Good morning and welcome to Skyline Champion Corporation's second quarter fiscal year 2020 earnings call. The company issued an earnings press release yesterday after the close. I would now like to introduce your host for today's call, Sarah Janowicz, the company's Director of Investor Relations and External Reporting. Sarah, you may begin.

Good morning and thank you for participating in our earnings call to discuss our second quarter results. Joining me on today's call is Mark Yost, President and CEO, and Laurie Hough, EVP and CFO. I would like to remind everyone that yesterday's press release and statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Mark.

Sarah, thank you. Good morning everyone. I am pleased to report solid profit and cash flow generation in the quarter even though HUD industry shipments were soft and our consolidated quarterly revenue was flat compared to the prior year period. With revenue that was stable, we delivered a 25% year-over-year increase in gross profit. Adjusted EBITDA grew by 36% year-over-year, reaching $32.5 million for the quarter. Adjusted EBITDA margin for the quarter was 9.2%, a 250 basis point improvement compared to a year ago and a 60 basis point improvement from our sequential June quarter. The strong gross profit and adjusted EBITDA margin improvement were driven by our material costs from the merger and the market, improvements in our product rationalization and material usage, and full run rate synergies from our merger. Turning to the market, we remain positive on the outlook for the manufactured housing industry as we see the opportunity for continued growth, driven by both demographic and economic factors. The underlying demand for homes offered at an affordable price point is strong, while the supply is very limited. As expected, recent HUD industry shipments were soft which normally happens when the industry backlogs are at a lower level. HUD volume for the three months ended in August declined by approximately 2.6% year-over-year. Since the destocking, we feel has ended in June, retailers are managing their order rates based on manufacturers' backlogs and their delivery times are shorter generally compared to last year's levels. The primary driver of the industry's decrease was concentrated in the state of Texas, which is the largest HUD market in the country. In the broader single-family housing market, we are seeing increased interest from traditional builders regarding off-site construction options. We are in the early stages of introducing and educating traditional site builders on these options and have been getting good responses regarding this long-term growth opportunity. We are seeing the demand for affordable housing continue to remain strong and expect the HUD industry's year-over-year volumes to improve modestly during the remainder of the fiscal year. We saw stability in our Canadian home sales volume, driven by small bulk buys during the second quarter. We expect that the oil-driven housing market in Western Canada will remain relatively weak for the short term. In the face of these conditions, the Canadian plants have performed well and remain profitable due to our efforts to effectively manage production run rates and reduce fixed expenses during the slower housing market cycle. Overall, backlog for the company decreased 32% year-over-year. U.S. retailers have worked to reduce their inventory levels by delivering and setting their on-site inventories and have normalized their ordering patterns, keeping inventory at lower levels than seen over last year. At the end of September, our consolidated backlog was $172 million, compared to a backlog of $252 million last September, driven by the destocking that occurred earlier this year. Sequentially from the June quarter, consolidated backlogs have grown by 12%. Although backlog varies significantly by plant, our average U.S. backlog stood at seven weeks of production at the end of the quarter. Our optimal backlog is in the four to six-week range as it allows us to effectively schedule production and manage the supply chain with our vendors. We typically see a buildup in backlog at the end of the second quarter and then expect our normal seasonal slowdown in the winter months and in our third and fourth fiscal quarters. On the financing front, we recently completed the securitization of a mature portfolio of manufactured housing home loans totaling about $0.5 billion that represents the first post-housing crisis transaction of its kind. The GSEs are still working toward the secondary market for chattel lending, which we expect will take longer to roll out than originally determined in the duty-to-serve program. We continue to educate our customers on the benefits of the MH Advantage and MH Choice home programs that are part of the GSEs duty-to-serve. We are starting to see traction this quarter with the first home shipments this quarter into our independent retail customers. The education process related to this new class of homes continues with our current customers as well as with the expanded efforts in our builder developer channel. We are really excited about the long-term potential of this new class of homes as well as interest from builder developers to utilize these homes in their subdivisions. We recently launched our Genesis Home brand, which is dedicated to the new class of homes and is positioned to serve the needs of our retailers and builder developer partners at a national level. We will be exhibiting two homes in January at the International Builders Show in Las Vegas, which is the largest show of its kind in the world. One of the models on display will be a Genesis Home, which will be built to the specifications required for the financing program. The other home will be an accessory dwelling unit or ADU as they are called, which is an innovative, effective, affordable housing option for the much-needed housing throughout the country, especially in urban areas. We are excited about the future benefits of our investment in this new class of homes. As you know, we recently expanded our manufacturing footprint to include Louisiana with the opening of our Leesville facility in June. As expected, we are experiencing strong demand as a result of the opening. This plant is the only manufactured housing plant in the state of Louisiana and can also easily serve the distribution channels in East Texas. During the second quarter, we made great progress on production ramp efforts as well as the plant certification process. In addition, we shipped our first homes to our growing retail customer base. We are about three months into the 18-month ramp cycle to full run rate capacity and profitability levels. We are excited about the progress we are making on the technology initiatives that we piloted at this plant, which include automated floor and wall builds and other automated tools. We are also evaluating lessons learned from these initiatives that can be utilized and applied to our other facilities as part of our longer-term strategy to incorporate technology and automation in our business. I am now going to turn the call over to Laurie to discuss our quarterly financials in more detail.

