Champion Homes, Inc.

Good morning and welcome to Skyline Champion Corporation's fourth quarter and full year fiscal 2021 earnings call. The company has issued an earnings press release yesterday after the close. I would like to remind everyone that yesterday's press release and the 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 Champions President and Chief Executive Officer.

Please go ahead. Thank you for joining our earnings call, and good morning, everyone. Joining me on the call is Lori Huff, EVP and CFO. Today, I will briefly talk about our fourth quarter and full year highlights, then provide an update on activities so far our first fiscal quarter, and wrap up with thoughts about the balance of the year. I am pleased with the results Skyline Champion delivered in the fiscal 2021. As we continue to make progress in delivering top-line growth, and achieving improved capacity and productivity levels for our customers. For the year, we grew adjusted EBITDA by 18% to 135 million and expanded margins by 120 basis points. I'm extraordinarily proud of our team and the success we achieved during the year despite the challenging and unpredictable operating environment. We started the year with idle facilities and restricted operations, and we finished with strong financial results and expanding production levels. I'm increasingly confident in our ability to capitalize on the growing demand for housing. From an industry standpoint, home builder confidence remains at historically high levels due to low interest rates and lean inventories of new and existing single family homes. Skyline Champion provides high quality and affordable solutions for consumers, and we believe that we can leverage our business model to continue to scale operations to service this robust demand environment. We had an outstanding fourth quarter delivering terrific results across the business as we continue to see robust demand for new housing. As stated earlier, demand is being driven by numerous factors, including favorable financing, historically low inventory levels, and rapidly growing number of millennials looking to become homeowners. Our affordable price point during these inflationary times created strong order demand, and that, along with the acquisition of Scottville, resulted in backlogs growing by 370 million during the fourth quarter to reach 859 million. Fortunately, we were able to increase production during the quarter allowing us to moderate the growth in our delivery times to our customers to 28 weeks at the end of March compared to 18 weeks at the end of the third quarter, despite the surge in orders. As a result of solid production increases, we delivered 6,342 homes, an improvement of 34% from the prior year and up 12% sequentially. We improved our U.S. manufacturing facilities capacity utilization to 77%, During the quarter, an increase of seven percentage points from the third quarter, achieving these production increases despite facing operational challenges caused by supply chain disruptions across our manufacturing operations and the industry. Our improved production efficiencies allowed us to increase daily production rates over the levels achieved in the sequential third quarter due in part to the progress made on streamlining product offerings. While we were able to add people to workforce, labor availability continues to be a challenge. We made progress in our Western Canadian plants as well, as we saw home sales volume increase over 200% from the prior year and 32% sequentially. During the quarter, we also announced the acquisition of Scott Build Homes, which significantly enhanced Skyline's manufacturing and distribution presence in the attractive Mid-South region with two facilities in Georgia. We are thrilled to have the ScottBuilt team on board and look forward to continuing to capture synergies. We are confident in our ability to deliver solid returns and meaningful shareholder value as part of our overall capital allocation strategy. Moving into fiscal 22, we expect that the demand for attainable housing will remain extremely strong for the first and second quarters and then moderate to higher than normal levels as the economy starts to reopen and the stimulus effect starts to fade. At the same time, we believe that we have the raw materials to operate and maintain top-line revenue levels in the first quarter, similar to what we saw in the fourth quarter of fiscal 2021. We then anticipate the compounding challenges of supply chain and labor to cause sequential declines in our second and third quarters. We expect that these challenges will subdue and subside by our fourth fiscal quarter, allowing us to return to first quarter levels. While we will manage through the short-term supply side challenges during our fiscal 22, our focus is in looking outward. With entry-level housing supply hitting a five-decade low and millennial household formations increasing, we continue to gain confidence in our move into digital and turnkey offerings. Inflationary and interest rate pressures will only hasten the transition away from antiquated site-built methods currently performed today to more modern production practices. Therefore, we are focused on expanding our capacity and investing in automation to enhance our processes. We will need to supply more housing to our channel partners and to our customers who need affordable ATTAINABLE HOMES. THE GROWTH AND ORDERS EXPERIENCED DURING OUR FOURTH QUARTER WAS ENHANCED DUE TO OUR INITIAL DIGITAL EFFORTS AND AS WE MENTIONED ON OUR LAST CALL BY SKYLINE BEING NAMED AMERICA'S MOST TRUSTED MANUFACTURED HOUSING BUILDER RECEIVING A FIVE STAR TRUST RATING IN A SURVEY OF MORE THAN 24,000 NEW MANUFACTURED HOME BUYERS. IN FISCAL 22 We are accelerating our investments into our platforms for sustained growth. Today's consumers reward brands that they can trust and that can deliver a simple and seamless experience digitally and at retail. The pandemic has only intensified this expectation. We recently expanded our senior leadership team with the addition of Tim Larson as the company's chief growth officer. as we accelerate our investments into our customer experience strategy and omnichannel digital platform. Tim brings with him significant experience and proven performance in transforming the customer and digital experience across a diverse portfolio of brands and industries. With Tim in this new role, I'm even more confident that Skyline Champion will be able to develop industry-best solutions and experiences for our customers and create growth opportunities for our company. Finally, in fiscal 22, we will continue to demonstrate our commitment to ESG through company-wide and plant-specific programs as well as through our everyday business practices when providing high-quality yet affordable homes to homebuyers. Beginning in fiscal 22, we have launched a program to participate in reforestation, With forestry products central to the construction of homes, we have initiated a program to plant one tree for every tree used in the construction of our homes. Reforestation contributes to the environment by replenishing forests, reducing greenhouse gases, and protecting the watershed. I will now turn the call over to Lori to discuss our quarterly financials in more detail.

