Q3 2020 Shyft Group Inc Earnings Call
[music].
Good morning, and welcome to the shifts group third quarter 2020 conference call and webcast all.
All participants will be in listen only mode until the question and answer session of the conference call.
This call is being recorded at the request that the shipped group. If anyone has any objections you may disconnect. At this time I would now like to introduce Juris Pagrabs group Treasurer and head of Investor Relations for the ships and that's your pick ups you may begin.
Thanks, Melissa good morning, everyone and welcome to the ship group's third quarter 2020 earnings call. Joining me on the call today are Daryl Adams.
Resident Chief Executive Officer, and John do your or Chief Financial Officer.
Today's call. We've included a presentation deck, which will be filed with the FCC and is also available on our website at <unk> Dot com.
You may download the deck from the Investor Relations section of our website to follow along with our presentation during the call.
Before we start todays call. Please please turn to slide two of the presentation for our Safe Harbor statement.
You should be aware that certain statements made during todays conference call, which may include managements current outlook viewpoint predictions and projections regarding the ship group and its operations maybe considered forward looking statements under the private Securities Litigation Reform Act of 19 1995.
Caution you that as with any prediction or projection. There are a number of factors that could cause the ship groups actual results to differ materially from projections.
All known risks that management believes could materially affect the results are identified in our forms 10-K, and 10-Q filed with the FCC. However.
However, there may be other risks that we cannot anticipate.
On the call today, we will provide a business update including the ongoing impact of the Coca 19 pandemic on our operations as well as the third quarter highlights before we move.
Before we before moving onto a more detailed review of the third quarter results and our outlook for the remainder of the year.
He will then be opening the line for Q and a.
Also remind everyone that with the divestiture of Virgin's response business on February Onest 2020, the revenues and expenses associated with the air business as well as the assets and liabilities had been reclassified as discontinued operations for all periods presented.
With incredible and innovative solutions to meet our customers demand such as pulling forward customer orders when requested.
Drive through interviews to address or they have constraints and employing a second shift to allow our employees the flexibility to provide care for the school aged children.
From a supply perspective Ah continued.
From a supply perspective conditions improve throughout the quarter.
As we now have clear visibility through the rest of the year.
Parts of delivery continues as accelerated growth trajectory.
As consumers embraced E commerce at a much higher rate.
A recent Wall Street Journal article delivery companies have indicated that the upcoming holiday shipping capacity is already booked.
Once earlier than usual.
Between Thanksgiving and Christmas. This year total shape is expected to be up 21% curious have already been operating near capacity for months as consumers have stayed home avoided stores and shop online.
And that has driven a capacity shortage for partial delivery vehicles.
We are excited about these trends are partial diluted customer orders are wrapping and customers have been asking us to build them with urgency.
Fps backlog his job $54 million to 282 million in the month of October alone.
And especially vehicle size or luxury motor coach chassis operation and benefited from the ongoing resurgence of the RV industry Virgin from the pandemic.
With the rebound and demand a motor home chassis line increase daily production level throughout the quarter.
On the service truck body side road truck body rebounded significantly due to increase in chassis availability and finished the quarter strong.
These recent athlete translate effected and our backlog, which is up 30% year over year to $52 million and includes back to back quarterly records for the motor coach chassis.
With that let me take a moment and summarize our year to date results on slide by.
So the first nine months of 2020, we posted solid improvement in our results, especially considering the pandemic related headwinds we encountered in the second quarter once again or your date results demonstrate the success and effectiveness of our business transformation strategy, which is focused on growth and higher.
Margin product offerings within our core market growing market share within our expanding geographic footprint and consistent productivity improvements in our operation. The result of our strategy can be clearly seen by the increase in our overall adjusted EBITDA margins through the first nine months as we achieved 12% margins even in the face.
Of headwinds from Covid, 19, shutdowns and supply constraints that limited some production.
Revenues for the first nine months increased $19 million or 4% too high to $104 million, excluding the USPS order.
Adjusted EBITDA for the first nine months period increased 20 million or 49% to $60 million.
Nearly matches all of our 2019, when we achieve 64 million.
