ThZeal - The Zeal

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-04714

Champion Homes, Inc.

(Exact name of registrant as specified in its charter)


Indiana		35-1038277
(State of Incorporation)		(I.R.S. Employer Identification No.)

755 West Big Beaver Road, Suite 1000
Troy, Michigan		48084
(Address of Principal Executive Offices)		(Zip Code)

    (248) 614-8211

   

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SKY	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filers,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:):


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of October 22, 2024: 57,403,251

CHAMPION HOMES, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 28, 2024 (unaudited) and March 30, 2024	1
Condensed Consolidated Income Statements (unaudited) for the three and six months ended September 28, 2024 and September 30, 2023	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended September 28, 2024 and September 30, 2023	3
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended September 28, 2024 and September 30, 2023	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended September 28, 2024 and September 30, 2023	5
Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. Controls and Procedures	29

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5. Other Information	30

Item 6. Exhibits	31

SIGNATURES	32

EXPLANATORY NOTE

On August 5, 2024, Skyline Champion Corporation changed its name to Champion Homes, Inc., which we refer to in this Quarterly Report on Form 10-Q as the “name change.” Unless the context otherwise requires, references herein to the “Company,” “we,” “us,” or “our” refer to Skyline Champion Corporation for periods ending on or before the name change and to Champion Homes, Inc. for any references to the Company after the name change.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Champion Homes, Inc.

Condensed Consolidated Balance Sheets

(Dollars and shares in thousands, except per share amounts)


	September 28, 2024			March 30, 2024
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	570,231		$	495,063
Trade accounts receivable, net		74,755			64,632
Inventories, net		325,534			318,737
Other current assets		43,594			39,870
Total current assets		1,014,114			918,302
Long-term assets:
Property, plant, and equipment, net		300,840			290,930
Goodwill		357,973			357,973
Amortizable intangible assets, net		70,491			76,369
Deferred tax assets		27,784			26,878
Other noncurrent assets		256,470			252,889
Total assets	$	2,027,672		$	1,923,341
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Floorplan payable	$	85,978		$	91,286
Accounts payable		64,260			50,820
Other current liabilities		268,446			247,495
Total current liabilities		418,684			389,601
Long-term liabilities:
Long-term debt		24,690			24,669
Deferred tax liabilities		7,297			6,905
Other liabilities		84,745			79,796
Total long-term liabilities		116,732			111,370

Stockholders' Equity:
Common stock, $0.0277 par value, 115,000 shares authorized, 57,384 and 57,815 shares issued as of September 28, 2024 and March 30, 2024, respectively		1,592			1,605
Additional paid-in capital		579,685			568,203
Retained earnings		924,408			866,485
Accumulated other comprehensive loss		(13,429	)		(13,923	)
Total stockholders’ equity		1,492,256			1,422,370
Total liabilities and stockholders’ equity	$	2,027,672		$	1,923,341

See accompanying Notes to Condensed Consolidated Financial Statements.

Champion Homes, Inc.

Condensed Consolidated Income Statements

(Unaudited, dollars in thousands, except per share amounts)


	Three months ended						Six months ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net sales	$	616,877		$	464,236		$	1,244,656		$	929,005
Cost of sales		450,544			347,747			914,108			682,843
Gross profit		166,333			116,489			330,548			246,162
Selling, general, and administrative expenses		99,655			64,454			208,482			134,893
Operating income		66,678			52,035			122,066			111,269
Interest (income), net		(4,737	)		(10,480	)		(8,986	)		(19,781	)
Other expense (income)		14			2,065			(1,205	)		2,065
Income before income taxes		71,401			60,450			132,257			128,985
Income tax expense		15,392			14,781			29,111			32,047
Net income before equity in net loss of affiliates		56,009			45,669			103,146			96,938
Equity in net loss of affiliates		691			—			2,034			—
Net income		55,318			45,669			101,112			96,938
Net (income) attributable to non-controlling interest		(584	)		—			(584	)		—
Net income attributable to Champion Homes, Inc.	$	54,734		$	45,669		$	100,528		$	96,938
Net income attributable to Champion Homes, Inc. per share:
Basic	$	0.95		$	0.80		$	1.74		$	1.69
Diluted	$	0.94		$	0.79		$	1.73		$	1.68

See accompanying Notes to Condensed Consolidated Financial Statements.

Champion Homes, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, dollars in thousands)


	Three months ended						Six months ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net income	$	55,318		$	45,669		$	101,112		$	96,938
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		1,624			(2,115	)		494			68
Total other comprehensive income (loss)		1,624			(2,115	)		494			68
Total comprehensive income before non-controlling interests		56,942			43,554			101,606			97,006
Comprehensive (income) attributable to non-controlling interests		(584	)		—			(584	)		—
Comprehensive income attributable to Champion Homes, Inc.	$	56,358		$	43,554		$	101,022		$	97,006

See accompanying Notes to Condensed Consolidated Financial Statements.

Champion Homes, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)


	Six months ended
	September 28, 2024			September 30, 2023

Cash flows from operating activities
Net income	$	101,112		$	96,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,123			14,378
Amortization of deferred financing fees		187			162
Equity-based compensation		11,213			10,943
Deferred taxes		(596	)		(1,919	)
Loss on disposal of property, plant, and equipment		57			96
Foreign currency transaction (gain) loss		(70	)		76
Equity in net loss of affiliates		2,034			—
Dividends from equity method investment		766			—
Change in fair value of contingent consideration		7,912			—
Change in assets and liabilities:
Accounts receivable		(10,051	)		12,101
Floor plan receivables		(15,155	)		(2,521	)
Inventories		(6,759	)		20,059
Other assets		(330	)		(13,434	)
Accounts payable		13,895			4,387
Accrued expenses and other liabilities		20,104			(12,128	)
Net cash provided by operating activities		144,442			129,138
Cash flows from investing activities
Additions to property, plant, and equipment		(24,827	)		(22,847	)
Cash paid for equity method investment		—			(1,000	)
Cash paid for investment in ECN common stock		—			(78,858	)
Cash paid for investment in ECN preferred stock		—			(64,520	)
Investment in floor plan loans		—			(18,466	)
Proceeds from floor plan loans		2,136			10,528
Proceeds from disposal of property, plant, and equipment		138			524
Net cash used in investing activities		(22,553	)		(174,639	)
Cash flows from financing activities
Changes in floor plan financing, net		(5,308	)		—
Payments on long term debt		(11	)		—
Payments on repurchase of common stock		(40,000	)		—
Stock option exercises		272			224
Tax payments for equity-based compensation		(2,273	)		(982	)
Net cash used in financing activities		(47,320	)		(758	)
Effect of exchange rate changes on cash and cash equivalents		599			(39	)
Net increase (decrease) in cash and cash equivalents		75,168			(46,298	)
Cash and cash equivalents at beginning of period		495,063			747,453
Cash and cash equivalents at end of period	$	570,231		$	701,155

See accompanying Notes to Condensed Consolidated Financial Statements.

