Q1 2021 Paccar Inc Earnings Call
Okay.
Good morning, and welcome to Packers first quarter 2021 earnings conference call all.
All lines will be in a listen only mode until the question and answer session.
Today's call is being recorded and if anyone has an objection. They should disconnect at this time.
I would now like to introduce Mr. Ken Hastings.
Packers director of Investor Relations.
Mr. Hastings. Please go ahead.
Good morning, we would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, <unk> director of Investor Relations.
And joining me. This morning are Preston Feight, Chief Executive Officer, Harry Skippers, President and Chief Financial Officer, and Michael Barkley Senior Vice President and controller.
As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode.
Certain information presented today will be forward looking and involve risks and uncertainties, including general economic and competitive conditions that may affect expected results for.
For additional information please see our SEC filings and the Investor Relations page of pack, our dot com.
I would now like to introduce <unk>.
Preston Feight.
Hey, good morning.
Harry Skippers, Michael Barkley and I'll update you on a very good first quarter results and business highlights.
First my sincere appreciation to Packers employees around the world for their dedication.
Work and upbeat spirit.
Throughout the past years challenges, they've delivered outstanding trucks and services that provide essential goods to our communities.
Now as the world moves forward, we have many reasons to be optimistic.
In the first quarter Packer achieved very good revenues and net income.
Of course first quarter sales and financial services revenues increased 13% to $5 $85 billion.
And first quarter net income increased 31% to $470 million.
Pack, our parts increase its first quarter revenues to a record $1.16 billion and parts pretax profits were a record $251 million set.
17% higher than the same period last year.
Truck and parts gross margins increased from 12.6 to 13, 4% in the first quarter.
In fact, our financial had a great quarter, delivering excellent portfolio performance and achieving pretax income of $76 million.
Patkars, having a tremendous year of new product introductions in February Peterbilt, and Kenworth launch beautiful new heavy duty truck models.
The new Peterbilt model 579, and next generation Kenworth T 680 feature enhanced aerodynamics and powertrains that deliver up to 7% higher fuel efficiency.
They feature new OLED headlights, new advanced driver assistant systems, and a state of the art interior the 15 inch Configurable digital display.
Truck owners and drivers will appreciate these and many other features in these great new trucks.
In April Kenworth, and Peterbilt introduced a new medium duty truck lineup.
These vehicles have an eight inch wider cab.
Lower cap heights, which makes it easier to get into and out of the truck best in class visibility for enhanced safety and a new premium interior with Configurable dash displays.
The new medium duty trucks feature pack RPX seven in PX nine engines and the new pack, our eight speed automatic transmission.
In April <unk> began producing CF electric trucks, and peterbilt and kenworth expect to deliver their first production battery electric vehicles in the coming months.
Hi car has strategic partnerships with two electric vehicle battery providers C. A T L and Romeo power.
These two excellent partners provide our customers with the right technology choice for their applications.
As the U S economy recovers GDP and industrial production are each projected to expand six 3% this year.
Consumer spending the housing market and the automotive sectors have strengthened.
Freight tonnage high truck utilization and a shortage of drivers has created strong demand for Packers premium trucks.
The 2021 market size will be tempered by the industry wide under supply of semiconductors, and we estimate the U S and Canada class eight market to be in the range of 260 to 290000 trucks.
The U K and European economies are also expected to grow strongly.
Economists project U K GDP increased four 8%.
And European GDP increased four 2%.
The 2021 European truck market is expected to increase to a range of 260 to 290000 trucks.
Harry Skippers will now provide an update on pack our parts Packer financial services.
And other business highlights Harry.
Thanks Preston.
Second our deliberate 42200 trucks during the first quarter.
This was a 3% increase total fourth quarter production.
Despite an under supply of semiconductors.
This was enabled by all the efforts of pet gross outstanding purchasing and production teams.
Truck parts and other gross margins improved to 13, 4% in the first quarter.
Second quarter production, that's a higher than normal level of uncertainty.
Depending on semiconductor supply.
