Champion Homes, Inc.

Good morning and welcome to the Champion Homes first quarter fiscal 2020 earnings call. My name is Erica and I will be coordinating your call today. A question and answer session will follow the formal remarks. As a reminder, this conference is being recorded. I will now turn the call over to Ellen Kaleniecki, Director of Investor Relations. Ellen, please go ahead.

Good morning. Thank you for joining us for today's conference call and review of Champion Homes results for the first quarter ended June 27, 2026. Here to review the results are Tim Larson, CEO, and Dave McKinstray, CFO. Yesterday, after the market closed, Champion Homes issued its earnings release. As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release. I will now turn the call over to Tim Larson.

Thank you, Ellen, and good morning, everyone. The Champion Homes team delivered a solid start to fiscal 2027, with results that aligned with our expectations. We continue to outperform the broader industry, demonstrating the strength of our customer-centric strategy and the team's operational execution. The recent closing of the Homes Direct acquisition marks an important milestone in advancing our direct-to-consumer strategy. The transaction closed on August 1st, and we are honored to formally welcome the Homes Direct team to Champion. While the financial impact in the second quarter will be limited due to timing, We remain excited about the strategic opportunities that we are already seeing as we work with the Homes Direct team. This acquisition reflects how we are allocating our capital to enhance and accelerate our strategic priorities. Across our channels, product portfolio, and operational scale, Champion remains uniquely positioned to help address the need for affordable housing. We remain focused on producing high-quality homes that provide compelling value when compared to traditional site-built alternatives. We will achieve this by advancing a differentiated, customer-centric strategy that supports long-term growth and value creation. Let's turn to our quarterly results. The quarter unfolded largely as we anticipated, and we are pleased with the consistency and execution demonstrated by our team in a dynamic economic environment. Net sales increased 1.3% year-over-year to $710.2 million. Manufacturing capacity utilization during the quarter was 62%, up from 59% sequentially, and up one percentage point compared to the same period last year. As a reminder, our utilization reporting includes our six idled facilities. Champ and again outperformed the broader industry. Our U.S. home sales were up 1.8% versus the same period last year. This performance is against the backdrop of declining HUD industry shipments, which were down year-over-year approximately 5% during the three-month period ending May 2026. The demand environment was very encouraging for us in the first quarter. Manufacturing orders increased year-over-year, resulting in an increase in backlogs to 421.8 million versus 302 million at the end of the first quarter last year. Manufacturing backlog lead time ended the quarter at approximately nine weeks, which is within our target range of four to 12 weeks. We continue to manage production responsibly and balance customer demand with market conditions. From a channel perspective, we achieved solid results across our portfolio, reinforcing the resiliency of our diversified go-to-market model. Sales to our independent retail channel were up 4% year over year. We continue to invest in tools and capabilities to support our independent dealers' businesses, including lead management capabilities via our dealer portal, Consumer Digital Engagement Initiatives, and being nimble with our product offerings. We believe these important investments position both Champion and our dealer network for long-term success. Our captive retail channel continued to perform well. Captive retail represented approximately 35% of consolidated sales during the quarter, compared to 34% in the prior year period. Execution across our retail network remained strong. As we leverage our investments across our now 95 captive retail stores, including 11 Homes Direct stores in the western United States. It's worth noting that our first quarter results do not include Homes Direct, which as I mentioned closed August 1st. Community orders were up modestly this quarter. Community operators continually carefully manage inventory levels and monitor consumer demand. Orders from some of the larger operators were drivers during the first quarter, and we are encouraged by community customer engagement trends. Builder-developer sales increased year-over-year, with momentum accelerating in this channel. During the recent quarter, our off-site construction event in York, Nebraska, attracted more than 150 attendees and showcased the interest in modular HUD housing solutions. Developers, builders, municipalities, and housing advocates from across the nation attended the event. This reflects the growing interest and demand for affordable and timely home construction solutions. Our joint venture with Triad Champion Financing continued to perform well in the quarter. As we reported on our last call, the ECN transaction closed successfully in our first quarter and generated proceeds of approximately 189.1 million Canadian dollars. a portion of which we have reinvested in the Homes Direct Transaction. Turning to the regulatory developments, we are pleased with the continued momentum of policies that expand affordable housing. The 21st Century Road to Housing Act recently passed both chambers of Congress with overwhelming bipartisan support, becoming law on July 10th. While implementation will take time and the HUD room-making process is ongoing, We believe the legislation represents a meaningful step toward expanding housing opportunities and removing barriers to factory-built housing adoption. Our teams remain actively engaged with HUD and other stakeholders as technical specifications and implementation details continue to evolve. As you would expect, in addition to the HUD rulemaking, there will be new engineering, transport, and set considerations for HUD homes that are not built on a permanent chassis. Our teams are excited to implement this change while also remaining focused on our traditional HUD product that is built on a permanent chassis. We envision over time that both types of construction will be utilized throughout the industry. Additionally, Champion will once again return to the National Mall for HUD's Innovative Housing Showcase in September. The showcase and legislation demonstrate that federal housing leaders are increasingly supportive of manufactured homes as a central solution to the housing affordability crisis. We continue to monitor zoning reform at the state and local level as well. The Commonwealth of Virginia, for example, recently enacted legislation that allows manufactured housing placement in residential districts where site-built homes are permitted. This represents additional momentum towards the long-term acceptance of off-site-built in parity with site-built. We believe the continued incremental regulatory progress leads to a favorable long-term outlook for our industry. As we've moved through the opening weeks of the second quarter, our observations remain consistent with the themes we've discussed today. The macro environment remains dynamic, and consumers continue to face broad affordability pressures. However, demand for attainable housing remains strong, and our team continues to execute our strategy with excellence. We are encouraged by the customer engagement trends and the opportunities we are seeing across our channels. We believe Champion is better positioned than ever to help address the housing affordability challenge with best-in-class products designed for the specific customers and markets we serve, supported by diversified channels, and a highly engaged team. Our balance sheet remains exceptionally strong, providing flexibility to invest in growth opportunities, pursue disciplined capital allocation, and continue creating long-term shareholder value. With that, I'll turn the call over to Dave.

