Cavco Industries Inc.

05/22/2026 | Press release | Distributed by Public on 05/22/2026 15:01

Annual Report for Fiscal Year Ending March 28, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Annual Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. In general, all statements included or incorporated in this Annual Report that are not historical in nature are forward-looking. These may include statements about the Company's plans, strategies and prospects under the headings "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," or "anticipates," or by discussions of strategy, plans or intentions. Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; our financial performance and operating results; our liquidity and financial resources; our outlook with respect to the Company and the manufactured housing business in general; the expected effect of certain risks and uncertainties on our business, financial condition and results of operations; economic conditions and consumer confidence; changes in interest rates; potential acquisitions, strategic investments and other expansions; operational and legal risks; how we may be affected by a pandemic or other infectious outbreak; labor shortages and the pricing and availability of raw materials; governmental regulations and legal proceedings; the availability of favorable consumer and wholesale manufactured home financing; and the ultimate outcome of our commitments and contingencies.
Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, many of which are beyond our control. To the extent that our assumptions and expectations differ from actual results, our ability to meet such forward-looking statements, including the ability to generate positive cash flow from operations, may be significantly hindered. Factors that could affect our results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed under Item 1A, "Risk Factors," and elsewhere in this Annual Report. We expressly disclaim any obligation to update any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise, except as required by law. For all of these reasons, you should not place undue reliance on any such forward-looking statements included in this Annual Report.
Introduction
The following should be read in conjunction with the Company's Consolidated Financial Statements and the related Notes that appear in Part IV of this Annual Report. References to "Note" or "Notes" pertain to the Notes to the Consolidated Financial Statements.
Company Outlook
It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations. Our home order backlog at March 28, 2026 was approximately $195 million in wholesale sales values, down $2 million from $197 million one year earlier. Distributors may cancel orders prior to production without penalty. After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders. We continue to focus on balancing the production levels and workforce size with the demand for our product offerings to maximize efficiencies.
We continue to make certain commercial loan programs available to members of our wholesale distribution chain. Under direct commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers (see Note 7 to the Consolidated Financial Statements). Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers. While these initiatives support our ongoing efforts to expand product distribution, they also expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.
In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner. For certain loans serviced for Ginnie Mae and Freddie Mac, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers.
The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans result in higher borrowing costs for home-only loans and continue to constrain industry growth. We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loans and non-conforming mortgage portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities. We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points. We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders.
We also work independently and with industry trade associations to encourage favorable legislative and GSE action to address the financing needs of buyers of affordable homes. Federal law requires GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008. In December 2025, FHFA published Fannie Mae and Freddie Mac's Underserved Markets Plans for 2025-2027 that describe, with specificity, the actions they would take over the three-year period to fulfill the "Duty to Serve" obligation. As with prior plans, the 2025-2027 plans offer enhanced mortgage loan products for manufactured homes titled as real property, including Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018. Although some progress has been made with these programs, meaningful positive impact in the form of increased home orders has yet to be realized. The plans do not include purchases of home-only loans during the three-year 2025-2027 timeframe. Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers.
Our insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten. Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of our loss mitigation structure. Purchasing reinsurance contracts mitigates the frequency and/or severity of losses incurred on insurance policies issued, such as in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time. Under these agreements, we may be required to repurchase and reestablish the reinsurance contracts for the remainder of the year to the extent that they have been utilized. See Note 15 to the Consolidated Financial Statements for additional information.
Results of Operations
Fiscal Year 2026 Compared to Fiscal Year 2025
Net Revenue.
Net revenue consisted of the following for fiscal years 2026 and 2025, respectively:
Year Ended
($ in thousands, except revenue per home sold) March 28,
2026 		March 29,
2025 		Change
Net revenue:
Factory-built housing $ 2,157,356 $ 1,933,111 $ 224,245 11.6 %
Financial services 87,149 82,347 4,802 5.8 %
$ 2,244,505 $ 2,015,458 $ 229,047 11.4 %
Total homes sold 20,842 19,753 1,089 5.5 %
Net factory-built housing revenue per home sold $ 103,510 $ 97,864 $ 5,646 5.8 %
In the factory-built housing segment, the increase in Net revenue was due partially to the acquisition of the American Homestar Corporation ("American Homestar"), which was completed in beginning of the third quarter of fiscal 2026 adding $90.5 million. Operations excluding American Homestar increased primarily due to higher average selling prices, which contributed $102.9 million and higher home sales volume, which contributed $30.8 million.
Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail"). Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, which include installation, utility connections, site improvements, landscaping and other additional services. Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold. For fiscal 2026, we sold 16,071 homes Wholesale and 4,771 Retail versus 15,621 homes Wholesale and 4,132 homes Retail in the prior year. Our homes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. Fluctuations in net factory-built housing revenue per home sold are also partially the result of changes in the number of modules per home, the selection of different home types/models and optional home upgrades, creating changes in product mix. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.
