Champion Homes (NYSE:SKY) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Champion Homes reported a 1.3% year-over-year increase in net sales to $710.2 million for the first quarter of fiscal 2027, with U.S. home sales rising 1.8%.
The company completed its acquisition of Homes Direct, advancing its direct-to-consumer strategy, although financial impacts from this acquisition will be seen in upcoming quarters.
Manufacturing backlog rose to $421.8 million, with manufacturing orders increasing year over year, indicating strong demand in the housing market.
Adjusted gross profit was $179 million, with an adjusted gross margin of 25.2%, while adjusted net income was $48.3 million or $0.88 per diluted share.
Champion Homes expects mid-single-digit revenue growth in the second quarter, with adjusted gross margins projected to be in the 25% to 26% range.
The company highlighted legislative support from the 21st Century Road to Housing Act as a positive regulatory development, potentially expanding market opportunities.
Management expressed confidence in the company's positioning to address affordable housing needs, supported by a strong balance sheet and diversified channels.
Full Transcript
Erica, Operator
Good morning and welcome to the Champion Homes first quarter fiscal 2027 earnings call. My name is Erica and I will be coordinating your call today. A question and answer session will follow the formal remarks. As a reminder, this conference is being recorded. I will now turn the call over to Ellen Kalanicki, Director of Investor Relations. Ellen, please go ahead.
Ellen Kalanicki, Director of Investor Relations
Good morning. Thank you for joining us for today's conference call and review of Champion Homes results for the first quarter ended June 27, 2026. Here to review the results are Tim Larson, CEO and Dave McKinstray, CFO. Yesterday, after the market closed, Champion Homes issued its earnings release. As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from the Company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the Company's filings with the Securities and Exchange Commission. Please note that today's remarks contain non-GAAP financial measures which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release.
I will now turn the call over to Tim Larson.
Tim Larson, President & CEO
Thank you, Ellen and good morning everyone. The Champion Homes team delivered a solid start to fiscal 2027 with results that aligned with our expectations. We continue to outperform the broader industry, demonstrating the strength of our customer-centric strategy and the team's operational execution. The recent closing of the Homes Direct acquisition marks an important milestone in advancing our direct-to-consumer strategy. The transaction closed on August 1st and we are honored to formally welcome the Homes Direct team to Champion.
While the financial impact in the second quarter will be limited due to timing, we remain excited about the strategic opportunities that we are already seeing as we work with the Homes Direct team. This acquisition reflects how we are allocating our capital to enhance and accelerate our strategic priorities across our channels, product portfolio and operational scale. Champion remains uniquely positioned to help address the need for affordable housing.
We remain focused on producing high-quality homes that provide compelling value when compared to traditional site-built alternatives. We will achieve this by advancing a differentiated customer-centric strategy that supports long-term growth and value creation. Let's turn to our quarterly results. The quarter unfolded largely as we anticipated and we are pleased with the consistency and execution demonstrated by our team in a dynamic economic environment.
Net sales increased 1.3% year over year to 710.2 million. Manufacturing capacity utilization during the quarter was 62%, up from 59% sequentially and up 1 percentage point compared to the same period last year. As a reminder, our utilization reporting includes our six idled facilities. Champion again outperformed the broader industry. Our U.S. home sales were up 1.8% versus the same period last year. This performance is against a backdrop of declining HUD industry shipments, which were down year over year approximately 5% during the three-month period ending May 2026.
The demand environment was very encouraging for us in the first quarter. Manufacturing orders increased year over year, resulting in an increase in backlogs to 421.8 million versus 302 million at the end of the first quarter last year. Manufacturing backlog lead time ended the quarter at approximately 9 weeks, which is within our target range of 4 to 12 weeks. We continue to manage production responsibly and balance customer demand with market conditions.
From a channel perspective, we achieved solid results across our portfolio, reinforcing the resiliency of our diversified go-to-market model. Sales to our independent retail channel were up 4% year over year. We continue to invest in tools and capabilities to support our independent dealers' businesses, including lead management capabilities via our dealer portal, consumer digital engagement initiatives and being nimble with our product offerings.