Adjusted Mark adjusted EBITDA margin improved 500 basis points driven primarily by.
Hi, considerable labor efficiencies as well as a shift and product mix, resulting from the continued implementation of our business transformation strategy.
Let's turn to slide six I will provide an fps business update.
Last week digital Master announced the launch of the velocity up to a purpose built walk in van based on a Ford Transit class II chassis.
To meet growing demand for E Commerce and last my delivery.
Initial customer reviews have been very favorable as velocity up to combined nimbleness comfort and increased fuel efficiency with cargo space low capacity and access similar to the traditional walk in advance.
This innovative new vehicles is ideal solution for partial delivery fleet operators.
To expand their fleet and delivery capacity quickly as the velocity F. Two offers lower total cost of ownership.
Detailed mattress velocity up to expand our product offerings and complements the previously announced velocity F. Three built on a for transit chassis and and three which is built on a Mercedes sprinter chassis offerings parcel delivery fleet customers, an entirely new vehicle lineup with innovative solutions to improve it.
<unk> and safety from the loading process to the final delivery.
Please turn to slide seven for an update on our most recent acquisition, especially part of the SP business.
And that's our conditions improved sequentially each month.
We worked through the lingering supply chain and labor constraints and in each case exceeded expectations alleviating the pressures through a variety of initiatives that resulted in a record breaking profit quarter.
Revenues for the third quarter were $203.5 million up slightly from the year ago quarter, excluding $23 million of U.S.P.S. pass through revenues.
Income from continuing operations was $19.4 million compared to $13.1 million a year ago.
Earnings per share from continuing operations increased to a record 54 cents per share up from 37 cents per share in the third quarter of 2019.
Turning to slide 10.
Q3, adjusted EBITDA from continuing operations increased 46% to $36.2 million from $22 million, while as a percent of sales adjusted EBITDA from continuing operations increased 610 basis points to 16% of sales compared to 9.9% of sales in the same period last year.
I'll cover these increases in more detail when we get to the segment discussions.
For the third quarter adjusted net income from continuing operations was $22.1 million or $6.2 million increase from $15.9 million a year ago, while adjusted EPS from continuing operations rose, 38% to 62 cents per share compared to 45 cents per share at the same time last year.
Next we'll jump into that in the results by operating segment let.
Let's begin with the fleet vehicles and services segment on slide 11.
Our SBS business delivered remarkable results in the third quarter, while managing through a number of challenges our truck body business experienced significant year over year volume declines with our factory shutdown for a good portion of the quarter due to order softness in chassis timing.
On the flip side, our Bristol enough. The teams were able to respond quickly to customer demand and accelerate deliveries that were planned for Q4, which offset the truck body volume declines and drove favorable mix and productivity for MDF in the quarter.
Overall, Fms generated total revenues of $140 million to $45.2 million, which was down 19% compared to $179.6 million in the third quarter of 2019.
As a reminder, third quarter 2019 included $23 million of U.S.P.S. pass through revenue, so excluding that impact fts sales year over year decreased $11.4 million or 7% 7%.
Despite the decreased revenue EPS, adjusted EBITDA increased 34% to $33.2 million from $24.7 million a year ago due to the improved product mix and productivity noted earlier as well as lower material and component costs and favorable health care expenses.
That said adjusted EBITDA margin also improved 920 basis points to 22.9% of sales from 13.7% of sales last year.
Fps backlog totaled $229 million up $5 million or 2% compared to $224 million at the end of the third quarter 2019.
And as Daryl mentioned earlier demand has been robust recently with orders exceeding.
The order volume we experienced in all of third quarter with October orders volume exceeding the order volume we experienced in all of the third quarter, resulting in a current FBS backlog of approximately $282 million.
Please turn to slide 12 for the specialty vehicles segment overview.
Specialty vehicles also had a great quarter delivering the first quarter of motor homes sales growth since 2018, while also realizing the benefits of the rail truck body acquisition that we made in September of last year.
SB had sales of $58.3 million, an increase of $13.2 million or 29%, primarily due to higher sales of luxury motor coach chassis as well as the addition of revenues from the Royal acquisition.
