Q3 2021 Intertape Polymer Group Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to the Interstate polymer group's Q3 2021 conference call. During the call all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
In order to maximize the efficiency of this event. The question period will be open to financial professionals only.
At that time, those with questions I should press star followed by the number one on their telephone keypad.
If at any time during the conference you need to reach an operator, Please press star followed by zero.
Joining me from the company I have intertype polymer group's Chief Executive Officer, Greg Hill, and Chief Financial Officer, Jeff Crystal.
I'd like to caution all participants that in response to your questions in it and in our prepared remarks today.
We will be making forward looking statements, which reflect management's beliefs and assumptions regarding future events based on information available. Today, you are cautioned not to place undue reliance on these forward looking statements as they are not a guarantee of future performance and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those.
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Please see slide two titled Safe Harbor statement for a further discussion during this call. We may also be referring to certain non-GAAP financial measures as defined under the SEC rules, a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available at our website at www Dot I tapes dot com.
Please also note that all dollar amounts are in U S dollars unless otherwise noted I would like to remind everyone that this conference is being recorded today November 12, 2021 at 10, a M eastern time.
I will now turn the call over to Greg you. Mr. Yao. Please go ahead.
Thank you and good morning, everyone and welcome to IPG <unk> 2021 third quarter Conference call. Joining me is Jeff Crystal our CFO.
During the call we will make reference to our earnings presentation that you can download from the Investor Relations section of the website.
A year ago. It was a challenge to see how we could deliver growth of such strong quarters in the back half of 2020.
Demand was still high for E Commerce, and we experienced a rebound in our other end markets as the economy opened.
Q3, and Q4 of 2020, where two of the best quarters in IPG history.
We knew they'd be tougher top rep.
Revenue was $396 million up 23% from what was already a great quarter in 2020.
Demand remains strong.
Our open order position today is as large as it has ever been and we continue to see organic growth and volume mix off a strong comparison periods in the second half of 2020.
Volume mix growth was up 4% in the quarter from the record performance, we delivered in Q3 2020 the.
The revenue growth would've been approximately $12 million to $14 million higher in the quarter, if not for the supply chain and labor labor constraints, we are experiencing in the market.
Despite the dramatic increases in the cost of raw materials, we continue to cover the spread between selling price and raw materials as well as the smaller impact from freight costs.
Adjusted EBITDA was $63 million down just slightly from a strong comparison period last year.
The ability of the business to deliver in this challenging environment is a function of the changes we've made to the business in the past five years and the experience and expertise of the team to navigate the supply chain and labor issues that manufacturers are experiencing globally.
IPG is structurally different today, which has allowed us to compete effectively and demonstrate outsized growth since the onset of the pandemic.
One of the positive structural differences or exposure to e-commerce fulfillment and market and the strategy, we've deployed to grow that aspect of our business.
Even with the economy, beginning to return to normal post the pandemic E. Commerce remains an end market, where we expect to show double digit growth.
Third party industry forecasts expect e-commerce to reach 38% of total core retail sales by 2026 growing from 25% share in 2020.
The largest player in that market is expected to grow with online sales by 16% per year through 2026.
Our e-commerce exposure represents approximately 27% of sales in 2020, and we expect it to be similar in 2021 as a rebound from other end markets catch up from the downturn experienced in 2020.
We service a broad array of players in the e-commerce market.
Within E Commerce, our sales to the larger player in the market mirror its market share, which means the majority of our E. Commerce sales reside with other players in the market, we're not a one trick pony when it comes to e-commerce.
Our largest product category water activated tape demonstrates strong growth in the quarter and continues to be a workhorse for us. However, our approach of bringing a bundle of products to customers is highly effective we're seeing major contributions to growth from dispensing machines service technicians that service machines onsite at fulfillment.
Centers as well as protective packaging.
In short we are offering e-commerce players a much broader range of offerings than just water activated tape to earn a larger market share with them and its working our E. Commerce offering grew significantly faster in Q3 than the online sales of the larger player in the market in the double digits off of a record comparison.
In 2020.
Based on this strength, we believe IPG can grow at GDP plus growth levels with the plus coming from our exposure to E Commerce, which continues to take share in the core retail market and as well higher growth verticals of the economy like building construction.
We're also experiencing headwinds in the broader market, we are not immune to supply chain constraints and the freight and logistics challenge challenges that other manufacturers are experiencing globally.
