Q4 2020 Earnings Call

Welcome to Skyline chip in corporations fourth quarter fiscal year 2020 earnings call.

The company issued an earnings press release yesterday after the close.

We know where do you have to show host for today's call sorry channel with the company's director Investor Relations and external external reporting. So please go ahead.

Good morning, and thank you for participating in our earnings call to discuss our fourth quarter in full year results.

We'll also provide an update on current business conditions and how the company's navigating the cobot 19 pandemic.

Joining me on today's call is Marciel, president and CEO, and Lori Hock EVP and CFO.

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 our expectations and projection.

Such risks and uncertainties include the factors set forth in the earnings release, and then our finally filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measure, which we believe can be useful in evaluating our performance.

Reconciliation of these measures can be found in the earnings release.

I would now what could turn the call over to Mark.

Thank you Sarah and good morning, everyone.

To begin I hope everyone on this call and their families are well as we navigate the cobot 19 pandemic.

I am proud of the resiliency of our team during this challenging time.

Health and safety of our employees and our customers remain are highest priority.

Today, I will briefly talk about our full year and fourth quarter results.

Then provide you an update on the activity so far in our first fiscal quarter and thought about to be able to the year.

I'm pleased with the result.

Hi line championed delivered in fiscal 2020.

We grew adjusted EBITDA by 18% to 114 billion from here.

We improve safety and turnover increased merchants.

Realized our run rate synergies from last year's merger finish the integration of the company's IP systems.

Completed the implementation of Sarbanes Oxley invested in our people automation and digital go to market platform.

As well as warm start Genesis branded products.

I am proud and appreciative of our team for their accomplishments this year.

Turning to the fourth quarter revenue was down 8%, primarily due to the temporary idling of 24 factories in the final weeks of March and outside industry growth in regions, where we do not currently have significant projects.

With the Cobot 19 related government restrictions and stay at home orders in the U.S., our customers canceled approximately 150 units and placed on told an additional 250 units.

In addition to the impact of the temporary idling of plants, which reduced production by between 200 250 units in the U.S.

The U.S. truck market rebounded during the quarter growing 13% with strong growth in the mid southern markets.

Even as the industry experienced strong growth rates the major markets, we serve today, including California, Michigan, and Florida, so quarter over quarter declines, resulting in industry growth in our markets in the flat to low single digit range, primarily due to the timing of orders from a community channel.

I was impressed with the U.S. team's ability to grow sales orders by 11% year over year during the quarter in lower growth regions, given the impact to covert night team and without the benefit of outsize backlogs last year.

Our Canadian operations were impacted by oil related impacts during the quarter and saw volume declined to 43%.

Turning to more recent events I would like to commend our team for their swift execution of plans and protocols in response to the unprecedented challenges brought on by coping 19 pandemic.

Guideline champion has prioritize the safety and well being of our employees customers and communities in which we operate.

Employees have been encouraged to work from home where possible.

Operating facilities, we implemented social distancing guidelines and have increased 16 sanitation standards.

In response to rapidly and I'll stay at home orders late in March we temporarily idled 20, or 33 U.S. facilities during the last weeks of March.

From that time, we've worked closely with all of our stakeholders to thoroughly manage the changes to our supply base, our employees well be and our customer needs.

In the first seven weeks of our fiscal 2021, we have seen large geographic differences related to demand.

Within the U.S. like many housing companies, we continue to see stronger demand in the southwest well short term demand in the Midwest and northeast have been hit the hardest as they suffered the largest virus outbreak in the strictest shutdown measures.

Consistent with this trend we have been more severely impacted in states like Pennsylvania, and New York, where we operate seven of our production lines.

Since late March we reduced production levels within our plants to accommodate social just keeping guidelines.

In addition to running Pershall work weeks at some facilities due to decreased demand.

Importantly, we have reopened 18 of our 20 titled U.S. plans over the first seven weeks of our fiscal 2021.

We will open another plant next week.

As we look at production trends in the U.S., so far this quarter.

In early April we operated at about 40% of last year's production volumes.

Moving up to 60% of last years levels in mid to late April and more recently in may improving to 75% to 80% of last years levels.

We anticipate production remaining in this range for the remainder of the quarter and expect overall industry growth for the year could be unwind with overall <unk> Gulf estimates.

