Champion Homes Inc

Previous wording

In October 2023, the Company acquired Regional Homes, which operated three manufacturing facilities in Alabama and 44 retail sales centers across the Southeast U.S. Regional Home's strong presence in large HUD markets. greatly expanded our captive retail and manufacturing distribution in that region. In July 2022, the Company acquired 12 Factory Expo retail sales centers from Alta Cima Corporation, which expanded the internal retail network across a broader portion of the U.S. In May 2022, the Company acquired Manis Custom Builders, Inc. ("Manis") in order to expand its manufacturing footprint and further streamline its product offering in the Southeast U.S.

Current wording

In October 2023, the Company acquired Regional Homes, which operated three manufacturing facilities in Alabama and 44 retail sales centers across the Southeast U.S. Regional Home's strong presence in large HUD markets expanded our captive retail and manufacturing distribution in that region. In July 2022, the Company acquired 12 Factory Expo retail sales centers from Alta Cima Corporation, which expanded the internal retail network across a broader portion of the U.S. In May 2022, the Company acquired Manis Custom Builders, Inc. ("Manis") in order to expand its manufacturing footprint and further streamline its product offering in the Southeast U.S.

Previous wording

During fiscal 2024, the Company made an equity investment in ECN. The investment, in part, facilitated the creation of a captive finance company in partnership with Triad, a subsidiary of ECN. The captive finance company, Champion Financing, provides factory-built home floor plan and consumer loans to manufactured home retailers and homebuyers. The Company believes this offering will provide customers needed financing solutions and improve the Company's market share.

Current wording

During fiscal 2024, the Company made an equity investment in ECN. The investment, in part, facilitated the creation of a captive finance company in partnership with Triad, a subsidiary of ECN. The captive finance company, Champion Financing, through Triad, provides factory-built home floor plan and consumer loans to manufactured home retailers and homebuyers. The Company believes this offering will provide customers needed financing solutions and improve the Company's market share.

Previous wording

The need for newly built affordable, single-family housing has continued to drive demand for new homes in the U.S. and Canadian markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the United States, including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time home buyers, and the population of households earning less than $60,000 per year. More recently, we have seen a number of market trends pointing to increased sales of ADUs and rent-to-own single-family options.

Current wording

The need for newly built affordable, single-family housing has continued to drive demand for new homes in the U.S. and Canadian markets. In recent years, manufactured home construction experienced revenue growth due to a number of favorable demographic trends and demand drivers in the United States, including underlying growth trends in key homebuyer groups, such as the population over 55 years of age, the population of first-time home buyers, and the population of households earning less than $60,000 per year.

Previous wording

Because of the need for affordable housing, the Company saw an increase in customers orders during three months ended June 29, 2024 versus the same period last year that outpaced production rates. As a result, the Company's backlog was $404.8 million as of June 29, 2024 compared to $260.0 million as of July 1, 2023.

Current wording

Because of the need for affordable housing, the Company saw an increase in customers orders during the six months ended September 28, 2024 versus the same period last year that outpaced production rates. As a result, of the increased orders and the acquisition of Regional Homes, the Company's manufacturing backlog was $427.5 million as of September 28, 2024 compared to $257.8 million as of September 30, 2023.

Previous wording

For the three months ended June 29, 2024, approximately 88% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the U.S. Department of Housing and Urban Development ("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the Manufactured Housing Institute, HUD-code industry home shipments were 27,024 and 22,217 units during the three months ended May 31, 2024 and 2023, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 21.3% and 18.0%, for the three months ended May 31, 2024 and 2023, respectively. Annual HUD-code industry shipments have generally increased since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. Annual industry shipments have generally increased each year since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, current manufactured housing shipments are still at lower levels than the long-term historical average of over 200,000 units per year. Manufactured home sales represent approximately 9% of all U.S. single family home starts. Our market share in the U.S total housing market was approximately 2.5% for the three months ended June 29, 2024 compared to 1.9% for the same period in the prior year.