Paying up for raw materials is just one piece of the puzzle of our supply chain and procurement team together with our sales team they've done a great job in covering the spread effectively which I'll address in a moment.
Securing supply of critical raw materials, and ensuring significant labor at the plant level have been extremely challenging in this environment.
We are working with multiple suppliers to maintain sufficient inventory, we're holding higher raw material inventory to ensure we have supply we have certain plants that are managing operations with less staff and what allows for optimal production in short we are managing through the constraints, although it's not easy.
Another key aspect of our business is different today is our margin profile.
Our App will pricing strategy is working extremely effectively in the face of dramatic raw material price increases we've endured since the fourth quarter of 2020.
Our primary objective is to protect the dollar contribution which we've done however.
However, as the selling price increases and we protect the spread by covering higher input costs. The math of that equation puts pressure on our margins, which is clear in our results today.
Our adjusted EBITA margin Q3 was 15, 9%, which is down from 20% in the same period last year. The major driver of this change was the mathematical impact of similar margin dollars on a higher revenue dollar as well as certain cost containment and reductions we implemented in the face of the pandemic.
The temporarily improve the margin in 2020.
$54 million of the increase in revenue as a result of price increases the simple math shows that backing out large price increases from the from revenue results in an adjusted EBITDA margin of 18, 5%.
This calculation that demonstrates the margin we would have earned in the raw material environment that existed prior to this inflationary period.
In my 30 years in the industry, we've never experienced this movement and speed and raw material pricing. The team has done a great job managing the business through the cycle.
How long raw material prices remain at elevated levels is difficult to predict.
We have started to see some downward movement in pricing.
Some third party sources like IHS forecast a further easing in 2022.
From where we said predicting the direction they'll head or win is a difficult call. Our priority is continuing to manage our suppliers to ensure we secure product and continuing to manage our customers' expectation to ensure we protect the spread and deliver products to our customers.
What we know is that as pricing eases, we have a track record of managing for consistency in the dollar contribution, which will mean margins moving back up the structural change in the business have fundamentally improved our forward margin profile to well north of the 15% range.
In terms of our outlook for the remainder of the year, we announced updates this morning, giving higher selling prices driven by the persistence of higher raw material costs.
We expect revenue for the full year of 2021 of between one five and 154 billion, which represents 25% growth over 2020 at the midpoint of the range.
Our adjusted EBITDA for the full year 2021, we expect to generate between 245 and $255 million, which represents growth of more than 18% over fiscal 2020 at the midpoint of the range as we continue to protect the dollar spread.
We expect free cash flows between 70 and $80 million in fiscal 2021. This metric is unchanged.
We still expect to unwind working capital of pricing and supply constraints ease and capture that free cash flow in future periods. However, the timing of that unwind is difficult to predict at this stage due to the persistence of high raw material pricing and the global supply chain constraints.
We continue to execute on our capacity expansion plans.
We remain committed to investing the entire $100 million allocation originally planned for 2021, although at this stage of the year, it's clear that some of it will spill over into 2022.
As a result, we have lowered our capex line item for fiscal 2021 to approximately $85 million from the prior estimate of 100 million. We also remain committed to the original timelines for the projects to be online and producing approximately $100 million.
And the incremental production on a run rate basis by the end of 2022 with more upside beyond that period.
These are projects, where we have clear line of sight on demand in the market today and offer IRR of plus 20%.
The business is in a great position to perform we are effectively managing the raw material challenging challenges, we've covered the price and maintain supply in the face of ongoing strong demand. We are allocating capital to key project categories key product categories, where we're experiencing our highest growth the capabilities of our team to manage these dynamics is extremely important.
Presses.
With that I'll turn it over to Jeff to review the financials, Jeff. Thank you Gregg on page nine of the presentation. We present, an analysis of our revenue for the third quarter of 2021.
Revenue was $395 $6 million, an increase of 23% compared to the same period in 2020.
Volume mix accounted for 4% of the increase compared to last year as Greg mentioned, the primary demand driver remains ecommerce and the outsized growth we are experiencing across a wide range of customers in that vertical as a result, our product categories that support E Commerce performed well in the quarter off a strong comparison period in 2020 those being.
Dispensing machines water activated tapes and protective packaging as well as certain carton sealing tapes like hot melt that serve a range of markets.