Thanks, Tim, and good morning, everyone. Before I get into the quarter and outlook, I want to briefly welcome the Homes Direct team to Champion. We're excited to have them as part of the company, and we look forward to collaborating together as we continue to expand our retail platform. Now, I'll begin by reviewing our first quarter financial results, followed by our balance sheet and cash flow performance. I'll then conclude with our outlook for the second quarter of fiscal 2027. Overall, our first quarter results reflected steady execution in a dynamic operating environment, with demand improving as the quarter progressed. The business performed in line with expectations and we're pleased with how we're starting fiscal 2027. Net sales increased 1.3% compared to the prior year period to $710.2 million. These results were slightly ahead of expectations, reflecting stronger anticipated overall demand throughout the quarter. In the United States, homes sold increased 1.8% to 7,089 units for Q1. Average selling price increased 0.6% to approximately $95,600, primarily driven by pricing on homes sold through our company-owned retail locations. In Canada, Homes sold declined to 185 from 250 in the prior year quarter. The volume decline, which was impacted by weather-related disruptions, was partially offset by higher average selling prices. Adjusted gross profit was $179 million, representing an adjusted gross margin of 25.2%. This was in line with our expectations and reflected disciplined pricing actions Operational Execution, and ongoing efforts to offset higher material costs in a volatile macro environment. As we discussed last quarter, these pricing actions typically lag cost increases. We expect the benefits to gain momentum in the second quarter. Adjusted SG&A expenses represent 16.4% of net sales for the quarter within our expected range. Adjusted net income attributable to Champion Homes was $48.3 million, or $0.88 per diluted share. Adjusted EBITDA was $73.6 million, representing an adjusted EBITDA margin of 10.4%. Our effective tax rate was approximately 25%, compared with 21% in the prior year quarter, reflecting the expiration of Energy Star-related tax incentives which we spoke about on our Q4 call. We ended the quarter with cash and cash equivalents of $784.7 million compared to $638.3 million at fiscal year end. The increase was primarily due to the proceeds received from the ECN transaction. Operating cash flow totaled $72.5 million during the quarter, demonstrating the strong cash generation characteristics of the business. We also continue to return capital to shareholders, repurchasing and retiring $50 million of common stock during the quarter. In July, the Board refreshed the share repurchase authorization back to the $150 million level. Since the inception of our share buyback program in fiscal 2025, we have repurchased $330 million, or 8% of our total outstanding shares. Overall, we continue to maintain a highly flexible balance sheet that supports organic growth investments, strategic acquisition, and shareowner returns. Looking ahead, our outlook reflects both the current operating environment and our confidence in our ability to execute. Our second quarter guidance excludes Homes Direct, given the timing of the transaction close. Consumer purchasing power remains under pressure. and interest rates remained elevated relative to historical levels. Despite these headwinds, we believe Champion is well positioned given the value and breadth of our product portfolio and the broad reach of our channel network. Material costs remain elevated across the industry, though the rate of inflation has slowed from what we saw earlier in the fiscal year, and we continue to execute strategies to mitigate the impact. Looking toward the second quarter of fiscal 2027, We expect revenue to grow mid-single digits compared to the prior year. This reflects the demand increases we saw in Q1 and resulting increases to backlog across our channels. We expect near-term adjusted gross margin in the 25% to 26% range as the actions we have taken to mitigate material cost pressures are beginning to take hold and we expect those benefits to build as we move through the second quarter. We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution. In Q2, we expect adjusted SG&A as a percent of sales to be 16% to 17% consistent with Q1 and our run rates following the Eisman acquisition. As a reminder, Energy Star Tax Credits expired on July 1st. Thank you, Dave.