We anticipate second quarter global truck production to be similar to the first quarter.
With truck parts and other gross margin.
So at first quarter levels.
Like our parts had an outstanding quarter.
Achieving revenues of $1 16 billion.
Which is 16% higher than the same period last year.
Parts pretax profits were a record $251 million.
Parts gross margin through a robust 28, 2%.
Paccar parts benefited from strong Crazy mountain and truck utilization.
Investments in distribution.
Initiatives, such as tier for you all makes parts and stores.
And a growing population of connected vehicles with Beck our engines.
E Commerce parts sales increased more than 30% in the first quarter compared to the same quarter last year.
Parts as a business you would speed of delivery is a major factor in customer purchasing decisions.
Each new distribution center that we opened increases sales capacity parts availability.
And delivery speed to customers and dealers.
Becker will continue its investments in world class distribution.
By opening a new distribution center in Louisville, Kentucky next year.
We expect second quarters with parts sales to be similar to the strong first quarter.
With full year parts sales up 15% to 18% compared to last year.
Paccar financial services benefited in the first quarter from strong new loans these business volumes.
Proved you strip prices and an excellent portfolio of quality.
Revenues were $432 million.
13% higher than last year.
Pretax income was 76 million, 58% higher than last year.
The excellent portfolio performance resulted in low past dues of less than half a percent at the end of March.
In the first quarter from North American Kenworth, and Peterbilt used truck pricing increased by 30% compared to a year ago.
Kenworth and Peterbilt truck resale values continue to command a premium over the competition.
Becker financial has been increasing its retail used truck center capacity.
And now it's 12 facilities worldwide.
Selling used trucks at retail that's resulted in higher price and margins.
Becker financial plans to open another use stroke retail center immigrants, Spain later this year.
Becca is infested seven $3 billion in new and expanded facilities.
Innovative products and new technologies during the past decade.
Capital expenditures are projected to be $575 million to $625 million.
Our research and development expenses are estimated to be $350 million to $375 million this year.
Becker is investing and many exciting projects.
These include next generation truck models.
Zero emissions and ultra clean diesel powertrains.
Advanced driver assistance and autonomous driving systems.
This vehicle services.
And in house production and distribution facilities.
We think are excellent independent kenworth, peterbilt and <unk> for their support to our customers.
Kenworth Peterbilt and <unk> dealers are well capitalized and have invested $1 $7 billion in their businesses.
In the last five years.
These investments make a significant contribution to pick our stroke market share and support the growth of backup parts pick our financial services.
Thank you we'd be pleased to answer your questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Our first question comes from Steven Fisher with UBS your.
Your line is open.
Great. Thanks, Good morning, guys I, just looking back historically the deliveries in Q2 tend to be higher than Q1. So just on your flat.
Livery expectations are you anticipating kind of shutdowns already and maybe what's the risk that and you can see that our delivery.
Number of go to the upside for the quarter.
Yeah, Steve Good question, it's something that we're all looking at obviously.
You think about the way the industry is working right now there is a under supply of semiconductors globally that does affect the truck industry as well.
It was what we why we delivered 42000 trucks in the first quarter I'm. So proud of the teams all throughout Packer, who brought that up from 40000 to 42000, so nice job by all of them was really good work, we do expect that the under supply will continue in the second quarter and then begin to improve as we get into the second part of the year and so that could have some impact.
<unk> on our deliveries as we are in the second quarter and that's reflected in the in the flat.
For the second quarter.
Okay, and then I guess you have the same our industry retail forecast for U S. Canada and Europe can you just talk a little bit about the relative confidence you have in each market any different risks that you see on either side, where you might see more upside or more downside risk.
Either of the markets.
I think both of the markets are performing really well our customers are doing well the economies.
<unk> doing well utilization is high.
Free tonnage is good spot rates are up so I think we see a good economies are strong order intake, we had 42% of the orders in the first quarter for Kenworth and Peterbilt in North America. So a great order intake we have a strong percentage of the backlog 32 percentage of the backlog and so our confidence is pretty good that the industry will be able to have low.