Financial services segment Net revenue increased 5.8% primarily due to higher insurance premiums in the current year and $0.8 million from acquired American Homestar operations, partially offset by fewer loans sold by the finance subsidiary.
Gross Profit.
Gross profit consisted of the following for fiscal years 2026 and 2025, respectively:
Year Ended
($ in thousands) March 28,
2026 		March 29,
2025 		Change
Gross profit:
Factory-built housing $ 476,330 $ 441,796 $ 34,534 7.8 %
Financial services 50,557 23,795 26,762 112.5 %
$ 526,887 $ 465,591 $ 61,296 13.2 %
Gross profit as % of Net revenue:
Consolidated 23.5 % 23.1 % N/A 0.4 %
Factory-built housing 22.1 % 22.9 % N/A (0.8) %
Financial services 58.0 % 28.9 % N/A 29.1 %
In the factory-built housing segment, Gross profit increased from higher average selling prices and higher home sales, partially offset by higher costs per unit. In the financial services segment, Gross profit increased primarily due to higher premiums and improved underwriting results as well as favorable weather in the year resulting in lower weather related insurance claims in the current year compared to the prior year.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses consisted of the following for fiscal years 2026 and 2025, respectively:
Year Ended
($ in thousands) March 28,
2026 		March 29,
2025 		Change
Selling, general and administrative expenses:
Factory-built housing $ 271,081 $ 253,027 $ 18,054 7.1 %
Financial services 27,237 22,288 4,949 22.2 %
$ 298,318 $ 275,315 $ 23,003 8.4 %
Selling, general and administrative expenses as % of Net revenue: 13.3 % 13.7 % N/A (0.4) %
Selling, general and administrative expenses related to factory-built housing increased in fiscal year 2026 due to the addition of American Homestar which added $12.5 million of incremental expense. Excluding the impact of American Homestar, compensation expense is up $11.0 million due to higher incentive compensation on better results as well as annual compensation increases, and deal costs are up $3.9 million due to the American Homestar acquisition. These increases are partially offset by a $10 million non-cash charge related to the adjustment of legacy indefinite lived trade names in the prior year.
In the financial services segment, Selling, general and administrative expenses increased in fiscal year 2026 primarily due to a $3.4 million increase in compensation and employee benefits compared to the prior year. The addition of American Homestar added $0.2 million of incremental expense.
Interest Income.
Interest income decreased to $16.3 million in fiscal year 2026 from $21.1 million in fiscal year 2025 due to reduced cash balances following the cash purchase of American Homestar on September 29, 2025 and lower interest rates.
Interest Expense.
Interest expense was flat at $0.5 million in fiscal year 2026 and 2025.
Other Income, net.
Other income, net primarily consists of realized and unrealized gains and losses on corporate investments, gains and losses from the sale of property, plant and equipment and partnership income from our unconsolidated joint ventures. For fiscal years 2026 and 2025, Other income, net was essentially flat at $0.3 million and $0.2 million, respectively.
Income Before Income Taxes.
Income before income taxes consisted of the following for fiscal years 2026 and 2025, respectively:
Year Ended
($ in thousands) March 28,
2026 		March 29,
2025 		Change
Income before income taxes:
Factory-built housing $ 221,380 $ 209,564 $ 11,816 5.6 %
Financial services 23,320 1,506 21,814 1,448.5 %
$ 244,700 $ 211,070 $ 33,630 15.9 %
Income Tax Expense.
Income tax expense was $54.1 million, resulting in an effective tax rate of 22.1% for the fiscal year ended March 28, 2026, compared to income tax expense of $40.0 million and an effective rate of 19.0% for the fiscal year ended March 29, 2025. The higher effective tax rate in fiscal year 2026 is primarily related to a decrease of $3.7 million in tax credits primarily due to changes in eligibility requirements related to the sale of energy efficient homes and Energy Star credits available under the Internal Revenue Code ยง45L compared to the prior year.
Fiscal Year 2025 Compared to Fiscal Year 2024
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" in the Company's 2025 Annual Report on Form 10-K.
Liquidity and Capital Resources
We believe that cash and cash equivalents at March 28, 2026, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits, but we have not experienced any losses with regards to such excesses. We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and may have other impacts on our liquidity and capital resources.
We have sufficient liquid resources including our $75.0 million revolving credit facility, of which no amounts were outstanding at March 28, 2026. The revolving credit facility is part of the Amended and Restated Credit Agreement among the Company, Bank of America, N.A., as administrative agent, swing line lender, letter of credit issuer, and the guarantors party thereto (the "Credit Agreement"). The Credit Agreement includes the following financial covenants: (i) as of the end of any fiscal quarter, the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) cannot exceed 3.25 to 1.00 and (ii) a requirement to maintain Consolidated EBITDA (as defined in the Credit Agreement) for any period of four fiscal quarters of at least $75 million. The Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants. 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.
