Good morning, and welcome to Skyline Champion Corporation's First Quarter Fiscal 2024 Earnings Call. The company issued an earnings press release this morning. I would like to remind everyone that today's press release and statements made during this 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 and projections. 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. Additionally, during today's call, the company will discuss non-GAAP measures, which it believes can be useful in evaluating its performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Mark Yost, Skyline Champion's President and Chief Executive Officer. Please go ahead.

Thank you for joining our earnings call, and good morning everyone. I'm pleased to be joined on this call by Laurie Hough, EVP and CFO. Today, I will briefly talk about our first quarter highlights, and then provide an update on activities so far in our second quarter, and conclude with our thoughts on the balance of the year. For the quarter, we delivered more than 5,000 homes, as we saw healthy demand from end consumers, and a return to growth in our retail sales channel. Despite good retail order intake, we are still seeing a pause in the community REIT channel, as they continue to set and finish their backlog of existing new home inventory. We expect this to continue through the end of our fiscal second quarter. The short-term pause in community ordering, combined with the absence of FEMA-related sales that were in our first quarter of last year, drove year-over-year declines in both production and revenue. In the current environment, we are aligning our plant production with order rates by channel. As a result of reduced volume leverage, margins continued to normalize to fiscal 2022 levels. I'm encouraged that our focus and our investment in enhancing the customer experience, streamlining our product offerings, and transforming the way homes are built and bought has led to a healthy margin profile, even at lower production levels. Additionally, the current demand environment has driven average lead times within the historically normal range of four to 12 weeks. Normal backlog levels help homebuyers lock in both pricing and financing, which benefits our direct sales channels to better meet the needs of their customers. Backlog as of July 1 was $260 million, compared to $308 million at the end of March. The sequential decrease in backlog was primarily driven by the continued pause in community orders and order cancellations in California. Sales orders in our first fiscal quarter were up 28% year-over-year and quotes, which are our leading indicator of future orders, were up 44%. We also saw growth in deposits at our captive retail locations, driven by a 22% year-over-year increase in e-leads. Sequentially, manufacturing quotes were up 17%, and orders were up 50% from fourth quarter levels, which are good trends given the pause in the community channel. During the quarter, we began production at our new manufacturing facility in Decatur, Indiana. This facility is a key investment in our broader efforts to innovate and streamline the production of our homes. In addition to traditional production at this location, we are ramping our R&D efforts in automating key production processes, and we believe this positions us to demonstrate the full benefits of modular construction, specifically providing developers with a turnkey solution at a price point, quality, and speed for today's market. Also, in an effort to support our channel partners, we began offering floor plan financing to select channel partners with the intent of growing this portfolio throughout the remainder of fiscal 2024. This investment will ensure ample credit to those retailers and timely delivery of orders to the end consumer. Moving to the second quarter outlook, we expect the community REIT pause in ordering to continue through September as they catch up on selling existing inventory. Accordingly, we are going to pull back production at our community-focused plants to better align the timing of the community channel needs. As a result, we anticipate second quarter revenue to be relatively flat to slightly down sequentially versus our first quarter. Mid-term strong end consumer demand for affordable housing, positive REIT channel outlook, and stable retail placements support our confidence in continuing to invest in the ramping of new capacity in Bartow, Florida, Decatur, Indiana, and Pembroke, North Carolina. This additional capacity will help us serve the upcoming needs from the impacts of Hurricane Ian and the growing builder-developer pipeline. We are continuing to focus on our strategic initiatives by enhancing our digital tools, including our online customer experience and production automation investments. These long-term investments will not only improve the experience for the end consumer but will drive greater efficiency in our operations and make us the preferred channel partner as we drive more engaged homebuyers to our customers. I will now turn the call over to Laurie to discuss our quarterly financials in more detail.

