Q3 2021 Shyft Group Inc Earnings Call
Good morning, and welcome to the chassis groups third quarter 2021 earnings results Conference call, all participants will be and listen only mode should you need assistance. Please signal conference specialist bypassing sarky followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask a question you may Crestar then one on your Touchtone phone to withdraw your question. Please press Star then too please.
Please note. This event is being recorded I would not like to turn the conference over to Juris pay grabs group Treasurer and had a by our please go ahead.
Thank you Kate and good morning, everyone and welcome to the shift groups third quarter 2021 earnings call Johnny.
Joining me on the call today are Darryl Adams, or President and Chief Executive Officer, and John do your our Chief Financial Officer.
For today's call. We've included a presentation deck that has been filed with the SEC and is also available on our website at the ship group Dotcom you may download the deck from the I R section of the website to follow along with their presentation during the call.
Before we start please turn to slide to the presentation for our Safe Harbor state, but you should be aware that certain statements made during today's call conference call, which may include management's current outlook viewpoint predictions and projections regarding the shift group and its operations may be considered forward looking statements under the private Securities Litigation Reform Act of 1995.
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I caution you that as with any predictions are projections. There are a number of factors that could cause the shift groups actual results to differ materially from projections, although address the management believes could be truly affect the results are identified and forms 10-K, and 10-Q filed with the SEC Over there may be other risks that we cannot anticipate.
On the call today, we will provide a business update before moving onto a more detailed review of the results and our outlook for the remainder of 2021.
We will then open the line for Q&A.
I would like to remind everyone that with the divestiture of the emergency response business February 1st 2020, the revenues and expenses associated with your business as well as the assets and liabilities have been reclassified as discontinued operations for all periods presented.
With this reclassification results discussed today will refer to continuing operations unless otherwise noted.
At this time I'm pleased to turn the call over to Darrell for his comments be getting a slide three.
Thank you jurors good morning, everyone. Thank you for joining us today to review our third quarter, 20th 21 results.
We were delighted and pleased to share with you another quarter, a strong financial performance.
Which continues or transcend the beginning of the year.
Our team continues to execute on our operational plans, despite industrywide supply challenges, enabling our growth momentum to endure while position us for a record year.
Fittingly [noise]. This week you honored to have been named in the 20th 21 Fortune 100 fastest growing companies list.
This distinction would not have been possible without the teams incredible hard work dedication to the business and most notably with a resilience in the face of adversity over the last couple of years.
As you can see on slide for our team did a tremendous job navigating the macroeconomic headwinds degenerate year over year revenue growth of 34% to a record $273 million [noise].
Excuse me.
And record income from continuing operations of 21 million or 58 cents per share, which represents 8% year over year growth and income from continuing operations.
Throughout the quarter actually since the beginning of the year, we worked hard to minimize supply constraints labor shortages and inflationary pressures to ensure customer deliveries are meeting our financial targets.
I'm extremely proud of the dream teams continued resourcefulness and relentless focus I'm execution that drove these results.
Please turn to slide five we're all provided business update.
I am pleased that demand for all of our fleet vehicle and services products continue unabated.
Particularly for our parcel delivery vehicles.
We recently announced an AD on U S. P S order.
47, sorry, 447 truck bodies, representing $53 million in revenues.
Production on this order is expected to begin in Q2 of next year with completion slated for 2023.
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As discussed in private calls a critical component of our F. B S strategy is to identify and evaluate ways. We can expand into new vocations in August we announce orders for more than 500 refrigerated delivery vehicles from several grocery chains.
To fulfill these orders, we expanded our production capabilities and our existing Kansas City facility, leveraging our flexible manufacturing strategy.
We are encouraged by these orders as groceries continue to evaluate delivery solutions, while consumer expectations are shifting toward home delivery. We continue to work with grocers as they develop solutions needed to optimize their home delivery strategies.