Champion Homes, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, dollars and shares in thousands)


	Three months ended September 28, 2024
	Common Stock
	Shares			Amount			Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total
Balance at June 29, 2024		57,579		$	1,598		$	574,365	$	889,837		$	(15,053	)	$	—		$	1,450,747
Net income		—			—			—		54,734			—			584			55,318
Equity-based compensation		—			—			5,123		—			—			—			5,123
Net common stock issued under equity-based compensation plans		19			—			197		(28	)		—			—			169
Common stock repurchases		(214	)		(6	)		—		(20,135	)		—			—			(20,141	)
Distributions declared payable to non-controlling interest		—			—			—		—			—			(584	)		(584	)
Foreign currency translation adjustments		—			—			—		—			1,624			—			1,624
Balance at September 28, 2024		57,384		$	1,592		$	579,685	$	924,408		$	(13,429	)	$	—		$	1,492,256


	Six months ended September 28, 2024
	Common Stock
	Shares			Amount			Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total
Balance at March 30, 2024		57,815		$	1,605		$	568,203	$	866,485		$	(13,923	)	$	—		$	1,422,370
Net income		—			—			—		100,528			—			584			101,112
Equity-based compensation		—			—			11,213		—			—			—			11,213
Net common stock issued under equity-based compensation plans		75			2			269		(2,270	)		—			—			(1,999	)
Common stock repurchases		(506	)		(15	)		—		(40,335	)		—			—			(40,350	)
Distributions declared payable to non-controlling interest		—			—			—		—			—			(584	)		(584	)
Foreign currency translation adjustments		—			—			—		—			494			—			494
Balance at September 28, 2024		57,384		$	1,592		$	579,685	$	924,408		$	(13,429	)	$	—		$	1,492,256


	Three months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at July 1, 2023		57,133	$	1,586	$	524,907	$	775,980		$	(11,552	)	$	1,290,921
Net income		—		—		—		45,669			—			45,669
Equity-based compensation		—		—		5,515		—			—			5,515
Net common stock issued under equity-based compensation plans		29		1		223		(21	)		—			203
Foreign currency translation adjustments		—		—		—		—			(2,115	)		(2,115	)
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193


	Six months ended September 30, 2023
	Common Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at April 1, 2023		57,108	$	1,585	$	519,479	$	725,672		$	(13,735	)	$	1,233,001
Net income		—		—		—		96,938			—			96,938
Equity-based compensation		—		—		10,943		—			—			10,943
Net common stock issued under equity-based compensation plans		54		2		223		(982	)		—			(757	)
Foreign currency translation adjustments		—		—		—		—			68			68
Balance at September 30, 2023		57,162	$	1,587	$	530,645	$	821,628		$	(13,667	)	$	1,340,193

Components of accumulated other comprehensive loss consisted solely of foreign currency translation adjustments.

See accompanying Notes to Condensed Consolidated Financial Statements.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation and Business

Nature of Operations: The operations of Champion Homes, Inc., formerly known as Skyline Champion Corporation (the “Company”), consist of manufacturing, retail, construction services, and transportation activities. At September 28, 2024, the Company operated 43 manufacturing facilities throughout the United States (“U.S.”) and 5 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 72 sales centers that sell manufactured houses to consumers across the U.S. The Company's construction services business provides installation and set-up services of factory-built homes. The Company’s transportation business engages independent owners/drivers to transport recreational vehicles throughout the U.S. and Canada and manufactured houses in certain regions of the U.S.

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after elimination of intercompany balances and transactions. In the opinion of management, these statements include all normal recurring adjustments necessary to fairly state the Company’s consolidated results of operations, cash flows, and financial position. The Company has evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on May 29, 2024 (the “Fiscal 2024 Annual Report”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes thereto. Actual results could differ from those estimates. The condensed consolidated income statements, condensed consolidated statements of comprehensive income, and condensed consolidated statements of cash flows for the interim periods are not necessarily indicative of the results of operations or cash flows for the full year.

The Company’s fiscal year is a 52- or 53-week period that ends on the Saturday nearest to March 31. The Company’s current fiscal year, “fiscal 2025,” will end on March 29, 2025 and will include 52 weeks. References to “fiscal 2024” refer to the Company’s fiscal year ended March 30, 2024. The three and six months ended September 28, 2024 and September 30, 2023 each included 13 weeks and 26 weeks, respectively.

The Company’s allowance for credit losses on financial assets measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current economic conditions and forecasts that affect the collectability of the reported amount. Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, are recognized in earnings. Accounts receivable are reflected net of reserves of $1.7 million and $1.9 million at September 28, 2024 and March 30, 2024, respectively.

Floor plan receivables consist primarily of amounts loaned by the Company through Triad Financial Services, Inc. ("Triad") to certain independent retailers for purchases of homes manufactured by the Company, of which $31.1 million and $18.1 million was outstanding at September 28, 2024 and March 30, 2024, respectively. Floor plan receivables are carried net of payments received and recorded at amortized cost. The Company intends to hold the floor plan receivables until maturity or payoff. These loans are serviced by Triad, to which we pay a servicing fee. Upon execution of the financing arrangement, the floor plan loans are generally payable at the earlier of the sale of the underlying home or two years from the origination date. Floor plan receivables are included in other current assets and other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets.

The floor plan receivables are collateralized by the related homes, mitigating loss exposure. The Company and Triad evaluate the credit worthiness of each independent retailer prior to credit approval, including reviewing the independent retailer’s payment history, financial condition, and the overall economic environment. The Company evaluates the risk of credit loss in aggregate on existing loans with similar terms, based on historic experience and current economic conditions, as well as individual retailers with past due balances or other indications of heightened credit risk. The allowance for credit losses related to floor plan receivables was not material as of September 28, 2024 or March 30, 2024. Loans are considered past due if any required interest or curtailment payment remains unpaid 30 days after the due date. Receivables are placed on non-performing status if any interest or installment payments are past due over 90 days. Loans are placed on nonaccrual status when interest payments are past due over 90 days. At September 28, 2024, there were no floor plan receivables on nonaccrual status and the weighted-average age of the floor plan receivables was six months.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

Interest income from floor plan receivables is recognized on an accrual basis and is included in interest income in the accompanying Condensed Consolidated Income Statements. Interest income from floor plan receivables for the three months ended September 28, 2024 and September 30, 2023 was $0.6 million and $0.3 million, respectively. Interest income from floor plan receivables for the six months ended September 28, 2024 and September 30, 2023 was $1.1 million and $0.6 million, respectively.

Recently issued accounting pronouncements: In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2025). We are assessing the effect of this update on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2026). We are assessing the effect of this update on our consolidated financial statement disclosures.

2. Business Combinations

Regional Homes Acquisition

On October 13, 2023, the Company acquired all of the outstanding equity interests in Regional Enterprises, LLC and related companies (collectively, "Regional Homes") for total purchase consideration of $316.9 million, net of assumed indebtedness and working capital adjustments. The purchase consideration consisted of net cash of $279.5 million, the issuance of 455,098 shares of common stock equal to approximately $27.9 million, and contingent consideration with an estimated fair value of $5.9 million. The contingent consideration is related to an earnout provision in the event certain conditions are met per the terms of the purchase agreement, with a maximum earnout amount of $25.0 million. The initial fair value of the earnout was established using a Monte Carlo simulation method and the resulting liability is recorded in other liabilities in the accompanying Condensed Consolidated Balance Sheets. In the first quarter of fiscal 2025, the method and timing of measuring the earnout was amended, which resulted in a charge of $7.9 million which is reflected in selling, general, and administrative expense in the accompanying Condensed Consolidated Income Statements. The Company accounted for the acquisition as a business combination under the acquisition method of accounting provided by FASB ASC 805, Business Combinations ("ASC 805"). As such, the purchase price was allocated to the net assets acquired, inclusive of intangible assets, with the excess fair value recorded to goodwill. The purchase price allocation is based upon preliminary valuation information available to determine the fair value of certain assets and liabilities, including goodwill, and is subject to change as additional information is obtained about the facts and circumstances that existed at the valuation date. The Company expects to finalize the fair values of the assets acquired and liabilities assumed during the one-year measurement period.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

The following table presents the consideration transferred and the purchase price allocation:


Description	Amount
Fair value of consideration transferred
Fair value of Champion Homes, Inc. common stock issued as consideration (455,098 shares at $61.20)	$	27,852
Cash consideration, net of cash acquired		279,545
Working capital adjustment		3,644
Estimated earn out consideration		5,904
Total consideration	$	316,945
Preliminary purchase price allocations:
Trade accounts receivable		16,300
Inventories		138,933
Other current assets		3,002
Property, plant, and equipment, net		86,174
Amortizable intangible assets, net		41,800
Other noncurrent assets		10,640
Floor plan payable		(75,916	)
Accounts payable		(14,427	)
Other current liabilities		(35,662	)
Long-term debt		(12,233	)
Other liabilities		(3,065	)
Identifiable net assets acquired		155,546
Goodwill		161,399
Total purchase price	$	316,945

Trade accounts receivable, other assets, floor plan and accounts payable, long-term debt and other liabilities are generally stated at historical carrying values as they approximate fair value. Retail inventories are reflected at manufacturer wholesale prices. Intangible assets include $16.9 million in customer relationships and $24.9 million in trade names and are based on an independent appraisal. The fair value of customer relationships was determined using the multi-period excess earnings method and fair value of the trade name was determined using the relief-from-royalty method. The Company estimated that each intangible asset has a weighted average useful life of ten years from the acquisition date. Fair value estimates of property, plant, and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals were drawn from a combination of market, cost, and sales comparison approaches, as appropriate. Level 3 fair value estimates of $86.2 million related to property, plant, and equipment and $41.8 million related to intangible assets were recorded in the accompanying consolidated balance sheet as of the acquisition date. For further information on acquired assets measured at fair value, see Note 5, Goodwill, Intangible Assets and Cloud Computing Arrangements.

