Good morning, and welcome to Skyline Champion Corporation Second Quarter Fiscal 2019 Earnings Call. The company issued an earnings press release yesterday.

Before we begin, I would like to remind everyone that today's press release and statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are subject to risks and uncertainties, include the -- sorry, that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in their filings with the Securities and Exchange Commission..

Additionally, during today's call, the company will discuss non-GAAP measures, which they believe can be useful in evaluating their performance. A reconciliation of these measures can be found in the earnings release..

I would now like to turn the call over to management. Please go ahead. .

Good morning. This is Keith Anderson, Skyline Champion's CEO. With me this morning is Laurie Hough, EVP and CFO of the company. Thank you for joining our second quarter 2019 earnings call..

I'd like to express my continued excitement about our new company and the opportunity ahead as we integrate the businesses and pursue a number of growth opportunities and operational improvements..

I'll start off by providing some background on the company and lay out our strategy for those of you that are new to the story.

Following the business Combination of Skyline and Champion in June of 2018, we are now the second largest factory-built housing company in the U.S., with pro forma market share of approximately 17% of the HUD manufactured housing industry. We also hold a leading position in Western Canada..

On a pro forma basis, we generated $1.4 billion of net sales and adjusted EBITDA of $95 million for the trailing 12 months ended September 29, 2018. This equates to an adjusted EBITDA margin of approximately 6.8%, which is before realizing all expected synergies stemming from the Combination..

Our U.S. business represents approximately 84% of our pro forma net sales, with Canada and our transportation business each representing approximately 8%..

Our product portfolio is broad as we offer a number of different types of homes at various price points. While manufactured housing accounts for the majority of our shipments, we have a strong presence in modular housing, commercial and Park Model RVs..

Our products are sold to a network of more than 1,000 independent dealers across the country as well as 21 company-owned retail stores located primarily in southern U.S. We operate in 36 manufacturing facilities strategically located in markets that are close to our customers.

Our industry is attractive and is being driven by differentiated and secular trends leading to outsized growth compared to the traditional site-built housing market..

Market volumes for manufactured housing have been recovering but remain significantly below long-term averages, with 2018 MH industry volumes expected to approach 100,000 units compared to the long-term average of 224,000..

Viewed from another perspective, MH is expected to be about 10% of single-family housing starts this year compared to the longer-term average of more than 17%. We believe there is significant room for continued growth in the MH industry.

We expect growing demand combined with new financing options to help close the gap with historical trends as MH plays an increasingly important role in providing the market with affordable housing solutions..

Before I jump into the financial results, I'd like to highlight that we had a very busy quarter in the capital market since we successfully completed 2 secondary equity offerings. First in August, we completed a $10.35 million share offering, raising gross proceeds of $227.7 million for the selling shareholders.

Then in September, we completed an $11.5 million share offering, raising gross proceeds of $336.4 million for the selling shareholders..

The core offering of 10 million shares in September was upsized from the original $6 million share offering. The completion of this transaction marked an important milestone as our sponsors' equity ownership fell to under 50%, meaning that Skyline Champion is no longer considered a controlled company as defined by the New York Stock Exchange.

This also prompted 3 of our sponsors' representatives to transition off of our Board of Directors..

I appreciate the strong investor interest in both offerings and would like to welcome all of the new shareholders to Skyline Champion. We look forward to continuing to get to know you and updating you about our business and performance going forward..

Now moving onto the financials. While this is our second earnings call following the business Combination between Skyline and Champion on June 1, this is the first time that our results included 3 full months of operations from both companies. Recall that our fiscal Q1 results had 3 months of Champion but only 1 month of Skyline..

As a reminder, our second quarter results are for the 3 months ended September 29, 2018, and our fiscal year will end on March 30, 2019..

I am pleased with the performance we delivered in the second quarter. We grew our top line by 37% and our adjusted EBITDA by 58%. We expanded our adjusted EBITDA margin by 90 basis points to 6.7%..

Our results were driven by improved volumes and margins from the U.S. manufacturing and retail segment. We sold 29% more homes at an average selling price of nearly $61,000..

We continue to see improvements in margins due to the pricing, discipline and effectiveness, better control over material content and usage and improved operating leverage from volume improvements. Next quarter, we should begin to realize more of the benefits from our [ synergy's initiatives ]..

I'll provide some comments now on the trends in our markets. We are continuing to see strong demand in most of our U.S. markets. Specifically, large markets such as Texas, Florida and California continue to have long backlogs. We are selectively adding capacity to meet demand, which we will describe in more detail shortly..