Adjusted EBITDA was $7.2 million or 12.3% of sales compared to $4.1 million or 9% of sales in the same period last year driven.
Driven primarily by production efficiencies and higher motor coach volume as well as the addition of the Royal truck body business.
SB backlog was up 30% to $52 million, which included a record $40 million in motor coach backlog breaking a record set in Q2 of this year.
Please turn to liquidity and outlook update on slide 13.
As we noted on our previous Q2 earnings call. We took a number of steps to enhance our liquidity to confront the pandemic.
We continue to exercise discipline in our use of cash and plan to continue to support our M&A growth strategy as opportunities arise.
We generated 32 point 32 million of cash from operating activities in Q3, ending the quarter with $43 million of cash on hand, and 144 million of total liquidity.
As we began October we used a portion of the $43 million of cash on hand to fund the Dura Mac acquisition as well as make up a payment to finalize the net working capital adjustment related to the sale of the our business.
As conditions improve during Q3, we paid down $10 million of debt in August and recently made $20 million and payments.
Payout pay downs in Q4.
As a result, our current leverage ratio.
Stands at approximately 2.5 times, adjusted EBITDA, which positions us well to fund our operations and to pursue our growth strategy.
We are extremely proud of our overall performance given the significant challenges we faced this year the high level of execution that FDF, coupled with the transformational actions. We made earlier in the year illustrate the power of shifts earnings and growth potential.
We are increasingly confident in the underlying strength of our end markets. In October we saw sizable increases in order volume, which is a positive indication as customers are now making initial buying decisions for 2021 vehicle orders to support E commerce parcel delivery.
Given these factors and despite the industry wide headwinds that impacted our business. We are excited to receive reinstate our initial March 2020 guidance at the high end of the full year profit range.
We expect to deliver full year revenues in the range of 660% to 680 million.
Adjusted EBITDA of 73 to 75 million and adjusted EPS of $1.28 to $1.32 cents per share barring any additional pandemic related impacts.
Now I will turn the call back to Daryl for closing remarks.
Thank you John Please turn to slide 14.
We had an incredibly successful quarter I want to reemphasize, how proud I am really incredible hard work dedication and commitment to excellence demonstrated by our team throughout this unusual time.
When we need to step up to ensure the shift group could manufacture and ship. The vehicles are customers demanded our employees came through this.
It's often said that challenging times bring out the best in people. We certainly saw that demonstrated at shift group and 21.
Over the last few years.
We've made a number of key strategic decisions that have positioned to shift group to win in markets that are growing at an accelerated pace I.
I believe our year to date performance reflects the earnings power of the transformed company. Our entire team is excited as we continue to have great conversations with our customers who share their optimism for continued growth trends in 2021.
Operator, we're now ready for the Q and a portion of the call.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if.
If you are using a speakerphone please pick up your handset before pressing the keys to.
You withdraw your question. Please press Star then two at this time, we will pause from entirely to assemble our roster.
The first question today comes from Mike Shlisky of Colliers Securities. Please go ahead.
Good morning, guys, putting my morning like.
So I want to maybe first off on the about the Q4 outlook you know the last two years. The Q4 margins have been berries in the Q3 margins looking where you once you've mentioned today it looks like the margins will be a bit lower from the all time record. We just had in Q3.
So I'm kind of curious you know you've you've only it is the only to be you've worked through many operational issues. It seems like you have.
Those are probably going away also so I'm trying to figure out how or why margins might be down in Q4 compared to Q3.
And Mike This is John I'd say, a couple of things.
You know as we look at that the mix of volume that we had in the third quarter.
With heavy heavy a walk in van enough. It can compare to what Q4 looks like which will be higher truck body and lower contribution from an upset and walk in van perspective.
We certainly see some some negative mix and that that's you know again, partially attributable to some of the pull in activity that we had well also see some strong growth in the motor home business, which was strong in Q3, but it will accelerate year over year in Q4.
So theres also the lower volume impact and so you know, we're not going to be able to get the same fall through from a contribution perspective, just just what the volume.
Sequential volume declines.