We believe these important investments position both Champion and our dealer network for long-term success. Our captive retail channel continued to perform well. Captive retail represented approximately 35% of consolidated sales during the quarter compared to 34% in the prior year period. Execution across our retail network remains strong as we leverage our investments across our now 95 captive retail stores, including 11 Homes Direct stores in the Western United States.
It's worth noting that our first quarter results do not include Homes Direct, which, as I mentioned, closed Aug. 1. Community orders were up modestly this quarter. Community operators continually and carefully manage inventory levels and monitor consumer demand. Orders from some of the larger operators were drivers during the first quarter and we are encouraged by community customer engagement trends. Builder developer sales increased year over year with momentum accelerating in this channel during the recent quarter.
Our offsite construction event in York, Nebraska attracted more than 150 attendees and showcased the interest in modular and HUD housing solutions. Developers, builders, municipalities and housing advocates from across the nation attended the event. This reflects the growing interest and demand for affordable and timely home construction solutions. Our joint venture with Triad Champion Financing continued to perform well in the quarter. As we reported on our last call, the ECN transaction closed successfully in our first quarter and generated proceeds of approximately 189.1 million Canadian dollars, a portion of which we have reinvested in the Homes Direct transaction. Turning to the regulatory developments, we are pleased with the continued momentum of policies that expand affordable housing. The 21st Century Road to Housing Act recently passed both chambers of Congress with overwhelming bipartisan support, becoming law on July 10. While implementation will take time and the HUD rulemaking process is ongoing, we believe the legislation represents a meaningful step toward expanding housing opportunities and removing barriers to factory-built housing adoption.
Our teams remain actively engaged with HUD and other stakeholders as technical specifications and implementation details continue to evolve. As you would expect, in addition to the HUD rulemaking, there will be new engineering, transport and set considerations for HUD homes that are not built on a permanent chassis. Our teams are excited to implement this change while also remaining focused on our traditional HUD product that is built on a permanent chassis.
We envision over time that both types of construction will be utilized throughout the industry. Additionally, Champion will once again return to the National Mall for HUD's Innovative Housing Showcase in September. The showcase and legislation demonstrate that federal housing leaders are increasingly supportive of manufactured homes as a central solution to the housing affordability crisis. We continue to monitor zoning reform at the state and local level as well.
The Commonwealth of Virginia, for example, recently enacted legislation that allows manufactured housing placement in residential districts where site-built homes are permitted. This represents additional momentum towards the long-term acceptance of offsite-built in parity with site-built. We believe the continued incremental regulatory progress leads to a favorable long-term outlook for our industry. As we move through the opening weeks of the second quarter, our observations remain consistent with the themes we've discussed today.
The macro environment remains dynamic and consumers continue to face broad affordability pressures. However, demand for attainable housing remains strong and our team continues to execute our strategy with excellence. We are encouraged by the customer engagement trends and the opportunities we are seeing across our channels. We believe Champion is better positioned than ever to help address the housing affordability challenge. With best-in-class products designed for the specific customers and markets we serve, supported by diversified channels and a highly engaged team, our balance sheet remains exceptionally strong, providing flexibility to invest in growth opportunities, pursue disciplined capital allocation and continue creating long-term shareholder value. With that, I'll turn the call over to Dave.
Dave McKinstray, CFO
Thanks, Tim, and good morning, everyone. Before I get into the quarter and outlook, I want to briefly welcome the Homes Direct team to Champion Homes. We're excited to have them as part of the company, and we look forward to collaborating together as we continue to expand our retail platform. Now I'll begin by reviewing our first-quarter financial results, followed by our balance sheet and cash flow performance. I'll then conclude with our outlook for the second quarter of fiscal 2027.