Current wording

For the six months ended September 28, 2024, approximately 87% of the Company’s U.S. manufacturing sales were generated from the manufacture of homes that comply with the U.S. Department of Housing and Urban Development ("HUD") code construction standard in the U.S. Industry shipments of HUD-code homes are reported on a one-month lag. According to data reported by the Manufactured Housing Institute, HUD-code industry home shipments were 44,278 and 37,536 units during the five months ended August 31, 2024 and 2023, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 21.9% and 17.9%, for the five months ended August 31, 2024 and 2023, respectively. Annual HUD-code industry shipments have generally increased since calendar year 2009 when only 50,000 HUD-coded manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD-coded manufactured homes have improved modestly in recent years, current manufactured housing shipments are still at lower levels than the long-term historical average of over 200,000 units per year. Manufactured home sales represent approximately 9% of all U.S. single family home starts. Our market share in the U.S total housing market was approximately 2.4% and 1.9% for the six months ended September 28, 2024 and September 30, 2023, respectively.

Previous wording

UNAUDITED RESULTS OF OPERATIONS FOR THE FIRST QUARTER OF FISCAL 2025 VS. 2024

Current wording

UNAUDITED RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF FISCAL 2025 VS. 2024

Previous wording

Net sales for the three months ended June 29, 2024 were $627.8 million, an increase of $163.0 million, or 35.1%, compared to the three months ended July 1, 2023. The following is a summary of the change by operating segment.

Current wording

Net sales for the three months ended September 28, 2024 were $616.9 million, an increase of $152.6 million, or 32.9%, compared to the three months ended September 30, 2023. The following is a summary of the change by operating segment.

Previous wording

Gross profit as a percent of sales during the three months ended June 29, 2024 was 26.2% compared to 27.9% during the three months ended July 1, 2023. The following is a summary of the change by operating segment.

Current wording

Gross profit as a percent of sales during the three months ended September 28, 2024 was 27.0% compared to 25.1% during the three months ended September 30, 2023. The following is a summary of the change by operating segment.

Previous wording

Gross profit for the Canadian Factory-built Housing segment decreased by $1.7 million, or 23.8%, during the three months ended June 29, 2024 compared to the same period in the prior fiscal year. The decrease in gross profit is primarily due to lower sales volumes, partially offset by higher average selling prices. Gross profit as a percent of net sales was 25.7% for the three months ended June 29, 2024, compared to 26.9% in the same period of the prior year, primarily due to less absorption of fixed costs due to lower sales volumes.

Current wording

Gross profit for the Canadian Factory-built Housing segment decreased by $3.2 million, or 39.6%, during the three months ended September 28, 2024 compared to the same period in the prior fiscal year. The decrease in gross profit is primarily due to lower sales volumes and average selling prices caused by slowing demand. Gross profit as a percent of net sales was 21.8% for the three months ended September 28, 2024, compared to 27.4% in the same period of the prior year, primarily due to less absorption of fixed costs due to lower sales volumes.

Previous wording

Gross profit for the Corporate/Other segment increased $0.3 million, or 7.1%, during the three months ended June 29, 2024 compared to the same period of the prior fiscal year.

Current wording

Gross profit for the Corporate/Other segment increased $1.8 million, or 52.4%, during the three months ended September 28, 2024 compared to the same period of the prior fiscal year due primarily to the inclusion of Champion Financing.

Previous wording

Selling, general, and administrative expenses include foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended June 29, 2024 and July 1, 2023:

Current wording

Selling, general, and administrative expenses include in part costs that are not directly attributable to the manufacture or resale of our products, including foreign currency transaction gains and losses, equity compensation, and intangible amortization expense. The following table summarizes selling, general, and administrative expenses for the three months ended September 28, 2024 and September 30, 2023:

Previous wording

Selling, general, and administrative expenses were $108.8 million for the three months ended June 29, 2024, an increase of $38.4 million, or 54.5%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

Current wording

Selling, general, and administrative expenses were $99.7 million for the three months ended September 28, 2024, an increase of $35.2 million, or 54.6%, compared to the same period in the prior fiscal year. The following is a summary of the change by operating segment.

Previous wording

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment increased $0.3 million, or 11.1%, for the three months ended June 29, 2024 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increased to 14.0% for the three months ended June 29, 2024 compared to 10.0% during the comparable period of the prior fiscal year due to less absorption of fixed costs from lower sales.

Current wording

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment decreased $0.3 million, or 11.3%, for the three months ended September 28, 2024 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales increased to 10.4% for the three months ended September 28, 2024 compared to 8.9% during the comparable period of the prior fiscal year due to decreased leverage of fixed manufacturing costs.

Previous wording

Interest income, net was $4.2 million for the three months ended June 29, 2024, compared to $9.3 million in the same period of the prior fiscal year. The change was primarily due to lower interest income from lower average invested cash balances and higher interest expense from larger average floor plan payables and long-term debt balances assumed in the acquisition of Regional Homes.

