Hey and thank you for standing by. Welcome to the Cavco Industries Planned Exposition of American HomeStar call. At this time, all participants are in listen-only mode. After the speaker's presentation, we will open up for questions. To ask a question during the session, you need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Mark Fusler, Corporate Controller and Investor Relations. Please go ahead. Good day. Thank you for joining us for Cavco Industries announcement of the planned acquisition of American HomeStar. During the call you'll be hearing from Bill Boor, President and Chief Executive Officer, Allison Aden, Executive Vice President and Chief Financial Officer, and Paul Bigbee, Chief Accounting Officer. Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward looking statements. Forward looking statements include statements about our future expected business and financial performance and are not promises or guarantees of future performance, their expectations or assumptions about the expected benefits of the acquisition of American HomeStar, Cavco's financial and operational performance, cost savings, operational efficiencies or future market conditions. All forward looking statements involve risks and uncertainties which could affect Cavco's actual results and could cause its actual results to differ materially from those expressed in any forward looking statements made by or on behalf of Cavco. Forward looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company's control. A number of important factors could cause actual events and results to differ materially from those contained in or implied by the forward looking statements, including, but not limited to, the risk that the proposed acquisition may not be completed in a timely manner or at all, the failures to satisfy any of the conditions required to close the transaction, including the receipt of certain regulatory approvals, the occurrence of any event, change or circumstance that could give rise to the termination of a transaction agreement, the effect of the announcement of the proposed transaction on a company's business relationships, operating results and business generally, unexpected costs, charges or expenses resulting from the proposed transaction, and other risks described in the risk factors set forth in our filings with the SEC, including the most recent annual report, which is also available on our Investor Relations website or at sec.gov. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, Wednesday, July 16, 2025. Cavco undertakes no obligation to revise or update any forward looking statement, whether written or oral, to reflect events or circumstances after the date of this conference call, except as required by law. To accompany this webcast, we have prepared a presentation which you can view and control yourself within the webcast portal. These slides will not be synchronized with our discussion. In addition, it can be accessed via our website investor.cavco.com under the Investor Relations Presentation section on the main page. Now I'd like to turn the call over to Bill Boor, President and Chief. Executive Officer Bill, thanks Mark. Welcome everyone and thank you for joining us today to discuss our planned acquisition of American HomeStar. This acquisition is another major step in our capital allocation and growth strategy. The opportunity to join forces with a quality organization like American HomeStar doesn't come along every day and we're very happy to have reached agreement on this deal. As Mark said, I will be referring to slides that are available online and if you have access to those and want to turn to slide 3, this provides an overview of American HomeStar. American HomeStar operates two manufacturing plants. Both are in the Greater Dallas-Fort Worth area. They're highly integrated with 19 company-owned retail centers. About 57% of their production is sold through their company stores. Their shipments to communities, builders, and developers closely mirror the industry ratio at about 30% and the balance of their production goes to independent retailers to round out their operations. American HomeStar also originates a small number of land home mortgage loans and lastly they operate an insurance agency selling third-party insurer policies. Across these operations they have approximately 800 employees and over the last 12 months through May they sold 1,676 homes. Regarding the transaction, we're estimating the total uses of cash to be $184 million, which will be completely funded from cash on hand and we expect the deal to close early in our third fiscal quarter. If you can go to the next slide, the market area, American HomeStar's operations are concentrated throughout Texas with a few sales centers in Oklahoma and Louisiana. Their Lancaster plant focuses on HUD code homes and the Fort Worth plant also does mostly HUD code units with some modular home production as well. Fort Worth also produces the company's innovative Smart Cottage line of homes. Smart Cottages are generally smaller footprint homes with high-end designs and heavy, highly energy efficient construction. To characterize that, Lancaster leans in on higher volume while Fort Worth covers a broad mix with some impressive innovative products. The next slide, I'll talk a little bit about kind of the fit that we see with this deal. The addition of American HomeStar clearly deepens Cavco's presence in one of the most important manufactured housing markets. Currently, Cavco has four plants and 46 retail centers in Texas. American HomeStar's approach to managing both integrated and independent retail is just a really good match with our operations. Their products fit well, and we'll have the opportunity to optimize the product mix across the combined retail footprint, filling out the offerings of each store with Cavco's broadened product lineup. In other words, we'll be able to fill out their store offerings with Cavco plant products and vice versa, and that'll strengthen our