Q2 2022 Skyline Champion Corp Earnings Call
Good morning, and welcome to Skyline Champion's Corporation second quarter fiscal year 2022 earnings conference call. The company issued an earnings press release yesterday. After the close I would like to remind everyone that yesterday's press release and statements made during this call include forward looking statements.
Within the meaning of the private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the securities.
$169 million during the second quarter to 1.4 billion or on average 40 weeks of production at the end of the quarter.
We anticipate continued growth of our backlog through the third quarter as post labor day order rates have only accelerated into October.
We delivered 6260 homes during the quarter and improvement of 25% from the prior year.
Increased output along with price increases to cover rising material labor and freight costs drove revenue to $524 million in the second quarter up 63% from the prior year.
Our plant teams continue to execute amazingly well, despite the volatile operating environment and continued supply chain challenges.
As expected home sales volume versus the sequential first quarter decreased slightly due to planned holiday shutdowns and material shortages.
Our capacity utilization of 64% during the quarter was also affected by higher than anticipated COVID-19 related delays we.
We continue to focus on the health and safety of our employees and take the necessary actions to ensure a safe and healthy environment at all of our plants.
By early September we saw Covid and Labour challenges start to moderate with the team continuing to work hard to increase output and the number of homes sold.
By streamlining of our product offerings, it really helped to offset the material supply shortages.
Our teams in the U S and Canada are also proactively working to schedule production to align with the available supply to take care of our customers.
In these challenging times, our supply chain partners have done amazing an excellent job coordinating with us. So we can plan and maximize delivery to our customers.
Our supply partners are giving us the confidence that material availability will be there and we will remain on track to open up one of our manufacturing facilities and they are a soda, Texas by the end of our fiscal year.
As we look forward, both internal and external factors are converging to create a long runway of outsized growth.
Externally demographic economic and migratory factors are driving the need for affordable starter homes, while the country is at a five decade low on the supply side.
Trends on inflation immigration and financing, particularly position our homes well compared to our conventional site built competitors.
We just recently saw manufactured housing lenders extend the length of both channel and land home loans, which helps to lower the homeowners monthly payment at a time when they need it the most with rising interest rates and inflationary pressures.
Internally, we see the already strong long term demand environment only enhanced by the significant investments we are making on the digital side of our business.
These investments will drive customer engagement as we are improving and simplifying the buying experience.
We expect to ease the design simplicity and transparency of the purchase process will lead to higher order rates and increased production levels from a more streamlined product offerings.
With the number of positive tailwinds driving higher levels of demand our focus is to efficiently increase output and.
In the near term, we anticipate the material availability and supply chain challenges across most building products will continue to govern production levels and the upcoming quarters as demand outpaces supply.
We expect the challenges of supply chain to peek in the third quarter and early fourth quarter.
Followed by moderate improvement in subsequent quarters.
In parallel as supply chain improves we're investing in automation to increase the number of homes, we can produce while lowering the cost and optimizing the material we use.
A recent investments at are targeted at helping the customer.
Customers, who today are dealing with conventional homebuilding, which is tedious unpredictable and expensive.
Our investments in our platform and our team will make buying a home engaging dependable and affordable.
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 second quarter of fiscal 2022, five by a discussion of our balance sheet and cash flows.
I will also briefly discuss our expectations for the third quarter as well as the longer term outlook.
Net sales increased by 63% to 524 million in the second quarter of fiscal 2022 versus the same quarter last year, we generated revenue growth of 188 million in the U S factory about housing segment as well as growth in our Canadian factory about housing segment of.
14 million.
The increase in U S factor about revenue was driven by an increase in the number of homes sold and an increase in average selling price per home.
The increase in the number of homes sold was 26% or 1213 units for a total of 5902 homes compared to the same quarter last year.
The average price per U S home increased by 32% to $79900 due to product mix and price increases in response to rising material labor and freight costs.
The sequential growth in revenue in the U S factory belts segment was three 1% compared to the first quarter.
The increase in revenue was driven by an 11.3% increase in average selling price per new home.
Actually offset by a 7.4% decline in the number of homes sold.
A sequential decline in the number of homes sold was due to the planned holiday plant shutdowns and Covid disruptions at a few of our manufacturing plants during the month of August.
Canadian revenue increased 57% to $39 million compared to last year as the number of homes sold increased 19% to 358 unit.
