Champion Homes, Inc. (SKY) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. Financial performance is stable with slight increases in net income and EBITDA, but SG&A expenses rose. Market strategy shows promise with growth in builder channels, yet community markets softened. Expenses are managed but tariffs pose a risk. The Q&A reveals uncertainties in market performance and the impact of the ROAD to Housing Act. Despite positive guidance on ASP stability and gross margins, the cautious consumer sentiment and lack of detailed responses temper expectations, leading to a neutral prediction.
Key Financial Performance
Net Sales $684 million, an 11% increase year-over-year. The increase was supported by effective cost management and increased sales through company-owned captive retail stores and independent retailers.
Homes Sold 6,771 homes, a 4% increase year-over-year. The increase was driven by higher sales through captive retail and independent retailers.
Manufacturing Backlog $313 million, up 4% sequentially. This reflects thoughtful pacing of production with demand in each market.
Average Selling Price per U.S. Home $98,700, a 7% increase year-over-year. The increase was due to changes in product mix to more multi-section units and increased pricing at company-owned retail sales centers.
Canadian Revenue $26 million, a 10% increase in the number of homes sold year-over-year. The increase was driven by higher demand in certain markets.
Average Home Selling Price in Canada $133,300, a 7% increase year-over-year. The increase was due to price increases and a shift in product mix.
Consolidated Gross Profit $188 million, a 13% increase year-over-year. Gross margin expanded to 27.5%, up 50 basis points, driven by higher sales through company-owned retail centers and lower material input costs.
SG&A Expenses $113 million, a $13 million increase year-over-year. The increase was due to higher variable compensation, closing costs for plant closures, and the inclusion of Iseman Homes, partially offset by a $3.7 million gain on sale of an idled manufacturing facility.
Net Income $58 million, a $3 million increase year-over-year. Earnings per diluted share were $1.03, up from $0.94, driven by improved operating income.
Adjusted EBITDA $83 million, a 12% increase year-over-year. Adjusted EBITDA margin was 12.2%, up from 12% in the prior year.
Cash and Cash Equivalents $619 million as of September 27, 2025. Operating cash flows generated during the quarter were $76 million.
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Operating Highlights
New Home Designs: Introduced new home designs to cater to a range of price points and value for customers.
Affordable Housing Pilot Program: Collaborated with New York State Homes and Community Renewal to provide affordable housing solutions in Syracuse, NY, with homes costing under $250,000 and completed in less than 6 months.
Sales Growth: Net sales increased 11% year-over-year to $684 million, with homes sold increasing 4% to 6,771 units.
Channel Expansion: Added independent distribution points and new customers in the builder-developer channel, contributing to sales growth.
Cost Management: Effective cost management supported strong gross margin and earnings growth.
Manufacturing Backlog: Backlog totaled $313 million, up 4% sequentially, with an average lead time of 8 weeks.
Legislative Advocacy: Advocated for the ROAD to Housing Act, which supports off-site built homes, and monitored its progress through legislative stages.
Share Repurchase: Repurchased $50 million in shares and refreshed $150 million share repurchase authority.
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Risk or Challenges
Community Sales Decline: Community sales were down slightly in the second quarter compared to the same period last year due to balancing inventory levels with moderating order rates and softening consumer confidence. This is expected to impact near-term sales.
Seasonal Demand Variability: Sequential decrease in U.S. factory-built housing revenue due to moderating sales volume in the community REIT channel and a focus on pacing production as the company moves into the slower winter selling season.
Consumer Sentiment and Demand: Cautious consumer sentiment and softer demand in certain markets are expected to impact near-term gross margins and sales.
Tax Law Changes: Increase in the effective tax rate due to a projected decrease in tax credits caused by changes in the new tax law, which could impact profitability.
Hurricane Impact: Unit sales shift from Q2 last year into Q3 due to hurricanes in North Carolina and Florida, which will impact year-over-year sales comparability.
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Guidance & Outlook
Near-term gross margin: Anticipated to be in the 26% range as the company manages through cautious consumer sentiment and softer demand in certain markets. Variability in consolidated gross margin is expected quarter-to-quarter, reflecting shifts in product mix and the proportion of sales through independent sales channels and company-owned retail sales centers.
Third quarter fiscal 2026 revenue: Expected to be flat compared to the third quarter of the previous year, influenced by a unit sales shift from Q2 last year into Q3 due to hurricanes in North Carolina and Florida.
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Shareholder Return Plan
Share Repurchase: In the quarter, Champion Homes returned capital to shareholders through $50 million in share repurchases. Additionally, the Board recently refreshed the $150 million share repurchase authority, reflecting confidence in continued strong cash generation.
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Key Q&A
Q:Can you explain the performance in the community and builder developer markets?
A:Community was down in the quarter due to inventory adjustments and market softening, though some operators performed well. The builder channel grew, reflecting progress in reaching more consumers through this channel.
Q:Can you break out the impact of ASPs from mix and sales through company-owned stores?
