Champion Homes, Inc.

Previous wording

Item 2. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous wording

Champion Homes, Inc. is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including factory-built home manufacturing, company-owned retail locations, construction services, and transportation logistics services. The Company markets its homes under several nationally recognized brand names including Champion Homes, Genesis Homes, Skyline Homes, Regional Homes, Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, New Era, J. Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 42 manufacturing facilities throughout the U.S. and four manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 84 sales centers that sell manufactured homes to consumers across the U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

Current wording

Champion Homes, Inc. is a leading producer of factory-built housing in the U.S. and Canada. The Company serves as a complete solutions provider across complementary and vertically integrated businesses including factory-built home manufacturing, company-owned retail locations, construction services, and transportation logistics services. The Company markets its homes under several nationally recognized brand names including Champion Homes, Genesis Homes, Skyline Homes, Regional Homes, Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, All American Homes, New Era, J. Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, and Titan Homes in the U.S., and Moduline and SRI Homes in western Canada. The Company operates 42 manufacturing facilities throughout the U.S. and four manufacturing facilities in western Canada that primarily construct factory-built, timber-framed, manufactured and modular houses that are sold primarily to independent retailers, builders/developers, and manufactured home community operators. The Company’s retail operations consist of 95 sales centers that sell manufactured homes to consumers across the U.S. The Company’s transportation business engages independent owners/drivers to transport manufactured homes, recreational vehicles, and other products throughout the U.S. and Canada.

Previous wording

In August 2026, the Company completed its previously announced acquisition of the assets of Homes Direct, representing 11 retail sales centers across the western region of the U.S. The acquisition expands Champion's Western U.S. footprint accelerates the Company's direct to consumer strategy. In May 2025, the Company acquired Iseman Homes which operated 10 retail sales centers across the North Central U.S. This acquisition enhances the Company's ability to strengthen distribution from its nearby manufacturing facilities, furthering the Company’s commitment to integrated growth.

Current wording

In August 2026, the Company completed its previously announced acquisition of the assets of Homes Direct, representing 11 retail sales centers across the western region of the U.S. The acquisition expands Champion's Western U.S. footprint and accelerates the Company's direct to consumer strategy. In May 2025, the Company acquired Iseman Homes, which operated 10 retail sales centers across the North Central U.S. This acquisition enhances the Company's ability to strengthen distribution from its nearby manufacturing facilities, furthering the Company’s commitment to integrated growth.

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.

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. However, in recent quarters, inflationary pressures and rising interest rates have compressed the purchasing power of homebuyers while simultaneously increasing material input costs, thereby impacting the Company’s operating margins. These macroeconomic headwinds further underscore the fundamental long-term need for affordable housing. Where possible, the Company tries to mitigate the impact of rising material input costs by taking pricing actions, working with supply chain partners, sourcing alternative materials, or making other operational improvements to minimize the effect on operating margins.

Previous wording

The Company's manufacturing backlog increased to $421.8 million as of June 27, 2026 compared to $302.5 million as of June 28, 2025. The increase in backlog is a function of order rates exceeding production rates during the three months ended June 27, 2026, compared to the same period in the prior fiscal year.

Current wording

The Company's manufacturing backlog increased to $500.2 million as of September 26, 2026 compared to $313.2 million as of September 27, 2025. The increase in backlog is a function of order rates exceeding production rates during the three months ended September 26, 2026, compared to the same period in the prior fiscal year.

Previous wording

For the three months ended June 27, 2026, approximately 87.3% 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 26,363 and 27,676 units during the three months ended May 31, 2026 and 2025, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 23.1% and 22.5%, for the three months ended May 31, 2026 and 2025, respectively. HUD-code industry shipments have improved modestly in recent years, but are still at lower levels than the long-term historical average of over 200,000 units per year. Manufactured home sales represent approximately 11% of all U.S. single family home starts. Our estimated market share in the U.S. total housing market, based on data through May 2026, was approximately 3.0% and 2.7% for the three months ended June 27, 2026 and June 28, 2025, respectively.

Current wording

For the six months ended September 26, 2026, approximately 86.6% 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 52,702 and 44,567 units during the five months ended August 31, 2026 and 2025, respectively. Based on industry data, the Company’s U.S. wholesale market share of HUD code homes sold was 23.0% and 22.6%, for the five months ended August 31, 2026 and 2025, respectively. HUD-code industry shipments have improved modestly in recent years, but are still at lower levels than the long-term historical average of over 200,000 units per year. Manufactured home sales represent approximately 11% of all U.S. single family home starts. Our estimated market share in the U.S. total housing market, based on data through August 2026, was approximately 3.0% and 2.6% for the six months ended September 26, 2026 and September 27, 2025, respectively.