Overall, backlogs remain strong as demand through all 3 of our distribution channels, independent dealers, company-owned stores and communities remain healthy..

During the second quarter, our consolidated backlog grew to $252 million from $222 million in the first quarter. We did see some softening in Canada. The provinces of Alberta and Saskatchewan continue to experience a weak housing demand, while other Canadian markets that we are in remain healthy..

In terms of the overall manufactured housing industry, there continues to be strong demand as HUD shipments increased by 9.7% year-over-year through the first 8 months of 2018.

Going forward, we continue to see the industry growing in high single digits, outpacing the growth of overall housing starts as manufactured housing is expected to take market share from traditional site-built housing..

We are also seeing the markets for modular and park model strengthen, which is helping to boost backlogs and drive average selling prices higher. While there are concerns about the outlook for the broader housing market, given softening in recent statistics, we have not seen any slowdown in our U.S.

market as our order growth and backlog remain strong. We do expect a normal sequential seasonal slowdown in our backlog during our third quarter, but the positive underlying drivers remain in place..

Consumers continue to view our homes as attractive and affordably priced. They are built with quality and care and with the features fitting the needs of today's families. Supportive demographic trends along with low unemployment rates continue to help our sector, given the growing cost advantages compared to the other housing alternatives..

We also continue to see improving competitive retail financing programs for both the chattel and land home segments of our business. Increased competition has resulted in interest rates for purchasers that are largely unchanged, on some cases, lower when compared to a year ago.

This also compares to the site-built market where Fannie Mae and Freddie Mac rates have increased by 75 to 100 basis points year-over-year.

The result is that our product continues to be very affordable alternative, providing tangible benefits to consumers such as allowing them to purchase larger homes with attractive features such as energy efficiency, granite, quartz countertops and smart technology..

In addition, last year, only about half of our industry shipments were financed. We expect this number to increase as more lending institutions enter our niche industry..

Fannie Mae enhanced our MH advantage product for land home purchases recently to benefit the appraisal language in their underwriting guidelines. We expect Freddie Mac to release their version of this product shortly as well.

While the impact from GSEs has not been materially impacting the industry this year, we do see momentum building along with other products that should enhance chattel financing next year..

Lastly, we are seeing plant capacity utilization rates rising into the 90s in some markets. As a result, we've taken a number of actions to expand capacity, improve efficiency. We recently completed the expansion of a second production line in our Corona, California facility.

This line will focus on Park Models and small homes, streamlining production capacity of both Corona and San Jacinto facilities..

We have a proven track record of driving growth in revenue and margin by expanding facilities that have strong management teams and labor forces that are in place..

In addition, we are opening a new manufacturing facility in Leesville, Louisiana. This will allow us to expand our share in an underserved region that is -- historically been a top 10 HUD market. It is -- also allows us to meet growing demand in the nearby markets such as Houston, Austin and The Florida Panhandle.

We anticipate that, that will take approximately 6 to 9 months to equip and staff the facility. This is another important step as we continue to execute our strategy as a combined company with increased scale and scope..

I will now turn the call over to Laurie to discuss the quarter in more detail. .

one, the inclusion of net sales of $68 million for the Skyline operations; two, plant operating improvements, which led to increased output; three, additional retail sales centers in operation during the most recent quarter; and four, an increase in the average home selling price..

The number of U.S. factory-built homes sold in the second quarter of fiscal 2019 increased 29%. Average selling price per U.S. homes sold increased 16% as a result of increased market demand, product mix and pricing actions to offset the impact of rising material and labor costs..

Canadian sales volume declined by 10%, driven by soft housing demand in the provinces of Alberta and Saskatchewan..

Gross profit increased to $59 million, up 43% compared to $41 million in the prior year period. Our U.S. factory-built housing segment increased gross margins to 16.5% of segment net sales from 15.8% in the same period last year..

Although material prices and labor costs have been increasing in recent periods, we have been able to offset the margin effect of those increases with the combination of price adjustments, operational improvements and product rationalization. Decreased volume at the Canadian operations did impact overall company gross margin..

The company continues to enhance our product innovation by adding cost-effective value to our product portfolio, allowing us to meet the growing needs of our customers while continuing to rationalize our material SKUs.

Continuing to streamline how and what we build and the number of models we offer as demand continues to increase allows our plants to increase output, which allows for better leverage of fixed costs..

