Q2 2021 Skyline Champion Corp Earnings Call
Good morning, and welcome to Skyline champion corporations second quarter fiscal year 2021 earnings call.
The company issued an earnings press release yesterday after the close.
I would now like to introduce your host for today's call Sarah John What's the company's director of Investor Relations and external reporting.
Sarah you may begin.
Good morning, and thank you for participating in our earnings call to discuss our second quarter results joining.
Joining me on today's call is Marchioni, president and CEO and <unk> E V P 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 D.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections such.
Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission.
Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance.
A reconciliation of these measures can be found in the earnings release I would now like to turn the call over to Mark.
Thank you Sarah and good morning, everyone.
Today, I will provide an update on the second quarter as well as the balance of the fiscal year and beyond.
I will discuss the overall favorable housing environment, which continues to recover and the very strong long term dynamics.
Let me begin by saying that I am very encouraged about the strength the broader industry.
We have seen a significant inflection point in the homebuilding industry as demand at the macro level is being driven by low interest rates millennial homeownership in people adapting to lifestyle center are centered around the home.
With homes now serving as a home.
Office School Gym Entertainment center in a place of safety and solitude, we believe demand, especially for high quality and affordable homes.
<unk> strong.
We are fortunate that we are very well positioned to benefit from these dynamics.
True to these dynamics, we have seen strong demand in order rates.
During the quarter, our consolidated orders were up 70% sequentially from our first quarter, you know, 53% from the second quarter of last year.
We delivered 4991 homes during the quarter, an 18% improvement from the sequential first quarter, but down 7% from prior year due to our production ramp.
During the quarter, our U.S. manufacturing facilities improved capacity utilization like 5%, reaching 63% during the quarter, despite being hampered by intermittent covert plant shutdowns.
The player disruptions in short term hurricane related outages.
By the end of September we reached production levels that are similar to those achieved at the same time last year.
Our western Canadian plants have followed a pattern like the U.S. plants.
Sales were down about 7% in the quarter.
Fiscal 21.
Compared to the same period last year, but were up 62% from the fiscal first quarter.
Canada also saw a steady increase in orders during the quarter.
The strong order demand for homes has continued to outpace production, which has resulted in increases in backlog or.
Our backlog grew 198 million during the second quarter to 390 million in scans on average in the U.S. at 19 weeks.
As a basis of comparison, our backlog grew 19 million during the second quarter of last year and was out an average of seven weeks in the U.S.
As our supply chain partners increase their production levels, we will be able to deliver more products to our customers.
Well recruitment of new out because it's not a pre cobot levels. It has improved in most regions of the U.S. over the last few months.
We are in the process of training and Onboarding, new employees and are working to increase our labor force to accommodate the increased demand for housing.
Maintaining a safe and healthy environment for our employees remains a top priority and we continue to fall the enhanced safety and sanitation protocols at our facilities.
Entered hearing to CDC guidelines for social distancing and other measures to reduce the spread of Coke at 19.
Walk in traffic at retail stores, it's still below pre cope with levels, but has also improved over the last few months.
Customers coming to look for homes are ready and able to buy we.
We hear that many buyers are moving from multifamily apartment buildings and need more space as they spend more time at home due to the financing environment. Many first time buyers are entering the market.
In talking with our dealers financing availability is still strong and inventories.
Levels are lean as customers are purchasing spec homes instead of waiting for custom order homes to arrive from the manufacturing facilities.
We continue to great gain traction in our builder developer channel with our Genesis brand.
Our penetration into small and mid sized subdivision builders continues to gain momentum.
Builders like the turnkey nature of the product.
More of our channel partners are asking for full turnkey solutions in.
In the northeast, where we've launched our set crew and finishing services last year, we are utilizing our turnkey approach. He genesis exclusive subdivision currently underway.
Likewise, the edu market is starting to pick up her west.
Given the backdrop of low interest rates favorable demographic and geographic trends combined with limited housing supply, we believe that the demand for housing solutions will grow.
What is important to note is that the demand is being driven by every channel we serve and across multiple geographies.
Which is deeper roots in sustainable demands in past years.
Given the dichotomy between housing inflationary factors in a recovering economy with millions out of work in behind in payments wanting to expand we believe that our attainable housing solutions well outpaced the overall market.
With our Labor force, we can scale more effectively over the long term.
Especially as we expand our automation and digital capabilities, which we intend to invest more heavily in.
