Good morning and welcome to Skyline Champion Corporation's Third Quarter Fiscal Year 2022 Earnings call. The company issued an earnings press release yesterday after the close.

I would like to remind everyone that yesterday'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 that could cause actual results to differ materially from the company's expectations and projections. 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.

Additionally, during today's call, the company will discuss non-GAAP measures, which it believes can be useful in evaluating its performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Mark Yost, Skyline Champion's President and Chief Executive Officer. Please go ahead..

Good morning, everyone, and thank you for joining. With me on the call is Laurie Hough, EVP and CFO. Today, I will review our third quarter results, discuss our activity so far in the fourth quarter, and give some color on the outlook for fiscal 2023.

In the third quarter, we continued to see rising levels of demand driven by numerous factors, including favorable financing, historically low inventory levels, and a rapidly growing base of customers looking for a better alternative to site-built homes.

Our attractive product offerings at affordable price points continue to drive order rates higher as industry-wide supply constraints and COVID disruptions remain a headwind to our production levels.

Strong order rates drove backlogs up $136 million during the third quarter to $1.5 billion, or an average 43 weeks of production at the end of the quarter. We anticipate the supply side challenges to continue at least through the first half of Fiscal 2023. We delivered 6,168 homes during the quarter, an improvement of 9% from the prior year.

Increased output along with price increases to cover rising material, labor and freight costs, drove revenue to $535 million in the third quarter, up 42% from the prior year. Our front line teams continue to execute exceptionally well in today's very difficult and unpredictable operating environment.

As anticipated, our home sales volume versus the sequential Second Quarter was slightly lower due to planned holiday shutdowns and higher levels of COVID-related absenteeism. Our capacity utilization during the quarter improved sequentially four percentage points to 68%.

We continue to see the benefits of streamlining our product offerings, which allows us to produce more without increasing material usage, and is particularly beneficial in this environment of persistent material supply shortages.

During the quarter, we also completed the integration of ScotBilt operations and are exceeding the anticipated acquisition synergies as we leverage the manufacturing facilities in strategic footprint in the mid-South region.

We remain on track with our other expansion efforts, and I'm proud to report that we are a month ahead of schedule in our production at our Navasota, Texas facility. Thanks to our supply partners in giving us the material and the incredible team members that have joined us.

I'm really impressed with the workforce and the pace at which they are ramping. As we look forward, market conditions are really starting to come together. We have historic lows in the supply side, while demographic, economic, and migratory factors continue to drive demand.

The supply side housing shortages combined with higher interest rates and inflationary pressures are favorable dynamics to our business model. In these conditions, our advantages only get enhanced. As we have seen in past cycles of rising interest rates, we are better able to convert traditional site-built buyers and gain share.

Because of these dynamics, we're even more excited to have one of our Genesis Homes in Orlando next week for the International Builders Show. We launched Genesis to help builders during these types of market conditions.

The share gains for ourselves and our channel partners will only be heightened by the significant investments we are making on the digital side of our business. These investments will help to eliminate the friction today's consumer experiences throughout their home building journey and will provide us with deep analytics to better serve the customer.

Strong backlogs fueled by double-digit order rate growth and minimal cancellations, combined with positive market tailwinds and investments, drive our focus on increasing capacity and output.

We are continuing to streamline our product offerings and have made very good progress on our long-term plan to incorporate manufacturing technology both on the process and automation side. Our technology partners have done an excellent job solving the unique challenges of our building processes.

And we will be accelerating investments in technology during fiscal 23. Our supply chain partners have also done an incredible job supporting us during these challenging times. We expect that supply chain challenges will be prevalent throughout the course of this calendar year, as many of our partners have been impacted by COVID outbreaks in the U.S.

and overseas. We do anticipate moderate improvement from our supply partners this quarter that will allow us to increase the sequential top-line by mid-single digits in our fourth quarter. It is also because of our partners and our people that Skyline, again, was named the most trusted brand this year.

It is only by all of us working together to take care of the customer that we earned their trust. I will now turn the call over to Laurie to discuss our quarterly financials in more detail..

Thanks, Mark, and good morning, everyone. I'll begin by reviewing our financial results for the third quarter of fiscal 2022, followed by a discussion of our balance sheet and cash flow. I will also briefly discuss our near-term expectations.