Moving to our specialty vehicle segment, the strength of our innovation innovative products and underlying markets resulted in strong revenues and orders during the quarter.
We continue to execute on our service body growth strategy by expanding production into our existing north Charleston facility.
This provides critical capacity as we grow and expand this business again, leveraging our flexible manufacturing strategy.
In a motor home business demand for a luxury motor coach chassis continues unabated as our market share increased to 31% during the quarter, while reach in a high of 37% in August reflecting the strength of our product offerings and brand among luxury motor coach customers.
And on our built more contract manufacturing business. We're excited to work closely with our partner Zuzu on the launch of their latest F series vehicle, we're optimistic and this vehicles prospect and look forward to can you continuing to ramp volume into next year.
Let me provide an update on shift innovations are dedicated mobility research and development team, which is currently focused on developing shifts electric vehicle chassis and our new walk in van body design.
During the quarter, we open a R&D facility, which is the new home of shift innovations and our two proof of concept electric vehicles.
And innovation team continues to impress me with their progress on development and Bill status of our two proof of concept electric vehicles.
This product is not immune to the supply challenges. What we are currently on track to the project timeline, we introduced in June and we look forward to unveiling this product.
This proof of concept vehicle in the first quarter of 2022 with that I'll turn the call over to John to discuss shifts financial results for the third quarter in more detail as well as provided update on of 2021 outlets beginning a slide six.
Thank you Darryl and good morning, everyone. Please turn to slide seven and I'll provide an overview of our financial results for the third quarter.
In Q3, we delivered record sales and profit we saw strong revenue growth in both segments and delivered another quarter of sequential margin improvements, despite higher inflation and increase supply chain delays.
Revenue for the third quarter was a record $272.6 million of 34% from year ago quarter.
Income from continuing operations with $21 million compared to net income of $19.4 million a year ago.
Diluted earnings per share from continuing operations with 58 cents per share compared to 54 cents per share in the third quarter of 2020.
Our gross margin for the quarter was 26% consistent with our year to date margin levels. Despite operating in a more challenging period.
Prior year gross margin was 24.9% the highest in company history as we benefited from favorable product mix driven by increased sleep volume and reduce truck bodies fails.
As expected are mixed returned to a more normalised level in 2021, we.
We also saw favorable pricing and productivity in the quarter, which helped us offset the impact of higher inflation and supply disruptions.
On an adjusted basis EBITDA from continuing operations increased to $33.7 million up from $32.6 million last year.
As a percent of sales adjusted EBITDA was 12.4% versus 16% last year.
It's important to note that we saw sequential improvement and adjusted EBITDA of 70 basis points from 11.7% in the second quarter.
While managing through a tougher supply environment and investing an additional $2 million in R. E V chassis and body initiative.
Let me know walk through our results by operating segment, beginning with fleet vehicles and services on slide eight.
R F. B S business continued to perform at a high level posting another quarter of impressive sales growth profit and order intake while the team remain diligent on pricing and management of the supply base.
The business achieve revenue of $198.5 million up $36, 7% compared to $145 $2 million a year ago.
The increase was driven by robust and market parcel delivery demand, including a continue to ramp and velocity.
While truck body sales more than doubled after a cold it impacted third quarter last year.
F B S. Adjusted EBITDA was $36.8 million versus $33.2 million a year ago.
Adjusted EBITDA margin was 18.5% of sales, which is the second highest in F. B S history behind the third quarter of last year.
F. B S backlog was up 15% sequentially and up a remarkable 231% compared to prior year.
The year over year increase was driven by parcel delivery vehicles.
Particularly walk in vans and velocity.
In addition to the USPS add an order of $53 million.
Please turn to slide nine for the specialty vehicle segment overview.
Specialty vehicle sales momentum continued in the third quarter.
Sales for the quarter was $74.1 million, an increase of $15.8 million or 27.1% versus prior year ended up 9% organically with consistent growth across product lines.
