Champion Homes, Inc.

Demand is being driven by numerous factors, including favorable financing, historically low inventory levels, and a rapidly growing base of customers looking for a better alternative to site-built homes, especially first-time homebuyers. Our affordable price point during these inflationary times contributed to strong order rates that continue to outpace production. This dynamic led to backlogs growing by 169 million during the second quarter to 1.4 billion, or on average, 40 weeks of production at the end of the quarter. We anticipate continued growth of our backlog through the third quarter as post-Labor Day order rates have only accelerated into October. We delivered 6,260 homes during the quarter, an improvement of 25% from the prior year. Increased output along with price increases to cover rising material, labor, and freight costs drove revenue to $524 million in the second quarter, up 63% from the prior year. Our plant teams continue to execute amazingly well despite the volatile operating environment and continued supply chain challenges. As expected, home sales volume versus the sequential first quarter decreased slightly due to planned holiday shutdowns and material shortages. Our capacity utilization of 64% during the quarter was also affected by higher than anticipated COVID-related delays. We continue to focus on the health and safety of our employees and take the necessary actions to ensure a safe and healthy environment at all of our plants. By early September, we saw COVID and labor challenges start to moderate with the team continuing to work hard to increase output and the number of homes sold. By streamlining of our product offerings, it really helped to offset the material supply shortages. Our teams in the U.S. and Canada are also proactively working to schedule production to align with the available supply to take care of our customers. In these challenging times, our supply chain partners have done an amazing and excellent job coordinating with us so we can plan and maximize delivery to our customers. Our supply partners are giving us the confidence that material availability will be there and we will remain on track to open up one of our manufacturing facilities in Navasota, Texas by the end of our fiscal year. As we look forward, both internal and external factors are converging to create a long runway of outsized growth. Externally, demographic, economic, and migratory factors are driving the need for affordable starter homes, while the country is at a five-decade low on the supply side. Trends on inflation, immigration, and financing particularly position our homes well compared to our conventional site-built competitors. We just recently saw manufactured housing lenders extend the length of both chattel and land home loans, which helps to lower the homeowner's monthly payment at a time when they need it the most, with rising interest rates and inflationary pressures. Internally, we see the already strong long-term demand environment only enhanced by the significant investments we are making on the digital side of our business. These investments will drive customer engagement as we are improving and simplifying the buying experience. We expect the easy design, simplicity, and transparency of the purchase process will lead to higher order rates and increased production levels from a more streamlined product offering. With a number of positive tailwinds driving higher levels of demand, our focus is to efficiently increase output. In the near term, we anticipate the material availability and supply chain challenges across most building products will continue to govern production levels in the upcoming quarters as demand outpaces supply. We expect the challenges of supply chain to peak in the third quarter and early fourth quarter, followed by moderate improvement in subsequent quarters. In parallel, as supply chain improves, we are investing in automation to increase the number of homes we can produce while lowering the cost and optimizing the material we use. Our recent investments are targeted at helping the customer. Customers who today are dealing with conventional home building, which is tedious, unpredictable, and expensive. Our investments in our platform and our team will make buying a home engaging, dependable, and affordable. I will now turn the call over to Lori to discuss our quarterly financials in more detail.

Thanks, Mark, and good morning, everyone. I'll begin by reviewing our financial results for the second quarter of fiscal 2022, followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our expectations for the third quarter as well as the longer term outlook. Net sales increased by 63% to $524 million in the second quarter of fiscal 2022 versus the same quarter last year. We generated revenue growth of $188 million in the U.S. factory-built housing segment, as well as growth in our Canadian factory-built housing segment of $14 million. The increase in U.S. factory-built revenue was driven by an increase in the number of homes sold and an increase in average selling price per home. The increase in the number of homes sold was 26%, or 1,213 units, for a total of 5,902 homes compared to the same quarter last year. The average selling price per U.S. home increased by 32% to $79,900 due to product mix and price increases in response to rising material, labor, and freight costs. The sequential growth in revenue in the U.S. factory built segment was 3.1% compared to the first quarter. The increase in revenue was driven by an 11.3% increase in average selling price per new home, partially offset by a 7.4% decline in the number of homes sold. The sequential decline in the number of homes sold was due to the planned holiday plant shutdowns and COVID disruptions at a few of our manufacturing plants during the month of August. Canadian revenue increased 57% to $39 million compared to last year. as the number of homes sold increased 19% to 358 units. The average home selling price in Canada of $107,500 increased 32% versus the same quarter last year, driven primarily by pricing actions enacted in response to rising material costs. Consolidated gross profit increased to $129 million, up 106% versus the prior year quarter, due to increased sales volume and higher pricing to offset inflationary input costs. Our U.S. housing segment gross margins were 24.7% of segment net sales, up 550 basis points from the second quarter last year due to improved operating efficiencies and leverage of fixed costs as we continue to see the benefit of streamlining our product offering. SG&A in the second quarter increased to $61 million from $41 million in the same period last year, primarily due to higher variable compensation, the impact of the acquisition of the Scottville operations in February 2021, and our continued investment in the customer buying experience. We expect further incremental investments in the online customer experience and systems integration through fiscal 2023. SG&A decreased 110 basis points to 11.7% of net sales compared to the same quarter last year due to increased leverage of fixed costs resulting from higher net sales. Net income for the second quarter was 51 million or 89 cents per diluted share compared to net income of 18 million or earnings per share of 31 cents during the same period last year. The increase in EPS was driven by a combination of higher revenue and improved profitability. The company's effective tax rate for the quarter was 24.4%, consistent with the period a year ago. Adjusted EBITDA for the quarter was $73 million, an increase of 153% over the same period a year ago. The adjusted EBITDA margin expanded by 490 basis points to 13.9% due to higher sales, gross margin improvement, and fixed cost leverage. The prior year's EBITDA included 2.6 million of wage subsidies provided by a Canadian government-sponsored financial assistance program that was enacted in response to the pandemic and did not reoccur in fiscal 2022. We expect inflation on building products and labor costs to remain persistent into fiscal 2023 due primarily to the widespread supply chain challenges on top of record levels of demand. We utilize several levers in response to increasing material and labor costs, including price adjustments, product standardization, raw material substitutions, and further operational improvements. Despite our efforts to continue to pass on inflation and make operational improvements, our production continues to be impacted by the availability of raw materials due to supply chain challenges, including the timeliness and cost of raw material deliveries. As of October 2nd, 2021, we had $310 million of cash and cash equivalents and generated $57 million of operating cash flows during the quarter. As a reminder, in the beginning of July, Skyline Champion entered into a $200 million revolving credit facility, replacing its existing $100 million facility. As a part of the refinancing, we paid off our outstanding revolver balance, totaling $26.9 million, using the company's cash on hand. The new credit facility expands the company's available liquidity for strategic initiatives and opportunistic acquisitions. We remain focused on executing on our growth and operational initiatives, and given our favorable liquidity position, plan to utilize our cash to reinvest in the business and to support strategic growth. I'll now turn the call back to Mark for some closing remarks.

Lori, thank you. We are pleased with our strong second quarter and year-to-date results. I'm encouraged with the solid momentum in our business despite the turbulent environment that we are operating within. Our strong backlog and investment to transform home building have us well positioned to solve the growing need for our homes. And with that, operator, you may now open the lines for Q&A.