Thanks Mark. As expected, net sales remained stable at $355 million in the current and year-ago quarter, despite some softness in the U.S. HUD industry shipments and our transportation business. Revenue growth of $7.2 million in the U.S. and Canadian factory-built housing segments was offset by declines in our transportation business revenue. The factory-built housing segment comprised 96% of our revenue during the quarter, compared to 93% in the year-ago quarter, as the transportation business has become a smaller piece of the consolidated company’s revenue base. The number of homes sold in the U.S. was flat versus the same quarter last year, while U.S. factory-built segment revenue grew by 2%. The increase in U.S. factory-built revenue was driven by an average selling price per U.S. homes sold increase of 2% to $62,200 primarily due to a shift in product mix. Canadian revenue increased by 4% to $26 million, while the number of homes sold in the quarter remained stable at 311 homes, compared to 312 homes in the prior year period. Average home selling prices increased by 4% to $84,900 due to product mix and pricing. Similar to the broader housing market in Western Canada, we expect a modest year-over-year volume and revenue shortfall for the remainder of the fiscal 2020 year compared to the same period in fiscal 2019. Consolidated gross profit increased to $74 million, up 25% compared to $59 million in the prior year quarter. Our U.S. housing segment's gross margins were 20.9% of segment net sales, up from 16.5% last year. Sequentially from the June 2019 quarter, U.S. factory-built housing segment gross margins were up 30 basis points from 20.6% driven by favorable material pricing and slightly lower margins at our Leesville, Louisiana plant that is still working through the production ramp curve. SG&A in the second quarter decreased to $48 million versus $128 million in the same period last year. The decrease was primarily due to non-cash equity-based compensation expense of $85.8 million recognized in the prior year and triggered by the secondary offerings, which closed during the second quarter of fiscal 2019. When subtracting the $85.8 million of equity compensation expense from last year's SG&A, which provides a more comparable basis quarter-over-quarter, SG&A was up due to our investment in our Leesville, Louisiana facility and higher variable compensation expense. Net income for the second quarter was $17.7 million or $0.31 per share compared to a net loss of $77 million or a loss of $1.42 per share during the same period in the prior year, driven by an increase in profitability from higher operating income, a reduction in equity compensation and other expenses, and lower net interest expense. On an adjusted basis, we generated $0.34 of net income per diluted share compared to $0.20 in the year-ago quarter. The company's effective tax rate for the three months ended September 28, 2019, was 29.8% versus an effective tax rate of a negative 8.2% for the fiscal 2019 second quarter. The change in the effective tax rate was primarily due to nondeductible transaction-related expenses and stock compensation expenses. Absent these nondeductible discrete items, the effective tax rate would have been 31.5% last year. The current quarter's effective tax rate is consistent with the company's ongoing expected tax rate. Adjusted EBITDA for the quarter was $32.5 million, an increase of 36% over the same period a year ago. The adjusted EBITDA margin expanded by 250 basis points to 9.2%, largely due to continued margin capture from lower material costs, synergies related to last year's combination reaching their run rate levels earlier this fiscal year, and execution on identified operational improvements. As of September 28, 2019, we had $155 million of cash and cash equivalents. Cash generated from operations during the second quarter of fiscal 2020 remains steady at $25 million versus the same period last year, driven by lower transaction-related expenses and higher operating margins. During the quarter, we used excess cash to pay down $5 million of our revolving credit facility. As a result, the company has $39 million of unused borrowing capacity under our $100 million revolving credit facility as of September 28, 2019. We have a strong cash position with added liquidity from our credit facility that provides ample flexibility to invest in our core business and our strategic initiatives. We continue to be focused on identifying areas to utilize our strong free cash flow on opportunistic growth including potential acquisitions or further organic capacity expansion. I will now turn it back to Mark for some closing remarks.

