Q2 2022 Cavco Industries Inc Earnings Call
Good day, and thank you for standing by welcome to the second quarter and fiscal year 2022 capital Industries Earnings Conference call. At this time all participants are in a list.
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I now like to hand, the conference over to your speaker today.
Firstly director of financial reporting and Investor Relations. Please go ahead.
Good day, and thank you for joining us for catheter industries second quarter fiscal year 2022 earnings conference call.
During the call you'll be hearing from Bill Boor, President and Chief Executive Officer, Allison Aden Executive Vice President and Chief Financial Officer, and Paul <unk>, <unk>, Chief Accounting officer before we begin we'd like to remind you that the comments made during this conference call by management may contain forward looking statements under the provisions of the private Securities Litigation Reform Act of 1009.
Five including statements of expectations or assumptions about <unk> financial and operational performance revenues earnings per share cash flow or use cost savings operational efficiencies current or future volatility in the credit markets or future market conditions.
All forward looking statements involve risks and uncertainties, which could affect <unk> actual results and could cause its actual results to differ materially from those expressed in any forward looking statements made by or on behalf of capital I encourage you to review <unk> filings with the Securities and Exchange Commission, including without limitation. The company's most recent forms 10.
<unk> K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward looking statements.
This conference call also contains time sensitive information and is accurate only as of the date of this live broadcast Friday November five 2021, KEPCO undertakes no obligation to revise or update any forward looking statement, whether written or oral to reflect actual events or circumstances. After the date of this conference call, except as required by law.
Now I'd like to turn the call over to our Billboard President and Chief Executive Officer.
Thank you Mark welcome and thank you for joining us today to review our results for the second quarter of fiscal year 2022.
We're very happy to report another record quarter for revenue and earnings.
Revenue increased 39% year over year and diluted EPS was up nearly 150%.
We also achieved a record housing gross margin of 24, 1%.
This was partly due to average selling price continuing its upward trajectory with a 13% sequential increase.
And partly due to the temporary lull, we saw in lumber and OSB pricing that flowed through our cost of goods sales goods sold during the quarter.
Demand for our products remains strong and our backlogs continue to grow.
Excluding Commodore backlogs were $828 million and the acquisition added another $279 million, putting the total at $1 1 billion.
This represents about 40% to 42 weeks of production.
New home supply has lagged for many years, leading to a large housing deficit, particularly for lower cost homes.
Mcgrath <unk> and low interest rates continue to underpin the strong demand we're experiencing.
And as the cost of supply and labor inputs increase efficiency advantages of factory built housing relative to site built are increasing as well.
This all results in a very positive and growing opportunity for our industry by any measure. We're seeing continued strong demand in console every house, we can make.
Regarding production it won't surprise anyone on the call that supply issues have not led up and they are affecting nearly every material we use to build homes.
Not much I can add to the information, we're all hearing about availability of imports as well as domestically produce supplies.
We have no ability to predict how long, but expect the situation will persist for some time our teams continue to do a great job managing through it and working to minimize the significant impact. This has had on production.
Labor difficulties also continued to negatively impact production. However, because of the holistic approach we've been taking to address root causes with fundamental and lapsing solutions, we're beginning to see signs of improvement in staffing and retention.
We've implemented increased wages and benefits, but equally as important we.
We are investing in recruiting onboarding and training processes.
The labor issues faced by nearly all manufacturers are complex and we're building systems and approaches that we believe will provide advantages long term.
That kind of fundamental systemic work is how we're building our team skills.
In addition to this intense focus on labor solutions. Our plant teams are continuing to simplify our product offerings in order to increase volume for our customers.
Strategically we've pushed forward by taking action across the spectrum of our investment priorities.
Our recent investment in Fort worth is a great example of improving process flow to enable increased production.
That investment is well on its way to improving throughput by approximately 20%.
And we're working to identify and pursue any opportunities to make similar investments across our network of plants.
With regard to our previously announced Glendale project, we have incurred permitting believes that have moved our startup production to the second quarter of calendar year 2022.