Overall, our first-quarter results reflected steady execution in a dynamic operating environment, with demand improving as the quarter progressed. The business performed in line with expectations, and we're pleased with how we're starting fiscal 2027. Net sales increased 1.3% compared to the prior-year period to $710.2 million. These results were slightly ahead of expectations, reflecting stronger-than-anticipated overall demand throughout the quarter.
In the United States, homes sold increased 1.8% to 7,089 units. For Q1, average selling price increased 0.6% to approximately $95,600, primarily driven by pricing on homes sold through our company-owned retail locations. In Canada, homes sold declined to 185 from 250 in the prior-year quarter. The volume decline, which was impacted by weather-related disruptions, was partially offset by higher average selling prices. Adjusted gross profit was $179 million, representing an adjusted gross margin of 25.2%.
This was in line with our expectations and reflected disciplined pricing actions, operational execution, and ongoing efforts to offset higher material costs in a volatile macro environment. As we discussed last quarter, these pricing actions typically lag cost increases. We expect the benefits to gain momentum in the second quarter. Adjusted SG&A expenses represented 16.4% of net sales for the quarter, within our expected range. Adjusted net income attributable to Champion Homes was $48.3 million, or $0.88 per diluted share.
Adjusted EBITDA was $73.6 million, representing an adjusted EBITDA margin of 10.4%. Our effective tax rate was approximately 25% compared with 21% in the prior-year quarter, reflecting the expiration of Energy Star–related tax incentives, which we spoke about on our Q4 call. We ended the quarter with cash and cash equivalents of $784.7 million compared to $638.3 million at fiscal year-end. The increase was primarily due to the proceeds received from the ECN transaction.
Operating cash flow totaled $72.5 million during the quarter, demonstrating the strong cash generation characteristics of the business. We also continued to return capital to shareholders, repurchasing and retiring $50 million of common stock during the quarter. In July, the Board refreshed the share repurchase authorization back to the $150 million level. Since the inception of our share buyback program in fiscal 2025, we have repurchased $330 million, or 8%, of our total outstanding shares.
Overall, we continue to maintain a highly flexible balance sheet that supports organic growth, investment, strategic acquisition, and shareholder returns. Looking ahead, our outlook reflects both the current operating environment and our confidence in our ability to execute. Our second-quarter guidance excludes Homes Direct, given the timing of the transaction close. Consumer purchasing power remains under pressure, and interest rates remain elevated relative to historical levels.
Despite these headwinds, we believe Champion Homes is well positioned given the value and breadth of our product portfolio and the broad reach of our channel network. Material costs remain elevated across the industry, though the rate of inflation has slowed from what we saw earlier in the fiscal year, and we continue to execute strategies to mitigate the impact. Looking toward the second quarter of fiscal 2027, we expect revenue to grow mid-single digits compared to the prior year.
This reflects the demand increases we saw in Q1 and resulting increases to backlog across our channels. We expect near-term adjusted gross margin in the 25% to 26% range, as the actions we have taken to mitigate material cost pressures are beginning to take hold, and we expect those benefits to build as we move through the second quarter. We continue to manage SG&A prudently with a focus on advancing our strategic growth priorities and driving execution in Q2.
We expect adjusted SG&A as a percent of sales to be 16% to 17%, consistent with Q1 and our run rates following the Eisman acquisition. As a reminder, Energy Star tax credits expired on July 1st, which is expected to increase the fiscal '27 ETR to approximately 25%. In summary, we remain disciplined in our near term while we continue to invest in our long-term strategy, generate strong cash flow, and allocate capital in ways that will create sustainable shareowner value.
I'll now turn the call back to Tim.
Tim Larson, President & CEO
Thank you, Dave. Our first-quarter results demonstrate that despite a dynamic operating environment, Champion Homes continues to execute its strategy with excellence. The progress we've made over the last several years starts with our people, who we believe are the best in the industry. It is also reflected in our channel diversification, retail expansion, product innovation, and our direct-to-consumer platform. Each of these position us favorably relative to the broader market, as demonstrated by our performance in Q1.
With that, operator, let's open the line and proceed with questions.