For customers 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 quarter, followed by a discussion of our balance sheet and cash flows I will also briefly discuss some margin headwinds we are expecting in our fiscal third quarter.
Net sales decreased by 9% to $322 million in the second quarter versus the same quarter last year. We saw revenue declines of 29 and a half million in the U.S. factory built housing segment as well as declines in our Canadian factory built housing segment of 1.8 million.
The decline in the U.S. factory built revenue was primarily driven by a decline in the number of homes sold and a reduction in average selling price.
The decrease in the number of homes sold was 6.7% or 337 units compared to the same quarter last year.
The average selling price for U.S. homes sold decreased by 2.9% to $60400 due to a shift in product mix to more single section homes and customer selecting less expensive upgrades versus the same period last year.
Well results remain below a year ago levels, we're particularly encouraged by the strong sequential performance as conditions have improved significantly compared to the beginning of the pandemic.
Sales revenue and the number of homes sold for U.S. factory built segment increased 14, and 16% respectively in the second quarter compared to the first quarter of fiscal 2021.
Canadian revenue decreased 7% to 24.6 million compared to last year, driven by a 4% decline in the average home selling price the $81300 as well as a 3% <unk> decline in the number of homes sold to 300 in Q.
The decrease in the average selling price was due to a shift in product mix consolidated gross profit decreased to 62.8 billion down 15.2% versus the prior year quarter due to reduced sales volume.
Our U.S. housing segment gross margins were 19.2% of segment net sales down 170 basis points from the second quarter last year due to increased material costs as a percent of sales caused by market volatility in certain commodities, including four products.
S DNA in the second quarter decreased to $41.4 million versus 48.4 million in the same period last year. The decrease was primarily due to a reduction in variable incentive compensation and reduced travel and marketing costs. We also experienced favorability and.
Jenny costs due to a reduction in non cash equity compensation expense of 1.4 million.
We recorded other income of 2.6 million during the quarter related to the <unk>, Canada emergency wage subsidy program and acted in response to the pandemic. We continue to monitor our eligibility to apply for financial assistance with this or any other government programs.
Net income for the second quarter was 717, and a half million dollars or 31 cents per share compared to net income of 17.7 million or earnings of 31 cents per share during the same period in the prior year.
On an adjusted basis, we generated 31 cents of net income per diluted share compared to 34 cents in the year ago quarter, driven by a combination of lower gross profit.
Which was partially offset by a reduction in S. DNA the benefit of the Canadian wage subsidy program and a reduction in income tax expense.
The company's effective tax rate for the three months ended September 26, 2020 was 24.4% versus an effective tax rate of 29.8% for the fiscal 2022nd quarter. The.
The company's effective tax rate decreased primarily due to increased federal tax credits related to R&D and the energy Star program.
Adjusted EBITDA for the quarter was $28.9 million, a GE a decrease of 10.9% over the same period a year ago. The adjusted EBITDA margin compressed by 20 basis points to 9% due to an increase in material costs that were partially offset by lower <unk> expenses.
Under the Canadian wage subsidy program.
Without the benefit of the wage subsidy, our adjusted EBITDA margin would have been 8.2%.
Shifting to our outlook for the third quarter, we believe our financial results will continue to be impacted by increased material costs, especially for products labor constraints, including higher than normal absenteeism due to covance and intermittent material shortages.
There has been considerable market volatility for lumber and always be over the last few months well pricing seems to have peaked and it's starting to decrease.
Expect to see compression in our margins and our fiscal third quarter as more of the impact of the spike in lumber pricing will be realized in our results due to the length of our backlog and the structure of our lumber and ought to be contracts.
We have instituted price increases to help to help offset a portion of the increased material costs, but in some cases, we're constrained by competitive pressure and other market dynamics, but don't permit a full recovery of the increased cost in the short term.
Over the medium and long term, we believe the demand for single family homes are strong and the increase in input costs can be passed on to the end consumer as they seek affordable and attainable housing solutions.
Turning to our Labor force voluntary attrition is lower this quarter compared to this time last year, we value our direct labor team members and are committed to retaining our people and growing our team to meet increased demand weaker.
We continue to recruit onboard and train new team members to support the expected growth in the business.
However, our production capabilities may continue to be limited in the short term by additional instances of high absenteeism for intermittent plant shutdowns related to COVID-19.
