Earnings Call: Q3 2021

Oct 25, 2021

Greetings. Welcome to the Simpson Manufacturing Co, Inc. 3rd Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to Madeleine Crane, Investor Relations, you may begin. Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's 3rd quarter 2021 Earnings Conference Call. Any statements made on this call that are not based on historical facts are forward looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward looking statements. We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise Please note that the company's earnings press release was issued today at approximately 4:15 p. M. Eastern Time. The The earnings press release is available on the Investor Relations page of the company's website at ir. Simpsonmfg.com. Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website. Now, I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer. Thanks, Madeleine. Good afternoon, everyone, and thank you all for joining us today. I'd like to provide a High level overview of our Q3 financial results and the associated performance drivers. I'll then wrap up by summarizing our key growth initiatives. Brian will then walk you through our financials and full year 2021 business outlook in greater detail. Our 3rd quarter net sales of $396,700,000 were once again very strong and increased 8.9% over the prior year period. Sales growth was primarily driven by product price increases to offset rising raw material costs. While the macroeconomic landscape remained challenged throughout the 3rd quarter Due to ongoing global supply chain constraints, limited steel availability and a tight labor market, We continued to deliver on the key elements of our business model to ensure our customers' needs were met. This includes, but is not limited to ensuring availability of our trusted product solutions typically within 48 hours or less. To date, we have implemented 4 price increases in 2021. In early April, mid June, mid August and our 4th price increase in mid October. These price increases ranged from mid single digits to mid teens depending on the product mix for certain of our wood connector, fasteners and concrete products in the United States. Looking at our sales results in greater detail, although 3rd quarter net sales benefited primarily from a full quarter of the first two price increases, Our top line moderately declined by 3.3% compared to the Q2 of 2021, predominantly due to decreases in sales volumes from our home sitter channel, which I'll discuss in more detail shortly. These price increases were primary contributor to another quarter of strong gross margins, which increased to 49.9% from 47.9% in the prior quarter 47.6% in the year ago period. As a result, our income from operations improved to $100,600,000 and led to strong earnings per diluted share of $1.70 As we highlighted on our last call, we currently anticipate significant gross margin compression beginning in fiscal 2022 as we continue to acquire higher priced raw materials, thereby raising our average cost of steel on hand. Brian will discuss this impact in more detail during his remarks. Turning back to our sales performance. We experienced declining sales volume during the Q3 throughout the various forms of distribution channels we serve, including our home center channel and other distribution channels to contractors and lumber yards. As a reminder, the home center channel includes both our home center and co op customers and is where we see much of our repair and remodel and DIY business. We experienced a slowdown in this channel during the Q3 as we believe there may be a re leveling of inventory for our customers. Additionally, our sales reflected an as expected decline year over year related to the return of Loews as a home center customer. As you may recall, we experienced elevated volumes In both Q2 and Q3 of 2020, as we loaded in our products at the lowest locations, resulting in a difficult comp in both quarter 2 and quarter 3 of this year. We expect volumes levels in the home center channel to become normalizing In the Q4, as demand increases and we pass the elevated volumes from last year's product roll in into Loews. Similar to the home center channel, we experienced modest volume decline in our other distribution channels to contractors and lumber yards during the quarter. We are confident this decline in volume is not due to a loss of customer or market share and attribute this primarily to customers adopting a more cautious stance in regard to their inventory levels, given tightening labor and supply chain conditions and the potential impact on the building industry. With that said, U. S. Housing starts continued to show promise, improving by 19.5% during the 1st 9 months of 2021 versus comparable period last year. And finally, in Europe, our 3rd quarter sales improved over the prior year on a local currency basis, primarily from strengthening demand compared to the prior year, where we experienced government mandated COVID-nineteen related closures and to a lesser extent from price increases. Sales in Europe also improved from our ability to continue meeting our customers' needs due to our solid inventory management practices amid broader supply chain shortage. I'll now turn to a high level discussion on our key growth initiatives, which we first unveiled in late March of this year. We are focused on growing in the OEM, repair remodel, DIY and mass timber markets, where we are striving to be a leader in engineered load rated construction fastening solutions, given that each of these markets have a broader Product opportunity within the fastening solutions. We are also focused on building our presence in concrete construction as well as structural steel, which