Erica, Operator
Thank you. As a reminder, at this time, if you would like to ask a question, it is star then one on your touchtone telephone. If at any point you find your question has been answered, you may remove yourself from the queue by pressing 2. Again, that is star one to ask a question. And we'll take our first question from Dan Moore with CJS Securities. Please go ahead.
Willem, Analyst at CJS Securities
Hi, this is Willem for Dan. Thanks for taking our questions. Can you update us on the cadence of retail traffic and orders through May and June as well as early Q2 in July?
Tim Larson, President & CEO
Good morning. Yeah, we saw good momentum through the quarter, and that's reflected in our backlog growth and certainly our outlook for Q2. And that traffic was both digitally as well as through the stores. And I would say the traffic at retail also indicates broader traffic that we're seeing with our independent dealers. And you saw the strength of that in our quarter as well as in our guide. So we've been pleased with the traffic, and we're looking forward to seeing that go throughout the summer months here into the rest of the year.
Willem, Analyst at CJS Securities
Thank you. It's very helpful. Inside the plants, where are you increasing production given the uptick in backlog, where are you holding steady, and how should we think about production in Q2 relative to the quarter you just reported?
Tim Larson, President & CEO
Yeah, we began ramping production in the key markets where we saw the growth in Q1, and we'll continue to do that through Q2. We do that very thoughtfully by plant location and looking at what their backlog is, what market conditions they're operating in. But we have been increasing production. You saw that through our utilization. We'll do so where it makes sense by each region.
Willem, Analyst at CJS Securities
Thank you. And then just one more: ASPs ticked lower sequentially. Was that a function of mix, fewer homes sold through captive retail, both? And what are your expectations for the next few quarters relative to the ASP you reported in Q1?
Dave McKinstray, CFO
Yeah. Morning, Dan. So a couple things going on within the ASP. So we talked about some pricing actions we've been able to take in Q1 to mitigate some of the inflation, so that's definitely a positive. As we think about ASP, a couple headwinds that we have: first one primarily on the channel mix side of things. So we're seeing good strength out of the community and independent channels. So that, while good in overall volume and net sales, is a little bit of an ASP headwind for us, so that's the first one I'd point to.
The second one, and smaller in impact for us but still notable, would just be on the product mix. What we're seeing is we've talked about the consumer environment. As they make their choices, they are going to more base-level models, especially as we see them move into the multi-sections. They're electing for a more base-level model in the multi-section. So those are a couple dynamics that we're seeing play out on the mix side of things and impacting ASP.
As we think about it going forward, obviously this will vary quarter to quarter as we think about what's going to be sold through our captive retail channel, as that has a big impact on ASPs versus independents and communities. But generally, next quarter I'd expect it to be sequentially higher than this quarter, and as we think about it year on year, roughly flat, maybe some slight headwind just given that mix play-out. But again, this will vary as we move forward quarter to quarter.
Willem, Analyst at CJS Securities
That is great color. Thank you so much.
Erica, Operator
Thank you. And we'll take our next question from Phil Ng with Jefferies. Please go ahead.
Phil Ng, Analyst at Jefferies
Hey guys, really impressive quarter. I guess first off, the guidance you guys provided for fiscal Q2, the mid-single-digit growth, which is great. Any way to unpack the organic piece—price? I guess Dave gave price—but any way to unpack the Homes Direct piece in the quarter versus the organic side of things?
Dave McKinstray, CFO
Yeah, Phil, so the guide is all organic. We did not include Homes Direct in that guide just given the timing of the close here late last week. So as we think about Homes Direct, it'll be relatively immaterial to the total, but it will be additive to that guide that I provided.
Phil Ng, Analyst at Jefferies
Okay. Is there going to be a ramp-up period in terms of how that kind of builds and how you integrate in terms of the drop-through contribution as we think about how the year progresses?