The acquisition of Regional Homes was a taxable business combination. Therefore, the Company’s tax basis in the assets acquired and the liabilities assumed approximate the respective fair values at the acquisition date.

3. Inventories, net

The components of inventory, net of reserves for obsolete inventory, were as follows:


(Dollars in thousands)	September 28, 2024		March 30, 2024
Raw materials	$	102,445	$	101,429
Work in process		24,452		23,436
Finished goods and other		198,637		193,872
Total inventories, net	$	325,534	$	318,737

At September 28, 2024 and March 30, 2024, reserves for obsolete inventory were $10.2 million and $10.1 million, respectively.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

4. Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is calculated primarily on a straight-line basis, generally over the following estimated useful lives: land improvements – 3 to 10 years; buildings and improvements – 8 to 25 years; and vehicles and machinery and equipment – 3 to 8 years. Depreciation expense for the three months ended September 28, 2024 and September 30, 2023 was $6.5 million and $4.7 million, respectively. Depreciation expense for the six months ended September 28, 2024 and September 30, 2023 was $14.2 million and $9.3 million, respectively.

The components of property, plant, and equipment were as follows:


(Dollars in thousands)	September 28, 2024			March 30, 2024
Land and improvements	$	75,004		$	72,188
Buildings and improvements		192,169			183,109
Machinery and equipment		154,384			142,870
Construction in progress		21,403			20,469
Property, plant, and equipment, at cost		442,960			418,636
Less: accumulated depreciation		(142,120	)		(127,706	)
Property, plant, and equipment, net	$	300,840		$	290,930

5. Goodwill, Intangible Assets, and Cloud Computing Arrangements

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At both September 28, 2024 and March 30, 2024, the Company had goodwill of $358.0 million. Goodwill is allocated to reporting units included in the U.S. Factory-built Housing segment, which include the Company’s U.S. manufacturing and retail operations. At September 28, 2024, there were no accumulated impairment losses related to goodwill.

Intangible Assets

The components of amortizable intangible assets were as follows:


(Dollars in thousands)	September 28, 2024									March 30, 2024
	Customer Relationships & Other			Trade Names			Total			Customer Relationships & Other			Trade Names			Total
Gross carrying amount	$	82,928		$	46,402		$	129,330		$	82,909		$	46,393		$	129,302
Accumulated amortization		(43,562	)		(15,277	)		(58,839	)		(39,825	)		(13,108	)		(52,933	)
Amortizable intangibles, net	$	39,366		$	31,125		$	70,491		$	43,084		$	33,285		$	76,369

During the three months ended September 28, 2024 and September 30, 2023, amortization of intangible assets was $3.0 million and $2.1 million, respectively. During the six months ended September 28, 2024 and September 30, 2023, amortization of intangible assets was $5.9 million and $5.0 million, respectively.

Cloud Computing Arrangements

The Company capitalizes costs associated with the development of cloud computing arrangements in a manner consistent with internally developed software. At September 28, 2024 and March 30, 2024, the Company had capitalized cloud computing costs, net of amortization of $25.0 million and $25.7 million, respectively. Cloud computing costs are included in other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. Amortization of capitalized cloud computing costs for the three months ended September 28, 2024 and September 30, 2023 was $0.5 million and $0.2 million, respectively. Amortization of capitalized cloud computing costs for the six months ended September 28, 2024 and September 30, 2023 was $0.7 million and $0.4 million, respectively.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

6. Investment in ECN Capital Corporation

In September 2023, the Company entered into a share subscription agreement with ECN Capital Corp. ("ECN") and made a $137.8 million equity investment in ECN on a private placement basis. The Company purchased 33.6 million common shares, representing approximately 12% of the total outstanding common shares of ECN, and 27.5 million mandatory convertible preferred shares (the “Preferred Shares”). The Preferred Shares receive cumulative cash dividends at an annual rate of 4.0%. Following the private placement, the Company owns approximately 19.9% of the voting shares of ECN. In connection with the share subscription agreement, the Company and Triad formed Champion Financing LLC ("Champion Financing"), a captive finance company that is 51% owned by the Company and 49% owned by Triad. The results of Champion Financing are included in the consolidated results of the Company on a three-month lag. Triad's 49% ownership interest is reflected as non-controlling interest in the Condensed Consolidated Income Statements.

The Company's interest in the common stock 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. For the three months ended September 28, 2024, the Company's share of ECN's earnings was $0.7 million. For the six months ended September 28, 2024, the Company's share of ECN's losses were $0.5 million. There were no earnings or losses recognized related to the equity method investment for the three and six months ended September 30, 2023. Dividends received on the investment in common stock of ECN are reflected as a reduction to the investment balance and are presented on the Condensed Consolidated Statements of Cash Flows using the nature of the distribution approach. At September 28, 2024, the investment in the common stock of ECN totaled $70.5 million, including $3.1 million of capitalized transaction costs, and is included in other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The aggregate value of the Company’s investment in the common stock of ECN based on quoted market price of ECN’s common stock at September 28, 2024 was approximately $53.0 million. We assess our investment in ECN common stock for other than temporary impairment on a quarterly basis or when events or circumstances suggest that the carrying amount of the investment may be impaired. We do not consider the difference in the fair market value of ECN common stock and our investment balance to be other than temporary at September 28, 2024.

The Company's investment in the Preferred Shares is included in other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The investment is measured using the measurement alternative for equity investments without a readily determinable fair value. The carrying amount of $64.5 million at September 28, 2024 represents the purchase price and capitalized transaction costs of $2.5 million. There have been no adjustments to the carrying amount or impairment of the investment. For the six months ended September 28, 2024, the Company has reflected dividend income of $1.2 million in other (income) on the accompanying Condensed Consolidated Income Statements from the investment in ECN Preferred Shares. There was no dividend income from the ECN Preferred Shares for the three months ended September 28, 2024 or for the three and six months ended September 30, 2023.

Triad, a related party through its parent ECN, provides loan servicing for the Company's floor plan receivables. The Company pays Triad a fee for servicing loans which was not material for the three and six months ended September 28, 2024 and September 30, 2023, respectively. Triad also provides floor plan financing of the Company's products to Company-owned and independent retailers. At September 28, 2024, the Company had floor plan payables due to Triad of $26.7 million. At September 28, 2024, the Company had repurchase commitments of $104.4 million on independent retailer floor plan loans outstanding with Triad.

