What Champion Homes (SKY) Said on Its Q2 Earnings Call

Key Points

• Sales and demand improved: Second-quarter net sales rose 6.2%, while manufacturing orders increased 17% and backlog reached about $500 million. Champion forecast third-quarter revenue growth of 8% to 10% year over year.
• Input-cost inflation is pressuring margins: Higher steel and petroleum-based material costs are expected to weigh on the third quarter, with adjusted gross margin forecast at 24% to 25%. Management said pricing, sourcing and efficiency efforts should help offset costs over time, but with a lag.
• Retail expansion is adding reach: Company-owned retail contributed about 39% of sales, and Champion agreed to acquire Timberline Homes, which has nine locations and more than $100 million in annualized revenue. The deal is expected to close in the fourth fiscal quarter.

Champion Homes NYSE: SKY reported a 6.2% increase in net sales for its second fiscal quarter and forecast faster revenue growth in the current quarter, as higher manufacturing orders and an expanding retail network helped offset rising material costs.

The manufactured-home builder sold 6,922 homes in the quarter ended September 26, 2026, up 2.2% from a year earlier. Manufacturing orders rose 17% year over year, lifting the company’s quarter-end manufacturing backlog to approximately $500 million, an 18.6% increase from the preceding quarter.

CEO Tim Larson said demand improved through the summer and into fall, while digital and showroom traffic in October was steady. The backlog gives Champion “good visibility into the third quarter,” he said, though the company remains attentive to the economy and consumer conditions.

Costs weigh on margin outlook

Adjusted gross profit was $185.6 million, with an adjusted gross margin of 25.5%. Adjusted EBITDA was $76 million, or 10.5% of sales. Adjusted selling, general and administrative expenses were 16.3% of net sales, within management’s expected range.

CFO Dave McKinstray said material cost inflation accelerated more quickly than the company had anticipated, particularly for steel and petroleum-based materials. Champion expects those pressures to continue into the third quarter, with steel costs rising further.

For the third quarter of fiscal 2027, the company forecast revenue growth of 8% to 10% from a year earlier, adjusted gross margin of 24% to 25%, and adjusted selling, general and administrative expenses of 16% to 17% of sales. The revenue outlook includes Homes Direct, which Champion acquired during the second quarter, but excludes its pending Timberline Homes acquisition.

McKinstray said pricing, sourcing initiatives and operational efficiencies should help mitigate cost pressures over time, although those actions lag increases in input costs. Asked whether margins could return above 25% if costs stabilize, he said he expects margins to build over the long run, depending on the cost environment.

In the U.S., homes sold rose 2.3% to 6,724, while the average selling price increased 4.1% to approximately $102,700. During prepared remarks, McKinstray attributed the average selling price increase primarily to a higher proportion of company-owned retail sales. In response to an analyst’s question, he said price realization accounted for the large majority of the year-over-year increase, with channel mix making a smaller contribution.

Retail expansion and backlog

Champion’s company-owned retail channel accounted for approximately 39% of consolidated sales, up from 37% a year earlier. The company had 95 captive retail stores during the quarter, and results included two months of contribution from Homes Direct, which closed on August 1.

Champion also announced an agreement on October 5 to acquire Timberline Homes, an independent retailer with nine locations in Alabama, Mississippi and Florida. Timberline has annualized revenue of more than $100 million, and the transaction is expected to close in the fourth fiscal quarter, subject to customary conditions.

Larson said Timberline was already a Champion customer, but its purchases were below the company’s normal market share. Champion plans to increase the share of its products in Timberline’s inventory over time.

Manufacturing backlog lead times averaged approximately 11 weeks at quarter-end, compared with nine weeks in the prior quarter. Manufacturing capacity utilization was 62%, including idled facilities, up from 60% a year earlier. Larson said utilization at many operating plants is higher and that production decisions are being made by region while balancing demand and seasonality.

Workforce housing and product development

Larson said workforce housing represented a relatively small portion of the homes sold during the quarter and was included in the company’s guidance. Champion evaluates such projects based on geography, available capacity and margins while protecting capacity for core customers, he said.

The company also displayed a two-story home called New Horizon at a U.S. Department of Housing and Urban Development showcase in September. Larson said the home can be offered under the current HUD Code and could serve customers seeking urban infill housing.

Champion is working with HUD as rulemaking associated with the ROAD Act proceeds, Larson said. He cautioned that there is no definitive date for the availability of no-chassis homes and that the regulatory process will take time.

Champion ended the quarter with $702.8 million in cash and cash equivalents and generated $43 million in operating cash flow. It repurchased $50 million of common stock during the quarter, bringing repurchases since the program began in fiscal 2025 to $380 million. The board also refreshed the company’s repurchase authorization to $150 million.

About Champion Homes (NYSE:SKY)

Champion Homes, Inc NYSE: SKY is a manufacturer of factory-built housing in the United States and Canada. The company designs and produces manufactured homes, modular homes and other residential structures in controlled factory environments, offering housing solutions for individual homeowners, developers, retailers and communities.

Its products include single-section and multi-section manufactured homes, modular homes, accessory dwelling units and park model recreational vehicles. Champion Homes markets its products through independent retailers, company-owned retail operations and other distribution channels, and also provides related construction and installation services in selected markets.

The company traces its heritage to the Skyline and Champion businesses, which combined in 2018 to form Skyline Champion Corporation.

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