CAVCO INDUSTRIES, INC. Q2 FY2026 earnings call

Management Statement and Operational Highlights

• General Market: Year-to-date national shipments are up over 3% through August, with Northern U.S. regions up double digits. The Southeast region experienced volume risk, with year-to-date shipments down 4% and July-August down 10% compared to the prior year.
• Operations: Adjusted production in the Southeast in Q2 due to volume risk, with plants in the Southeast now operating just above last year's pace, while other regions maintained elevated production. Backlogs remained at 5 to 7 weeks, slightly up quarter-to-quarter.
• Average Selling Price: Consolidated average selling price was up due to a higher percentage of retail units and a mix shift toward multi-section homes. Wholesale prices were essentially flat, and pricing held across regions.
• Financial Services: Revenue was up 5%, and operating profit improved from a loss last year to $8 million this year, driven by the insurance business with fewer claims.
• American Homestar Acquisition: Closed after quarter end, with integration progressing well.
• Capital Allocation: Repurchased just over $36 million of common shares under the board-authorized share repurchase program, with $142 million remaining authorization. Continued investing in plant facilities, pursuing acquisitions, assessing lending opportunities, and share buybacks.

Segment Performance

• Factory-Built Housing Segment: Net revenue was $535.1 million, up $48.8 million or 10% from the prior year quarter. Gross profit was 22.9% in Q2 2026, flat with the prior year quarter. It contributed approximately 96.1% to total revenue.
• Financial Services Segment: Net revenue was $21.4 million, up $0.3 million or 1.4% from the prior year quarter. Gross profit as a percentage of revenue increased to 55.6% in Q2, up from 21.8% in the prior year quarter. It contributed approximately 3.9% to total revenue.

Guidance

• No specific forward-looking revenue or earnings guidance provided. Focused on monitoring regional market conditions, adjusting production as needed, and continuing operational adjustments based on market shifts.

Risks

• Tariffs: Impact on cost of goods, with Canadian lumber tariffs increasing expenses. China tariff delay helps, but other tariffs remain a concern for cost of goods.
• Regional Market Volatility: Southeast region volume risk and potential for market shifts affecting production levels and backlogs.
• Regulatory Uncertainty: Chassis removal, HUD code changes, and state/local zoning challenges affecting operations and potential cost savings or pass-through to consumers.

Question and Answer

• Q: Color on regional trends, orders, and production in Q3 and seasonal slowdown A: William Boor discussed regional differences, noting orders were slightly down, production adjusted in the Southeast, and a balanced market with continued monitoring for seasonal slowdowns in northern states.
• Q: Market outperformance, what's working A: William Boor highlighted digital marketing, rebranding, local decision-making, product innovation, and sales team improvements as contributing to outperforming the industry.
• Q: Mix, Homestar impact, pricing, tariffs A: Mark Fusler noted retail sales through company-owned stores increased to 22.9% in the quarter. William Boor discussed Homestar integration and pricing holding across regions, with tariffs impacting cost of goods.
• Q: Chattel rates, mortgage, regulatory discussions A: Mark Fusler mentioned chattel rates down to mid-8% range. William Boor discussed regulatory discussions on GSEs, chassis removal, and state/local zoning.
• Q: Southeast pricing, CapEx, chassis A: William Boor noted Southeast maintained pricing, CapEx in plant modernization, and chassis cost at ~$1,500 per floor, with 80% HUD code homes and 20% modular in production.