Demand for the products and probably build will be constrained by the supply as we look at the year.
Yeah.
Okay. Thank you.
You bet.
Good day.
Yeah.
Our next question comes from Jerry Revich with Goldman Sachs. Your line is open.
Yes, hi, good morning, everyone. Good morning, Jeremy.
I'm wondering if you could talk about on the new flagship truck products that you're introducing here. It typically you folks see assembly efficiency gains, where when you have new product Rollouts and I'm wondering if you could just quantify what the increase in automation you here is with the new models and also is there an increase in terms.
The proprietary parts content on these trucks versus the prior models.
Might be willing to quantify for us.
Thanks for the question Gerry I mean, we are really excited about this year in terms of product launches I can't remember a year. When we've had quite so many new product introductions of new T 680, and model 579 or one beautiful.
But from a performance standpoint up to 7% fuel efficiency is going to mean a lot to our customers. So that's going to be good for the business as well.
On the medium duty products as a brand new cabinet entire new platform. It's a fantastic truck both for class five six and seven markets for Peterbilt and kenworth.
And there is a higher degree of automation in the product. So it has more robotic assembly, which is.
Good for us good for quality and good for our customers.
And there is more proprietary part count and the medium duty and heavy duty trucks as well so that's all.
Really good things for I think everyone.
And Preston any chance you might be willing to quantify those two pieces you know how much or labor hours per truck expect it to be down.
And what's the magnitude of increase in proprietary parts would you be willing to flesh that out for us.
Can't really flesh that out for you in simple maybe if we were together we could spend some time thinking about it but I think it's a more complicated than simple answer gerri.
Okay I appreciate that and then nice to see the momentum on E. Commerce can you just frame for us what's e-commerce revenue share of your parts business today and is it more profitable than conventional orders.
Can you talk about that please.
The biggest thing with E. Commerce is really that the world is changing as we all know and we've experienced especially in the past year and we have a great new e-commerce system in place, which makes it very easy for people to order parts find like parts and the in models or even for other OEM parts. You can do that in your handheld device you can do it in your laptop and so the system is.
Fantastic and that's what's causing the growth and the up to 30% increase we've seen in E. Commerce sales. So we just see that as a foundation to what we're doing and it is continuing to grow as part of the business and we think it's just it's a convenience and a strength for the parts business in general.
Okay.
And lastly, I'm wondering if you could talk about as you look at your supply base whats the critical count of suppliers that you're monitoring where we.
We might see the issues that we're seeing on the microchip side or how in other words, how concerning is the broader supply chain picture outside of semiconductor shortage that we're obviously experiencing.
Well I'd start by saying, we have a great set of supply base and partners for us around the world and they do it.
Using job of trying to supply Packer and supplying pack or this this specific issue semiconductors comes back to just a handful and so it's and that handful that we ever concentration and they're located around the world and we're working closely with our first tier suppliers are second tier suppliers on this and looking for ways to solve the problems and we've come up with some good solutions and we keep work.
For the future to get it all put behind us.
Okay terrific I appreciate the discussion. Thank you yeah, you bet take care.
Our next question comes from Ann Duignan with Jpmorgan. Your line is open.
Yes, good morning, everybody.
Okay.
It looks like your deliveries were up quarter over quarter and D. That's Canada versus down quarter over quarter in Europe can you just talk about.
The supply chain issues in both regions. It does seem like it's more exacerbated in Europe is that what you're seeing also and then beyond.
Non semiconductor chips.
Can you talk about input costs and pricing power, whether and higher steel prices I know youre more of an assembler et cetera et cetera, but.
If current input cost prevail, how much pricing power do you have given where your backlog is and where your share of orders alright, I know theres a lot of embedded in there sorry, but.
[laughter], that's great assets, it's fun.
To begin with on your EU North America question on the semiconductors, I would I would say that there isn't really any differentiation. This all kind of can come back to you know.
Really just a handful of suppliers that make wafers and then those translate out into another handful of suppliers, who make semiconductors and those are distributed globally for all industries obviously.