Before the implementation of the cares Act, we acted quickly to roll out a safety net temporary emergency sick pay policy, which allowed for limited pay from employees impacted by Cobot 19.

With the cares Act, we furloughed most employees at the temporary idle facilities.

With those furloughed employees, maintaining health care benefits in job status.

Our employees have responded and our attendance is better than has historically been at several plants.

In addition to the 20 U.S. factories, we also announced a temporary idling of our five western Canadian plans due to the decline caused by lower oil prices.

Our Canadian facilities have been running at lower sales volumes than last year throughout fiscal 2020.

The plants, where reopened yep reduce production levels intermittently throughout April.

Demand in Western Canada is expected to remain low for the remainder of the first quarter and possibly the rough.

After fiscal 2021.

We will continue to adjust production levels and operations as demand warrants.

During the seven weeks since our year end that production at our Canadian factories is that 65% of the level seen in the same period of the prior year.

We are staying in close contact with our customers who have also been impacted by the virus and related stay at home waters.

In some state and Providences retailers have been required to temporarily closed while others have moved more online selling.

Although it varies by speed in talking to our U.S. retailers. They have seen a 40% to 60% reduction in walk in traffic, but the closing ratio was higher so they've seen better conversion into sales compared the typical levels.

Our company owned retail centers have also experienced reduced traffic, but have increased appointments for.

For virtual home tours and have enhanced the use of digital selling tools.

To help our dealers who this time, we have partnered with some of the industry floor plan lenders to defer curtailment payments for up to 120 days, which will help our independent retail base better manage their liquidity.

So more to the homebuilding industry, we are seeing lenders tightened credit and verifying employment status in advance of loan closings.

Despite the short term headwind there are larger longer term potential tailwinds arising from cobot 90.

We're seeing increased demand for people wanting to move from urban settings into rural environments.

Including the outskirts of the suburbs.

This can be a very positive secular trend for us given the fact that manufactured housing has only 3% share in urban areas, but 15% of share in rural areas.

In addition, the work at home movement will increase housing demand for homes that have larger square footage at an affordable price point and continued demand for alternative dwelling units as a place of sanctuary to use your home office workout facility keep your parents safe or as an escape in your own backyard I will now turn.

On the call over Lori to discuss the quarterly financials in more detail as well as actions we've taken to preserve our solid liquidity position.

Thanks, Mark and good morning, everyone I will begin by reviewing our financial results followed by a discussion of our balance sheet as well as financial actions. We have taken in response to the covert 19 pandemic.

Net sales decreased by 8% to $301 million on the fourth quarter. We saw revenue declines of 18.3 million in the U.S. factory built housing segment as well as declines in our Canadian factory built housing segment of $7.4 million. The decline in U.S. factory built revenue was primarily.

He driven by a reduction of approximately 234 homes.

Oh, the to 4603 homes compared to the same quarter last year.

A 1% decline than the average selling price per U.S. harmful to $60200 also contributed to the decrease in revenue.

The decline than the average selling price was due to a shifting product mix as we sold a larger percentage of single section homes this quarter versus the same quarter last year.

Canadian revenue decreased 40% to $11 million driven by a 43% decline and the number of homes sold in the quarter.

Average home selling prices increased by 6% to $86800.

Our Canadian business was impacted by the continued reduction in oil prices in Western Canada.

Consolidated gross profit decreased to $60 million down almost 10% versus the prior year quarter. Our U.S. housing segment gross margins were 20% of segment not sell down 60 basis points from the fourth quarter last year.

If margins were impacted by reduced sales volumes.

Labour inflation as well as temporary plant closures due to covert 19 shutdown orders.

I see in a in the fourth quarter decreased to $47 million versus 53 million in the same quarter last year.

The decrease was primarily due to read a reduction in noncash equity based compensation expense.

Variable incentive compensation and integration costs.

Net income for the fourth quarter was $6 million or 11 cents per share compared to net income of $9.2 million.

Core earnings of 16 cents per share during the same carried in the prior year driven by a combination of lower gross profit and higher income tax expense, which were partially offset by reductions and asked DNA.

On an adjusted basis, we generated 14 cents of net income per diluted share compared to 26 cents in the year ago corridor.

The company's effect effective tax rate for the three months ended March 28, 2020 was 51.8% versus an effective tax rate of 25.9% for fiscal 2019 Spark corridor.