Thanks Laurie. As you see from our results, we continued to improve our financial and operational performance. We are pleased with the sequential improvement in margins and more importantly, our continued track record of progress as we continue to achieve our incremental improvements along the path to reaching our long-term goals. We are focused in the near term on internal opportunities to maintain and enhance our costing and pricing strategies as well as investing in our people, our processes, and our products. As we look forward, we expect the markets to remain healthy, driven by increasing demand for affordable housing supported by the favorable financing and regulatory environments. With favorable long-term demand fundamentals, we continue to invest and evaluate opportunities to position Skyline Champion as a sustainable solution for the future of our customers and their families. And with that, operator, you may now open the lines for Q&A.

Our first question comes from Greg Palm with Craig-Hallum Capital Group. Please go ahead with your question.

Yes. Thanks. Good morning everyone. Congrats on the continued execution here, really impressive margins.

Thank you. Good morning Greg.

Just starting with the demand environment a little bit. You alluded to it a little bit, being a little bit softer than I think what maybe the earlier expectations were. Can you tell us maybe about some geographic areas that are outperforming? It sounds like Texas is still a drag. And then maybe any commentary on the demand environment for the land lease community channel?

Yes. No, I think overall we are seeing kind of demand. Texas was an industry-driven thing. I think actually, we saw Texas as fairly good during the quarter and continue to see that. Overall, Greg, as you saw, the HUD market was down 2.6% for the three months ended in August. Our shipments were flat. So we are happy that we are outperforming a little bit there. And as mentioned last quarter, we expected kind of with the normalization of our inventory that we saw, we saw that during this quarter and it built back up. And we also saw that short-term pricing pressure that we expected, as we mentioned last quarter and view that as a shorter-term demand environment that we chose to focus on operating improvements in margin. So I think the margin aspect was driven in part by that. So I think the community channel is very strong. Underlying demand is very strong. And I think we have seen good demand overall. Right now, placements are up 7% through August across the country based on staff surveys, data through August for the three-month period. So we see underlying consumer demand is actually quite healthy across the country. So no real weakness anywhere in the country per se. It's actually been strong right now. The only thing we see is retailers, as we mentioned before, placing orders hand-to-mouth. So your wholesale shipments are going to lag a little bit behind end consumer demand just because of the nature of how they are placing orders versus how they were a year ago, let's say, because they are more real-time. But the community channel is strong, underlying demand is very strong. No concerns there.

Yes. Okay. It makes sense. That's helpful. And so you mentioned the realizations; you saw some pricing pressure in the September quarter, you had your gross and even EBITDA margins greatly outperformed expectations. I mean going forward, what are some of the biggest levers for continued improvement? Is it volume? Is it continued operational excellence, standardization? How big of an opportunity is still ahead?