Thanks, Mark, and good morning everyone. I'll begin by reviewing our financial results for the first quarter followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our near-term expectations. During the first quarter, net sales decreased 36% to $465 million compared to the same quarter last year, in which we recognized $63 million in FEMA unit sales. The decrease in net sales reflects a lower number of units sold and a lower average selling price per home. We sold 4,817 homes in the US during the quarter, compared to 6,813 homes in the prior year period. US home volume was down year-over-year due to the absence of FEMA-related sales and reduced production schedules to align with order rates. The average selling price per US home sold decreased 8% to $89,000 due to product mix and the decrease in material surcharges. FEMA disaster relief units sold last year carry a higher ASP than our core product due to the complexity of build. On a sequential basis, US factory-built housing revenue decreased 6% quarter-over-quarter, consistent with expectations that production rates would moderate to align with shifts in order activity from our community REIT customers. The number of homes sold declined by 2%, and the average selling price per home decreased by 4% as core customers looked to maintain affordable monthly payments in the current interest rate environment, opting for smaller and less optioned homes. Capacity utilization decreased to 56% compared to 59% in the sequential fourth quarter of fiscal 2023. Capacity utilization is being adversely impacted by newly opened plants, notably our Pembroke, North Carolina facility which opened in January and our facility in Decatur, Indiana which started production this quarter. Our teams at these plants are prioritizing training employees while tailoring production to current demand levels. This additional capacity will enhance our ability to service key channels such as our builder-developer channel. We also look forward to ramping up production in our Bartow, Florida facility later this year. Canadian revenue decreased 42% to $26 million compared to the first quarter last year, driven by a 37% decline in the number of homes sold. The average home selling price in Canada decreased to $118,200 compared to $128,000 in the prior year, primarily due to price reductions in response to changes in demand. Consolidated gross profit decreased 44% to $130 million in the first quarter, and gross margins contracted by 370 basis points versus the prior-year quarter. On a sequential basis, we saw gross margin decline 80 basis points. Our US housing segment gross margins were 27.6% of segment net sales, down 410 basis points from the first quarter last year, primarily due to higher margined FEMA unit sales in the prior year quarter, as well as lower core product sales volume, and a mix shift to homes with fewer features and options allowing the homeowner to hit their monthly payment price point given higher interest rates. SG&A in the first quarter decreased to $70 million from $72 million in the same period last year due to lower incentive compensation expense and reduced sales activity, partially offset by additional SG&A costs from plant start-ups and acquisitions closed in fiscal 2023. Net income for the first quarter decreased 56% to $51 million or $0.89 per diluted share, compared to net income of $117 million or earnings of $2.04 per diluted share during the same period last year. The decrease in EPS was driven by the decline in sales and reduced operating leverage on lower volume. The company's effective tax rate for the quarter was 25.2% versus an effective tax rate of 25.7% for the year-ago period. Adjusted EBITDA for the quarter was $67 million compared to $163 million in the prior year period. Adjusted EBITDA margin of 14.4% compared to 22.4% in the prior year period reflects a return to more normal profitability levels. In the near-term, we remain focused on maintaining efficient production lines as channel conditions improve and order activity returns to a more regular cadence. The structural improvements and investments made in our business have strengthened our operational capabilities, protecting profitability in periods of lower output. That said, we reiterate our expectation that the mix shift by customers, looking to maintain affordable monthly payments in the current interest rate environment will continue for the remainder of fiscal 2024. Our expectations for margins landing near fiscal 2022 levels are driven by additional margin compression from the ramp of our three manufacturing facilities in North Carolina, Indiana, and Florida. As of July 1, 2023, we had $798 million of cash and cash equivalents in long-term borrowings of $12 million, with no maturities until 2029. We generated $75 million of operating cash flows for the quarter compared to $47 million for the prior year period. The increase in operating cash flows is primarily due to the working capital impact of producing FEMA units in the prior year. We remain focused on executing our operational initiatives, and given our favorable liquidity position, we plan to utilize our cash to reinvest in the business and for opportunities that support strategic long-term growth. I'll now turn the call back to Mark for some closing remarks.

Thanks, Laurie. As we manage through the rebalancing of our channels, we believe Skyline Champion is well positioned due to our affordable price points, strategic positioning and our core initiatives. The long-term outlook for demand is supported by the channel opportunities, with community REIT, manufactured-to-rent, and builder/developer growth as well as helping our retail partners adapt to the changing consumer demographics. In addition, the need for affordable housing continues to grow, and we believe that the elevated cost of housing will drive more traditional site-built buyers to our homes. Before we open the lines for Q&A, I want to take a moment to thank our people. The entire Skyline Champion team, as our consistently strong performance is a result of the amazing things they make happen each and every day. And with that operator, you may now open the lines for Q&A.

Thank you. We will now conduct a question-and-answer session. Our first question comes from Dan Moore with CJS Securities. Please go ahead.

Hey. Good morning. It's actually Chris for Dan. Thanks for taking a couple of questions. So maybe we just get a little more specific. So in terms of expectations for unit shipments as well as ASPs for Q2 versus Q1, could you help us out a little bit more directionally?

Sure Chris and good morning. I think directionally we see Q2 relatively flat to slightly down in terms of unit shipments, and I think ASPs will be slightly down as Laurie's been mentioning, just really due to changing mix to hit an affordable price point. So I think flattish to slightly down is where we're thinking, primarily due to the community REITs and pullback in production at those plants specifically until they return to ordering in the September timeframe.