Good news is that we've now received the necessary permits and are executing on the build out.
This project will both nearly double our park model production in Arizona and free up a production line for incremental HUD capacity at our Goodyear plant.
On the acquisition front, we closed on the Commodore transaction during the quarter a little ahead of the planned third quarter timeline after.
After just a month and a half since the closing integration is going well and we could not be happier about joining forces with the people that Commodore.
Beyond the geographic expansion and 25% increase in capacity. This deal brings I remain as excited as ever about the manufacturing technologies and the best practices will be applying across the combined company.
The challenges that have limited production of hidden the fact that our plants are improving their efficiencies for example, our hours per floor produced have improved this year as our plants demonstrate their ability to drive through this period of understaffing in intermittent high absenteeism as.
As we solve these issues and our suppliers become more reliable.
We are poised to see a new level of plant throughput.
So strategically we've not pause and we're looking forward to playing an increasing role in addressing the affordable housing issues that are facing prospective homebuyers.
Today, we have our new CFO Allison Aden with us on the call. She has been here for just a couple of months now and we're very happy to have her on board.
That I will turn it over to Alison to discuss the quarterly results in more detail.
Thank you Bill we are pleased to report that capital achieved record breaking net revenue results for the second fiscal quarter of 2022.
Net revenues for the period with $859 5 million 79, 4% higher than the $2 58 billion posted to the same quarter last year and up eight 8% sequentially over the first quarter of fiscal 2022.
Within the factory built housing segment net revenue increased 42% to $342 million.
AIG $241 million in the prior year quarter.
This increase was primarily due to a 35, 3% uplift in average revenue per home sold Kevin byproduct pricing increases to pass through rising material costs as well as product mix shifts to more multi section homes.
In Q2 of fiscal 2022.
Sold also increased 5% from the same period a year ago.
Included in the Q2 revenue results with one week of activity for <unk> homes of $4 4 million.
Increases in home production levels continue to be somewhat muted as we face hiring challenges.
<unk> factory employee absenteeism.
Supply chain disruption.
So utilization for Q2 2022 was consistent with the Q1 2022 utilization rate of 75%.
Higher than the Q2 2021 utilization rate of 70%.
Financial services segment net revenue increased two 6% to $17 5 million from $17 million.
Mainly due to higher home loan sales volume servicing income and insurance policies in force compared to the prior year.
In addition to year over year increases in revenue for the quarter. We also expanded our profit margin percentage.
Q2, 2022 consolidated gross profit as a percentage of net revenue was 25% up.
Up from 28% in the same period last year, a 420 basis point improvement.
The increase is mainly the result of the factory built housing segment, increasing to 24, 1% in Q2 2022 versus 19, 2% in Q2 2021.
Those factories have been implementing product price increases at a rate greater than input cost increase resulting in higher total gross margin dollars per home, while also expanding the gross margin percentage.
Although lumber and other lumber related product market prices decline it does.
Benefits now being realized in cost of sales. These decreases have been mostly offset by other product price increases on many other input costs.
The gross margin from Continental is not accretive in the period as inventory was written up to fair value through the application of purchase accounting as required by GAAP.
And no margin on the associated sales.
We expect the remaining inventory at fair value to sell through towards the later half of the third quarter.
Gross margin as a percentage of revenue in financial services increased to 43, 7% in Q2 2022.
43, 4% in Q2, 2021, and fewer weather related events in the current period, partially offset by unrealized losses on marketable equity securities compared to unrealized gain in the prior year period.
Selling general and administrative expenses in the second quarter fiscal 2022, or $45 4 million or 12, 6% of net revenue compared to $35 5 million or 13, 7% of net revenue during the same quarter last year.
The increase is due to Commodore acquisition deal costs, plus higher incentive and commission wages.
Here earnings and was partially offset by the additional D&O insurance premium amortization of $2 1 million in the prior year quarter.
Other income this quarter was $4 7 million compared to $1 7 million in the prior year period.