Current wording

Interest income, net was $4.7 million for the three months ended September 28, 2024, compared to $10.5 million in the same period of the prior fiscal year. The change was primarily due to lower interest income from lower average invested cash balances and higher interest expense from larger average floor plan payables and long-term debt balances assumed in the acquisition of Regional Homes.

Previous wording

Income tax expense for the three months ended June 29, 2024 was $13.7 million, representing an effective tax rate of 22.5%, compared to income tax expense of $17.3 million, representing an effective tax rate of 25.2% for the three months ended July 1, 2023. The effective tax rate for the three months ended June 29, 2024 was positively impacted by an increase in recognition of tax credits related to the sale of energy efficient homes.

Current wording

Income tax expense for the three months ended September 28, 2024 was $15.4 million, representing an effective tax rate of 21.6%, compared to income tax expense of $14.8 million, representing an effective tax rate of 24.5% for the three months ended September 30, 2023. The effective tax rate for the three months ended September 28, 2024 was positively impacted by an increase in recognition of tax credits related to the sale of energy efficient homes.

Previous wording

The Company’s effective tax rates for the three months ended June 29, 2024 and July 1, 2023 differ from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, and results in foreign jurisdictions.

Current wording

The Company’s effective tax rate for the three months ended September 28, 2024 and September 30, 2023, differ from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes, non-deductible expenses, tax credits, and results in foreign jurisdictions.

Previous wording

The Company's investment in ECN is accounted for under the equity method and the Company’s share of the earnings or losses of ECN are recorded on a three-month lag. Equity in net loss of affiliates of $1.3 million for the three months ended June 29, 2024 represents a loss on the equity method investment in ECN of $1.2 million and net losses from other equity method investments of $0.1 million. There were no earnings or losses recognized related to equity method investments for the three months ended July 1, 2023.

Current wording

The Company's investment in ECN is accounted for under the equity method and the Company’s share of the earnings or losses of ECN are recorded on a three-month lag. Equity in net loss of affiliates of $0.7 million for the three months ended September 28, 2024 represents a gain on the equity method investment in ECN of $0.7 million and net losses from other unconsolidated affiliates of $1.4 million. There were no earnings or losses recognized related to equity method investments for the three months ended September 30, 2023.

Previous wording

The following table reconciles net income, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended June 29, 2024 and July 1, 2023:

Current wording

The following table reconciles net income attributable to Champion Homes, Inc., the most directly comparable U.S. GAAP measure, to Adjusted EBITDA, a non-GAAP financial measure, for the three months ended September 28, 2024 and September 30, 2023:

Previous wording

Adjusted EBITDA for the three months ended June 29, 2024 was $75.0 million, an increase of $8.1 million from the same period of the prior fiscal year. The increase is primarily a result of higher sales volumes and gross profit, partially offset by higher SG&A expenses, primarily due to the inclusion of Regional Homes.

Current wording

Adjusted EBITDA for the three months ended September 28, 2024 was $74.2 million, an increase of $15.4 million from the same period of the prior fiscal year. The increase is primarily a result of higher sales volumes and gross profit, partially offset by higher SG&A expenses, primarily due to the inclusion of Regional Homes.

Previous wording

Net sales for the Company’s U.S. manufacturing and retail operations increased by $170.7 million, or 39.8%, for the three months ended June 29, 2024 compared to the three months ended July 1, 2023. The increase was primarily due to the inclusion of $151.5 million of net sales from Regional Homes in fiscal 2025. The number of new homes sold during the period increased 35.7% and the average selling price per new home increased 3.0%. The increase in the number of homes sold was due to higher customer demand and production volumes compared to the prior year, and the inclusion of Regional Homes in fiscal 2025. The increase in average selling price was due to the increase in the number of units sold through our company-owned retail sales centers, also in part a result of the addition of Regional Homes. The mix of wholesale unit sales versus homes sold through our company-owned stores impacts average selling price. During the three months ended June 29, 2024, wholesale average selling price per new home decreased due to the decrease in material surcharges and changes in product mix, including customers choosing homes with fewer or lower cost options.