Adjusted EBITDA was $5.8 million or 7.9% of sales compared to $7.2 million or $12, 3% of sales in the same period last year with a decrease primarily driven by raw material and labor inflation as well as supply constraints impacting production bullshit <unk>, both of which accelerated in the third call.
Hunter.
These factors collectively outpaced the pricing actions that we took earlier in the year.
We will see incremental price benefits starting in October and we expect to fully recover the inflation impact in the coming quarters.
S. B backlog was up 82% to $94 million, which included significant growth in both motor home and service bodies.
Please turn to the liquidity in outlook update on slide 10.
We remain focused on managing our overall liquidity and cash flow to fund our operations and growth initiatives through.
Through the first nine months of 2021, we generated $42 million in cash from operations, enabling us to pay off our debt entirely leaving zero borrowings at the end of the quarter.
At the end of September we had total liquidity of $184 million, including $15 million of cash on hand, and $169 million and borrowing availability under our current credit agreement.
Capex for the quarter was approximately $6 million.
Year to date, we have spent $18 million on capital and we expect a full year to be approximately $25 million in line with the upper end of our previously disclosed range.
Overall, our team is executed at a high level year to date and despite dealing with a highly dynamic supply chain and labor market. We are pleased with our overall results.
As we look forward, we are optimistic about the underlying demand for our products and our ability to sustain growth.
We expect inflation and supply constraints to continue into next year, and we're taking the appropriate actions to mitigate the impact.
Given our performance to date in South solid backlog position. We are pleased to raise our 2021 midpoint guidance as follows.
Revenue of $950 million up from $925 million, adjusted EBITDA of $109 million up from $105 million.
And adjusted EPS of $1.99 per share up from $1 85 per share.
With that I'll turn the call back that they are all for closing remarks.
Thank you John Please turn to slide 11.
A record third quarter results reflect the success of a longterm growth strategy and the efforts of our incredible team.
Our commitment to quality execution innovation and operational excellence is generating improved revenue and profitability.
And proud of the dedication and collaboration of our team as they manage through the current macroeconomic issues to ensure we delivered for our customers and our shareholders.
We remain nimble and creative in our approach managing our suppliers and labor into 20th 22, while continuing to invest in our team and new products or operations and technologies that will drive our future growth.
With that operator, we all know ready to take questions.
We will now begin the question and answer session can I ask a question you May pass, Oregon, one on your Touchtone town. If you are using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
The first question is from Matt Koranda Roth capital. Please go ahead.
Hey, guys. Good morning, Thanks for taking my question.
<unk> on the margin on the margin front.
It just seems like you're not getting the pull through.
From from the pretty exciting revenue growth that you've generated in three Q.
I just wanted to see if he could maybe put a finer point in each segment, maybe on sort of what the headwinds were related to product cost inflation labor inflation and it sounded like there is recovery coming from price action, especially in SUV, but wanted to see if he could maybe speak to pricing and both as a van.
Play vehicles to kind of recover some of the the headlines that you've been experiencing them on the inflation front.
Sure My address is John Uhm, I think when we look at.
The overall.
Performance, we're certainly pleased with the result from any but a percentage perspective.
You know as we said in the prepared remarks, there's certainly some headwinds that we faced and a quarter I think when you when you look at it across the board we've seen the impact of inflation.
Just like others.
On commodities labor et cetera, I think our team has done a really nice job being able to manage through that as well as the supply constraints.
And have been able to offset that I think more more so on the side at least in the quarter than on the <unk> site. We've.
We've taken multiple price increases on and really across the business I think if you look at pieces of the business, we've taken three or four price increases throughout the year.
And so we've seen that pricing trickle in and we felt the impacts of that in Q3 and expect to see more of that in Q4.
And so we'll continue to be conscious of the environment and the markets. We continue to execute and look for opportunities to lock material and pricing consistent with the strategy that we've talked about previously.
And really just focusing on execution of of getting products in the hands of our customers I think that there was there was some inefficiencies.
