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spk01: Good morning and welcome to the SHIFT group third quarter 2021 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Joris Pagrabs, Group Treasurer and Head of IR. Please go ahead.
spk07: Thank you, Kate, and good morning, everyone, and welcome to the SHIFT Group's third quarter 2021 earnings call. Joining me on the call today are Daryl Adams, our President and Chief Executive Officer, and John Duyard, 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 theshiftgroup.com. You may download the deck from the IR section of the website to follow along with our presentation during the call. Before we start, please turn to slide two of the presentation for our safe harbor statement. You should be aware that certain statements made during today's 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. I caution you that, as with any prediction or projection, there are a number of factors that could cause the shift group's actual results to differ materially from projections. All known risks that management believes could materially affect the results are identified in Forms 10-K and 10-Q filed with the SEC. However, there may be other risks that we cannot anticipate. On the call today, we will provide a business update before moving on to 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 on February 1st, 2020, the revenues and expenses associated with the ER business, as well as the assets and liabilities, have been reclassified as discontinued operations for all periods presented. With this reclassification, the results discussed today will refer to continuing operations unless otherwise noted. At this time, I'm pleased to turn a call over to Daryl for his comments beginning on slide three.
spk06: Thank you, Juris. Good morning, everyone. Thank you for joining us today to review our third quarter 2021 results. We are delighted and pleased to share with you another quarter of strong financial performance, which continues our trend since the beginning of the year. Our team continues to execute on our operational plans despite industry-wide supply challenges, enabling our growth momentum to endure while positioning us for a record year. Fittingly, this week we were honored to have been named in the 2021 Fortune 100 fastest-growing companies list. This distinction would not have been possible without the team's incredible hard work, dedication to the business, and most notably, for the resilience in the face of adversity over the last couple years. As you can see on slide four, our team did a tremendous job navigating the macroeconomic headwinds to generate year-over-year revenue growth of 34% to a record $273 million. Excuse me. and record income from continuing operations of $21 million, or 58 cents per share, which represents 8% year-over-year growth in 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 while meeting our financial targets. I'm extremely proud of the team's continued resourcefulness and relentless focus on execution that drove these results. Please turn to slide five, where I'll provide a 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 add-on USPS order of 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. As discussed in prior calls, a critical component of our FBS strategy is to identify and evaluate ways we can expand into new vocations. In August, we announced orders for more than 500 refrigerated delivery vehicles from several grocery chains. To fulfill these orders, we expanded our production capabilities in our existing Kansas City facility, leveraging our flexible manufacturing strategy. We are encouraged by these orders as grocers 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 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 our motorhome business, demand for our luxury motor coach chassis continues unabated as our market share increased to 31% during the quarter while reaching a high of 37% in August. reflecting the strength of our product offerings and brand among luxury motor coach customers. And in our Biltmore contract manufacturing business, we're excited to work closely with our partner, Isuzu, on the launch of their latest F-Series vehicle. We are optimistic in this vehicle's prospect and look forward to continuing to ramp volume into next year. Let me provide an update on Shift Innovations, our dedicated mobility research and development team. which is currently focused on developing SHIFT's electric vehicle chassis and our new walk-in van body design. During the quarter, we opened a R&D facility, which is the new home of SHIFT Innovations and our two proof-of-concept electric vehicles. Our innovation team continues to impress me with their progress on development and build status of our two proof-of-concept electric vehicles. This product is not immune to the supply challenges, but 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 SHIFT's financial results for the third quarter in more detail, as well as provide an update on our 2021 outlook, beginning on slide six. Thank you, Daryl, and good morning, everyone.