The change in the effective rate was primarily due to increases and deferred tax asset valuation allowances, partially offset by the recognition of certain tax credit and a reduction of tax reserve.

Adjusted EBITDA for the quarter was $20.1 million a decrease of 17% over the same period a year ago, you adjusted EBITDA margin compressed by 70 basis points to 6.7% largely due to lower production volumes.

At the end of March 2020, our consolidated backlog was 127 million compared to backlog last March of 143 million as we started fiscal 2024th quarter with $48 million less of backlog, which was partially offset by improved sales order.

Current U.S. backlogs are up slightly since quarter end to end are averaging six weeks of production in mid may but at lower production volumes due to social does something protocols and reduced work week schedule, which we expect to negatively impact first quarter margin.

As of mid May Canadian backlogs are down 35% from this time last year.

We'll continue to modify production schedule in order to manage the short term challenges associated with the cold and lighting virus.

As of March 28, 2020, we had $209 million of cash and cash equivalents.

During the quarter in order to maximize financial flexibility, we borrowed an additional $38 million on our revolving credit facility.

The incremental borrowings will be used to offset temporary working capital impacts of production production shut down and to preserve financial flexibility to continue to invest and strategic priorities. Its current conditions allow.

We ended the year was $77 million of lot of term debt outstanding with no material that maturities until June 2023.

I'll now discuss the cold winter related financial actions we've taken.

We moved swiftly to increase our cash position in liquidity, while reducing or deferring controllable expenses in order to minimise cash spend.

We have reduced non essential capital expenditures, but are continuing to invest in strategic initiatives related to automation and digital go to market platforms in order to lower our cost and bring benefits to our customers.

Additionally, we implemented compensation savings by closely monitoring overtime and through Furloughing and lay off of employees.

We will continue to monitor SGN, a cost and a justice and that's a very well balancing our ability to return to normal operating levels as quickly as possible when demand dictates.

Given the limited visibility on the trajectory of the virus.

And path to a more normal operating environment.

We are withdrawing our previous view of reaching 10% EBITDA margins in the next 18 months.

We have taken many actions that will enable us to continue to support the company and all that stake holder said the impact of covert 19 persist well into fiscal 2021.

We are confident that we have the financial strength and flexibility to continue to offer quality belt affordable housing to our customers and Neath unprecedented times and allow us to be well prepared when conditions improve.

I'll now turn the call back to Mark for some closing remarks.

Thanks, Laurie we're pleased with the incremental improvements we achieved in fiscal 2020, as we progress along our path to reaching our medium and long term goals as we manage through the day to day challenge as brought on by the pandemic, we're continuing to focus and invest in our strategic initiatives a stream.

Streamlining our products digital offerings to our customers and adding more value and sustainability turnkey services and the elimination of waste.

We anticipate that these actions will provide benefits both in the near term in years to come.

As we look forward, we expect housing demand to benefit from <unk> tailwinds that will generate new opportunities for our business.

Through this skyline champion, we'll continue to provide high quality sustainable affordable housing solutions for customers and their families.

Our ultimate goal is to make dream home attainable for everyone.

We will continue to demonstrate.

Zillions shoes unprecedented times and will be here to support the need for housing as the economy recovers.

And with that operator, you may now open the lines for Tonight.

Thank you went up ducking. Your question answer session. That's about to be placed into question Q. Please press star one under telephone keypad, a confirmation told will indicate your line is in the question Q.

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First question today is coming from Mike Dahl from RBC capital markets for why this allies.

[noise] morning, Thanks for taking my questions I Hope you guys on your teams are on families are all well.

Thanks, Mike.

Mark I I wanted to revisit a couple of comments you made around production levels and just make sure we we understood correctly.

I missed a part of it but you were talking about kind of production rates as a percentage of.

Last year as we move through April and May can can you just give us a can you repeat those or give us a sense of just you know at quarter to date, what your shipment volumes are down at both the U.S. and in Canada.

Yes, so so.

In the first two weeks of April we were running at 40% of last years levels.

In the latter part of April 2nd half of April we were at 60%.

Of last years levels.

And then more most recently in May 1st two weeks in May we're running at 75% to 80% of last years levels. So it's been increasing 20 ish percent per.

You know every two weeks.

Through that through the collector and I expected to remain in that 75% to 80%.

Through the remainder of the quarter are really driven.

You know sales is really not as much of the issue right now as production.