is a new market for Simpson. While we are looking to grow our presence In each of these key growth areas, it's important to realize that we already have existing products, Testing results, distribution and manufacturing capacities in place for all five of these initiatives. To bolster our growth, we remain focused on organic opportunities through expansion into new markets within our core competencies of wood and concrete products as well as inorganic opportunities through licensing, Purchasing IP and traditional M and A. While we are pleased that we are continuing to build out these product lines and inherit new customer wins to improve our market share. We recognize this will be a multiyear endeavor to ensure we have the proper testing, The validation of our product lines and to ensure we provide our customers with the highest quality solution set to build safer, stronger structures. Currently, each of our key growth initiatives remains in different phases of implementation. However, we believe that these are the right areas to pursue to position Simpson for above market growth based on our ability to execute given the core tenants of our business model. That includes our strong, long standing relationship with top builders, Engineers, contractors, code officials and distributors as well as our significant engineering expertise and our ongoing commitment to testing, research and innovation. Finally, We are working to become a leader in building technology space, which hits upon all of our key growth initiatives. As we continue to develop innovative new tools and solutions for our customers to help with design and options management, We'll also be able to easily specify the right Simpson solution for the job, helping to drive enhanced growth across our business. Our strong earnings and effective working capital management have enabled us to continue generating strong cash flow to fuel our growth and stockholder return priorities. In regard to growth, we are dual focused on both organic growth and M and A opportunities. To facilitate growth organically, we are investing in areas such as engineering, Marketing and sales personnel as well as testing capabilities across all areas of our business, including the aforementioned 5 adjacencies where we are looking to expand. We may also invest In regards to M and A, we are more broadly focused on product line expansions in order to develop complete solutions for the markets in which we operate. This may also include opportunities in areas that support our key growth initiatives. In summary, despite broader market challenges, we are very pleased with our continued strong results, both financially and operational for the Q3. I want to say thank you to all our Simpson Strong Tie employees for your commitment to health, Safety and outstanding customer service to successfully manage through the broader supply chain constraints and keep our customers up and running. Thank you for your time and attention. And now I'd like to turn the call over to Brian, who will discuss our Q3 financial results and our 2021 outlook in greater detail. Brian? Thank you, Karen, and good afternoon, everyone. I'm pleased to discuss our Q3 financial results with you today. Before I begin, I'd like to mention that unless otherwise stated, All financial measures discussed in my prepared remarks today refer to the Q3 of 2021, and all comparisons will be year over year Comparisons versus the Q3 of 2020. Now turning to our results. As Karen highlighted, our consolidated net sales increased 8.9 percent to $396,700,000 Within the North America segment, net sales increased 6.8 percent to $338,600,000 primarily due to Product price increases that took effect through the Q3 of 2021 in an effort to address rising material costs and were partially offset by a decline in sales volumes, primarily in our home center channel. In Europe, net sales increased 22.5 percent to $54,800,000 primarily due to higher sales volumes Compared to last year's COVID-nineteen related slowdown, Europe's sales also benefited by approximately $900,000 of positive foreign currency translations resulting from some Europe currencies Strengthening against the United States Dollar. Wood Construction Products remained consistent at 85% of total sales And concrete construction products also remained consistent at 15% of total sales. Consolidated gross profit increased by 14.3 percent to $198,000,000 which resulted in another strong gross margin quarter at 49.9%. Gross margin increased by 2 30 basis points, primarily due to the aforementioned price increases, which were partially offset by higher material costs. On a segment basis, our gross margin in North America increased to 52.1% compared to 48 0.9%, while in Europe, our gross margin declined slightly to 37.7% compared to 37.9%. From a product perspective, our 3rd quarter gross margin on wood products was 50 0.2% compared to 48% in the prior year quarter and was 44.6% Concrete Products compared to 42.1 percent in the prior year quarter. Now turning to our 3rd quarter costs and operating expenses. As a reminder, last year, we implemented various cost saving and other measures in light of the uncertainty surrounding the impact of the COVID-nineteen pandemic. As a result, total operating expenses were $97,400,000 an increase of $15,400,000 or approximately 18.8%. As a percentage of net sales, Total operating expenses were 24.6% compared to 22.5%. Research and development and engineering expenses increased 18.5 percent to $14,600,000 primarily due to increased salaries and expenses on patents. Selling expenses increased 19.3% to $35,100,000 due to increased salaries, commissions and travel expenses. On a segment basis, selling expenses