spk08: 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 increased supply chain delays. Revenue for the third quarter was a record $272.6 million, up 34% from the year-ago quarter. Income from continuing operations was $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 20.6%, 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 fleet volume and reduced truck body sales. As expected, our mix returned to a more normalized level in 2021. 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 in 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 our EV chassis and body initiative. Let me now walk through our results by operating segment, beginning with fleet vehicles and services on slide eight. Our FBS business continued to perform at a high level, posting another quarter of impressive sales growth profit, and order intake, while the team remained diligent on pricing and management of the supply base. The business achieved revenue of $198.5 million, up 36.7% compared to $145.2 million a year ago. The increase was driven by robust end-market parcel delivery demand, including a continued ramp in velocity, while truck body sales more than doubled after a COVID-impacted third quarter last year. FES 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 FES history, behind the third quarter of last year. FES 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-on 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 were $74.1 million, an increase of $15.8 million, or 27.1% versus prior year, and 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, both of which accelerated in the third quarter. 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. SV backlog was up 82% to $94 million, which included significant growth in both motorhome and service bodies. Please turn to the liquidity and outlook update on slide 10. We remain focused on managing our overall liquidity and cash flow to fund our operations and growth initiatives. 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 in 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 the 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 are taking the appropriate actions to mitigate the impact. Given our performance to date and 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 to Daryl for closing remarks. Thank you, John.
spk06: Please turn to slide 11. Our record third quarter results reflect the success of our long-term growth strategy and the efforts of our incredible team. Our commitment to quality, execution, innovation, and operational excellence is generating improved revenue and profitability. I am proud of the dedication and collaboration of our team as they manage through the current macroeconomic issues to ensure we deliver it for our customers and our shareholders. We remain nimble and creative in our approach, managing our suppliers and labor into 2022, while continuing to invest in our team and new products, our operations and technologies that will drive our future growth. With that, operator, we are now ready to take questions.
spk01: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Matt Caranda of Roth Capital. Please go ahead.
spk03: Hey, guys. Good morning. Thanks for taking the questions. Good morning, Matt. On the margin front, It just seems like you're not getting the pull through from the pretty exciting revenue growth that you've generated in 3Q. And just wanted to see if you 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's recovery coming from price action, especially in SCV. But wanted to see if you could maybe speak to pricing in both SCV and fleet vehicles. to kind of recover some of the headwinds that you've been experiencing on the inflation front.
spk08: Sure, Matt. This is John. I think when we look at the overall performance, we're certainly pleased with the result from an EBITDA percentage perspective. But as we said in the prepared remarks, there's certainly some headwinds that we faced in the quarter. I think when you look at it across the board, we've seen the impact of inflation, you know, just like others on commodities, labor, et cetera. I think our team's 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 so on the FES side, at least in the quarter, than on the SV side. We've taken multiple price increases 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 sort of trickle in and we felt the impacts of that in Q3 and expect to see more of that in Q4. And so, you know, we'll continue to be conscious of the environment in 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 getting products in the hands of our customers. I think that there was There were some inefficiencies that occurred in the quarter, really just driven by part shortages. And so the team 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 the gross margin is consistent for the first three quarters of the year. I think we're really, really pleased with the way the team's performed.
spk03: Great, very helpful, John. Thank you. And then just one more from me, just on the fleet vehicle side, backlog still looks extremely healthy. Just wanted to see if you could clarify, is the USPS order, the $53 million order in backlog, in the backlog figure that you provided for FBS? And then just wondered, maybe, Daryl, if you could speak to sort of trends in order flow and that you've seen as of late. It looks pretty healthy here, but maybe you could just parse out sort of, you know, the strength and velocity platform, what the mix looks like in terms of backlog, and any other trends that are notable in the fleet vehicles backlog.
spk06: I think I can answer both of those. The first one was easy. Yes, it's in our backlog. Your second question, you know, we are seeing the velocity increase in backlog, but we're also seeing a number of FedEx ground contractors and dealers ordering both velocity and traditional walk-in vans. So as John mentioned, truck body is up significantly over Q3 last year. So we're seeing it on all the products. I don't think I could pick one in particular, but we're excited about how it is across all the products, not just in one, and it's a diverse customer base, too, not just one.
spk03: That's great. And I lied. One more question just around the USPS contract. More of a modeling-oriented question, but I recall last go-around with this, there was 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 all just sort of truck body revenue to you guys? Just if you could clarify that for us in terms of modeling this, that would be helpful.
spk08: Yeah, no, the order is consistent with what we had last time. So we'll be procuring chassis and building truck bodies. And so that is the $53 million inclusive of both.