So we are ramping production back online to get our dealers product.

Our dealers have actually im seeing very good demand.

Many of the dealers are just now reopening so as a result, there are just able to take products. So it's really a timing issue.

Got it okay. So so if I if I look at that your your expectation that would come out to be you know rough weed out.

30% to 35% and in the U.S. It if I think about those run rates for for the full quarter.

Yeah, I'd have to do the weighted average Mike, but yes in essence that sounds mathematically in the ballpark yes.

And then as far as I think you also asked on Canada in Canada, Thus far for the first seven weeks of the quarter were running 65% of prior year levels in our Canadian operation.

Okay. All right. Thanks, then my second question is up as a follow up.

And I think it along the same winds you made a comment that you'd expect yeah industry shipments about flat with or consistent with.

Site build estimates I say build estimates or are there there's a pretty buried range right. Now. So you know two part question one would be.

When you say in line with those what what are you using us kind of a consensus for.

Built numbers and then the second part is you know bigger picture that go out of US are on board with the idea that there's some real tailwinds to manufactured housing growth over the coming years, but from a near term standpoint do you do have a customer base, that's particularly economically sensitive you have you know you have some.

Actual disruption in the financing improvement thematic you've got developers that may put things on cold. So so I guess I'm.

Yeah, what Oh.

What I'd like to know is is the given those factors why do you why is it your expectation that manufactured housing can kind of hold at share it in the near term.

I think I think so first off I'm, probably in the in the 15% to 20% range in terms of.

You know the full year kind of number.

Thing right now the cares act is acting as a instead of kind of unemployment insurance exacting more of the stimulus package to certain.

You know.

Wage level of demographics in the country.

So I think we're getting a short term bomb and we're seeing there you know I am concerned what happens after July depending on what happens obviously in the government actions that they take.

But overall I think there's a there's a tremendous movements.

Our retailers are telling us with their business activity level.

On a whole and it's very sporadic obviously.

Exceptionally strong we've seen.

You know two or three weeks ago about 60% of a retail base in the country roughly.

Was was idle or maybe shut down because of of.

Stay at home orders or other such items.

I'll now today about 90% to the retailers I would estimate our captive and open they maybe only have one person in the office social Duston thing we're doing more on line.

But I would say the actual traffic and closing ratio while traffic is down the closing ratio was so high that I would say.

Several retailers are experiencing all time record volumes in certain parts of the country.

So it is sporadic, but I think theres a demand for housing this pent up.

And I think we're seeing that type of traffic pattern at many of our retail base I think it's going to be the community channel.

That is going to watch.

Then in payments come in over the next few months before they start to really returned back to the market.

They have started to return, but I think it's going to be more of a slow drip.

Over the next few months until they have some assurances that maybe.

They can have a payment stream coming into them before they start placing orders for new homes. So.

I think on whole I'm very bullish because we are seeing more activity.

In rural areas of people interested in acquiring on homes.

And we're also seeing tremendous number of companies who are moving to the work from home.

Policies.

That's not has just yet but with those two trends and given our.

The predominant amount of sales that we have going into rural areas.

That's that's a huge long term positive for us. So it just depends on how fast that shift happens and I'm anticipating that will start to happen more towards the fall this year.

Okay. Thanks, Mark really appreciate the insight.

Thanks.

Thank you. My next question today is coming from Greg Palm from Craig Hallum. Your line is that a lot.

Yeah. Thanks for taking the questions and hope everybody is doing well I guess I just wanted to follow up Reclarify on a couple things first off can you actually give us some color on what some of the order trends have been over recent weeks I think you said that backlogs are actually ops.

Since quarter end in the U.S., so that implies some strength I know you talked a lot about sort of production rates, but but what do you actually seen in terms of orders right now.

Yes, so so orders have been outpacing our production Greg.

Pretty consistently over the past several weeks I mean, obviously each weeks independent but.

We have built off backlog, our backlogs year over year now are up.

From where they were at this point Lori 5% to 10%.

Stronger backlogs than we had at this point last year. So we are seeing sales.

Slightly outpaced the production levels that I mentioned to you.

Just previously.

The question is are those are those orders and pace going to keep up and we're just watching that so far they are holding.

And like I said to to make a minute ago, Greg I think the piece that we see is I think the community channel.

Which is roughly 40% of the hub market is going to kind of slowly return, whereas retail activity.