Thanks, Mark, and good morning, everyone. I will begin by reviewing our financial results for the fourth quarter, followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our expectations for the fiscal first quarter as well as the long-term outlook. Before reviewing our numbers, I would like to highlight a few dynamics that impacted our results in the quarter compared to the year-ago period. As mentioned in our press release, we had an extra week in our fourth quarter of fiscal year 2021 compared to the fourth quarter of fiscal 2020. The extra week accounted for approximately $31 million in sales during the quarter. In addition, we acquired Scott Built Homes on February 28th and have included its results for the month of March. Finally, we experienced negative impacts from the COVID restrictions, which caused us to temporarily close 20 plants at the end of the fourth quarter last year, reducing overall production levels for that period. Net sales increased by 49% to $448 million in the fourth quarter versus the same quarter last year. We saw revenue growth of $120.6 million in the US factory-built housing segment, as well as growth in our Canadian factory-built housing segment of $23.9 million. The increase in US factory-built revenue was driven by an increase in the number of homes sold and an increase in average selling price. The increase in the number of homes sold was 29% or 1,320 units for a total of 5,923 homes compared to the same quarter last year. The average selling price per U.S. home sold increased by 11.6% to $67,200 due to product mix and price increases in response to rising material costs. We are pleased with the sequential growth in revenue in the US factory built segment, which increased 18% in the fourth quarter compared to the third quarter of fiscal 2021. This increase was driven by an 11% increase in homes sold and a 7% increase in average selling price. Canadian revenue increased 212% to $35.2 million compared to last year, driven primarily by a 222% increase in the number of homes sold to 419 units. The average home selling price in Canada of $84,100 decreased 3% versus the same quarter last year as pricing actions enacted in response to rising material costs were offset by a shift in product mix. Consolidated gross profit increased to $99.1 million, up 65% versus the prior year quarter due to increased sales volume and higher pricing. Our U.S. housing segment growth margins were 21.9% of segment net sales, up 120 basis points from the fourth quarter last year, due to direct labor efficiencies and increased leverage of fixed costs caused by higher sales volumes. SG&A in the fourth quarter increased to $52.5 million from $47.2 million in the same period last year. Lower expenses due to decreased travel and marketing were more than offset by higher variable compensation and investment in the company's online customer experience and other system enhancements, which will continue to accelerate throughout the year. Net income for the fourth quarter was $33.9 million or 59 cents per diluted share compared to net income of $6 million or earnings of 11 cents per diluted share during the same period last year. The increase in EPS was driven by a combination of higher revenue and gross profit. The company's effective tax rate for the quarter was 24.5% versus an effective tax rate of 51.8% for the year-ago quarter. The company's effective tax rate decreased primarily as a result of a fiscal year 2020 increase in a deferred tax asset valuation allowance, partially offset by recognition of certain tax credits. Adjusted EBITDA for the quarter was $51.2 million, an increase of 155% over the same period a year ago. The adjusted EBITDA margin expanded by 470 basis points to 11.4% due to higher sales growth, growth margin improvement, and leverage of fixed costs. Forest product inflation, as well as other building product costs, continue to increase during the fourth quarter and into our fiscal 2022 first quarter. As we discussed during our third quarter conference call, we began seeing an increase in labor inflation during these periods as well. There are several levers we can utilize 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 may be impacted by the availability of raw materials due to global supply chain challenges, the availability of qualified labor, as well as the homebuyer's ability to qualify for financing at the higher inflationary rates. As of April 3rd, 2021, we had $263 million of cash and cash equivalents and long-term borrowings of $39 million with no maturities until June of 2023. We generated $154 million of operating cash flow for the year, which doubled from the prior year. The increase in operating cash flow is primarily due to the increase in net income, customer deposits, and deferment of employer payroll taxes allowed by the CARES Act, which were partially offset by an increase in raw material inventory balances. During the fourth quarter, we used $52.5 million of our cash on hand to acquire Scottville. We remain focused on executing on our growth and operational initiatives, and given our favorable liquidity position, plan to utilize our cash to reinvest in the business and support strategic growth. I'll now turn the call back to Mark for some closing remarks.