I know, you're really well aware of how the auto and truck industry. Both are using those components that are affected by it and we don't see differentiation between the EU and North America, It's really about which chipset is used in whichever vehicle and that's ubiquitous across markets.
From a cost standpoint to that second part of your question.
Certainly there is raw materials impaction in cost recently, whether it's steel or aluminum. That's also true on resins as we saw in the first quarter, which affect plastics. There is good backlog across pack car in the industry and so we do start to see pricing advantage in that and we.
That is kind of balanced well right now.
So your backlog does include some price increases to offset higher input costs is that how I should interpret that answer.
That's a that's a good interpretation.
Okay and I'll leave it there since my questions were long winded. Thank you take.
Take care.
Our next question comes from David Raso with Evercore ISI.
Your line is now open.
Thank you for the time, Inc.
Hey, David.
Good morning.
A scenario that you lay out for the year and the industry sales youre willing to increase your outlook.
But where do you see just trying to think about 'twenty two a little bit the setup, where do you see year end inventory versus however, you wanted to find a historical norms and so forth and then second part is the inability to ship as many trucks as you would like or the industry would like how would that play into the stronger parts outlook.
Because obviously you know you raise that parts outlook materially.
You bet, David from an inventory standpoint, as we think about it you know inventories relatively tight right now the industry is at 1.9 months. We're at one seven I wouldn't expect to see a lot of change in that through the year given the demand that's out there for product. So I think we would enter 2022 and kind of a similar fashion.
As I mentioned earlier, there's strong economies are strong truck markets and working with our customers. They have they have the desire for a great trucks that were just have introduced so.
So we see that carrying through.
Because there is limitations and build in.
In the first half of the year its rational to think that there is a lift in parts just because people are running their trucks for longer periods of time and that is advantageous to us and I also think that it has to do with the great systems. The team has built I mean.
Probably can't overstate, how how stronger job our team has done putting in distribution centers that are close to our dealers, making it easy for people to get parts of the same day building. This e-commerce system, introducing TRP parts in stores, which serves you all make market very well.
All of those factors are important and the performance of the record setting performance of our parts team delivered.
For some quantification of your answer for the 1.7 months that patkars that for their inventory.
Let's say that remains throughout the year and full year and how would you quantify that vs quote normal or your desired levels and if you can sort of quantify the parts revenue increase how much.
It was that interplay from from less new sales.
I would let me take your second part first and say I think the biggest percentage of the parts performance as the team in the business of parts and our dealers and our relationships with our customers I think that's overwhelming I couldnt quantify it beneath that so and then from your first part of your question on inventory I think that inventory is less than normal, but you know, it's not an order of magnitude.
Lastly, just low.
Yes, so it's probably a fair enough way to characterize it David.
Alright, thank you.
You bet.
Our next question comes from Nicole <unk> with Deutsche Bank. Your line is open.
Yeah, Thanks, Hi, guys.
Nicole.
Net.
Okay production.
That you're kind of assuming that each geography is flattish from a production perspective Q on Q is that the right way to play that.
Yeah, that's probably fair to look at it it will depend a lot on where we if we have spot shortages of parts that would that would have some impact but for your generalization yeah I agree with you.
Okay got it and then.
Got that.
Seems like 5% gross margin and she can't make.
Hi.
Moving to the second half and some of the supply chain issues abate and hopefully production day about the step up again with a strong backlog. How do you guys think about the ability to improve gross margins as we move into the second half.
Sure I'll ask you I'll take the second part of your question, we had some cutting out on the first part of your question. If you can ask that again after we go through this one but as we begin with as we look at the margin performance. We're really pleased with the year over year growth in the sequential growth that we experienced in gross margins are teams are doing a good job on that we think is the situation gets resolved and supply bases and gets ameliorated in the second half.
For the year, then we will see improvements in margin you know that we have build capacity and we think that there'll be instruction.
Instructional free for all of us to think of margins improving in the second half.
And then if you could just help me back with the first part of your question.