We mentioned last quarter that labor constraints contributed to our idling of two plants that are situated in a campus style layout by the end of our second quarter, we restarted operations at one of the two idle plant and expect to restart our operations at the other plant later this.
School year as recruiting initiative allow.
As we progress through the second half of our fiscal year, we expect to continue to experience intermittent shortages or delays of certain raw materials used in our homes.
We believe our supply chain partners are experiencing similar challenges with labor constraints.
Including cobot outbreaks and higher than normal absenteeism, we believe that we will be able to work with our vendor to effectively manage through these situations by using alternate sources or products to obtain the supplies needed for the homebuilding process.
As of September 26 to 2020, we had 264 million of cash and create cash equivalents in long term borrowings of 77 million with no maturities until June 2023.
We generated $32 million of operating cash flow during the second quarter compare.
Compared to 25 million during the same period last year.
The increase in operating cash flow is primarily due to cash flow benefits from government programs.
Under the care affect employers are eligible to defer the employer portion of payroll taxes in part until as late as December 2022 during.
During the first half of the fiscal year, we've deferred just over $7 million of U.S. payroll taxes and have received almost $6 million from the Canadian wage subsidy program.
We remain focused on executing on our growth and operational initiatives and plan to utilize our cash to reinvest in the business and to support strategic growth.
I'll now turn the call back to Mark for some closing remarks.
Thanks, Laurie while we remain mindful of the uncertain conditions with the pandemic has introduced we believe we are well positioned to support growth in revenues and expanded returns over the longer term as we work through labor constraints and pricing dynamics over the short term.
Continue to be impressed with the way our entire team has rallied together in the current environment. Our employees are amazing and dedicated they continue to work hard providing the market with a tangible housing options that are so varied desperately need it today.
And with that operator, you may now open the lines for Q and a.
<unk>.
Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press star two if you'd like to remove your question from Nick you for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Daniel Moore with CJS.
<unk> Securities. Please proceed with your question.
Good morning, Mark Laurie Thank you for taking the questions.
Good morning.
Let's start with maybe just describe the monthly cadence of homes ship through the quarter and thus far into October I think Mark you said you were back at similar rates of production to this time last year at the end of September.
I'm wondering if we have been able to exceed that at this point.
Yeah, Dan. Thanks, I think steadily through July August and September you know, we saw pick ups in production.
So it was pretty good pickups a month after month, you know we had a 21% increase in production in the [noise].
Second quarter versus the first quarter, you know thus far into into October we're running about 10% to 15% in the first few weeks of October higher production levels than we were during the average of the second quarter. So we so we've seen steady improvement even into October and its progressing.
The concern going forward I think is with the.
Increasingly cobot cases and potential for further enhance supplier disruption maybe later in the quarter. You know, we're kind of moderating the beef production levels or potential production levels to think that we're going to be relatively flat for the quarter in terms of shipments versus last year.
Got it that's helpful and then and you get very good color, obviously in the prepared remarks, but maybe just talk about that.
Whether its rank ordering but the most significant bottlenecks to expanding production is.
Is it labor is it the supply chain concerns it so what items and just kind of what's in your control and what's a little bit.
You know lessen your control in terms of how long it might take to ramp ramp up.
Yeah, I think I think labor has steadily improved.
During the quarter you know, we've we've brought on more than about of about 100 people I think weve hired during the quarter.
And they've been Onboarding and ramping up so we've seen good traction in getting a new hires brought in so I think with the carriers Act a subs are these kind of waning I think that's improved steadily since then.
You know labor still comes to market, but I would say it popped up early in the quarter second quarter. It was probably labor related later in the second quarter. It was probably supply disruption that was primary, especially you know in certain cases forest products, we're very scarce. So we had to.
You know travel in and go wrong, just fine lumber products in some cases, you know in many cases trying to find appliances or other things to make sure we get a complete home for the customer.
So those were challenges probably late in the second quarter those in thus far in October have I think mitigated somewhat so we're seeing improvement in the supply chain and improvement in the labor.
A pretty consistently which is encouraging I'm just it really comes down to well the ramping cobot cases cause a you know a week outage at a certain plants or another week outage or will you know.
Governors and all the other people take action to.
Pull back certain.
Certainly.
Certain limitations.
Okay, and maybe one more and I'll jump out back in queue, but.
[laughter], if you could put a little bit more specificity around.
I know, it's early in the quarter, but you know around the commentary for margins.