Occurred in the quarter really just driven by parts shortages and so the team had.
It had to be nimble throughout the quarter, which certainly impacted productivity.
But we did see productivity across the business in the quarter as well and so I think as we look at all those pieces.
And look at how we performed year to date I mentioned in the gross margin is consistent for.
For the first three quarters of the year.
I think we're really really pleased with the team's performance.
Great very helpful. Tom. Thank you and then just one more from me just on the fleet vehicles side back.
Backlog still looks extremely healthy just wanted to see if you could clarify is the USPS order the $53 million order in backlog and the backlog figure that you provided for Fps and then just wandered maybe Darrell if you could speak to sort of trends in order flow that you've seen as of late it looks pretty healthy here, but maybe you could.
Just parse out sort of.
Strengthened velocity platform, what the mix looks like in terms of backlog. Many other transfer notable in the fleet vehicles backlog.
Yeah, I think I can answer both of those first one was easy yes, it's in our backlog.
And your second question, we are seeing the velocity increase in in backlog, but we're also seeing a number of.
Cedex ground contractors and dealers ordering both philosophy and traditional luck in van So as John mentioned truck body.
Is up significantly over Q3 last year. So we're seeing it on all the products mm mm.
I don't think I could pick one in particular, but the we're excited about.
How it is across all the products and not just in one and it's a diverse customer base to not just the one.
That's great and I like one more question just around the USPS contract.
More of a modeling oriented question, but I recall last go around with this.
There was a quite a bit of pass through revenue associated with the cabin chassis on that truck body contract that you had is it the similar is it going to be recognized in a similar way. This go around.
Or is that 53 million I'll, just sort of truck body revenue to you guys. Just if you could clarify that for us in terms of modeling this that'd be helpful.
Yeah.
The order is consistent with what we had last time, so it will be procuring chassis and building truck bodies and so that is a.
The $53 million inclusive of Bolton.
Okay very helpful. Thank you guys. Thank you.
Thanks Man.
The next question is from Steve Daya of Craig Hallum. Please go ahead.
Oh, thanks, guys great quarter.
Does it relates to see if I chose I guess the the the subject does your does it feel like your things.
Things are getting incrementally a little bit better with supply chain or is it still a slog I mean, I guess any color as to when you feel like things will loosen up a bit.
Yeah, I'll I'll start with that Steve. Thank you for your quarter comment [noise].
Team appreciates it.
You know it's.
It's interesting because we've just.
Constantly on our mind, we're talking about it.
Some days, we think the chassis supplies is breaking loose with with the chips and then two days later, we will hear that there was a sure shut down at one of the Jesse suppliers.
We think we got supply on.
Some February glass, which I think we mentioned last quarter moving into nine different suppliers trying to get the arrow caps.
And then you know they'll.
They'll have some issue Puccini supply and then it moves into the labor P. So I would tell you. It's about the same it's been the same all year I mean, it's been a constant battle, but the team and I can't say enough about how resourceful they have been in and actually looking through the backlog in understanding the volume and making sure they had.
Enough product procured they didn't they would find other suppliers.
And that's look that's.
Frankly, what allowed us to have the successful quarter that we had.
And as we look into the queue for I think we're in pretty good shape.
And in the beginning of and.
Q too.
2022 things could change, but right now it's just.
It's been the same and we see it continuing at least through the first half of 2022 for sure.
Got it.
And then just with respect I guess to capital spending or capital allocation I guess bigger picture.
You guys generate a lot of cash have very very little bit at this point in the strategy is sort of historically been too.
Fine accretive tuck in acquisitions things that are sort of makes sense to your business.
Is that sort of still a strategy I guess any color you could give on the acquisition pipeline sort of how you sort of see things playing out going forward.
Yeah, again, I'll leave that that Steve and maybe you'll have a financial question, we can move over to job, but uhm.
Yeah, we do still have our pipeline as we continue to have that every Friday morning.