And then.
You know we do have we do expect to see some of the the profit productivity that you talked about I think as we look at the quarter. The yeah, there's still.
Uncertainty given the environment that we're operating in and so we think we've taken a a good view here as to to what a what it could be but there is there is still a lot of variability and uncertainty that was that we're playing with particularly given some of the case increases that we're seeing across the country in the last couple of weeks.
Weeks.
Okay. Okay.
And then follow up there in Q3, and the F.B.S. segment. It sounded like some customers wanting to be put put at the front of the line for their orders I'm. Just curious if there is there a charge for that and do you have other orders or other folks in Q4, or just just simply cannot wait any longer and also want to be put to the.
One of the line here.
Oh My God. This is Darryl I'll take this one.
No. We don't we look at our customers as partners and they you know they are struggling to meet the demand.
So we wanted to make sure that we could do that.
So we got creative did a few different things I.
I think it just shows you know is the shift group name gets out there more that we continued to be according our strategy nimble agile flexible and the customers really look at that as an asset we think it's going to pay off in future orders that we were able to help them out in Q3 and pull some of those orders forward.
Okay got it.
I'm also wanted to ask about are some of the big parcel delivery companies I think that one of them over the last week or two has indicated that they want to cut their capex and 2021.
I don't know if you talk with those folks recently, but do you know if that will be including the vehicle part of the Capex do you think that the other companies out there the other parcel folks might be actually increasing to offset.
What this one company might be cutting.
Yeah, Mike [laughter].
We did hear that and I think you know when you look at the.
The big delivery company.
Companies out there they're buying airplanes.
And a lot of other product in their capex budget. So.
We have not heard.
Oh directly that our products are going to be a part of that reduction.
We're actually seeing increases in a number of our parcel delivery customers have a great conversations with some other ones that.
That we think will will come to fruition here before the end of the end of the year. So we're we're actually bullish and optimistic on slide 21.
Oh excellent never going to squeeze in one more here on the velocity discussion you had really are the two.
Well that family of products eventually be electrified and won't be do you have to whether you have three.
And do you have to wait until other Florida, Mercedes IXYS has any veatch actually that's that's available or you use on other manufacturers chassis. If you do choose to electrify the.
Velocity product lineup.
So I think there was three questions in that last question. So let me try to [laughter] through.
Yes, we can electrified are they up to the Evthree and the M. three.
And we have it will not be we don't have to wait for the Oems to come out with their product. We can use a third party to electrify those and that's.
You probably get ahead of us a little bit, but that's probably something that we're going to be talking more about as we move forward and to to the 2021.
Okay well.
Well, thanks, very much I will I'll leave it there I appreciate it thanks, Mike Thank you.
The next question comes from Matt Koranda of Roth Capital. Please go ahead.
Hi, guys. Thanks, I guess implied in your commentary on the sequential backlog increase and fleet vehicles.
Suggests that you may have had order flow approaching 100 million. So I was just wondering if you could speak to whether that's accurate.
And then also maybe on the composition of that order flow sounds like you guys are alluding to it mostly being parcel fleets, which I would assume is mostly walk in van but any inclusion of velocity product and that October order flow as well.
Tim This is John Yeah.
Yeah I would tell you. Your math is is is close I'm, probably a little bit less than the number you stated.
And.
What we saw is is mostly.
Certainly mostly on the personal side also on the walk in van side of the business I think as you know we continue to have very good discussions with customers on the velocity.
And hopefully we'll have have a they have something here shortly but you know that there's.
There's nothing in that backlog increase in October.
Related to that that velocity increased for the I'm, sorry related to backlog in Greece.
Okay very helpful. And then just usually I mean, the normal seasonality I believe to your parcel fleets are sort of order flow it tends to be more balance towards the spring and so I'm just wondering as you get orders kind of toward the end of the year here.
How does that impact your view or your expectations as we head into the early twenties 21, when do you sort of would normally get a sort of normal course orders.
Yeah, Matt this is their own [noise] morning.
You know I think the cold bid delayed some of the the ordering in Q2 as we discussed and we're seeing some of that come through right now [laughter] and I'd say the other factor that.