7. Other Current Liabilities

The components of other current liabilities were as follows:


(Dollars in thousands)	September 28, 2024		March 30, 2024
Customer deposits	$	85,027	$	80,833
Accrued volume rebates		26,345		21,169
Accrued warranty obligations		43,995		39,176
Accrued compensation and payroll taxes		40,289		35,063
Accrued insurance		12,892		12,772
Accrued product liability - water intrusion		34,500		34,500
Other		25,398		23,982
Total other current liabilities	$	268,446	$	247,495

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

8. Accrued Warranty Obligations

Changes in the accrued warranty obligations were as follows:


	Three months ended						Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Balance at beginning of period	$	54,111		$	35,090		$	50,869		$	35,961
Warranty expense		18,131			14,977			36,819			27,833
Cash warranty payments		(16,554	)		(12,705	)		(32,000	)		(26,432	)
Balance at end of period		55,688			37,362			55,688			37,362
Less: noncurrent portion in other long-term liabilities		(11,693	)		(7,385	)		(11,693	)		(7,385	)
Total current portion	$	43,995		$	29,977		$	43,995		$	29,977

9. Debt and Floor Plan Payable

Long-term debt consisted of the following:


(Dollars in thousands)	September 28, 2024		March 30, 2024
Obligations under industrial revenue bonds due 2029	$	12,430	$	12,430
Notes payable to Romeo Juliet, LLC, due 2026		5,314		5,314
Notes payable to Romeo Juliet, LLC, due 2039		2,036		2,036
Note payable to United Bank, due 2026		4,910		4,889
Revolving credit facility maturing in 2026		—		—
Total long-term debt	$	24,690	$	24,669

On July 7, 2021, the Company entered into an Amended and Restated Credit Agreement with a syndicate of banks that provides for a revolving credit facility of up to $200.0 million, including a $45.0 million letter of credit sub-facility ("Amended Credit Agreement"). The Amended Credit Agreement replaced the Company's previously existing $100.0 million revolving credit facility. The Amended Credit Agreement allows the Company to draw down, repay and re-draw loans on the available funds during the term, subject to certain terms and conditions, matures in July 2026, and has no scheduled amortization.

On May 18, 2023, the Company further amended the Amended Credit Agreement, which removed references to the London Interbank Offer Rate ("LIBOR") and clarified language pertaining to the Secured Overnight Financing Rate ("SOFR") in regards to the interest rate on borrowings. The interest rate on borrowings under the Amended Credit Agreement is based on SOFR plus a SOFR adjustment, plus an interest rate spread. The interest rate spread adjusts based on the consolidated total net leverage of the Company from a high of 1.875% when the consolidated total net leverage ratio is equal to or greater than 2.25:1.00, to a low of 1.125% when the consolidated total net leverage ratio is below 0.50:1.00. Alternatively for same day borrowings, the interest rate is based on an Alternative Base Rate ("ABR") plus an interest rate spread that ranges from a high of 0.875% to a low of 0.125% based on the consolidated total net leverage ratio. In addition, the Company is obligated to pay an unused line fee ranging between 0.15% and 0.3% depending on the consolidated total net leverage ratio, in respect of unused commitments under the Amended Credit Agreement. At September 28, 2024, the interest rate under the Amended Credit Agreement was 6.07% and letters of credit issued under the Amended Credit Agreement totaled $31.5 million. Available borrowing capacity under the Amended Credit Agreement as of September 28, 2024 was $168.5 million.

The Amended Credit Agreement contains covenants that restrict the amount of additional debt, liens and certain payments, including equity buy-backs, investments, dispositions, mergers and consolidations, among other restrictions as defined. The Company was in compliance with all covenants of the Amended Credit Agreement as of September 28, 2024.

Obligations under industrial revenue bonds are supported by letters of credit and bear interest based on a municipal bond index rate. The weighted-average interest rate at September 28, 2024, including related costs and fees, was 4.75%. The industrial revenue bonds require lump-sum payments of principal upon maturity in 2029 and are secured by the assets of certain manufacturing facilities.

As part of the acquisition of Regional Homes, the Company assumed notes payable to Romeo Juliet, LLC, a subsidiary of Wells Fargo Community Investment Holdings, Inc. ("WFC"). The weighted-average interest rate on those notes at September 28, 2024 was 5.42%. The notes are secured by certain assets of Regional Homes. In addition, the Company assumed a note payable to United Bank with an interest rate of 3.85% that is secured by a note receivable from HHB Investment Fund, LLC, a subsidiary of WFC.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

Floor Plan Payable

The Company’s retail operations utilize floor plan financing to fund the purchase of manufactured homes for display or resale. At September 28, 2024 and March 30, 2024, the Company had outstanding borrowings on floor plan financing agreements of $86.0 million and $91.3 million, respectively. Total credit line capacity provided under the agreements was $223.0 million as of September 28, 2024. The weighted average interest rate on the floor plan payable was 7.25% at September 28, 2024. Borrowings are secured by the homes and are required to be repaid when the Company sells the related home to a customer.

10. Revenue Recognition

The following tables disaggregate the Company’s revenue by sales category:


	Three months ended September 28, 2024
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing	$	378,506	$	22,234	$	—	$	400,740
Retail		208,621		—		—		208,621
Transportation/Other		—		—		7,516		7,516
Total	$	587,127	$	22,234	$	7,516	$	616,877

	Six months ended September 28, 2024
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing	$	758,800	$	43,033	$	—	$	801,833
Retail		427,860		—		—		427,860
Transportation/Other		—		—		14,963		14,963
Total	$	1,186,660	$	43,033	$	14,963	$	1,244,656

	Three months ended September 30, 2023
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing	$	351,997	$	29,256	$	—	$	381,253
Retail		76,135		—		—		76,135
Transportation		—		—		6,848		6,848
Total	$	428,132	$	29,256	$	6,848	$	464,236

	Six months ended September 30, 2023
(Dollars in thousands)	U.S. Factory-Built Housing		Canadian Factory-Built Housing		Corporate/ Other		Total
Manufacturing	$	697,254	$	55,376	$	—	$	752,630
Retail		159,663		—		—		159,663
Transportation		—		—		16,712		16,712
Total	$	856,917	$	55,376	$	16,712	$	929,005

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

11. Income Taxes

For the three months ended September 28, 2024 and September 30, 2023, the Company recorded $15.4 million and $14.8 million of income tax expense and had an effective tax rate of 21.6% and 24.5%, respectively. For the six months ended September 28, 2024 and September 30, 2023, the Company recorded $29.1 million and $32.0 million of income tax expense and had an effective tax rate of 22.0% and 24.8% respectively.

The Company’s effective tax rate for the three and six months ended September 28, 2024 and September 30, 2023, differs 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.

At September 28, 2024, the Company had no unrecognized tax benefits.

12. Earnings Per Share

Basic net income per share attributable to the Company was computed by dividing net income attributable to the Company by the average number of common shares outstanding during the period. Diluted earnings per share is calculated using our weighted-average outstanding common shares, including the dilutive effect of stock awards as determined under the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per common share:


	Three months ended				Six months ended
(Dollars and shares in thousands, except per share data)	September 28, 2024		September 30, 2023			September 28, 2024		September 30, 2023
Numerator:
Net income attributable to Champion Homes, Inc.	$	54,734	$	45,669		$	100,528	$	96,938
Denominator:
Basic weighted-average shares outstanding		57,648		57,232			57,757		57,224
Dilutive securities		537		492			492		471
Diluted weighted-average shares outstanding		58,185		57,724			58,249		57,695

Basic net income per share	$	0.95	$	0.80		$	1.74	$	1.69
Diluted net income per share	$	0.94	$	0.79		$	1.73	$	1.68

13. Segment Information

Financial results for the Company's reportable segments have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's chief operating decision maker in allocating resources and in assessing performance. The Company’s chief operating decision maker, the Chief Executive Officer, evaluates the performance of the Company’s segments primarily based on net sales, before elimination of inter-company shipments, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and operating assets.