Our first quarter results demonstrate that despite a dynamic operating environment, Champion continues to execute its strategy with excellence. The progress we've made over the last several years starts with our people, who we believe are the best in the industry. It is also reflected in our channel diversification, retail expansion, product innovation, and our direct-to-consumer platform. Each of these position us favorably relative to the broader market, as demonstrated by our performance in Q1. With that, operator, let's open the line and proceed with questions.

Thank you. As a reminder, at this time, if you would like to ask a question, it is the star and 1 on your touchtone telephone. If at any point you find your question has been answered, you may remove yourself from the queue by pressing star 2. Again, that is star 1 to ask a question. And we'll take our first question from Dan Moore with CJS Securities. Please go ahead.

Hi, this is Willem for Dan. Thanks for taking our questions. Can you update us on the cadence of retail traffic and orders through May and June as well as early Q2 in July?

Good morning. Yeah, we saw a good momentum through the quarter and that's reflected in our backlog growth and certainly our outlook for Q2. And that traffic was both digitally as well as through the stores. and I would say the traffic at retail also indicates broader traffic that we're seeing with our independent dealers and you saw the strength of that in our quarter as well as in our guide. So we've been pleased with the traffic and we're looking forward to seeing that go throughout the summer months here into the rest of the year.

Thank you. It's very helpful. Inside the plants, where are you increasing production given the uptick in backlog? Where are you holding steady and how should we think about production in Q2 relative to the quarter you just reported?

Yeah, we began ramping production in the key markets where we saw the growth in Q1, and we'll continue to do that through Q2. We do that very thoughtfully by plant location, looking at what their backlog is, what market conditions they're operating in. But we have been increasing production. You saw that through our utilization. We'll continue to do so where it makes sense by each region.

Thank you. And then just one more. ASPs... Tickler sequentially was at a function of mix. Fewer homes sold through captive retail both. And what are your expectations for the next few quarters relative to the ASP you reported in Q1?