Thanks, Lori. I'm encouraged with the solid momentum in our business and the results we delivered this fiscal year. Our strong backlog and efforts to expand our capacity and increase our productivity have positioned us well to respond to the growing demand for our homes. Before we open the lines for Q&A, I want to take a moment and thank our team. This has been a truly challenging year for everyone, and the Skyline Champion team overcame those challenges and delivered strong results while helping to solve the affordable housing crisis with our unique and innovative home solutions and ensuring the safety of all involved along the way. I am even more confident in our ability to execute our strategy going forward after this extraordinary year. And with that, operator, you may now open the lines for Q&A.

Thank you. At this time, we'll be conducting the question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. 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. Thank you. And our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your questions.

Mark, Lori, good morning. Thanks for taking the questions.

Good morning, Daniel.

How are you? I'm well, thank you and congrats on the execution for you as well as the team. Maybe start with a little bit more detail on the customer buying experience you described. Can you maybe provide a few specific examples of how you're kind of simplifying the process? And then separately, you know, the digital initiatives and automation projects. Any tangible examples of where some of those projects and where you're ramping investment would be really helpful?

Yeah, sure. Thanks, Dan. You know, I think as far as the buying experience, the first thing we're doing is driving a tremendous amount of leads to our retail channel partners to increase their business and to make it an easier buying experience for the customer. So if the customer comes in with a pre-vetted home that they know what they want because they priced it, they looked at it online, it's much easier for the retail salesperson and the retail channel partner to serve the customer's needs. So I think that's a first step is providing more vetted leads to our retail channel partners. A second step in that process is to make it very easy to design and configure your home online and then find that home along with maybe a communication process, Dan, that allows the customer to see when that home is delivered in backlog, how long that order is going to take, so that they can pick from a selection of options and have more transparency in the buying process eventually, because I think that's where the world is going. So I think it's really streamlining some of those front end. And then also, too, it's with our turnkey solutions that we've been investing in in different parts of the country, in the U.S., you know, having a set and finish crew that can set, finish, and turnkey the home over to the end customer to make it easier for either a retail partner community partner and or just you know the end customer to have a seamless experience rather than multiple handoffs and so all of that will be connected through our systems and digitally so it looks it looks like the handing of the baton is seamless to the end customer and makes the buying process more enjoyable perfect and then on the kind of automation side maybe some of the

Any examples you might be able to share there?

Yeah, I think on the automation side, there's some new and innovative processes that are out there that have come to bear. You know, thus far, we've seen and studied many things, frankly, Dan, that don't work or don't have a good return on capital. We've actually met with about 40 or 50 different companies or companies suppliers or vendors to different automation components and things. In doing that, what we've seen is that many of the process and tools today that are developed that are off the shelf really are not effective to meet the speed and or quality and or cost savings that would be needed. But now, today, there's a handful of new equipment that's starting to come out that is being designed that can meet the speed and quality. So we're not quite there yet, but we see some potential investments right on the horizon that we're going to be making in the next, you know, actually throughout this year and into next year. So because it's proven itself out at least on a high level.