Regardless, depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future. There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources at such time. The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control.
State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its subsidiaries. We believe that stockholders' equity at the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco will be restricted per state regulations.
We have entered into a forward flow agreement with a third-party financial institution (the "Purchaser") under which we have agreed to offer a minimum of $25.0 million of consumer loans per quarter. Loans that meet the agreed-upon criteria are expected to be sold to the Purchaser on a recurring basis. This arrangement provides a predictable and recurring source of cash to fund origination of non-GSE loans, reduces our exposure to long-term credit risk and supports efficient capital recycling. The settlement cycle, with purchase consideration remitted promptly upon transfer of ownership, minimizes the time between loan origination and cash realization, thereby enhancing liquidity. We believe this arrangement supports our liquidity by aligning loan origination activity with a consistent outlet for loan sales.
The following is a summary of the Company's cash flows for fiscal years 2026 and 2025, respectively:
Year Ended
($ in thousands) March 28,
2026 		March 29,
2025 		$ Change
Cash, cash equivalents and restricted cash at beginning of the fiscal year $ 375,345 $ 368,753 $ 6,592
Net cash provided by operating activities 267,491 178,496 88,995
Net cash used in investing activities (222,437) (23,955) (198,482)
Net cash used in financing activities (162,787) (147,949) (14,838)
Cash, cash equivalents and restricted cash at end of the fiscal year $ 257,612 $ 375,345 $ (117,733)
Net cash provided by operating activities increased primarily from a $19.5 million increase in net income, changes in working capital, which provided net a increase to cash including accounts receivable, providing $31.7 million and inventories providing $16.2 million. These were partially offset by changes in accounts payable and accrued expenses and other current liabilities, which had a net decrease of $15.6 million.
Consumer loan originations decreased $2.1 million to $64.0 million during the year ended March 28, 2026, from $66.1 million during the year ended March 29, 2025. Proceeds from the sale of consumer loans provided $79.6 million in cash, compared to $51.1 million in the previous year, a net increase of $28.5 million.
Commercial loan originations increased $15.2 million to $158.5 million during the year ended March 28, 2026, from $143.4 million during the year ended March 29, 2025. Proceeds from the collection on commercial loans provided $142.7 million in cash compared to $135.1 million in the previous year, a net increase of $7.6 million.
Net cash used in investing activities for the year ended March 28, 2026 was primarily used for purchases of American Homestar for $172.8 million net of cash acquired and property, plant and equipment. Net cash used in investing activities for the year ended March 29, 2025 was primarily used for purchases of property, plant and equipment.
Net cash used in financing activities for the years ended March 28, 2026 and March 29, 2025 was primarily related to common stock repurchases, partially offset by net proceeds received from the exercise of stock options.
Obligations and Commitments
We enter into commercial loan agreements with distributors, communities and developers under which the Company provides funds for financing homes. In addition, we enter into commercial loan arrangements with certain distributors of our products under which the Company provides funds for wholesale purchases. We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements. Further, we invest in and develop home-only loan pools and lending programs to attract third-party financier interest in order to grow sales of new homes through traditional distribution points.
We have contractual lease obligations for certain production and retail locations, office space and equipment with durations ranging from monthly to 20 years. Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more. For additional information related to these obligations, see Note 9 to the Consolidated Financial Statements. In addition, we also have contingent commitments at March 28, 2026 consisting of contingent repurchase obligations, construction contingent commitments, interest rate lock commitments ("IRLCs") and forward loan sale commitments. For additional information related to these contingent obligations, see Note 17 to the Consolidated Financial Statements.
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources" in the Company's 2025 Annual Report on Form 10-K for a discussion of changes in liquidity between fiscal years 2025 and 2024.
Critical Accounting Estimates
Our discussion and analysis of the Company's financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We base these estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See "Forward-Looking Statements" above.
We believe the following accounting policies are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Consolidated Financial Statements and should be read in conjunction with the Notes to the Consolidated Financial Statements.
Warranties. Estimates include the number of homes still under warranty, including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home. While the number of homes still under warranty are readily determinable, the average costs incurred, which will vary based on market prices, and the timing in which work orders are completed are the primary subjective inputs in estimating the reserve. We expect that a 5% increase in average costs would increase our reserve proportionally.
Other Matters
Impact of Inflation. Our ability to maintain certain levels of gross margin can be adversely impacted by sudden increases in specific costs, such as the increases in material and labor. In addition, measures used to combat inflation, such as increases in interest rates, could also have an impact on the ability of home buyers to obtain affordable financing. We can give no assurance that inflation will not affect future profitability.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements.
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