I think with the supply constraints and all the disruption that people are dealing with there's only been a couple assets that we felt were or something we can look at.
We've looked at them have and executed on any of them for various reasons uhm, but it. It is tight I think people are waiting to see what's gonna happen because they you know when you try to value a company that does that.
Supply constraints all year in revenues are down Ah most companies and profits are down the.
The owners looking for something different.
<unk> searching and some discussions but right now nothing actionable, but will continue to do that our preference right.
We've done for recently, which have been smaller tuck into like you said, we'd we'd rather do something larger but.
We continue to look at both the smaller one and something that might be a third leg or a large acquisition, but nothing right now that that we see on the horizon unfashionable.
Got it okay. The last one for me and no funds to John but it's not financial Uhm.
Your your.
Manufacturing capacity, you've added a bunch, you've kind of rejigger capabilities.
Geographically the last few you're sort of how do you feel like your setup. There I don't I don't expect you to give me a utilization number but I guess just big picture do you feel like you're starting to rub up against needing more or different or a different location or do you feel like you are.
You are set up pretty well there for the next couple of years.
Yeah.
Good question, Steven I'm glad you're.
You are starting to understand how are flexible manufacturing strategy that we put in place is working right due to the lumpiness of the orders.
US it doesn't matter.
What names on the front of the plant right, whether it's an S. C. S V or FBS plant. This got capacity, we're gonna try to fill it because we continue to grow.
This is we're looking at expanding currently in Pennsylvania.
Last maybe there was an 18.
Did that USPS order and.
A smaller plant in Pennsylvania, we like where we're seeing the truck body order. So we're looking to expand that facility and probably would more than double it I believe.
With some of the buildings were looking at.
We continue to add in.
Capacity in Kansas City.
And as we see the orders and a growth.
We do have some.
<unk>, Pennsylvania it comes to get that finalize that will give us.
An extra 100, and some thousand square feet, which will will last for awhile.
But right now nothing else besides that but I do I do feel like there is capacity available because currently we're still running mainly on one shift at.
And a lot of locations, but it's just we've tried to go to two shifts.
When needed and it's a struggle just due to the labor challenges that we're seeing today in the market.
But I think the team has done a really good job over the last five six years managing.
Our footprint and will continue to do that I think it would continue to add it into the script and we talk about a long term growth strategy, but we as a reminder, we do have a five year.
Rowling strategy that we continue to look at and part of that discussion is capacity.
So where.
Usually ahead of the game and and will continue to run the same process forward.
That's very helpful. Thanks, Darryl and congrats again.
Thank you.
The next question is from Felix notion of Raymond James. Please go ahead.
Hey, the morning, Darrel John jars.
Good morning, good morning.
Hey, I was hoping to start on it on the grocery comments.
Expanding the coastal facility therefore refrigerated units.
I'm just curious from your conversations with customers is that what you think the market installing refrigeration versus maybe more dry van bodies with installation just just curious if he could maybe talk to the grocery opportunity in general and how you're approaching it.
Yeah.
Like any new.
Product new location I mean I can.
Go back Felix too.
What we did with Amazon right. When we were able to solidify that orders, we gave them 10 trucks.
All different shapes and sizes different options and that's what we're actually at with the grocery guys.
It was nice to receive the order.
But that's.
Receiving that or no means do I feel or believe that that's going to be the only solution.
And the market.
Alright. This is something they're trying they liked the product.
And it's it's not a big truck body. So it's not a real large space too.
If you will cool or freeze.
But even even in there right, they're going to have to have some <unk> mineralization inside the truck so they're still trying to figure it out and were right beside them like we have been with all of our customers to make sure we give them different solutions and different ideas.
To help them be more efficient.
At what they're doing.
I'm not sure if you saw it but there was some stuff on CNBC. This morning.
But what Kroger the strategy Kroger's doing I think we alluded to that in a couple of calls ago.
The last call that.
