On August 6, 2024, Skyline Champion Corp (SKY, Financial) released its 8-K filing for the first quarter of fiscal 2025, ending June 29, 2024. The company, now known as Champion Homes, Inc., reported notable financial results, reflecting significant growth in net sales and challenges in profit margins.
Company Overview
Skyline Champion Corp, now Champion Homes, Inc., is a leading factory-built housing company in North America. The company offers a diverse portfolio of manufactured and modular homes, park model RVs, accessory dwelling units (ADUs), and modular buildings for various sectors including multi-family, hospitality, senior, and workforce housing. Champion Homes operates under several well-known brand names such as Skyline Homes, Champion Home Builders, Genesis Homes, and others, generating maximum revenue from its U.S. Factory-built Housing segment.
Performance Highlights
For the first quarter of fiscal 2025, Champion Homes reported:
- Net sales increased by 35.1% to $627.8 million, surpassing the analyst estimate of $601.25 million.
- U.S. homes sold increased by 35.7% to 6,538 units.
- Average selling price (ASP) per U.S. home sold rose by 3.0% to $91,700.
- Gross profit margin contracted by 170 basis points to 26.2%.
- Net income decreased by 10.7% to $45.8 million.
- Earnings per diluted share (EPS) decreased by 11.2% to $0.79, beating the analyst estimate of $0.71.
- Adjusted net income increased by 3.5% to $53.0 million.
- Adjusted EPS increased by 2.2% to $0.91.
- Adjusted EBITDA increased by 12.2% to $75.0 million.
- Net cash generated by operating activities was $84.6 million.
- Repurchased $20.0 million of shares under the share repurchase program.
Financial Achievements and Challenges
Champion Homes' significant increase in net sales and the number of U.S. homes sold highlights the company's strong market position and the effectiveness of its strategic investments. The increase in ASP per U.S. home sold indicates a favorable product mix and higher retail unit sales. However, the contraction in gross profit margin and the increase in SG&A expenses pose challenges. The gross margin contraction was attributed to lower ASPs on wholesale new homes, a shift in product mix, and the impact of purchase accounting from the Regional Homes acquisition.
Income Statement Summary
| Metric | Q1 FY2025 | Q1 FY2024 |
|---|---|---|
| Net Sales | $627.8 million | $464.8 million |
| Gross Profit | $164.2 million | $129.7 million |
| Net Income | $45.8 million | $51.3 million |
| EPS (Diluted) | $0.79 | $0.89 |
Balance Sheet and Cash Flow
As of June 29, 2024, Champion Homes reported $548.9 million in cash and cash equivalents, an increase of $53.9 million from the previous quarter. The company’s total assets stood at $1.99 billion, with total liabilities of $536.4 million. The company also repurchased approximately 292,000 shares of its common stock for $20 million during the quarter.
Commentary and Outlook
"I am excited to announce that our shareholders approved our corporate Company name change to Champion Homes, Inc. during our annual meeting this year. The name change aligns with our previously launched Champion Homes flagship brand supporting a unified Company, our purpose of championing home attainability and the customer experience, as well as the Company’s direct-to-consumer marketing and digital expansion," said Mark Yost, Champion Homes’ President, and Chief Executive Officer.
"Throughout the quarter, we experienced an increase in demand for our homes evidenced by growing sales and backlog. This positive trend reflects the benefits of our strategic investments in expanding our retail footprint and capitalizing on the growing need for attainable housing in the market," Yost added.
Analysis
Champion Homes' performance in the first quarter of fiscal 2025 demonstrates robust revenue growth and a strong market presence. The increase in net sales and the number of homes sold are positive indicators of the company's strategic direction and market demand. However, the contraction in gross profit margin and the rise in SG&A expenses highlight areas that require attention. The company's ability to manage these challenges while continuing to drive growth will be crucial for sustaining its market position and delivering value to shareholders.
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Explore the complete 8-K earnings release (here) from Skyline Champion Corp for further details.