This increase was primarily driven by a one time $3 3 million gain on the consolidation of a non marketable equity investment that was increased from our 50% ownership level up to a 70% ownership level.
Pretax profit was up 152% this quarter to $49 million of $19 6 million from the prior year.
The effective income tax rate was 23, 1% for the second fiscal quarter compared to 23, 2% in the same period last year.
Here this quarter is it line item for net income it is attributable to the remaining 30% noncontrolling interest in a non marketable equity investment that we did not own.
After deducting for that component net income attributable to capital shareholders was up 150% to $37 6 million compared to net income of $15 million in the same quarter of the prior year.
Net income per diluted share this quarter was $4 <unk>.
The $1 62 and.
In last year's second quarter.
Now I'll turn it over to Paul to discuss the balance sheet.
Thanks Allison.
Comparing the October 2nd 2021 balance sheets April 3rd 2021 cash balance was $224 3 million down $98 million from $322 3 million six months earlier.
The decrease was primarily due to the acquisition of comment our homes.
Purchases of common stock and higher inventory purchases.
These uses of cash were partially offset by net income excluding the impact of noncash items.
Changes in working capital primarily related to higher accrued expenses and other current liability balances.
And the film consumer loans greater than the loan origination.
And then in general across the board, we had increases in accounts receivable commercial loans receivable inventories property plant and equipment goodwill and goodwill and intangibles accounts payable and accrued liabilities due to the acquisitions during the period.
Consumer consumer loans receivable decrease related to principal collections on loans held for investment that were previously securitized.
Prepaid and other assets were lower as the other assets recorded for the delinquent loans.
The Ginnie Mae has decreased due to lower forbearance rates, while we are not obligated to repurchase these loans accounting guidance required requires us to record an asset and liability for the potential of a repurchase at reporting periods.
Accrued expenses and other current liability balances increase in addition to acquisition balances as a result of higher wage accruals from the deferral of payroll tax payments under the cares Act and higher volume rebate accruals and customer deposits received as a result of the greater order rate.
Redeemable non controlling interest as a new line item represents the value of the noncontrolling shareholders interest due to the consolidation of a non marketable equity investment previously discussed.
Lastly.
Stockholders equity was approximately $733 1 million.
October 2nd up $49 5 million from $683 6 million as of April three 2021.
And with that Bill this completes the financial report.
Thank you Paul Victor lets turn it over for questions.
Alright to ask a question at this time. Please press Star then the number one key on your <unk>.
Home and to withdraw your question just press the pound key once again Thats star one for questions one loan for questions.
Our first question comes from the line of Daniel Moore from CJS Securities You may begin.
Thank you Bill Allison and Paul Good morning, or good afternoon, depending on where you are and thanks for taking my questions.
Let me start with gross margin, obviously very strong in the quarter, even given the raw material and other supply chain headwinds just talk about sustainability of that level.
We look out into Q3 and Q4 do you expect any pullback or is that 25% type level.
Sustainable for the next for the next few quarters anyway.
I'll take a quick stab and others here might want to.
What I will say, we did kind of catch.
The temporary drop in lumber and OSB during the quarters, so well prices increase and I think with long backlogs Theres every reason to expect that prices will hold.
The.
Cost of goods sold had a temporary dip in lumber and OSB. So we're already seeing that come up so the cost side is really the wildcard that we can't predict very well.
Maybe it will turn again in our favor.
That's the thing that I think you really have to look at in the coming quarters as if.
Youre going to try to predict what the gross margins will be.
You guys have anything to add to that.
So a little bit hard to predict though and I think we've explained in the past health costs have about a 30 to 60 day lag.
And hitting our cost of goods sold so if you follow those key commodity inputs, you can kind of get a sense for where.
Their impact will lie in the P&L.
So really it was a good price.
We're in our P&L in the first two and really August and September fully.
Helpful. Okay understood.
