Q3 2023 Skyline Champion Corp Earnings Call
Speaker 2: you
Speaker 3: Good morning and welcome to Skyline Champion Corporation's third quarter fiscal 2023 earnings call. The company issued an earnings press release yesterday after close. I would like to remind everybody that yesterday's press release and statements made during thewing.
Speaker 4: This call includes 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.
Speaker 5: such risks and uncertainties, includes factor set forth in the earnings release. And in the company's filings with the Securities and Exchange Commission, additionally, during today's call, the company will discuss non- GAAP measures , which it believes can be useful in evaluating its...
Speaker 6: Commission. It's performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Marquillo's Skyline Champions President and Chief Executive Officer. Please go ahead.
Speaker 7: Thank you for joining our earnings call and good morning everyone.
Speaker 8: I'm pleased to be joined on this call by Lori Huff, EVP and CFO .
Speaker 9: Today, I will briefly talk about our third quarter highlights and then provide an update on activities so far in our fourth quarter and the year ahead.
Speaker 10: I'm pleased to report another solid quarter as we delivered year-over-year growth in sales and profitability despite our strong performance in the prior year period.
Speaker 11: During the third quarter, we grew net sales by 9% and EBITDAB by 13%. Expanding margins by 60 basis points.
Speaker 12: Margins began to normalize now that the impact of FEMA unit sales have been fully realized and our product mix began to shift to achieve a more affordable monthly payment for our customers.
Speaker 13: We remain steadfast on our key areas of focus, enhancing the customer experience,
Speaker 14: streamlining our product offerings, and transforming the way homes are built and bought.
Speaker 15: Over the past few quarters, we have seen significant progress in normalizing our backlog because of stronger production capabilities.
Speaker 16: dealer destocking inventory
Speaker 17: and the easing of supply chain challenges.
Speaker 18: The backlog at the end of the quarter was down 282 million to 532 million or 35% compared to the September quarter.
Speaker 19: Lead times improved during the quarter to 13 weeks compared to 19 weeks at the end of September .
Speaker 20: Normalizing backlogs to pre-pandemic levels of 4-12 weeks helps the home buyer lock in both pricing and financing and also benefits are direct sales channels to better meet the needs of their customers.
Speaker 21: We saw strong year-over-year growth in shipments.
Speaker 22: during the quarter to our community REITs and builder developer channels.
Speaker 23: Additionally, orders from communities and builders were healthy as backlogs of both of those channels grew sequentially from the second quarter levels.
Speaker 24: While retailer walk-in traffic is down year over year, digital leads are driving good credit quality customers with higher closing rates.
Speaker 25: As a result, we are seeing year-over-year increases in the number of home deposits at our captive retail operations, and our financial partners are seeing an increase in loan applications.
Speaker 26: We have also seen increased interest in our homes from our future growth channels.
Speaker 27: We attended the International Builders Show in Las Vegas last week where builders and manufacturer-to-rent customers saw the advantages our two genesis model homes could give them.
Speaker 28: Production volumes were down slightly during the quarter as retailers continued to destock their inventory levels in response to higher carrying costs and right-sizing of their floor plan credit limits. Sequentially, our decline in production reflects the completion of the FEMA units in the prior quarter and the normal holiday shutdowns at the end of the third quarter. Order cancellations have subsided, and courting activity at our manufacturing operations are trending up in the first part of our fiscal fourth quarter.
Speaker 29: That said, we expect the retail inventory de-stocking to continue through the end of March.
Speaker 30: Demand varies widely by geography with lower orders and backlogs in the south central regions of the US.
Speaker 31: In these areas, our plants have lower production rates for the short term.
Speaker 32: while retaining talented team members for the spring selling season.
Consistent with our last earnings call, we anticipate a sequential seasonal decline in the fourth quarter revenue, which we estimate in the high single digits, putting our second half top line above where we expected and anticipated.