SG&A in the second quarter increased to $128 million versus $28 million in the same period last year. The increase was primarily due to $86 million of noncash equity compensation expense for employee restricted shares issued in connection with the Combination. These shares vested as a result of the equity offerings..

In addition, SG&A increased due to the inclusion of the Skyline operations for the entire second quarter of fiscal 2019 and continued integration and restructuring costs associated with the Combination..

The net loss for the second quarter was $77 million compared to net income of $7.4 million during the same period from the prior year. The decline was driven by the increase in SG&A associated with the $86 million of equity compensation..

On an adjusted basis, we generated $0.23 of net income per diluted share compared to $0.17 in the year-ago quarter..

The company's effective tax rate for the 3 months ended September 29, 2018, was a negative 8.2% versus an effective tax rate of 36.5% for the fiscal 2018 second quarter. The change in the effective rate was primarily due to nondeductible transaction-related expenses and noncash stock compensation expense.

Absent these nondeductible discrete items identified in the quarter, the company's effective tax rate would have been 31.5%..

Adjusted EBITDA for the 3 months ended September 29, 2018, was $23.8 million, an increase of 58% or $8.7 million over the 3 months ended September 30, 2017. The adjusted EBITDA margin expanded by 90 basis points to 6.7%.

We're seeing improvement driven by strong demand in a number of our markets, improved operating leverage as our volume grows and continued results from our operating margin improvement initiative..

As of September 29, 2018, we had $103 million of cash and cash equivalents. Cash generated from operations for the first 6 months of the year improved by over $25 million versus the same period last year, driven by improved profitability adjusted for the noncash equity-based compensation and improved working capital management..

The company had $32.1 million of unused borrowing capacity under our $100 million revolving credit facility as of September 29. We have a strong and growing cash position with added liquidity from our credit facility that provides ample flexibility to invest in our core business and our strategic initiatives..

We continue to make good progress integrating Skyline into Champion's Legacy platform. A critical aspect of this integration is moving the core functions within Skyline's plants onto Champion's systems. Systems conversions are on track, and we expect to have them complete by June 2019.

The company has been focused on synergy capture and are revising our original estimates of $10 million to $15 million to our updated range of $12 million to $16 million..

Operational improvements included in the synergy targets are progressing better than expected. These improvements are resulting from eliminating redundant material costs, streamlining throughput and refining product mix.

Procurement rationalization synergies are coming in as expected and will take time as material changeovers roll through the supply chain and our processes..

We are revising our time to achieve synergies from our original estimate of 24 months to 18 months or reaching run rate by December 2019. We did begin to realize some synergies toward the end of the September quarter but expect a bigger impact to our financial results in Q3..

I'd like to turn the call back to Keith for some closing remarks. .

Thanks, Laurie. As you can see, we delivered strong results during the first half of our fiscal year. We feel good about the outlook for the second half, given our strong backlog and the potential for some pent-up demand in areas impacted by recent hurricanes. In recent weeks, material inflation has softened.

We are beginning to see synergies from the Skyline transaction. Collectively, these trends provide a nice backdrop for the company to continue to deliver revenue growth and margin improvement..

As we look forward, we expect our markets to remain healthy, driven by increasing demand for affordable housing, supported by improving financing and regulatory environments.

We see opportunities to grow our business organically, pursue incremental M&A and expand our margins through operating leverage, operational initiatives and transaction-related synergies.

Longer term, we are well positioned to remain one of the leading providers of factory-built homes and generate attractive returns for our stakeholders while providing affordable housing for our customers..

Operator, you may now open the lines for Q&A. .

[Operator Instructions] Our first question comes from the line of Daniel Moore from CJS Securities, Inc. .

I wanted to start with just top line. Obviously, exceptionally strong revenue growth.

I'm wondering if there is any impact at all as far as hurricanes and/or weather, Florence and Michael, in the quarter? And whether you expect to see any impact in Q3?.

Dan, good question. There was some impact in the results of this third quarter for Hurricane Florence. Obviously, Hurricane Michael didn't make landfall until after the quarter-end. But relatively immaterial, we did have -- we have one facility in Lillington, North Carolina that lost 7 days of production.

And then, obviously, the heavy rainfall impacted our -- the shipping abilities off the East Coast and into the Midwest. In addition to that, there was a tropical depression that came through in Texas that impacted shipping capabilities there. .

And then as far as Q3 is concerned, expecting any impact as well? Or is that encompassed -- those comments encompass that as well?.

We do see that the shipments will catch up, I would say, for the delay. And then, eventually, through the end of the year, we'll catch up the lost production at the Lillington facility.