Net sales increased by 42% to $535 million in the third quarter of fiscal 2022 versus the same quarter last year. We generated revenue growth of $148 million in the U.S. factory-built housing segment, as well as growth in our Canadian factory-built housing segment of $11 million. The increase in U.S.

factory built revenue was driven by an increase in the number of homes sold and an increase in average selling price per home. The increase in the number of homes sold was 9% or 489 units for a total of 5,832 homes compared to the same quarter last year. The average selling price per U.S.

home sold increased by 32% to $83,000 primarily due to price increases in response to rising material labor and freight costs, as well as changes in product mix. The sequential growth and revenue in the U.S. factory built segment was 2.7% compared to the second Quarter.

The increase in revenue was driven by a 3.9% increase in average selling price per new home. Partially offset by a 1.2% decline in the number of homes sold. The sequential decline in the number of homes sold was due to the planned manufacturing shutdowns to perform routine maintenance, as well as planned holidays.

We also experienced a higher level of COVID -related absenteeism during the month of December, which has continued to disrupt production run rate in January. Canadian revenue increased 40% to $37 million compared to last year. As the number of homes sold increased 6% to 336 units.

The average home selling price in Canada of $109,900 increased 33% versus the same quarter last year, driven primarily by pricing actions enacted in response to rising material costs.

Consolidated gross profit increased to $157 million up 119% versus the same quarter last year due to increased sales volume and higher pricing to offset rising material, labor, and freight costs. Our U.S.

housing segment gross margins were 29.6% of segment net sales, up more than I,000 basis points from the third quarter last year due to focused product simplification and material rationalization to improve operating efficiencies in order to better leverage increased production and manufacturing fixed costs.

Gross margins were also positively impacted by price increases in response to rising material and labor costs and the timing of certain price adjustments for raw materials under our buying program. SG&A in the third quarter increased to $66 million from $44 million in the same period last year, primarily due to higher variable compensation.

The impact of the acquisition of the ScotBilt operations in February 2021, and our continued investment in the enhanced customer buying experience. We expect further incremental investments in the online customer experience and systems integration through fiscal 2023.

Net income for the third quarter was $68 million or $1.18 per diluted share compared to net income of $22 million or earnings of $0.38 per diluted share during the same period last year. The increase in EPS was driven by a combination of higher revenue and improved profitability.

The company's effective tax rate for the quarter was 25.6%, an increase from last year due to recognition of a tax benefit related to a U.S. R&D tax credit in the prior year third quarter. Adjusted EBITDA for the quarter was $97 million and increase of over 200% versus the same period a year ago.

The adjusted EBITDA margin expanded by 960 basis points to 18.1% due to higher sales gross margin improvement in an increase in fixed cost leverage.

Looking forward, we expect inflation on building products and labor costs to remain persistent through the first half of fiscal 2023, due primarily to the widespread supply chain challenges on top of elevated levels of demand.

We utilize several levers in response to increasing material and labor costs, including price adjustments, product standardization, raw material substitutions, and further operational improvements.

Despite our efforts to continue to pass on inflation and make operational improvements, our production continues to be impacted by the availability and timeliness of raw materials due to supply chain challenges, including the volatility and magnitude of the cost changes of raw materials.

During our fiscal Fourth Quarter, we expect to see some compression in gross margin versus the sequential Third Quarter due to the recent volatility in forest product inflation.

In the third quarter, we benefited from our lumber spot buying program and the temporary dip in forest product pricing that will increase in the March quarter given the recent increases in lumber costs. As of January 1st 2022, we had $382 million of cash and cash equivalents and generated $76 million of operating cash flows during the quarter.

We remain focused on executing on our operational initiatives to enhance our production capabilities resulting in higher output levels. Our favorable liquidity position allows us the ability to continuously reinvest in the business and to support strategic growth. I will now turn the call back to Mark for some closing remarks..

Thanks, Laurie. We are very pleased with our third quarter and year-to-date results. I'm encouraged with a solid momentum in our business despite the turbulent environment that we are operating in. Our strong backlog and investment to transform home building have us well-positioned to solve the growing need for our homes.

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

Thank you. We will now be conducting our question-and-answer session. [Operator Instructions] The confirmation shall indicate that your line is in the question queue. [Operator Instructions] For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. Our first question is coming from the line of Daniel Moore with CJS Securities. Please proceed with your question..

Thank you. Good morning, Mark. Good morning, Laurie. Congrats on, obviously pretty exceptional quarter. Maybe start with the prepared remarks. I think, Mark, you said, sequential growth mid-single digits going into this quarter.

Did I hear that right? And was that revenue, volume? How do we think about that?.

