Champion Homes, Inc. Q2 FY2025 earnings call

Memorial: Honored the memory of Keith Anderson, a former CEO and Director. ### Performance: Second quarter saw home sales increase 29% y-o-y to 6,536 units, organic sales orders up 14% y-o-y. Hurricane impacts disrupted orders and sales. Backlog grew $23 million to $427 million. ### Acquisition: Acquisition of Regional Homes surpassed synergy targets 1 year after acquisition. ### Financing: Champion Financing gained momentum with new floor plan and consumer client financing. ### Third Quarter Outlook: Anticipated modest decline in top line performance due to hurricane timing disruptions, but long-term demand expected from hurricane destruction.

In the second quarter, net sales increased 33% to $617 million compared to the same quarter last year, with U.S. factory-built housing revenue increasing 37%. The number of homes sold in the U.S. increased 31% to 6,357 homes. The average selling price per U.S. home sold was $92,400, a 4.5% increase. Canadian revenue was $22 million, with a 23% decline in the number of homes sold and a 1.5% decline in average selling price. Consolidated gross profit increased 43% to $166 million, with gross margin expanding by 190 basis points. SG&A increased $35 million over the prior year period to $100 million. Net income attributable to Champion Homes increased 20% to $55 million, and adjusted EBITDA was $74 million.

Third Quarter: Anticipates modest decline in top line performance, projected to decrease by mid-single digits sequentially due to hurricane timing disruptions. ### Long-Term: Anticipates strong medium- and long-term demand in hurricane-affected regions spurred by widespread home destruction, positioning for recovery efforts.

Hurricanes: 9 plant locations in Florida, Georgia, and the Carolinas impacted, causing timing delays in order fulfillment, home deliveries, and retail sales. ### Consumer Behavior: Consumers taking a cautious approach, delaying purchases awaiting election outcome. ### Canadian Market: Impacted by higher interest rates and economic uncertainty, tempering enthusiasm for new homes.

Q: Can you quantify the impacts from the storms near term in terms of volume or revenue? At what point will pent-up demand be caught up?

A: Production at several facilities interrupted due to power outages and flooding. Retail placements affected. Pent-up demand catch-up depends on infrastructure rebuild, likely taking a couple of quarters.

Q: What about the gross margin impacts, when will purchase accounting headwinds end?

A: Purchase accounting impacts are immaterial going forward. Lower forest product input costs positively impacted margins, but less significant in third quarter. Strong captive retail sales also contributed.

Q: Thoughts on order rates, backlog, and managing production vs order rates?

A: Order softening due to presidential election, but organic order growth up 14% y-o-y. Backlogs expected to moderate in December, with election outcome influencing order pace in third and fourth quarters.

Q: Any potential upside from FEMA regarding units?

A: No FEMA orders received yet; federal and state governments actively figuring out response but no activity as of yet.

Q: Movement in charter rates?

A: Charter rates generally lag mortgage changes by 6 months, currently running at about a 150 basis point spread for good credit, around 8%-8.5%.