The average home selling price in Canada of $107500 increased 32% versus the same quarter last year, driven primarily by pricing actions enacted in our sponsor rising material costs.
[noise] consolidated gross profit increased to 129 million up 106% versus the prior year quarter due to increased sales volume and higher pricing to offset inflationary input costs.
R. U S housing segment gross margins, where 24 seven per cent of segment net net sales up 550 basis points from the second quarter last year due to improved operating efficiencies and leverage of fixed costs as we continue to see the benefit of streamlining our product offering.
SG&A in the second quarter increased to $61 million from 41 million in the same period last year, primarily due to higher variable compensation the impact of the acquisition of the Scottsville operations in February of 2021, and our continued investment in the customer <unk>.
Variance.
We expect further incremental investments in the online customer experience and systems integration through fiscal 2023.
SG&A decreased 110 basis points to 11.7% of net sales compared to the same quarter last year due to increased leverage of fixed costs, resulting from higher net sales.
Net income for the second quarter was 51 million or 89 cents per diluted share compared to net income of 18 million or earnings per share of 31 cents.
Or in the same period last year the.
The increase in EPS was driven by a combination of higher revenue and improved profitability.
The company is effective tax rate for the quarter was 24.4% consistent with the period a year ago.
Adjusted EBITDA for the quarter was $73 million, an increase of 153% over the same period a year ago.
He adjusted EBITDA margin expanded by 490 basis points to 13.9% due to higher sales gross margin improvement and fixed costs leverage the.
The prior year's EBITDA included 2.6 million.
Of wage subsidy is provided by a Canadian government sponsored financial assistance program that was enacted in response to the pandemic and did not reoccur in fiscal 2022.
We expect inflation and building products and labor costs to remain persistent antithetical 2023, due primarily to the widespread supply chain challenges on top of record levels of demand.
We utilized several levers in response to increasing material and labor costs, including price adjustments.
[noise] standardization raw materials substitution and further operational improvements.
Despite our efforts to continue to pass on inflation and make operational improvements are production continues to be impacted by the availability of raw materials due to supply chain challenges, including the timeliness and cost of raw material deliveries.
As of October 2nd 2021, we had $310 million of cash and cash equivalents and generated $57 million of operating cash flows during the quarter.
As a reminder, in the beginning of July Skyline champion entered into a $200 million revolving credit facility, replacing its existing 100 million dollar facility.
As a part of the refinancing we paid off our outstanding revolver balanced totalling $26.9 million using the company's cash on hand.
The new credit facility expands the companies available liquidity for strategic initiatives and opportunistic acquisition.
We remain focused on executing on our growth and operational initiatives and given are favorable liquidity position plan to utilize our cash to reinvest in the business and to support strategic growth.
I will now turn the call back to Mark for some closing remarks.
Lori Thank you.
We are pleased with our strong second quarter and year to date results I'm encouraged with a solid momentum in our business. Despite the turbulent environment, we're operating with it.
Are strong backlog investments to transform homebuilding have us well positioned to solve the growing need for our homes.
And with that operator, you may know opens the lines for Q&A.
At the Sun will be conducting a question and answer session. If you would like to ask a question. Please pass star one on your telephone keypad, a confirmation tumble indicate your line isn't the question queue. You may <unk> start to to move your question from the cute, but participants evening speaker equipment and may be necessary for you to pick up your hand.
Before brushing the snarky, one moment, while I pull for questions.
Our first question comes from the line of Grad Palm with Craig Hallum. You May proceed with your question.
[noise] yeah, great. Thanks, good morning, and probably won't be the only one that congratulates chew on the results, but pretty amazing quarter. So congrats.
Thanks for a good morning.
Just curious you know given everything that's gone on in in in recent months you seem to be you know bypass and some of the supply chain challenges better than you know better than most but has your view of how production ramps over to come in quarters changed at all and and I guess.
You know more specifically at what point do you think production can actually catch up with the current demand right. So I guess at this point, what's your Crystal ball tell Ya.
Yeah. Thanks, Greg I think are were consistent with the supply chain challenges in Pryor calls, we mentioned there would be kind of a step down in the third quarter of about kind of mid single digits. I think we're on track for that.
In terms of unit volume just because of the supply chain challenges combined with the fact that we have our normal seasonal holiday outages.
So I expect that to kind of continue.