Yeah, Dan. We're looking at that as kind of topline revenue growth with the supply chain starting to rebound a little bit. We think there's a little bit of sequential improvement quarter-over-quarter..

Perfect, very helpful.

And then, as we open the facility in Texas, do you expect or would you expect some continued sequential unit volume growth as we move into the first half of fiscal '23 or is that TBD based on supply chain and other challenges, etc.?.

Obviously, supply chain would be a critical factor, but I would expect sequential improvement as supply chain starts to ease up throughout the calendar year..

Got it. And Laurie, care to make our lives a little easier and just maybe talk about the -- Thank you for the color on gross margin. Obviously, some changes in terms of timing of buying and lumber price patterns.

But what type of, let's say, compression might we look for in this fiscal quarter, and would that be a sustainable run rate going forward?.

Hi, Dan. Yeah. We certainly saw in the third quarter some favorability in our gross margin because of the spot-buying programs for lumber. And as everybody is seeing those costs are certainly increasing pretty steadily and quickly.

In addition, we had higher levels of COVID absenteeism that filtered into January and throughout the month that are going to also impact gross margin. I'm expecting that margins will balance out somewhere between what we saw in the second quarter and the third quarter.

And then of course, keeping in mind at the EBITDA margin level, we're going to see some increases in SG&A sequentially..

Very helpful. Lastly, for me, maybe just talk about the -- what are the biggest bottlenecks right now from a supply chain perspective. I know it's been a game of whack-a-mole, but is there anything specific you'd call out and just to get a better sense of when -- how long it might take the bus to alleviate? Thank you for the color again..

Yeah, Dan, I think supply chain is a game of whack-a-mole, as you mentioned. Right now, I would say that the biggest challenges are things like duck work and other things like that, small electrical components they're still clearing through the system.

Different colors in specific grades of like roofing, shingles other things like that are difficult to come by. So it really changes day-by-day inconsistent, so that's why we'd see some improvement and kind of a steady improvement since we've come out of the I'll call it holiday shopping season, but it's not consistence.

So that's why we're confident we can ramp. We're confident we can bring Navasota and further bring Navasota align. It's really just a timing issue of when the supply chain fills up throughout the calendar year..

Got it. I will jump back with any follow-ups. Thank you very much..

Thank you. The next question is coming from Greg Palm with Craig-Hallum Capital Group, please proceed with your question..

Yeah. Good morning and thanks for taking the questions and I will add my congratulations as well..

Thanks, Greg, good morning..

Maybe to start, can you talk about what you're seeing in terms of order rates year-to-date?.

Yeah. Order rates are -- have been good year-to-date. Obviously, it's January, so normally there's a lot of volatility in order rates but I would say overall, I would expect backlogs during the quarter to be relatively flat. So order rates are still very good..

Got it. In terms of the types of customers, maybe the types of new customers that you may be seeing out there, I think you mentioned that this is the type of environment where you'd expect to take meaningful share from [Indiscernible].

Maybe you can help flush out those comments a bit more?.

Yeah. Sure, Greg. I think there's a few factors here. One is we're seeing high inflationary pressures across the board, mainly driven on the material side and the labor side. So if you think of our competitiveness versus our site-built competitors, we use substantially less labor per home than site builders deal.

We use substantially less material than most site builders do. So as a result, in inflationary times, we become much more cost effective, and so our position on the cost curve gets much better. So that's one key driver is that just our efficiencies really come to shine in inflationary times.

Plus, when you look at our general business model, we generate tremendous amount of cash, we can grow our topline revenue with very minimal CapEx investments, and we're able to pass on inflationary. We can raise prices to offset inflation. So I think those dynamics of our business model are very good.

I think that's compounded favorably by interest rate increases. Because if you look with higher price expectations coming out for the site builders and with interest rate increases, just even the most recent stats on new site - built were I think $404,000 per median price per home in the fourth calendar quarter on average.

And if you assume, the interest rates go up 0.5%, then the average customer cannot afford $24,000 less home with interest rate increases.

So they're going to be forced to find a different alternative or incentivize to form, find a different alternative, and that really plays into us, and really plays into the fact that builders are going to start to switch to an offsite model to be successful..

Makes sense. That's helpful. Last one, circling back to gross margin. If we think about the go-forward periods and we make some assumptions around demand standard elevated levels, and capacity in volumes ramping up.

Hopefully, you're not going to see the same levels of sort of COVID absenteeism and even some of the supply chain issues that are likely impact in gross margin.

Is there any reason not to think that as those volumes increased throughout fiscal 23, that you won't see at least a modest lift to gross margin relative to what you're thinking at least for the current quarter?.