Current wording

Net sales for the Company’s U.S. manufacturing and retail operations increased by $329.7 million, or 38.5%, for the six months ended September 28, 2024 compared to the six months ended September 30, 2023. The increase was primarily due to the inclusion of $299.4 million of net sales from Regional Homes in fiscal 2025. The number of homes sold during the period increased 33.5% and the average home selling price increased 3.7%. The increase in the number of homes sold was due to higher customer demand and production volumes compared to the prior year and the inclusion of Regional Homes in fiscal 2025. The increase in average selling price was due to the increase in the number of units sold through our company-owned retail sales centers, also in part a result of the addition of Regional Homes. The mix of wholesale unit sales versus homes sold through our company-owned stores impacts average selling price. During the six months ended September 28, 2024, wholesale average selling price per new home decreased due to the changes in product mix, including customers choosing homes with fewer or lower cost options.

Previous wording

The Canadian Factory-built Housing segment net sales decreased by $5.3 million, or 20.4% for the three months ended June 29, 2024 compared to the same period in the prior fiscal year, primarily due to a 24.4% decrease in homes sold partially offset by a 5.4% increase in average home selling price. The increase in average home selling price was primarily due to a change in product mix. The decrease in homes sold is due to slowing demand. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $0.2 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended June 29, 2024 as compared to the same period of the prior fiscal year.

Current wording

The Canadian Factory-built Housing segment net sales decreased by $12.3 million, or 22.3% for the six months ended September 28, 2024 compared to the same period in the prior fiscal year, primarily due to a 23.6% decrease in homes sold, partially offset by a 1.8% increase in average home selling price. The decrease in homes sold is due to slowing demand in the Canadian market. On a constant currency basis, net sales for the Canadian segment were unfavorably impacted by approximately $0.8 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the six months ended September 28, 2024 as compared to the same period of the prior fiscal year.

Previous wording

Net sales for Corporate/Other includes the Company’s transportation business and the elimination of intersegment sales. For the three months ended June 29, 2024, net sales decreased $2.4 million, or 24.5%, primarily attributable to continued decreases of shipments of recreational vehicles as part of a shift in focus of this business unit to expanding shipments of manufactured housing.

Current wording

Net sales for Corporate/Other includes the Company’s transportation business, financing activities and the elimination of intersegment sales. For the six months ended September 28, 2024, net sales decreased $1.7 million, or 10.5%, primarily attributable to the decrease in recreational vehicle shipments, offset in part by the inclusion of Champion Financing.

Previous wording

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $34.1 million, or 66.4%, during the three months ended June 29, 2024 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales increased to 14.2% for the three months ended June 29, 2024 compared to 12.0% during the comparable period of the prior fiscal year. The acquisition of Regional Homes was the primary driver of the increase. In addition, the Company incurred a charge of $7.9 million in the first quarter of fiscal 2025 related to the change in fair value of the contingent consideration included in the acquisition of Regional Homes.

Current wording

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $64.2 million, or 65.6%, during the six months ended September 28, 2024 as compared to the same period in the prior fiscal year. Selling, general, and administrative expenses, as a percent of segment net sales increased to 13.7% for the six months ended September 28, 2024 compared to 11.4% during the comparable period of the prior fiscal year primarily due to the acquisition of Regional Homes, including a charge of $7.9 million in the first quarter of fiscal 2025 related to the change in fair value of the contingent consideration included in the acquisition of Regional Homes, as well as higher incentive compensation, which is generally based on sales volume or a measure of profitability.

Previous wording

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $4.0 million, or 24.4%, during the three months ended June 29, 2024 as compared to the same period of the prior fiscal year. The increase was due primarily to higher incentive and stock-based compensation expenses and investments made to enhance our online customer experience and support systems.

Current wording

Selling, general, and administrative expenses for Corporate/Other includes the Company’s transportation operations, corporate costs incurred for all segments, and intersegment eliminations. Selling, general, and administrative expenses for Corporate/Other increased $9.4 million, or 29.5%, during the six months ended September 28, 2024 as compared to the same period of the prior fiscal year due primarily to higher incentive and stock-based compensation expense and investments made in people and information systems to support future growth.

Previous wording

The following table summarizes other (income) for the three months ended June 29, 2024 and July 1, 2023:

Current wording

The following table summarizes other (income) expense for the six months ended September 28, 2024 and September 30, 2023:

Previous wording

Other (income) for the three months ended June 29, 2024 represents dividend income from the investment in ECN Preferred Shares.

