Q3 2021 Skyline Champion Corp Earnings Call
Good morning, and welcome to Skyline Champion Corporation's third quarter fiscal year, 'twenty 'twenty one earnings call.
The company issued an earnings earnings press release yesterday after the close.
I'd now like to introduce your host for today's call Sarah Channel with 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 third quarter results.
Joining me on today's call is Mark Yost, President and CEO, and Laurie Hough EVP and CFO.
I'd 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 projections.
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 third quarter as well as the balance of the fiscal year.
I will also touch on the trends, we see for next fiscal year, given the strong demand environment and favorable fundamental backdrop for housing to support the long term growth in our operations.
From an industry standpoint, homebuilder confidence remains at a historically high level due to the low interest rates and lean inventories of new and existing single family homes.
We are encouraged by these trends as we believe that it can leverage our business model to scale our operations in this robust demand environment.
We continue to see strong demand as our consolidated orders were up 43% from our third quarter of last year we.
We delivered 5661 homes during the quarter, an improvement of almost 7% from the prior year and up 13% sequentially as production throughput continued to improve steadily.
During the quarter, our U S manufacturing facilities improved capacity utilization by 7% from the sequential second quarter, reaching 70% for the quarter.
We achieved these production increases despite the expected intermittent COVID-19 and holiday plant shutdowns.
During the third quarter of fiscal 2021, we were able to increase daily production rates over the levels achieved in the prior year as well as direct staffing labor staffing levels that have increased and production efficiencies have improved due in part to the progress made on streamlining product offerings.
We anticipate further improvements during the upcoming quarters.
With the progress we are making we expect our consolidated fourth quarter revenues to be up 25% to 30% from fourth quarter of fiscal 'twenty barring any significant COVID-19 or supply disruptions.
Our western Canadian plants have also performed well sales.
Sales were up about 16% from the third quarter of fiscal 2021 compared to the same period last year and were up 7% sequentially from the second quarter.
Canada also increased production rates in response to stronger order demand.
As a result of our strong order demand backlogs grew $98 million during the third quarter to $489 million.
Due to the production increases realized during the quarter. The U S was able to reduce lead times for our customers, which decreased the backlog from 19 weeks in the second quarter to 18 weeks at the end of the third quarter.
The U S operations have done an excellent job recruiting and hiring an additional 300 employees since the last quarter.
We are in the process of training and Onboarding. These new employees and will continue to increase our labor force to accommodate the increased demand for our homes.
Our daily output levels have grown year over year and sequentially, which has allowed us to more effectively manage through the intermittent disruptions stemming from higher than normal absenteeism and production delays related to COVID-19.
The largest of the goals to increasing output in the upcoming quarters will be driven by supply chain challenges and COVID-19 related production interruptions.
Our retail stores and retail channel partners report the traffic has improved and conversion rates are higher due to downpayment availability, the financing environment and taking great care of our customers.
I am proud to say that in today's environment, where trust is at a premium.
Our customers know and trust that we have their best interest in mind as recently in the survey of more than 24000, new manufactured homebuyers Skyline was named America's most trusted manufactured housing builder, receiving a five star Trust rating.
This great honor belongs not only to skyline champion team, but to our channel partners as well.
We are getting similar reviews with our Genesis branded products, which continued to gain momentum in the market.
Our turnkey set and finish operations are continuing to expand as we have added crews in both the northeast and Midwest regions of the U S.
We believe that we're well positioned to provide housing solutions to a larger market than ever before.
This is supported by the backdrop of low interest rates availability for financing millennial household formations and companies announcing work from anywhere options.
This is why we continue to expand our turnkey offerings to our channel partners.
Throughout the pandemic, we have continued to invest in the design and testing of enhanced digital offerings and production automation for our factories.
The initial indications validate how revolutionary this will be at how dramatically it can redefine the home buying and building process.
We will be intensifying investment in these areas in the near term to evolve home buying for our customers.
We are also mindful that our customers have a growing need for homes and as such in January we closed on the purchase of two idled manufacturing facilities in North Carolina, one of the strongest growth states in the U S. We are working through the automation lead times and anticipate beginning production in.