Well right now currently unable to way is.
What does the velocity needs in 2021 right. So.
But even if you go back to 28 20.
<unk> team, we had some restrictions in late 2018 with Chelsea's.
Due to various number of reasons I think at that time, if you go back and check.
I discuss that we're going to develop.
Additional class three chelsea's that will not put in that situation again so.
So I think it's very timely that is E commerce or continue to accelerate.
As nice Cagar rate and then you have cold did have an inflection point into that trajectory.
I think the traditional walk in van suppliers like Freightliner in the DCP or the four chassis.
I was going to struggle, especially with motor home continuing to.
Accelerate or have had good numbers so.
With us bringing out the effort to the Evthree and then Mercedes Benz or M. Three Oh, we give the customer three more chances to pick from.
Not did the unlimited supply right, but at least give them options that run much faster the transit cutaway. He's running probably you know 60 units in our Kansas City, sprinters, probably little bit less but their higher volume then freightliner DCP would get so and then you know we're looking at.
Robby Q1, maybe to bring out the are too which is going to be the Dodge Ram last two which is going to be also in the velocity family.
So we'll actually give them for more chassis is to be able to buy a these are purpose built walk in vans. So a very similar to walk in van from shape, except.
Except it's doubled the fuel efficiency or traditional walk in van and it's a smaller and easier to get around the city. So.
We we see that you know with Colgate in the delivery customers at peak basically since March is running the holiday season that.
This may be a trend of the future at this level and they're going to need to to fill out their fleet. So we're excited about the orders coming here and out of the year and into 2021.
Very helpful. Daryl and I think that bodes well look what I was going to ask back switches.
Can you speak to maybe your ability to fulfill from the F.B.S. backlog.
The 2021, obviously like the gating factor typically historically for you guys. It's been.
Chassis availability, but it sounds like at least if you were to get a strong mix from the velocity platform.
That's chassis may no longer be the you know the large constraints on your ability to fulfill from backlog.
So just curious as to maybe.
Maybe if you could speak to capacity and utilization there.
How how quickly we can fulfill next year if we.
We do see sort of maybe.
A bit of a backlog of orders so to speak that that flows through from the parcel a fleet guys next year yeah.
Yeah, I'll take it again, Matt So again I think if we.
Go back in history, a little bit and talk about our strategy, which was the build up to.
The footprint we have [noise].
Have a model plant if you will someone tell you that's not the model plant isn't fully bake, but right now our footprint.
It's nicely situated and we have the ability right. So right now we're building truck bodies in Pennsylvania, Michigan in California.
We have the ability to move.
Truck body out of Michigan, and open that plan up to build velocity.
Right and then we have some space in South Carolina that we can move around in order to build philosophy down there on the.
Mercedes chassis okay.
Kind of looking at additional up space opportunities in Kansas City.
That will help us build the trends so we have.
Flexibility to move other product around.
And and open up some space to build the velocity, which we're pretty.
Pretty well down the path and ready to pull the trigger here.
Probably in Q4 sometime to.
To start that move.
Okay very helpful. Darryl I'll jump back in queue guys. Thanks, Thanks, guys.
Our next question today comes from Steve Dyer from Craig Hallum. Please go ahead.
Oh, Thanks, Good luck have a corridor.
Graduation.
<unk>.
As it relates to sort of the the implied Q4 guidance I understand kind of mix shift in holidays, and some things like that kind of working against you from a from a margin perspective, just what it implies for revenue and volumes are usually you know it.
It seems a bit more severe than it typically.
Yeah, and I'm trying to sort of gauge how much of that is just your trademark conservatism versus versus anything else you might see I don't know if you're constrained from a labor perspective or.
'cause Kelly I think should be generally better revenue opportunities I know that but maybe some some commentary there. Thanks.
Yeah, I mean, I think you noted on the revenue side of things I think.
Q3 was it was a fantastic quarter, particularly in the F.B.S. business.
Hi, Andy if you think about the leverage they were able to get the volume they were able to get out and respond to customers and.