In the near term, we continue to focus on streamlining our production as we have seen significant benefits from these efforts.
In early January , we started production at one of our island's manufacturing facilities in North Carolina.
Additionally, we continue to prepare and open our R&D plants indicator Indiana and our Bartel Florida plant to support the growing, those are developed by demand and additional short and long-term housing needs from the impacts of Hurricane Ian.
We anticipate that the ramping of these plants will impact margins over the next few quarters as we bring very needed affordable housing to our customers.
As we look forward, homebuyers are facing higher interest rates and inflation.
As a result, we are seeing traditional site-built home buyers moving into our more value-oriented, factory-built home solutions.
Our confidence in the long-term growth potential is further strengthened by the growing upside from the build-to-rent channel, expanded penetration into the traditional REIT channel, and the growing interest from mid-sized builder developers.
While these growth drivers will take time to mature, we are excited by the progress and we continue to make and are encouraged by the longer-term impact, the results, and the impact to the overall housing accessibility.
We've been recognized for our advanced infant housing as we were recently named the most trusted manufactured housing brand by Lifestyle Research for this third straight year. I will now turn the call over to Lori to discuss with 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 near-term expectations.
During the third quarter, net sales increased 9% to $582 million compared to the same quarter last year.
We saw revenue growth of $58 million in the U.S. factory built housing segment during the quarter, which was primarily driven by the increase in average selling price.
The number of homes sold during the quarter was down roughly 1%, or 83 units, for a total of 5,749 homes compared to the same quarter last year.
Volumes elsewhere in the business were down year over year due to reduced production schedules. Plants located in certain markets where demand softened or retailer inventory de-stacking occurred realigned production schedules given lower backlogs and holiday shutdowns. The average selling price per U.S. home sold increased by 14% to $94,200 due to product mix and year over year price increases on our core products to offset higher input costs. On a sequential basis, revenue in the U.S. factory built segment increased by $4.5 million
This decrease was due to the absence of FEMA sales, which were completed in the prior quarter, and the plant shutdowns around the holidays.
A decline of 21% in the number of homes sold and a 9% decline in average selling price per home is primarily a result of completing the FEMA order in the prior quarter, which drove higher ASPs versus our core product.
In addition, we saw a decrease in our core product ASP sequentially due to a shift in product mix to smaller, less optioned homes and a reduction in our material surcharges on a per home basis.
As mentioned earlier, some markets are experiencing softening demand because of retailer destocking, resulting in reduced production levels, which caused our capacity utilization to decrease to 66% during the quarter compared to 72% in the prior quarter.
Canadian revenue decreased 15% to $31 million compared to the third quarter last year, driven by a 19% decline in the number of homes sold, partially offset by an increase in the average selling price per home.
The average home selling price in Canada increased 5% to $114,800, and was driven by previously enacted price increases in response to rising material and labor costs.
The decline in volume was caused by softening demand in certain markets and a shift in product mix.
Consolidated gross profit increased 11% to $174 million in the third quarter, while gross margins improved 50 basis points versus the prior year quarter, primarily due to higher average selling prices.
Our US housing segment growth margins were 29.9% of segment net sales, up 30 basis points from the third quarter last year, primarily due to the increase in retail sales as a percentage of the total US housing segment, resulting from our expansion of our captive retail operations.
SG&A in the third quarter increased to $72 million from $66 million in the same period last year, primarily due to the acquisition of 12 factory expo retail locations earlier this year and investments made to enhance our online customer experience and supporting systems.
both of which were partially offset by lower incentive compensation.
Net income for the third quarter increased 22% to $83 million or $1.44 per diluted share compared to net income of $68 million or earnings of $1.18 per diluted share during the same period last year.
The increase in EPS was driven by higher sales and improved gross margin, resulting in improved profitability as well as higher net interest income.
The company's effective tax rate for the quarter was 23.1% versus an effective tax rate of 25.6% for the year-go quarter.