Price positively impacted revenue by 17% in the quarter with the remainder coming from acquisitions and foreign exchange the price impact was due to the multitude of price increases implemented to ensure we maintained our dollar spread which Greg covered earlier.
Turning to page 10, gross margin was 22% in the second and the third.
Third quarter, a change of approximately 400 basis points compared to the same period in 2020.
The primary pressure on the margin was at 350 basis point impact of maintaining our dollar spread on higher average selling prices.
Adjusted EBITDA was 63 million a decline of $1 5 million from the same period last year.
The change was primarily a result of increased SG&A due to the reintroduction of a more normalized cost base requiring required to support the growth of the business versus the cost reduction strategies implemented in 2020 as a result of Covid.
These costs were partially offset by higher gross profit. However that gross profit could have been higher without the impact of the missed revenue opportunity in the third quarter from the supply chain constraints as Greg mentioned earlier.
Cash flows from operating activities were $42 $6 million in the third quarter compared to $67 5 million in the same period in 2020. The change is primarily due to working capital changes.
Free cash flows were $22 million in the quarter compared to $59 $2 million in the same period in 2020.
Our working capital and free cash flow are bearing the brunt of the global supply chain challenges manufacturers are managing we are carrying a higher inventory to ensure availability at higher price points, which exacerbates the issue.
We believe the incremental working capital tied up due to the global supply chain issues and higher raw material pricing is in a range of approximately $55 million to $65 million.
As raw materials normalize and once the supply chain constraints ease, we expect working capital to return to historical levels and generate incremental free cash flow in future periods.
We finished the first quarter with $463 million in cash and loan availability and our total leverage ratio at the end of the third quarter was two three times.
The investments we have made in Capex and acquisitions have structurally changed our business, resulting in an improved margin profile and strong cash flow profile. We believe that both of these attributes are sustainable moving forward.
Finally, our effective tax rate for the quarter was 17, 7%, which reflects a favorable mix of earnings between jurisdictions.
As a result of the mix of earnings experienced to date, we are adjusting our effective tax rate guidance for the fiscal year down from a range of 25% to 30% to a range of 22% to 25% now I'll turn it back over to Greg for his closing thoughts Greg Thanks, Jeff.
As you can see there are a lot of moving parts that we're managing as we return to a more normal business environment post the pandemic.
To focus on the key facts demand remained high in the third quarter and now into the fourth quarter. Our open order position remains as strong as it's ever been.
Raw material pricing remains elevated and our pricing strategy has worked effectively to cover the spread on a dollar contribution basis. We expect this strategy to continue to be effective for us.
The global supply chain constraints are required our team to show agility.
We have effectively deployed procurement and inventory management strategies to secure key raw materials, and keep our customers and products.
E Commerce and market remains an outsize growth driver for.
Our strategy of bringing a bundle of products to customers in that end market is working with double digit growth in that aspect of the business.
We are investing in new capacity at very attractive returns of over 20% IRR for demand that exists in the market today with our capital Capex projects. The business is structurally different today than it was five years ago. The improvements we've made to the business and the demand outlook. We see in the markets have set us up to deliver GDP plus growth on a consistent long term.
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As part of that growth profile, we believe our approach to sustainability will be a long term driver as distributors and users and consumers are increasingly aware of the impact their supply chains and choices have on the environment last month as part of our core pillar to embrace sustainability IPG signed the climate pledge, which was coal.
By Amazon and.
Concerning the pledge, we joined more than 200 other companies with a similar vision of net zero carbon by 2040 by doing so we are demonstrating our commitment in action to customers and prospects that we have a role to play in the de carbonization that is critical to address today's climate challenges. We are focused on executing our.
Liturgy to deliver for all of our stakeholders building a global leader in packaging and protective solutions with that I'll turn the call back to the operator to open up for question and answer period. Thank you.
Thank you, ladies and gentlemen, we will now conduct the question and answer period. If you would like to register a question. Please press star one on your telephone keypad, you'll hear a two tone prompt to acknowledge your request.
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And your first question comes from the line of Michael <unk>.
<unk> with Scotiabank.
Hey, good morning, guys.
Good morning, Michael.
I'll start with a quick one maybe can you quantify that.
The missed revenue opportunity in Q3 that you talked about as it relates to the supply chain and whether or not you can catch up in Q4.
Yes, so we called out 12 to 15 $12 million to $14 million sorry on revenue. So that's the estimate we had of what with both the ship out that didn't.
