CAVCO INDUSTRIES, INC.

Cavco Industries, Inc. operates in the factory-built housing industry, designing and producing manufactured homes, park model RVs, vacation cabins, and factory-built commercial structures. According to statistics published by the Manufactured Housing Institute, for the 2024 calendar year, manufactured housing wholesale shipments of homes constructed in accordance with the HUD code accounted for an estimated 13.1% ¹ of all new single-family homes sold. Approximately 103,000 ² HUD code manufactured homes were shipped during calendar year 2025, compared to the 103,000 ³ shipped during calendar year 2024 and 89,000 ⁴ shipments in 2023. The company also operates in financial services through its subsidiaries CountryPlace Acceptance Corp., which offers conforming mortgages, non-conforming mortgages, and home-only loans, and Standard Casualty Company, which provides property and casualty insurance primarily to owners of manufactured homes.

The manufactured housing industry is highly competitive at both the wholesale and retail levels, with competition based on several factors including price, product features, reputation for service and quality, depth of distribution, promotion, merchandising, and the terms of retail customer financing. Cavco competes with more than 30 ⁵ other producers of manufactured homes, as well as with new and existing apartments, townhouses and condominiums and site-built homes. There are a number of other national manufacturers competing for a significant share of the manufactured housing market in the United States, including Clayton Homes, Inc. and Champion Corporation, which may possess greater financial, manufacturing, distribution and marketing resources. In the financial services segment, significant competitors include 21st Mortgage Corporation, an affiliate of Clayton Homes, Inc. and Berkshire Hathaway, Inc.; Vanderbilt Mortgage and Finance Inc.; and Triad Financial Services, Inc. In the insurance market, Standard Casualty competes with companies such as National Lloyds and American Modern Insurance.

The company generates revenue through two reportable segments: factory-built housing and financial services. In the factory-built housing segment, revenue is recognized from home sales to independent distributors, builders, communities, and developers (wholesale) generally when the home is shipped, and from sales by Company-owned retail stores generally when the home is delivered, permanently located at the customer's site, accepted by the customer, and title has transferred. In the financial services segment, revenue is generated from insurance premiums, insurance agency commissions, interest income on consumer loans receivable, loan origination fees, gains or losses on sales of loans, and third-party mortgage servicing fees. The company's primary customer demographics are entry-level and move-up buyers and persons aged 55 and older, as well as manufactured housing community owners, subdivision developers, and second home or vacation home buyers.

The factory-built housing segment operates a total of 33 ⁶ homebuilding production lines, with 31 ⁷ located throughout the United States and two ⁸ production lines in Mexico. These manufacturing facilities range from approximately 79,000 ⁹ to 341,000 ¹⁰ square feet of floor space. The company sold 20,842 ¹¹ factory-built homes in fiscal year 2026, compared to 19,753 ¹² in fiscal year 2025 and 16,928 ¹³ in fiscal year 2024. As of March 28, 2026, there were a total of 92 ¹⁴ Company-owned retail stores, located in thirteen states, of which 57 ¹⁵ are located in Texas. The company distributes homes through a large network of independent distribution points in 48 ¹⁶ states and Canada. Net factory-built housing revenue per home sold was $103,510 ¹⁷ in fiscal year 2026, compared to $97,864 ¹⁸ in fiscal year 2025. The home order backlog at March 28, 2026 was approximately $195 million ¹⁹ in wholesale sales values, down $2 million ²⁰ from $197 million ²¹ one year earlier.

The financial services segment includes CountryPlace Acceptance Corp., which is an approved Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) seller/servicer, and a Government National Mortgage Association (Ginnie Mae) mortgage-backed securities issuer. CountryPlace is authorized by the U.S. Department of Housing and Urban Development to directly endorse Federal Housing Administration Title I and Title II mortgage insurance, is approved by GNMA to issue GNMA-insured mortgage-backed securities, and is authorized to sell mortgages to, and service mortgages for, FNMA and FHLMC. CountryPlace is also an approved servicer with the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture under its Single Family Housing Guaranteed Loan Program. Standard Casualty, located in Texas, specializes in homeowner property and casualty insurance products for the manufactured housing industry and holds insurance licenses in multiple states, primarily serving the Texas, Arizona, New Mexico and Nevada markets. Net revenue for the financial services segment was $87,149,000 ²² in fiscal year 2026, compared to $82,347,000 ²³ in fiscal year 2025. Gross profit for the financial services segment was $50,557,000 ²⁴ in fiscal year 2026, compared to $23,795,000 ²⁵ in fiscal year 2025, with gross profit as a percentage of net revenue of 58.0% ²⁶ in fiscal year 2026 versus 28.9% ²⁷ in fiscal year 2025.