There's still definite opportunity there. We are at the early stages of all of that. We have made good progress. This quarter, we really focused on those operational improvements and margin enhancements as opposed to chasing the market with pricing pressures. So I think we made good traction along that path this quarter. And I think we will continue to see that. But there is a long tremendous way to go; there is a lot of upside there.

Okay. Great. And I guess just last one, it's interesting that several of the large public site builders are starting to talk about off-site construction in a much more favorable way. I guess, what's your opinion on this? Would you be a potential partner? Could they do this in a JV? Do you think they would do it themselves? Any thoughts on some of that recent commentary? And if you want to sort of include any commentary on the Genesis brand within that, that would probably be helpful for all of us?

Yes. I think the launching of the Genesis brand is really targeted to builder developers and to create awareness of what off-site solutions are out there for builder developers. That's why we are investing in the IBS show this upcoming quarter to showcase two products there to demonstrate that product and help them understand the timeliness, affordability, and ease of doing business that it will generate for them overall. I absolutely think you are going to see a shift in the off-site construction market from builder developers in time. And that’s why we are taking action to make that happen. I definitely think, I don't know if it’s JVs, partnerships, alliance customers; it could be any form. It really depends on the builder developer themselves, their strategic partnership, and all those factors. But as the labor market tightens, which it will and it's going to continue to do, especially as we see an aging population, that's going to require more and more labor to be utilized for repair and remodeling across the country, our current housing stock doesn't allow for people to age in place as effectively as they need to. I think the labor costs are going to become extreme; they are extraordinarily tight in the upcoming year. So I think you are going to see a movement from builder developers to off-site. And we think we are going to be the partner for them to do that.

Yes. It sounds like an obvious opportunity. All right. That's it for me. Thanks for the time and good luck going forward.

Thanks Greg.

Thank you. Our next question comes from Matthew Bouley with Barclays. Please proceed with your question.

Good morning. Thank you for taking my questions. Congrats on the quarter as well. So just to follow up on that last point around Genesis, maybe some specifics there might be helpful. Do you actually have any kind of line of sight to orders with Genesis? Or is it something that can be kind of incremental in the next year or two? And then just maybe some details around what you are doing to kind of penetrate the builder developer customer? Thank you.

Yes. Matt, good morning. I think overall the Genesis product, we have started to generate some product that is built to the MH Advantage and MH Choice specifications, which is what the Genesis product is geared towards largely. It also has an ADU or accessory dwelling unit component that we have done as well to that for maybe, for mostly urban environments the ADU product is for. But I think both of those really fit the builder developer channel. We have shipped MH Advantage and MH Choice product to our retail customers in this past quarter. We have actually started shipping and generating that product. So we have seen some incremental pickup of that, very small, but it’s happened this past quarter. I think the Genesis brand, which we just launched a week ago, is kind of our entrance into this and it will definitely generate incremental growth and opportunity in the builder developer channel, especially coming out of the IBS show as we get awareness and exposure to it out there. This product of the future has a way to target the affordable price point and make it accessible, especially in a recessionary environment or a potential recessionary environment that may be out there, that people are thinking about. Builder developers are concerned about their cost of capital in tying up land for a long period of time. Because we can turnaround a development much faster with our product advantage, I think their risk profile is advantageous as they hear the rumors of a potential recession, which we haven't seen any of that on our side as consumer demand is still very robust.

Okay. Got it. Thank you for that. Yes, I think, well, I look forward to seeing that product out in Vegas in January. So secondly, I guess the other thing you are hearing from the site builders is that there is a bit of a push into the build-to-rent marketplace. Obviously for you guys, it's really not too different than what you are already doing with your REIT customers. Can you just comment if you are hearing anything different or incremental opportunities there, I guess, as built to rent kind of gains momentum out there? Thank you.