Got it. And maybe switch gears for one more. Just talk about the raw material availability. What are the biggest pain points that you're seeing as you enter kind of fiscal Q2 and fiscal Q3 as you described for you and the industry and maybe some of those alternatives in terms of procurement or substitute materials?

Yeah, thanks, Dan. I think the raw material supply chain will probably be the largest short-term driver for the industry and specifically for us. You know, as we look, many of the supply of our supply partners are dealing with production challenges themselves. So they're going out and putting allocations in place. So certain critical raw material supplies that we've got, you know, they said we'll give you an increase year over year. However, that increase year over year would mean, you know, roughly a 20% reduction to where we were in the fourth quarter. So we've got a problem solved. to either get substitute materials, which we're working through, but I think those supply chain allocations that were given on several components are gonna create challenges as we work through the year. So if we can find substitute products and or materials for some of those categories, then hopefully we can maintain certain levels of production, but it's really supply allocation that is the larger issue today other than just confronting the day-to-day challenges of short-term supply issues in two-part adhesives, PVC, fiberglass tubs, insulation. I think today it's a very volatile situation. The team has done an exceptional job managing through that thus far, but I think the larger allocation issues will be the driver of volumes this year.

Perfect. I'll jump back with any follow-ups. Thank you.

Thank you. Our next question is from the line of Greg Palm with Craig Hallam. Please proceed with your questions.

Hey, good morning, Mark. Hey, Lori. Congrats on the quarter. Congrats on getting to that 10-plus percent EBITDA margin as well. Really impressive stuff overall.

Thanks, Greg.

I guess just starting off, appreciate some of the color on the expectations for the fiscal year. And I just wanted to clarify whether the comments about top line, are those related solely to unit production? I guess the reason why I ask is I'm assuming pricing or ASPs on a go forward basis will be somewhat higher than what you just reported in the past quarter based on what we see home prices doing. So I'm curious if that's incremental or if the commentary on top line includes contribution from higher home sales as well.

Hey Greg, I can take that one. So we really expect ASPs to moderate to the growth in ASPs to moderate versus the fourth quarter kind of going forward through fiscal 22. We are going to have some increase in price that comes through, but that's going to be offset with product mix.

Got it. Okay, so maybe more singles than multis, which brings down the ASP, but somewhat higher prices on a like-for-like basis. So maybe that evens out ASPs. That's what you're thinking?

You got it, yep.

Got it. And just looking back on the quarter, even if you make some adjustments for the extra week, you're still outpacing industry production or shipments by a pretty decent amount. I think it's the second quarter in a row. So it implies additional share gains. I don't know if that's a byproduct of having some available capacity that others don't. Maybe you're starting to see returns in this online digital initiative. I don't know. How sustainable is that going forward?

Yeah, I think it's definitely sustainable. The team has, we definitely have had some productivity gains, you know, are just labor efficiencies and productivity have definitely picked up in the second half of the year. So, you know, I see that, you know, continuing and progressing supply chain, you know, borrowing supply chain issues. So that's very encouraging. And then, yeah, I think the digital solutions are bringing to us of a vetted standardized product, and we've been simplifying our product mix. So I think all of those factors, Greg, are allowing us and helping us to gain share today, especially given many of the states that we participate in this past year have been down in terms of volume. So some of the key states we participate in, you know, in California, Michigan, You know, the Pennsylvania, New York, Florida regions, if you look at total industry shipments for manufactured housing, those are actually down. So for us to gain share overall when some of the key geographies we serve, we're down for the year is quite encouraging.

Yeah, no, that's a good point. All right, great. Well, I'll leave it there. Best of luck going forward. Thanks again.

Thanks, Greg. Thank you. Our next question is from the line of Matthew Boulay with Sparklace. Please receive your questions.

Morning, everyone. Thanks for taking the questions. Congrats on the results. I wanted to ask back on the pricing side. You mentioned moderating the growth rate this coming year, and in the prepared remarks, you made a comment about people qualifying for financing and keeping an eye on that as prices move higher. How do you think about the ability at this point for the typical customer of manufactured housing to accept further price increases? Is there any kind of ceiling to it or just a consideration on not stretching affordability too far? Thank you.