Yeah, morning, Dan. So a couple things going on within the ASP. So we talked about some pricing actions we've been able to take in Q1 to mitigate some of the inflation. So that's definitely a positive as we think about ASP. A couple just headwinds that we have is First one primarily on the channel mix side of things, so we're seeing good strength. out of the community and independent channels. So that, while good in overall volume in net sales, is a little bit of an ASP headwind for us. So that's the first one I'd point to. The second one, and smaller in impact for us but still notable, would just be on the product mix. What we're seeing is we've talked about the consumer environment. As they make their choices, they are going to more base-level models, especially as we see them move into the multi-sections. They're electing for a more base-level model in the multi-section. So those are a couple dynamics that we're seeing play out on the mixed side of things and impacting ASP. As we think about it going forward, obviously this will vary quarter to quarter as we think about what's going to be sold through our captive retail channel as that has a big impact on ASPs versus independents and communities. But generally, next quarter, you know, I'd expect it to be sequentially higher than this quarter. And as we think about it year on year, you know, roughly flat, maybe some slight headwinds just given that mixed play out. But again, this will vary as we move forward quarter to quarter.

That is great, Collar. Thank you so much.

Thank you. And we'll take our next question from Phil Ng with Jefferies. Please go ahead.

Hey guys, really impressive quarter. I guess first off, the guidance you guys provide for fiscal 2Q, the mid-single digit growth, which is great. Any way to unpack the organic piece, you know, price, I guess Dave really gave price, but any way to unpack the homes direct piece in the quarter versus the organic side of things?

Yeah, Phil, so the guide is all organic. We did not include Homes Direct in that guide, just given the timing of the close here late last week. So as we think about Homes Direct, it will be relatively immaterial to the total, but it will be additive to that guide that I provided.

Okay. Is there going to be a ramp-up period in terms of how that kind of builds and how you integrate in terms of the drop-through contribution as we think about how the year progresses?

Yeah, Phil, as far as Homes Direct, we've mentioned they did about $70 million in sales. They have 11 locations. One of those locations was next to our Chandler facility, and we were the primary provider of products, obviously, there. The other 10 operate like our traditional dealers, so you're going to see that ramp over time as we migrate other manufacturers' products to ours. and so as you think about the business, those are some of the indicators and we'll update as we go along. But just to reiterate, there's none of that in our guide in Q2. Super.

That's helpful. And then certainly exciting news on the legislation front on the Road to Housing Act. Tim, perhaps, you know, how quickly you think, you know, HUD's going to be able to give you some color in terms of how this ramps up and then you certainly have to retool your specs, your product offering inventory. So just kind of help us think through One we could potentially see an uplift in demand and some of the steel chassis dynamic. Should we think of that as a cost good guy or perhaps it makes your product even more of a value prop for some of the consumers?

Yeah, I appreciate the question, Phil. I mean, we're very pleased legislation passed and the support that came from the leadership of HUD, Secretary Turner, was just tremendous. As we mentioned in the prepared remarks, the industry is now working with HUD on the detailed rulemaking that we will adopt to our code for the HUD code, and that allows us to permit homes without a chassis. That process, as you can imagine, takes time, and there's engineering involved in really defining the product specs, and also how does that affect transport and set and finish, things that we need to make sure that are ready, be able to comply with the code and the execution. So that process is ongoing. From there, there's obviously input that happens with a lot of different comment periods. So we're not anticipating an impact in F27 because those things take time. In past HUD, if you will, impact has been a year plus. This may happen faster just given the focus on affordable housing, but we don't anticipate an immediate impact. It's going to be gradual over time, and what we're pleased by is the team is working well with HUD, and we're going to continue to focus on the opportunities as they make sense. And then you've got the local piece, which is how long does the local adoption happen around zoning in each of those municipalities. That's in terms of the timing. In terms of your question on how we think about the chassis removal, yeah, we don't really see it as much as a cost play being the primary driver. It's really more about how this changes the aesthetic of our homes to be at priority with site build at the local level. It also allows us to do other types of products. It gives us the ability on the zoning side, as I mentioned, for municipalities that historically maybe weren't as supportive of a home as the chassis. It gives us that opportunity. We really see it as about expanding the addressable market, that product aesthetics, and also ultimately being able to engage a broader set of buyers through all of our channels, but certainly our Build-A-Developer channel in particular. It's encouraging, but it's going to take time, and we're engaging that process right now.