If we are able to at least wrapped production sequentially.
You know Recchi <unk> should we think about margins being gross margin being relatively flat versus this quarter or ret and not expanding or do you expect it to be actually down sequentially.
Sequentially based on what you see today from all those factors. Thanks.
Hi, Dan I'm I can take that one we expect margins to to go down sequentially from the second quarter, primarily due to the length of our backlogs and the structure of our lumber and I want to speak contracts.
So still expecting to see some decreases especially in the U.S.
Okay, I'll jump back with follow ups. Thanks.
Thanks, Dan.
Thank you. Our next question comes from line of Matthew Bouley with Barclays. Please proceed with your question.
Hi, This is actually Ashley can on for Matt. This morning. So I just wanted to ask on the increased backlogs are you are you worried about any increase exposure to input cost volatility just given me and then on that you know how are you kind of managing pricing in light of the increase materials costs.
Yeah, absolutely. Thanks, I think no I I think really the pricing environment is good.
And I think overall whats the demand levels and pricing you know I know most site built homes have gone up significantly in price.
I think for us with our backlogs, we have price adjusted most of most of our products.
Into into the future here, but im we're able to pass along those increases generally depending on competitor pressure pressures by region, but overall I would say, we're generally able to pass on those price increases the only dynamic that I think Lori was referring to a moment ago is the fact that we had a quite a bit of sept prices.
In our backlog and lumber and always be moved outside of our forecast window quickly.
Somewhat unprecedented and then on top of that certain supply contracts that we had were disrupted and so we weren't able to get lumber even on those contracts. So we have to go to the spot market to buy in some cases, because our current obligations were not be able.
People can be met so I think overall pricing environment is a good one I think you know the third quarter is where we should see some of that compression. Once we're out of the third quarter I'd I don't expect much compression after that.
Okay.
I think he said that that's helpful. And then on the ramping capacity do you have to make any changes to the compensation order should get some labor that you needed in order to meet demand or was that mainly just kind of as a result of no uncertain here on the care that did not that was kind of bringing more labor here.
Hi.
Yeah, I think primarily it was the competition for labor Judith Cares Act.
That was driving the challenges earlier in the year I think labor availability is becoming more available definitely and I would expect you know those depending on certain government stimulus packages or.
Or other things that they might enact it could play a role in the labor availability, but overall I'd say labor is available there's high levels of unemployment. So people are looking for work and we're a great company to work for and so good product to build people lead homes. Today. So I think I think it's not really a pricing environment for labor.
As much as it is just getting the labor trained and developed and ramped up which takes a few months.
Okay I'll leave it at that thank you.
Thank you.
Thank you. Our next question comes from the line of Greg Palm with Craig Hallum Capital Group. Please proceed with your question.
Yeah, that's a good results and in light of everything going on I mean market to put you on the spot, but you know from a.
Oh demand standpoint, I guess thinking back to last quarter, you sounded a little bit more cautious or maybe you know cautiously optimistic is the right way to describe that you sounded you know a lot more bullish.
This quarter, obviously, given the backlog and the order rates, that's I guess not all that surprising but what gives you.
Maybe some added confidence that what we're seeing now you know in terms of the demand environment has some legs behind it.
Yeah, Greg Thanks, and good morning, overall I think.
There's there's a few things number one is there's demands coming from every channel.
That we serve and in multiple markets. So its.
If you looked in past years in the MH industry.
There was generally a large amounts of demand either coming from let's say, a large FEMA contract, which was kind of a onetime event.
Which was coming from you know a a surge in in.
I'll call. It suddenly orders if you will that flooded the supply chain if you remember.
You know like two years ago, we had a large either a build up in the supply chain, which kind of accelerated orders and then a de stocking of that supply chain in the retail network that that subsequently lowered orders I think what we're seeing here is you know generally speaking retail inventories are in good fuzzy.
Mission their lease.
And also to since we see demand coming from multiple channels. It really is more it.
It's dispersed and it has deeper roots I think the financing environment is good we're seeing a tremendous amount of millennial traffic from what were talking to our dealers on.
People are looking to get out of you know I think people, who have who have lost their jobs or maybe lower income are trying to get out of a high payment rent environment Department.
And they can actually save a few hundred dollars a month by going to live in the community going to purchase one of our homes. So I think I think the.
The current economic environment with financing and everything is just driving a lot of it which I foresee how you know continuing for.
