Champion Homes Q1 Earnings Call Highlights

Key Points

• Champion Homes’ first-quarter fiscal 2027 results were resilient: Net sales rose 1.3% to $710.2 million and U.S. home shipments increased 1.8%, outperforming an approximately 5% decline in broader HUD industry shipments.
• Demand and production indicators improved: Backlog grew to $421.8 million from $302 million a year earlier, while manufacturing capacity utilization increased to 62%. Adjusted EBITDA was $73.6 million, with a 10.4% margin.
• Management expects continued growth but sees affordability pressures: Second-quarter revenue is projected to rise by a mid-single-digit percentage, with adjusted gross margins of 25%–26%. The Homes Direct acquisition should be additive over time, while new rules allowing some HUD homes without permanent chassis are viewed as a long-term market opportunity rather than a near-term earnings driver.

Champion Homes NYSE: SKY reported first-quarter fiscal 2027 results that management said were in line with expectations, as sales growth, higher manufacturing utilization and an expanding order backlog helped the company outperform the broader manufactured-housing industry.

For the quarter ended June 27, 2026, net sales increased 1.3% from a year earlier to $710.2 million. U.S. homes sold rose 1.8% to 7,089 units, while the company said HUD industry shipments declined about 5% year over year during the three months ended May 2026.

CEO Tim Larson said the company saw encouraging demand during the quarter, with manufacturing orders increasing from the prior year and backlog rising to $421.8 million, compared with $302 million at the end of the prior-year first quarter. Manufacturing backlog lead time ended the quarter at about nine weeks, within Champion’s targeted range of four to 12 weeks.

Sales Channels and Production

Champion’s manufacturing capacity utilization was 62%, up from 59% in the preceding quarter and 61% a year earlier. The company’s utilization calculation includes six idled facilities.

Sales to independent retailers increased 4% from the prior-year period. Larson said the company continues to invest in dealer tools, including lead-management capabilities through its dealer portal and consumer digital-engagement efforts.

Captive retail represented about 35% of consolidated sales, up from 34% a year earlier. Champion operated 95 captive retail stores at the end of the period, including 11 Homes Direct locations in the Western U.S. However, the first-quarter financial results did not include Homes Direct, as the acquisition closed Aug. 1.

Community orders increased modestly, with some larger operators contributing to growth, while builder-developer sales also rose year over year. Larson said momentum in the builder-developer channel accelerated during the quarter. He pointed to an off-site construction event in York, Nebraska, attended by more than 150 developers, builders, municipalities and housing advocates, as evidence of interest in modular and HUD housing solutions.

During the question-and-answer session, Larson said shipment growth was stronger in Texas, Florida, Mississippi and Alabama, while the West and parts of the Midwest were weaker in the first quarter. He added that order and backlog trends were broadly positive across geographies, though the West showed relatively less strength.

Margins, Earnings and Capital Allocation

Adjusted gross profit totaled $179 million, producing an adjusted gross margin of 25.2%. CFO Dave McKinstray said the result reflected pricing actions, operational execution and efforts to offset elevated material costs. The company expects the benefits of its pricing and cost-mitigation actions to gain momentum in the second quarter.

Adjusted selling, general and administrative expense was 16.4% of sales. Adjusted net income attributable to Champion was $48.3 million, or $0.88 per diluted share, while adjusted EBITDA was $73.6 million, representing a 10.4% margin.

The company’s effective tax rate was approximately 25%, compared with 21% a year earlier. McKinstray attributed the increase to the expiration of ENERGY STAR-related tax incentives.

Cash and cash equivalents totaled $784.7 million at quarter-end, up from $638.3 million at fiscal year-end, primarily due to proceeds from the ECN transaction. Operating cash flow was $72.5 million in the quarter.

Champion repurchased and retired $50 million of common stock during the quarter. In July, its board refreshed the share-repurchase authorization to $150 million. Since the buyback program began in fiscal 2025, the company has repurchased $330 million of stock, or about 8% of its outstanding shares, according to McKinstray.

Homes Direct Acquisition and Regulatory Developments

Champion completed its acquisition of Homes Direct on Aug. 1. McKinstray said Homes Direct has about $70 million in sales and operates 11 locations. One location is next to Champion’s Chandler facility and had primarily sourced Champion products, while the other 10 locations operate like traditional dealers.

The company expects the acquisition to be additive but relatively immaterial to second-quarter results because of the timing of the closing. Management said it expects to gradually migrate products supplied by other manufacturers at Homes Direct locations to Champion products.

Larson also discussed the 21st Century ROAD to Housing Act, which became law July 10. The legislation could allow HUD homes to be built without a permanent chassis, though the company said HUD rulemaking, engineering specifications, transport requirements and local zoning adoption will take time.

Champion does not expect a material impact from the change during fiscal 2027. Larson said the opportunity is primarily about expanding the addressable market and providing homes with aesthetics more comparable to site-built housing, rather than reducing costs. The company expects both chassis and non-chassis construction to remain relevant across its customer channels.

Second-Quarter Outlook

For the second quarter of fiscal 2027, Champion expects revenue to increase by a mid-single-digit percentage from the prior-year period. The outlook excludes Homes Direct and reflects demand improvement seen during the first quarter and increased backlog across channels.

The company expects adjusted gross margin of 25% to 26% and adjusted SG&A expense of 16% to 17% of sales. Management said consumer purchasing power remains under pressure and interest rates remain elevated, while material costs continue to be high despite a slower rate of inflation.

McKinstray said average selling prices may vary quarter to quarter based on channel mix. The first-quarter mix included greater relative strength in independent dealer and community sales, which carry lower selling prices than company-owned retail sales. He said Champion expects average selling price to be sequentially higher in the second quarter but roughly flat to slightly lower year over year.

About Champion Homes (NYSE:SKY)

Champion Homes, traded under the NYSE ticker SKY, operates as a leading provider of factory-built housing solutions in North America. The company specializes in the design, manufacture and sale of manufactured and modular homes, serving a broad spectrum of customers from first-time homebuyers to those seeking upscale residential properties. Champion Homes leverages vertically integrated operations to streamline production, ensuring consistent quality and cost efficiencies across its product lines.

The company's product portfolio encompasses single- and multi-section modular homes, manufactured home models, park models and select commercial modular buildings.

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