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 this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. Such risks and uncertainties include factors 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 we believe can be useful in evaluating its performance. A reconciliation of these measures can be found in the earnings release. I would now like to turn the call over to Mark Yost, Skyline Champion's President and Chief Executive Officer. Please go ahead.

Thank you for joining our earnings call and good morning, everyone. I'm pleased to be joined on this call by Laurie Hough, EVP and CFO. Today, I will briefly talk about our third quarter highlights and then provide an update on activity so far in our fourth quarter and the year ahead. 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. During the third quarter, we grew net sales by 9% and EBITDA by 13%, expanding margins by 60 basis points. 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. We remain steadfast on our key areas of focus, enhancing the customer experience, streamlining our product offerings and transforming the way homes are built and bought. Over the past few quarters, we have seen significant progress in normalizing our backlog because of stronger production capabilities, dealer destocking inventories and easing of supply chain challenges. The backlog at the end of the quarter was down $282 million to $532 million or 35% compared to the September quarter. Lead times improved during the quarter to 13 weeks compared to 19 weeks at the end of September. Normalizing backlogs to pre-pandemic levels of 4 to 12 weeks helps the homebuyer lock in both pricing and financing. Additionally, this benefits our direct sales channels to better meet the needs of their customers. We saw strong year-over-year growth in shipments during the quarter to our community REITs and builder developer channels. Orders from communities and builders were healthy as backlogs of both of those channels grew sequentially from the second quarter levels. While retailer walk-in traffic is down year-over-year, digital leads are driving good credit quality customers with higher closing rates. 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. We have also seen increased interest in our homes from our future growth channels. We attended the International Builders' Show in Las Vegas last week, where builders and manufacturers to rent customers saw the advantages our two Genesis model homes could give them. In total, we delivered 6,022 homes compared to 6,168 homes in the prior year, a decline of roughly 2.5%. Production volumes were down slightly during the quarter as retailers continue to destock their inventory levels in response to higher carrying costs and rightsizing 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 quoting activity at our manufacturing operations are trending up in the first part of our fiscal fourth quarter. That said, we expect the retail inventory destocking to continue through the end of March. Demand varies widely by geography with lower orders and backlogs in the South Central regions of the U.S. In these areas, our plants have lowered production rates for the short-term 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 is 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 idled manufacturing facilities in North Carolina. Additionally, we continue to prepare and open our R&D plant in Decatur, Indiana and our Bartow, Florida plant to support the growing builder developer 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 homebuyers 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 midsized builder developers. While these growth drivers will take time to mature, we are excited by the progress we continue making and are encouraged by the longer-term impact to the overall housing accessibility. In this economic environment, we need to continue to invest in innovation by introducing offerings that connect with the growing number of customers who need affordable housing. We are accelerating our investments into production automation and the customer experience. We continue to expand our digital presence by investing in technology and content that engages and educates consumers on the value of manufactured homes. This includes expanding awareness via social media where we can visually demonstrate the great design and quality of our homes as well as allow customers to design and price their homes online. These investments bring additional leads to our dealers while making it easier for our customers to find and personalize their new home. We've been recognized for our advancements in housing as we were recently named the Most Trusted Manufactured Housing brand by Lifestyle Research for the third straight year. I will now turn the call over to Laurie to discuss the 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. U.S. volume levels during the quarter were supported by increased capacity driven by the opening of our Navasota, Texas plant and the acquisitions of Manis Homes and the Factory Expo retail locations earlier this 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 destocking 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 decreased 28% in the third quarter of fiscal 2023 compared to the second quarter of the same year. 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 was primarily a result of completing the FEMA order in the prior quarter, which drove higher ASPs versus our core products. In addition, we saw a decrease in our core product ASPs 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 U.S. housing segment gross 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 U.S. 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-ago 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, and 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 fewer 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 net 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 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 the 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 REITs, manufactured 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.

Our first question is from Daniel Moore with CJS Securities.

Start with on the retail side, maybe talk a little bit more, Mark, about inventories. It sounds like destocking maybe through the end of March, which is consistent with your prior thoughts. Just how far are we along in that process? And is that more sort of a market-by-market, geography-by-geography phenomenon at this point?