The next 12 months to 18 months.
I will now turn the call over to Laurie to discuss our quarterly financials in more detail.
Thanks, Mark and good morning, everyone I'll begin by reviewing our financial results for the third quarter, followed by a discussion of our balance sheet and cash flows I will also briefly discuss our expectations for the fiscal fourth quarter as well as the longer term outlook.
Net sales increased by 10% to 378 million in the third quarter versus the same quarter last year.
We saw revenue growth of 31 $5 million in the U S factory built housing segment as well as growth in our Canadian factory built housing segment of $3 $5 million.
The increase in U S factory built revenue was driven by an increase on the number of homes sold and an increase on average selling price. The increase on the number of homes sold was 6% or 310 units for a total of 5343 homes compared to the same quarter last year.
The average selling price per U S homes increased by 4% to $63000 due to price increases in response to rising material costs.
We are pleased with the sequential growth in revenue in the U S factory built segment, which increased 19% in the third quarter compared to the second quarter of fiscal 2021 at.
This increase was driven by a 14% increase in homes sold and a 4% increase in average selling price Canadian revenue increased 16% to $26 $4 million compared to last year, driven primarily by a 15% increase on the number of homes sold to 318 you're on.
The average home selling price in Canada of $82900 stayed relatively stable versus the same quarter last year as pricing actions enacted in response to rising material costs were offset by a shift in product mix.
<unk> gross profit increased to $71 $8 million up 4% versus the prior year quarter due to increased sales volume our U S. Housing segment gross margins were 18, 7% of segment net sales down 140 basis points from the third quarter last year due to increased material.
Costs, partially offset by direct labor efficiency and increased deleverage of fixed cost caused by higher sales volume.
SG&A in the third quarter decreased to $44 3 million versus $45 2 million in the same period last year. The decrease was primarily due to reduced travel and marketing expenses, partially offset by increased variable compensation.
Net income for the third quarter was $21 $6 million or <unk> 38 per share compared to net income of $17 million or earnings of <unk> 30 per share. During the same period last year. The increase in EPS was driven by a combination of higher revenue and gross profit as.
Well as reductions in SG&A and income tax expense.
The company's effective tax rate for the three months ended December 26, 2020 was 19, 7% versus an effective tax rate of 27% for the fiscal 2023rd quarter.
The company's effective tax rate decreased as a result of the U S research and development tax credit study and tax credits related to the energy Star program that resulted in the recognition of a tax benefit of $1 $7 million.
Adjusted EBITDA for the quarter was $32 $1 million, an increase of seven 8% over the same period a year ago. The adjusted EBIT margin compressed by 20 basis points to eight 5% due to the increase in material costs, We mentioned previously.
The market volatility for lumber and OSB has persisted.
Pricing actions, we've initiated a few months ago started to flow through in the latter half of the third quarter, which helped to offset a portion of the increase on material costs. We expect these pricing actions will be effective throughout the fourth quarter.
Turning to our Labor force, we're focused on retaining talent and growing our team in response to increased demand. We continue to recruit onboard and train new team members to support the expected growth in the business.
We may see some level of labor inflation in the near term if some of the items proposed by the New administration are past there are several lever levers we can utilize in response to changing labor availability and market dynamics and the longer term.
All that said our production capabilities may continue to be limited in the short term if we experience additional instances of high absenteeism or intermittent plant shutdowns related to COVID-19.
As of December 26, 2020, we had $267 million of cash and cash equivalents and long term borrowings of $39 million with no maturities until June 2023 with.
We generated $40 million of operating cash flow during the third quarter compared to $21 million during the same period last year.
The increase in operating cash flow is primarily due to an increase in customer deposits and deferment of employer payroll taxes allowed by the cares Act.
Also during the quarter, we repaid $38 million of the outstanding balance on our revolving credit facility.
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 to support strategic growth I'll now turn the call back to Mark for some closing remarks.
Thanks Laurie.
Encouraged with the results we delivered in the quarter and the favourable inflection points as we returned to year over year growth in home sales in total revenue on.