The decrease in the effective tax rate was primarily due to lower state tax expense and an increase in the tax benefit for R&D tax credits.
Adjusted EBITDA for the quarter was $109 million, an increase of 13% over the same period a year ago. The adjusted EBITDA margin expanded by 60 basis points to 18.7% due to gross margin improvement. The structural improvements in our business over the last few years have strengthened our operational capabilities leading to increased profitability.
These improvements also enhance our ability to navigate periods of economic uncertainty while continuing to service our customers and protect our margin profile.
As we move toward the end of our fiscal 2023, we reiterate our expectations of margins normalizing back to fiscal 2022 levels as we anticipate headwinds to our product mix, with consumers moving to homes with less options to offset inflation and interest rate increases.
and maintain more affordable monthly payments. In addition, we expect some margin compression from the ramp of the three new manufacturing facilities in North Carolina, Indiana, and Florida.
As of December 31, 2022, we had $712 million of cash and cash equivalents and long-term borrowings of $12 million with no maturities until 2029.
We generated $85 million of operating cash flows for the quarter, an increase of $10 million compared to the prior year period.
The increase in operating cash flows is primarily due to the increase in that income.
During the third quarter, we repaid our outstanding floor plan borrowings of $39 million, which the company historically utilized to fund the purchase of home inventory for its captive retail operations.
We remain focused on executing on our operational initiatives and given our favorable liquidity position plan to utilize our cash to reinvest in the business and for opportunities that support strategic long-term growth.
I'll now turn the call back to Mark for some closing remarks. Thanks, Laurie. While the current economic environment has raised a level of caution with consumers due to sustained inflation, higher interest rates, and global uncertainty, we are confident that Skyline Champion can continue to outperform the broader housing market.
due to our affordable price points, strategic positioning, and our core initiatives.
The Outlook for Demand is supported by the channel opportunities with community reads, manufacturer to rent, and builder developers, as well as helping our retail partners adapt to different consumer demographics.
In addition, the need for affordable housing continues to grow and we believe that the elevated cost of housing will drive more traditional site-built buyers to our homes.
Before we open the lines for Q&A, I want to take a moment to thank our entire Skyline Champion team as our consistently strong performance is a result of our focus, hard work, and our ability to take care of our customers.
And with that operator, you may now open the lines for Q&A.
Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You must press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
Our first question is from Daniel Moore with CJS Securities. Please proceed. If you look at the
Thank you. Good morning, Mark. Good morning, Lori. Thanks for taking questions.
Good morning, Mark. Good morning, Laura. Thanks for taking questions. Thanks for having me, Dan.
Start with retail side. Maybe talk a little bit more mark about inventories. It sounds like destocking, maybe to the end of March, which is consistent with your prior thoughts. Just how far are we along in that process?
Is that more a market-by-market, geography-by-geography phenomenon at this point?
Stan, it's definitely a market by market dealer by dealer inventory destocking. I would say that a majority of the destocking in certain markets is already occurred as we've seen cancellations and order code activity pick up in certain regions in certain markets.
I would say that the mid central south region still has more D stocking to do that's the primary area that we're seeing it today.
But I would say it's geography based and most of the dealers and most of the indications we see that will be finalized by around the March time period, which is consistent with what we thought prior.
Very helpful. Let me talk a little bit more about retail traffic. I know you're kind of shifting from traditional to digital but a traditional retail traffic quoting inquiries are you seeing pickup at all with the recent pullback in rates over the last month or so.
Yes, I would say that retail traffic, foot traffic, has been up since the beginning of the calendar year, generally speaking.
digital traffic is still exceeding those levels so I would say foot traffic was down in the third quarter about 20 to 25 percent it's improved since then since January
Digital has always been strong. So we have seen our deposit activity at our captive retail increase year over year by seven percent. So people are definitely shopping. People are definitely buying and putting deposits on homes stronger than they were last
Got it. And I appreciate the color. So I think if I heard correctly, revenue down high single digits sequentially for the March quarter, is that correct? And I'm assuming ASPs are down a little, so kind of a low double digit decline in...