spk05: Okay, very helpful. I'll jump back into you guys. Thank you. Thanks, Matt.
spk01: The next question is from Steve Dyer of Craig Hallam. Please go ahead.
spk00: Thanks, guys. Great quarter. As it relates to supply chain, I guess the subject is yours. Does it feel like 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.
spk06: I'll start with that, Steve. Thank you for your quarter comment. The team appreciates it. It's interesting because it's constantly on our mind. We're talking about it. Some days we think the chassis supply is breaking loose with the chips, and then a few days later we'll hear that there's a short shutdown at one of the chassis suppliers. We think we've got supply on on some fiberglass, which I think we mentioned last quarter where we were into nine different suppliers trying to get the aero caps. And then, you know, they'll have some issue procuring supply. And then it moves into the labor piece. 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, you know, how resourceful they have been and actually, you know, looking at through the backlog and understanding the volume and making sure they had enough product procured. If they didn't, they'd 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 Q4, I think we're in pretty good shape. And in the beginning of Q2, 2022, things could change, but right now, You know, it's been the same, and we see it continuing at least through the first half of 2022 for sure.
spk00: Got it. And then just, you know, with respect, I guess, to capital spending or capital allocation, I guess, bigger picture, you know, you guys generate a lot of cash, have very, very little debt at this point, and the strategy has sort of historically been to, you know, find accretive tuck-in acquisitions, things that are know sort of make sense to your business is that sort of still a strategy I guess any color you could give on the acquisition pipeline you know sort of how you serve see things playing out going forward yeah again I'll leave with that Steve and maybe you have a financial question we can move over to John but um yeah we do still have our pipeline as we continue to have that every Friday morning
spk06: 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 something we could look at. We've looked at them, haven't executed on any of them for various reasons, but it is tight. I think people are waiting to see what's going to happen because when you try to value a company that It's had supply constraints all year, and revenues are down on most companies, and profits are down. The owner is looking for something different. We're still searching and having some discussions, but right now nothing actionable. But we'll continue to do that. Our preference, right, we've done four recently, which have been smaller tuck-ins, like you said. 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 larger acquisition. Nothing right now that we see on the horizon is actionable.
spk00: Got it. Okay, last one for me, and no offense to John, but it's not financial. Your manufacturing capacity, you've added a bunch. You've kind of rejiggered capabilities geographically the last few years. How do you feel like you're set up there? 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 different location, or do you feel like you're set up pretty well there for the next couple years?
spk06: Yeah, good question, Steve, and I'm glad you're starting to understand how our flexible manufacturing strategy that we put in place is working. Due to the lumpiness of the orders, to us it doesn't matter names on the front of the plant, whether it's an SV or FBS plant, it's got capacity. We're going to try to fill it because we continue to grow. We're looking at expanding currently in Pennsylvania. Last, I believe it was in 2018, we did that USPS order in 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 we're looking at. You know, we continue to add in capacity in Kansas City. And, you know, as we see the orders and the growth, we do have some, you know, with the Pennsylvania comes to get that finalized, that will give us an extra hundred and some thousand square feet, which will last for a while. But right now, nothing else besides that. But I do feel there is capacity available because currently we're still running mainly on one shift at a lot of locations. But it's just we've tried to go to two shifts when needed. 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, you know, five, six years managing, uh, our footprint and we'll continue to do that. Um, you know, I think it, it, we continue to add it into the script and we talk about our longterm growth strategy, but we, as a reminder, we do have a five year, uh, rolling strategy that we continue to look at. And part of that discussion is capacity. Um, so we're, we're usually ahead of the game and, uh, and we'll continue to run that same process forward.
spk05: Got it. That's very helpful. Thanks, Daryl, and congrats again. Thank you.
spk01: The next question is from Felix Votion of Raymond James. Please go ahead.
spk02: Hey, good morning, Daryl, John, George.
spk05: Morning, Felix.
spk02: Morning. Hey, I was hoping to start on the grocery comments. You mentioned expanding the KC facility there for refrigerated units. I'm just curious from your conversations with customers, is that where you think the market is going, refrigeration versus maybe more dry van bodies with insulation? Just curious if you could maybe talk to the grocery opportunity in general and how you're approaching it.