Our strong backlog and efforts to expand our capacity and increase our productivity.
Positioned us well to meet the growing demand for our homes.
Before we open the lines for Q&A I wanted to take a moment to thank our team.
I am constantly amazed by what our people are able to accomplish in the extraordinarily challenging conditions that we have today.
Execution and innovation of our team combined with the narrow strong secular market lay the foundation for our company's long term success.
And with that operator, you may now open the lines for Q&A.
Thank you well now be conducting a question and answer session if you'd like to be placed on the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is on the question queue. You May press star two if he'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.
Pressing star one one moment, please while we poll for questions.
Our first question today is coming from Greg Palm from Craig Hallum. Your line is now live.
Thanks morning, everyone. Congrats on the on the quarter here, starting with the demand environment I'm, just curious if youre seeing any noticeable difference from the dealers versus the community channel and then anecdotally we've heard that there's potentially maybe a new you know at a higher income buying group that's starting to them.
Merge in this in this space for manufactured homes, just curious if youre seeing.
Any evidence of that as well.
Yeah, Thanks, Greg and good morning.
Overall, I would say the retail channel is still very strong the community channel has started to return.
To their ordering patterns. So I think that market is coming back we're definitely seeing.
Slightly different demographic of buyers theres more millennials buying today I think we are seeing kind of.
A more educated buyer starting to to.
The move into our sectors, it's looking for tenable and attainable home.
So I think Youre correct. There is definitely more educated buying process, what's starting to happen in the manufacturing sector.
With average selling prices of new homes jumping up to $356000 at the end of December. So they were up about 2000 26000 year over year, our average ASP.
Has gone up about just over $2000 in that time period. So I think the spread between average site built.
As you know versus what we've changed is about $24000 year over year, So youre definitely looking and seeing people look for better value.
I think people are getting more concerned with the lamb.
<unk>, Phil and environmental impacts the traditional homebuilding.
And then also too just you know theres more and more concerns over mold and mildew and health concerns.
That people have with traditional site built homes versus our homes built on doors. So I think all of those factors are creating more educated buyer.
Net educated buyer.
Generally a higher shopper.
It is starting to come to us.
The new solution, that's in the marketplace today, which is us.
Yeah, that's interesting perspective as it relates to the USPS.
We've heard that I think some of the price increases have been north of double digits. Your asps in the quarter U S up.
For sure should we assume that there's further ASP.
ASP growth on top of what you. What you did I mean is the double digit range that maybe we've heard is that sort of ballpark where pricing could could end up as everything flows out of the backlog.
Yes, I think we started to see part of our pricing increases during the quarter. We didn't see all of them. So we will continue to see price escalation going into our fourth quarter.
Okay.
Okay, and then just last one thinking back a few years I feel like we went through the same dynamic with lumber and commodity cost inflation on recall industry pricing went up a bunch back then maybe not to the same level, we're seeing today, but it seems like pricing stock even when commodity prices normalize so is there.
Any difference this time around I mean, if you were able to hold pricing when certain input cost normalize it would certainly imply there could be a actually a pretty meaningful tailwind at some point do you agree with that.
Yeah, I think if the demand environment stays as robust as it is.
There's definitely some ability to maintain some of that margin overhang I think it will be a highly inflationary environment for the remainder of the year.
Homebuilding demand is up and I think the supply chain in aggregate throughout the entire year will be challenged to keep up with demand. So I don't expect much relief on the inflationary side throughout the majority of the year.
Okay makes sense, Congrats again best of luck going forward.
Thank you Greg.
Thank you. Our next question is coming from Daniel Moore from CJS Securities. Your line is now live.
Good morning, Mark Lorie, Thanks for taking the questions.
Good morning, Dan.
Just wanted to you gave great color, but dig in on palm string even a little bit more what did you do differently. This quarter in terms just beyond wages in hiring you mentioned streamlining.
But really the steps that you're taking to increase capacity, particularly in the light of the challenges that were.
We're seeing from Covid et cetera, any more color that you'd like to provide an end.