in North America were up 18.9% and in Europe, they were up 22.4%. General and administrative expenses increased 18.6 percent to $47,800,000 primarily due to increased salaries, variable compensation and travel expenses. Our solid top line performance combined with our stronger Q3 gross margin helped drive a 10.2% increase in consolidated income from operations to $100,600,000 compared to $91,300,000 In North America, income from operations increased 11% to $97,000,000 primarily due to the increase in gross profit, partly offset by higher operating expenses. In Europe, income from operations increased 23.8% to $7,500,000 primarily due to the increase in sales volumes and gross profit. On a consolidated basis, our operating income margin of 25.4% increased by approximately 30 basis points from 25.1%. Our effective tax rate decreased slightly to 26.1% from 26.2%. Accordingly, net income totaled $73,800,000 were $1.70 per fully diluted share compared to $67,100,000 or $1.54 per fully diluted share. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day to day operations. At September 30, Cash and cash equivalents totaled $294,200,000 a decrease of 17,300,000 dollars compared to September 30, 2020. And as of September 30, 2021, The full $300,000,000 on our primary credit line was available for borrowing and we remained debt free. Our inventory position of $385,500,000 at September 30 increased by $75,300,000 from our balance at June 30, primarily due to the increases we saw in steel prices over the 1st 9 months of the year. We continue to be highly selective in regard to inventory purchases through careful management and purchasing practices, While at the same time ensuring we maintain ample product availability in order to provide our customers continued high levels of customer service and on time delivery standards, which are key cornerstones to our value proposition. As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of 40 $500,000 for the Q3 of 2021. Turning to capital allocation, we remain dedicated to supporting the growth of our business as well as providing strong capital returns to our stockholders through both dividends and share repurchases. Our strong cash generation enabled us to invest $12,000,000 for capital expenditures during the quarter as well as pay $10,900,000 in dividends and repurchased 222,060 shares of our common stock at an average price of $108.64 per share for a total of $24,100,000 On October 19, 2021, our Board of Directors declared a quarterly cash dividend of $0.25 Per share, the dividend will be payable on January 27, 2022 to stockholders of record as of January 6, 2022. And as of September 30, 2021, we had $75,900,000 of Given our confidence in our business and our expectation that our strategic initiatives will continue to drive improved operational performance And a higher return on invested capital, we expect we'll remain both active and opportunistic as it relates to share repurchase activity. Finally, I'd like to discuss our 2021 financial outlook. Based on business trends and conditions as of today, October 25, we are updating certain elements of our guidance for the full year ending December 31, 2021 as follows. We are updating our operating margin outlook to be in the range of 20% to 22% from our previous estimate of 19.5% to 21%. Our current outlook reflects 3 quarters of actual results as well as our latest expectations regarding demand trends, Raw material input costs and operating expenses. We are reiterating the remaining elements of our Outlook for fiscal 2021 as follows. We continue to expect our effective tax rate to be in the range of 25% to 26 Including both federal and state income tax rates and our capital expenditures outlook remains in the range of $55,000,000 to $60,000,000 including approximately $15,000,000 to $20,000,000 that will be used for safety and maintenance CapEx. At this time, only a small amount of our CapEx spend is related to implementing our key growth initiatives. Further, I'd like to provide some additional color on our margin expectations for fiscal 2022. Based on our current expectations, we are anticipating continued raw material cost pressure for the remainder of 2021 and into fiscal 2022. Our gross margins thus far in 2021 reflect an average cost of steel sourced prior to and during the increasing steel price market. As we work through our on hand inventory and continue to buy raw material at these much higher prices, Our anticipated cost of goods sold are expected to increase significantly in late 2021 and into 2022, Even if prices for raw material begin to decline, which will adversely affect our margins as the impact from averaging raw material costs typically lags our price increases. As a result and based on our updated fiscal 2021 operating margin outlook, We currently expect our operating margin for the full year of 2022 will decline by approximately 400 basis points to 500 basis points year over year. However, despite near term macroeconomic pressures, we continue to believe we can maintain an industry leading operating margin in the high teens range Annually in the long term, a key goal of our 5 year company ambitions. In summary, we were pleased with our strong Q3 financial results and remain focused on executing against our strategic, Operational and Financial Initiatives. We believe our industry leading position, geographic reach and diverse product offerings, Combined with our strong balance sheet and liquidity position gives us confidence in our ability to maintain operational excellence to support current and future demand trends. We look forward to updating you on our progress in the coming quarters. With that, I'd like to turn the call back to Karen for some