Ladies and gentlemen, thank you for standing by, and welcome to H. B. Fuller Q3 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Barbara Doya. Please go ahead.
Thank you, and welcome to H. B. Fuller's Q3 2021 earnings for the fiscal quarter ended August 28, 2021. Our speakers today are Jim Owens, H. B.
Fuller President and Chief Executive Officer and John Corcoran, Executive Vice President and Chief Financial Officer. Please let me cover a few items before I turn the call over to Jim. First, a reminder that our comments today will include references to organic revenue, which excludes the impact of foreign currency translation on our revenues. We will also refer to adjusted non GAAP financial measures during this call. These measures are in addition to the GAAP results reported in our earnings release and in our Forms 10Q and 10 ks.
Discussion of sales and revenue refers to organic revenues and discussion of EPS, margins or EBITDA refers to adjusted non GAAP measures. We will also be making forward looking statements during this call. These statements are based on current expectations and assumptions that are subject to risks Many of these risks and uncertainties are and will be exacerbated by COVID-nineteen and resulting deterioration of the global business and economic Actual results could differ materially from these expectations due to factors discussed in our earnings release, Comments made during this call or risk factors in our Forms 10 ks and 10 Q filed with the SEC and available on our website at investors. .Hbfuller.com. Now let me turn the call over to Jim Owens.
Thank you, Barbara, and welcome to everyone joining us on the call this morning. In a world where there are unprecedented supply chain shortages and significant inflationary pressures impacting every portion of our business, H. B. Fuller delivered double digit growth and met our bottom line commitments. Last evening, we announced strong third quarter results led by 20% year over year revenue growth.
Organic revenue was up 16% versus 2020 and was up 13% versus the pre COVID-nineteen environment in the Q3 of 2019. This top line performance reflects broad based double digit organic revenue growth in all three global business units and includes significant contributions from both volume and pricing. We also reported adjusted EBITDA of $111,000,000 and adjusted EPS of $0.79 These results were slightly ahead of our implied guidance. Our margins in the quarter were reduced as expected, We expect to see significant margin recovery in Q4 and 2022 as our price increases begin to outpace raw material increases and other In the Q3, we continued to gain share in key market segments with our innovative solutions. We are leveraging our technical capabilities and global footprint as well as our operational speed and agility so that our customers can Continue to innovate and build new products.
Our Adhesive wins this quarter are in products ranging from new consumer electronics And globally produced solar panels to sustainable food packaging in electric vehicles. These wins are driving our growth. At the same time, our team is managing the raw material supply chain exceptionally well, enabling us to meet high customer demand without impacting our sales volumes. We are also demonstrating our ability to price based on the value our critical adhesive solutions provide our customers. Through the Q3, we have implemented $225,000,000 of price adjustments, and we took the decisive step of announcing a September 1 increase and surcharge in order to offset further raw material cost increases.
These actions are expected to result in more than $400,000,000 of pricing revenue on an annualized basis. We anticipate a significant improvement in margins in Q4 and into 2022 as a result of these actions. We are also prepared to take additional pricing actions as needed at the end of the year. These pricing actions, coupled with our strong organic volume growth, Which is up 13% year to date is the basis for our confidence that H. B.
Fuller's innovative solutions and global network We'll continue to drive share gains and significant margin improvement in the quarters ahead. We are demonstrating an standing ability to perform in a highly dynamic macro environment. Shortages persist for many specialty chemical raw materials, For plastic and metal packaging and for international shipping containers, we continue to see inflationary cost pressures in terms of materials, freight and labor. Extraordinary weather conditions during the year have caused shipping disruptions, unplanned safety and governmental actions have caused factory closures, We continue to navigate the uneven impact of the COVID-nineteen pandemic around the world. Through all of this, We are serving customers, we are winning through innovation, and we are protecting our margins.
We anticipated gross margin headwinds in the 3rd quarter, and we manage them well by controlling SG and A expenses. We are now positioned to reestablish our margins through higher pricing over a larger base We have grown our base of business through exceptional support for existing customers, helping other customers in need when we can and by adding new customer business by winning through innovation. While we overcome these near term challenges, Our long term strategy to grow our business through innovation and continue to build our position as the world's leading dedicated adhesive provider. We are gaining share in our markets by focusing on providing new and innovative adhesives that enable hygiene and packaging products to be more environmentally friendly, buildings more energy efficient and durable goods stronger and more lightweight. Our largest customer wins in this quarter were in the areas of electric vehicles and solar panel production.
We are also actively investing to further differentiate our products and expand capacity. We recently announced a strategic partnership in Europe with Covestro, 1 of the world's largest polymer suppliers to deliver an adhesive with a reduced climate impact for the woodworking composites, textiles and automotive industries. This partnership is one of our initiatives to advance our sustainability efforts and better enable customers to achieve their own sustainability objectives. We also recently announced a strategic investment to build a new facility in Cairo to support customers' increased demand in the fast growing markets of Egypt, Turkey, the Middle East and Africa. Because of the resilience of our cash flows, we are able to make these investments while continuing to pay down debt in line with our $200,000,000 target for 2021.