And then what are your expectations for production levels as we look out Q3 and into Q4, given typical seasonality and some of the northern geographies as well as lingering supply chain challenges.
Yes.
Second part is kind of the key I think we are getting.
Showing a little bit of progress on stabilizing and growing our workforce, we've been understaffed for quite a while but you hit on the key which is supplies or the question Mark and we don't really I don't think we're any different from anyone else and saying, we don't see that just suddenly clearing up so that's really the governor on on.
I will be able to go with production.
Seasonality I think with the backlogs were seeing we have raised the moment it shouldnt be a big impact.
So what we produce.
Even in the northeast Midwest. So those are those locales.
Still kind of produce straight through if you have enough.
Raw materials.
I think generally I mean, we'll see some impact but in the scheme of our total company production it shouldnt be a huge factor.
Perfect.
And then I really appreciate the comments regarding improvements in throughput hours per floor.
And I know this question is a little theoretical but if supply chain award.
Not an issue.
Happening more homes, either in numbers or percentages do you think you could produce across the portfolio, including Commodore.
Yeah, we feel really good about what the plants have demonstrated.
A number of quarters, now where they've really been short handed both general staffing a number of folks on the on the payroll as well as absenteeism, which is hard to predict and we made a comment last quarter to kind of reinforce that.
We're looking back and a lot of our internal comparisons to two years ago, because it was pre COVID-19 and more of a stable grounding point for some analysis and this quarter, we made a few more.
The floors in the quarter production wise than we did in the similar quarter two years ago, and we did that with over 10% less production hours.
So that gives us some optimism as we continue to get on top of labor that we should be able to.
So really kind of blow past pre COVID-19 levels of production.
Giving you the number you'd like to have because I don't know if I would predict it but we're looking to try to hold those efficiency gains as we staff up and we should be able to get.
On our existing on a plant by plant basis same plant basis, we should be able to.
Exceed where we were before COVID-19.
And Youll remember too that even if you go back to 2019, we're in a pretty strong demand market. So we are generally making everything we could make.
Yes.
Understood I appreciate that and then given the initiatives some of the expansions et cetera, do you have a target of how fast you can grow capacity again, excluding supply chain challenges, but.
Okay.
How fast do you think annualized we should be able to sort of grow that capacity.
Operating efficiencies.
Greenfields et cetera, thanks again.
Yes, now I appreciate the question I apologize that we don't really have a target because of the supply and we're so focused on.
Optimizing what we're doing.
Well managing the supply constraint and at the same time getting everything we can control internally focused on being ready to make as much as possible as supply limitations ease up.
But with that.
To be honest with you and say inside the company with that supply dynamic is.
Very hard for us to say hypothetically, what's our target over the next several quarters from production. It's just a real challenge every day so.
I just was kind of a peak inside our mindset right now but.
But we do think we're doing all the things that are positioning us to.
Not Miss a beat as much the supply will allow us we will be maximizing production.
I will jump back in queue with a couple of follow ups. Thank you.
Dan.
And our next question comes from the line of Greg Palm from Craig Hallum, You may begin.
Yes. Thanks, Congrats on the really good results here, so maybe just starting on demand.
And environment just kind of.
Curious if you could walk us through what Youre seeing quite channel.
And do you think that youre, starting to see some more material share gains versus site built whether thats would be consumers that are now sort of culminated into your space versus traditional home.
Yeah demand channel by channel.
I couldnt, even differentiator because it's strong across the board.
Can make enough frankly, we can't.
Keep any of our customers happy right now they would all like to have more homes. So they are all very strong.
And then.
The second drawing your second part of your question.
Yes.
Kind of curious if youre seeing more share gains from our site built.
Yes, I think you can look at.
You can look at how the manufactured housing industry shipments of compared to new home sales and.
They kind of bottomed out and I think I'm right about this they kind of bottomed out during the pandemic at around 10%.
And now we're kind of in the mid teens and partly Thats a statement that.
The challenge is the site builders are having.
But we've seen in over a quarter to quarter the share increased pretty dramatically.