But overall, it's really more dependent on the ability of the transporters to ship the product in those areas that were impacted by flooding in the hurricanes as well as the set crews to set the homes. .

Okay. And then kind of a related question, expectations for FEMA. Q3 has a pretty tough comp. Obviously, your backlogs are rising so expected to grow through it, but any thoughts or comments on that? And then the outlook for FEMA for potential inventory replenishment as we look out to fiscal '19 -- for calendar '19. .

There is no FEMA in either of the year-to-date periods presented in our earnings results. There's also no FEMA in our current backlog number. And you're absolutely right. There are some tough comps coming off in the third and fourth quarter. Last year, Champion alone produced 1,100 -- close to 1,100 FEMA units.

That was very heavily concentrated in the third quarter. And those production rates are very standardized products, which help with efficiency through the plan. .

Got it. And lastly for me, and I'll jump out. Gross margins, it's very strong year-over-year.

If we kind of compare to fiscal Q1 down about 50 bps sequentially, I'm wondering how much of that would you attribute to Canada? And how much to the change in mix, given we've got a -- kind of a full quarter now with Skyline in the operations? Just trying to put it on a bit of an apples-to-apples basis. .

Yes. Certainly, a piece of it was Canada. I would say, it was less Canadian driven than it was mix of Skyline. Going back in the first quarter, we only had 1 month of Skyline included in the operating results versus the full 3 months in the second quarter.

And as we know, Skyline's margins were historically a bit lower than the traditional Champion plants. So we're working to improve those margins but not quite there yet. Obviously, that's part of the synergy capture. So that was definitely dilutive to the whole in the third quarter -- in the second quarter, sorry. .

Our next question comes from the line of Greg Palm from Craig-Hallum. .

Keith, maybe we could start some commentary out there -- mix commentary as it relates to the broader housing cycle. You talked about backlogs and order trends. Would be curious to kind of get your two cents on what you're seeing from a demand perspective.

And maybe more relevant, how does your product fare against some of the other options out there? And how specifically does that change in a rising rate environment, in your opinion?.

Yes. It's a good question, Greg. We've been watching our demand closely throughout this past quarter. And it's been very stable. As I mentioned in my opening comments, in some areas of the country, it's more than stable.

It's still growing robustly, and that's caused some challenges and working through our backlog to get our homes delivered on a timely basis. But we feel good about it.

There is a very different price point on our homes from an affordability perspective and what our consumers are seeing from a value perspective versus the rising costs on the site-built side and the alternative housing costs with rising apartment rents. So I think the industry at a 9.7% growth rate year-over-year still is performing quite strong.

So -- thus, our view to -- it's time to open up more capacity in some of these markets that we've got longer backlogs in, Greg. .

Yes. That makes sense. I mean, any evidence that you're -- that you've seen in the past quarter, maybe year-to-date, that as rates are rising and affordability becomes a bigger concern for maybe the traditional site-built, that you're seeing more consumers of that product start to look at other options, i.e.

manufactured housing, anything that you're seeing?.

Yes. I think, in the short window of rising rates here over the past year, we have seen some drop-down buyers, especially in our modular product.

Modular has been growing even faster than the HUD product, and that's your typical buyer that is taking -- at one time, looking at a site-built home, finding potentially affordability being an issue and then dropping into the next class of homes down, which would -- in our product array would be modular.

The other distinguishing factor is, for our HUD product, our rates haven't gone up across the board like you are seeing on the site-built side with Fannie and Freddie. So we are in a niche industry. We've got unique financial institutions with different capital sources. And our rates have been very stable.

So that's also helping from an affordability perspective. .

Interesting. Okay. And I guess, just following up on the previous question in terms of demand, hurricane-related impacts. What are you seeing now from a replacement opportunity? I mean, I'm assuming you're seeing some demand.

But at what point do you start to be able to set some of those homes back in? And any sense in how big the replacement opportunity is down in that region?.

It's still very early, especially in The Florida Panhandle, but we haven't seen the spurt yet in -- both from the community and the dealer network from Hurricane Florence in the Carolinas.

But we -- from everything we hear and see and our people local on the ground, there will be a definite surge in volumes in the coming quarters as people start settling down and getting their insurance proceeds and determining their next steps. .

Our next question comes from the line of Mike Dahl from RBC Capital Markets. .

Wanted to start out on the demand side as well. I guess, if I think about the moving pieces, it seems like organic growth is in that low to maybe low mid-single-digit-type range in the quarter, which will be lagging the industry a little bit. You outgrew the industry last quarter.