Tim Larson, President & CEO
Yes, Phil. As far as Homes Direct, we've mentioned they did about $70 million in sales. They have 11 locations. One of those locations was next to our Chandler facility, and we were the primary provider of products, obviously, there. The other 10 operate like our traditional dealers, so you're going to see that ramp over time as we migrate other manufacturers' products to ours. And so as you think about the business, those are some of the indicators, and we'll update as we go along.
But just to reiterate, there's none of that in our guide in Q2.
Phil Ng, Analyst at Jefferies
Super, that's helpful. And it's certainly exciting news on the legislation front on the Road to Housing Act. Tim, perhaps how quickly you think HUD's going to be able to give you some color in terms of how this ramps up? And then you certainly have to retool your specs, your product offering, inventory—so just kind of help us think through when we could potentially see an uplift in demand. And some of the steel chassis dynamic—should we think of that as a cost good guy, or perhaps it makes your product even more of a value prop for some of the consumers?
Tim Larson, President & CEO
Yeah, I appreciate the question, Phil. I mean, we're very pleased legislation passed, and the support that came from the leadership of HUD Secretary Turner was just tremendous. As we mentioned in the prepared remarks, the industry is now working with HUD on the detailed rulemaking that we will adopt to our code for the HUD code, and that allows us to permit homes without a chassis. That process, as you can imagine, takes time. And there's engineering involved in really defining the product specs, and also how it affects transport and set-and-finish—things that we need to make sure are ready to be able to comply with the code and the execution.
So that approach is ongoing. From there, there's obviously input that happens with a lot of different comment periods. So we're not anticipating an impact in F27 because those things take time. And past HUD, if you will, impact has been, you know, a year plus. This may happen faster just given the focus on the fourth, but we don't anticipate immediate impact. It's going to be gradual over time. And what we're pleased by is the team is working well with HUD, and we're going to continue to focus on the opportunities as they make sense.
And then you've got the local piece, which is: how long does the local adoption happen around zoning in each of those municipalities? That's in terms of the timing. In terms of your question on how we think about the chassis removal, we don't really see it as much as a cost play being the primary driver. It's really more about how this changes the aesthetic of our homes to be at parity with site build at the local level and also allows us to do other types of products.
And it gives us the ability on the zoning side, as I mentioned, for municipalities that historically maybe weren't as supportive—if the home was on the chassis—this gives us that opportunity. So we really see it as about expanding the addressable market, product aesthetics, and also ultimately being able to engage a broader set of buyers through all of our channels, but certainly our builder-developer channel in particular. So it's encouraging, but it's going to take time and we're engaging that process right now.
Phil Ng, Analyst at Jefferies
Tim, could you see an uplift as early as spring selling season 2027?
Tim Larson, President & CEO
Yeah, we'll update you as we go along. It really depends on how long this process takes that I walked through. So we'll keep you posted as we go along. And the teams are engaged, and we'll keep you updated as we go along that process.
Phil Ng, Analyst at Jefferies
Okay? Really appreciate the color, guys. Thank you.
Erica, Operator
Thank you. And our next question goes to John Lavallo with UBS. Please go ahead.
John Lavallo, Analyst at UBS
Good morning, guys. Thanks for taking my questions as well. You know, it seems like you're targeting a 4 to 12 week backlog range. You're currently around the midpoint there. I mean, what is sort of the optimal backlog level for balancing revenue visibility, customer service, and operational efficiency?
Tim Larson, President & CEO
Yeah, it's a great question. That is our range and we talk about it in that range. It really is plant by plant that we work on that. And because we're working with the customers—when do they need the homes, how does that tie to their projects, including set-and-finish timing? So we like that four to 12 weeks, and we do that customer by customer. So, for example, there are times customers will say, look, the orders I gave you—it's taking a little longer on set and finish—so you can pace those out.
We'll move other customers up. So that's where that range really comes into play. And from a plant perspective, it allows, obviously, planfulness on labor. And so we make a decision, plant by plant, how we ramp based on that. And we also want to do it thoughtfully on the margin side because you don't want to drive, if you will, overtime or extra cost at a level that's unnecessary. So there's a good balance there. And that's why that range of backlog is what we speak to.