And that's due to a lot of things.
We do believe that.
Theres that interface, we talk about a lot between with manufactured housing does as far as price points and what site builders do.
At this point I tried to make in my prepared remarks about.
And supply.
As input costs, including Labor go up.
It's a challenge for us, but we're more efficient with those inputs and so theyre moving further and further away from being able to supply kind of the upper end of what we traditionally do so I really do think that we're capturing some of that.
Space.
I just can't hit at this point and people are.
Manufactured housing more and more so I think we're taken some share in that regard the flip side is if you flip over to the.
The folks that are just trying to get into them into a house at the lower end of what we do that's where the story is kind of tough because with price increases late they've been.
A lot of people are getting priced out at that lower end.
But yes, I do think that it's clear that manufactured housing and we are taking some share away from site built right now.
And the other thing I'll point out Greg is that.
And I noticed probably doesn't need to be said, but I always feel the need to say it when you look at our industry shipments.
It has for a while represented what we can make not with demand is so if our industry could make more we'd be even a higher share.
Of new homes at this point.
Yes.
Good point as well.
Looking at backlog, if my math is right so excluding commodore.
You are up a little bit sequentially, but a lot less so than your other publicly traded peer so curious if you're.
Being more selective in terms of order intake based on capacity levels or if there's anything else to call out there.
Yes, I do think ours has been strong.
Kind of a really good question because I know people are trying to think is there is some differentiation across the industry about order pace.
I'll try to explain here is that our.
Backlog.
The orders we counted in backlog.
Compared to our total orders.
Has some judgment in it and we want to manage our backlog.
To be as conservative as we think is reasonable meaning as we all know were out.
Many months and lead time.
And so when we get orders that are for really far out in some cases on a plant by plant basis, we'll make the decision.
They are good orders, but we'll make the decision not to include them in our backlog as we look at it internally and as we reported to you all.
And as long winded way of saying that during this quarter, we actually took a considerable money.
Suitable number of orders and said Hey, let's.
There is so far out let's take them out of our backlog number for now.
Doesn't mean, they're not good orders doesn't mean, we won't make them, but it's a bit of conservatism in case.
The market does change on us.
So kind of a little bit of apologetically.
We report this backlog and yet there is some art and judgment in it and this quarter. We made a correction that makes it looks like it grew a little bit less than if we hadn't made that correction.
So I hope that's I hope that explains it a bit and you might have some follow up questions on that for us.
Yeah.
Definitely deal.
That's interesting do you care to quantify exactly how much that amount of IP.
Im looking because I don't have the number at the top of my head.
Yes, I don't think we I don't think we have a quantification for you right now it was a meaningful amount that we took out and thats not real helpful. But.
I guess I would say that I think I think you should.
My answer would be that our backlogs on a if we hadn't made that correction, we're very much in line with industry.
And do you not view those I mean, it sounds like those are real orders, but we'll get there has.
Not putting them in the backlog.
I'm, just a little bit confused why you wouldnt exclude them. If you do in fact think the Reorders and.
They understand where their real orders, we plan to make them I'd say it's assessed.
Assessment, we make to make sure that what we're looking at in the backlog is I guess, a quality backlog that it really wouldn't change if the industry did see a little bit of a pullback. So we all know that orders can vanish and we're not expecting that we're not predicting a pullback in the industry, but we're constantly evaluating.
<unk> the backlog to make sure that we're looking at we feel like is a really conservative high quality backlog.
Interesting okay.
It makes sense, if I could just spend a couple minutes on an commodore.
There was some commentary on purchase accounting and the gross margin impact in the current quarter can you quantify what that was to the consolidated and what kind of impact do you expect in the current quarter as well.
Yes, I mean basically given the timing of the closing date, we had five business days of commented our operations, which was about $4 million in revenue.
We had mentioned.
Doing an acquisition like this you basically are required to apply purchase accounting and as you know write up the inventory.
The fair value, which negated the any profitability in this particular quarter, but we do expect to sell through the inventory that we purchased.