They're gonna try to do without brick and mortar stores and do it more from a D C Center.
So it's it's starting to in my opinion gained some traction maybe not as fast as last time delivered did but it will still be something there and we feel confident will be in the mix. When the vehicles are finally figured out and again I don't think there'll be one solution for all.
So there could be different strategies by different customers and and different grocers. So we'll we'll continue to monitor in an offer ideas.
Right. Okay. That's helpful. And then it just maybe switching gears a little bit, but I'm curious if you could touch on the velocity product lineup and curious if you could specifically comment on the progress up a Mercedes and Ram chassis launch sort of the timeline there and expectations.
Yes for sure I do know the the Ram So we are done with our testing.
Vehicle passed it's ready to go.
And some of our customers in discussions with Atlantis to understand.
How many vehicles, they're gonna get for 2022.
So it is ready and we believe we will see some orders I'm not sure we'll get him a cue for but there should be some an early 22 on that vehicle.
It did the customers liked it when they.
And we also like I said past all the durability testing. So we're ready to go we're just waiting for the orders which is the typical process.
And I'm I'm going to defer to John if he has any updates on the Mercedes I've not heard of anything lately. Yeah. I mean, we do have three orders and the backlog and those will.
Be in production if not December it'll be early next year.
Got it Okay, and then and I was hoping John to just follow up quickly on the specialty vehicle margins in the commentary around recovering the full cost inflation, David what's price over time.
I was wondering just just looking at the backlog in that segment. It seems like that could happen pretty swiftly into early 2022, assuming we run to pricing actions and <unk>.
I'm curious if you would agree disagree with that statement or how we should think about that sequential rant there.
Yeah, No I think I think you're I think you're right in that.
We will see.
We've taken additional pricing in queue for.
We will see benefits from pricing that we've already taken earlier in the year incrementally in queue for.
And then as we work through that backlog we will.
Early next year, we should be in that recovery piece I think it's important to note as we look at.
Where the business today that into the queue for will look more like the first half of the year.
For SV than it did in Q3, and so we expect incremental sequential improvement there and going into next year.
Got it very helpful. I'll stop there I appreciate it.
Okay.
The next question is from my <unk> <unk>.
Davidson. Please go ahead.
Hey, guys good morning.
Hi.
Can I allow me to touch on.
An fps performance Nicole at first.
It's clear that you've had probably fewer challenges and most insecurity chassis.
<unk>.
What you need I mean, it's not easy, but you've gotten better than most or.
What sort of schemes like at this point.
Can you hear me share with us whether you've seen better performance from the larger please.
The cost of a livery companies to get these charges as opposed to the smaller books or are they paying upper chassis to make sure. They have what they need for the holidays are for next year.
And and there's a certain small customers just not getting to exchange driven from the from the chords are the <unk> of the world.
I mean, I think when you look at it I wouldn't necessarily say, they're paying up I think where the discussions that we were having even if you go back to last year was was not necessarily on chassis availability, though we did anticipate some issues.
On that front earlier in the year, but it was more around just the overall demand profile for parcel and last mile delivery in general and so.
Given.
The demand that we were seeing at the time are expected.
We work closely with our customers as well as is with our own pool in terms of securing chassis early in the year.
And so that's that's benefited us I think through certainly year to date.
And we continue to work closely with customers as we as we look at 2022 as well even though there is some uncertainty in terms of volume there and so I think our ability due to identify early in the year you can even go back to the queue for last year in terms of securing chassis ourselves as well as supporting our customers and that I think.
Okay dynamic essentially differentiator.
Got it.
I also wanted to maybe get a little more granularity on some of your comments on on D. V is probably.
Probably a bit more.
Yep there.
Just kind of one of your.
Big competitors.
Now to publicly some new agreements with various U V platform providers like a zoo certain outlets to.
To develop the next generation of vehicles.
Four or five if not more than that outdoor at this point.