Tim, could you see an uplift as early as spring selling season 2027?

Yeah, we'll update you as we go along. It really depends on how long this process takes that I'm going to walk through. So we'll keep you posted as we go along, and the teams are engaged, and we'll keep you updated as we go along that process. Okay. Really appreciate the color, guys. Thank you.

Thank you. And our next question goes to John Lovallo with UBS. Please go ahead.

Good morning, guys. Thanks for taking my questions as well. You know, it seems like you're targeting a four to 12-week backlog range. You're currently around the midpoint there. I mean, what is sort of the optimal backlog level for balancing revenue visibility, customer service, and operational efficiency?

Yeah, it's a great question. That is our range, and we talk about it in that range. It really is plant by plant that we work on that because we're working with the customers. When do they need the homes? How does that tie to their projects? including set and finish timing. So we like that four to 12 weeks and we do that customer by customer. So for example, there are times customers will say, look, the orders I gave you, it's taking a little longer on set and finish so you can pace those out. We'll move other customers up. So that's where that range really comes into play. And from a plant perspective, it allows obviously planfulness on labor. And so we make a decision plant by plant how we ramp based on that. And we also want to do it thoughtfully on the margin side because you don't want to drive Over time or extra costs at a level that's unnecessary. So there's a good balance there. And that's why that range of backlog is what we speak to. Understood.

And then the 2Q guide implies about 200 basis points of gross margin headwind, despite homes, the units increasing year over year and backlog being up about 34% sequentially. I mean, is the bulk of this the elevated input cost inflation or is there just other factors that we should be considering?

Yeah, thanks. I think it's all on the elevated input costs as we think about it. So just a couple things I'd note there, and we made the comment to it in the prepared remarks, but we've seen those start to level off now, albeit at this higher rate. So as we look forward, what we're assuming is kind of the environment that we're in now tacking forward. Obviously, it's a pretty volatile environment, so we'll have to see how that unfolds. But it's those same cost pressures that we talked about into Q1 or back in Q1 is we think about the offsetting mitigation actions, and we've spoken about this. We've spoken about pricing. We've spoken about driving efficiency within the manufacturing. So we'll continue to execute against those things, and we should see those accelerate as we move through Q2 as well.

Great. Appreciate it, guys. Thank you.

Thank you. And we'll go next to Matthew Booley with Barclays. Please go ahead.

Morning, everyone. Thanks for taking the questions. I wanted to ask about in terms of the rulemaking process now that the legislation has been passed. I guess it's kind of an open-ended question here. But kind of how do you think about the sort of benefits of standardization in manufacturing? Obviously, you know, when you had a fairly specific HUD code, That ability to create a lot of the same unit with various changes would have benefits to your manufacturing. On the other hand, now with the removal potentially of the chassis, you can have more flexible design methods. Again, an open-ended question, but maybe in terms of how you're putting forth your own inputs into that rulemaking process, and then when it does eventually get into place, How do you think about that balance between, again, standardization versus, you know, more of that flexible design? Thank you.

Yeah, I appreciate that, Matt. Great question. Part of the approach is by having a national HUD code that allows for broader utilization of our offsite built homes versus, say, traditional modular, there is a benefit that you can have national product, national specs that you can leverage across your platform. albeit with some local variation where it makes sense. So that's compared to previously modular-built homes that took on the local building specs, which is why modular typically has not as great of adoption as HUD. So we now get the benefit of that national but through the chassis removal approach. In terms of plant-by-plant, one of the things that our teams always work on is how effective can they be at having enough changeover between types of products. As you've seen in obviously our product portfolio, we can make a very entry-level home, multi-section. We can make park models, cabins, various variants of those homes. And the agility of the team is a key part of that. Part of what we do during the rulemaking is to help make sure that there are as much standardization as possible while still delivering on what the customer is going to expect. And that standardization does help the execution that you mentioned. So that's literally the process that the teams are going through. and the preparation that we'll do as we go forward in leveraging the benefits of our experience on various products that we've done in our facilities.