For some time, so I think the demand is very good I'm encouraged that our order rates are up 53%.
Even when you.
We have a significant presence in California, which was affected by wildfires, we have a significant presence in Louisiana.
Louisiana, which was affected by Hurricanes, you know some of the states like Michigan and parts of it when you look at shipments or even in Florida. Some of those states that are key states for us were down in terms of shipments yet our orders were up significantly so to me.
Demand is very good very strong and has a lot of deep roots to it to continue.
Okay and in terms of pricing, maybe I missed it I'm not sure did you quantify.
You know maybe how much industry pricing has gone up here over the recent months given all of sort of the equation weve been soon.
I don't think we quantified industry pricing, Dan, but I would say you know overall.
Lumber pricing has gone up I know site builders I saw a recent report by NIH be they went up about I think if I read right $16000 per home.
In that neighborhood I don't our industry has not gone up quite that much but you know it's it's a meaningful number is.
It's definitely in the thousands of dollars.
You know per home, but.
So I would say, it's it's been significant win lumber doubles and triples and price yeah.
Yes.
Yeah, Okay, and I guess, just going back to the margin.
I think you probably be you know our gross margin expectations almost every quarter since we've covered the stock.
Even though you certainly guide for conservatism, but just help us understand because you know presumably if pricing is up in shipments are flat that means you know revenue is up year over year or up sequentially and you know I guess I would assume that pricing has already gone up.
That may be the headwind from lumber in raw materials, you know won't be as bad as the previous quarter, but you're certainly alluded to the fact that it it might be worse. So just maybe help us understand if there's anything else in there.
Hey, Greg I can take that one.
So no price increases are going to have to trickle in over the December quarter, because of the length of our backlog and at the same time, we're going to be hit by.
Higher lumber prices because of you know the structure of our contracts so.
We actually are expecting to see you know sequentially and down versus the third quarter a pretty significant.
Decrease in margins.
Okay, and then as we get through this.
This sort of near term impact I mean, youre consistently running 20% plus pre told that it that you know sort of a good baseline or when were sort of through this near term impact yeah.
Yes, definitely I think we'll be able to get back there.
Shortly after this quarter.
Okay perfect. Okay. That's it for me thanks.
Thanks, Eric.
Thank you. Our next question comes from the line of Mike Dahl with RBC capital markets. Please proceed with your question.
Hey, guys. This is actually Chris from Mike Thanks for taking my questions.
First question just want to dive into the the competitive dynamics, you're seeing right now on a given all your comments on.
Actually I.
I see.
And then increase competition can you just kind of give us little more that's true.
Driving that increase in competition and whether whether we should expect that to continue going forward.
Yeah, Thanks, Chris and good morning, I think overall that the competitive environment is.
Obviously always there I think right now today demand is outweighing most of the industry's ability to manufacture and supply. So I I think it's really on a geographic basis that you might see pockets of competition that are.
More competitive than others generally speaking I think overall I think the company is able to pass on price increases in and manage the business effectively given the competitive dynamics in the market. It's obviously, a lean market, but overall I think the competitive dynamics are good.
And.
Maybe not more challenging than former times, just it's the timing and sequencing.
Of People's reaction to maybe the lumber inflation that is a dynamic that I think we'll see over the over the coming months.
Okay got it and then just for my second question.
The pricing that you guys have in place today is that is that enough. You know once you work through this the the the backlog is that enough to kind of cover what a what.
What the peak lumber inflation is going to look like or do you still need incremental pricing from here to make to cover those costs.
Yeah, I think I think overall, we didnt really price the product you know necessarily I think for full inflation.
It's always a forecast, but generally you try not to you know price at the peak you try and phrase it what do you think it's going to be in the forecast.
So overall I think you know with lumber prices coming down on average our forecasts are probably in line with where we think we should be.
So as lumber is expected to continue to decrease we are seeing input other input prices start to increase maybe offsetting some of the declines that we're seeing in lumber because other products are lagging to that lumber inflation, but they're starting to uptick because of those supply chain challenges that I mentioned earlier.
So I think you're going to see lumber coming down you're going to see other materials start to come up and it'll be kind of be in line with where we think it's going to be a.
Got it and if I could just sneak one more in and just to clarify does that is that what's kind of driving your commentary on threeq you being the low point that yeah.
As the cost pressures abate that allow for for pricing to catch up.