The Company operates in two reportable segments: (i) U.S. Factory-built Housing, which includes manufacturing and retail housing operations and (ii) Canadian Factory-built Housing. Corporate/Other includes the Company’s transportation operations, the Company's financing activities, corporate costs directly incurred for all segments and intersegment eliminations. Segments are generally determined by geography. Segment data includes intersegment revenues and corporate office costs that are directly and exclusively incurred for each segment. Total assets for Corporate/Other primarily include cash and certain U.S. deferred tax items not specifically allocated to another segment.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

Selected financial information by reportable segment was as follows:


	Three months ended						Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net sales:
U.S. Factory-built Housing	$	587,127		$	428,132		$	1,186,660		$	856,917
Canadian Factory-built Housing		22,234			29,256			43,033			55,376
Corporate/Other		7,516			6,848			14,963			16,712
Consolidated net sales	$	616,877		$	464,236		$	1,244,656		$	929,005
Operating income:
U.S. Factory-built Housing EBITDA	$	88,448			64,752		$	167,469		$	138,985
Canadian Factory-built Housing EBITDA		2,979			5,763			5,858			10,527
Corporate/Other EBITDA		(15,943	)		(13,759	)		(31,967	)		(25,930	)
Other expense (income)		14			2,065			(1,205	)		2,065
Depreciation		(6,543	)		(4,700	)		(14,245	)		(9,333	)
Amortization		(2,968	)		(2,086	)		(5,878	)		(5,045	)
Equity in net loss of affiliates		691			—			2,034			—
Consolidated operating income	$	66,678		$	52,035		$	122,066		$	111,269
Depreciation:
U.S. Factory-built Housing	$	5,944		$	4,198		$	13,048		$	8,326
Canadian Factory-built Housing		448			356			885			712
Corporate/Other		151			146			312			295
Consolidated depreciation	$	6,543		$	4,700		$	14,245		$	9,333

Amortization of U.S. Factory-built Housing intangible assets:	$	2,968		$	2,086		$	5,878		$	5,045
Capital expenditures:
U.S. Factory-built Housing	$	12,465		$	11,743		$	21,992		$	21,421
Canadian Factory-built Housing		448			475			874			941
Corporate/Other		1,202			288			1,961			485
Consolidated capital expenditures	$	14,115		$	12,506		$	24,827		$	22,847

(Dollars in thousands)							September 28, 2024			March 30, 2024

Total Assets:
U.S. Factory-built Housing (1)							$	1,251,635		$	1,239,338
Canadian Factory-built Housing (1)								137,703			132,420
Corporate/Other (1)								638,334			551,583
Consolidated total assets							$	2,027,672		$	1,923,341

(1)

Deferred tax assets for the Canadian operations are reflected in the Canadian Factory-built Housing segment. U.S. deferred tax assets are presented in Corporate/Other because an allocation between segments is not practicable.

Champion Homes, Inc.

Notes to Condensed Consolidated Financial Statements - Continued

14. Commitments, Contingencies, and Legal Proceedings

Repurchase Contingencies and Guarantees

The Company is contingently liable under terms of repurchase agreements with lending institutions that provide wholesale floor plan financing to retailers. These arrangements, which are customary in the manufactured housing industry, provide for the repurchase of products sold to retailers in the event of default by the retailer on its agreement to pay the financial institution. The risk of loss from these agreements is significantly reduced by the potential resale value of any products that are subject to repurchase and is spread over numerous retailers. The repurchase price is generally determined by the original sales price of the product less contractually defined curtailment payments. Based on these repurchase agreements and our historical loss experience, we established an associated loss reserve which was $1.7 million at September 28, 2024 and $1.8 million at March 30, 2024, respectively. Excluding the resale value of the homes, the contingent repurchase obligation as of September 28, 2024 was estimated to be $254.9 million. Losses incurred on homes repurchased were immaterial during the three and six months ended September 28, 2024 and September 30, 2023.

At September 28, 2024, the Company was contingently obligated for $31.5 million under letters of credit, consisting of $12.7 million to support long-term debt, $18.5 million to support the casualty insurance program, and $0.3 million to support bonding agreements. The letters of credit are issued from a sub-facility of the Amended Credit Agreement. The Company was also contingently obligated for $19.1 million under surety bonds, generally to support performance on long-term construction contracts and license and service bonding requirements.

In the normal course of business, the Company’s former subsidiaries that operated in the United Kingdom historically provided certain guarantees to two customers. Those guarantees provide contractual liability for proven construction defects up to 12 years from the date of delivery of certain products. The guarantees remain a contingent liability of the Company which declines over time through October 2027. As of the date of this report, the Company expects few, if any, claims to be reported under the terms of the guarantees.

Product Liability - Water Intrusion

The Company has received consumer complaints for damages related to water intrusion in homes built in one of its manufacturing facilities prior to fiscal 2022. The Company has investigated, and believes, the cause of the damage is the result of materials that did not perform in accordance with the manufacturer's contractual obligations. The Company has identified certain homes constructed over that period that may be affected. Based on the results of ongoing investigation and repair efforts, the Company has developed and HUD has approved a remediation plan under Subpart I of the HUD code. The plan calls for inspection and repair of affected homes if there is evidence of damage, or procedures to mitigate the opportunity for future damage. As a result of the proposal, the Company recorded charges to execute the remediation plan of $34.5 million during the fourth quarter of fiscal 2024. The Company estimated the charges by establishing a range of total expected costs determined by an actuary using a Monte Carlo simulation. The analysis resulted in a range of losses between $34.5 million and $85.0 million. The Company was not able to determine a value in the range that was more likely than any other value, and as prescribed by U.S. GAAP, recorded the charge for remediation based on the low end of the range of potential losses. The Company is monitoring the results of the inspection and repair activities, and may revise the amount of the estimated liability, which could result in an increase or decrease in the estimated liability in future periods. The liability is included in other current liabilities in the accompanying Condensed Consolidated Balance Sheets.

Based on the Company's investigation into the cause of the water intrusion, including third-party testing of the material at issue, the Company believes it is possible that it will recover some or all of the estimated remediation costs. The Company will attempt to recover those costs from the manufacturer of the material, the distributor of the material, their related insurance providers or from the Company's insurance providers. However, the Company is unable to record an offset for any estimated costs at this time in accordance with U.S. GAAP.

Legal Proceedings

The Company has agreed to indemnify counterparties in the ordinary course of its business in agreements to acquire and sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. As of the date of this filing, the Company believes the ultimate liability with respect to these contingent obligations will not have, either individually or in the aggregate, a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

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

The following should be read in conjunction with Champion Homes, Inc.’s condensed consolidated financial statements and the related notes that appear in Item 1 of this Report.

Overview

Champion Homes, Inc., formerly known as Skyline Champion Corporation (the “Company”), 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, 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 43 manufacturing facilities throughout the U.S. and five 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 72 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.

Acquisitions and Expansions

The Company is focused on operational improvements to increase capacity utilization and profitability at its existing manufacturing facilities as well as measured expansion of its manufacturing and retail footprint through facility and equipment investments and acquisitions. Those investments will help improve the Company's ability to satisfy demand for affordable housing. During fiscal 2023, robust demand for housing began to slow as inflation and higher interest rates made housing less affordable. The current economic environment drives an even greater need for attainable housing solutions. As a result, the Company continues to focus on growing in strong housing markets across the U.S. and Canada, as well as expanding products and services to provide more holistic and affordable solutions to homebuyers.

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.

In addition to those acquisitions, the Company is also focused on enhancing its U.S. manufacturing production capacity through various plant start-ups in strategic locations. As a result, the Company began production in previously idled or acquired facilities in Decatur, Indiana and Bartow, Florida in fiscal 2024 and a facility in Pembroke, North Carolina in the fourth quarter of fiscal 2023. The Company owns six idle manufacturing facilities that could be used for further manufacturing capacity expansion in future periods.

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.

The Company's acquisitions and investments are part of a strategy to grow and diversify revenue with a focus on increasing the Company’s homebuilding presence in the U.S. as well as improving the results of operations through streamlining production of similar product categories. These acquisitions and investments are included in the Company's consolidated results for periods subsequent to their respective acquisition dates.

Industry and Company Outlook

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.

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.

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.