Obviously, you gave pretty good indication of where things will shake out this coming quarter and continued progress, but would just love to pull on that string a little if you could.
Yeah. Thank you Dan.
So overall, we've made tremendous progress throughout this fiscal year in streamlining our product offerings to increase the throughput as a matter of fact, probably I would say on the next quarter or two will probably be readjusting, our capacity utilization numbers.
Overall, just because I think with the refined product offerings, we've actually debottleneck, some things to increase our overall and capacity at the end of the day. So I think the team has made tremendous progress on that during this fiscal year on especially during the quarter.
But really it's in large part just to be Frank.
In terms of the production increases just fantastic innovation.
And draw.
Drive at the plant level.
And people figuring out solutions on how to operate in these challenging conditions. So I think the team has worked well theres a lot of cross collaboration between plants between functions to problem solve very quickly and to identify issues.
Fully before they happen and to correct them. So we don't run into trouble. So I think it's.
The benefit of having a great team and also to streamlining product offerings, that's going on overall increase our overall utilization.
And raise the bar on the future.
Got it really helpful.
Laurie the gross margin.
Fared much better than expected or perhaps feared.
Throughput probably had a lot to do with it I think last quarter, you indicated that this quarter would be a pretty good snapback.
Do you still expect that to be the case do you see getting back to sort of 20% this quarter or is that.
It might take a little more time.
Hi, Dan, Yes, we expect to.
Get back to that more 20% gross margin range as we move through the quarter.
That's helpful and maybe one more just capacity.
<unk> for the two new plants once fully ramped how much incremental capacity do you expect those to add too.
24 months plus from now.
That's a great question, Dan we don't quite have that identified we're putting in and working through some of the automation that will be a more automated facilities. So.
I think we need to define some of that capability, which will be done in the upcoming months here.
So that's a TBD for now.
Okay and are you seeing more opportunities in terms of ones and twos to add capacity from an M&A perspective.
Yes, I think we will continue to see that.
As we move through through the year debt.
There's always opportunities we have a deep pipeline. So I think it's all very favorable I will say the facilities in North Carolina is a.
Very large facilities. So they are generally larger campuses. So it will.
It has very good productivity it'll be one of our larger plants.
Perfect. Okay, Congrats and thanks again for the color.
Thank you.
Thank you. Our next question is coming from Matthew Bouley from Barclays. Your line is now live.
Good morning, Congrats on the quarter and thanks for taking the questions.
Mark I wanted to ask about the capacity utilization that you just touched on you guided to.
I think 25% to 30% revenue growth in Q4, it sounds like you're kind of past the worst of it in terms of the recent production challenges.
But obviously orders at least recently have still been running ahead of that number. So it's my question is is there just is there still an ability to increase the production rates further from where they are to knock down that backlog or are you actually running up against kind of peaking capacity utilization here.
Yeah.
Yeah, Good morning, Matt and thank you.
No I think we have very good potential to increase the throughput of our factories in our plants, which were doing.
Overall, the really the largest challenges on as I mentioned on the call will be either supply chain related or continued.
Covid spikes in certain areas.
We're fortunate that the teams have managed to.
Operate in those conditions today, I don't want to say, it's a normal conditions, but they've learned to operate effectively and are continuing to do so.
Overall capacity utilization will continue to increase I think throughout the year very steadily to do that.
During the quarter our U S backlog is actually decreased from 19 weeks of backlog in the second quarter to 18 weeks. During this quarter. So we are making progress with the throughput and production increases that we've seen so we just need to continue that and we will continue to work through the backup.
Log, but orders are very strong demand is coming we're seeing it from every channel. So we just need to provide more solutions and provide more product to R. R.
Our partners.
Okay understood.
Second one the AR.
You talked about Mark about.
Making some investments in it sounded like enhancing the homebuyer experience and perhaps some some investments in online capabilities and things like that can you just elaborate a little bit on I guess, what you meant by that what what do you think you can do and theres been any kind of tangible results thus far.
Yeah. Thanks, Matt overall, we've been investing throughout the year.
<unk>.