Can you just give us a sense for kind of how you're seeing your share position as you've kind of moved through the year? And how much of that is going back to the kind of geographic mix related to weather? Or how we should be thinking about that as it relates to the balance of the year?.

Mike, to answer your question, we really need to consider the mix that's running through the financial statements. So in the unit numbers, you have both retail and manufacturing. We're also seeing -- which impacts overall units.

So we did see an increase in multi-section home sales versus Single Wide home sales in this quarter and year-to-date period over the same period last year. And we're also seeing an increase in our other product types, our modular builds as well as our Park Models and units that we produce and ship into Canada from our U.S.

factories, mostly into Eastern Canada. So all of that is impacting, I think, how one would maybe calculate organic growth, given unit numbers. .

Got it. Okay.

Is there a comparable number that you have that you can offer?.

Yes. When I look at floor volume, which I think of more directionally from an organic perspective, we're in the -- we're closer to the mid- to higher single digits. .

Great. That's helpful, Laurie. And then my second question relates to kind of the pricing environment. And clearly, you had an inflationary environment for the first half of the year on lumber, and that's helped you push price, and you've pushed price ahead of costs.

Now that you're in a more deflationary environment, how should we be thinking about -- for lumber, that is, how should we be thinking about your average unit price and related effects on kind of operating or EBITDA margins?.

Well, there's a couple of things, I think, to consider when talking about price and inflation and how we look at it together. So not only are we raising prices to offset inflation, but we're looking at, once again, different mix of product and optimizing our product portfolio and rationalizing those products that we've talked about earlier.

With -- in relation to lumber specifically, lumber prices are -- have softened more recently, but we're also seeing -- and really waiting to see -- to solidify the impact of tariffs, not necessarily on our company specifically but the broader building products segment.

And even those products sourced in the United States, whether because of the tariffs, those products increase their price. And then, in addition to that, we have labor and healthcare inflation that we're managing. So even though some commodities are coming down, we have other costs that are going up.

So as we've managed in the prior quarters, we're going to continue to manage price and margin overall. .

Okay. That's helpful. And then last one for me. Just given the strength that you're seeing in modular, and that does seem to be an easier conversion process for the traditional site-built buyer and also conventional mortgage product on that.

Is there any change in the way you're viewing that? And potential increases in investments to expand that business more rapidly?.

We have to monitor that mix challenge in a number of our plants around the country. And I'll give you, for instance, Mike, right now in Colorado, the modular sector is growing very rapidly.

So we have a few plants that produce and ship into Colorado that now have converted a bigger portion of their backlog and production from HUD product into more modular products.

So it is something that each market and each one of our plants monitor closely as well as we consider making expansions and looking at new investments, what areas of the country are growing and what types of product line, and we'll continue to have to do that. So it is a very important factor. .

Our next question comes from the line of Matt Bouley from Barclays. .

So just following up on, I guess, broader housing questions. I think, in the industry data, it seemed like there was some deceleration in the August growth for manufactured housing. And so for your own, I guess, U.S.

business, did you see a similar deceleration? How did the growth trends track into September, just given every thing you've heard from the site-built companies? And would love to hear any comments, I guess, about trends in October as well. .

Yes. In August and September, they were very stable months [ from ] us from order rate and then, obviously, a production rate so -- thus, producing the $252 million of backlog at the end of the quarter. We really haven't seen in any major markets any real changes in demand.

From a overall industry HUD shipment level, the month to month numbers I'll caution you do bounce around some because of weather-related events. So we tend to look at things in a more macro environment as far as the industry goes and then what are our local markets, what are our people on the ground telling us.

And so far, traffic's been good at the retailers. I'm sure some of you have listened to some of the calls with the big REITs from the community side, their occupancy rate continue to improve. They're opening up new communities. So we have a pretty robust outlook. .

Okay. And then, secondly, the Leesville opening, I think we were under the impression a few weeks ago that, that was going to be on hold as you are integrating Skyline and Champion.

So I guess, what's changed in your thought process these past few weeks? Is it really just the specific demand in that region? Or just kind of how well the integration is going? I guess, what's led to kind of the change in thought process in such a relatively short period of time?.

Yes. It's a good question. The number one impact was progress made on the integration side, as Laurie mentioned in her opening comments around synergies, and specifically. The systems conversions are going well. So that certainly gave us a greener light to move forward internally.