Previous wording

UNAUDITED RESULTS OF OPERATIONS FOR THE FIRST QUARTER OF FISCAL 2027 VS. 2026

Current wording

UNAUDITED RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF FISCAL 2027 VS. 2026

Previous wording

Net sales for the three months ended June 27, 2026 were $710.2 million, an increase of $8.9 million, or 1.3%, compared to the three months ended June 28, 2025. The following is a summary of the change by operating segment.

Current wording

Net sales for the three months ended September 26, 2026 were $727.0 million, an increase of $42.6 million, or 6.2%, compared to the three months ended September 27, 2025. The following is a summary of the change by operating segment.

Previous wording

Net sales for the Company’s U.S. manufacturing and retail operations increased by $15.4 million, or 2.3%, for the three months ended June 27, 2026 compared to the three months ended June 28, 2025. The increase was due to a 1.8% increase in new homes sold and 0.6% increase in the average selling price per new home. The increase in new homes sold was due to higher new home orders and production rates.

Current wording

Net sales for the Company’s U.S. manufacturing and retail operations increased by $41.7 million, or 6.4%, for the three months ended September 26, 2026 compared to the three months ended September 27, 2025. The increase was due to a 2.3% increase in new homes sold and 4.1% increase in the average selling price per new home. The increase in new homes sold was due to higher new home orders and production rates. The increase in average selling price was primarily due to a shift in mix to more multi-wide units and improved price realization.

Previous wording

Net sales for Corporate/Other includes the Company’s transportation business, financing activities, and the elimination of intersegment sales. Net sales were consistent for the three months ended June 27, 2026 and June 28, 2025.

Current wording

Net sales for Corporate/Other includes the Company’s transportation business, financing activities, and the elimination of intersegment sales. Net sales increased by $1.7 million or 18.6% for the three months ended September 26, 2026 compared to the same period in the prior fiscal year due to higher volumes from Champion Financing.

Previous wording

Gross profit as a percent of sales during the three months ended June 27, 2026 was 25.2% compared to 27.1% during the three months ended June 28, 2025. 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 26, 2026 was 25.5% compared to 27.5% during the three months ended September 27, 2025. The following is a summary of the change by operating segment.

Previous wording

Gross profit for the U.S. Factory-built Housing segment decreased by $9.4 million, or 5.4%, during the three months ended June 27, 2026 compared to the same period in the prior fiscal year. Gross profit was 24.4% as a percent of segment net sales for the three months ended June 27, 2026, compared to 26.3% for the three months ended June 28, 2025. The decrease in gross profit as a percent of segment net sales was driven by higher manufacturing material input costs.

Current wording

Gross profit for the U.S. Factory-built Housing segment decreased by $3.9 million, or 2.3%, during the three months ended September 26, 2026 compared to the same period in the prior fiscal year. Gross profit was 24.4% as a percent of segment net sales for the three months ended September 26, 2026, compared to 26.6% for the three months ended September 27, 2025. The decrease in gross profit as a percent of segment net sales was driven by higher manufacturing material input costs.

Previous wording

Selling, general, and administrative expenses were $119.0 million for the three months ended June 27, 2026, an increase of $7.7 million, or 6.9%, 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 $119.8 million for the three months ended September 26, 2026, an increase of $6.7 million, or 5.9%, 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 U.S. Factory-built Housing segment increased $1.7 million, or 2.0%, during the three months ended June 27, 2026 as compared to the same period in the prior fiscal year. SG&A as a percent of segment net sales decreased to 13.0% for the three months ended June 27, 2026 compared to 13.1% during the comparable period of the prior fiscal year. The increase in SG&A was due to the inclusion of Iseman Homes for the entire period in fiscal 2027 versus a partial period in the prior year subsequent to the acquisition.

Current wording

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $9.4 million, or 11.2%, during the three months ended September 26, 2026 as compared to the same period in the prior fiscal year. SG&A as a percent of segment net sales increased to 13.5% for the three months ended September 26, 2026 compared to 12.9% during the comparable period of the prior fiscal year. The increase in SG&A was due to the inclusion of Homes Direct, higher incentive compensation and marketing costs and the $3.7 million gain on sale of idle facility from the prior fiscal year which did not recur.