retail position throughout the region. In addition to the retail product optimization opportunities, we expect to achieve cost savings by leveraging Cavco's in-place shared services. We also expect to be able to deliver purchasing synergies, reducing the HomeStar plant materials costs. As we've seen in prior manufacturing acquisitions, we expect to have plant efficiency and throughput opportunities through implementation of best practices. The deal will be funded by cash on hand and will be accretive to earnings and cash flow. More generally, we at Cavco are very focused and driven to increase our impact by expanding our affordable housing solutions. Joining with American HomeStar gives us added scale and capabilities toward that objective. On the last slide, I'd like to just step back and finish on a bigger picture related to our allocation of capital. We looked at our use of capital over the last four years because that roughly covers the period of our share repurchases. Over the period, we've generated $800 million of cash flow from operations. We've reinvested about $100 million organically in our plant network. This has included our new plant in Hamlet, North Carolina, as well as a number of high-return plant modernization projects, which have all improved safety, quality, and production capacity. Cumulatively, through these direct investments, we've meaningfully increased the overall production capacity of our existing system. We've also successfully found value-creating acquisitions, primarily the purchases of Commodore Homes in fiscal 2022, Solitaire Homes in fiscal 2023, and now American HomeStar. Upon completion of the American HomeStar transaction, we will have invested approximately $435 million in these major acquisitions, and we've repurchased over $420 million of our stock using this important tool to responsibly manage the balance sheet. Through these buybacks, we've retired 15.5% of the shares outstanding. With that, Victor, I'd like to turn it over to questions. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for a name to be announced. To withdraw your question, please press *11 again. Please stand by while we comply. The Q and A roster. One moment for the first question. Our first question will come from the line of Daniel Moore from CJS Securities. Your line is open. Hi, this is Will and Dan. Can you elaborate on the expected cost. Synergies and how long you expect it. We'll be developing that and we're not going to get too much into quantifying. I would say that on this transaction they are pretty substantial relative to the size of the deal. Some of them will come relatively quickly. We do think there's an opportunity in due diligence. We look at purchase of materials and we do think there's an opportunity with our pricing on our materials at Cavco, that we should be able to get pretty quick synergies by reducing their cost of materials. That'll come pretty quickly. There are some cost synergies that will happen very quickly. I mean, you can imagine that some of the folks at the leadership level of American HomeStar will take this opportunity to move on. We'll get some pretty significant initial cost synergies and over time we'll work through the benefits of the shared service leveraging. Some will come pretty quickly and some, I would say, could develop over a period of, I would say, a year or so. We'll have some offsetting upfront integration costs and expenses just as we work through systems integration and other aspects of integration. I'm going a little bit beyond your question, but I think at a high level, I would think about it being relatively awash in the remainder of 2025, and we'll end them for approximately two quarters. A lot of the integration synergies will be kicking in and most of the big integration costs will be behind us. We'll kind of be hitting it full steam in fiscal 2026. Thank you, that's super helpful. And. I was going to add one more thought. Sorry for the long pause, but in addition to all those kind of pretty tangible, I really do think that on deals like this, and we've seen this in the past on deals like this, some of the product optimization opportunities and the best practice sharing and improvements to efficiency and throughput, those are frankly the big ones. They're harder to track, they're harder to put your finger on. I don't think they take forever. They take a little bit of time to get in place, just wanted to round out with that color. Thank you. Can you quantify the company's ASPs? Factory-built gross margin and overall gross margins? I can give you a feel for that. One thing you might notice even looking at the revenue numbers is that if you imply an ASP, it's not entirely that clean. If you imply an ASP, it's relatively high. The reason for that is that, as I said, they're pretty highly integrated with retail. Because they're putting 60% of their manufactured homes through their company-owned stores, their ASP has a lot more retail pricing in it than ours. They're around 60%. Cash flow, I think we've told in the past, is somewhere around 20% plus or minus. That kind of explains why you might look and see an implied high average selling price. When we look at the products and we look at it, cleaning out that retail effect on both gross margin and average selling price, I can tell you that when we look at their wholesale gross margin, it's very similar to ours. These assets really don't have a standout difference other than that high degree of integration, which can drive some of the high-level numbers. You have anything to add to that? I think just to add to it also, as we've done with the last couple of acquisitions, when we do purchase accounting on some of the inventory, just for a brief period of time, call it two to three quarters, you will see slightly lower, call it 20 to 50 basis points for the total consolidation, and then that comes back up to a. Gross margin to be comparable to the. Companies, similar to acquisitions we did at Commodore and Solitaire. Thank