Thus far is stronger than it was in the prior year.

In aggregate.

Yes, as retailers are coming back obviously, when they were at 60% or not but.

Recent trends I'd say retail activity stronger than it was last year.

Interest in so I got that you know kind of implies that at least some of your retailers are seeing activity. That's an access so when we were pleased told bid.

I know there is it certain geographies or that's just byproduct of certain retailers I mean, what do you think it's sorta driving that strength.

So it's definitely geography based Greg so, it's not I'm kind of making a broad statement in terms of the U.S.

But I would say you know that that statement is is probably true for 60% to 70% of the country.

Right now obviously places that are just reopening.

Haven't had that bump yet, but that states that have been opened or maybe more.

Open.

Have have experienced those trends pretty consistently.

I really attribute that to to a few facts. One is you know a large portion.

Of our our customer base are the.

The meat Packers and that the warehouse workers and the grocery clerks and the you know.

Health care professionals most folks in addition.

Even though there's ramp in unemployment or high levels of unemployment in the country.

Most workers today with their confidence level.

Believe theyre going to be returning to work I think about three quarters of all the laid off employees believes that there just temporary furloughs and they will return to work. So right now given the cares act. Many workers are getting a and the stimulus package are getting somewhere between a at least in the lower.

Our income demographic.

Getting a 30% to 40% pay increase.

By being unemployed and so I think they're using an opportunity to invest in their future and invest at home.

Yeah that makes sense last one following up on your comments around these trends to rule I guess is that a theory at this point are you actually seen folks, making the mood and just kind of curious if you are.

Are these renters are there certain geographies, where maybe you're seeing more of an impact now just wanted to get some some additional thoughts on that because I thought that was a another interesting theme.

Yes, I think right now it's more of a.

Just.

Our forecast or an estimate Greg we're not seeing actual tangible people move to roll yet I think people it's too early in the.

Stay at home order process for people to really be out.

I'd say relocating at this point in time, but I think that will come in a in a few months like I mentioned I think in the fall is what I expect that activity start.

Coming together at this point in time.

So.

But it's definitely interesting that the.

The number of people coming into dealerships that are.

Closing on homes, and putting deposits on homes across the country.

Is very high at retail so.

The closing ratio is just it's impressive actually so with those kind of numbers.

Even though it's offsetting the lower walk in traffic.

Yep, Great alright, thanks for the color best of luck going forward.

That's correct.

Thank you next question today is coming from Daniel Moore from CJS Securities. Your line is that a lot.

[noise] Mark Lori good morning.

Good morning.

Laura you touched on margins going into the next quarter.

Perhaps being impacted to some degree by social distancing talk about the I guess a.

If it's more of a supply issue or predict production issue.

But the glide path is to getting back to full.

Production capacity and B, what that glide path looks like from a margin in productivity perspective, you know what you've learned so far as far as how to handle actually working in the factories et cetera, maybe a little bit more on that would be helpful.

Sure.

So the company in addition to the social distancing Dan The company chose to continue to pay this portion of employees that were furloughed their health benefits and other benefit.

So as long as we have those furloughed employees in place that's going to be a bit of a drag on margins, but the right decision overall.

I think that.

It is highly dependent margin growth or back to normal margins the higher the trajectory is highly dependent.

On volume as you say that so as we see volume pick up.

Over the next week some line.

Well be able to return to that level, depending on how.

How many followed in place we still have.

I don't know that help.

It does it does that help the some of the dynamics in terms of just the gross margin.

Can you give a sense of what we've seen on average through the first.

Well, it's six seven weeks of fiscal Q1.

Sure you know I'm looking at our decremental margins there they're around.

You know low 20% range right now.

The decrementals not the gross margins.

Yeah.

Yeah.

Okay.

And.

Mark.

Mentioned financing.

Both consumer perspective and.

Inventory Floorplan perspective, what are you seeing there are things loosening up from.

Maybe let that initial freeze back in March and.

How much of a.

Have a bottleneck do you think that'll be the getting back to.

Yeah, maybe flat or your.

Letter.

[noise] kind of year over year comps.

Yes, I think the financing environment actually Dan overall.

Is actually very good right now.

What we're seeing is primarily in west, Texas oilfield related areas.

I've seen credit tightening chattel lending tightening.

In aggregate, but I would say outside that the real only.