In Poland demand, you know things were sort of hitting on all cylinders from that perspective [laughter] you know part of that was it was.
Was that mix within products, even where we had.
We were able to to to deliver on on fleet volume and so consistent.
Trucks are going down the line, which shifts a little bit into Q4, you know, where we have sort of marbury backlog and so that you know being able to to to sort of change lines and in.
Change customer bills, and specs and those types of things are impacting some of the output differences between Q Keith.
Q3 in Q4, as we again broad volume in to satisfy customer demand ahead of us.
Kind of the peak holiday season here.
Okay in terms of the be incremental backlog the big boost you saw it in October I'm, just kind of curious if that youre sort of maybe the composition of that how how concentrated.
That was for yield it was about a couple of big customers was a fairly without any any color there.
Yes, Steve I will take it [laughter].
We saw it from let's say a couple of the smaller.
Ah parcel delivery companies.
Out of the maybe the say the top four so we were getting those conversations were having with the two big ones are we're excited about it and I think as I said before we're looking.
You know to have something before the end of the year or both of those guys. So.
It was none of the big guys. It was mainly the smaller ones, which the graben as much volume as we can get right. So I think that's what you're seeing right. Now is is a it's a race to see who could lock up the chassis is going.
On the 2021, so there's a little bit of a race going on and I think there's some a horse.
Horse trading into some big negotiations with the OEM chassis manufacturers that Oh, the the big players are talking to on the parcel in Congress delivery.
Got it that's a that's very helpful. Daryl. Thanks, a question just kind of on Labor you were sort of recently quoted and saying you want to add something like 10% of your so to your workforce over the next year or so and sort of anticipation of this demand is that going I know you've had a lot of.
Firing curves and so forth is that been a constraint at all I mean, your Q3 results would suggest you're you're doing just fine and haven't haven't success. There, but is up that you anticipate that being a constraint at all going forward are you having good success.
I think Steve we we've shown good success as you mentioned in the Q2 down in Bristol and the.
Increase that I talked about was companywide [noise]. So as you can imagine, it's probably not going to be at Bristol. This what I talked about Michigan, a little bit and probably into South Carolina.
In both of those locations, we feel we have Ah the ability to hire the high sound we need.
The real constraint, we have established the Bristol location do the motor home business being you know humming along pretty good but we again, we've been successful I'm getting a second shift started and able to.
Moving product out for Q3, but the hiring is probably going to be not in Bristol.
Okay got it lastly for me I guess, just kind of a two part question as it relates to capital allocation, you're generating a ton of cash a lot of options for places to put out whether it's you.
You know in my view you have a cheap stock you can buy back stock you can you can make acquisitions, you could either pay down but that all of those types of things but.
How do you sort of think about the allocation of that capital for greatest return and then as it relates to acquisitions, you've done kind of a two pronged. One has been you know sort of buying capacity around the country are expanding capacity the other sort of bad.
I guess, what I would call horizontal acquisitions, whether its strobes or girl Magar Royal.
Any sort of color on how you think about the capital allocation and acquisition opportunities going forward. That's it. Thanks.
Yes, Oh Oh.
Start off here and maybe drunkenness Cummins.
You know I think to your point, where if we're in a solid position from a capital allocation standpoint.
We we are cash flow certainly picked up here in the second half of the year, we expect that to continue.
We've.
We continue to have a pretty solid pipeline I think from an M&A perspective, and we feel that there are opportunities to drive accretive returns through that and we feel like there Mac fits squarely into that.
And to that equation and there's other opportunities out there that will be similar and then I think you know we continue to discuss that internally growth investments as we think about philosophy launch her as we execute a velocity launch as well as other expense.
Expansion opportunities, we feel like there is there is the opportunity to sort of accelerate organic growth both from.
Or a footprint perspective to daryls points, but also.
From a footprint perspective, a product perspective in potentially a technology perspective.
And so those are certainly high on the list and then you know from a from a buyback perspective to your yeah. Just specifically to your question. We've got 800000 shares available.
Under the current authorization and.
We certainly understand that so.
Yeah anything in that acquisition. So I think you know, Steve we're always looking for that third leg.