Actually you captured the whole scared of it so I can go ahead and pass it on thank you.
I Wonder if you have a good day.
Our next question comes from Joel <unk> with BMO. Your line is open.
Hey, guys How's it going.
Good Joel how are you doing.
Alright.
So I wonder can we just talk a little bit about sort of shape of cycle.
Can the industry meet zero emission mandates by 2024, and 2025 with with without kind of over the road with just doing.
You know refuse and.
Port trucks and things like that.
US understand how the cycle works.
Well I think theres two questions in there one is the shape of the cycle and then one is electrification strategy I'd say on the on the <unk>.
Where we're at in the performance of the truck market is I think we're just at the beginning of a really nice steady growth from the truck market things are going well our business is doing well customers are doing well and then just to complement that and in a very important component of that as these great new trucks, we're introducing the new medium duty and the new heavy duty trucks are going to be fantastic for our customers. So.
That's that's going to help <unk> in the coming months and years actually you know so I would say that's an important story.
And the second part of your question was around electrification and I would I would say that there we have great products, we outlined a little bit out in our earnings release from share with you that our thoughts are as we have partnerships with C. A T L and we have partnerships with Romeo power and battery pack production cell production for us, which gives us an array of different technologies, we can put into <unk>.
Electric vehicles, that's important because that enables us to meet different applications for customers. Some people will use the truck for one.
Eight hours, a day, and then park it overnight and charged overnight others want multiple charged cycles in a day that requires different battery types. So we have that capability built into our systems, which will give us a strong product offering that product offering will enable us to meet the demands of California to 15 states or anything else, whether it's port drayage medium duty or.
Heavy duty trucks.
Okay, great. Thank you.
Great have a good day.
Our next question is from Robert Wertheimer with Melius Research Your line is open.
Alright, Thank you and good morning, everyone.
Good morning.
Two questions. One is just a simple when you probably saw Scandinavian competitor reported pretty good orders in Europe, and obviously COVID-19 and inventory is theres a lot of disruption going on.
Just wonder if you could characterize as European like there is real and profound underlying strength.
And the orders to the extent you're willing to comment.
Sure I think that we do feel there is real and underlying strength in the orders we work closely with our customers and our dealers either personal relationships and we know them all and we pay close attention to what that what their needs are so yeah, we definitely have a.
Clear eye on their needs and the backlog.
Perfect. So it's not just a catch up okay perfect.
Question is a little bit more profound and I'm not sure how far are you going to be willing to go on it but you saw too simple.
It kind of threw out a revenue a revenue share or cents per mile kind of idea on autonomous you guys are obviously working with with folks on autonomous I am Wonder if you will characterize what the potential revenue streams for paccar or as the years go by I assume there's higher content per vehicle you know maybe at a decent mark.
And maybe theres some autonomous revenues that you get shared or service revenues or whatever just wondering about if you could give us any update on the strategy there and the timeline the potential in terms of revenue for Packer. Thank you.
Sure on the strategy standpoint, we have a great partnership with them, where they're really strong to work with them. We are enjoying that early on and our teams are together all the time our leadership teams are together talking about how we're going how we're going to develop these vehicles and they're very complicated vehicles. We would all understand that we also continue to have good partnerships with the other startups in the valley and others that are using our trucks in working with us.
Developing economies platforms. So our strategy is.
To work with the best of the best and to contribute an autonomous vehicle platform, which has a lot of technology in it and then we would provide that to the market space in that market space would be able to end up relying eventually on Packers product lines and Thomas vehicle platforms in partnership with the autonomous driver.
To help our customers out we think it's really going to work well as far as predicting revenue streams I feel like it's a little bit early for that I feel like Theres a lot of development work, there's a lot of regulation and societal work that needs to be taken care of first in and I think we should let that sort itself out before we're making projections that are sure to be wildly wrong at this point.
Yes.
Understandable okay. Thank you.
Our next question comes from Jamie Cook with Credit Suisse. Your line is now open.
Hi, Good morning, I guess, just two follow up questions.