Previous wording

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment decreased $2.5 million, or 42.9%, for the three months ended June 27, 2026 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 14.0% for the three months ended June 27, 2026 compared to 19.0% during the comparable period of the prior fiscal year, primarily due to costs associated with the Kelowna, BC plant closure of $2.9 million being included in the prior fiscal year.

Current wording

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment decreased $2.4 million, or 46.4%, for the three months ended September 26, 2026 when compared to the same period of the prior fiscal year. Selling, general, and administrative expenses as a percent of segment net sales decreased to 11.0% for the three months ended September 26, 2026 compared to 19.9% during the comparable period of the prior fiscal year, primarily due to costs associated with the Kelowna, BC plant closure of $2.4 million being incurred in the prior fiscal year.

Previous wording

Income tax expense for the three months ended June 27, 2026 was $17.0 million, representing an effective tax rate of 25.0%, compared to income tax expense of $17.7 million, representing an effective tax rate of 21.0% for the three months ended June 28, 2025. The effective tax rate for the three months ended June 27, 2026 was negatively impacted primarily by a decrease in recognition of tax credits related to the sale of energy efficient homes.

Current wording

Income tax expense for the three months ended September 26, 2026 was $17.7 million, representing an effective tax rate of 24.2%, compared to income tax expense of $18.6 million, representing an effective tax rate of 23.6% for the three months ended September 27, 2025. The effective tax rate for the three months ended September 26, 2026 was negatively impacted primarily by a decrease in recognition of tax credits related to the sale of energy efficient homes.

Previous wording

Adjusted EBITDA for the three months ended June 27, 2026 was $73.6 million, a decrease of $20.6 million from the same period of the prior fiscal year. The decrease is primarily a result of lower operating income as a result of lower gross margins.

Current wording

Adjusted EBITDA for the three months ended September 26, 2026 was $76.6 million, a decrease of $6.8 million from the same period of the prior fiscal year. The decrease is primarily a result of lower operating income as a result of lower gross margins.

Previous wording

The Canadian Factory-built Housing segment net sales decreased by $6.8 million, or 22.6% for the three months ended June 27, 2026 compared to the same period in the prior fiscal year, primarily due to a 26.0% decrease in homes sold partially offset by a 4.6% increase in average home selling price. The decrease in homes sold was due to lower demand in certain markets and the closure of the Kelowna, BC plant in the second quarter of fiscal 2026. The increase in average selling price was due to product mix. On a constant currency basis, net sales for the Canadian segment were favorably impacted by approximately $0.4 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended June 27, 2026 as compared to the same period of the prior fiscal year.

Current wording

The Canadian Factory-built Housing segment net sales decreased by $7.7 million, or 13.6% for the six months ended September 26, 2026 compared to the same period in the prior fiscal year, primarily due to a 14.1% decrease in homes sold. The decrease in homes sold was due to lower demand in certain markets and the closure of the Kelowna, BC plant in the second quarter of fiscal 2026. 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 six months ended September 26, 2026 as compared to the same period of the prior fiscal year.

Previous wording

Gross profit for the Canadian Factory-built Housing segment decreased by $1.5 million, or 18.3%, during the three months ended June 27, 2026 compared to the same period in the prior fiscal year. The decrease in gross profit was due to fewer homes sold in the period compared to the prior year. Gross profit as a percent of net sales was 29.0% for the three months ended June 27, 2026, compared to 27.5% in the same period of the prior year. The increase in gross profit as a percent of segment net sales was due to higher average selling prices of new homes and the impact of the closure of the Kelowna, BC plant, which reduced segment margin percentage in the prior fiscal year.

Current wording

Gross profit for the Canadian Factory-built Housing segment decreased by $1.3 million, or 8.5%, during the six months ended September 26, 2026 compared to the same period in the prior fiscal year. The decrease in gross profit was due to fewer homes sold in the period compared to the prior year. Gross profit as a percent of net sales was 29.6% for the six months ended September 26, 2026, compared to 28.0% in the same period of the prior year. The increase in gross profit as a percent of segment net sales was due to the impact of the closure of the Kelowna, BC plant, which reduced segment margin percentage and did not recur in the current fiscal year.

Previous wording

Gross profit for the Corporate/Other segment increased $0.4 million, or 4.9%, during the three months ended June 27, 2026 compared to the same period of the prior fiscal year.

Current wording

Gross profit for the Corporate/Other segment increased $1.8 million, or 11.8%, during the six months ended September 26, 2026 compared to the same period of the prior fiscal year due to Champion Financing.