Quite a bit in terms of the online digital experience some test pilot.
Products online for certain retailers for certain and consumers where customers can price configure designed homes online and then.
Mediately ordered.
And so those test pilots have been very successful we've seen tremendous.
Interest from the end consumer.
And believe that people will be buying more products online and so we're going to.
Move that from what I'll call a test pilot phase two to a substantial phase to where that.
That success can really drive we think.
Extraordinary.
Increases in demand over time.
By making the home buying experience very simple.
It's very complicated today, so I think we'll continue to develop those online solutions.
To make it very simple to buy a home and the easier we can make it better it will be for the end consumer.
Got it well, we'll keep looking at the progress on that and thanks again and congrats on the results.
Thanks, Matt.
Thank you next question today is coming from Mike Dahl from RBC capital markets. Your line is non life.
Alright, thank Mike Lawrie therapy market.
Wanted to follow up on.
Capacity and I think in the release and some of the comments you talked about on the automation than I was.
Just wondering just to what extent is the debottlenecking that you talked about.
Attributable to improvements and expansion and automation and how should we think about that as you.
As part of also the debt capacity expansion plans.
Yes, Thank you Mike and good morning.
Overall, I think the capacity expansion that we've seen thus far is primarily driven by product streamlining not really driven by automation.
The automation test pilots that I mentioned that we've been investing in over the course of this past year.
Have proven out.
Success to us.
So I think really if you think about capacity utilization you might want to think about it in two or three waves.
First wave is product simplification.
Which can ultimately raise the bar on our capacity utilization at the end of the day by let's say, 10% to 15% roughly.
And then wave two is is the ability.
<unk> to automate our facilities, which will give us another increase in capacity utilization beyond debt. So right now we're moving the automation from.
Just a prototype phase to more.
On the developed phase to start rolling out in partnering with.
Some of our automation.
Suppliers and vendors and.
Some in house automation teams that will we will be bringing on board to really up the game in terms of our ability to be an advanced manufacturers homes.
For our customers.
Got it Okay. That's helpful. And then the second question or a couple of questions actually.
Just with respect to the.
On the shift in the administration and Lori I think you talked about.
Potential for labor inflation I'm wondering first.
If the proposals for a $15 minimum wage were to go through have you studied and could you quantify kind of what affect.
That would have for you guys and then secondly.
Theres clearly.
Potential for support from an affordable housing.
Policy standpoint, but.
But at the same time the last Democratic Administration also was responsible for pushing Dodd, Frank through which had a negative effect on manufactured housing.
Can you just talk through kind of your thoughts on the puts and takes around.
On a potential policy change.
Yeah. Thanks, Mike overall, the policy change I view.
Kind of a tale of two administrations the first administration.
Prior administration I think was very successful.
Overall on HUD in deregulating some of the regulatory challenges that had been in place for 10 or 20 years for decades.
I think they were less successful or not successful in.
Modifying zoning within local jurisdictions, so I'd say today in today's administration I think it's kind of.
The ability for the new administration to impact zone, and regulatory barriers at a local level and they are probably more.
The view would be that they are probably more inclined to do that so I think the zoning and regulatory changes at a local level will be a very big positive.
Overall, I think the access to affordable housing is a key priority for the administration. If you saw the <unk>.
Secretary Fudge, the new HUD Secretary and her confirmation a few days ago. She made reference a few times actually during the transformation.
Saying that manufactured housing was an outstanding option later on said on the 100% supportive of looking at more of how we can incorporate manufactured housing as a solution. So I think.
It's already on the radar.
On a critical part of the solution, which is a big positive.
As far as other regulatory barriers I think.
Dodd Frank I'm, not as concerned with I think that was a reaction to prior crisis and challenges I don't think we have access of lumping or challenges today.
And overall the.
One administrative challenge that we have to be on the watch for is maybe.
Energy efficiency and.
Other type of regulatory changes to put in place that could increase the cost of housing.
Tun within hub.
Okay, that's really helpful and with respect to minimum wages have you done any analysis around how that could impact you.
Yes, we're constantly looking at wages I think net.