Yes. I think that's a good channel. We are not hearing much. I think it's just at the beginning stages of interest or thought process on that. But with our amount of business we do with the large REITs, build-to-rent type of housing in accommodations is kind of a bread-and-butter product of ours. This MH Advantage and MH Choice product that you are going to see at the Builders show is geared toward both a rental and a purchase option for homebuilders out there. It suits the rental market strongly, because of its features and amenities and price point. So I think it's definitely an opportunity for builder and developers to serve that market. It's definitely a growing trend.

All right. Got it. I will leave it there. Thanks a ton, Mark.

Thanks Matt.

Thank you. Our next question comes from Daniel Moore with CJS. Please proceed with your question.

Mark and Laurie, good morning. Thanks for taking the questions.

Good morning Dan.

Good morning Dan.

I wanted to start with gross margin. Operationally, this is obviously a very strong quarter. And I know, Mark, you mentioned there is more opportunity over time. Near term gross margins that we saw in Q2, I mean, that type of level is sustainable as we think about the rest of this year?

Yes. Dan, U.S. margins, we think generally are sustainable. But in the third and fourth quarter, we expect some impacts from our planned holiday shutdowns in November and December, which is pretty normal for our company and generally the industry. We will also see some investments in the IBS show that we mentioned. Other than that, generally sustainable. Canada and Star Fleet will probably see a little bit of pressure in the third quarter and then maybe bounce back in the fourth.

And at this stage, can you quantify the marketing investment in the show that you expect?

No.

Okay. And volume growth, not to pin you down too much, Laurie, but do you expect modest volume growth for the remainder of the year? Or should we think about that as low single-digit? And what are your expectations for ASPs for the remainder of the year as well?

Yes. Dan, I think volume growth for the remainder of the year, we kind of see mid-single digits. I think it will increase as we go from the third quarter to fourth quarter. The average is kind of that mid-single digits. But I think it will be a little less than that in the third and stronger in the fourth as we go through. Retailers are really not going to stock more inventory or build, rebuild inventories to normalized levels until they have spent six months to a year destocking inventories to lean down. And after all that time and effort, they are going to want to go into the December period lean and then kind of resurge after the holiday season there.

Makes sense. And Mark, maybe just talk about the GSEs. As we work toward chattel lending, we had the first securitization, which was a great sign, albeit some seasoned loans in that portfolio. What is it that's taking a little bit longer than expected? Is it purely education? Or is there anything else that you can sort of put your finger on at this stage?

No. I think with the securitization market, it's just here we are at the end of October, beginning of November, and I think it's just taking longer to get traction. The government is not always promptly on all their programs and initiatives and I think it’s really just a timing issue. Just a few weeks ago in front of Congress, there was discussion and there's still commitment to the duty-to-serve and they are still progressing along that track. I think they just need to make that first move and get it done. I just think that's going to take a little longer than at the end of this calendar year, given where we are at today.

And last from me. You mentioned some of the automation that has been installed in Leesville in terms of floor and wall building. How is that learning going? And how big of an opportunity is it to transport some of those capabilities across some of the other legacy or existing plants? Thanks.

Yes. Thanks Dan. I think the learnings have gone phenomenally well actually. I couldn't be more excited about what the takeaways from the team have been, especially given the fact that no automation company today that builds this equipment has really done anything for manufactured production. They have done it for small light-build type situations. But it’s a big difference when you have an automation piece of equipment that builds an 80-foot wall panel, right for an 80-foot floor, a different load requirement to everything else. The takeaways have been monumental and I am very impressed by it. The automated tools, I think, would be a fast roll-out in terms of how we look at those and how we are approaching that. I would like to see Leesville ramp another few months to get the final kinks out of it and fine-tune the process a little bit. Then I think we can look at the larger automation projects in terms of wall and floor builds and some of those other dynamics. What we are seeing right now is encouraging.

Very helpful. Thank you.

Thank you.

Thank you. Our next question is from Mike Dahl with RBC Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my questions.

