Cavco Industries Q2 Earnings Call Highlights

Key Points

• Record quarterly performance: Cavco shipped 5,972 homes and generated $656.4 million in revenue, up 18% year over year. Backlog was 63% higher than a year earlier, despite a broader market that management described as mixed.
• Growth came with margin pressure: Factory-built housing revenue increased 18.4%, but gross margin fell to 21.1% from 22.9% due to higher input costs, including sharply higher steel prices.
• Data-center workforce housing is expanding backlog: Orders for remote data-center housing increased significantly, though Cavco cautioned that the opportunity’s long-term size and durability remain uncertain. The company also repurchased $30 million of stock and is continuing investment in its El Mirage facility, expected to open around mid-2027.

Cavco Industries NASDAQ: CVCO reported record second-quarter fiscal 2027 shipments and revenue, as orders continued to outpace production and lifted backlog levels heading into the seasonally slower winter period.

President and Chief Executive Officer Bill Boor said the manufactured-housing market was not broadly strong, but Cavco’s orders remained above shipment levels during the quarter. The company shipped a record 5,972 homes and generated $656.4 million in net revenue, up 18% from the prior-year period and 7.6% sequentially.

“Overall, we are shipping more than last year, orders are slowing but are well above last year’s levels, and our backlog is 63% higher,” Boor said. End-of-quarter backlog averaged eight to 10 weeks across the system, while capacity utilization was approximately 75%.

Factory-Built Housing Drives Revenue Growth

Factory-built housing revenue rose 18.4% year over year to $633.5 million. Chief Financial Officer Allison Aden said the increase reflected the addition of American Homestar, higher legacy-home sales and increased legacy average revenue per home.

On a same-plant basis, orders increased by a high-single-digit percentage from a year earlier, though they declined sequentially from what Boor described as a very strong first quarter. During the question-and-answer session, Mark Fusler, Cavco’s corporate controller and investor relations executive, said legacy same-plant shipments were up by the low single digits year over year, with the remaining shipment growth tied to American Homestar.

Aden said average revenue per legacy home increased primarily because of product pricing, partly offset by a lower proportion of homes sold through company-owned stores and a larger mix of single-section homes. Boor emphasized that both single-section and multi-section homes sold at higher prices during the quarter, rather than the company’s higher average selling price being driven solely by mix changes.

Factory-built housing gross margin was 21.1%, compared with 22.9% in the prior-year quarter. The decline reflected higher input costs, partly offset by product price increases. Consolidated gross margin was 22.5%, down from 24.2% a year earlier.

Management said materials inflation remained a risk. Aden cited steel costs that were up nearly 150% since the beginning of the year and said Cavco could not be certain that additional price increases would be available during the winter months to fully offset continued input-cost pressure.

Data Center Workforce Housing Adds to Backlog

Boor devoted much of the call to the growing role of workforce housing tied to remote data center projects. Cavco said orders and shipments for data center workforce housing increased significantly during the quarter, though the company does not plan to separately disclose the related unit or order figures.

These projects include temporary construction and office structures, conventional single-family-style homes for leadership personnel, and units designed for workers maintaining and operating remote data centers. Boor described the latter as generally single-section units containing six or seven self-contained rooms, each with bathroom and shower facilities.

He said these units generally carry wholesale prices of roughly $70,000 to less than $100,000. While they sell for more than typical single-section homes, they also require substantially more materials. As a result, Boor said the workforce housing activity had no meaningful effect on Cavco’s gross-margin percentage.

The primary benefit has been additional orders and backlog, which could allow Cavco to maintain or increase production at facilities where backlog supports it. Boor said the company is distributing the orders across its manufacturing network rather than concentrating them at a small number of plants and potentially disrupting service to dealers and community customers.

Management cautioned that it remains early in the opportunity and that the company does not yet have clear visibility into its size, durability, potential cancellations or exposure to construction delays. Early activity has been concentrated in remote parts of Texas, although Boor said the opportunity is beginning to spread to other regions.

Financial Services, Capital Allocation and Investment

Financial services revenue increased 5.6% to $22.6 million, driven by higher mortgage loan sales. Segment gross margin increased to 60.2% from 55.6%, primarily because of improved underwriting margins.

Boor said insurance continued to benefit from low claims and lower reinsurance costs, while CountryPlace Mortgage continued to increase originations after securing new investors for loan purchases. Financial services pre-tax profit increased by a couple of percentage points from an already strong year-ago quarter, he said.

Companywide pre-tax profit rose 9.1% to $73.4 million. Net income totaled $55.4 million, compared with $52.4 million a year earlier, while diluted earnings per share rose to $7.17 from $6.55.

Cavco repurchased $30 million of common stock in the quarter, leaving approximately $158 million under its repurchase authorization. The company said it has returned $642 million to shareholders through buybacks since beginning the program more than five years ago and has repurchased more than 20% of its shares over that period.

Cash and restricted cash increased by $31.7 million during the quarter to $297.9 million. Operating activities generated $96.4 million in cash, while investing activities used $33.8 million, primarily for plant improvements and related equipment. Cavco also cited continued investment in its new El Mirage facility, which is expected to begin operations around the middle of calendar 2027.

Regulatory Opportunities Remain a Long-Term Focus

Boor said American Homestar had exceeded Cavco’s expectations during its first year within the company, with higher-than-assumed tangible synergies and rapid productivity gains.

He also highlighted potential longer-term opportunities from federal and state housing policy. Cavco recently displayed its first off-chassis home at HUD’s Innovative Housing Showcase and discussed its readiness to offer products enabled by the ROAD to Housing Act with HUD Secretary Scott Turner and Rep. Eli Crane.

While Boor said it was too early to attribute current demand trends to the law, he said developers have shown increased interest in two-story and ground-set HUD Code homes. He also pointed to state-level efforts intended to expand factory-built housing access in areas where zoning rules have historically limited it.

Looking ahead, Boor said Cavco was entering winter with its largest backlog since the 2022-2023 period when interest rates increased sharply. He said the company intends to remain flexible, leaning into production where backlogs permit while retaining the ability to adjust to changing market conditions.

About Cavco Industries (NASDAQ:CVCO)

Cavco Industries, Inc is a manufacturer of factory-built housing and related products. The company designs and produces manufactured homes, modular homes, park model recreational vehicles, and commercial structures for residential, hospitality, and other applications. Its homes are sold through independent retailers, company-owned retail locations, and a network of housing dealers.

Cavco markets its products under several brands, including Cavco, Fleetwood Homes, Palm Harbor Homes, Nationwide Homes, Solitaire Homes, and CountryPlace.

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