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Champion Homes, Inc. (SKY)·Q3 2025 Earnings Summary

Executive Summary

  • Solid Q3: revenue $644.9M, diluted EPS $1.06, gross margin 28.1%; results driven by higher captive retail mix, lower input costs, and synergy capture; operating cash flow $50.4M .
  • Mix and execution tailwinds: U.S. homes sold +14.1% to 6,437; U.S. ASP +2.8% to $94.9K; adjusted EBITDA $83.3M, margin 12.9% .
  • Backlog $313M: +7.6% y/y, down 26.9% q/q on seasonal slowdown; average backlog ~10 weeks (upper end of 4–12 week norm) .
  • Outlook: management expects Q4 revenue up “low double digits” y/y and gross margin normalizing to 26–27% as wood-cost tailwinds fade; SG&A investments continue; repurchase authorization refreshed to $100M .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion: gross margin rose 280 bps y/y to 28.1% on higher captive retail mix, lower input costs, and synergy capture; adjusted EBITDA margin improved to 12.9% .
    • Retail/digital strategy traction: U.S. ASP +2.8% to $94.9K with higher mix through company-owned retail; CEO: “deliver profitable growth…expansion of our retail and digital presence…investing in technology and accelerating product innovation” .
    • Balance sheet/capital returns: cash and equivalents $581.8M; $20M buyback in Q3; authorization replenished to $100M .

  • What Went Wrong

    • Canada softness: Canadian homes sold fell to 209 (from 249 y/y); CFO cites higher rates and uncertainty; Canada revenue $26M, -16% units y/y .
    • Backlog down q/q seasonally: backlog fell 26.9% sequentially to $313M; management noted normal winter seasonality and slower orders late in Q3 .
    • SG&A deleverage: SG&A rose to $108.2M (16.8% of sales) on variable comp and growth investments; management expects investment pace to continue for several quarters .

Financial Results

Performance vs prior quarters

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Revenue ($M)$627.8 $616.9 $644.9
Diluted EPS ($)$0.79 $0.94 $1.06
Gross Margin (%)26.2% 27.0% 28.1%
Adjusted EBITDA ($M)$75.0 $74.2 $83.3
Adjusted EBITDA Margin (%)11.9% 12.0% 12.9%

Operating and mix KPIs

KPIQ1 FY2025Q2 FY2025Q3 FY2025
U.S. Homes Sold (units)6,538 6,357 6,437
U.S. ASP ($)$91,700 $92,400 $94,900
Canada Homes Sold (units)167 179 209
Canada Revenue ($M)$21 $22 $26
Backlog ($M, end of qtr)$405 $427 $313
Capacity Utilization (%)58% 60% 63%
Operating Cash Flow ($M)$84.6 $59.8 $50.4
Cash & Equivalents ($M, end of qtr)$548.9 $570.2 $581.8
Share Repurchases ($M)$20 $20 $20

Notes:

  • Q3 y/y highlights: revenue +15.3%; EPS +30.9%; GM +280 bps .
  • Sequential: revenue +$28M vs Q2 on shipment recovery post-hurricanes and higher utilization; ASP +2.7% q/q; utilization 63% vs 60% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (y/y growth)Q4 FY2025—“Up low double digits” y/y; in line with pre-earnings consensus New quantitative directional outlook
Gross Margin (%)Q4 FY2025—26–27% expected; wood-cost benefit fading; tariff impact not included New range
SG&A Run-RateNext several quarters—Investment pace similar to Q3 to support growth (people/IT/retail) New qualitative
Share Repurchase AuthorizationOngoing$100M replenished in Q2 Replenished to $100M again Jan 30, 2025; $20M repurchased in Q3 Maintained/extended