Focus for the financing companies is not really been on tightening credit or.

Any of those factors, it's been driven by validation of employment levels.

So right now credit and financing for product is actually very very good just depending on the.

Employment level and employment status of the individual.

Got it thank you.

Lastly from me.

You gave good color on the geographic regions, just as as in terms of the cadence over the course of the quarter.

Or the kind of Midwest and northeast over the last couple of weeks you starting to see.

Those come back or play a little bit a catch up relative to the rest of the country or too early to tell.

Yeah, I think I think they are playing some catch up Dan, but I think what's more important is really.

View that the mid south is playing catch up.

So if you look for example, two years ago, when the fourth quarter, our fiscal 18.

Mid South region was at about 6500 units in the quarter.

And last year, the mid so because of rain and inventory dropped.

About 2000 units to 4500 units so they had a 31% decline year over year because of weather.

Last year's fourth quarter.

And so this year the mid Celts growth was about 1300 units, which is about 30%.

And that's really just so I actually view it that really the market growth in the mid so this year.

Quarter over quarter is really because they were at 60 502 years ago. They dropped 31% last year because of weather a onetime event. This year, they're just getting back to what I'm going to call normal recovery.

And so in the Midwest.

We're definitely seeing communities come back and those things, but really to the market trends are more driven by at least in the mid south by a return to normal.

And then I think the other markets or just.

Seeing their normal growth rates and come back as communities come back to the market.

[noise] very good helpful. Appreciate it thanks for the call it.

Thank you.

Thank you Thats question today is coming from Matthew Boulay from Barclays. Your line is not alive.

Hey, good morning, everyone. Thanks for taking the question.

Everyone's doing well I wanted to ask Scott back on the does the 10% EBITDA margin.

Timeline being pushed out I know the at the prior expectation was for that to be I guess on sort of a constant revenue target. So so the push out is that just entirely due to the lower production volumes and kind of that under absorption of employee cost as you mentioned Laurie or is there kind of an impact the timeline on the.

The operational initiatives as well because I I was wondering if there was sort of an opportunity to perhaps even accelerate some of those operational initiatives in this environment. Thank you.

Hi, Matt. Thanks for the question, it's entirely due to volume so pulling that that 10% doesnt entirely due to volume, we'll just see how the volume comes back we are going to continue to focus on.

The operational initiatives.

That we set out to do.

Okay, but no change to the timeline of those initiatives one way or the other.

Not really not as of today.

Okay got it and then.

Secondly, I wanted to ask back on the financing side, I guess, a little bigger picture, though I guess, what do you what are you hearing or seeing with what the G.S. These are doing here in terms of their their plans to roll out that that secondary market you know that we've been waiting for like it.

So I would say that due to serve program.

It's still on hold to actually Friday, Freddie actually came out and said that they're not planning to move forward with it.

Fannie Mae is still planning to move forward with the duty to serve so we're just waiting for them to rollout. So it's really a tightening work we're more encouraged to be honest by the secondary lending that's happening in the market.

And I would say today, we're seeing more lending activity than we have.

Along time that the lending market is actually quite good.

For us at this point in time.

Okay. So thanks for the details.

Thanks, Matt.

Thank you. My next question today is coming from Philip Ng from Jefferies. Your line is not a lot.

Hi, this is actually calling on for Phil and so you called out. The 250 units are placed on old in the quarter have you seen these orders released in the fiscal first quarter and kind of baked into those production rates that you called out or are you anticipating the doors will come later on in the year and got to give you and a nice Tom.

Yes, I think those orders column will be.

We will come sporadically.

We probably gotten a few of those in the in the numbers within April and May.

But I would say really it's dependent on the customer who put it on hold.

On what their time horizon is and how they're viewing their return to the market and many of those are community customers.

So I I believe it's just it's going to be rolled out and small increments overtime. So it's really I don't see it coming back as a big.

Bump up one point in time, I think it's going to be something where.

Our customer's going to get comfortable and they are at release 25 units Alright release 15 units at a time or something like that to as they get more confident in the future expectations for the market.

Okay understood and then you called out that 15% to 20% decline.

An industry shipment can you just talking about the shape of the rest of the year is just steady decline throughout the remainder of the year or do you expect to see some positive inflection at some point in calendar year 20, and then just how you think skybell track relative to the industry just given your footprint.

Yeah, I think I think as.

As I mentioned before I think with footprint.