John Lavallo, Analyst at UBS
Understood. And then the 2Q guide implies about 200 basis points of gross margin headwind despite homes, the units increasing year over year, backlog being up about 34% sequentially. I mean, is the bulk of this the elevated input cost inflation, or are there just other factors that we should be considering?
Dave McKinstray, CFO
Yeah, thanks. I think it's all on the elevated input costs as we think about it. So just a couple things I'd note there—and we made the comment to it in the prepared remarks—but we've seen those start to level off now, albeit at this higher rate. So as we look forward, what we're assuming is kind of the environment that we're in now, tacking forward. Obviously, it's a pretty volatile environment, so we'll have to see how that unfolds. But it's those same cost pressures that we talked about back in Q1.
As we think about the offsetting mitigation actions—and we've spoken about this—we've spoken about pricing. We've spoken about driving efficiency within the manufacturing. So we'll continue to execute against those things, and we should see those accelerate as we move through Q2 as well.
John Lavallo, Analyst at UBS
Great. Appreciate it, guys.
Erica, Operator
Thank you. And we'll go next to Matthew Bouley with Barclays. Please go ahead.
Matthew Bouley, Analyst at Barclays
Morning, everyone. Thanks for taking the questions. Wanted to ask about, in terms of the rulemaking process now that the legislation has been passed—because it's kind of an open-ended question here—but how do you think about the sort of benefits of standardization in manufacturing? Obviously, when you had a fairly specific HUD code, that ability to kind of create a lot of the same unit with various changes—that would have benefits to your manufacturing.
On the other hand, now with the removal potentially of the chassis, you can have more flexible design methods. And so, again, an open-ended question, but maybe in terms of how you're putting forth your own inputs into that rulemaking process and then, when it does eventually get into place, how do you think about that balance between, again, standardization versus more of that flexible design? Thank you.
Tim Larson, President & CEO
Yeah, I appreciate that, Matt. Great question. Part of the approach is, by having a national HUD code that allows for broader utilization of our offsite-built homes versus, say, traditional modular, there is a benefit that you can have national product, national specs that you can leverage across your platform, albeit with some local variation where it makes sense. So that's compared to previously modular-built homes that took on the local building specs, which is why modular typically has not as great of adoption as HUD.
So we now get the benefit of that national. But through the chassis removal approach, in terms of plant by plant, one of the things that our teams always work on is how effective can they be at having enough changeover between types of product. As you've seen in our product portfolio, we can make a very entry-level home multi-section. We can make park models, cabins, various variants of those homes. And the agility of the team is a key part of that.
Part of what we do during the rulemaking is to help make sure that there is as much standardization as possible while still delivering on what the customer is going to expect. And that standardization does help the execution that you mentioned. So that's literally the process that the teams are going through and the preparation that we'll do as we go forward, leveraging the benefits of our experience on various products that we've done in our facilities.
Matthew Bouley, Analyst at Barclays
Got it. Okay. Yeah, that's really helpful, especially discussing the sort of the local versus national code versus what you already do with modular—so really helpful there. And then, I guess secondly, maybe just sticking on the same topic because it's such a big topic here going forward since the legislation has been passed—how are your conversations going with your institutional customers, with REITs, with builder-developers? What do you think they're going to be looking for from you with this new kind of design flexibility going forward?
Thank you.
Tim Larson, President & CEO
Yeah, clearly our builder-developer business is where you have most of that occurring, given that they're in development projects—they're thinking about their future land use. And so we're in more of the strategic discussions there because they, too, are waiting to see how long it's going to take to get down to this—to actual product in the market. And that's going to take some time. As I mentioned in my prepared remarks, we're hearing from our key customers that many of them are going to continue with the chassis communities, obviously make SEMs, some independents that serve more of the traditional HUD buyer.