you. Hop back in the queue. Okay, thanks. Thank you. One moment for our next question. Our next question will come from the line of Greg Palm from Craig-Hallum Capital Group. Your line is now open. Thanks. Congrats on the acquisition news. It might be helpful if you can provide any color on the background of the deal in terms of how long they've been in the acquisition pipeline. Was there any sort of process that was run and maybe just why now? Why? What was the sort of rationale for the timing now? Yeah, this is a deal like a number of deals that we've talked about in the past, that it's driven by when the owners are ready to sell, frankly. I feel good that we were on the short list of folks that Buck Peter and his team wanted to talk to. It did take us a bit of time to reach agreement, and I can't really speak, and probably wouldn't if I could, to what other discussions they had over time. We had a very good, productive process working one on one with them. From our perspective and what we know about the deal process, it was a one on one relationship for quite a while trying to make this deal happen. These things, Greg, we've talked about it in the past, these things happen when the seller's ready to sell their company. I think that's kind of the story of this one. I kind of don't want to put words in the Peter's mouth on that. Nope, that's fair. That makes sense. I know you mentioned a little bit, talked a little bit through the cost synergies and you kind of hinted at some revenue synergies as well. Can you maybe expand on that? I guess where I'm going with this is, for example, are there certain product lines, maybe types of homes that, you know, they don't produce that you can put through their own retail network and just sort of vice versa and thinking about, you know, distribution networks. Just talk to us a little bit about what you see in terms of. Revenue synergy potential here. Yeah, that's the one that I kind of waved at in the comments that we've had on previous deals too. I remember in Solitaire it was a big discussion. You know, they have retail, we have retail as we add additional manufacturing plants to the combined system, which is what's going on here. You find that products being produced by the manufacturing plants are complementary. The ability, you know, take a Cavco store, for example, the availability to be able to more completely fill out all the price points and all the types of products that that retail center wants to sell with Cavco produced products is a big opportunity, and that goes both directions. We should be able to bring to them complementary products into their retail system. It's a very hard one to quantify. We've kind of learned, primarily through the Solitaire deal. We didn't have as much of that dynamic in the Commodore deal, which was really going into a new geography. In the Solitaire deal we definitely saw that product optimization opportunity. I'm not sure what else to tell you, Greg. I'd be happy to answer a follow up question if I'm not getting to the point. We do think that that's a significant benefit of this kind of a deal. Yeah. Okay. In terms of the purchase price and kind of the inherent valuation multiple, it's definitely higher than sort of your other two most recent. I'm just wondering, is that a function of more retail network? Is that a function of maybe more potential synergies? I don't know, maybe the market is just moving towards higher multiples lately. Maybe you can expand upon that a little bit. Yeah, maybe. Where I'll start is kind of reiterate our process. I mean, when we look at a deal, it's all about business planning. We model out and fill out a business plan and plot a cash flow valuation of what return we think we can achieve on a deal at different price points. We're not applying a standard multiple to deals. We then kind of look at the multiple alongside that just to make sure we feel comfortable with where we're at in this deal. I think there's two things that I would point out that cause us to feel like it's fairly priced for both parties. One is we comment on their trailing twelve month results. We didn't give normalized. Normalized is a very hard concept to nail down. However, we feel that the trailing 12 months would be below there through the cycle even if they weren't selling to us. We think the last 12 months were a little bit below average for them because I think the industry has been in that mood. If you make one mental adjustment to more normalized, that brings the multiple down a bit. As you said, and we've been saying, this deal has significant synergy opportunities and by the time you start to apply some of that in a business plan, multiple again seems very fair to both parties. Got it. Okay. I'm going to leave it there. Congrats again. It seems like it'll be a great fit. Thanks. Appreciate it. Thank you for a moment for questions. Next question comes Jay McCanless from Wedbush Securities. Your line is now open. Hey, thanks for taking my questions. The first one I had. If you. Think about what's more important here, is it more important to get an expansion in the store base or do one or both of these plants bring something to your Texas operations that you don't currently have? It's an interesting question because you're phrasing it probably in a good way. More important because we like both right in this deal, the fact that they're so highly integrated, the retail is really part of the operation. It's not like we don't think of it as we went out and bought 19 stores and we separately went out and bought two plants. This is a highly integrated and well-run business that fits together. We always start, at least I do. My mentality always starts with manufacturing. I think they've got good plants and they make some good products. We were impressed by the innovation which we think is important. We also think that we can help those plants. I think we can bring some things that will improve the performance of those plants, not that they're not running. For