Midway through this quarter to through the third quarter. So we start seeing their margins uplift to <unk>.
Level set we had shared with you historically.
Okay.
And it sounded like there was also some onetime acquisition related costs that my guess was included in Opex can you quantify how much that was assuming it was sort of onetime in nature and I guess trying to figure out if there's any lingering items, we need to think about in the current quarter as well.
Right absolutely in SG&A, there would have been $2 $1 million worth of deal costs associated with Commodore which in.
It is essentially the.
A large body of the cost associated with the deal.
Great. Okay, all right I'll leave it there thanks for the help.
And our next question comes from the line of Jay Mccanless from Wedbush you may begin.
Thanks, Good afternoon, everyone. So I've got three.
Three questions for you.
First one in the original comment or announcement capture we indicated the Commodore delivered 3700 homes in the 12 months ended March 31.
I guess did Commodore had the same jump in the backlog post.
The initial COVID-19 surge like cab Cowen Sky to.
And if so what what is commodore's quarterly run rate on home sales now.
Assuming that theyre, having to work through a larger backlog and production headwinds like legacy Kafka.
Yes, we looked at the quarter increase and it was very consistent with other other increases ours and others. So their backlog growth is very much in line with.
Other numbers that you guys are looking at.
And from a run rate perspective.
They are basically pretty close to where they were pre COVID-19.
The 37, hundreds there a little bit off the 3700 because of some staffing challenges right now.
But they're very much in line with where they were pre COVID-19 on their run rate.
Okay.
Two since they are in the northeast is there any seasonality we need to think about how that 3700 or.
Below 3700 falls out during during the calendar year.
Yes, I think so.
I had mentioned earlier that for ours, I think when you spread it over our entire company, it's not that significant but yes. There are plants that are in the northeast will have some seasonality. They do have the big backlogs right now so there'll be run into the extent they can.
Try to work those backlogs down but share a little bit of production seasonality there.
Okay.
And then in terms of the Commodore average price I think it was roughly 70000 based on that same release.
Is that still the case or have they had a large step up in price from when the press release came out.
They've been increasing I mean, they are current prices a bit higher than that the average selling price both from increases that they've made in line with the rest of the industry and also not to belabor the point, but we've mentioned a few times in previous discussions that <unk> pursued a different pricing policy and so.
They protected price in the backlog more than us.
Others in the industry and so they are also getting an average selling price lift from working offset price protected backlog.
So where are they sit and $75 80 K on average now.
Were they shaken out.
Yes, they are in the upper 70%.
Okay.
Yes.
Okay.
And then I guess just on the mix for <unk>. This quarter. You said there were more multi section homes in there but is that price that we saw this quarter is that a good number to use for the next couple of quarters based on what's sitting in backlog.
As we think about the price.
The effect of price increases in many sectors.
The mix.
Dominantly the increase in price.
Increase in ASP was due to pricing with some uplift coming from mix that publicly more minor.
As we look forward our factories continue to review pricing.
But I think that we were successful in second quarter that was really having all the factories now.
Put in place increases to cover material cost uplift so Ali.
Currently without any large changes.
Material costs that need to be passed.
We consider those somewhat consistent going into the third quarter, but maybe suggest upward.
Let's shift to more multi section homes.
Okay.
Okay. That's great. Thanks for taking my questions.
Okay.
And once again Thats star one for questions. Our next question will.
Will be from Daniel Moore from CJS Securities you may begin.
Thanks, again, maybe one macro and one micro and macro earlier. This week, we heard one of your competitors.
Talk about the duration of land home MH loans materially improving.
Going from the kind of low 20% towards the.
More on par with stick built and the kind of 30 year range.
As well as new lenders coming into the MH financing arena are those trends consistent with what Youre seeing and just how significant is that from your perspective.
Yes, absolutely consistent when we heard the comments as well and would just kind of echo.
Extending the duration or the term on both land and home and chattel lending.