On September 29, 2025, the company completed the acquisition of American Homestar Corporation, including their two manufacturing facilities and 19 retail locations, by acquiring 100% of the outstanding stock for total consideration of $181.3 million ²⁸ paid with cash on hand. The purchase added $90.5 million ²⁹ to factory-built housing net revenue. The company expensed $5.0 million ³⁰ in acquisition related transaction costs. The Board approved an additional $150 million ³¹ for the stock repurchase program as announced on May 22, 2025, and another $150 million ³² as announced on May 21, 2026. During fiscal year 2026, the company repurchased common stock for $161,241,000 ³³. The company also entered into a forward flow agreement with a third-party financial institution under which it has agreed to offer a minimum of $25.0 million ³⁴ of consumer loans per quarter. The maximum amount of contingent obligations under repurchase agreements was approximately $141 million ³⁵ as of March 28, 2026, compared to $133 million ³⁶ as of March 29, 2025.

Total net revenue for fiscal year 2026 was $2,244,505,000 ³⁷, an increase of 11.4% ³⁸ compared to $2,015,458,000 ³⁹ in fiscal year 2025. Net income attributable to Cavco common stockholders was $190,551,000 ⁴⁰ in fiscal year 2026, compared to $171,036,000 ⁴¹ in fiscal year 2025. Diluted earnings per share was $23.98 ⁴² in fiscal year 2026, compared to $20.71 ⁴³ in fiscal year 2025. Gross profit was $526,887,000 ⁴⁴ in fiscal year 2026, compared to $465,591,000 ⁴⁵ in fiscal year 2025, with consolidated gross profit as a percentage of net revenue of 23.5% ⁴⁶ in fiscal year 2026 versus 23.1% ⁴⁷ in fiscal year 2025. Income before income taxes was $244,700,000 ⁴⁸ in fiscal year 2026, compared to $211,070,000 ⁴⁹ in fiscal year 2025. Net cash provided by operating activities was $267,491,000 ⁵⁰ in fiscal year 2026, compared to $178,496,000 ⁵¹ in fiscal year 2025.

The company continues to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities and develops and invests in home-only lending programs to grow sales of homes through traditional distribution points. Management believes that growing investment and participation in home-only lending may provide additional sales growth opportunities for factory-built housing operations and reduce exposure to the actions of independent lenders. The company also works 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, and in December 2025, FHFA published Fannie Mae and Freddie Mac's Underserved Markets Plans for 2025-2027 that offer enhanced mortgage loan products for manufactured homes titled as real property, including Fannie Mae's 'MH Advantage' and Freddie Mac's 'ChoiceHome' programs. The plans do not include purchases of home-only loans during the three-year 2025-2027 timeframe.

The company continues to make certain commercial loan programs available to members of its wholesale distribution chain. Under direct commercial loan arrangements, the company provides funds for financed home purchases by distributors, community owners and developers. Commercial loan originations increased $15.2 million ⁵² to $158.5 million ⁵³ during fiscal year 2026 from $143.4 million ⁵⁴ during fiscal year 2025. The company also entered into a forward flow agreement with a third-party financial institution under which it has agreed to offer a minimum of $25.0 million ⁵⁵ of consumer loans per quarter over a two-year term, providing a predictable and recurring source of cash to fund origination of non-GSE loans and supporting efficient capital recycling.

The company continues to focus on balancing production levels and workforce size with demand for product offerings to maximize efficiencies. In the factory-built housing segment, gross profit as a percentage of net revenue was 22.1% ⁵⁶ in fiscal year 2026, compared to 22.9% ⁵⁷ in fiscal year 2025, with the decrease attributed to higher costs per unit partially offset by higher average selling prices. In the financial services segment, gross profit as a percentage of net revenue was 58.0% ⁵⁸ in fiscal year 2026, compared to 28.9% ⁵⁹ in fiscal year 2025, with the increase primarily due to higher premiums and improved underwriting results as well as favorable weather resulting in lower weather related insurance claims. Selling, general and administrative expenses as a percentage of net revenue were 13.3% ⁶⁰ in fiscal year 2026, compared to 13.7% ⁶¹ in fiscal year 2025.