me, the manufacturing really drives the train and the retail to us is a critical component because it fits so well together and makes sure that we have the access to the market that we need to be successful with the manufacturing. That's the way I put it. Is that kind of address what you're asking, Jay? Yeah, absolutely. Thanks, Bill. The second question I had is I think you said they just do land homes with their financial services now. There's not going to be much change in terms of like loans receivable, notes receivable to consumers that you guys are going to be adding to the balance sheet. Am I understanding that correctly? Yeah. In the scheme of their operations, their lending business is relatively small and they're 100% or they basically originate to sell. They've got some relationships with some investors, just like we've explained our business in the past. They're originating to sell. They sell their land home deals, which is all that they've been doing of late. They sell those land-based deals to the third parties. They don't stay on the balance sheet very long. They also sell them with the servicing rate. For completeness, it's important to know that they have that plus they have the insurance agency, but in relative scale to the business, it's a relatively small, small part of the deal. We do think we'll get some benefits. I mean the loans that they're doing, like I said, they sell them with the servicing rates. We sell our loans retaining the servicing rate. There are some opportunities and we're happy to have what they do. Got it. Okay, thanks. The last one, I have kudos for the slide 6. I thought that was a great way to kind of tell the story about how much you guys have been sitting on share buyback as well as on acquisitions, I guess. Are you going to be precluded from buying back any stock until this deal is closed? After that, are you thinking about getting back on the normal cadence that Cavco had before? How are you thinking about that post deal? Yeah, I mean, we're very careful about blackout periods, but as this deal becomes public, we won't be precluded from that perspective. We'll continue to look at the opportunities and continue to use buybacks as we have as a way to kind of just keep the balance sheet in check. This has been a main theme since we started the buybacks that we've said we don't see. We aren't making a trade-off between buying back stock and doing strategic moves like this. I think this deal just kind of proves that point. We'll still have a healthy balance sheet and we'll still use buybacks going forward to manage that in a responsible way. Awesome. Thanks guys. Appreciate you taking my questions. Thanks, Jay. Thank you once again. That's Star 1 0 1 for questions. Our next question will come from the line of Jesse Lederman from Zelman & Associates. Your line is open. Hey, thanks for taking my question and congrats on a good deal. Always nice to hear from you. Thanks for all the color. Question on the expansion in Texas and increasing the concentration there, curious if the company average capacity utilization was in the 70 to 75% range. I'm curious what the Texas and Duncan facilities were like, were those higher and you felt the need to go out and increase exposure there, or just a little curious on how demand has been and what the capacity utilization has been in the existing plants. Yeah, it really didn't enter into our thinking to think about the current state of the region. To be honest, it was kind of a long-term fit decision. We really haven't been looking at, for example, current capacity utilization in Texas as a part of the decision-making. Over time, I think that stuff settles out, and we have a very long-term positive view about the industry in general, obviously when we're doing deals like this, but also about the important Texas market. It's a deep one, and we think the opportunity to increase our position there was one we really wanted to pursue. Texas, you know, try to be careful because we've got an earnings call in a few weeks. Jesse will be updating you on what's going on in the market. I will say that I don't think Texas has been noticeably different from a capacity utilization perspective than other regions in the country at this time. Got it. Okay, that's helpful. Yeah, sorry, go ahead. Was there something else you wanted to add? That's fine. That's it. Okay. I was just curious if you were seeing stronger demand there and tighter. Capacity and felt the need to go. Thanks for the color on that and I'd love to get your thoughts. It sounds like you were really pleased with the kind of interplay and relationship between the retail business and their manufacturing business, given they're closer to 60% through their captive retail. You mentioned you guys are still around 20%. Are there plans to drive that 20% higher? Obviously it'll move higher because of mix as you integrate the transaction. As you think ahead, is that a strategy you'd like to continue to pursue, to grow the captive retail share? I wouldn't say that that's specifically a strategy. Here we had a business that we kind of look at on any acquisition we do. You kind of have to look at, okay, how secure is the distribution of the products that are being manufactured? Here they were already set up with a very highly integrated system. They had the solution to that question, right? They had the answer to that question, frankly. I don't have the number off the top of my head, but we are more highly integrated in Texas than we are in other parts of the country. Before this transaction, we had roughly, I'll probably be off by 1 or 2 because it changes, but roughly 80 sales centers across the country. I believe I mentioned that 49 of them, I think that number is right, 49 of them are in Texas. We're more integrated in Texas as they are. The big question to us is just if we're going to grow and have manufacturing, how comfortable are we with the distribution and the access to market? They had the answer to that with their