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


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023
Income Statements Data:
Net sales	$	616,877		$	464,236
Cost of sales		450,544			347,747
Gross profit		166,333			116,489
Selling, general, and administrative expenses		99,655			64,454
Operating income		66,678			52,035
Interest income, net		(4,737	)		(10,480	)
Other expense		14			2,065
Income before income taxes		71,401			60,450
Income tax expense		15,392			14,781
Net income before equity in net loss of affiliates		56,009			45,669
Equity in net loss of affiliates		691			—
Net income	$	55,318		$	45,669
Net (income) attributable to non-controlling interest		(584	)		—
Net income attributable to Champion Homes, Inc.	$	54,734		$	45,669

Reconciliation of Adjusted EBITDA:
Net income attributable to Champion Homes, Inc.	$	54,734		$	45,669
Income tax expense		15,392			14,781
Interest income, net		(4,737	)		(10,480	)
Depreciation and amortization		9,511			6,786
Equity in net income of ECN		(658	)		—
Transaction costs		—			2,065
Adjusted EBITDA	$	74,242		$	58,821
As a percent of net sales:
Gross profit		27.0	%		25.1	%
Selling, general, and administrative expenses		16.2	%		13.9	%
Operating income		10.8	%		11.2	%
Net income attributable to Champion Homes, Inc.		8.9	%		9.8	%
Adjusted EBITDA		12.0	%		12.7	%

NET SALES

The following table summarizes net sales for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024		September 30, 2023		$ Change			% Change
Net sales	$	616,877	$	464,236	$	152,641			32.9	%
U.S. manufacturing and retail net sales	$	587,127	$	428,132	$	158,995			37.1	%
U.S. homes sold		6,357		4,842		1,515			31.3	%
U.S. manufacturing and retail average home selling price		92.4	$	88.4	$	3.9			4.5	%
Canadian manufacturing net sales	$	22,234	$	29,256	$	(7,022	)		(24.0	%)
Canadian homes sold		179		232		(53	)		(22.8	%)
Canadian manufacturing average home selling price	$	124.2	$	126.1	$	(1.9	)		(1.5	%)
Corporate/Other net sales	$	7,516	$	6,848	$	668			9.8	%
U.S. manufacturing facilities in operation at end of period		43		39
U.S. retail sales centers in operation at end of period		72		31
Canadian manufacturing facilities in operation at end of period		5		5

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.

U.S. Factory-built Housing:

Net sales for the Company’s U.S. manufacturing and retail operations increased by $159.0 million, or 37.1%, for the three months ended September 28, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to the inclusion of $148.0 million of net sales from Regional Homes in fiscal 2025. The number of new homes sold during the period increased 31.3% and the average selling price per new home increased 4.5%. 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 sold to independent channels versus homes sold through our company-owned retail sales centers impacts average selling price since we capture revenue from additional installation services for homes sold through internal channels.

Canadian Factory-built Housing:

The Canadian Factory-built Housing segment net sales decreased by $7.0 million, or 24.0% for the three months ended September 28, 2024 compared to the same period in the prior fiscal year, primarily due to a 22.8% decrease in homes sold and a 1.5% decrease 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 $1.2 million due to fluctuations in the translation of the Canadian dollar to the U.S. dollar during the three months ended September 28, 2024 as compared to the same period of the prior fiscal year.

Corporate/Other:

Net sales for Corporate/Other includes the Company’s transportation business, financing activities, and the elimination of intersegment sales. For the three months ended September 28, 2024, net sales increased $0.7 million, or 9.8%, primarily attributable to Champion Financing, partially offset by lower recreational vehicle shipments from the Company's transportation business.

GROSS PROFIT

The following table summarizes gross profit for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Gross profit:
U.S. Factory-built Housing	$	156,319		$	105,084		$	51,235			48.8	%
Canadian Factory-built Housing		4,837			8,007			(3,170	)		(39.6	%)
Corporate/Other		5,177			3,398			1,779			52.4	%
Total gross profit	$	166,333		$	116,489		$	49,844			42.8	%
Gross profit as a percent of net sales		27.0	%		25.1	%

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.

U.S. Factory-built Housing:

Gross profit for the U.S. Factory-built Housing segment increased by $51.2 million, or 48.8%, during the three months ended September 28, 2024 compared to the same period in the prior fiscal year. Gross profit was 26.6% as a percent of segment net sales for the three months ended September 28, 2024 compared to 24.5% in the same period of the prior fiscal year. The increase in gross profit as a percent of segment net sales is being driven by higher average selling prices from our Company owned retail stores, which also generated a greater percentage of total segment revenue than the prior year as well as lower input costs primarily from forest products and higher capacity utilization.

Canadian Factory-built Housing:

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.

Corporate/Other:

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.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

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:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	76,781		$	46,614		$	30,167			64.7	%
Canadian Factory-built Housing		2,306			2,600			(294	)		(11.3	%)
Corporate/Other		20,568			15,240			5,328			35.0	%
Total selling, general, and administrative expenses	$	99,655		$	64,454		$	35,201			54.6	%
Selling, general, and administrative expense as a percent of net sales		16.2	%		13.9	%

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.

U.S. Factory-built Housing:

Selling, general, and administrative expenses for the U.S. Factory-built Housing segment increased $30.2 million, or 64.7%, during the three months ended September 28, 2024 as compared to the same period in the prior fiscal year. SG&A, as a percent of segment net sales increased to 13.1% for the three months ended September 28, 2024 compared to 10.9% during the comparable period of the prior fiscal year. The acquisition of Regional Homes was the primary driver of the increase in both the amount of SG&A and as a percent of sales. Sales through our internal retail channels incur a higher percent of SG&A than wholesale sales to independent retailers. We also had higher incentive compensation during the period, which is generally based on sales volume or a measure of profitability.

Canadian Factory-built Housing:

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.

Corporate/Other:

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 $5.3 million, or 35.0%, during the three months ended September 28, 2024 as compared to the same period of the prior fiscal year. The increase was due to investments made in people and information systems to support future growth.

INTEREST (INCOME), NET

The following table summarizes the components of interest (income), net for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change		% Change
Interest expense	$	2,113		$	362		$	1,751		483.7	%
Less: interest income		(6,850	)		(10,842	)		3,992		(36.8	%)
Interest (income), net	$	(4,737	)	$	(10,480	)	$	5,743		(54.8	%)
Average outstanding floor plan payable	$	89,418		$	—
Average outstanding long-term debt	$	24,687		$	12,430
Average cash balance	$	559,582		$	749,436

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.

OTHER EXPENSE

The following table summarizes other expense for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024		September 30, 2023		$ Change			% Change
Other expense	$	14	$	2,065	$	(2,051	)		(99.3	%)

The decrease in other expense for the three months ended September 28, 2024 compared to September 30, 2023 is due to transaction costs incurred for the acquisition of Regional Homes in the prior fiscal year.

INCOME TAX EXPENSE

The following table summarizes income tax expense for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change		% Change
Income tax expense	$	15,392		$	14,781		$	611		4.1	%
Effective tax rate		21.6	%		24.5	%

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.

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.

EQUITY IN NET LOSS OF AFFILIATES

The following table summarizes equity in net loss of affiliates for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024		September 30, 2023		$ Change		% Change
Equity in net loss of affiliates	$	691	$	—	$	691		100.0	%

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.

NON-CONTROLLING INTEREST

The following table summarizes net (income) attributable to non-controlling interest for the three months ended September 28, 2024 and September 30, 2023:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023		$ Change			% Change
Net (income) attributable to non-controlling interest	$	(584	)	$	—	$	(584	)		100.0	%

Net income attributable to non-controlling interest represents the minority partner's 49% share of the results of operations of Champion Financing.

ADJUSTED EBITDA

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:


	Three months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Net income attributable to Champion Homes, Inc.	$	54,734		$	45,669		$	9,065			19.8	%
Income tax expense		15,392			14,781			611			4.1	%
Interest (income), net		(4,737	)		(10,480	)		5,743			(54.8	%)
Depreciation and amortization		9,511			6,786			2,725			40.2	%
Equity in net income of ECN		(658	)		—			(658	)	*
Transaction costs		—			2,065			(2,065	)	*
Adjusted EBITDA	$	74,242		$	58,821		$	15,421			26.2	%

* indicates that the calculated percentage is not meaningful

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.