So you have your own platform coming as well, but that's gonna be probably just one class of vehicle.
Okay. So you know what youre doing beyond the basic class 3222 addressed Eev's checker are you signing up more customers for how shall manufacturing or for a platform development without announcing them or is it just still on the come here.
Okay, Uhm, Mike I hope I remembered all your questions, but if I did have one please ask.
Yeah, one big one [laughter] so.
First I wanted to clarify our Evie strategy isn't only class three.
I believe in analysts day, we mentioned, we're starting with class three and we're moving down to class two and up through class five.
Right.
So we will have as we typically do a one stop shop for any customer looking for E V product.
And it'll be all on our chassis.
And are.
Operating system, so we're not going to be.
Buying any of that but we will procure.
As we typically do with.
Motor home chassis axle springs, and thanks for not converted the integrate except in the software for the operating system.
And that's that's shifts innovation. So we'll we'll have the ability to.
Build our own product or sell the chassis to others and then if we look at Fps. They are currently doing some.
E V builds for other customers.
As we would expect and possibly even doing.
Some of it for them, which we've talked about in the past so they're having some good discussion so.
As we talk to at the analysts they wanted to make sure that we didn't.
Mix it with Fps and you tell them as she wanted to keep it as a separate group, which so far we feel is the right decision, but we will have in addition to.
Just the chassis will have some other products I think to to talk to people about in the future.
Okay.
Just to just to.
Clarify, they're oftentimes when a company.
Has partnered with big competitor some of these bodies.
Not the decision right the customer can choose to specify until the master.
The other guy correct, so absolutely absolutely.
Could I get the business got it yeah, I think it might make it <unk> sorry to interrupt if you look at it there was a report out yesterday by.
Morgan Stanley that said.
When it comes to Eevees.
It's not demand.
That's the problem, it's the the supply.
Alright.
So when people wonder if there's enough.
Appetite out there they answered from Morgan Stanley anyway is yes.
And when they ask is there enough business for more than a couple of suppliers I think they also answer that by saying, it's a demand problem.
So we're very comfortable with where we're at on the project the timing.
And as I mentioned.
Sorry, if I could share with you guys, what I'm seeing and and the progress the team is making.
It's really rewarding that we made that decision back in and announced the decision back in June.
Got it.
Squeeze in one more here.
On the matter and Royal business or if you've got any good integration benefits or is that they put it on pause keeping some of the supply chain issues.
Sorry S essay question again, I just wanted to know how things are going with.
Well and Magnum and if you've had any.
Additional benefits were trying to get.
The two five lines across their footprints and whether you had to pause that because of the supply chain.
What are you talking more from the strategy standpoint, yeah exactly.
Yeah.
Mmm I thought it was more towards the financial but yeah on our strategy side for sure where we are currently.
Mountain dramatic bodies and in California locations.
We're doing mountain.
Don't make bodies in Florida, as well as doing some of our royal bodies.
Out of our existing facilities.
In Florida as well.
And I think I mentioned.
We are building some other bodies and Ah.
South Carolina facility to.
To increase capacity.
For the dirt Mag So we're excited about how.
How that progress in the integration between the two are going and if I can mention again I mean, it's not even.
<unk> was just out at.
In Maine last few days and talked to him. This morning, and she's really excited with the throughput that they're getting due to a lien activities and we're hoping we'll see the same progress there that we saw in royal over the last.
Year, or so when we really focused on improving operations too.
And proved capacity.
And it's it was good to hear the report when they came back.
Wow sounds like all systems go. Thanks, so much I will do with that.
Thanks, Mike.
This concludes that question and answer session I would like to turn the conference back over to insurance paragraphs for closing remarks.
Thank you Kate.
For those interested in learning more about shift will be participating in a couple of conferences in the next couple of weeks next week is Barrett on November 10th.
And then the Deutsche Bank on Tuesday November 16th So please sign up if you'd like to.
To learn more having said that thanks for participating in today's call and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.