One I think last quarter, when you talked about costs associated with COVID-19, you were embedding sort of 40 bps of margin headwind.
Your numbers is that sort of tracking where you thought or what are the expectations for the rest of the year and then just to follow up on Rob's questions on the orders.
You meet.
With Peterbilt and Kenworth I think you said your 42% of the order book just trying to understand.
How sustainable that is is it just the new products are or what's driving that market share growth and are you concerned at all that there is.
Double ordering in the order book, just given the market's concern about supply chain. Thanks.
On the on the COVID-19 cost side Jamie.
I think those costs as a percentage have definitely come down over the quarters and we expect those costs to continue to come down.
We do see some some more expense last quarter and probably also in the second quarter associated with the endless supply of certain components.
And the inefficiency that those calls.
And then going forward, which will also have some startup costs.
Costs for the new products.
But those new products will definitely generate stronger margins for those going forward.
Okay. That's helpful. And then just the orders the sustainability of it and just.
No concerned if if there is any sort of double ordering just because of the concerns on supply chain.
No I think we've kind of tried to talk about that I think we feel like we know the customers well work with them and feel like the order board is solid I mean this is.
This is good backlog I mean, we have we.
We have confidence in it.
Okay. Thank you.
Beth.
Our next question comes from Chad Dillard with Bernstein. Your line is open.
Hi, good morning, everyone.
Morning, Chad.
So can you talk about your price cost assumption doesn't go through the year, maybe you can compare first half second half and how you're thinking about that.
Okay.
So I think if you just think about it I mean, we mentioned that we're starting to see price realization, that's occurring and we would expect that to continue through the year.
That's generally how we think about it.
Alright, and then can you just talk about thank you EDI order book today, how far up the construction.
Just remind us when do you think is going on.
High volume production in that product line.
I think that for us right now.
It's simply about getting the right semiconductor supply in the second quarter and as that stabilizes, we'll see builds increase and that's how we're thinking about it in good order good order book.
Good backlog great production team has done a good job you're able to reach production in the first quarter over the fourth and will and we think that that's kind of the trend for the year.
Got it thank you.
You bet.
Our next question comes from Ross Gilardi with Bank of America. Your line is open.
Hey, good morning, guys.
How are you doing.
Great. Thank you.
Just a couple of questions just on the semiconductors pressed and what gives you confidence that.
They will in fact be more readily available in the third quarter I mean, a lot of the recent news flow seem to suggest the tightness could be longer lasting.
And previously assumed I mean are you actually seeing or hearing anything that supports the view that they are they're going to become more readily available in the second half than they are.
In terms of general procurement practices are.
Do you see yourselves entering into more long term supply agreements for semi conductors or any of your other critical inputs just to cope with this.
Seems to be some real widespread tightness across any number of different components.
Yes, I think when I look at it if I think about the third quarter and our confidence recovery you'd have to put into construct the fact that there had been a couple.
Unique circumstances in the first quarter, there was a storm in Texas, which took.
Two plants down from the Austin area.
And so that's a big impact and then there was a fire at a supplier in Japan that had a big impact so as those.
Our facilities are able to recover that will certainly be a help and I think that theres also been a lot of good work by the by the way from manufacturers and understanding the need so those together along with their suppliers forecasts gives.
It gives us confidence that we'll see improvement into the third and fourth quarters.
Think tightness is gonna be eliminated, but I, just anticipate that there'll be improvements.
But <unk> has done really well is that we early on.
He gave very reliable future outlook of our needs through our supply base.
So that also means that.
So when things start to recover that we will get priority and those deliveries and that's what we're assuming.
And then part of it.
Question, you asked me about procurement practices and Harry just said, we do a good job with forecasting and we also did a good job of working with the second tier suppliers and our needs. So that we can.
As you know have good supply.
Okay got it and then can you talk a little bit more about this new medium duty transmission that you discussed is this it.
It sounds like a product youre, making in house versus sourcing ex currently from the Allison's of the world, but just wanted to verify that is it a fully automatic or an E. M T.