Naturally overtime wages will pick up and we've been expecting that for some time.
But overall.
Part of the reason we've been prototyping our investments in automation is not just to improve the throughput and not just to improve the quality, but to mitigate some of the escalation labor and automation is has a greater payback and return.
As wages increase which we think they will so I think we're we've been studying that quite intently and frankly expecting it which is why we've.
Invested so much in some of the prototyping was done to make sure that we're ahead of that curve.
Great makes sense thanks Mark.
Thank you.
Thank you next question today is coming from Philip <unk> from Jefferies. Your line is now live.
Hey, good morning, guys congrats on a very impressive.
Impressive quarter.
Marked at 20 to 25% to 30% sales growth you called out for fourth Q clearly very strong some of that I assume is playing a little catch up as you kind of work down your backlogs. So it'd be helpful to kind of give us a sense fiscal 2022, what type of deliveries do you kind of expect.
Yeah, I think I think the deliveries throughout the year will steadily increases COVID-19 and supply challenges Wayne. So I would overall expect and I think I mentioned on the prior quarter that we should increase utilization too.
Somewhere.
75, plus percent range overall for the year, so pretty big increases in production and productivity across the year.
I will wait and see what happens with the stimulus packages, because we might increase further depending on.
<unk>.
The overall demand levels coming out of.
The type of stimulus and other packages that come out of.
The current administration so.
We're still evolving but right now the order book is very strong we've seen orders.
Pick up as Lorie mentioned on the call I think at 43% increase so we continue to expect that type of level demand throughout the year.
Got it Mark.
Is the takeaway based on just your comments house on these bottlenecks easing your expectation is sales growth to kind of accelerate from that 20% to 30% range, because you're talking about deliveries picking up and certainly some of the price increases you have out there ramping up as well.
Yes, I would expect slow and steady increases in revenue as we go throughout the year.
Okay.
Super helpful.
Then from me.
Lead time perspective manufacture homes and modular homes historically.
We've had a little quicker than your cycle hallman at a minimum you add a little more visibility.
Curious how the pandemic has potentially changed it or that GAAP is actually tracking more favorably for you guys going forward.
You broke up for half a second there could you repeat that.
Sure Mark.
Apology for my Spotty Wifi.
Historically modular manufacture homes I think just from a visibility on lead time, it's been better than a site built home.
The pandemic had made has presented some challenges.
Is that still the case going forward.
No I think right now we're running at the end of the quarter at 18 weeks. So I think thats fairly good delivery time.
Each of the.
Traditional manufacturer traditional builders I do think that some of their lead times could be exaggerated I know theres more and more labor challenges on the site builder side Theres more and more challenges with the supply channel supply chain side. So I think youll start to see.
Even traditional homebuilders lead times start to accelerate and especially with the labor challenges competing with the repair and remodel side of the business. So overall I think we're very well positioned in our delivery and lead times, especially as we debottleneck some of our production capabilities to accelerate debt.
Okay. That's super helpful and a question for Laurie It sounds like Youre, making really good progress on managing inflation and gross margins are expected to get back to more normal as you kind of exit fourth quarter, but Mark also mentioned that you guys are expecting a pretty inflationary year. So should we kind of assume gross margins continue to build off of <unk>.
Obviously, the accounting for seasonality and do you need to go for net around pricing as well.
Okay.
Sales were watching pricing very closely as commodity move.
And on.
As Mark mentioned on a hyperinflationary fashion, so certainly expect to keep a very close eye on price on pricing.
And competitive challenges based on geographies on certain plants. So.
As we've talked before.
Competitive pricing and demand.
Geographically based.
And just keeping an eye on inflation, but we do expect as revenue increases to be able to leverage our fixed cost with margins potentially going on yes. Okay.
Got it Super helpful. Thanks, a lot guys.
Thank you. Our next question today is coming from Jamie cameras from Wedbush. Your line is now live.
Hey, Good morning first question just wanted to confirm have you all been raising prices thus far in January and if so what magnitude and how does that compare to some of the pricing that you took in <unk>.