But externally, we've identified the management teams that are going to be running Leesville. The market in East Texas, Louisiana remain really strong, and now it's bullied by the Hurricane Michael impacts from -- for The Florida Panhandle that certainly are going to help in demand over the next 12 months.

So it's a combination of things, Matt, that drove us that the timing was ready. It will take 6 to 9 months to buy and equip the plant as well as to staff the plant. So we're really preparing for a launch later next spring in that -- in those markets. .

[Operator Instructions] Our next question comes from the line of Phil Ng from Jefferies. .

This is actually Collin on for Phil. Just going back to the pricing discussion. You talked about that 16% improvement.

Can you just give us a little bit more of a feel about how much of that was actually like-for-like pricing versus the change in that product mix that you were talking about earlier?.

Yes, Collin, it's really a mix of both and generally, difficult to separate the 2, unfortunately. .

Okay.

I guess, then is that 16% growth rate at the second quarter you put up in mid-teens, is that something that is sustainable, you think, through the rest of this year?.

Yes. It's certainly -- we need to manage both inflation and competitive pressures, and the competitive pressures are generally more regionally based and sometimes even plant specific.

So if we can't necessarily raise price in those markets where our products are more price sensitive because of the competition, we'll look at despecking the units, changing the way that we build the models in order to maintain margins. .

Okay, great. And then just going back to the capacity additions.

Can you describe a little bit more color about what kind of capital investments are going to be involved in that, and any potential drag on profitability before you see this plant be fully optimized?.

Yes. For leasehold specifically, the CapEx is going to be in the range of $2 million to $2.5 million. And then the ramp time to breakeven is generally 12 to 18 months. And that can range anywhere from $1 million to $2.5 million, depending on the product that's being built in the training needs and speed at which we can bring on the labor force. .

You may want to mention Corona, Laurie?.

Yes, Corona, a different situation because we have the management team and a lot of the labor force in place where we added the additional product line, therefore, Park Models, which helps to streamline the production of the core product lines at both San Jacinto and Corona. So that's a much shorter time to ramp and really very little ramp cost. .

Our next question comes from the line of Daniel Moore from CJS Securities. .

Number one, spend some time on modular. Wondering, outside of traditional HUD code, what you're seeing in other markets, hospitality, other verticals, that's first. And then, second, Canada obviously was a bit soft. What are you seeing there? Is the market stabilizing? Any comments would be great. .

Sure. While we were pleased and continued to see growth in a few other sectors, as you mentioned, Dan, the modular side is outpacing the HUD side year-to-date. Our Park Models, those are those tiny homes that we typically put in our RV communities, are up nearly 30% year-over-year.

And then lastly, the commercial sector, we are just completing a large apartment complex known as The Corners in Detroit as well as we completed a Fairfield Inn hotel unit in Wisconsin. We do have a good pipeline of additional hospitality units coming on later next year, early next spring.

So that's an avenue we always will be looking at as to spreading our different product array around different plants as demand and margin work through. So that will be of continued importance for us to diversify in certain markets. .

In Canada, are you seeing things stabilize there? What should we expect from current demand levels in the quarter?.

Yes. They're -- In British Columbia, they remain very strong. We got very long backlogs. But as we mentioned in our opening comments, Alberta and Saskatchewan, the backlogs are shorter than we'd like. The order rates are down. We haven't seen a bounce back in the past 12 months there.

So I predict that we'll continue to have soft markets there for the foreseeable future, Dan. .

Got it. And then lastly, I think, Keith, you mentioned no real tangible benefit yet from -- in your results to date from financing, from some of the Fannie and pending Freddie programs.

Any sense for when we might see a little bit more meaningful benefit?.

Yes. That's a good question, [ mate ]. As I mentioned, Fannie Mae tweaked their appraisal language on their MH Advantage product a few weeks ago. That was favorable and well received by the industry. It does take time to rollout these programs.

These are a very different distribution through hundreds and thousands of dealers versus financial institutions. So that will take time. We think Freddie Mac will be releasing their similar product to MH Advantage here before year-end. So I'm really looking into 2019 before we see tangible benefits from these programs.

And the program that we're waiting in earnest on and most enthusiastic about is around chattel financing with the GSEs. And they're -- we're being told that they're still committed to launching their pilot programs next year on those programs. .

Ladies and gentlemen, we have reached the end of the question-and-answer session. Now I'd like to turn the call back to management for closing remarks. .

Well, thank you very much for your interest and support. And we look forward to updating you on our third quarter results in a few months. Have a good day. .

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..