And just what's the longer plan on longer term plan on transmissions are you going to in source more of their transmissions much like you've done with your engines.
Well, we have great partnerships in our transmission suppliers around the world and this will be a this is a fully automatic transmission torque converter in it so that's going to be a great great help for our customers. It goes up to 1000 foot pounds of torque 380 horsepower. So it fits perfectly into the medium duty space it'll give us the aftermarket parts stream that is really <unk>.
Advantageous to us and it allows us to integrate into the powertrain and a very efficient way to help optimize performance for our customer so all of that together.
Good for pass car and good for our customers.
And you're saying you have great partnerships with your suppliers, but is this are you, making this internally or someone making it for you, but we are partnered with set up on this.
Okay got it thank you.
Our next question comes from Matt Alcott with Cowen Your line is open.
Sure.
Good morning. Thank you for taking my question I know you guys.
It's good to hear that you that.
The order the quality of water it seems to be pretty solid here, but I wanted to ask a question from a different angle from your conversations with customers and dealers do you have any reason to be concerned that.
Do the driver shortage, even though demand for equipment is there.
You might see some cancellations because of people's inability to keep trucks.
I guess, you could build that scenario, but no. We don't just to be simple with it we don't see that happening we see theres strong demand for the trucks, we see strong demand for our used trucks as well, which means that there is a need for free movement and.
The economy is doing well, which means people are buying things and that is likely to continue so our premium trucks could use truck business. Good order board all bodes well for a steady good future.
Okay. That's very helpful and just one more question on that technology from <unk>.
Guys have been investing quite a bit in house and through partnerships.
Technologies, but given the increasing interest in technology, whether it's autonomy or.
New energy technologies would you consider kind of taking another look at your acquisition strategy and maybe.
Consider acquiring companies instead of the.
So partnership model that you've gone well so far.
We look at all options and we don't have a single strategy. The strategy. We just take the best approach that we think is going to provide the best returns for our customers and bring the right technologies to bear with the right economies of scale on a global level.
Got it thank you very much.
You bet.
Our next question comes from Rob Salmon with Wolfe Research Your line is open.
Hey, good morning, guys and thanks for taking the question.
You bet.
With regard to your delivery outlook.
Obviously, there's some supply chain challenges that you've talked about earlier can you give us a sense of kind of that day monthly cadence is it pretty similar throughout the second quarter or are you expecting an uptick kind of later in the quarter just to give us a sense of upside and downside risks.
Rob I think it's a little hard to characterize it I think the teams are moving things around and we're talking with suppliers. So as there's parts that come available and they've done a good job of finding parts that were able to increase the cadence of delivery and other times, we have to moderate that and so it's hard to get to in a monthly basis.
Okay.
It's not outsized weighted to the second half of the quarter.
That a fair characterization or.
No no. It's not it's just it just depends upon the chip and the supplier and where it sits.
Okay, and then things kind of in the company.
A way to think about it for you as these things come in batches as they are produced so you might get a batch of parts, which alleviates. The supply constraint then you might be tight for a little while somewhere else.
Think of it more like that but it but it's not.
Continuous flow.
Got it so kind of a red cagny effect.
If you will in an ability to kind of make up or.
Accelerate or decelerate, depending on kind of how the supply chain working from I guess looking out in terms of the you talked a little bit earlier about kind of some of the new.
Electrification partnerships that you guys have when I'm thinking about kind of like the early models with regard to electrification how should I think about the pack or kind of proprietary part mix. Initially and then how do you see that evolving over time.
The question I think it's going to evolve over time to be higher content as we move along as volumes increase and economies of scale makes sense to do that so we have great partners and that's working really well at the end we talked previously about hundreds of trucks into the one thousands of trucks and as it grows then we will see probably higher prepared content come along with it.
Really appreciate the color. Thanks, guys, Yeah, you bet.
There are no other questions in queue. At this time are there any additional remarks from the company.
We'd like to thank everyone for joining the call and thank you Lindsay.
Ladies and gentlemen, this concludes Packers earnings call. Thank you for participating you may now disconnect.
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