Dan, it's definitely a market-by-market, dealer-by-dealer inventory destocking. I would say that a majority of the destocking in certain markets has already occurred as we've seen cancellations and order quote activity pick up in certain regions, in certain markets. I would say the Mid Central South region still has more destocking 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. Maybe talk a little bit more about retail traffic. I know you're kind of shifting from traditional to digital, but traditional retail traffic quoting inquiries, are you seeing a 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%. 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 7%. So people are definitely shopping. People are definitely buying and putting deposits on homes stronger than they were last year.

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 volumes. Is that the right way to think about it? And just any cadence as we look out maybe a little further into the June quarter?

Yes, 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 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. And then usually, we pick up during the spring time and people start buying again.

Excellent. Lastly, I have one more question before I leave. I want to confirm the guidance on margins is returning to historical levels. I believe we mentioned previously that this was in the range of about 26% to 26.5%. Is my memory correct on that? Also, what is the magnitude of the additional pressure from ramping up the three new facilities?

Dan, yes, in the 26%, 27% range, I would say probably on the lower side of that range given the three new factories starting out.

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, 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 even if production volumes don't pick up like we expect, maybe you're still able to sort of maintain this higher level of margins?

This quarter's results were fairly consistent, but we are starting to notice a couple of trends that are likely to become more pronounced in the fourth quarter. These include the reduction or elimination of material surcharges as we see more products coming through production, and a shift in our product mix towards smaller units with fewer features and options to help consumers manage their monthly payments amidst rising interest rates. While we experienced a glimpse of this trend this quarter, we expect the majority of next quarter's products to reflect these changes. Additionally, we are set to open three new factories in the coming year, which will impact our margins. Regarding the structural changes, we are primarily focused on streamlining our product offerings and adopting a campus approach to production. This means we are simplifying our floor plans and options to facilitate production and are also organizing facilities closely to enhance the efficiency of manufacturing similar products for our workforce.

And do you feel like there's still room for further improvements on the product simplification area? And then it sounds like maybe you're accelerating your increase in 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.

Yes, Greg, I believe we are about halfway through the streamlining of our product. Regarding automation, I mentioned during the call that we are dedicating certain facilities to research and development and innovation. Specifically, we are opening our Decatur, Indiana facility, which will not only produce customer products but will also serve as an automation hub and an R&D center for the company. We have other campuses under consideration for similar purposes. Automation represents a significant shift for the company moving forward. The potential innovation from automation is truly remarkable. It will fundamentally change housing in the country and will make quality affordable homes much more accessible to the general population in the future. This will lead to considerable efficiencies, not just in workforce terms, improving the safety and health for employees making it a better environment to work in. It will also enable us to implement multiple shifts, as all our plants currently operate on a single-shift basis. This means we can adjust staffing and operations, which will enhance efficiencies beyond just product simplification and streamlining.

Yes 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 specifically or are those still yet to come?

Yes, 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 about the retail issue during the quarter as far as backlogs go. The top 100 builder 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 early first fiscal quarter of next year in April.

Our next question is from Phil Ng with Jefferies.

Can you hear me now?

Yes, please go ahead.

Sorry about that. Another really strong quarter, Mark, I think once we kind of flush out some of this retail destock, when we kind of look out to fiscal 2024, how are you thinking about the components from a demand standpoint after you kind of strip out FEMA? Certainly, your commentary sounds a lot more upbeat than perhaps some of your traditional site-built builders they've talked about what was driving pretty hard at this point?

I am quite optimistic about fiscal 2024 moving forward. Currently, we are experiencing a half-century low in the supply of homes for sale and vacant rental properties. On the supply side, housing availability is at a historic low. I don't anticipate the Federal Reserve making significant downward adjustments to interest rates, and with employment levels remaining high, people will have jobs. However, they will likely have less purchasing power, which positions them within our price range for homes that traditional site-built builders cannot accommodate. Therefore, I expect us to gain market share compared to traditional builders after we navigate through this period of destocking. This outlook aligns with what we heard at the International Builders' Show last week, where many builders expressed keen interest in our solutions and the cost and time advantages we offer. I believe we will start to collaborate with some of these builders to help them address their challenges during these tough times.

Got it. 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?

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 product, it's a different type of order process. They need generally bulk orders. So they'll take either 10%, 20% or 50% of a plant's capacity with their home needs. So I think we need to run a little bit in excess to make sure we can supply that channel adequately, definitely. So 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 supply chain and labor issues are behind us.

Super. And just one last one from me. Any color on how chattel loan rates have kind of performed and reacted to this current environment, call it the last few months? Certainly, any color on the spread side would be helpful?