We do expect to get that revenue in Q4, but again when you think about Q4 the supply chain issues are persisting. So we expect that we could have issues towards the end of the quarter again getting the shipments out so I would expect similar issues in Q4.
So it should be considered maybe more of a gross number than a net number.
Like I was thinking of it that way.
What do you mean by a growth number versus that number.
So you will get those sales back, but presumably or there could be other sales that can fall into your yeah correct yeah correct.
And then on the gross margins.
You know you indicated that the price cost spread was maintained in the quarter, which is obviously commendable.
Can you elaborate a little bit more on the supply chain disruption and labor shortages and the how.
We think that the.
Those will kind of persist.
Into the next few quarters in terms of gross margin impact.
Yes, so just at a high level I would say that what we're experiencing right now is pretty similar to what we experienced in Q3 and Q3, it really hit US kind of latter part of August into September.
Historically September is a really big month for us and we were unable to because of restraints around supply chain and labor issues.
Hit that historical higher revenue in September, but I would say that as we sit here today, we're continuing to experience similar issues as it relates to a lack of raw materials in some cases to run production lines.
And in a couple of specific plants.
Being short labor, which at the end of the day just cut your machine hours that youre available to run.
When we made reference again I mean from a demand.
Perspective.
We continue to see.
Really high demand.
And as we move forward into kind of 2022.
The whole business that we see some we see some labor free up and some of these supply restraints.
Get minimized.
Because the company as you know these these orders that are in house right now are priced at the right price.
And we.
We just really have to see how we manage through when they're capable of handling access to raw materials and labor going forward. So certainly we're very active in that area and I feel confident that we'll be able to work through but as we sit here right now we're still experiencing similar things in Q4 that we did in Q3.
Got it Okay, and then maybe one last thing that typically or historically, you've narrowed the EBITDA range for Q4 to $5 million.
Rather than what's implied for Q4 with your full year guidance of $10 million.
And also what's been the case is Q4 EBITDA is typically been higher and thats not necessarily suggested by the midpoint of your 2021 Guy, but I mean hearing everything youre, saying Gregg, it's just a matter of.
Whether or not the supply chains work a little bit better.
And whether or not you are able to fill those orders is that the right interpretation of it.
Absolutely and we've talked about in the past that typically our third quarter fourth quarter is bigger than the first two rate.
And what's happening now is that on the order side, it's following that historical trend, but on the revenue side its not because of some of those those gaps that we discussed so.
Certainly this is not a normal time typically we would narrow that range, but with what we're dealing with right now I don't think it's appropriate to.
To narrow that range at this point.
That's great color I appreciate it thanks guys.
Thank you.
And your next question comes from the line of Stephen Macleod with BMO capital markets.
Yeah.
Good morning, guys good morning.
Just I just wanted to follow up.
On the margin questions.
Obviously.
I guess, you talked about maintaining the dollar cost spread at this point, which is sort of a headwind to margins obviously.
Sitting here with one five months left in Q4, so just curious.
Are you seeing any abatement in terms of the resin supply virtually resin prices that youre seeing.
And then similarly, how would you expect margins to evolve as we head into 2022 or is that something that it's sort of too soon to to tune too soon to tell.
Yes so.
Right now we're experiencing some.
Reductions, namely on the resin side polyethylene polypropylene not not not huge.
The way that works is you know that will flow into our P&L till probably December or most likely into January just.
The way the inventory turns work.
Certainly from our perspective, and what we read we expect 2022 to show some falling raw materials, namely in the resin side again. So continued reduction there we don't we don't foresee it as being very dramatic like it's not going to be a huge drop right away, which is which is good from our perspective.
And typically what we see on that falling raw materials, obviously is a pickup in margin holding that spread and in some cases being able to increase that spread.
But it's very difficult to call that out on a forward looking perspective.
Perspective for 2022, but but if it follows its normal course, I feel really positive that that margin when we called out the effect on this quarter.
In a normalized environment that margin would have been 18, 5% from an EBITDA perspective, and certainly that range in a normalized environment is well within our reach as we see a falling raw material environment.
Okay.
That's great.
And then maybe just talking about the end markets.
Sort of cited broad based broad based demand strength, but I'm just wondering.
What are you hearing from your from your supplier customers around.
How order levels are building by end market into into next year are sort of things normalize through the pandemic.
Yeah, I mean, nothing really that different I guess I mean from the E Commerce standpoint, certainly that remains strong.