Is that the right way to think about it? Any cadence as we look out maybe a little further into the June quarter.
Yeah, I think the March quarter is consistent with our prior earnings call guidance.
So in the March quarter, we anticipated we're holding consistent with what we thought on the prior call. We just had a very good third quarter result. So on a sequential basis, it's down, but it's consistent with what we thought prior, previously.
Overall, in the June quarter, we anticipate the volumes to pick up after the destocking happens, and it's our normal seasonality. The winter months are typically our lowest order rates and shipment time period in this kind of December through February March time period.
then usually we pick up during the springtime and people start buying again.
Excellent. Last for me and I'll jump out, but consistent guidance from a margin perspective, getting back to sort of historical levels. I think we said, Lori, previously that was in the maybe 26, 26.5% range. Is that the mic?
remembering that correctly and is there some what's the sort of magnitude of the incremental pressure for the ramp up of those three new facilities. Thanks.
Hi Dan, yeah in the 26-27 percent range I would say probably on the lower side of that range given the three new factories starting out.
Perfect, I'll jump back to the link in the follow-up.
Thank you.
Our next question is from Greg Palm with Craig Hallam Capital Group. Please proceed.
Yeah, morning everybody. Thanks for taking the questions as well. I wanted to first follow up on the margin discussion. It's pretty impressive in light of production volumes being down as much as they were that your ability to maintain pretty elevated margins. So I guess as a follow-up to some of your prepared comments.
Anything sort of one time in the quarter, you know, whether that was just the benefit of lower raw material costs or something else that we should be aware of. And then more importantly, as we kind of think ahead, maybe you can just remind us about some of the structural improvements you made to the business where.
you know, even if production volumes don't pick up like we expect, you know, maybe you're still able to sort of maintain this much, much higher than historical level of margins.
Hi Greg, yeah so not really anything unusual in this quarter's results. We did start to see a couple of things happening and I think are going to continue. One more slide talking about Valley of Anger, how about Botanical Garden, can the surface
more strongly in the fourth quarter. And that would be the elimination of, or reduction of our material surcharges in the units that are finally coming through production. And then also the shifting of the
the product mix to smaller units with less features and options in order for the consumer to hit that monthly payment that they need with the higher interest rates. So where we probably saw just a piece of that this quarter, we're gonna see the vast majority of next quarter's product having those implications.
And then, as I mentioned, we're bringing on three new factories over the next, probably four quarters. And so that's going to impact margins somewhat. So those two, sorry, I forgot the second part of your question. Oh, the structural changes. The structure.
producing and making it more production friendly, but we're also on campuses that are in production facilities that are close to one another streamlining the production of similar product to make it easier for the direct labor workforce to build.
And do you feel like there's still room for further improvements on the product simplification area? And then, you know, it sounds like maybe you're accelerating or increasing some of those investments in automation, I'm guessing that can also.
have some sort of benefit to margins at some point going forward, right? Yes, so we have certainly room to still go as far as just the general simplification of product offering and streamlining of that product offering. I'll let Mark speak to the automation.
Yeah Greg I think we're probably about halfway through that streamlining a product. As far as automation I mentioned on the call that we have we're dedicating certain facilities towards R&D and innovation.
On the call I mentioned we're opening up our Decatur, Indiana facility which will produce customer products but it will be kind of an automation hub.
For the company kind of an R&D Center for the company in part along with we've got some other campuses We're looking at doing that as well So automation is a different step level change for the company in the future the innovation that we can see from automation is Actually kind of mind-blowing to be very honest with you. It'll it'll really transfer
the safety health of the workforce to make it a better job to work at Then it'll allow us to do multi shift and other things because all of our plants today work a single shift operation So we can staff a different way. We can run a different way Which will bring greater efficiencies that are outside of just the products and streamlining and simplification
Yeah, okay, great. Looking forward to getting more updates on that going forward. And then just lastly, more of a clarification. I think you mentioned that backlogs on community and builder developer were actually up on a sequential basis.