A:37% of sales went through captive retail stores this quarter compared to 34% last year. ASPs increased primarily due to a higher mix of multi-section homes, but specific details on single vs. multi-section homes are not disclosed.
Q:What are your expectations for the mix of units going through captive retail in the near term?
A:It is hard to predict quarter-to-quarter due to timing of closings and weather-related events. Pricing is expected to be more influenced by mix than price actions.
Q:How are orders trending as we look into October and early November?
A:Reports indicate good traffic and order encouragement in October, but this is balanced against year-over-year impacts. Production is adjusted plant by plant based on regional market conditions.
Q:What are you hearing from REITs and builder developers about their midterm plans?
A:Builders are showing growth and optimism, supported by events and best practices. Community operators are expected to moderate in the near term, influenced by market conditions and end consumer strength.
Q:What are your thoughts on the ROAD to Housing Act and its potential impacts?
A:The Act could open up restrictive municipalities and allow for product innovations like two-story homes. However, its impact depends on legislative and HUD processes. The broader trend of off-site building visibility is positive for the industry.
Q:Should we expect ASPs to be stable in fiscal Q3, and what trends are you seeing?
A:ASPs are expected to be stable, influenced by mix rather than price actions. Trends include a shift to multi-section homes and new product introductions, with some choppiness in REITs and varying retail performance by geography.
Q:What are your insights on the ROAD to Housing Act's state-by-state opt-in approach and timing?
A:The Act's implementation will take time due to HUD processes and state opt-ins. Full benefits are expected in the longer term, but near-term benefits include increased state engagement and awareness of off-site built homes.
Q:What factors are driving the higher near-term gross margin range?
A:Lower material input costs, higher ASPs due to product mix, and a shift to multi-section homes contributed to the higher gross margin range.
Q:What caused the sequential decline in gross margin versus Q2?
A:Higher costs from tariffs and the slower winter selling season, coupled with cautious consumer confidence, contributed to the decline.
Q:What is the expected impact of tariffs on material costs?
A:Tariffs are expected to increase material costs by about 1%, including additional duties on Canadian lumber.
Q:What drove stronger-than-expected revenue performance in the last quarter?
A:Stronger performance in retail channels, growth in the builder channel, and a shift to multi-section homes due to new product introductions drove the revenue performance.
Q:Which markets have been particularly strong or weak recently?
A:The Northeast and Southeast were stronger markets, while the West moderated. Performance varies by geography and is influenced by community orders and consumer dynamics.
Q:What drives regional differences in market performance?
A:Regional differences are driven by consumer demand, channel factors (e.g., builder projects), and the availability of new products tailored to specific markets.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the breakdown of single vs. multi-section homes, citing that this information is not disclosed publicly. Additionally, they were vague about the exact timing and impact of the ROAD to Housing Act, as well as the precise regional dynamics influencing market performance.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Act title
CEO Chief
CFO result
Canada price
Champion Homes
Champion New
Champion ROAD
Champion ability
Champion effectiveness
Cleveland Champion
Commission measure
Community Renewal
Director result
Financing result
Governor plan
HUD implementation
Homes CEO
Homes Community
Homes President
Homes gain
Homes increase
Homes name
Homes selling
Homes share
House President
House legislation
Iseman Homes
New York
SGA
York State
acquisition Iseman
channel period
event
factory housing
feature
highlight
market home
sale acquisition
site construction
SKY Transcript
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Neutral5-26
Champion Homes, Inc. (SKY) Q3 2026 Earnings Call Transcript
Unknown2-4
The earnings call summary reveals mixed signals: flat revenue and stable gross margins suggest no strong growth drivers, while cautious consumer sentiment and legislative uncertainties add risks. Positive aspects include balanced inventory management and alignment with affordable housing goals. Q&A insights reveal optimism but lack specificity, especially regarding legislation and spring sales indicators. Overall, the sentiment is neutral, as positive elements like strong demand and strategic alignment are offset by flat revenue expectations and unclear management responses.
Champion Homes, Inc. (SKY) Q2 2026 Earnings Call Transcript
Unknown11-5
The earnings call presents a mixed outlook. Financial performance is stable with slight increases in net income and EBITDA, but SG&A expenses rose. Market strategy shows promise with growth in builder channels, yet community markets softened. Expenses are managed but tariffs pose a risk. The Q&A reveals uncertainties in market performance and the impact of the ROAD to Housing Act. Despite positive guidance on ASP stability and gross margins, the cautious consumer sentiment and lack of detailed responses temper expectations, leading to a neutral prediction.
Champion Homes, Inc. (SKY) Q1 2026 Earnings Call Transcript
Positive8-6
The earnings call summary indicates strong financial performance, with increased revenue, EBITDA, and operating cash flows. The acquisition of Eisman Homes and community channel growth signal strategic expansion. Despite some market uncertainties and cautious consumer sentiment, the company maintains a robust backlog and has a balanced capital allocation strategy. The Q&A highlighted strong community business and improved pricing, although some growth moderation is expected. Overall, the positive earnings, strategic acquisitions, and share repurchase plan suggest a positive stock price reaction over the next two weeks.
SKY Report
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