But right now it seems a lot of PE money out there that are maybe paying a higher than what we'd be willing to jump into so we're continuing to look we still have our pipeline meetings every every Friday.
And Ah you know some nice comes along would be very interested again I think we've talked about the leverage ratio.
At the end 0.5 theaters currently I think we'll be comfortable somewhere two and a half so we could do it in a sizable deal with the opportunity or.
You know comes comes at the top of the table.
All right got it well done guys. Thanks. Thank you.
The next question comes from Steve O'hara from Sidoti and company. Please go ahead.
Yeah, Hi, good morning, Thanks for taking the question.
Let me see pouring I'd just on the you know the kind of the E. Commerce shift I mean, I think a you know goldman or somebody you'd noted that I think previously you had noted or you know they sought it had pulled forward. It by a few years and I think the most recent was more like five years or something like that.
I mean can you talk about you know what that might do to the demand environment.
You know maybe in the medium term. So you know if the ecommerce growth was expected to be a you know 10%.
You know cagar, but now you've kind of leap frog you know a few years forward and now you got to kind of catch up to that I mean does that imply that you know the medium term. There is a significant order book out there waiting or are they kind of meeting that that need with you know some other method.
Yeah. Good question, Steven and I'll tell you what we have learned since our last conference call, where we we talked about the conversations we're having in that the the big.
Parcel delivery companies are trying to figure out what.
Or the volume is going to remain after after cope with it I think the Goldman Sachs Article You report you mentioned like Morgan Stanley came out with one late last night.
That is all positive.
The parcel delivery space from a demand, especially with the brick and mortar stores closing.
Yeah, you know I always go back to even before coated ecommerce was it was on a 14% to 18% CAGR rate, depending on which company Ah report you looked at.
I think if we take Goldman Sachs, which was 14 cagar rate year over year, they didnt put Uh huh.
The term on it.
And then with cold weather they said it it increased 6.0, sorry eight points up to 22 now that's the one you're ever seen it pulled forward. There's something that you know you have to consider and we're trying to understand it right now is.
With the acceleration and parcel delivery in the vehicles needed.
And they've been doing that now for about two and a half years the replacement.
Cycle is going to be accelerated due to the.
Or more parcels those deliveries so if the walk in vans would have been a 15 year life.
I think it was all the increase in person delivery that's gonna shorten.
And then if you look at the cargo vans.
That are running around a class two space.
Those were thinking maybe a five to seven and those are going to shorten as well so not only do we have the cagar rate on the parcel going up we also have the add on top of that the replacement cycle, that's going to come sooner.
So in the next you know mid term to longer term I see a continued growth in this market. It look it may go up and down a little bit its covert those totally go away, but you know we're coming into the holiday season, and the more I read is just more people are going to not go to the stores and continue to shop online. So.
Longer that drags out I believe the muscle memory is going to be harder to come back to where it was before cobot.
Yeah, No I think that makes sense.
Ah and then maybe just on the RV side, you know it looked like from a if I, maybe I missed it but the backlog I think increased pretty nicely.
There as well you know your over year at least and is that or would you characterize that as a more demand or or share share gains there it maybe or how do you flesh that out a little bit.
That's a.
Good question, we Didnt actually talk about that we've talked about the backlog side. It's both.
So some of it.
And I have two options I, usually say that 50 50, so let's say that.
Increased volume.
Is it split between two one is the demand and one is because were a exclusive on more products with our customers.
So it is it's both.
I don't know, maybe John or someone else has a percentage better than 50%, but I think we're adding in I think it was three different models. We gained exclusivity on with one of our customers and then you have the the natural.
Oh increased due to people want the RV versus air travel and stay in hotels. So it's it's split down the middle of both of those.
Okay.
And then maybe on the.
Easy side I guess, you know [laughter] you election are still kinda undecided at this point, but I mean is there a.
A thought about you know what you know a democratic president might mean for the E V side I mean, it seems like the opportunities maybe more on the West coast now, but do you see that you know growing a little faster and is that you know good or bad for you guys.
Long yeah.
Steve another good question there. Thank you.