closing remarks. Thanks, Brian. Again, we are very pleased with our Q3 financial and operational results that we've achieved despite ongoing macroeconomic challenges. While we cannot control elements of the economy, we are dedicated to managing the key areas of our business that we can control, and we remain confident in our ability to execute on our 5 year company ambitions. These include strengthening our values based culture, Being a partner of choice in all aspects of our business, being an innovative leader in our product categories. To continue our above market growth relative to U. S. Housing starts and maintaining an operating income margin and return on invested capital target within the top quartile of our proxy peers. I want to thank you again and thank all our employees, Customers, suppliers and stockholders for your continued support of Simpson Strong Tie. With that, I'd like to open up the call for questions. Operator? Thank you. At this time, we will be conducting a question and answer session. Our first question comes from the line of Tim Wojs with Baird. Please proceed with your question. Hey, everybody. Good afternoon. Hi, Tim. Hi, Tim. Maybe just to start, if In North America, if you could maybe true up a couple of numbers for me. I guess the first piece is what was the Contribution from pricing in the quarter? That was give me just a second here. About $75,000,000 Tim. Okay. And is that if you kind of look at the 4 price increases that you've implemented, what would you think run rate kind of Pricing should be on a quarterly basis once everything is fully effective. Yes, good question because The 3rd price increase that took effect was halfway through the quarter. And of course, we've got the 4th one that's Just very recently took effect. I'd say About $100,000,000 all in. Now of course that is comparing it to Prior to any price increase. So as we start lapping quarters here, we're going to start lapping quarters with price increases in them. But $100,000,000 all in versus no price increase. Does that make sense? Okay. Yes, that makes sense. That's helpful. Thank you. And then Go ahead. Yes. That's it. And then on the and then I guess on the home center business, is there a way To kind of indicate how much that business was down in dollars? So we had a pretty there was a from a comparability perspective, it was down A pretty good amount. Part of it was due to the load in last year is noted, but also part of it was due to we believe they were The home center customers were doing some inventory leveling during early like July, August of the quarter Because they had pretty good inventory position Leading up through the end of Q2. So don't have a dollar amount that we're going to share with you, but a big A portion of that was of the volume decline in the quarter was related to the home center channel. Again, tough comparable because last year heavy DIY projects in addition to the load in, But also the inventory leveling we believe was taking place. For the end of the quarter, We feel that more normal buying patterns are in existence Probably through in September and on a go forward basis, we would expect more of the normal Patterns of purchases through the home centers. Okay. And what about kind of I guess if you look at like October, Did you if you kind of look at your volume numbers, you could look at it total or by home center and by kind of legacy distribution. But Did October see improvement? Because it sounds like the core distribution channel was down a little bit in the Q3. Has that started to kind of grow again As you've gotten into the Q4? Yes, Tim. We're seeing some nice growth In early, obviously, we're early in the Q4, but as Brian mentioned, we saw the home center business kind of pick up a little bit to become more normal buying in September continuing through October. And as we also mentioned, our other means of distribution really contractor distributors, lumber yards, They were also pretty slow in the 1st couple of months of Q3. We're seeing that pick up again Awesome. Got you. Okay. Okay. And then just the last question I had on lead times. Where are you lead times today in terms of when customers order and how quickly you're able to fulfill those orders? And how has it changed over the last 6 to 9 months? Has there been a lot of ups and downs? Or you've been pretty consistent on lead times? Yes. As you know, we think our availability of product and lead time is a very large differentiator for us. So we're still north of 97% on lead times on the majority of a product that a customer would order. Doesn't mean that if there was a special or something that it might take a little bit longer, but we're still running a little north of 97% In that 24 to 48 hour lead time. And that's a key differentiator for us. Yes. So basically, would you agree with the statement that your customers don't necessarily feel the need to over order or Stock in the sense that they know your lead times are pretty good. And so they're not a lot of their orders are actually reflective of end market demand versus any sort of inventory build. Yes, I mean we've done a really good job probably ever since the 2,008 downturn, I would say, Being able to, I would say, our customers feel comfortable that they don't need a lot of product in their inventory because We can fill their orders in an expedited manner. So we haven't really seen that change like we're not seeing a lot of customers add Extra inventory, and again, I think that's just a credit to what we've been able to do with our lean manufacturing and being able to meet those Customer needs and fill those orders in that 48 hour timeframe at that 97%, 98% rate. Okay, good. I'll pass it on. Thank you for the