So we're prepared to have our portfolio support both chassis and off-chassis. And we think that balance is really important given the type of industry we serve and our range of channels. But the conversations with those builders—it's encouraging because they remember when they went to zoning and said, well, we want this project, and they said, well, we want you to do it mod, not HUD. Well, now we can come back to those in the future and say, well, we can do a home that looks like it's on a foundation because it won't be on a chassis.
And those are the type of opportunities that we see. So it's a balanced approach across our channels that we see as we go forward.
Matthew Bouley, Analyst at Barclays
Well, got it. Well, thank you, Tim. Good luck, guys.
Erica, Operator
Thank you. And we'll take our next question from Greg Palm with Craig-Hallum. Please go ahead.
Jackson Trader, Analyst at Craig-Hallum
Good morning, this is Jackson Trader on to Greg Palm. I appreciate you taking the question. Kind of wanted to just start out on getting some color on some of the key markets that you had talked about that saw growth and what kind of drivers to your outperformance, as well as if you could touch on any competitive dynamics that might be happening across geographies that impacted the quarter, and if that might have been a part of the ASPs.
Tim Larson, President & CEO
Yeah, in terms of geographies, we saw obviously some increased shipments in Texas, Florida, Mississippi, Alabama—those states. A little weaker in the West and parts of the Midwest during the first quarter. With respect to orders and our backlog, we did see broad strength around geographies—maybe a little bit of weakness there in the West relative to the rest of the growth. So that's from a geography perspective. From your question on the competitive element, you can imagine that every day our teams are all competing to earn that customer, and various markets have certain amounts of retailers and retail presence.
And our team does a really good job of helping that customer get to the right home, the right price point, every month that they're looking to pay. And that's what the battleground is in terms of that approach. And I've been pleased with how that's happening. To your question on ASP, no, that was more of a function of having more community orders, more retail orders—independent retailers versus captive retail. As Dave mentioned, we have the wholesale price there versus when we have the retail being the main driver—you get the retail and the wholesale.
So pricing was really a function of the channel mix that we had versus something more direct. In terms of your question, we did see from a consumer perspective, as Dave mentioned, the entry-level piece, which is obviously going to be driven by the consumer, but we think it's all healthy things relative to the market and our ability to grow share with the right balance in the marketplace.
Jackson Trader, Analyst at Craig-Hallum
Perfect. And do you see that kind of shift toward base models—kind of possibly a longer-term thing, or is that kind of just something that hit in the quarter and kind of starts to normalize going forward?
Tim Larson, President & CEO
You know, it certainly reflects the consumer. And so as the consumer health strengthens, you'll see some opportunities there. It also, again, is by channel, and as community strengthens in their need, they tend to be in those single-section affordable price points. So it's really going to be more based on those market factors. But we're positioned well across our portfolio in a range of options. We have our good, better, best approach, which allows us to ladder up where there's opportunities with consumers.
UNKNOWN, Analyst
Perfect. I'll leave it there. Thank you.
Erica, Operator
Thank you, and as a reminder, it is star and one to ask a question. We'll take our next question from Jesse Lederman with Zelman. Please go ahead.
Jesse Lederman, Analyst at Zelman
Hey, thanks for taking the questions and nice job during the quarter. And another question on price, not to kind of harp on it, but it sounded like last quarter you were anticipating some of these channel and price point mix headwinds and, if I remember correctly, suggested that you thought pricing would be relatively steady sequentially and, of course, with the decline, kind of still wondering, like, were the mix headwinds more than you were expecting?
You know, what were some of the other dynamics that may have deviated from your expectations entering the quarter?
Dave McKinstray, CFO
Yeah, thanks, Jesse. Exactly as you said, it was just a little bit more of a headwind than we had initially anticipated. So really nothing more to it than that. We did anticipate as we went through, but it was a little bit more; we saw more strength in independents and communities than we had anticipated.
Jesse Lederman, Analyst at Zelman
Got it. I guess it's a good problem to have. So I guess on a like-for-like pricing basis, how would you describe, you know, your pricing power and pricing out in the market?