Yeah, Greg, there will be some deficiencies that come through as we continue to simplify our products offering and increased production output. But the majority of our cost of sales is variable. So we'll see some improvement as we continue to focus on the product simplification initiative and efficiencies..

Okay. Great. All right, I'll leave it there. Thanks and good luck..

Thank you..

Thank you. The next question is coming from Matthew Bouley with Barclays. Please proceed with your question..

Morning, everyone. Thank you for taking the questions and congrats on the results. Question on, I guess, customer qualification and risk of cancellations given how long they're in the backlog I think you said 43 weeks. I know you guys are relatively protected in terms of dealers having to take ownership when you start construction.

And I know you've done all the work around testing that backlog, but I'm just curious in this rate environment if I guess number 1, what is happening with chattel rates and number 2, just what is that risk before you start construction.

Buyers are in this backlog for a long time, that they either fallout of qualification or have a change of heart I guess related to financing rates. So what's the risk of all that? Thanks..

Yeah, Matt. Thank you. I think overall, we've seen very low cancellations. Very low cancellation rates thus far. Generally, when a dealer puts a home online, they will generally requalify the customer prior to that home going onto production.

In other words, before it's produced, there's generally a discussion to requalify the customer to make sure before that dealer puts that order in that the customer fully qualified that time.

Obviously, if there's extreme volatility in rates that post that, then before close, there could be a window, but generally, that's just a few weeks’ time period. So we have good visibility going forward on those issues, and I think right now what we're seeing is most customers are able to still qualify.

Actually, most of our credit scores and other people are a growing customer base of first-time home buyers, who actually have really good income and really good credit scores, so they're not on the bubble necessarily.

And when they're going from a $400,000 site-built price and they're moving to a better alternative at a more affordable price, they can actually qualify and keep that home up-to-date..

Makes sense now. That's great color there, Mark, thank you for that. Second one, I have to go back to the gross margin. I believe, Laurie, I don't know if I'm reading too much into this, but the first things you mentioned around the gross margin where the product simplification and material rationalization.

I know obviously you discussed the benefit of lumber prices there as well. But just speaking specifically on the simplification and rationalization efforts.

Are those structural at this point or are those kind of a function of just the tight supply environment, so those efforts may not kind of stick in a more normalized environment for lack of a better term? Thank you..

No, I would say that they're more structural changes. It varies by plant. How far along in the process of simplification we are but definitely more structural..

Okay, perfect. Thanks much and congrats again on the results..

Thank you. Our next question is from Mike Dahl with RBC Capital Markets. Please proceed with your question..

Hi. Thanks for taking my questions. First question, and sorry to keep harping on the gross margin side. I'm hoping for a little more quantification of the lumber dynamics because you didn't seem to get hurt by that much when lumber spiked last year.

But in proportion, the benefit from a temporary dip in calendar '21 seems far in excess of what the spike last spring hurt view by.

So can you just go into a little more detail on exactly what was the benefit in the quarter from lumber? And have you made changes to your spot program? Or just help elaborate a little bit more on the spot versus contracts..

Sure. So we have made changes. We have a percentage of buy versus contract varies by plant, Mike. And it also varies based on the price of the SKUs. So during this quarter, we bought more lumber at lower prices through the spot dining program with the anticipation that it would go up. It's as simple as that. We are quantifying it publicly..

Got it. Okay. Thanks. My second question. Just to only think about the demand, the backlog, obviously, the overarching widespread supply constraints, availability of material and labor.

I get that, but when you think about your capacity relative to where you're seeing the most demand growth and the most backlog growth, can you just talk about whether you think geographically your capacity is positioned the right way today, obviously, inclusive of what you're bringing on or if there are further adjustments in terms of where you have capacity that you think are needed in light of the demand trends that you've seen evolve?.

Yeah, Mike. I think there's two parts of that question. The first is, I think we're positioned geographically well for the demand trends that are out there. If you look migratory factors in the U.S. and where people have relocated to, I think we've been growing our presence in those states of the Carolina, Georgia, through Florida, Texas.

There's been a tremendous amount of migration to those regions. So I think we've opened up capacity, bought capacity in those regions in advance to take advantage of that.

As far as are we positioned well for the demand, I would say that we are -- we need more capacity with the number of orders that were turning away and rejecting every day, we're passing on so many orders today that we definitely need more capacity today, throughout.