Got it. Very helpful. From a gross margin perspective, you mentioned that Q1 would be down. Looking ahead for the next few quarters, does that same guidance still apply, or could you elaborate a bit more on margins?

Hi Chris. I expect gross margins to decrease sequentially in the second quarter and likely settle in the 26% to 27% range, probably closer to the lower end as we bring on the new plants.

Got it. Very helpful. I’ll leave it there. And appreciate it.

Thank you, Chris.

Our next question comes from Matthew Bouley with Barclays. Please go ahead.

Good morning. This is Elizabeth Langan standing in for Matt today. To start, could you share more about what you are observing at the community order level? You mentioned that things would slow down through September, but do you have any insights or metrics that indicate when REITs and communities might start to reengage, or is this primarily related to a supply chain issue?

Yeah. Good morning, Elizabeth. And thank you. The community REITs are still setting and finishing the current inventory that they've got. So it's a little bit of a supply chain issue. In terms of being able to get those units set finished and trimmed out at the community level, obviously we're having conversations with many of the community REITs who are talking about timing. But if you look at the earnings releases of some of the public REITs, they mention where their inventory levels are and how quickly they're going through those inventory levels. Their timing anticipation is generally targeting that September timeframe, which is when they're going to start to return to order. So I think their sales pace is phenomenal. The end-consumer demand is excellent at many of the REITs, so it's not an end-consumer demand issue because the traffic is strong, and their end demand for affordable housing is very strong. It really is just that they don't want to take on more inventory until they can get the units they already have set finished and populated. Otherwise, they're just doubling down on finished goods inventory and tying up cash.

Thank you. That makes a lot of sense. At the dealer level, could you discuss what you're observing regarding their inventories and whether there is any destocking or the potential for restocking?

Yes, the dealer channel is through their destocking. I think we've seen our order pace pick up 28% year-over-year, really driven by the retail channel, because that 28% includes a decline in community orders. The retail traffic is actually quite strong. They're not building up inventory; they're keeping things lean because of the higher carrying cost of inventory right now. But the end consumer demand at the retail level is quite good. We've seen our own captive retail deposit activity increase year-over-year, so deposits are up. So, I'd say it's very encouraging in terms of what the retail channel is seeing today.

Okay. Thank you very much. I appreciate that.

Thank you.

Our next question comes from Phil Ng with Jefferies. Please go ahead.

Hey, guys. Mark, I appreciate some color on the timing of orders coming back from your REIT customers, call it September. But help us think through what that actually means for your volumes, right? And give us a little more color on how to think about the shape of the year, particularly in the back half as it relates to revenue and potentially margins as you ramp up some of that capacity?

Yes. Thanks, Phil, and good morning. I think the REIT channel will start to come back as I mentioned in September with orders. After that, REITs really won't turn into production until, let's say, October, November. So I think you'll see relatively flattish revenue levels into the third quarter because you get into the holiday season in December. I don't think we'll be able to fully ramp into that. And then revenues and volumes will strengthen as we go into the first calendar quarter of next year, our fourth fiscal quarter. So I think it'll be relatively flat in the second and third, and then kind of picking up in our fourth fiscal quarter of this year as those community orders really start to pick up and fill the backlogs and allow us to produce for those orders.

And then on the margin side of things, how should we think about how that kind of moves through the back half of the year?

Yes, Phil. I think you know margins are going to come down sequentially, and then remain at that level through the end of the year.

Okay. And you said, Laurie, Q2 gross margins are going to be closer potentially to that 26% level, the lower end of that 26% to 27% range. So, in the back half, it could kind of breach through that 26% level. Is there a good way to think about a floor for you guys?

You know, I think that's probably the floor, at the bottom of that range. It might fluctuate a few basis points, not substantially.

Okay. That's impressive of you. You're managing through that pretty well. And then Mark, I was intrigued by your comment earlier about how you're offering some floor plan lending and which lines up with a question I actually had. I believe a pretty large manufacturer home lender is being put on strategic review. Is that something that you would consider taking a look at? Two of your larger competitors do have a lending arm. Is that a void in your business? Does that put you at any disadvantage from how you compete and go to the market?

You know, Phil, I think obviously we look at many things strategically. Really it comes down to the customer and the consumer and their experience. Many of our customers, for instance said they wanted a deeper relationship with us and a closer tie in terms of if we are a preferred manufacturer for them. They want that full suite of services, whether it's our set and finishing services or our floor plan tie-in. I think the more turnkey you can make the relationship with the dealers in some of our community and frankly the growing builder-developer channel. What we're hearing from many of them is what can you do to be a full turnkey provider to us because the experience is easier to do business with. We make one phone call. So I think those alternatives are always on the table. But I think it really comes down to our dedicated focus on the consumer and what they need. If providing those financial services to them adds benefit and creates a better experience, I think then we'll definitely focus on that.