The company's manufacturing facilities are structured to operate on a one shift per day, five days per week basis, and a typical home is completed in approximately six ⁶² production days. The company operates a total of 33 ⁶³ homebuilding production lines. The company continues to monitor and react to inflation in materials by maintaining a focus on product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs. The company has experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies. The company's workforce is made up of approximately 7,700 ⁶⁴ skilled full-time team members. Certain manufacturing production employees (approximately 7% ⁶⁵ of total employees as of March 28, 2026) are represented by unions and are covered by collective bargaining agreements, which expire in February 2027 ⁶⁶ and April 2029 ⁶⁷.

Capital expenditures for purchases of property, plant and equipment were $35,406,000 ⁶⁸ in fiscal year 2026, compared to $21,427,000 ⁶⁹ in fiscal year 2025. The company has a $75.0 million ⁷⁰ revolving credit facility, of which no amounts were outstanding at March 28, 2026. The company repurchased common stock for $161,241,000 ⁷¹ during fiscal year 2026. The Board approved an additional $150 million ⁷² for the stock repurchase program as announced on May 22, 2025, and another $150 million ⁷³ as announced on May 21, 2026. As of March 28, 2026, there was $68 million ⁷⁴ remaining from the May 22, 2025 approval. The company has not paid any dividends on the company's common stock in the past two fiscal years. Stock-based compensation expense was approximately $12.8 million ⁷⁵ in fiscal year 2026, compared to $8.7 million ⁷⁶ in fiscal year 2025.

The company faces structural headwinds from the limited availability of consumer financing for manufactured homes. Home-only financing is usually more difficult to obtain than financing for site-built homes, and most of the national lenders that have historically provided home-only loans have exited the manufactured housing sector of the home loan industry. 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. Increases in interest rates could significantly increase the cost of owning a new home, which usually reduces the number of potential buyers who can afford, or are willing, to purchase homes. From March 2022 through December 2023, the Federal Reserve increased its benchmark interest rate 11 times, resulting in significantly higher mortgage interest rates. Although the Federal Reserve subsequently lowered its benchmark interest rate three times since September 2024, mortgage interest rates remain elevated from their previously historically low levels prior to 2022 following COVID-19.

The company's operations are concentrated in certain states, most notably Texas, California, Florida, Arizona, and Oregon. The company has a significant presence in Texas with factories in the cities of Austin, Fort Worth, Seguin and Waco, and a facility in Presidio that serves as a shipping point for homes produced in Mexico. Of the 92 ⁷⁷ Company-owned retail stores, 57 ⁷⁸ are located in Texas. Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of March 28, 2026, 44% ⁷⁹ of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 13% ⁸⁰ was concentrated in Florida. The company's insurance subsidiary primarily serves the Texas, Arizona, New Mexico and Nevada markets and 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.

The company's sales of affordable homes are largely dependent on the ability of consumers to obtain financing, and tightened credit standards, curtailed lending activity by home-only lenders, and increased government lending regulations continue to constrain the consumer financing market. The maximum amount of contingent obligations under repurchase agreements with financial institutions providing inventory financing to independent distributors was approximately $141 million ⁸¹ as of March 28, 2026, exposing the company to credit loss if distributors default. The company's operations are concentrated in certain states, with 57 ⁸² of 92 ⁸³ Company-owned retail stores located in Texas, and 44% ⁸⁴ of the outstanding principal balance of consumer loans receivable concentrated in Texas, making the company vulnerable to regional economic downturns or natural disasters. Increases in interest rates could significantly increase the cost of owning a new home and reduce the number of potential buyers, as mortgage interest rates remain elevated from their previously historically low levels prior to 2022 following COVID-19. The company's insurance subsidiary is subject to adverse effects from excessive policy claims during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten, though losses from catastrophic events are limited by reinsurance contracts in place as part of the loss mitigation structure, with catastrophic losses recoverable through reinsurance in excess of $4.0 million ⁸⁵ per occurrence, up to a maximum of $75.0 million ⁸⁶ in the aggregate for that occurrence.

Management's message emphasizes the company's decentralized operational approach, which enables operators to adapt to local market demand, be more customer focused, and have the autonomy to make swift decisions while being held accountable for operational and financial performance. The company's home order backlog at March 28, 2026 was approximately $195 million ⁸⁷ in wholesale sales values, down $2 million ⁸⁸ from $197 million ⁸⁹ one year earlier. Management states that the company continues to focus on balancing the production levels and workforce size with the demand for product offerings to maximize efficiencies. The company continues to make certain commercial loan programs available to members of its wholesale distribution chain, and management believes that growing investment and participation in home-only lending may provide additional sales growth opportunities for factory-built housing operations and reduce exposure to the actions of independent lenders. The company also continues 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.