Yeah.
Hi, Jay good morning.
Yes, we continue to keep an eye on commodities and inflation relative to our all of our input costs not just lumber and.
And so we have it.
Geographically based sell its plant dependent on we have been taking some price increases on January.
Okay great.
And then the second question I had is.
The commentary you had about the millennials are starting to come into the market is that driving a change in your mix between modular and HUD total homes and if so could you maybe talk about where that change is happening and what it looks like.
I don't think Thats driving a significant mix change in terms of the home itself or what type of home they're buying.
Overall, they're just looking for a good quality home, they're looking for a safe home and whether it's built to HUD code or whether it's built to the modular code.
I think it's really more personal preference and style.
Along with price point, so it really depends on the.
Individual.
Their key needs are at a volume level, but we haven't seen a major shift between the two.
In terms of the dynamics of what they're buying.
Got it.
And then the last question for me I think mark and not too.
Over characterize it but your commentary this quarter about labor availability and getting people back on the line seems to be much improved over last quarter.
Just could you talk about the labor as you look forward and then also thinking about the labor for these two new plants. How are you feeling about your ability to staff those plants.
Yeah. Thank you Jay I think labor availability is becoming.
Better overall I think people are starting to return back to work and we're seeing good traction on those fronts. Obviously, we are waiting.
What's the outcome of certain stimulus bills will be and how we will respond to that so we've got three different plans on how we might respond depending on what levels. The bills are.
Two to keep and maintain and to drive our labor force.
As far as the staffing for the.
New plants in new facilities in North Carolina, I think one those are going to be more automated facilities likely have a need for less labor overall, but also too I think one of the studies, we did as we looked into that.
Location.
Was to understand the labor force and Theres, good labor availability net market.
Good people on that market. So overall I think we're encouraged by the ability to start to plateau.
Okay. That's great. That's all I had thanks for taking my questions.
Thank you Jay.
Thank you. Our next question is a follow up from Greg Palm from Craig Hallum. Your line is non life.
Yeah. Thanks, just maybe a clarification to start I think mark as you were talking about kind of growth rates in fiscal 'twenty two.
I'm thinking about the March quarter, the revenue guidance for 25% to 30% I mean, it's a it's a much easy easier comp this quarter than than lets say three or four quarters from now. So when you were talking about kind of a gradual increase in revenue growth rates were you talking about in absolute dollars or were you saying that.
The 25% to 30% growth rates could still increase as we go throughout the year in fiscal 'twenty two.
Yeah, I was talking absolute increases quarter over quarter over quarter. Greg is what I was thinking I think we will see steady improvement.
In absolute.
Revenue.
As the year progresses.
Got it that makes sense, Okay, and then I guess just thinking of back.
So maybe a year ago, we had this sort of 10% EBITDA target out there and you know maybe I missed it but I haven't heard an update or anything on that call I mean, given where we are on on the topline given where we are with pricing and all of the improvements with the margins I.
I guess at what point is the 10% on attainable target.
So Greg the 10% is still on an internal target we did take the timing off the table several quarters ago, primarily because of Covid. So we are still experiencing non COVID-19 related shutdowns, which is going to impact <unk>.
But as we talked about in addition to that were.
Sure.
Going to see an increase on our SG&A cost for some of the.
Automation and.
Digital transformation that Mark was talking about earlier.
And then also we need to keep in mind that our suppliers are also impacted by Covid and COVID-19 related shutdown on cell avail.
Availability of materials from our supply chain is key as we move through these periods. So we want to see all of those.
Both COVID-19 related factors kind of settled down.
Before we put out on me.
The timeframe for that 10% margin, but <unk>.
Bear in mind, we're still internally where sales striving for that and we think that's a realistic.
Target.
Okay, great. Thanks for taking the follow ups.
Thank you we reached end of our question and answer session I'd like to turn the floor back over to Mark for any further closing comments.
Very good well. Thank you everyone for taking the time to dial into our call and listened to the progress. We've made we have a great team and great operation look forward to presenting our results and our innovations for you in may take care and stay safe.
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.
Yeah.