Got it. Okay, yeah, now that's really helpful, especially discussing the sort of, you know, the local versus national code versus what you already do with modular. So it's really helpful there. And then I guess secondly, maybe just sticking on the same topic because, you know, it's such a big topic here going forward. Since the legislation has been passed, how are your conversations going with your institutional customers, with REITs, with builder developers? What do you think they're going to be looking for from you with this new kind of design flexibility going forward? Thank you.

Yeah, clearly our builder-developer business is where you have most of that occurring given that they're in development projects. They're thinking about their future land use. And so we're in more of the strategic discussions there because they too are waiting to see how long is it going to take to get down to this actual product in the market. And that's going to take some time. As I mentioned in my prepared remarks, we're hearing from our key customers that many of them are going to continue with the chassis. Communities obviously make some independence that serve more of the traditional HUD buyer. So we're prepared to have our portfolio support both chassis and off chassis. And we think that balance is really important given the type of industry we serve and our range of channels. But the conversations with those builders, it's encouraging because they remember when they went to zoning and said, well, we want this project. And they said, well, we want you to do it mod, not HUD. Well, now we can come back to those in the future and say, well, we can do a home that looks like it's on a foundation because it won't be on a chassis, and those are the type of opportunities that we see. So it's a balanced approach across our channels that we see as we go forward. Well, got it. Well, thank you, Tim. Good luck, guys.

Thank you. And we'll take our next question from Greg Palm with Craig Hallam. Please go ahead.

Good morning, this is Jackson Schroeder on for Greg Palm. I appreciate you taking the question. I kind of wanted to just start out on getting some color on some of the key markets that you had talked about that saw growth and what kind of drivers to your outperformance, as well as if you could touch on any competitive dynamics that might be happening across geographies that impacted the quarter and if that might have been a part of the ASPs.

Yeah, in terms of geographies, we saw obviously some increased shipments in Texas, Florida, Mississippi, Alabama, those states a little weaker in the west and parts of the Midwest during the first quarter. With respect to orders and our backlog, we did see broad strength around geographies, maybe a little bit of weakness there in the west relative to the rest of the growth. So that's from a geography perspective. For your question on the competitive element, You know, you can imagine that every day our teams are all competing to earn that customer. And various markets have certain amounts of retailers and retail presence. And our team does a really good job of helping that customer get to the right home, the right price point every month that they're looking to pay. And that's what the battleground is in terms of that approach. And I've been pleased with how that's happening. To your question on ASP, no, that was more of a function of having more community orders, more retail orders, independent retailers. versus Captive Retail. As Dave mentioned, we have the wholesale price there versus when we have the retail being the main driver, you get the retail and the wholesale. So pricing was really a function of the channel mix that we had versus something more direct in terms of your question. We did see from a consumer perspective, as Dave mentioned, the entry-level piece, which is obviously going to be driven by the consumer. But we think it's all healthy things relative to the market and our ability to grow share with the right balance in the marketplace.

Perfect. And do you see that kind of shift towards a base model? Is that kind of possibly a longer-term thing, or is that kind of just something that hit McCord and is kind of such a normalized going forward?

You know, it certainly reflects the consumer, and so as the consumer health and strengthens, you'll see some opportunities there. It also, again, is by channel, and as community strengthens in their need, they tend to be in those single sections. It's really going to be more based on those market factors. But we're positioned well across our portfolio in a range of options. We have our good, better, best approach, which allows us to ladder up where there's opportunities with consumers.

Perfect. I'll leave it there. Thank you. Thank you.

Thank you. And as a reminder, it is star and one to ask a question. We'll take our next question from Jesse Letterman with Zillman. Please go ahead.

Hey, thanks for taking the questions and nice job during the quarter. And I've got another question on price, not to kind of harp on it, but it sounded like last quarter you were anticipating some of these channel and price point mixed headwinds. And if I remember correctly, you suggested that you thought pricing would be relatively steady sequentially. And of course, with the decline, kind of still wondering, like, were the mixed headwinds more than you were expecting? What were some of the other dynamics that may have deviated from your expectations entering the quarter?