You know, we always go back to our strategy.
Are we have a a national footprint now if.
If you look at the product lines, we've always said.
She doesn't want to bridge that gap on the E. V is until the Oems have a product available and I think at the time times that we've talked about it I've also said you know we're not sure when it's coming but we want to be ready.
Right. So there's a lot of variables and the economy right both Michael macro in the government.
Subsidies different states.
We can't you know.
Plan for everything so what we want to do is make sure that when we are doing our strategy that we are ready whether it's you know it's not fair I don't think there to our investors say well, we're just going to wait for the Oems have their chassis in 2022 23 at Minnesota opportunity. So that's why we bridge the gap just in case something like.
You know, what you're describing happens or just in case. Another state gives you know more subsidies to the E V products. So what I will tell you is were ready regardless of what we can do it at any of the 10 states that we operate in today, we can do the conversion from ice.
The easy at all of our locations.
Okay, alright, thanks, a lot for the time I appreciate it I see.
The next question is a follow up from Mike Shlisky I call. Your Securities. Please go ahead.
Hi, there guys are still going to be extra questions here and I wanted to follow up on the last two questions on the on the story here.
I recall seeing you actually announced that you are starting to supply several parcel companies with their initial orders of east from Utilimaster, if I'm not mistaken.
So I guess I was wondering how that's going but I I kind of want no more broadly.
There are some other startups in the in the walk in van space more than one and do you think I mean, if kind of made any <unk> any substantial in roads, thus far.
And I also want to know if if youre, even if it's just converted if your E V walk in van is priced.
Hi, competitively with folks are trying to make there is because their own facility from the ground up.
Yeah.
Hi, guys its.
I just want to make sure I'm clear right. The ship group doesn't take anything for granted.
So every time a nuclear comes into the space, we gain as much due diligence as we can.
Frankly, even talk to them right because a lot of that as I mentioned before a lot of the easy startups are great at a invent team, but they lack some skill set and actually building the product.
So we're talking to even the ones that are coming in we continue to talk to hate to put a number out there but [noise].
More than a handful of.
Companies that were working with have arrangements with agreements with.
To build product.
So that to me right, where we're all over just making sure again, we want to see in a swim Lane, we don't go ice chassis today.
And we're not going to get into the developing an easy operating system. We can use somebody elses, but we we are really good at either contract manufacturing or assembly and that's what we're we're talking to them about as for how are the customers are evaluating that movie.
We're getting great feedback from them.
We're making a couple of changes and some of the vehicles that we put out there.
And Ah you know I think it's going to be right. If they want them, we'll be ready to supply him and that's still the problem right Steve talked about is.
You know I think if the.
Election, and it goes one way or the other because there will be a probably more easy. These are required around the country not sure at what point that will start.
So it or to stays the same as it was say religion in California. So.
Again, we want to be ready I'm, a little locations and if you look at our class one through six and there's no way that we can electrified we're ready and we're positioned to to answer the call. If we get it from our customers.
And just a typo on the answer to that yet so you know I.
I guess, you've got pretty good volumes in general across your facilities could you maybe compare your pricing and your ability to deliver a good price product.
With some of the startups that might be out there or are you.
Able to provide even if it's just converted which is nothing wrong with that pay competitively priced TV at the current time to these other folks.
Yeah, we believe we've done the price analysis Mike.
And I think some of the people that are offering products out to do that a certain price or maybe a little optimistic.
To achieve that price when you start adding it up.
And I think their price may take the incentives into account. So that's some of the things you have to to try to uncover unwrap as you're looking at pricing, but we feel our vehicle, especially when we can do it when our current plants in overhead is is obviously going to be lower because we cover it with our traditional vehicles.
We think we can be as competitive more competitive with them.
Thank you. This does conclude our question and answer session I would like to Kinda conference back over to Jarrett take ups for any closing remarks.
Thanks for joining every one and to learn more about a shift company. We plan to keep you updated on our progress on a regular basis next week, we are participating in D. Baird Virtual conference on Wednesday in the 11th I.
I think there's a few slots available if you want to check with them again, thanks for participating and have a great day.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.