In terms of that top 100 builder win that you talked about last year, were there any orders associated with that specific we or those still yet to come?
Yeah, Greg, I think the community and builder channels have been very strong. Actually, our builder developer channel was up year over year in the quarter 25%. Our community channel year over year in the quarter was up 37%. We even saw growth in our park model tiny home channel.
during the quarter and I think very importantly as you mentioned the backlogs for community and builder developer actually increased during the quarter so it was really all of a retail issue during the quarter as far as backlogs go.
The top 100 building that we signed up has not put orders into the backlog yet. We anticipate those probably in the March
Maybe rolling into April time period when they really start rolling in so I would expect it late in the fourth quarter. If not for me
in the April times period when they really start rolling in so I would expect it late in the fourth quarter if not for the first.
Fiscal quarter of next year in April .
fiscal quarter of next year in April . Okay, appreciate all the color. Thanks.
Our next question is from Phil Ng with Jefferies. Please proceed. In this
Please check and see if your phone is muted.
Okay, we will move on. Can you hear me now? Yes, please go ahead. Hey guys, sorry about that. Another really strong quarter. Mark, I think once we kind of flush out some of this retail D-Stock, when we kind of look at the fiscal 2024, how are you thinking about the components from a demand standpoint after you kind of strip out FEMA?
just overall we see kind of we're at a half century low in terms of supply of homes for sale and rental properties vacant rental properties so we're at a half century low on the supply side for housing
In general, I don't expect the Fed to make major downward moves on interest rates, you know, employment levels are high, so people will have jobs.
It looks like for the foreseeable future they'll just be able to afford less, which puts them into our price point of homes where the traditional site build builders can't hit those price points. So I expect us to gain share versus the traditional site build builders.
after we flush through this desocking. So I think it's shaping up very well for us, vis-a-vis traditional builders. And we heard that same commentary fill.
At the International Builder Show where we were last week the number of builders that were very interested in their solutions and The advantages on the cost side and time side we can provide them were Very real and very material. So I think we'll start to gain share and partnership with some of those builders as well
to help them solve their challenges during these.
their challenges during these difficult times for them.
Mark, outside of just the HUD code dynamic going through, are there any real bottlenecks on your end from a production standpoint to meet some of that demand if you've got a pretty sizable order from the builder side of things?
You know, Phil, I think part of the reason we're opening up capacity and expanding capacity
in essence, running with excess capacity a little bit is because when builders come to us and need products, it's a different type of water process. They need generally bulk orders, so they'll take either 10 or 20 or 50% of a plant's capacity.
with their home needs. So I think we need to run a little bit in access to make sure we can supply that channel adequately. Definitely. I would say that's the main bottleneck is making sure we have available capacity to them.
that channel and to make sure that we're also taking care of our Existing customers and making sure they have the product available to them as well. Supply chain is pretty much cleared
Today, maybe some HVAC issues still that are lingering, but that would be the main, I would say, most of the spot chain and labor issues are behind us.
Super. And just one last one for me. Any color on how chattelone rates have kind of performed and reacted in this current environment called the last few months? Certainly any color on the spreads I would be helpful. Chattelones have performed surprisingly well. You know, I think the traditional 30-year mortgage last I looked this week was six point.
Four six or six six and a half percent we're seeing for good credit score channel
700 plus FICA score and 10 percent down. We've seen loans at about 6.7 percent. So about a 20 or 30 basis point spread versus traditional 30 year mortgage for good quality customers.
If the customers are running closer to a 600 FICA score, only 5% down, then you're seeing spreads of probably one and a half to even up to 3%, depending on how low the FICA score is. So they could be in that seven and a half, eight, nine percent range, depending on their enterTax rate or 8% and Cal
credit quality but for good customer buyers we're seeing a very tight spread. Has that spread come down or pretty constant color last about three or six months?