Is a big deal for affordability and it really kind of helps us.
This increases.
Modest but.
Kind of threatened rate increases.
We're seeing exactly the same thing and I think it's it's solid lending, we're still seeing appropriate underwriting standards I don't have any concerns in that regard.
These extensions really make a difference for people that generally buy on a monthly basis.
Got it and you've talked about this.
In past and a little bit earlier, but if you could elaborate on the opportunity to streamline products across facilities.
To share manufacturing techniques between cap Cohen Commodore.
I don't know if this.
To quantify the potential uplift or benefit, but maybe any more detail on that.
As we look out over the next year or two it would be helpful.
Yes.
Product simplification.
When demands late this and when.
Our customers really are more.
They're more interested in getting the incremental homes than they are in customization and specialized product.
Sure.
We are deep and really focusing on product simplification and some cases with long backlogs you've already got a lot of orders that.
Kind of broaden your product mix he's got to work through some of the benefits kind of come over time, but we're very focused on product simplification. That's a big deal for getting more throughput. So we will see gains continue from from that perspective.
It plays a part and Dan and what I've talked about earlier as far as getting more homes per employee hour produced.
Some of that is is very much attributable to product simplification. So we're getting those gains.
Yeah on the Commodore.
It's just that the idea flow has started already.
Got it together we had.
Companywide General managers meeting a few weeks ago that was just really.
Created a lot of excitement and optimism for me and the information flow of best practices in both directions.
<unk>.
Meaningful and.
Just thinking about the things that Commodore brings to us.
<unk> talked in the past so I think it was when we announced the acquisition we talked about some of the really good work they do around Manny.
Manufacturing technologies on the floor.
Increased.
Increased cycle times and reduce labor intensity.
They're not easy gains there are things you have to really lay the groundwork for I've said before they're very dependent on having really solid engineering systems. Because that's the backbone that allows you to do some of what theyre doing but were going to be able to reapply that stuff across our.
Previous 19 plants and there are things like <unk>.
CNC routers, and CMC cutting machines to make that process more efficient.
Do some great work with.
Laser projection that reduces errors or when you have to make cuts for example or win win.
Fastening Floorboards for example.
This is a really if they don't sound significant they really are in Canada, where it's been all over that kind of stuff. So.
We only have them for a little over a month right now, but I think the attitudes and openness on both sides are encouraging and I really think that we're going to be able to.
That value in both directions pretty pretty significantly over time.
Great and then.
I'll take a crack but earlier this week you filed the motion to dismiss the SEC's. Most recent action any comments, there or thoughts around timing of when this might be kind of fully finally put to rest.
I'll take a crack and I thought we might actually get through a call without that right.
I'd say, if there's any yet.
Yes, pretty serious subject, obviously and.
I think when we got when we talked to folks about the FCC complaint being filed.
In an odd way kind of expressed that.
Hey, its a step towards resolution and I continue to feel that way.
We filed earlier this week was really very legally focused motion to dismiss and what I mean by that is we're not in litigation, where we're arguing.
What the FCC proposed in their complaint as far as the facts of what happened, but we believe that there are some legal issues with with their complaint and.
So our first step is what we filed this week to just challenge that and have a motion to dismiss so it's another step in the process.
We hope that that will be a successful step, but we are ready to go to litigation, if thats, where we ended up and we feel pretty confident in our position once that one.
Once that happens if it does so.
Still continues to be very difficult to project when it will be resolved, but I think we can all told that we're getting closer and closer to that date.
Alright, Thanks, Bill and Allison welcome and look forward to speaking with you at our conference coming up shortly.
I appreciate the color again again.
Thank you very much.
Thank you and I'm not showing any further questions in the queue at this moment.
Okay, well again very happy to report on our record results in the quarter end.
So on the progress we continue to make on our strategic actions. So we look forward to keeping everyone updated and certainly thank you for your interest in <unk>.
Yes.
And this will conclude today's conference call. Thank you for participating you may now disconnect have a great day.
Yes.
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