time. Okay. Thanks, Tim. Thank you. Our next question comes from Daniel Moore with CJS Securities. You may proceed with your question. Good afternoon, Karen and Brian. Thanks for taking the questions. Hi, Dan. Hi, Dan. Just wondering, obviously, we're in our 4th round of price increases. Are you seeing it doesn't sound like it, given Pickup in the band in October September, October, but are you seeing any signs at all of your customers' customers' Demand being impacted after multiple rounds of pretty significant price increases over the last 6 to 12 months? Yes. I think, Dan, it's those price increases we're seeing in all construction materials and of course we focus On anything associated with steel. So, as they see price increases with anything really associated, I always refer to garage doors and appliances, obviously our products. What's really been The huge driver for us has been the availability of product. We mentioned we think We've heard from our customers that we've been one of their best suppliers in this really tight market from a supply chain standpoint. We've heard from Some of our competitors' customers that they're having they'd like to get some product from us. So I think we've gained just a little bit of market share, especially in our market by being able to meet those needs and have that inventory. But it's really been a supply issue Rather than focus so much on pricing. Not to say from our salesman standpoint that it's easy to get a price increase through, Always a difficult thing, but it's so highly publicized in the market space that our customers understand Why we're having to have these price increases? Helpful. And I think you mentioned this in the prepared remarks, But your increased inventory levels, how much of that reflects just pricing versus quantity? And At this stage, do you feel pretty comfortable about your ability to procure, so you don't need to strategically continue to build inventories in terms of Actual volumes, any commentary there? Dan, significant the majority of the increase is price related On the inventory? Yes, I would say from the steel, again, we've Our purchasing group has done an excellent job of making sure that we've got steel to be able to meet our customer needs. But as you pointed out, it's a right now ensuring that we have steel that we can continue those fill rates, but then not having too much steel if we have Any pricing decrease that we see. Right now, we still see the steel industry is I would say it's maybe it's Slowed a little bit, it hasn't come down, but price increasing has slowed a little bit. So we'll just see how that continues. I think Most people, most industries would think that there is some new volume 1st steel mills coming online, it was supposed to come online in Q4. Now it's anticipated late Q1. I think that will help And we'll see how things go from there. But we are very cautiously trying to balance customer needs, being sure we have that Product for them as well as steel inventories. Perfect. Maybe just one more kind of high level. Just as you look around the country, are you seeing any changes in building codes and standards in any particular areas that could potentially impact Your revenue or competitive positioning over the coming years? We actually and I think this is kind of early on, but this Build to rent concept, we have had some of those Owners of those buildings contact us about building to a resiliency standard versus a life safety standard. Resiliency meaning that they're going to hold on to that building for quite a long time as they continue to rent it. And so they want the building to be Able to be occupied after any sort of natural disaster. So it's just starting, but that's quite interesting for us Because it means typically you would put more of our content into a house built from a resiliency standpoint versus a house built from a life safety standpoint. And just on the tip of the iceberg of seeing what happens with this. All right. Look forward to seeing it. Appreciate the color once again. Thanks, Dan. Thank you. Our next question comes from the line of Kurt Yinger with D. A. Davidson. You may proceed with your question. Great. Thanks and good afternoon, Karen and Brian. Hey, Kurt. Hello, Kurt. Hi. Just starting off, When we think about the increase in the operating margin outlook kind of back to the prior range after the strong Q3, Just curious, what were the biggest upside surprises in terms of the performance in the quarter relative to your expectations? Because it Sounds at least like volume was pretty challenging and you hadn't kind of yet benefited from the 4th price increase. So just curious What was better than expected there? Yes. Part of it is the price increase relative to the use of the associated inventory, The timing of that and then the I think we may have saw a little bit more strength in European margin and then also the trajectory of expenses through the balance of the year, What projects would start and continue through the balance of the year? Yes. At the 6 month mark, we were making some estimates, obviously with an additional 3 months under our belt And just the only 3 months left in the year, give us a little bit more of that insight into Bring that operating margin back up at the high end there, low end and high end. Got it. Okay. And then historically, Simpson has had a Premium price position relative to peers and it would seem that the value proposition is there currently perhaps Even more so than it's been in the past. Is where your pricing today, is that consistent with where you've been historically? And how does Kind of competitive positioning factor into your decision making process around price at a time when inputs are rising