spk05: Yeah.
spk06: Like any new Product, new vocation. I mean, I can go back, Felix, to what we did with Amazon, right, when we were able to solidify that order. We gave them 10 trucks, all different shapes and sizes, different options. And that's where we're actually at with the grocery guys. It was nice to receive the order, but by receiving that order, no means do I feel or believe that that's going to be the only solution in the market. This is something they're trying. They like the product. And it's not a big truck body, so it's not a real large space to, if you will, cool or freeze. But even in there, they're going to have to have some compartmentalization inside the truck. So they're still trying to figure it out, and we're 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 mean, I'm not sure if you saw it, but there was some stuff on CNBC this morning about what Kroger, the strategy Kroger's doing. I think we alluded to that on a couple of calls ago. The last call that, you know, they're going to try to do it without brick and mortar stores and do it more from a DC center. So it's starting to, in my opinion, gain some traction, maybe not as fast as last month delivery did, but It'll still be something there, and we feel confident we'll be in the mix when the vehicles are finally – when they figure out – and, again, I don't think there'll be one solution for all of them. So there could be different strategies by different customers and different grocers. So we'll continue to monitor and offer ideas.
spk02: Right. Okay. That's helpful. And then 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 of the Mercedes and Ram chassis launch, sort of the timeline there and expectations.
spk06: Uh, yes, for sure. I do know the, uh, the Ram. So, um, we are done with our testing, uh, vehicle past it's ready to go. Um, and some of our customers in discussions with Stellantis to understand, uh, how many vehicles they're going to get for 2022. So, it is ready, and we believe we'll see some orders. I'm not sure we'll get them in Q4, but there should be some in early 2022 on that vehicle. The customers liked it when they saw it, and we also, like I said, passed all the durability testing, so we're ready to go. We're just waiting for the orders, which is the typical process. I'm going to defer to John that he has any updates on Mercedes. I'm, I've not heard of anything lately.
spk08: Yeah. I mean, we, we do have, uh, M3 orders in the backlog, uh, and those will be in production. If not December, it'll be early next year.
spk02: Got it. Okay. And then, and I was hoping John to just follow up quickly on the specialty vehicle margins and the commentary around recovering the full cost inflation there with, with price over time. Um, I was wondering, just looking at the backlog in that segment, it seems like that could happen pretty swiftly into early 2022, assuming we run through pricing actions in 4Q. Curious if you would agree, disagree with that statement or how we should think about that sequential rant there.
spk08: Yeah, no, I think you're right in that. I mean, we will see. We've taken additional pricing in Q4. we will see benefits from pricing that we've already taken earlier in the year incrementally in Q4. And then as we work through that backlog, we will, you know, early next year, we should be in that recovery piece. I think, you know, it's important to note as we look at where the business is today that, you know, that Q4 will look more like the first half of the year for SB than it did in Q3. And so we expect incremental sequential improvement there and going into next year.
spk02: Got it. Very helpful. I'll stop there.
spk05: I appreciate it.
spk01: The next question is from Mike of DA Davidson. Please go ahead.
spk04: Hey, guys. Good morning. I wanted to touch on FDS performance in the quarter first. It's clear you've had probably fewer challenges than most in securing chassis and securing the parts you need. I mean, it's not easy, but you've done better than most of what it seems like at this point. Can you maybe share with us whether you've seen better performance from the larger police, the big parts delivery companies to get these chassis as opposed to the smaller folks? Are they paying up for chassis to make sure they have what they need for the holidays or for next year? And are there certain smaller customers just not getting the same treatment from the hordes or the GMs of the world?
spk08: I mean, I think when you look at it, I wouldn't necessarily say they're paying up. I think where, you know, the discussions that we were having, even if you go back to last year, 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 with our own pool in terms of securing chassis early in the year. And so that's benefited us, I think, through certainly year to date. And we continue to work closely with customers as we look at 2022 as well, even though there's some uncertainty in terms of volumes there. And so I think our ability to identify early in the year, you can even go back to Q4 last year, In terms of securing chassis ourselves as well as supporting our customers in that, I think it's a big dynamic and potentially differentiator.