Expecting the mid south to continue to grow just to get back to that I'm going to call normal level, where they were two years ago before though the are caught the rain hit them last year.

So I expect the mid south continue to grow a little bit.

Obviously.

We're going to be impacted definitely in first quarter in our first fiscal quarter.

Due to the fact that much of our geography was in in the northeast, which was hardest hit by stay at home orders.

And independently.

In general so I think you'll see a little bit of dynamic there but.

As the rest of the year progresses, we will be right on track.

Overall I think the.

The housing or the industry shipments.

I think I'm looking at it from a standpoint that.

After we get through July August type time period in some of the stimulus wears off that we might see a little bit of a slowdown.

In the market.

And so I'm I'm, a little bit I'll call I'm cautiously optimistic I'd, rather rather plan for the market to be a little softer going into the tail ended the year.

And so thats.

The outlook is just what's going to happen after the stimulus runs out in are we seeing and false signals.

From.

The current environment and do we see more more people more of the unemployment flip from furloughs to permanent layoffs and depending on that timing as it comes to bear.

Maybe the July or August time period, that's really the telltale or whether we're going to.

Beat those estimates or.

We're going to them.

Great. Thank you for the color.

Thank you.

Thank you as a reminder, that star one to be placed the question Q.

Our next question today is coming from Rohit, Seth Simpson from Suntrust. Your line is that a lot.

Hey, Thanks for taking my question most of them been answered just on the builder developer.

Genesis initiative that you have seen cried any color then it gets up to and what your thoughts are there.

Yes.

The the builder developer channel.

Was actually quite good for us in the in the fourth quarter, and we saw significant traction or good traction I'll call. It.

In the fourth quarter of getting product out in the field.

We actually had.

You know between one and 200 floors in backlog at the end of the quarter related to the Genesis rollout.

So it was definitely regain traction for us.

Just a few weeks after the rollout in the midst of coated.

Okay. So have you seen a positive that now.

And what's the.

How do we in down are you more people knocking on your door to.

Take a look at what's going on with Genesis already opportunities.

Yes, I think overall the that inbound is still good people are inquiring.

Overall for the so the marketplace I don't think it stopped I think theres, a little bit of a pause obviously.

In today's market not a lot of people are quoting a builder developer projects just yet today, so, but I would say our our actual inquiry activity has not slowed down.

I would say the quoting slowed down but the inquiry activity has not slowed down I think people just.

Or waiting to see a little bit of the future before they move forward.

Okay, and then in terms of your demand or is there any difference the different price points.

Are you selling some of those.

Higher price point owns more.

Okay.

Is that traction picked up in is there any difference in the price points.

Terms of products in the modular and covered.

At the moment.

No I think right now the we're not seeing any specific price point.

Gain more traction than another in the marketplace there's.

A little bit higher demand for a low end product you know in certain regions of the country.

But overall I would say, we're actually seeing pretty high demand at every price point that we sell to.

In terms of its normal ratio so I really good question.

In.

We're actually seeing we're not seeing one price point falloff versus the others necessarily so it's actually been encouraging to see that.

And then it today.

Okay, and then are you offering incentives or you retailers offerings and does it move product any okay.

Any of that source.

I would say no I mean right now the retailers.

The the.

The dynamic happening at retail today I would say is that the customers are walking in.

And the customer who's visiting sales center.

He is buying and actually there there.

This might be a generalization, but what we've heard from our retail base is that the customer is not necessarily as price sensitive.

As they are just I need to house I need it soon.

And.

What do you have and what can we do to to close the deal.

So that it's not as much of a.

Shopping environment.

As much as it is a purchase environment at retail currently.

Okay, and then a lot of the job losses that are out there.

For me on travel tourism et cetera, and your footprint I mean it.

Do you sense of what would the job losses on your footprint or the root of job losses.

More or less.

The headline I guess worse than what's actually happening in your footprint.

I don't I don't know the answer to that were we to be honest, but I would say most of the people that are coming in today believes that they're going to be reemployed coming out of this a vast majority.

So.

The general shopper today in the general person who's laid off I would say that's actually visiting dealerships believes they'll have a job either currently have a job or will have a job.

And they're just temporarily temporal are temporarily furloughed for the time being so.

Most of our footprint is in the northeast we have a significant presence obviously mid Texas.

So in a lot of those were not necessarily in.