There's probably a ramp into the fourth quarter of them throughout the next year as supply chain clears, but it's going to be a little bit slower maybe I'd say I think the backlog of the supply chain is a little more strange than even we anticipated three to six months ago. So I think it'll it'll ramp modern.
Lee coming out of the fourth quarter into into next year, So I expect backlogs to build.
Between now and the end of the calendar year, and then to kind of moderate through next year as we kind of bring on new facilities is.
Supply chain clears.
Got it makes sense and you know the commentary on affordability was was interesting I I feel like you know you and others in the industry are starting to highlight just more as as one that's becoming a bigger groat driver. So help help us understand what you're seeing out there.
Sure if I heard you right you talked about demand friends that actually re accelerated here over the last I got six or eight weeks and I I guess, you know as you talk to dealers and and other industry folks. What are you hearing from them in terms of the type of consumer that's starting to look at those type of <unk>.
Product.
Yeah. Thanks, Greg I think there's really two to three questions and that you know I'll take one of them. We saw orders accelerate posts labor day, there's a normal seasonal slowdown in home buying activity in kind of August September timeframe as people return back to school and.
And have the final summer vacations and what have you. So as that return we saw demand starting to pick up through.
September and October.
To to stronger levels that will slow down a little bit with the holidays coming up.
Overall I would tell you that affordability is one of the key drivers that we're seeing our our market share of single family completions has increased we gained about a half a percent of the entire U S market year over year.
If you look at quarterly reports from.
Some of our main competitors Lamar grew units, 10% Pulte was up 9%.
<unk> was up for N. B R was up 10%, we grew and the US about 2500, 26% year over year. So we're definitely gaining share of the overall site built market.
And likewise I think for.
For HUD code product the HUD code.
Let me try your industry grew 13.4%.
During the quarter.
Through August and we were growing at a pace of about 26%. So I think we're getting share in can both segments and that's really driven one by affordability.
In financing financing is a key driver that we're seeing out there that's making a huge difference for people in need of good product.
So that's great I've got a bunch more but I'll I'll hop back in the queue for now thanks.
Our next question comes from the line of Daniel more with C. J S Security as you May proceed with your question.
Good morning, Mark and Lori Thanks for taking questions Uhm, let's continue to pull on that string in terms of financing you mentioned terms or speed extended I think for chadel in traditional mortgages can you give a little bit more color detail around that.
Yes, good morning, Dan.
The the.
<unk> B term and duration of travel lending has increased I think it's gone from 23 year terms too.
We've seen 25 year term. So it has gone up slightly on average land home financing for product has gone through 23 years to 30 years. So that's a fairly significant increase in duration of payment terms and that's just been in the past 30 60 days.
So overall in times, where interest rates are increasing inflationary pressures are.
Increasing the duration of loans that is caused by some of the financing programs that have freed up recently.
You know what people pay their fees.
Fees over.
Another 84 months on average for a random deal, which can reduce the payments 50.
15, 20%, which is pretty significant so I think that's going to drive additional volume <unk> site builders, who are seeing interest rate increases and inflationary pressures to a great degree.
Excellent and very helpful and then in terms of.
Kind of piggybacking on the last question, where the increases in order rates are coming from maybe rank order community developers traditional retail park models et cetera.
And then in the past and we've been you know an.
Elevated levels of of.
Backlog and we'd get up toward 40 weeks.
We've seen folks kind of jump in line are you seeing you know just the confidence around the quality of the orders that that continue to come into the come into the backlog into the fold as well that'd be helpful. Thanks.
Yeah very good question.
The strength of backlogs in order cancellations have been virtually nil. So I think the strength of the orders coming in are very real even at 40 weeks, we do have processes in place, where we are reaching out to financing companies and reaching out to the dealers themselves too.
Audit orders on a periodic basis to make sure that there is a name and financing advanced to the deal to make sure it's real.
So I think that audit process is a very good one.
As far as where it's coming from frankly every channel the retail channel and demand a strong traffic at the dealerships is extraordinarily strong.
The roots are looking for growth in volume over the course of the next few years the build for rent channel and builder developer are enquiring about long term demand. So I think park model sales are very strong and there's usually a lag effect with park models versus.
The RV industry normally people by Harvey's first and then once they are.
Once they find a place to settle the move into a park model. So there's a lag effect coming as well for park model demand. So I think all the channels right now we're extraordinarily strong across the board, there's really not even a rank order because they're they're all jockeying for number one.