UNAUDITED INCOME STATEMENTS FOR THE FIRST HALF OF FISCAL 2025 VS. 2024


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023
Income Statements Data:
Net sales	$	1,244,656		$	929,005
Cost of sales		914,108			682,843
Gross profit		330,548			246,162
Selling, general, and administrative expenses		208,482			134,893
Operating income		122,066			111,269
Interest income, net		(8,986	)		(19,781	)
Other (income) expense		(1,205	)		2,065
Income before income taxes		132,257			128,985
Income tax expense		29,111			32,047
Net income before equity in net loss of affiliates		103,146			96,938
Equity in net loss of affiliates		2,034			—
Net income	$	101,112		$	96,938
Net (income) attributable to non-controlling interest		(584	)		—
Net income attributable to Champion Homes, Inc.	$	100,528		$	96,938

Reconciliation of Adjusted EBITDA:
Net income attributable to Champion Homes, Inc.	$	100,528		$	96,938
Income tax expense		29,111			32,047
Interest (income), net		(8,986	)		(19,781	)
Depreciation and amortization		20,123			14,378
Equity in net loss of ECN		521			—
Change in fair value of contingent consideration		7,912			—
Transaction costs		—			2,065
Adjusted EBITDA	$	149,209		$	125,647
As a percent of net sales:
Gross profit		26.6	%		26.5	%
Selling, general, and administrative expenses		16.8	%		14.5	%
Operating income		9.8	%		12.0	%
Net income attributable to Champion Homes, Inc.		8.1	%		10.4	%
Adjusted EBITDA		12.0	%		13.5	%

NET SALES

The following table summarizes net sales for the six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024		September 30, 2023		$ Change			% Change
Net sales	$	1,244,656	$	929,005	$	315,651			34.0	%
U.S. manufacturing and retail net sales	$	1,186,660	$	856,917	$	329,743			38.5	%
U.S. homes sold		12,895		9,659		3,236			33.5	%
U.S. manufacturing and retail average home selling price	$	92.0	$	88.7	$	3.3			3.7	%
Canadian manufacturing net sales	$	43,033	$	55,376	$	(12,343	)		22.3	%
Canadian homes sold		346		453		(107	)		23.6	%
Canadian manufacturing average home selling price	$	124.4	$	122.2	$	2.2			1.8	%
Corporate/Other net sales	$	14,963	$	16,712	$	(1,749	)		10.5	%
U.S. manufacturing facilities in operation at end of period		43		39
U.S. retail sales centers in operation at end of period		72		31
Canadian manufacturing facilities in operation at end of period		5		5

Net sales for the six months ended September 28, 2024 were $1.2 billion, an increase of $315.7 million, or 34.0%, compared to the six months ended September 30, 2023. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

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.

Canadian Factory-built Housing:

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.

Corporate/Other:

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.

GROSS PROFIT

The following table summarizes gross profit for the six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Gross profit:
U.S. Factory-built Housing	$	310,660		$	223,508		$	87,152			39.0	%
Canadian Factory-built Housing		10,189			15,035			(4,846	)		32.2	%
Corporate/Other		9,699			7,619			2,080			27.3	%
Total gross profit	$	330,548		$	246,162		$	84,386			34.3	%
Gross profit as a percent of net sales		26.6	%		26.5	%

Gross profit as a percent of sales during the six months ended September 28, 2024 was 26.6% compared to 26.5% during the six months ended September 28, 2024. The following is a summary of the change by operating segment.

U.S. Factory-built Housing:

Gross profit for the U.S. Factory-built Housing segment increased by $87.2 million or 39.0%, during the six months ended September 28, 2024 compared to the same period in the prior fiscal year. The increase in gross profit was driven by higher unit volume due to higher customer demand and production rates and the inclusion of Regional Homes. Gross profit was 26.2% as a percent of segment net sales for the six months ended September 28, 2024 compared to 26.1% in the same period of the prior fiscal year.

Canadian Factory-built Housing:

Gross profit for the Canadian Factory-built Housing segment decreased by $4.8 million, or 32.2% during the six 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. Gross profit as a percent of net sales was 23.7% for the six months ended September 28, 2024, compared to 27.2% in the same period of the prior year, primarily the result of decreased leverage of fixed manufacturing costs.

Corporate/Other:

Gross profit for the Corporate/Other segment increased $2.1 million, or 27.3%, during the six months ended September 28, 2024 compared to the same period of the prior fiscal year. Gross profit increased as a a result of the revenue mix in the Company's transportation operations and the inclusion of Champion Financing.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

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 six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Selling, general, and administrative expenses:
U.S. Factory-built Housing	$	162,115		$	97,893		$	64,222			65.6	%
Canadian Factory-built Housing		5,216			5,220			(4	)		(0.1	%)
Corporate/Other		41,151			31,780			9,371			29.5	%
Total selling, general, and administrative expenses	$	208,482		$	134,893		$	73,589			54.6	%
Selling, general, and administrative expense as a percent of net sales		16.8	%		14.5	%

Selling, general, and administrative expenses were $208.5 million for the six months ended September 28, 2024, an increase of $73.6 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.

U.S. Factory-built Housing:

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.

Canadian Factory-built Housing:

Selling, general, and administrative expenses for the Canadian Factory-built Housing segment were flat 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 12.1% for the six months ended September 28, 2024 compared to 9.4% during the comparable period of the prior fiscal year due to less absorption of fixed costs caused by lower sales.

Corporate/Other:

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.

INTEREST (INCOME), NET

The following table summarizes the components of interest (income), net for the six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change		% Change
Interest expense	$	4,310		$	739		$	3,571		483.2	%
Less: interest income		(13,296	)		(20,520	)		7,224		(35.2	%)
Interest (income), net	$	(8,986	)	$	(19,781	)	$	10,795		(54.6	%)
Average outstanding floor plan payable	$	88,632		$	—
Average outstanding long-term debt	$	24,680		$	12,430
Average cash balance	$	532,647		$	724,304

Interest (income), net was $9.0 million for the six months ended September 28, 2024, compared to $19.8 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 higher average floor plan payables and long-term debt balances assumed in the acquisition of Regional Homes.

OTHER (INCOME) EXPENSE

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


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023		$ Change			% Change
Other (income) expense	$	(1,205	)	$	2,065	$	(3,270	)		(158.4	%)

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.

INCOME TAX EXPENSE

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


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Income tax expense	$	29,111		$	32,047		$	(2,936	)		(9.2	%)
Effective tax rate		22.0	%		24.8	%

Income tax expense for the six months ended September 28, 2024 was $29.1 million, representing an effective tax rate of 22.0%, compared to income tax expense of $32.0 million, representing an effective tax rate of 24.8% for the six months ended September 30, 2023. The effective tax rate for the six months ended September 28, 2024 was positively impacted by an increase in recognition of tax credits related to the sale of energy efficient homes.

The Company’s effective tax rates for the six 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.

EQUITY IN NET LOSS OF AFFILIATES

The following table summarizes equity in net loss of affiliates for the six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024		September 30, 2023		$ Change		% Change
Equity in net loss of affiliates	$	2,034	$	—	$	2,034		100.0	%

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 $2.0 million for the six months ended September 28, 2024 represents a loss on the equity method investment in ECN of $0.5 million and net losses from other unconsolidated affiliates of $1.5 million. There were no earnings or losses recognized related to equity method investments for the six months ended September 30, 2023.

NON-CONTROLLING INTEREST

The following table summarizes non-controlling interest for the six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023		$ Change			% Change
Net (income) attributable to non-controlling interest	$	(584	)	$	—	$	(584	)		100.0	%

Net income attributable to non-controlling interest represents the minority partner's 49% share of the results of operations of Champion Financing.

ADJUSTED EBITDA

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 six months ended September 28, 2024 and September 30, 2023:


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023			$ Change			% Change
Net income attributable to Champion Homes, Inc.	$	100,528		$	96,938		$	3,590			3.7	%
Income tax expense		29,111			32,047			(2,936	)		(9.2	%)
Interest (income), net		(8,986	)		(19,781	)		10,795			(54.6	%)
Depreciation and amortization		20,123			14,378			5,745			40.0	%
Equity in net loss of ECN		521			—			521		*
Change in fair value of contingent consideration		7,912			—			7,912		*
Transaction costs		—			2,065			(2,065	)	*
Adjusted EBITDA	$	149,209		$	125,647		$	23,562			18.8	%

* indicates that the calculated percentage is not meaningful

Adjusted EBITDA for the six months ended September 28, 2024 was $149.2 million, an increase of $23.6 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.

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.