Okay. That’s helpful color. Appreciate it, Mark.

Thank you, Phil.

Our next question comes from Mike Dahl with RBC Capital Markets. Please go ahead.

Hi, this is Chris Kalata filling in for Mike. Thank you for taking my questions. I wanted to focus on the SG&A outlook for this year. Laurie, last quarter, you mentioned that you expected the fixed portion of SG&A to remain relatively flat. However, the Q1 numbers seem to indicate some year-over-year increases in the fixed portion. Could you clarify what the expectation is for SG&A dollars this year?

Yes, this quarter was primarily influenced by the ramp-up of the new plants in relation to sales. Additionally, we are making investments in customer experience and back-end systems to support that. A significant portion of these long-term investments is reflected in SG&A. I expect SG&A to remain at the levels we observed in the second quarter, with fluctuations as revenue increases in the March quarter, possibly in dollar terms. For the second and third quarters, I anticipate it will stay relatively consistent with what we saw in the first quarter.

Got it. That's helpful. And then I just wanted to follow up on the large builder customer orders that were supposed to be delayed last quarter. Any update there? Is it still a supply chain delay that you're seeing or have you started placing orders through there?

No, actually Chris, I think we mentioned on the last call that we expected those orders in August and September, and we still anticipate those orders coming in August or maybe early September. By Labor Day, we expect those orders to arrive. So everything is on track and on pace. We expect those orders any time now.

Awesome. Great to hear. Thanks for taking my question, guys.

Our next question comes from Greg Palm with Craig-Hallum Capital Group. Please go ahead.

Yes. Good morning. Thanks for taking the questions. I want to maybe dig into various channels a little bit more. So maybe we can just start with what you're seeing at the retailer or dealer in terms of maybe go on a little bit more about traffic and order rates. But more importantly, are we completely through the inventory destocking or are there still regions where there are certain issues? Maybe you can give us a little bit of a sense on what's going on geographically?

Yes, good morning, Greg, and thank you. In the retail channel, there are some areas experiencing destocking, but it is not affecting us on a global scale. We've already gone through any destocking phases in the retail channel. Retail orders are increasing, and we have seen a 50% increase in orders quarter-over-quarter, driven mainly by the retail sector. The community channel, which accounts for 35%-40% of our business, has remained flat. Retailers are showing strong performance overall, with some variations in strength across different regions. While retail traffic in the US and Canada is slightly slower, primarily due to economic factors, this slowdown is fairly widespread. The communities are where we have noticed a hold in activity.

Yes, and maybe that segues into my question on the REITs. I mean, as you sort of look around, do you get the sense that the pause, if you want to call it that, is driven by more supply chain setting crews? I mean, how does the cost of capital sort of contribute to all of this? I mean, I guess I'll leave it there, and I'll ask a follow-up.

I don't believe the cost of capital significantly impacts this, Greg, because many of the REITs are adjusting their targeted price points for consumers. They are still achieving strong returns, particularly the established REITs with a long history in the industry. They have effectively managed their capital structures to maintain this. Demand in the communities is strong; if you look at some of the public communities or speak with others in the field, they are experiencing record sales. Consumer demand is robust at the moment. They are currently focused on overcoming supply chain issues, particularly related to electrical transformers in new projects. However, we are beginning to see new projects coming online, indicating positive developments in the community sector. They just need to manage their existing inventory.

And just lastly, in terms of visibility, anything that makes you believe that it is September and not October or November? I mean, is that what they're telling you directly or is that just your best sense given what you know today in terms of order resumption?

It's a combination, Greg. So we're seeing the pace at which they're moving through their inventories in many situations. We have our business development team in weekly communication with them. It's been fairly consistent in terms of the messaging. Many of the REITs, separate and distinct from one another, are all targeting that time period. It sounds like it's consistent throughout the industry when talking to and working with the different partners that we work with.

Understood. Okay. I’ll leave it there. Thanks.

Thanks, Greg.

There are no further questions at this time. I would like to turn the floor back over to Mark Yost for closing comments. Please go ahead.

Thank you for participating in today's call. We appreciate the time and your continued interest. We look forward to updating you on our progress on our second quarter call. Take care.

This concludes today's conference call. You may disconnect your line at this time. Thank you for participation and have a good day.