Perfect and then I appreciate the color in terms of.
Direction of production just talk about sustainability of gross margins and EBITDA margins from these levels over the next quarter or two.
And that'll be it for me thanks.
Good morning again, we.
We do feel that gross margins are sustainable contingent upon of course, the supply chain challenges and how much of our material I need to buy off contract.
Which obviously fluctuates day to day from an EBITDA margin perspective, we do feel with production decreasing the mid single digits sequentially in the third quarter.
Might see some deterioration in EBIT down margins just from reduced to leverage a fixed cost as well as higher SG&A from our investment.
Makes sense. Thank you very much.
Thanks to him.
Our next question comes from the line of Matt Bully with Barclays. You May proceed with your question.
Hey morning, everyone. Thanks for taking the questions first one on the the a S. P up 32% I know you said mix was part of that but.
I guess, the two parter was that.
Sort of reflecting deliveries from from price increases that you took earlier in the year when lumber prices were doing what they were doing just curious if that was part of it and what happens going forward, but then really the higher level question is since you talked so much about affordability.
Just kind of how you guys are thinking about balancing price increases and affordability to your customers.
Good morning that.
As far as the AFP covering inflation versus next I would say about two thirds of the aspie growth year over year was due to inflation coverage.
And a third was due to product mix.
This quarter, we're finally back to covering are being like for like on our material margins till last year.
So we are actually covering material inflation, where last quarter, we saw some deterioration on our Michelle margins.
We do expect to see slight.
Slight aspie growth.
Probably next quarter, but but really leveling off prior tanning next changes.
From an affordable affordability standpoint demand seems still very strong so we still seem to be covering.
You know.
Formability target to our customers.
Yep Yep, <unk>, certainly doesn't seem like based on the comments on order rates there that that it's having a an issue. So thank you for that and then the second one just on the the streamlining of product I'm, just curious to what extent the kind of market wide supply crunch is maybe.
Maybe allowing you to compel dealers to accept them more limited range of product offerings and if that's the case cannot be sticky.
I think can be sticky mat.
Overall the B.
The market is definitely helping us to streamline because it's it's a win win.
We can ramp up production faster and get products to customers quicker.
As we streamline our offerings definitely the supply chain.
And the the.
The missing.
Missing pieces of the supply chain like paint and electrical components of appliances and fiberglass insulation or.
Y'see contributing to that in our discussions with our customers, but I think it's a win win because we can we can streamline product offering we can deliver to the customer faster and better and frankly I think.
I think it is sticky because we're going more and more digital with the sales approach and customers are choosing what they want online, which is usually our best selling models and starting to move in that direction. So as we continue down the digital transformation that we are underway with.
I think you'll see more and more stickiness to the product streamlining because people are choosing the products and Rodney happen to pick very similar options.
No. That's a great color. Thank you for that Mark Thanks, Lori and good luck.
Thanks, Matt.
Our next question comes from the line of my dull with R. V C capital mortgage neighbors she'd with your question.
Welcome. Thanks for taking my questions I have a follow up on the financing side those are pretty material changes.
Happened and it sounds like a short period of time, what's driving that.
And does it yeah <unk> is it new players coming into the market.
How would you characterize why why we've seen such a change in terms of duration overcast. There is just as is.
Good morning, Mike I think it is due to the competitiveness of the market.
There have been over the course of a few years more market participants entering the market.
Also too there has been more secondary offerings.
We've mentioned over the past, let's say 18 to 24 months.
There has been secondary market offerings, helping facility new capital entering the marketplace.
And so I think both of those are giving people the confidence.
It does help that there's been a significant amount of wage inflation for I'll call. It first time homebuyer demographics, which is also giving I think some confidence that market values are there better job growth and wage inflation is putting more disposable income into people's.
Pockets in terms of homeownership.
So I think all of that is contributing but it's definitely a more competitive market, which is something we've been anticipating for a few years, we're actually just seeing those tailwind starting to.
Come to fruition.
Got it Okay. That's helpful very interesting my second question Israeli around the orders and backlogs so I I think.
And the implied order rates seemed like they'd be up something in the neighborhood of 40% year on year and a lot of that.
Would appear to be price, but there's some maybe some unit growth could you could you help us understand kind of an order terms.
And looking at your backlog breaking.
Breaking down what.
What is the unit growth versus.
<unk> growth in the second part to that is yeah, I understand kind of the audit process suggest.