I would say it's pretty consistent to where it's been.
Yeah, I'd say it's pretty consistent to where it's been
Thanks a lot, Mark. Great color. Our next question is from Jay McCandless with Wedbush Securities. Please proceed.
Please check and see if your phone is muted.
Sorry, can you hear me now? Yes, thank you. Okay, thanks. So, Mark, you've shown the Genesis homes now at the Orlando show and then the Vegas show last week. I guess maybe any big differences that you heard from the builders on either side of the coast and where I guess.
Given the affordability that Genesis brings to the table, do you think there's more opportunities out west where you just naturally have higher prices? Would love to get your take on that.
depending on what area of the country they're in. I would say that the interest in activity at the current show in Vegas was much higher. And it was real interest. I would say customers, we had numerous amounts of customers who not only provided their information but actively have solicited on projects that they're working on, were very interested in quoting out specs. So it wasn't just a walk-by interest, it was during the show.
We actually saw numerous builders actually starting to quote out our product and understand if it worked for their existing pipeline of subdivision projects that they're working on so I I think Given the interest rate and affordability challenges the end consumers are facing
Along with the increased interest rate challenges and cost of capital challenges that billers are facing I think it's a win-win with the speed and the availability of the product
Yeah, I think they see the show. Yeah, the traffic through the models was pretty amazing.
I guess my second question now with with the acquisition earlier this year some more polion retail units could you maybe
level set up for all this and talk through how many wholly owned retail dealerships you have now. Is there a potential that because it sounds like the the home sold through the wholly owned channel had a higher gross margin. Is that something we should expect going forward and at some point might y'all bracket that out so we can see wholly owned retail versus wholesale sales.
Yeah, I think, you know, they're obviously the more vertical you can get with your integrated model, the more of the value chain margin capture.
With the acquisition of factory expo, I think we've grown our retail footprint to 31 retail locations.
So we have expanded especially on the digital side of things factory expo is more of a digital retailer
that we acquired.
As you know retailers, I think
You know phase out of the business. There's a lot of aging retailers. There's a lot of Locations and geographies that we can meet especially more digitally, you know, I think There's definitely expansion opportunities into retail should retailers want to retire or exit the business in some way
And we want to make sure to ensure our distribution and supply for the future.
All right, that's all I had. Thanks for sharing my questions. All right, thank you for sharing your questions.
Thank you, Jay. Our next question is from Matthew Boulet with Barclays. Please proceed.
Hey, good morning, everyone. Thanks for taking the questions. That was a helpful quantification you gave on the REIT and builder channels. I guess just focusing on the REIT channel. I think in the past you talked about some supply chain issues that were maybe preventing that channel from...
you know, basically holding that channel back on the order side a little bit, maybe now that's behind you. Is the expectation that channel can continue to grow like this in the coming quarters? What are you hearing from those customers? And you know, how should we think about that over your fiscal 24?
Yeah, thanks Matt. The the REIT channel and the community channel I think has high demand currently. It's the most affordable high quality housing solution I think out there for people and they're renting and both selling on a land-least basis.
Most of the community's green fields are starting to expand. We're starting to see transformers, which is probably the critical bottleneck.
electrical transformers are starting to come in. It hasn't fully been resolved. There's still shortages and delays.
And I think that concrete is also...
a limiting factor for some of them, but that's easing up a little bit. But I think concrete and transformers will be the critical bottleneck.
which is starting to ease but it'll kind of normalize throughout the calendar year I believe.
Their demand is very strong, and I think it will continue to grow as they have the most greenfield expansions they've planned in the past 20 to 30 years. So, I think a lot of greenfield activities happening in the communities, let alone. The repair and replacement of units that are.
coming upon in a 40, 50 years old in many of these communities.