Thanks, Matt, and good morning. I think, yeah, we definitely watch for that. Right now, what we call the fallout rate at lenders is very low by historic standards still. So as prices increase, that will definitely create a ceiling in some way. But I think what we're seeing more so is really our price increases vis-a-vis traditional site builders is much lower. So we're actually getting home buyers that maybe could have qualified for a site-built home, but they're moving in. Maybe they couldn't. They now can't. qualify for a site-built home so they can move into a more affordable price point home, a more attainable home. So generally as inflation happens and interest rate increases happen, generally manufactured housing or off-site construction does better than site-built during those times. So as we see the inflation and as we see this, we anticipate gaining share versus site-built over time. So that's a positive note. But we haven't seen any significant concerns yet. We're watching it, but we're not concerned yet on the fallout rates at lenders.

Got it. That's really helpful, Mark. Thank you for that. Second one, on the margin side, the north of 11% this quarter on EBITDA margins. Obviously, it's only three months, but ahead of you know, call it soft long-term goal of 10% on a full year basis. Is there any reason why that margin can't sustain a double-digit rate year just given the volume strengths and kind of in light of all the other puts and takes you're seeing on price versus cost? Thank you.

Hi, Matt. So the 11.4% in that number, we've got to consider a couple of things. We have the extra week in this fourth quarter, so we were able to leverage more fixed costs with our production. Mark mentioned we had significant labor efficiencies from simplification of products, so that certainly will continue, barring any more significant than we've seen labor challenges. But in the fourth quarter, we did see a benefit from forced product costs. which sounds kind of odd, but the way that we price our forest products is based on market futures and looking at those futures versus our backlog. And so we saw those futures and priced accordingly, but then the cost actually dipped slightly. That's not going to continue going forward. So we see our margins actually coming down because of those reasons from the 11.4%. Is it sustainable? The 10% was actually at pre-COVID volumes, and our volumes, as Mark had mentioned, are higher. So we have that impacting as well. Another component that's going to go into the EBITDA margin is an increase in FD&A from our digital offerings and investment in our direct-to-consumer platform.

Really helpful. Thank you, Laurie, and thanks, Mark. Thanks, Matt.

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

Hi, this is Chris Collado. I'm from Mike. Thanks for taking our questions. My first question, I was wondering if you guys have seen any kind of tangible evidence of your kind of customer base broadening out, particularly on the traditional site builds. builder side, given some of the struggles they're having to kind of complete homes. Have you seen any of the recent demand strength come from that part of the market? And also, do you have any update on the Genesis rollout?

Yeah, thank you. I think two things. One is on the site-built side, we're just seeing recently site builders pause construction because of high material costs. We have not, with our cost structure, we are not, we're still very affordable and still producing. So I think that switch is yet to happen. I think it's too early in the stage to see much of that switch. As builders continue to pause production and construction activity because of high costs, we're able to still produce and produce make margin even at these lower price point levels. So it's a more effective cost structure for us than most site builders have. So I think that transition will happen, but it's going to take a handful of months before people really start flowing from one side to the other in at least a significant number. On the Genesis side, there's definitely been a tremendous amount of interest and activity on that. The challenge for us is just to still increase output to meet the demands and make sure we have adequate supply for those site builders. So adding capacity and adding allocations for builders is really the primary focus. It's not so much a demand issue as it is a supply issue to make sure we can get them adequate supply in Genesis. But the product itself has been very well received.

Understood. Thanks for that. And in terms of kind of demand trends by channel, has there been any notable differences between retail and the community channel?

No, I think community at the beginning of the pandemic, community channel softened. I would say they've returned and probably returned with a little bit more vigor recently. than even retail. Retail was strong kind of initially out of the pandemic. I would say both channels are adequately strong and I believe that the community channel probably has a little bit more momentum currently than even the retail channel today. So it's just a very strong outlook for housing demand. I think the affordable price point housing is particularly attractive in today's market with the inflationary pressures and concerns over interest rate increases.

Thanks for taking my questions. Thank you.