Dave McKinstray, CFO
Yeah, I mean, we talked about we've taken pricing actions in Q1 and, you know, with our product we feel like we can get the value for our product, and we've done that very strategically to maintain competitiveness in each of our markets. So we feel good about that. I do think it's important to understand the pricing dynamic that we're talking about. When we sell a home wholesale the average price is in the $85,000 range. When we sell it in captive it's in the $140,000–$150,000 range.
So if you think about the strength—when I talk about the relative strength in community and wholesale, or independent, excuse me—you're really talking about that $85,000 price point versus, you know, $140,000 price points. So a small move in that can actually have a pretty big impact to ASP. So when I talk about versus expectations we're not talking about a huge move. It's really just that difference between wholesale and retail pricing and the impact that can have.
That's why I made that comment towards how it will vary quarter to quarter as we go forward, because these aren't huge moves but they can have pretty, you know, what look like percentage point changes on ASP.
Jesse Lederman, Analyst at Zelman
All right, that's really helpful, thank you. I guess me and perhaps others were underappreciating the magnitude that the mix dynamics can have on the ASP, so that was really interesting and helpful color. I'd love to talk a little bit more about SG&A. Seems to kind of continually grudge higher quarter over quarter—was up about $4 to $5 million on an adjusted basis—which, you know, the prior quarter should already include Eisman, and we're going to have the Homes Direct overhead presumably entering the fold coming up here the next quarter or two.
So just curious if you could talk about kind of the pre–Homes Direct run rate of SG&A, what's in there, what's maybe transitory, what might come out, and how we should expect SG&A to trend once kind of the Homes Direct overhead is more fully incorporated.
Dave McKinstray, CFO
Yeah. So we've been pretty consistent, the 16% to 17% of sales. And as we think about our SG&A, you have to remember that a good portion of that is variable; it comes with as we sell homes. As we sell more homes, you're going to get higher SG&A costs. So there is a big relationship there. Now, Homes Direct will add to it as we go forward. It's a little bit larger than Eisman from a sales perspective. So if I were to point you to what to look at, think about the relative size of Eisman to Homes Direct, and then you can kind of adjust your model proportionately for SG&A—you can think about it that way, what Homes Direct would add.
Now as we think about steady state going forward, you know, ultimately we'll start to pick up some leverage on the fixed portion of the SG&A, and we'll continue to do that. It's that variable portion that will push the absolute dollar higher. So as you think of it as a percent of sales, we'll see, gradually over time as we continue to expand the top line and we get that leverage on the fixed portion of it, we'll see the percent of sales, you know, work lower but the absolute dollar will work higher.
Right. So that's kind of how to think about it, Jesse.
Jesse Lederman, Analyst at Zelman
Yeah, makes sense. Appreciate that. Just kind of looks like even if I assume some run rate for variable versus fixed, the fixed component did tick higher quarter over quarter as well. Can you just give us maybe an update on, maybe relative to like a year ago outside of Eisman, what some of the SG&A— I know you've talked about in the past some of the technology initiatives—if you can give us an update on how that's trending.
Dave McKinstray, CFO
Yeah. So just a couple things. One, if you look at the prior year in Q1, we did have some discrete things that impacted it. So that's why I say more steadily, broadly, if you step back and look at a broader set of quarters, that's one thing to look at. The other thing to think about is as retail grows, so will SG&A. Retail runs heavier as a percent of sales to SG&A. So there's a mix in retail. Tim spoke about retail ticking up slightly as a total of our business and net sales, so there's that impact as well.
We are making investments for the long term. Now, as we think about that, we're making choices on how we fund it to drive SG&A prudently—where can we shift dollars of investment. But we are making investments in infrastructure, things like IT, people, our team members, things like that to make sure that we can drive the business over the long term.
Jesse Lederman, Analyst at Zelman
Really helpful. Thanks for all the color.
Tim Larson, President & CEO
Great. Well, we appreciate everybody joining us today. We look forward to updating you on our second quarter and all the progress in the market. Thanks, everybody. Have a great day.
Erica, Operator
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
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