integrated approach. That's helpful. You're pretty agnostic still to the distribution, whether it's through captive or independent. It's just that this deal, and maybe in the Texas market specifically, it might make sense or be positioned more for captive. In terms of the genesis of this deal, it wasn't particularly about let's grow the captive. It was just these pieces fit so well together and what they're already doing. We can add gasoline to the fire. That's right. Jay asked an interesting question. The prioritization or the biggest driver? It's kind of our mentality that at the core we're a manufacturer, and they've got really well run, very impressive operations that make sure that what they can make, they can get to market. It starts with manufacturing for us, and if we went to any geography in the country, we wouldn't necessarily have a target for retail. We just want to make sure that whether it's dealing with independents, which we are happy to do and enjoy those relationships, or whether it's putting our own stores in place, we just want access and security of access to the market. Right. Okay. That makes a lot of sense. Last one for me, you talk about maybe the underappreciated nature of the efficiency and the throughput opportunity as you integrate the two businesses and implementation of best practices, et cetera. Love to hear you just maybe give a couple examples, just so we can have a better idea of what some of those strategies might be that would translate to synergies there. Yeah. One thing I'll say, I was going to give you an example that we talked in the past. It's not always one direction. Right. Sometimes we buy a company, and it's almost a certainty that will be the case here, where previous Cavco learns from the new additions to Cavco. I give you the best example we have of that, which is when we bought Commodore. They came with some, what I would call, manufacturing technologies that we've been deploying across our system in those plant modernization projects that I talked about. We've created tremendous value in the previous Cavco plants by leveraging the best practices and technologies that came to us with that acquisition. Those synergies are very hard to pin down. They come over time. Sometimes it's as simple as just a different way to think about how to run the operation. Often it comes with a little bit of investment. They're high return investments when they're investment oriented. We haven't pinned that down, but we do believe just by visiting the plants and seeing them that there's going to be a lot of opportunity for interplay between how they approach manufacturing and how we do, and we'll be better for it. Absolutely. Thanks a lot for the color, Bill. Congrats on the deal. Yeah, thanks, Jesse. Thank you. One moment for our next question. We actually have a follow-up from the line of Jay McCanless from Wedbush Securities. Your line is open. Hey, just wanted to ask that since you talked about Bill, maybe the results that you guys have put out there for American HomeStar, maybe they were a little soft this year, relative to historical, I guess. Is that partly due to some of the price competition you guys talked about on the last conference call? If so, are you still seeing that price competition and where is that price competition mainly focused? I don't want to, and you'll appreciate this, I know you're not fishing for it. I don't want to get too much into what we might cover in the earnings call since we're so close to that and we're pretty far since the last earnings call. No, my comment wasn't that they're underperforming. My comment was more general from an industry perspective that I don't think the last 12 months across the industry really reflects the earnings potential of good companies operating within the industry. Their last 12 months wasn't underperforming. It was performing relatively in line with how the whole industry is doing. I just think there's a lot of upside from that. I guess I will give this piece of data: their shipments over the last fiscal year for them, their shipments over that period were roughly 70% of what they shipped two years ago when the industry was really hot. There's considerable upside in these plants. I can say that they've done some good investing in the plants recently. That's really what I was alluding to, Jay, is more the opportunity for upside. I didn't mean to imply underperformance. Understood. Okay, thanks for the follow-up. Thank you. Thank you. I'm not showing any further questions at this time. I would like to turn the call back over to William Boor, President and CEO, for closing remarks. Thank you. I do want to make a couple comments before we sign off. I really want to thank Buck Peter, Duane Peter, and the entire American HomeStar team. It did take some time to reach this agreement, and I think it was time well spent to write a deal that's beneficial to the stakeholders of those companies. Through that process, you really get to know each other pretty well. My respect for the Peters and their entire team only grew through our discussions over the past months. I became more and more convinced that this deal makes a lot of sense, not only from an asset combination perspective, but also from a cultural perspective. Buck built this company over 54 years and he grew it. You saw it through really devastating industry downturns. In the end, what survived was a well-run and really deeply committed organization. I can only imagine the emotions through a deal process like this and ultimately the decision to sell the company you built over so many years, but we at Cavco are humbled and extremely appreciative that they decided Cavco was the right fit. We're really looking forward to the years ahead with the American HomeStar team. With that, we'll sign off. We really appreciate everyone's time and interest today, and we look forward to updating you on the quarter in a few weeks. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect, everyone. Have a great day.