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You know popular crews destinations or those type of hospitality hot spots.

Were generally in.

I'm just going to call it roll Rural America.

Where maybe that tourism isn't quite as prominent.

Yes, that's come on corn.

Alright, and then on the strategic initiatives.

I mean that your plants are idle during is under way to automate automate your production a little bit faster I'm surprised to hear though that's just going to be on trend.

The timeline.

Yeah, I think the question would be what the lead time on automation equipment or we right now.

At least some of the automation equipment will have lead times that are drawn out just because of their supply disruptions.

So it it it's a little too early to tell in that in that case so.

But you know I think we've got plans underway.

And we're working towards those those items in towards kind of our.

Our digital plant.

Last one from me on manufactured housing that's meeting channel.

What percent of that is your what percent of as your mix and then what are the trends you're seeing there I realize there's a there's a region specific issue.

In that channel skewing update on that and I see that playing out for us here.

Yes, Thanks Roy.

The community channel is approximately 30%.

Of our sales.

And the way that's playing out I would say is in in certain states like Michigan, Michigan actually in California.

There was strong.

M&A activity, so Michigan had M&A activity.

For a large reach that is closing in June in.

In California, there was I'm going to call it a buying frenzy by read of other communities in California. So in California. Many of the we have been working on putting in infrastructure and doing infrastructure spending before they buy homes with the purchases. So we're just way.

For the conclusion of that infrastructure spending.

For some of those communities to restart.

They are buying patterns.

So I think overall it's.

There's there's still good demand I.

I do think theres going to be a pause.

With some of the right in terms of what their outlook is and what they are concerned.

Unemployment and payment levels will be going forward. Thus far if you look at the public Reits and others that we've talked to they've actually been surprised with how.

With with their ability to collect and and receive payment.

Within the question, sorry about 95% for them, so nice it sounds pretty good.

Yes, very good.

All right. There is only had thank you.

Thanks, Rick.

Thank you next question is a follow up from Daniel Moore from CJS Securities. Your line is alive.

Thank you again, just as it relates to ASP is do you see Q4 as being sort of the harbinger of things to come over the next couple of quarters.

Or do you think we can get back to flat or maybe even a little bit of growth as we get it later into fiscal 21.

Hey, Dan on it it's really highly dependent on product next so I think we are going to see a higher continue to see a higher percentage of single lights at least in the short term and then as next ill chef well see a shift in assay, but I expect relatively flat to Q4.

Got it I guess.

Far what we've seen at least in fiscal Q1.

That that mix too.

Single floors are still still holding.

Yeah got it thank you.

Thank you next question is a follow up from Greg Palm from Craig Hallum. Your line is alive.

Thank you quick one more you wanted to follow up on the margin targets I just to clarify did you would drop.

Previous margin targets because of the lack of visibility you have right now. So for example, I guess at the industry in your volumes to recover faster to call. It three Tobin levels is the expectation that in that environment do you can still hit the 10% target or has something changed.

Changed that's not volume dependent just just wanted to be Claire.

Ah Nothing's changed it is entirely volume dependent and visibility.

Yes, Okay makes sense and then.

Speaking more public commentary on recent activity.

Thinking about your footprint, a little bit more I mean, obviously, whether its states like Michigan or the northeast I imagine things are still pretty slow there, but maybe you can confirm that.

If they are I mean that would make the recent order trend, Tom and Jerry company wide, even more impressive. So I guess are you expecting any pent up demand.

Some of those states and area start to reopen like the rest of the country.

Yes, Greg I think.

We should see a little bit of a spike as things start to open back up, especially as retailers come back online.

And move forward, so I do expect.

That will that will be a positive sign going forward as we move and.

Frankly, I think when we saw in the quarter, 11% year over year sales order growth, we view that as fairly strong and that includes all of the cancellations and orders put on hold so you know I think I think we saw very good.

Year over year growth, even though our markets were relatively flat.

Especially given the covance situation.

Yes, Okay, alright, that's it for me thanks.

Thanks.

Ladies and gentlemen, we reach of our question answer session ought to turn the floor back over to Mark for any further or closing comments.

Just want to thank everyone for their time today and hope everyone and their families are staying healthy and well we will continue to.

[noise] make our way through the cobot pandemic affectively and look forward to the Tailwinds that it will take company over the next level. Thank you very much for your time.

Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

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