Boor, President, CEO & Director at Cavco Industries]

For this quarter that we saw this pretty nice increase in both single section and multi section homes, that was pretty much across the board regionally. So we really don't have hotspots where we're seeing an undue amount of price competition right now.

[Jay McCanless, MD - Equity Research at Wedbush Securities]

Okay. That's great. Thanks. Thanks for taking my follow-up.

[William Boor, President, CEO & Director at Cavco Industries]

Thank you.

[Operator]

Thank you. And our next question comes from Jesse Liederman with Zelman and Associates. Your line is open.

[Jesse Lederman, Associate Director at Zelman & Associates]

Hey, thanks for taking the follow-up. Real quick, just want to give you kudos for the SG and A. Looks like as a percent of revenue, it's among the lowest levels since maybe fiscal twenty twenty three. Just wanted to kind of understand if that kind of expense management on the SG and A line is kind of a conscious decision or if there has been expenses over time that you've been able to pull out of that line? Color you can give there would be great. Thanks.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Sure. Donna, with regards to SG and A, overarchingly, our approach to our business model has always been to maintain a good part of that SG and A to be variable. So the largest component there that moves with volume as an increase is sales commission and variable compensation. We do very carefully watch the fixed costs, so the SG and in general leverages quite a lot as we increase the top line. So our approach has been consistent.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

We also are continually instituting processes and procedures that add to our shared services so that when we continue to grow both organically and inorganically, the shared services in the back office conserve the field at a lower per unit cost. So, you know, it's more of a continuation of our commitment to maintain a very low fixed cost component for SG and A.

[Jesse Lederman, Associate Director at Zelman & Associates]

Yeah.

[William Boor, President, CEO & Director at Cavco Industries]

Yep. We definitely wanna see what we saw. I mean, get that leverage on the fixed costs as we grow. So appreciate you raising the question.

[Jesse Lederman, Associate Director at Zelman & Associates]

Yeah. Of course. So the fixed costs really you're talking about are this kind of shared services back office type stuff. Right?

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

That's correct.

[Jesse Lederman, Associate Director at Zelman & Associates]

Okay, cool. Thanks and nice job.

[Allison Aden, EVP, CFO & Treasurer at Cavco Industries]

Thank you.

[William Boor, President, CEO & Director at Cavco Industries]

Thank you.

[Operator]

Thank you. There are no further questions. I'd to turn the call back over to Bill Bohr, President and CEO, for closing remarks.

[William Boor, President, CEO & Director at Cavco Industries]

Thank you. We're nearly at the top of the hour. A lot of good discussion. Appreciate the interest. I really want to acknowledge the execution across our organization that enabled these results this quarter.

[William Boor, President, CEO & Director at Cavco Industries]

Over the last several quarters, we underwent a major ERP upgrade, which is always stressful and full of challenges. We rebranded our plants and aligned our product branding in ways that enable the customer experience to improve and enable us to give better lead generation for our retail partners. And we executed a thorough due diligence process and ultimately reached agreement to purchase American OwnStar. So with all this change happening in the organization and despite the ongoing uncertainty in the economy, our operations really delivered the results we've had the pleasure to discuss today. So really want to thank everyone for joining us and for your interest in Cavco, and we look forward to continuing to keep you updated. Thank you.

[Operator]

This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Mark Fusler, Corporate Controller and Investor Relations
• William Boor, President, CEO & Director
• Allison Aden, EVP, CFO & Treasurer
• Paul Bigbee, Chief Accounting Officer
• Mark Fusler, Corporate Controller and Investor Relations

Analysts

• Daniel Moore, Director - Research at CJS Securities
• Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Jay McCanless, MD - Equity Research at Wedbush Securities
• Jesse Lederman, Associate Director at Zelman & Associates
• Ian Lapey, Portfolio Manager at Gabelli Funds