And in the reports we read continues to be strong and we continue to expect double digit growth into that category. The building and construction as well we continue to see some tailwind there and continue to see good growth in the other end markets I mean for the most part have held up and continues to be strong. So I mean like Greg said.
<unk> demand has been just not the issue at all [laughter].
Our order book is very full probably at all time highs right now and really the challenge is getting stuff out the door. So we don't see that necessarily changing as we enter into 2022, obviously you fast forward I mean, it's tough to make a call on a macro side, what's going to happen, but certainly as we sit here today demand looks like the least of our issues.
Okay.
That's great. Thanks, guys appreciate it thank you.
And your next question comes from the line of Walter <unk> with RBC capital markets.
Good morning, everyone.
Patrick.
Coming back on the.
The lost volume opportunity with high demand, but supply chain and labor issues. When you look at it and contextualize from what you can see at this point.
And so far in the fourth quarter.
Would you would you.
In order of magnitude essentially is it in line with what you're missing in the third quarter or is there any risk that as we go through the fourth quarter, whether it be resin.
Supply not price because youre, passing that on nicely, but the ability to do it.
To get resin.
Or labor that could.
Magnify the impact of what you saw in the third quarter or is it more in line with what you saw in the third quarter, yes.
Yes.
As we sit here today its somewhat more in line.
But again like we'd like we mentioned on the earlier question. When you think of the ranges of our revenues and Ebitdas. Obviously, there were buffering ourselves for stuff that's going to happen as we get into the end of December. So there is still uncertainty as to how good or bad that's going to be which is why we're keeping the range is where we are but as we sit here today it looks very similar.
Okay.
When you put GDP plus and context.
That makes sense.
Im looking at the EBITDA consensus for next year I'm, just looking at the share price today, and obviously there is some trepidation being expressed.
And I know youre, not giving guidance, but if you give GDP plus on the top line.
It seems like consensus is right now at mid kind of mid to high single digit EBITDA growth for next year.
It seems achievable.
On a GDP plus topline is there anything that is happening next year barring any of the uncertainties around the current environment, but assuming the supply chain issues and labor availability labor availability issues, Wayne and Theyre no longer as big a factor next year as they are this.
Is there anything else next year that you would flag that would prevent you from getting sick.
Similar type of EBITDA growth.
On the back of GDP plus type of revenue growth.
Yes so.
Obviously, I will comment on consensus or guidance, but from my perspective, I look forward in this business and I see tremendous growth opportunities for the business I also see opportunities to increase the dollar spread on the way through.
Barring any other as you mentioned supply chain restraints, I think with our projects coming on.
From a capital investment perspective, with the type of IRR as were expecting I know that's a run rate at the end of the year, but.
Youll see some of that in the year.
I feel really positive about the business and again.
What we're experiencing right now as you know is nothing that anyone else is experiencing out there I think we're managing very well as it relates to things, we can control and I think from a growth perspective, I think we are.
Very very positive position.
In many markets that we serve and back to that capital investment in it.
And those IRR is I think that bodes really well for the future results of the business.
Yes, I agree with you Gregg and I guess.
No you had to defer some of that into next year that that work is.
Labor availability related is there any risk that we get meet more meaningful.
Delays here on those projects because I think I think youre absolutely right there was a great.
Low risk high return projects that certainly investors want to see come to fruition. So just an update there would be great. Yes.
And the delay is just on the cash flow rates. So the cash out theres no delay on the ramp up.
The run rate. So I think that's very importantly, we're really confident in our ability to deliver that run rate.
That we articulated so theres really no delay there sometimes on capital expenditures as you know it's difficult to get the money out the door.
And there have been some slowdowns, but it's not going to affect the timing.
Of our of our projects on a go forward basis, so feel really positive about that perfect. Okay. That's all my questions. Thanks for the time, thanks a lot.
Your next question comes from the line of Samir Patel with CIBC capital markets.
Hi, yes, good morning.
Good morning, Guy Amazon, Amazon recently announced that they are invested in.
Company, that's trying to reduce.
The cubic volume of each box, but I think they said, 24% and potentially eliminate about a billion plastic hello.
Plastic are close by the end of next year.
I'm curious what your thoughts on.
Maybe some trends youre seeing there with <unk>.
Box sizes and the implications.
For tape demand.