Yes, so I think with our with our pricing we have backlogs that we're through the end of the year.
At the same time that.
Our lumber contracts for supply.
Was either affected by outages, so we weren't able to buy at our contracted negotiated prices or wasn't available I should say at those prices and so we had to go to the spot market. Just just continued production and or in some cases, you have a situation where lumber went so.
So quickly.
Because of those shortages that are you know.
It will compress some of the emerging in the backlog.
Got it appreciate all the color.
Thanks, Chris.
Thank you. Our next question comes from the line of filling with Jefferies. Please proceed with your question.
Hey, Good morning. This is Matt again, so I guess first sticking show raw materials on.
You know you you've talked about a lot about the elevators lumber cost.
We've also started to share you know the manufacturers may price increase now since for other categories like insulation and roofing indoors. So I guess, if you could just talk about on.
You know, how you're thinking about the magnitude of some of those other categories entered this corner and and.
For the fourth quarter.
Yes, Thanks, Vicki I think overall the the inflationary pressures we see from those other commodities that you just mentioned.
We will start to come into play I think closer to the end of the third quarter early fourth quarter.
<unk> is when we're seeing some of those increases are on.
On roofing materials and all those other commodities that you mentioned.
So I believe that with the declines in lumber and because lumber is such a meaningful component within our AR.
The homebuilding process I think you'll actually see most of those things net out. So I don't think it'll be an overall absolute increase inflationary wise I believe the increase or decrease as a lumber will also be offset by some of those other commodities that you just mentioned so.
So I think were priced we're where we should be.
Got it Okay, and then kind of switching gears on can you talk about the the rollout of the Genesis, how didn't try and and market acceptance.
Maybe some color on the revenue opportunities you have thought over.
The next year or so.
Yes. Thank you I think Genesis is very fixed.
Exciting product for us, we're gaining traction with small and mid tier subdivision builders.
And that's going very well I think you know the rollout of our.
Some of our turnkey services that we started to do last year.
Primarily focused in the northeast has been received very well by multiple channels our community partners are retailers.
And now that set and finish crews that we launched last year are able to do subdivision developments and were currently have one under way in the northeast. So I think genesis, especially as builders find out how simple and easy it is to use the quality and the.
Price point, its a very turnkey oriented solution for builders as they build their so division. So I think the potential is a very good and we're continuing our business case of developing multiple sub division so that we have.
Proof positive to builder developers that this product really works, we fell as well.
Okay, great. Thank you thank.
Thank you.
Thank you. Our next question is a follow up from the line of Daniel Moore with CJS Securities. Please proceed with your question.
Thank you again, I'm always looking for as much specificity as possible. So production run rate. We've got a good sense for October is that reasonable thing else. If we think about that as sort of plateauing for the remainder of fiscal Q3 can we continue to ramp that up a little bit or is that more challenging given potential covert outbreak.
[noise] lumber availability et cetera.
Yeah. Thanks, Dan I think overall you.
I expect that will continue obviously to ramp production per day I think we're seeing success with that in the number of floors and units we can produce per day.
I do expect some co bid disruptions that will take days out of production.
During the quarter, just given the nature of what we're seeing is through.
Throughout the U.S. and even in Canada.
Related to the increase in covert cases.
It's hard to believe that if it continues to spike and elevates that we won't see maybe higher out absentee levels, especially as you get closer to the holidays and people may be more concerned with.
Visiting relatives and other things so they may be less.
What's likely to come into work.
Right right before and maybe the right after the holidays.
So I I do expect that the production per day will increase but I am concerned about the cobot outages and also that impact our supply base.
And so I think you know production levels overall will be close.
Closer to what we saw the third quarter of last year.
And probably net Oh, you know.
Mid high single digits from from this current quarter.
Overall, just because of the even though we're producing more per day, there might be a few more outages.
Yes.
Got it although it sounds like as we run rate exiting the quarter into fiscal Q4, we should be in and better position all else equal and obviously, depending on cove at another other factors yeah.
Yes without a doubt.
Okay. Thank you.
Good.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. used for any final comments.
Thank you very much I'm very impressed with what our team has done and their ability to.
Not only survive, but thrive in these challenging conditions.
And just a continued to keep up the good work for one listening and for everyone out there. We're here to produce great homes for great people. So thank you very much have a great day.
Thank you. This concludes todays conference you may disconnect. Your lines at this time. Thank you for your participation.