Then I would say it's probably in those same geographies I would mention but, I think it's throughout the entire country. Some additional capacity in Eastern Canada would be good. There's tremendous housing demand out there, but I would say generally speaking there's very few regions of the U.S. that are softer on capacity.

There's one or two geographies that are a little soft. It could be seasonal due to weather in some of the northern climates. Great Plains regions, not as robust as other regions, but you take Texas through Oregon and draw a line there of the U.S and that's there is fantastic demand there.

So I think growth of demand, I mean our order rate to outpaced every homebuilders by a large margin. This past calendar year. And we've turned away more orders than our backlogs, so it's pretty robust demand..

Thanks for that Mark. And maybe my last one.

I certainly understand and appreciate your point of view on the potential conversion factor for MH versus site-built as you see affordability shifts and some of that makes sense, but if I take a step back and manufactured housing did decline in 2018 and 2019 alongside site-built housing the last time we saw a rate shock.

So I guess I'm not really seeing it in the data that there were these share gains just a few years ago, and some of the same arguments could've been made.

So maybe talk through what you see as the differences in this upcoming year or next couple of years versus maybe just a few years ago when that dynamic didn't play out?.

Yes. I think a few things. One, if you go back through history, if you look at - I think we have historical data on our Investor Presentation. Go back to let's say to 1970s.

I know that's not the time period you were mentioned, but the 1970s we saw as a manufactured housing industry, robust growth, there were extraordinary robust growth in that was a period of obviously higher inflationary rates and pressures that we're similarly faced with in today's current environment and outlook.

I think part of a difference in that dynamic you're referring to is the fact that we didn't have financing back it where as much financing, if you will, back just a few years ago. If you recall, I think spread just as recently as 22 years ago, spread to traditional mortgages were double what they are now.

I think when you see rising interest rates at that point in time, we still had extraordinarily high spread and mostly cash-only buyers during that period of time. So I think the housing market is a little different, I think the financing environment is a little different that's out there today than what we saw previously.

And also say there's a little bit of different tone in terms of the communities. SUMH, S-U-M-H. A lot of the right buyers were in a different place back in 2018 and '19 and they generally make up 35% to 40% of MH demand as an industry. So I think they were on -- more on the sidelines at those period of time.

Obviously, with the rental market outlook and the housing market outlook that's very different today. That build for rent, the capital that's flowing into the build for rent channel. Let alone go land lease communities is very robust. So I think it's a very different tone today.

And so I think in the housing market dip previously I would look at it, look at the pricing environment, look at the difference in spreads and interest rates. Look at the right channel and their demand at that period of time. All those factors are vastly different today..

Thanks for that. I appreciate the perspective. Thanks..

Our next question is coming from the line of Phil Ng with Jefferies. Please proceed with your question..

Hey, good morning. This is actually Collin calling on for Phil. I just want to follow-up on the financing environment you're just talking about.

Can you give a little bit more color or maybe quantify the size of the spread between more MH Lending and the traditional 30-year mortgage just after the recent move in mortgage rates? And then do you expect any air pocket in demand in calendar year 2022 as higher rates are digested by home buyers?.

Collin, I think there's a few factors that one, the spreads I think right now are 2-250 basis points traditional mortgages, so, that's holding to where it's been last quarter. So I think as mortgage rates move to the 30-year, you'll see that spread bump around there, so it's a constant spread.

As far as pockets, I don't see pockets so much as interest rates move as much I think, there will be likely some housing pressures that happen later this calendar year.

Single-family starts have outpaced completions in the housing -- home-building world, and so I think there's going to be a kind of a work in process catch-up where you have given or take 100 to let's say 40,000 homes that come to market as supply chain improves because they're caught between that housing starts and completions.

So I think you'll see a little bit of a thing where you see a bunch of houses come to market. It really doesn't offset the low supply in existing elements, but -- so to put there will be a little bit of gap there, but nothing to be concerned with long term..

Okay. That's helpful color. And then just on your production rates, you've been able to increase those over the past several quarters.

Can you just talk about where you are, I guess, in the long term process of improving those rates, and give us some goalpost for you if you can get in terms of quarterly or annual production over the next couple of quarters and maybe on a longer-term basis?.

Yes, so Collin we're not giving guidance, but I will tell you it really depends on supply chain. Right now, we've got seven idle plants that we would look to bring on and restart at the appropriate time as supply chain improves and market dynamics continue. So I think those plants would be enhanced as we start off.

Obviously, our current existing plants are operating less than efficiently because of material shortages and resequencing of production. So obviously, there will be some enhancements and production as supply chain improves.