All of these orders are are real production time, so very extended at 40 weeks, usually a first time buyer doesn't have nearly a year. So wait for for a product so I guess.
How do we think about what you want to do on on managing those those production weeks and and whether or not there's consideration where you would intentionally try to manage those order rates down a bit to help you work through the supply constraints work through the backlog.
Yeah. Good good set of questions there, Mike I think as far as order rates.
There is pricing dynamic and unit impact in there we don't break those out but I would look at it maybe on a year to date basis. When you look at it.
We've had a $1.034 billion of revenue year to date.
For the first six months and our backlogs have grown 510 million during that time, so in essence, our backlog so grown.
50% more than a revenue base, so kind of the implied order right.
And first quarter was a little stronger than the second quarter, but.
Overall here to date basis, the order entry flows coming in 50%.
<unk> on a revenue basis higher than our sales rate, which is at all time records so definitely strong demand.
And strong favorable outlook.
Right now today as far as.
Expediting order delivery to our customer which is our key priority.
Supply chain is gonna be the limiting factor for that or.
Pass Utilizations at 64%, So we would look to ramp up volumes and bringing on capacity to supply more as quickly as possible to take care of our customers.
But I think people.
You mean to say this in a negative way, but people are getting used to waiting for a car sale because there is shortage of inventory or waiting for food or other type of deliverables in today's market.
Just because there's shortages in multiple channels. So I think we're trying to manage that with the customer and looking to supply as quick as possible I don't think it's our job or intent to.
Dissuade people from ordering homes, if they're in need of a home we want to supply them.
And we will just try to accelerate our production to get it to them faster as soon as the supply chain officers to do so.
Okay that helps thanks Mark.
Thanks, Mike.
Our next question comes from the line of failing with Jeffries you May proceed with your question.
Hey, guys. Congrats on a really strong court in a challenging environment.
Mark you gave some great color in terms of share gains certainly it makes sense are gaining share from the site built home just given the affordability dynamic but it sounds like you are taking share from some of your manufacturing homes competitors as well can you give a little color on you know what's driving what what's your secret sauce, and then you mentioned potentially bringing on a facility.
Five year and in Texas can you give us a little Colorado, how much capacity could add to your production levels.
Yeah. Good morning film Thank you.
<unk>.
The production facility I'll start with that one.
Never soda, Texas.
Got it and take the number of plants, we have today.
And divided by our volume today, and just apply that ratio to to an additional plant I think that's a great great way to kind of get a a proxy for that plants.
Capacity that will be coming online.
As far as you know gaining share with our.
HUD code peers.
And manufactured oscillate peers I think we are gaining share there and it's really I think about being able to solve the supply chain issues right now today.
And I think that's really driven by our people our secret sauce, frankly, it's our people got great and amazing people.
And they're solving these issues every day they are getting creative.
They are communicating how to solve.
Those issues nationwide and even into Canada.
So it's kind of this cross border crossed steep collaboration.
Looking at the supply chain as a whole and recognizing the issues before they become problems. So that we can solve them in advance and I think that's helping us to accelerate our production as much as possible.
And delivered to the customer faster than I think are.
Dealers and the wreaths and other people see that and they want to participate with someone who's going to take care of them.
That's a great color and then from a comparison I mean, certainly from a backlog invisibility. It sounds like you have a lot of visibility just given how strong orders are.
I guess you are starting to run into pretty difficult cops right I mean, you're you're growing north of 20%. This year when we kind of look at the fiscal 2023, what's your view of normalize growth do you think given those cops you could be up year over year from a shipment standpoint.
You know.
I believe we can even with the difficult comps.
The one key driver there is going to be supply chain.
Supply chain in Covid challenges, assuming those abate.
We've got the demand and the profile.
To to accelerate production into next year. So I think we can definitely.
Take that.
That's excellent and quick one for Laurie I guess bigger picture and then in the past you've talked about a long-term aspirational EBIT margin target of call at 10% were certainly well past that this past year. So and then once you get into more normalised environment on the demand side.
Is this level of profitability sustainable L. Dot org could there be some leakage, we kind of look out.
So you know.
As I mentioned before I do think we're going to see some compression in the near term and the margins production levels decrease in the third quarter as well as the investments, we're making an SG&A.
For the customer experience.
Uhm.
Longer term.
Certainly at high production level unless we.
Are able to leverage our fixed costs. So.