Current wording

Other (income) of $1.2 million for the six months ended September 28, 2024 represents dividend income from the investment in ECN Preferred shares. Other expense of $2.1 million for the six months ended September 30, 2023 represents transaction costs incurred for the acquisition of Regional Homes.

Previous wording

The Company defines Adjusted EBITDA as net income or loss plus expense or minus income: (a) the provision for income taxes; (b) interest (income) expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) non-cash restructuring charges and impairment of assets; (f) equity in net earnings or losses of ECN; (g) charges related to the remediation of the water intrusion product liability claims; and (h) other non-operating income and costs, including but not limited to those costs for the acquisition and integration or disposition of businesses, including the change in fair value of contingent consideration, and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

Current wording

The Company defines Adjusted EBITDA as net income or loss attributable to Champion Homes, Inc. plus expense or minus income: (a) the provision for income taxes; (b) interest (income) expense, net; (c) depreciation and amortization; (d) gain or loss from discontinued operations; (e) non-cash restructuring charges and impairment of assets; (f) equity in net earnings or losses of ECN; (g) charges related to the remediation of the water intrusion product liability claims; and (h) other non-operating income and costs, including but not limited to those costs for the acquisition and integration or disposition of businesses, including the change in fair value of contingent consideration, and idle facilities. Adjusted EBITDA is not a measure of earnings calculated in accordance with U.S. GAAP, and should not be considered an alternative to, or more meaningful than, net income or loss, net sales, operating income or earnings per share prepared on a U.S. GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by U.S. GAAP, which is presented in the Statement of Cash Flows. In addition, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

Previous wording

Although orders from customers can be canceled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at June 29, 2024 totaled $404.8 million compared to $260.0 million at July 1, 2023. The increase in backlog is due to higher net orders and the acquisition of Regional Homes.

Current wording

Although orders from customers can be canceled at any time without penalty, and unfilled orders are not necessarily an indication of future business, the Company’s unfilled U.S. and Canadian manufacturing orders at September 28, 2024 totaled $427.5 million compared to $257.8 million at September 30, 2023. The increase in backlog is due to higher net orders and the acquisition of Regional Homes.

Previous wording

The following table presents summary cash flow information for the three months ended June 29, 2024 and July 1, 2023:

Current wording

The following table presents summary cash flow information for the six months ended September 28, 2024 and September 30, 2023:

Previous wording

Cash provided by operating activities was $84.6 million for the three months ended June 29, 2024 compared to $74.9 million for the three months ended July 1, 2023. The increase was primarily driven by higher income before non-cash charges related to the change in fair value of the contingent consideration for the Regional Homes acquisition and the loss on equity method investments, and more favorable changes in working capital items during the first three months of fiscal 2025 as compared to the same period of the prior year.

Current wording

Cash provided by operating activities was $144.4 million for the six months ended September 28, 2024 compared to $129.1 million for the six months ended September 30, 2023. The increase was primarily driven by higher income before non-cash charges, including the charge for the change in fair value of contingent consideration for the Regional Homes acquisition, partially offset by less favorable changes in working capital items during the first six months of fiscal 2025 as compared to the same period of the prior year.

Previous wording

Cash used in investing activities was $9.1 million for the three months ended June 29, 2024 compared to $25.6 million for the three months ended July 1, 2023. The decrease in cash used for investing activities was related to the Company's investment in floor plan loans in fiscal 2024, which did not recur in fiscal 2025.

Current wording

Cash used in investing activities was $22.6 million for the six months ended September 28, 2024 compared to $174.6 million for the six months ended September 30, 2023. The decrease in cash used for investing activities was related to the Company's investment in floor plan loans, ECN common stock and ECN preferred stock in fiscal 2024 which did not recur in fiscal 2025.

Previous wording

Cash used in financing activities was $20.6 million for the three months ended June 29, 2024 compared to $1.0 million for the three months ended July 1, 2023. The change in cash between periods was primarily due to share repurchases of $20.0 million in the first quarter of fiscal 2025. As of June 29, 2024, there was approximately $80.0 million remaining on a board-approved share repurchase program. On August 1, 2024, the Company's Board of Directors approved an increase to the share repurchase program to increase the authorization to repurchase the Company's common stock by an additional $20.0 million.

Current wording

Cash used in financing activities was $47.3 million for the six months ended September 28, 2024 compared to $0.8 million for the six months ended September 30, 2023. The change in cash between periods was primarily due to repurchases of the Company's common stock totaling $40.0 million in the first half of fiscal 2025.