The chattel loans have performed surprisingly well. I think the traditional 30-year mortgage last I looked this week was 6.4% or 6.5%. We're seeing for good credit score chattel, 700-plus FICO score and 10% down. We've seen loans at about 6.7%, 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 FICO score, only 5% down, then you're seeing spreads are probably 1.5% to even up to 3%, depending on how low the FICO score is. So they could be in that, 7.5%, 8%, 9% range, depending on their credit quality. But for good customer buyers, we're seeing a very tight spread.

Has that spread decreased or has it remained relatively stable over the past 3 to 6 months?

I would say yes, it's pretty consistent to where it's been.

Our next question is from Jay McCanless with Wedbush Securities.

Sorry. Can you hear me now?

Yes.

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 difference 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.

Yes, I believe the Genesis product is designed to assist builders across the nation, depending on their specific region. The interest and engagement at the recent show in Vegas were significantly higher and genuine. We had many customers who not only gave us their information but also expressed strong interest in projects they are currently involved in. They were very eager to get quotes on specifications. This was not just casual interest; during the show, we observed several builders actively assessing our product and determining how it could fit into their ongoing subdivision projects. Considering the current challenges with interest rates and affordability that end consumers are experiencing, along with the rising costs of capital that builders are facing, I see this as beneficial for both parties, especially given the speed and availability of the product, and I believe the builders recognize this as well.

Yes good traffic through the models was pretty amazing. I guess my second question, now with the acquisition earlier this year, some more wholly owned retail units. Could you maybe level set it for all of this and talk to how many wholly owned retail dealerships you have now? Is there a potential, because it sounds like the homes sold through the wholly owned channel had a higher gross margin. Is that something we should expect going forward? And at some point, might not bracket that out so we can see wholly owned retail versus wholesale sales?

Yes, I think there are 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 retailers 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. 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.

Our next question is from Matthew Bouley with Barclays.

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 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 how should we think about that over your fiscal '24?

Yes, thanks, Matt. 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 lease basis. Most of the communities greenfields are starting to expand. We're starting to see transformers, which was 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 will 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. There is substantial demand coming from communities for the foreseeable future.

Got it. That's very helpful color there. Second one, just to kind of zoom into Q4. I know you gave the guide, you gave some kind of early January trends, order cancellations subsiding and quoting getting better. Presumably, when you say order cancellations have 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 relative to the holidays, just kind of what do you think has driven that sort of uptick and any kind of detail around that?

Yes, 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, we saw cancellations improved by 60% going into December. And then here in January, it's improved another 10%. So cancellations are improved by 70% from where they were 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 right-size their floor plan credit limits. They were needing to cancel orders just to get basically in compliance with our credit facilities. Some of the orders in terms of cancellations were done by some of the REITs. But those were really 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 reput those in when they need them in June.

Our next question is from Mike Dahl with RBC Capital Markets.

A few follow-ups here, when we think about Laurie, the product mix impacts, you're coming off some periods where you had a lot of price inflation, mix was 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 in 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 it varies by geography, but it's definitely lower—the mix will be lower than what we've observed in the past few years. Additionally, as the builder developer channel expands, this will positively affect our average selling prices, although not necessarily our margins. The average selling prices are likely to increase slightly because these homes typically come with more features and amenities over time. As we've mentioned, these types of supply agreements take a bit longer to develop and come to fruition.

Yes, okay. All right, that makes sense. And maybe also diving into the retail side again, I think if we look at historically, the difference like the retail sales price of the unit at least grew up census numbers might be 120, 130k. Your wholesale price has been ex the FEMA, somewhere in the 80s to low 90s. But as you kind of mix into that retail 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 that retail dynamic, how we should think about that as an ongoing impact to ASP? And if that helps support a higher ASP than you would have previously expected?

Yes, at the retail level, the average selling prices are higher than at wholesale. It really depends on the mix of sales. As we increase our manufacturing capacity, we will also be producing more units over the medium to long term. This is influenced by the proportion of units sold in U.S. manufacturing compared to retail. If more of the sales shift toward retail due to acquisitions or organic growth, we will likely see an increase in the average selling price. Does that make sense?

Okay, right. Yes and I guess maybe more specifically for the fourth quarter, 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 decline, which then may imply that you don't expect unit down much sequentially at all so maybe a little more color on the unit versus ASP dynamic 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.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Mark 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.