Thank you. As a reminder, you may press star 1 to ask a question. Our next question is from the line of Phil Ng with Jefferies. Please proceed with your question.

Hey, guys. Good morning. Congrats on another strong quarter. On pricing, you know, Lori, I think it said you mentioned that pricing growth may moderate a little bit going forward. So from a high level, have you taken enough pricing to offset all the inflation we're seeing? You called out maybe supply constraints. I would imagine your suppliers are pushing more price. I just want to get a little more color on that and the ability to kind of stay in front of inflation and drive margins through this year.

Hi, Phil. Yeah, I think that we have seen, we are taking price increases to offset the majority of inflation. To be perfectly honest, commodities are really volatile, as I'm sure everybody on the call has seen. So we're doing the best we can based on the information that the futures show and, you know, just keeping an eye on it. So we are integrating the Scottville acquisition and have also their backlog that's going to be flowing through at pre-acquisition pricing. So that's just another component of price and margin coming through in the next couple of quarters.

Okay, that's helpful. The constraints you're calling out in meeting demand in 2Q and 3Q, it sounds like it's getting better, at least on your end, from a production standpoint. and issues more getting material from your suppliers. But any color when your production levels will get to an optimal level on your end, and any of the mothball facilities that you have that you're potentially considering bringing on just to kind of help meet that strong demand?

Yeah, thanks, Phil. I think we are anxiously looking at bringing on some of our idle facilities. Really, the limitation there primarily is supply chain driven today. We want to make sure we have adequate materials to operate those plants effectively. So we feel very good. The onboarding process we've done this year has been improved, has been better. Our training and our people have been doing a great job. So I think some of those internal processes, they're not where they need to be. I think there's always room for improvement, but the team has done an exceptional job at doing that and simplifying some of the operating processes we have internally. I feel very good about the ability to ramp production as long as we have adequate materials to operate. When we see a break in the supply chain, I think we'll be looking to bring on more capacity because we see affordable housing demand is in very needed supply.

And on that note, Mark, in terms of bringing on some of these mothball capacity, one, is it really capital intensive? How are these facilities from a state operational level? I don't know if they've been idle for a long time. And then lastly, on the supply side, from a material standpoint, you kind of talked about a few of them. Are these mostly material that were impacted from the Texas storm? Because I think you called out some of the PVC polyethylene material. type of material, which might have been more impacted, but any more color on what type of material you're seeing a little more constraint in general. Thanks.

Yeah, thanks, Phil. I think on the idle plants that we're looking to restart, I think it's fairly lean capital to get them restarted. We do anticipate having one or two of those plants restarted with some automation capabilities so the lead time on that may be a little different, but to get capacity to the market quickly, I think we will restart facilities with very low CapEx levels, and then as we put in automation into some of our facilities, that will take a little longer, be a little bit more expensive, but nothing that's, from our standpoint, crazy. I think it's, Lori, what's our normal capital to open up a facility is? Three to four million. Three to four million dollars. it's fairly low.

Got it. And then on the material side, I'm sorry. Go ahead, Mark.

On the material side, we're definitely seeing allocation issues from the, you know, on, as you mentioned, the petrochemical side. And that's lingering. You know, it's starting to clear up in certain functions, but it has a cascading effect. And I think some of that cascading effect is we've we've destocked the supply chain, the entire supply chain to such a level that any other hiccups will create challenges in that. So I think it's definitely on the petrochemical side, and that will kind of linger throughout a portion of the year a little longer than we anticipate because, or at least maybe initially anticipated, just because they're having a difficult time finding labor, bringing people back as well in certain functions, and and they have to repopulate or restock the supply chain in general. But I think it's other items like insulation and other products that have longer lead times to bring on capacity are going to also be part of that solution. You can't start off a fiberglass plant, for instance, in an immediate time period and ramp up capacity quickly. So some of those longer lead time items are also going to be... more on the allocation side.

Okay. That's great color, Mark. Really appreciate it.

Thank you. Thank you. At this time, I'll turn the floor back to Mark Yost for closing comments.

I'd like to thank everyone for taking time and your interest this morning on Skyline Champion. We look forward to continuing to solve the affordable housing crisis. throughout and provide good quality and attainable homes for people across the country and in the U.S. and Canada. Thank you for your interest. Stay safe and have a great day.

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