Huh.
I think there are generally sustainable and higher production levels.
So I would really appreciate it guys.
Thanks So.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, my mom and while they pull for questions.
Our next question comes on J Mccandless with Wedbush You May proceed with your question.
Hey, good morning, Thanks for taking my questions just to make sure I'm understanding this you're thinking over the next couple of quarters gross margins could stay at the level, we saw two Q, but higher SG&A costs or what's going to crimp, the EBITDA margin a little bit.
Yeah, that's correct J on the gross margin, obviously that is highly dependent on the supply chain challenges that we face going forward and how much of our material and we'll have to buy off contract.
And then the second question I had the unit volume has tracked what you expected. It would after the end of fiscal 21, but pricing has certainly moved up and was just wondering if you could give us an idea with what's in the backlog do you think's going to deliver before year end, whereas.
Bridge price might shake out for the third quarter.
Sure.
I really think average prices go up sequentially only slightly.
So we did see most of our price increases come through.
And in the second quarter.
And not to overdo.
Overdo this but historically at least my experience with with the M H industry.
When we've seen chadel lending terms relaxed or east.
From my experience it hasn't been a great sign for the industry.
Would would love to hear what you're hearing from from customers and an <unk>.
Street dealers, especially on where some of these lending terms or do they feel like people are being.
Being a little too aggressive or you're starting to see me early delinquencies anything you could give us there because just want to be careful with with this type of accelerated lending and how we think about the industry.
Yeah, that's a good question J.
I don't think we're anywhere close.
Another words, if if the prior.
The prior kind of wild west of financing was out there 15, 20 years ago and that was a 10 on a scale. We were constricted to have one or two and I would say what it's what's opened up is now kind of mid range of four or five we are nowhere near the practices and Paul.
<unk> that were there 15 20 years ago, it's actually far from it.
They haven't gone aggressive into.
Credit scores, they haven't gone too aggressive into rates.
It's very selective monitoring the jobs and other factors to a great degree. So I think what we're seeing is.
In what we're observing is that we were so constrained from a financing perspective that.
You know given two years ago over half of the sales were cash only sales.
And now there's a little bit of financing and a little bit of credit with some minor extensions it feels like.
A breath of fresh air if you will but it's to say that it's aggressive today, it's not even close it's I wouldn't even say, it's mid range yet in terms of.
You know kind of kind of where it is if I think.
Far more conservative than traditional mortgage lending from my observations today.
Oh, that's great to hear well congrats on a great quarter. Thanks for taking my question.
Thank you J.
Our next question comes from the line of Greg Palm with Craig How let me proceed with your question.
Thanks, just a couple of follow ups I I guess first on on gross margin I don't know if you can quantify you know any of the maybe supply chain you know cost impacts this quarter, presumably there's there's some in there, but I guess, where I'm going with this is you know assuming that normalizer.
<unk> and you know production increases further there seems to be a nice runway for further gross margin expansion from these levels and fiscal 23 is that something that you would agree with.
You know, we certainly have some fixed costs and our cost of goods sold structure. So.
I'll ask production increases Greg there's potential for that I would be cautious, though the supply chain challenges are certainly still out there and prevalent Mark noted, we think it's going to be extended into into our physical twenty-three.
Okay Fair enough and then on the the transportation logistics side of things you know it seems to be coming more of an issue widespread issue out there as well and.
I'm just curious how your viewing starfleet and and whether there's any changes in how do you utilize you're not asked to just given the environment. We're in.
Yeah. Good question, Greg I mean transportation has always been a critical component strategically for us.
And given where the markets that we have.
Made significant progress over the past few years in moving more and more of our shipments from Starfleet for our own for M. H, both ourselves and our competitors. So I think.
We were able to find drivers more effectively we're able to make sure and secure for the forecast of demand that we have.
And it gives us a better availability in view into the shipping world of what's happening day to day. So we have our finger on the pulse of the marketplace I think to a great degree. So I think it's definitely a strategic component of what we've got.
So so sounds if I'm reading you right it sounds like more more or less a competitive advantage.
Yeah, I believe so I.
I believe so and I think digital strategy I think it'll even tie in further.
Yep Yep got it okay, Thanks, and best of luck going forward.
Very good well. Thank you everyone for your questions today and participating in today's call. We appreciate the time and your continued interest we look forward to updating you on our progress on our next call take care and be safe.
Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.
Yeah.
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