Good morning Mike.

I have a couple of follow-ups on the volume side. Mark, you alluded to the placement data running up 7% year-to-date. If you look at the implication for the summer months, is that it actually accelerated to high-single digits, specifically through the summer. So as it relates to your expectations for the low single-digit growth potentially, then higher in the fourth quarter and in getting to the mid-single for the second half, is there anything other than timing and that lag that really prevents you from seeing the same growth as what we are seeing out of placements? I am thinking whether it's the things you have pointed out about choosing to pass on some volume that's been price driven or just because you are putting through a higher mix that you may not see the unit numbers, but we will see it in price? Just a little more color on that would be great.

Yes. Sure, Mike. Just one clarification. I think the 7% was for the last three months ended in August. So it's not year-to-date necessarily; it is for MH placement data. It’s kind of a comparable period for us. There’s nothing stopping us from seeing the 7% type of growth rate as we go. The big things we saw this past quarter, as I mentioned, was we rebuilt and normalized our inventory. So if you remember, last quarter we destocked or call it, we had some inventory and cash flow generation from shipments of inventory, and we expected a normalization. We've built back up our finished good inventory this quarter. So some of our process went there. Our backlogs built up healthily and that's why we are seeing that in the backlog. Our backlogs are up 12%. We see quite a healthy demand environment as orders are processing through. Like I said, it really comes down to the timing of when the customers take those in all those things. I don't know, with the holiday season and everything else, if they are going to take them in the last few weeks of December or if it's going to roll over into January, right? That's really the question of when the deals are going to take those, depending on their demand and set crew availability and everything else.

Got it. Okay. That's helpful and encouraging. My second question really relates to the margins. As others have alluded to, you guys have done a tremendous job expanding margin at a fairly rapid pace over the past year and certainly ahead of where we would have expected. So as we think through the next 12 to 18 months given the progress that you have already made, yet the runway that's still left, in your view, what's a realistic goal post for where EBITDA margins can get to over the next 12 to 18 months? And how much of that would you say is internal initiatives versus market recovery and recovering volumes?

Hi Mike. I really think as we have stated before, that we can get our EBITDA margins to around the 10% level. I do think it might take a little bit longer than the 18 months, maybe all the way to 24 months, because we have captured the low hanging fruit. Now we are focusing on the operational improvements that we have been talking about, which just takes time to roll out to all 38 plants. We are going to see slow progression of that increase in EBITDA margins, but it's really going to come from all operational improvements in that volume improvement.

Volume improvement would be … upside.

Yes.

Okay. That's great. And last one from me. Mark, you mentioned the securitization that recently occurred. Can you talk a little bit more about whether you've heard post that any changes in the landscape as far as what that's done to potentially encourage further deals or larger deals along the same lines? And whether you are starting to see any new entrants into the lending market on the back of this?

Yes. Mike, I think we are definitely seeing kind of new entrants and maybe even more importantly in my mind, we have seen improvements in the lending environment from the existing players in the market. So there's definitely a stronger level of competition. There’s more engagement. The turnaround times are faster. The responsiveness is faster. I think the whole process in the chain has improved. The securitization has been that one that was completed; it has been a wonderful thing to see to the first type of its kind since I will call it the secondary market went away. I would caution everybody to be transparent and honest that that was a portfolio of mature loans. So it was rated by the rating agencies. It had good strength and good duration. So they were able to accomplish those ratings. A mature portfolio getting a secondary issuance of it is easier than having a bucket of newly issued loans that doesn’t have quite the maturity time duration on it. There’s excitement in the secondary market and that it performed well. Now, the next step is we need to get kind of the rating agencies and other people to take a look at a batch of new loans and get those through the process. I think Fannie and Freddie, when they target that secondary market, will assist that. You're also going to see more activity from the current players in the market who are actually going to look to do securitization in the secondary market, offering of their portfolios regardless of Fannie and Freddie. So you will see the lenders in the market start to go that route independent of Fannie and Freddie and they won't wait for Fannie and Freddie. I think it is a good sign. It would obviously be helpful if Fannie and Freddie got behind it and started the program as well.