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 $8.4 million, or 44.4%, during the three months ended June 27, 2026 as compared to the same period of the prior fiscal year. The increase was primarily due to foreign currency transaction losses, employee severance costs, and higher stock compensation and incentive expense.

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 $8.2 million, or 19.0%, during the six months ended September 26, 2026 as compared to the same period of the prior fiscal year. The increase was primarily due to higher employee compensation and incentive expense, higher professional fees and foreign currency transaction losses.

Previous wording

Other income for the three months ended June 27, 2026 represents the net gain on sale of the Company's investment in ECN common and preferred shares of $2.5 million and dividend income of $0.8 million from the investment in ECN Preferred Shares. Other income for the three months ended June 28, 2025 represents dividend income of $1.2 million from the investment in ECN Preferred Shares.

Current wording

Other income for the six months ended September 26, 2026 represents gain on debt extinguishments of $2.0 million, the net gain on sale of the Company's investment in ECN common and preferred shares of $2.5 million and dividend income of $0.8 million from the investment in ECN Preferred Shares. Other income for the six months ended September 27, 2025 represents dividend income of $1.1 million from the investment in ECN Preferred Shares.

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 $0.6 million for the three months ended June 27, 2026 represents a loss on the equity method investment in ECN of $0.3 million and net losses from other unconsolidated equity method investments of $0.3 million. Equity in net loss of affiliates of $0.6 million for the three months ended June 28, 2025 represents a loss on the equity method investment in ECN of $0.5 million and net losses from other equity method investments of $0.1 million.

Current wording

The Company's investment in ECN was accounted for under the equity method and the Company’s share of the earnings or losses of ECN were recorded on a three-month lag. Equity in net loss of affiliates of $0.9 million for the six months ended September 26, 2026 represents a loss on the equity method investment in ECN of $0.3 million and net losses from other unconsolidated equity method investments of $0.6 million. Equity in net loss of affiliates of $0.7 million for the six months ended September 27, 2025 represents a loss on the equity method investment in ECN of $0.5 million and net losses from other equity method investments of $0.2 million.

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 27, 2026 totaled $421.8 million compared to $302.5 million at June 28, 2025. The increase in backlog is a function of order rates exceeding production rates during the three months ended June 27, 2026, compared to the same period in the prior year.

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 26, 2026 totaled $500.2 million compared to $313.2 million at September 27, 2025. The increase in backlog is a function of order rates exceeding production rates during the six months ended September 26, 2026, compared to the same period in the prior year.

Previous wording

The following table presents summary cash flow information for the three months ended June 27, 2026 and June 28, 2025:

Current wording

The following table presents summary cash flow information for the six months ended September 26, 2026 and September 27, 2025:

Previous wording

Cash provided by operating activities was $72.5 million for the three months ended June 27, 2026 compared to $75.3 million for the three months ended June 28, 2025. The decrease was primarily driven by lower operating income before non-cash charges partially offset by more favorable changes in working capital items during the first three months of fiscal 2027 as compared to the same period of the prior year.

Current wording

Cash provided by operating activities was $115.4 million for the six months ended September 26, 2026 compared to $151.2 million for the six months ended September 27, 2025. The decrease was primarily driven by lower operating income before non-cash charges.

Previous wording

Cash provided by investing activities was $126.0 million for the three months ended June 27, 2026 compared to cash used in investing activities of $33.9 million for the three months ended June 28, 2025. The increase in cash provided by investing activities was primarily related to the sale of the investment in ECN common and preferred shares during the first quarter of fiscal 2027 and the acquisition of Iseman Homes in the prior fiscal year.

Current wording

Cash provided by investing activities was $61.6 million for the six months ended September 26, 2026 compared to cash used in investing activities of $37.8 million for the six months ended September 27, 2025. The increase in cash provided by investing activities was primarily related to the sale of the investment in ECN common and preferred shares during the first quarter of fiscal 2027 partially offset by higher cash spent on acquisitions compared to the prior fiscal year.

Previous wording

Cash used in financing activities was $48.8 million for the three months ended June 27, 2026 compared to $51.9 million for the three months ended June 28, 2025. The change between periods was primarily a result of changes in floor plan financing. Cash used for repurchases of common stock was $50.0 million for each of the three months ended June 27, 2026 and June 28, 2025.

Current wording

Cash used in financing activities was $109.2 million for the six months ended September 26, 2026 compared to $107.9 million for the six months ended September 27, 2025. The change between periods was primarily a result of changes in floor plan financing. Cash used for repurchases of common stock was $100.0 million for each of the six months ended September 26, 2026 and September 27, 2025.