Yeah, thanks, Jesse. Exactly as you said it, just a little bit more of a headwind than we had initially anticipated. So really nothing more to it than that. We did anticipate as we went through, but it was a little bit more. We saw more strength in independents and communities than we had anticipated.

Got it. I guess it's a good problem to have. So I guess on a like-for-like pricing basis, how would you describe your pricing power and pricing on the market?

Yeah, I mean, we talked about we've taken pricing actions in Q1. And with our product, we feel like we can get the value for our product. And we've done that very strategically to maintain competitiveness in each of our markets. So we feel good about that. Thank you very much. If you think about the strength, when I talk about the relative strength in community and wholesale, or independent, excuse me, you're really talking about that $85,000 price point versus $140 price point. So a small move in that can actually have a pretty big impact to ASPs. So when I talk about versus expectations, we're not talking about a huge move. It's really just that difference between wholesale and retail pricing. and the impact that can have. That's why I made that comment towards how it will vary quarter to quarter as we go forward because these aren't huge moves, but they can have pretty, you know, what looked like percentage point changes on ASP.

All right, that's really helpful. Thank you. I guess me and perhaps others were underappreciating the magnitude that the mixed dynamics can have on the ASP, so that was really interesting and helpful, Caller. I'd love to talk a little bit more about SG&A. Seems to, you know, kind of continually crash higher. Quarter over quarter was up about $4 to $5 million on an adjusted basis, which, you know, the prior quarter should already include Eisman, and we're going to have the Homes Direct overhead presumably entering the fold coming up here the next quarter or two. So just curious if you could talk about kind of the pre-Homes Direct run rate of SG&A, what's in there, what's maybe – Transitory, what might come out and how we should expect SG&A to trend once kind of the homes direct overhead is more fully incorporated.

Yeah, so we've been pretty consistent in the 16% to 17% of sales. And as we think about our SG&A, you have to remember that a good portion of that is variable. It comes with as we sell homes. As we sell more homes, you're going to get higher SG&A costs. So there is a big relationship there. Now, Homes Direct will add to it as we go forward. It's a little bit larger than Eisman from a sales perspective, so if I were to point you to what to look at, think about the relative size of Eisman to Homes Direct, and then you can kind of adjust your model proportionately for SG&A. You can think about it that way, what Homes Direct would add. Now, as we think about steady-state going forward, Ultimately, we'll start to pick up some leverage on the fixed portion of the SG&A, and we'll continue to do that. It's that variable portion that will pick the absolute dollar higher. So as you think it is a percent of sales, we'll see it gradually over time as we continue to expand the top line and we get that leverage on the fixed portion of it, we'll see the percent of sales work lower. But the absolute dollar will work higher, right? So that's kind of how to think about it, Jesse.

Yeah, makes sense. Appreciate that. Just kind of looks like even if I assume some run rate for variable versus fixed, the fixed component did tick higher quarter over quarter as well. Can you just give us maybe an update on maybe relative to like a year ago outside of Eisman, what some of the SG&A, I know you've talked about in the past, some of the technology initiatives, if You can give us an update on how that's trending.

Yeah, so just a couple things. One, if you look at the prior year in Q1, we did have some discrete things that impacted it. So that's why I say more broadly if you step back and look at a broader set of quarters, that's one thing to look at. The other thing to think about is as retail grows, So will SG&A. Retail runs heavier as a percent of sales to SG&A. So there's a mix in retail. Tim spoke about retail ticking up slightly as a total of our business in that sales. So there's that impact as well. We are making investments for the long term. Now, as we think about that, we're making choices on how we fund it to drive SG&A prudently. You know, where can we shift dollars of investment, but we are making investments in infrastructure, things like IT, people, our team members, things like that, to make sure that we can drive the business over the long term.

Really helpful. Thanks for all the color.

Great. Well, we appreciate everybody joining us today. We look forward to updating you in our second quarter and all the progress in the market. Thanks, everybody. Have a great day.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.