Earnings Call Themes & Trends

TopicQ1 FY2025 (prior-2)Q2 FY2025 (prior-1)Q3 FY2025 (current)Trend
Demand/order cadenceBroad-based strength; backlog up to $405M; expected flat-to-down Q2 on weather timing Orders softened late Q2 around election; backlog $427M; hurricanes impacted shipments Seasonal slowdown late in Q3; backlog $313M; early spring selling season improving Stable seasonality; watch macro
Mix/captive retailCaptive retail outperformed; ASP up; margin variability by mix Captive retail strong; margin tailwinds from mix Captive retail drove ASP/margins; captive ~35% of U.S. sales Improving structural mix
Input costs/woodTailwind helped margins in Q1 Wood cost tailwind; margins beat expectations Wood tailwind fading into Q4; margin normalizing to 26–27% Normalizing
Tariffs/macro——Tariff risk under review; playbook to balance price/volume/cost if needed Watch risk
Builder/developer channelAccelerating sign-ups; strong growth Extremely strong; accelerating capture Growth continued; pipeline expanding; working with municipalities/zoning Improving
CanadaSoft due to rates/economy Units -23% y/y Units -16% y/y; revenue $26M Weak
Capacity utilization58% including idled capacity 60% 63%; several plants idled; can flex by market Improving
FEMA/disaster rebuild—Potential future demand; no orders yet Ongoing outreach; no FEMA orders yet; California wildfires support likely later Potential upside later
Financing JV (Triad)Early momentum (floorplan/retail loans) Continued momentum “Early benefits” supporting affordability; collaboration continuing Building

Management Commentary

  • CEO Tim Larson: “deliver profitable growth across our family of brands…expand our retail and digital presence…investing in technology and accelerating product innovation” .
  • On demand/backlog: “Backlog at the end of the third quarter was $313 million…we saw a normal seasonal slowdown in order rates…average backlog ended Q3 at 10 weeks” .
  • On outlook: “We anticipate fourth quarter revenue to be up low double digits…in line with pre-earnings consensus…prepared to further scale production with order demand” .
  • CFO Laurie Hough: “Gross margin expanded 280 bps…due to higher ASPs through company-owned retail, lower input costs and acquisition synergy capture…expect gross margins to return to the 26% to 27% range” .
  • Capital deployment: “$582 million of cash…$20 million in share repurchase…Board…replenishment of our $100 million share repurchase authority” .

Q&A Highlights

  • Order cadence/seasonality: Orders slowed late in Q3 due to normal winter seasonality; early Q4 traffic and quoting activity are healthy; expecting low-double-digit Q4 revenue growth y/y .
  • Tariffs: Dynamic environment; company will balance cost, pricing, and volume; supply sources are “pretty balanced”; monitoring potential inflation impact .
  • Captive retail mix: ~35% of U.S. sales; strategy is balanced across channels; mix is a key margin driver; not disclosing granular margin buckets .
  • SG&A: ~35% variable with revenue; growth investments in people/IT and captive retail to continue at Q3 pace over next several quarters .
  • Capacity/utilization: 63% in Q3; includes idled plants; ability to flex capacity by market as orders warrant .
  • FEMA/Disaster rebuild: No FEMA orders yet; engaging federal/state/local stakeholders; ready to support Carolinas and California rebuilds .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 EPS and revenue were unavailable to retrieve at this time due to access limits; therefore, we do not present a beat/miss vs consensus for Q3. Management guided Q4 revenue growth “low double digits” y/y and “in line with pre-earnings consensus,” but did not provide numeric Q3 comparisons vs consensus on the call .
  • Where estimates are not shown, consider using your internal sources or S&P Global directly for official consensus.

Key Takeaways for Investors

  • Mix-led margin strength: Captive retail penetration and pricing power lifted gross margin to 28.1%; expect normalization to 26–27% as wood tailwinds fade—still supportive for sustained double-digit EBITDA margins .
  • Demand resilient despite seasonality: Healthy traffic/quotes into early Q4 and builder/developer momentum underpin revenue outlook for low double-digit y/y growth in Q4 .
  • Backlog and capacity provide flexibility: 10-week average backlog and 63% utilization (with idled capacity optionality) position SKY to scale into improving demand while protecting margins .
  • Canada remains a drag: Macro and rates weighing on Canadian volumes; limited near-term relief expected .
  • Watch tariffs and input costs: Margin normalization reflects dissipating wood tailwinds; tariff outcomes are a risk factor for cost/price/volume balance .
  • Capital returns intact: Strong cash generation with $582M cash and renewed $100M buyback capacity add downside support .
  • Near-term trading setup: Positive narrative around margin execution and Q4 growth vs tougher macro headlines; any tariff clarity or FEMA order flow could be incremental catalysts .