so meaningfully? I think, Kurt, you mentioned a key point to us from the standpoint of the services that we provide for our product. As we talked about this on time delivery, we talked about large SKU mix, our customer service both inside And our outside sales team as well as our engineering that we really pride ourselves again as we talked about, we don't want to Sell on price, we want to sell on all the services and that's really where you see that pricing premium. I would say today we still probably have That pricing differential in place and as I mentioned, what's key to our customers is availability of the product. We never want to be The vendor that shuts the job site down because we didn't have product available for those customers and I think it's been really well appreciated As we're in times of a tight supply chain. Right, right. Makes sense. Okay. And then just last one for me. I didn't hear it in the prepared remarks, but I'm just curious whether Sourcing from overseas has been a challenge for you guys. And at least in the last few years, I think North America Fasteners production capabilities have been something that's been of interest. Given everything that's going on, is that still a priority? And is that something where you would look M and A or something you can maybe build out organically? Yes, it's a great question. As we've mentioned, Our fastener business is one of our fastest growing, has been for probably the last 3 to 4 years. We domestically At the Simpson facility, about 35% of our fasteners and we buy the other 65% offshore, basically in Taiwan. A typical lead time before this year would have been maybe 3 to 6 months to get a product. We are now running about 10 to 14 months lead time on those products out of Taiwan and that certainly makes it very difficult When we think about forecasting and also having that inventory on hand. So as we've talked about in the past, We're very interested in trying to grow through either acquisition or organically, more control of our Capabilities have been manufacturing that product and a little less dependent on buying out of that product. So certainly it's It's on our radar and something that we're constantly looking for. And do you have, I guess, extra Space at the existing facility or would that be something where if you were to do it organically, it would need to be Kind of a greenfield location. Well, a lot of that Kurt has the additional manufacturing that For the local manufacturing that Karen had mentioned, we have stood that up over the last number of years Within an existing factory here locally in the U. S, as we Move things around and utilize space, we've been able to bring that production in house. A lot of things that we also do from a lean perspective, try to take advantage of that to the best that we can. But We're getting to the point where it may hit an inflection and we may need to add Some facility footprint into that into those locations that we're doing that in. So You've always heard us talk about we like local production to be able to respond quick to customer needs. And this has been the buildup of that. But we will if we continue to significantly grow the amount of local production, We would need to make some investments in facility. Got it. Okay. Well, appreciate all the color and good luck here in Q4 guys. Thanks Kurt. Thank you. Our next question comes from the line of Julio Romero with Sidoti and Company. You may proceed with your question. Hey, good afternoon, Karen and Brian. Hi, Julio. How are you? Hello, Julio. I'm good. Thanks. So I wanted to dig a little more into the channels in North America other than the home centers. I think you mentioned The volume headwinds in contractors and lumber yards, there may have been some different drivers that drove the decline in those channels Then what happened in the home centers? I believe you mentioned more of a cautious stance because of their own labor and supply constraints. So I was Hoping you could speak a little more to that and if you've seen and have those labor and supply issues alleviated in those channels at all? Yes, it's a great question and we certainly saw and heard from some of our customers Kind of a slowdown on that new construction standpoint, just because, 1, pricing of lumber, which has now gone down, but Pricing of lumber was very high. Unable to complete structures because of supply chain issues, again, whether that be Doors or windows, appliances, faucets, inks, it didn't really matter, but unable to complete the structure. And so we definitely saw that slowdown in that space. We have now seen as we kind of came out of 3rd quarter in September and as we're looking at Q4 with where we are so far in early October, An uptick in those markets just as we've seen an uptick in that home center buy also. Great. And would you say that the uptick is to the same extent that you've seen in Home centers, either on a I guess on a percentage basis or however you want to take that? Yes. I mean, I think, as we know the cyclicality of our market is Pretty well defined and also when you think from the home center standpoint. So I would say we're seeing a, what I would call a normalized, if There is such a thing, a normalized uptick in both what we see from our contractor distributor lumber yards as well as the home centers. So nothing No unusual anomalies at least in the last 60 days or so. And that's in Q Relative to the prior year same period. Right, relative to Q4. Yes, absolutely. Okay, great. Thanks for taking the questions and best of luck in the Q4. Great. Thanks, Julio. At this point, we have reached the end of the question and answer session. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a great day.