Great. Okay. Thank you both.

Thank you. Our next question comes from Rohit Seth with SunTrust. Please proceed with your question.

Hi. Thanks for taking my question. On the secondary purchase, just to be clear, that was on the chattel loan side?

Yes. Yes, that was; I think about 80% of that was chattel loans, Rohit.

Okay. And then what was the ASP of those MH Advantage homes that you produced in the Genesis Homes?

It really varies by amenity and feature and the brand is just rolling out. We are going to work through pricing and everything else by the Builders show. But I would say it's generally in line with our HUD product, maybe slightly up with the added features that they will generally have if the customer chooses, like a garage component to it. It will be built with a garage and other amenities, which will raise the price, but you are getting more house for the money. The general average ASP is going to be higher.

Okay. And then do you have any comments on the M&A pipeline?

M&A pipeline is always good. We are always looking at that. We have a stronger balance sheet that we can utilize. I would say right now we are just looking for the right opportunities and making sure that we do the right amount of diligence and not rush into anything. So I would say, prudent diligence and kind of looking for the right opportunities.

And are you looking on the manufacturing side or the regional side or both?

It could be any and all the above.

Yes. All right. Thank you. That's all I have.

Our next question comes from Phil Ng with Jefferies. Please proceed with your question.

Hi. Good morning. It's actually Colin, on for Phil. I just wanted to go back to the Genesis brand. Can you give any more color on the value proposition that this has for the builder developers? Like how much cost savings you can pass along? And how much time do you anticipate being able to save the builder developers? I know it's early days, but any quantification of the opportunity size that you see for Skyline, whether that's in shipments or revenues?

Yes. I think the value proposition for the market is, the average home builder today uses 22 subcontracting trades to build a home. Sometimes it varies; some builders use 51 subcontractors, some use a few less. But on average, across the industry, they use 22 subcontracting trades to build a home. Those homes, depending on the geography and everything else, can take months upon months to multi-year type or 18 months to build a subdivision. The benefit for the builder developer is, if they look at their return on capital employed or return on invested capital and the speed of getting our product in weeks and being able to put into a site, it really improves their returns overall and it eliminates the challenges they have in managing multiple subcontractors. We, in essence, replace and augment, I will call it, all the subcontracting trades. We are the architect, we are the builder, we are the plumber, the electrician; we are all of those things to the builder. The manufactured housing industry is somewhat between 90,000 and 100,000 units this year. Single-family starts are 860,000 over the last 12 months. When you take a look at it, the market opportunity is really opening up for ourselves and our retail partners to sell into that 850,000 type unit market and broaden our horizon. It's a large opportunity, especially as subcontracting trades and labor challenges become more severe. As liquidity risk becomes more top of mind for builder developers, it becomes harder to start and stop a subdivision when you employ subcontracting trades. Our model allows us to supply one or two houses at a time or entire subdivisions within weeks.

Okay. Great. Thank you. And then just in terms of your backlog, I was wondering if you could help us understand how much of the sequential move higher was normal seasonality versus any acceleration in order trends that you saw from your customers?

So backlog, I think we saw 12% growth in our backlog and I would just say that's the normal demand curve that we saw during the quarter. The way we saw the quarter was, we rebuilt inventory in the early months of the quarter and then as orders and demand were strong, we built up backlog in the latter half of the quarter. So it's good.

Thank you. It appears we have no additional questions at this time. So I would like to pass the floor back over to Mr. Yost for any additional or concluding comments.

Well, thank you, everyone. Excited about the progress we have made and the opportunities. Hopefully we will see all of you at the Las Vegas show at the IBS show in Vegas in January to see the new product. It is really game-changing. We are very excited about it. Look forward to the opportunity and we will talk to you soon. Have a great day.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.