spk04: Got it. I also wanted to maybe get a little bit more granularity on some of your comments on EVs, probably a bit more depth there. One of your big competitors has been announcing publicly some new agreements with various EV platform providers. like a Zeus or an Atlas to develop the next generation of EV vehicles. You must have four or five, if not more than that, out there at this point. It's clear you have your own platform coming as well, but that's going to be probably just one class of vehicle. Can you update us as to what you're doing beyond the basic class three to address the EV sector? Are you signing up more customers for touch manufacturing? or for platform development without announcing them, or is it just still on the come here?
spk06: Mike, I hope I remembered all your questions, but if I didn't, please ask. One big one. Yeah, one big one. So, first I want to clarify our EV strategy isn't only Class 3. Um, I believe in our analyst day, we mentioned we're starting with class three and we're moving down to class two and up through class five. Right. Um, so we will have, as we typically do a one-stop shop for any customer looking for EV product. Um, and it'll be all on our chassis and our, um, operating system. So we're not going to be, uh, buying any of that, but we will procure. as we typically do with our motorhome chassis, axles, springs, and things. We're not going to vertically integrate except in the software for the operating system. And that's shift innovation, so we'll have the ability to build our own product or sell the chassis to others. And then if we look at FBS, they are currently doing some EV builds for other customers. as we were expecting, possibly even doing some upfit for them, which we've talked about in the past. So they're having some good discussions. So as we talked at the analyst day, we wanted to make sure that we didn't mix it with FVS and Utilimaster. We wanted to keep it as a separate group, which so far we feel was the right decision. But we will have, in addition to just the chassis, We'll have some other products, I think, to talk to people about in the future.
spk04: Okay. Just to kind of clarify there, oftentimes when a company has partnered with your big competitor in some of these bodies, it's really not their decision, right? The customer can choose to specify a telemaster for the other guy, correct? Absolutely. That doesn't mean they're going to get the business. Got it.
spk06: And I think, Mike, if you, sorry to interrupt, if you look at, there was a report out yesterday by Morgan Stanley that said when it comes to EVs, it's not demand that's the problem, it's the supply, right? So when people wonder if there's enough appetite out there, the answer 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 EV project, the timing. And as I mentioned, if I could share with you guys what I'm seeing and the progress the team's making, it's really rewarding that we made that decision back or announced the decision back in June.
spk04: Got it. I'm going to squeeze in one more here. Can you update us on the Magnum and Royal business and if you've gotten any good integration benefits or has that been put on pause given some of the supply chain issues?
spk06: Sorry, ask that question again?
spk04: I just want to know how things are going with Royal and Magnum and if you've had any additional benefits from trying to get the two product lines across their footprints. and whether you had to pause that because of the supply chain.
spk06: Oh, you're talking more from the strategy standpoint? Yeah, exactly. I thought it was more toward the financial. But yeah, on the strategy side, for sure, we are currently mounting DERMAG bodies in the California locations. We're doing mounting DERMAG 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 in our South Carolina facility to increase capacity for the DERMAG. So we're excited about how that progress and the integration between the two are going. And if I can mention again, I mean, uh, Todd, even our COO was just out at, uh, in Maine, uh, last few days and talked to him this morning and he's really excited with the throughput, uh, that they're getting due to our lean activities. And we're hoping we'll see the same progress there that we saw in Royal over the last, uh, you know, probably year or so, uh, when we really focused on improving operations to improve capacity. And it was good to hear the report when they came back.
spk05: Wow, sounds like all systems go. Thanks so much. I'll leave it there. Thanks, Mike.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Juris Paygrabs for closing remarks.
spk07: Thank you, Kate. For those interested in learning more about SHIFT, we'll be participating in a couple conferences in the next couple weeks. Next week at Baird on November 10th, and then the Deutsche Bank on Tuesday, November 16th. So please sign up if you'd like to learn more. Having said that, thanks for participating in today's call, and have a great day.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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