Adjusted EBITDA is presented as a supplemental measure of the Company’s financial performance that management believes is useful to investors, because the excluded items may vary significantly in timing or amounts and/or may obscure trends useful in evaluating and comparing the Company’s operating activities across reporting periods. Management believes Adjusted EBITDA is useful to an investor in evaluating operating performance for the following reasons: (i) Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest income and expense, taxes, depreciation and amortization and other non-operating income or loss, which can vary substantially from company to company depending upon accounting methods and the book value of assets, capital structure and the method by which assets were acquired; and (ii) analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry.

Management uses Adjusted EBITDA for planning purposes, including the preparation of internal annual operating budget and periodic forecasts: (i) in communications with the Board of Directors and investors concerning financial performance; (ii) as a factor in determining bonuses under certain incentive compensation programs; and (iii) as a measure of operating performance used to determine the ability to provide cash flows to support investments in capital assets, acquisitions and working capital requirements for operating expansion.

BACKLOG

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.

Liquidity and Capital Resources

Sources and Uses of Cash

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


	Six months ended
(Dollars in thousands)	September 28, 2024			September 30, 2023
Net cash provided by (used in):
Operating activities	$	144,442		$	129,138
Investing activities		(22,553	)		(174,639	)
Financing activities		(47,320	)		(758	)
Effect of exchange rate changes on cash, cash equivalents		599			(39	)
Net increase (decrease) in cash and cash equivalents		75,168			(46,298	)
Cash and cash equivalents at beginning of period		495,063			747,453
Cash and cash equivalents at end of period	$	570,231		$	701,155

The Company’s primary sources of liquidity are cash flows from operations and existing cash balances. Cash balances and cash flows from operations for the next year are expected to be adequate to cover working capital requirements, capital expenditures, and strategic initiatives and investments. The Company has an Amended Credit Agreement which provides for a $200.0 million revolving credit facility, including a $45.0 million letter of credit sub-facility. At September 28, 2024, $168.5 million was available for borrowing under the Amended Credit Agreement. The Company’s revolving credit facility includes (i) a maximum consolidated total net leverage ratio of 3.25 to 1.00, subject to an upward adjustment upon the consummation of a material acquisition, and (ii) a minimum interest coverage ratio of 3.00 to 1.00. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year and beyond. In the event operating cash flow and existing cash balances were deemed inadequate to support the Company’s liquidity needs, and one or more capital resources were to become unavailable, the Company would revise its operating strategies.

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.

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.

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.

Critical Accounting Policies

For a discussion of our critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements, see Part II, Item 7 of the Fiscal 2024 Annual Report, under the heading “Critical Accounting Policies.” There have been no significant changes in our significant accounting policies or critical accounting estimates discussed in the Fiscal 2024 Annual Report, other than those included in Note 1, "Basis of Presentation".

Recently Issued Accounting Pronouncements

For information on the impact of recently issued accounting pronouncements, see Note 1, “Basis of Presentation – Recently Issued Accounting Pronouncements,” to the condensed consolidated financial statements included in this Report.

Forward-Looking Statements

Some of the statements in this Report are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words “will,” “could”, “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in our forward-looking statements, including regional, national and international economic, financial, public health and labor conditions, and the following:

•

supply-related issues, including prices and availability of materials;

•

labor-related issues;

•

inflationary pressures in the North American economy;

•

the cyclicality and seasonality of the housing industry and its sensitivity to changes in general economic or other business conditions;

•

demand fluctuations in the housing industry, including as a result of actual or anticipated increases in homeowner borrowing rates;

•

the possible unavailability of additional capital when needed;

•

competition and competitive pressures;

•

changes in consumer preferences for our products or our failure to gauge those preferences;

•

quality problems, including the quality of parts sourced from suppliers and related liability and reputational issues, including those related to the remediation of the water intrusion claims;

•

data security breaches, cybersecurity attacks, and other information technology disruptions;

•

the potential disruption of operations caused by the conversion to new information systems;

•

the extensive regulation affecting the production and sale of factory-built housing and the effects of possible changes in laws with which we must comply;

•

the potential impact of natural disasters on our supply chain, sales and raw material costs;

•

the risks associated with mergers and acquisitions, including integration of operations and information systems;

•

periodic inventory adjustments by, and changes to relationships with, independent retailers;

•

changes in interest and foreign exchange rates;

•

insurance coverage and cost issues;

•

the possibility that all or part of our intangible assets, including goodwill, might become impaired;

•

the possibility that all or part of our investment in ECN Capital Corp. ("ECN") might become impaired;

•

the possibility that our risk management practices may leave us exposed to unidentified or unanticipated risks;

•

the potential disruption to our business caused by public health issues, such as an epidemic or pandemic, and resulting government actions;

•

the possibility our share repurchase program will not enhance long-term stockholder value, could increase the volatility of our stock price, and diminish our cash reserves; and

•

other risks described in Part I — Item 1A, "Risk Factors," included in the Fiscal 2024 Annual Report, as well as the risks and information provided from time to time in our other periodic reports filed with the Securities and Exchange Commission (the “SEC”).

If any of the risks or uncertainties referred to above materializes or if any of the assumptions underlying our forward-looking statements proves to be incorrect, then differences may arise between our forward-looking statements and our actual results, and such differences may be material. Investors should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. We assume no obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof, except as required by law.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s interest rate and foreign exchange risks, see Part II, Item 7A of the Fiscal 2024 Annual Report, under the heading "Quantitative and Qualitative Disclosures about Market Risk." There have been no significant changes in such risks since March 30, 2024.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the specified time periods and accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) of the Exchange Act at September 28, 2024. Based upon this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 28, 2024.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. In October 2023, we completed the acquisition of Regional Homes and are currently integrating Regional Homes into our operations, compliance programs and internal control processes. Regional Homes constituted approximately 26% of our total assets as of September 28, 2024, including the goodwill and intangible assets recorded as part of the purchase price allocation and approximately 24% of our net sales for the six months ended September 28, 2024. United States Securities and Exchange Commission guidance allows companies to exclude acquisitions from their assessment of the internal control over financial reporting during the first year following an acquisition while integrating the acquired company. We have excluded the acquired operations of Regional Homes from our assessment of the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are involved from time to time in various legal proceedings and claims, including, without limitation, commercial or contractual disputes, product liability claims and other matters. For additional information on legal proceedings, see Note 14 “Commitments, Contingencies and Legal Proceedings – Legal Proceedings,” to the condensed consolidated financial statements included in this Report.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On May 16, 2024, Champion Homes, Inc.’s Board of Directors approved a share repurchase program for up to $100.0 million of the Company’s common stock, which was subsequently amended for up to $120.0 million. On October 28, 2024, the Company's Board of Directors approved an increase to this share repurchase program to repurchase up to an additional $20.0 million of the Company's common stock. Under this share repurchase program, the number of shares ultimately purchased, and the timing of purchases are at the discretion of management and subject to compliance with applicable laws and regulations. The share repurchase program does not expire. The Company intends to fund the program from existing cash. Share repurchases are made in the open market or in privately negotiated transactions in compliance with applicable state and federal securities laws and other legal requirements. The level of repurchase activity is subject to market conditions and other investment opportunities. The repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended or discontinued at any time. Share repurchase activity during the three months ended September 28, 2024 was as follows:


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (in thousands)
9/1/2024 - 9/28/2024		214,275	$	93.32		214,275	$	80,000
		214,275				214,275

Item 5. OTHER INFORMATION

During the six months ended September 28, 2024, none of the Company’s directors or Section 16 officers adopted or terminated a Rule 10b5-1 Trading Plan or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.

Item 6. EXHIBITS


Exhibit Number		Description

31.1		Certification of Chief Executive Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

31.2		Certification of Chief Financial Officer pursuant to Exchange Act rules 13a-4 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

101 (INS)		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101(SCH)		Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

† Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Champion Homes, Inc.

Registrant


Signature	Title	Date

/s/ Mark Yost	President and Chief Executive Officer	October 29, 2024
Mark Yost	(Principal Executive Officer)

/s/ Laurie Hough	Executive Vice President, Chief Financial Officer and Treasurer	October 29, 2024
Laurie Hough	(Principal Financial Officer)