But I do foresee that supply chain would be volatile throughout this calendar year towards the -- it might recover by late in the calendar year, but it will be volatile in the West in the short-term..

Great. Thank you for taking my questions..

Thank you..

Thank you. Our next question is coming from Jay McCanless with Wedbush. Please proceed with your question..

Hey, good morning. Thanks for taking my questions.

First question, could you remind us in your COGS basket how to still fit in there and are you seeing any benefit from the recent price declines in that commodity?.

Yes. Jay, I think obviously still pricing factors in for our HUD related products that are on steel chassis. It's not a meaning -- it pales in comparison to lumber. So you see some of that relief in there but it's not significant..

At least highlight one commodities is going down instead of up.

My second question, you were talking earlier about the communities, could you maybe talk about where your business trends are with them and maybe what type of volume increases you saw year-over-year in the Third Quarter?.

Yes. We don't disclose sales by channel, but I think the community channels has been very strong and active. If you look at most of the communities, UMH, especially the public ones, which are probably representative of others. UMH, EOS, some communities have very, very strong Greenfield development in terms of their processes and where they're going.

So I think we see tremendous upside and they are clamoring for product. So that trend is definitely out there in terms of growth, but the retail channel in our retail distribution partners, very strong demand, order rates are up. They're producing very well the park model, tiny homes, ADU models are up.

So really, we're seeing benefits on in demand across, it's really more of how we allocate our limited capacity to fill that demand today..

Exciting to hear that the Texas plant is ramping fairly quickly.

Could you give us an update on the plants you purchased in the Carolinas, any progress on those?.

Yes. So we acquired two plants in North Carolina. Those plants we will look to -- we're really waiting on supply chain. Once we get firm commitments on supply chain and have visibility, you never want to start a plant, and train the labor, and hit everyone up to speed at only to idle plants three weeks into your ramp. That doesn't go well.

So you need enough supply and certainty of supply and consistency of supply to ramp into it. So we will bring on plants in the right geographies. Obviously, we're bullish on Carolina's, as the market dictates when the supply chain dictate..

So really no change from what you were seeing last quarter in terms of being able to get consistent supply into those plants?.

Correct..

Okay. And then, the last question I have, I thought it was very interesting that the FHFA rejected the GSE's latest duty to serve submissions.

Don't know if you had any high-level thoughts about that and anything new or notable in terms of GSE interaction with the MH industry since we talked on the second quarter call?.

Yeah. Nothing really new on that front and nothing really surprising in terms of the interaction between the carbon. Fortunately for us, I think there is a strong enough secondary market and some private secondary offerings that have happened to bring in capital.

And so I think those are not impediment right now to any of the demand trends we're seeing..

Okay. Sounds Great. Thanks for taking my questions..

Thank you..

Thank you. [Operator Instructions]. Our next question is coming from Daniel Moore with CJS Securities. Please proceed with your question..

Thanks again, maybe one or two follow-ups, just putting together some of the commentary, Mark the historical perspective is really helpful. Any sense of where obviously not Skyline Champion's, but just in general, margin profiles were either gross margin or EBITDA.

During periods of high inflation, rising rates like the 70s that you mentioned previously?.

I don't have information that goes back that far Dan, but I just look at it during times of inflationary pressure. Generally, the industry is able to pass on price increases in maintained margin. Obviously, there's some short-term volatility in terms of you got to work with customers if their loan is out there and you want to do stuff.

But over the cycle, you're able to pass on pricing increases as a whole and maintain your margins. And I would say during inflationary times, obviously the ASP of site builders because of their significant inefficiencies versus us are going to be higher on a relative basis over time.

So I think passing on price increases and keeping into affordable is very doable..

Understood. One more just in terms of uses of cash. You can ramp CapEx and you are obviously reinvesting in the business that even higher rates probably can't keep up with the level of cash flow of cash generation.

So would you consider alternatives like buybacks to take advantage of periods of share price volatility like we've seen year-to-date or kind of sticking with the status quo in terms of capital allocation priorities? Thanks again..

Yeah, Dan. We're continuing to invest in the business through opening up additional idled capacity, as well as production automation, R&D, and our customer based in website enhancements. That's our major focus for capital allocations today..

Okay. I appreciate the color again..

Thank you. We have no additional questions at this time so I would like to pass the floor back to management for any closing remarks..

Thank you everyone for taking the time this morning to dial into our call. We appreciate it. Look forward to the future as we sold and transform home building as we know it. Take care, stay safe, stay amazing. Take care..

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time..