And then compounding that is obviously the
You gave some kind of early January trends, you know, order cancellation subsiding, some quoting getting better. Presumably, when you say order cancellation subsided, that's related to the retail channel. But I'm just curious when you say some trends have improved, is that across all channels? Is it better than seasonality? Is this kind of what you normally see in January , you know, relative to the holidays? Just kind of what do you think has driven that sort of uptick in any kind of detail around that? Thank you. Yeah, thanks, Matt. I think there's a few things. One, the order cancellations that we saw earlier in the year, I think even going into December .
earlier in the year. That is mainly on the retail channel side.
I would say a majority of that was and that was really as retailers were trying to write size their floor plan credit limits.
They were needing to cancel orders just to to get basically in compliance with their current facilities
Some of the orders in terms of cancellations were done by some of the REITs, but those were really more cancellations in terms of I don't need it until June . So they're still out there, but they're not in our buildable backlog.
in terms of the foreseeable future. So we'll re-put those in when they need them in June .
All right, thanks Mark. Good luck. Thank you.
As a reminder to Star one on your telephone kead, if you would like to ask a question. Our next question is from Mike doal wowith RBC Capital Markets. Please proceed.
Thanks for taking my questions. A few follow-ups here.
When we think about, Laurie, the product mix impacts, you know, you're coming off some periods where you had a lot of price inflation mix.
with a tailwind now you're calling out kind of
normalizing lower or just a shift towards lower product mix. When you think about in a long-term context, when you look at what's coming through the backlog, the next couple of quarters in terms of that lower product mix, do you view that as...
the normalized product mix, or is that a mix that would represent now kind of a below normal, smaller than normal mix than what you'd expect over the medium to long term?
That's a good question, Mike. I think that it differs by geography, but it's certainly lower, the mix is going to be lower than what we've seen over the last couple of years. I also think that as the builder developer, as the developer, as the developer, as the
channel grows that will impact our SPs not not you know necessarily SPs to go off of it because those typically can be larger homes with more features and amenities in in the longer term as we've talked about those types of
side again I think if we look at
historically the difference, you know, like the retail sales price of
of a unit at least of who census numbers might be 120 to 130K. Your wholesale price has been, you know, X the FEMA is somewhere in the 80s to well 90s. So as you kind of mix into that retail...
you know vertically integrated model a little bit more. I think last quarter you might have made a comment that you'd expect ASP to come back down into the 80s as some of the surcharges rolled off, but I'm wondering you know that retail dynamic how we should think about that as an ongoing impact.
the ASP and if that if that helps support a higher ASP than you would have previously expected.
Yeah, it's certainly at a retail level. The SPs are higher than at wholesale. It really depends on the relative mix. So as we add manufacturing capacity, we're going to add manufacturing units right over the medium to long term.
And it's just a dependency on how much of the units being sold in US manufacturing are manufacturing versus retail. If that percentage goes leads more toward retail because of acquisitions or
you know, internal organic growth, then certainly we'll see a shift in ASP into a higher ASP relatively.
Does that make sense? Okay, right. And, yeah, and I guess maybe more specifically to fourth quarter, you know, how should we be thinking about ASP? Because if you did kind of drop back into the 80s, it seems like that alone would be kind of a high single digit quarter on quarter.
the client which then may imply that you don't expect units down much sequentially at all. So maybe a little more color on the universe's ASP data and it can in the fourth quarter.
Sequentially I would expect ASPs to come down a bit versus the third quarter, primarily because of the things I talked about before, the elimination of more of the material surcharges as well as the shift mix.
more broadly across retail and manufacturing to smaller, less optioned homes. Got it. Okay, thank you.
We have reached the end of our question and answer session. I would like to turn the conference back over to Mark's for closing comments.
Thank you for participating in today's call. We appreciate your time and your continued interest. We look forward to updating you on our progress on our fiscal year end call late in May.
Take care. Stay well, stay amazing.
Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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