Yes. So we saw that we saw that investment and certainly that's the technology that they've deployed in some of their facilities in the past and generally in e-commerce.
From our perspective.
We've always looked at it this way is that we have to evolve on a go forward basis. In this business is going to continue to.
<unk> evolved from a packaging perspective at this point, we don't see that as a huge impact to our existing tape business.
We do see a lot of shift so from plastic mailers for example, a paper mailers and Thats, a big area of focus for us as it relates to our Kirby Mailer.
And I think I think with that investment in.
In that box manufacturer, it's too early to tell what kind of impact it has but again, it's been deployed in <unk>.
Quite a few facilities over the last five or 10 years.
Okay. Great. Thanks, that's helpful. That's all I had I'll turn it over.
Thank you.
And as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Your next question comes from the line of Roger Spitz with Bank of America.
Thanks, very much and hopefully already.
Already answered this I was multitasking.
With 2021, EBITDA and free cash flow unchanged.
That's all by $15 million and perhaps cash taxes are lower.
Taxes are lower.
The offsetting 50.
$15 million plus <unk>.
Headwind.
Yes, so thats working capital so what we've seen versus what we started out the year, we've certainly seen a lot of headwinds around around working capital some of that on purpose, obviously related to the supply chain constraints. So we've have been ensuring that we're securing supply and that's been the most important part of the plan to make sure that we can.
Can produce and provide our customers with products. So we're certainly carrying heavier inventory related to that and then you have the price impact which is affecting our inventory obviously at a much higher price and then you've got our receivables as well at much higher prices. So that's really impacting our our working capital and we continue to see that impact as we move through the year. So that's why.
You see that somewhat little bit worse worse off than we originally planned in Q4.
Got it that was my question. Thank you.
<unk>.
And your next question comes from Zachary ever said with National Bank financial.
Good morning, everyone. Good morning.
Given the supply chain disruptions, you're seeing some sales get pushed to the right.
When that happens how much of a risk is there that you'll lose that sell altogether.
Maybe contrast that in today's environment and in a more normal operating mixture.
I think I mean, good question I think in today's environment I think when we look at our.
We look at the industry I think everyone's pretty much in the same position.
I think right now it's a question of getting product for many customers.
So I don't think it has as we sit here today I don't think what we're experiencing is any different than what any of our other competitors are experiencing as it relates to supply.
And that's the feedback that we're getting from our customers. So certainly certainly we're doing our best to keep our customers in product.
And to do the best that we can from an on time perspective.
As we look forward again once it settles down I think I think we will start kind of eating into that backlog quite nicely.
Thanks for that.
In times like these.
I would suspect that you are getting orders from people that you've never heard of before as people kind of scramble for supply.
What do you think your odds are of being able to hold onto those relationships. After this settles out and build market share that way.
Well in situations like that we're trying to we're trying to make sure that we're taking care of obviously, our historical customers and with new customers. We're trying to make sure that we're doing our best to make sure. That's a long term relationship going forward and not spot.
We do not want to allocate.
Inventory or finished goods to people that are spot buyers. So we want to create a relationship with them. This long term and I think I think we're picking our spots appropriately.
We'll see how that plays out, but certainly we're very cognizant of that.
Both from a pricing perspective, and from an availability perspective as it relates to spot buyers.
That's good color. Thanks, and then one last one for me the supply chain issues, you're seeing are they primarily related to port congestion or as inland free to big issue as well.
Okay.
It's a long list. So certainly it certainly those two issues are playing a role.
We have had.
Just inability of producers to make product to deliver to us. So so certainly from a production supply demand perspective, some of our suppliers have been.
On capable of meeting our demand requirements. So nothing to do a freight just their actual production capacity.
But certainly freight is playing a role certainly when we think of our supply chain from Asia to North America that was impacted in the quarter, just availability of containers and availability of spots on cargo vessels and then the whole port congestion issue played a role in backing up some material in the supply chain, but but it's.
It's pretty it's pretty deep.
Diverse as it relates to the areas that have impacted that supply disruption.
That's helpful. Thanks, I'll turn it over.
Thank you.
And at this time there are no further questions I will now turn the call back over to Greg for closing remarks.
I'd like to thank you for participating in today's call. We look forward to speaking with you again following the release of our fourth quarter results in March in the meantime, I Hope you and your families stay safe and healthy. Thank you.
Okay.
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33796. This concludes today's conference call you may now disconnect.