Now let me move on to discuss our GBU performance in the Q3. Hygiene, Health And consumable adhesives 3rd quarter organic sales increased 13% year over year with strong growth across the portfolio, including very strong results in packaging applications, beverage labeling and tapes and labels. As expected, HHC segment EBITDA margin of 12% was down Last year, strong volume leverage and pricing gains were offset by higher raw material costs. We expect HHC organic volume growth Construction Adhesives organic revenue was up 20% versus last year, with strong growth in both flooring and commercial roofing as Improving demand, share gains and pricing drove significantly improved top line performance versus 2020. We saw a significant improvement in pricing contribution in the quarter with pricing contributing 8% of the organic growth in Q3.
We expect these pricing gains and the impact of the surcharge to drive 10% to 15% year on year growth in EBITDA in the 4th quarter. Engineering Adhesives top line results continued to be extremely strong in Q3 with organic revenue up over 19 versus last year, reflecting share gains and strong pricing execution. Sales increased versus last year in almost every market with Exceptional growth in Adhesives for Woodworking, Insulating Glass and New Energy. And looking back to the non COVID impacted Q3 of 2019, Organic revenues were up more than 15%. We expect continued strength in double digit full year growth in this segment.
Engineering Adhesives 3rd quarter EBITDA increased 11% year over year, driven by exceptional volume performance and pricing gains. We expect double digit sequential EBITDA growth in the 4th quarter as pricing actions and the surcharge Fully implemented and further offset the impact of raw material cost increases. Our planning assumptions are that demand will remain strong across our business units. Raw materials will continue to be tight through the end of the year and pricing will remain elevated against a strong demand backdrop. We anticipate that higher customer demand and share gains in each of our business units will drive Strong year over year organic growth.
As a result, revenue in most of our end markets will exceed 2019 levels by double digits. Overall, when considering our strategic pricing actions, coupled with the solid volume growth in HHC, continued improving performance In Construction Adhesives and strong demand in Engineering Adhesives, we now expect full year revenue growth of 17% to 18% versus 2020. Now let me turn the call over to John Corcoran to review our Q3 results and our updated outlook in more detail based on these and assumptions.
Thanks, Jim. I'll begin on Slide 5 with some additional financial details on the 3rd quarter. Adjusting for currency, organic revenue was up 16.4% with volume up 10.1% and pricing up 6.3%. All 3 GBUs had double digit organic growth versus 2020 with engineering Strong when compared to the non COVID impacted Q3 of 2019, which we believe validates the strength of our top line performance. When compared to Q3 2019, organic revenue increased 13.1% for the total company with strong organic growth for all 3 GBUs.
Adjusted gross profit was up 3.8% year on year, but gross profit margin was down as volume growth and pricing gains were more than offset by higher raw material costs. Adjusted selling, general and administrative expense was down 220 basis points as a percentage of revenue, resulting from strong volume leverage and general expense controls. Adjusted EBITDA for the quarter of $111,000,000 was up 5% versus the same period last year, and adjusted earnings per share were $0.79 up 4% versus the Q3 of last year, driven by strong volume growth, pricing gains and good cost controls, offset by higher raw material costs. Cash flow continued to be strong with cash flow from operations in the quarter of $81,000,000 similar to the same period last year despite higher working capital requirements to support the strong top line performance and higher raw material And we continue to reduce debt, paying down $110,000,000 in the 1st 3 quarters of 2021, between 15% and 17%. We are narrowing our adjusted EBITDA guidance range to $460,000,000 to $470,000,000 Given our expectations for continued strong volume growth and accelerated pricing offsetting raw material cost increases that we now expect to exceed 15% for the full This would represent full year EBITDA growth in the range of 13% to 16%.
We expect cash flow to be strong for the rest of the year, allowing us to maintain our target to pay down approximately $200,000,000 of debt during 2021. With that, I'll turn the call back to Jim Owens for some closing comments.
Thank you, John. Early in the year, we set 3 critical priorities for 2021: volume growth, pricing to value and releasing of greater productivity and operational capacity. As you've heard this morning, we executed exceptionally well against each of these priorities again this Our double digit volume growth versus both 2020 and pre COVID 2019 reflects enduring demand for our critical adhesive solution, Market share gains and the success of our global sourcing initiatives. On pricing, we moved quickly to implement $225,000,000 in pricing actions, which are aligned with the value customers derive from our adhesives. And we have implemented further increases, which will reestablish our margin profile in the 4th quarter.
And we continue to enable productive efficient capacity to deliver at a high level for our customers with lower factoring overhead costs as a percentage of revenue than last year. Our execution of these three priorities reinforces that despite varying economic conditions, Our clear strategic vision enables us to take rapid decisive actions to create value for our shareholders. Our performance through the pandemic in 2020 and now through the unique supply and inflationary challenges in 2021 demonstrates our resilience and flexibility as we outperform our competitors. Our performance consistency strength of our cash flow generation and resiliency of our diverse customer set, including a strong and durable HHC business coupled with our substantial growth And Engineering Adhesives and Construction Adhesives. Looking ahead, innovation will continue to fuel multiyear growth opportunities, including an outsized percentage of our new product pipeline focused on electronics, electric vehicles, building and energy efficiency and more sustainable packaging and hygiene products.
A strong debt paydown track record increases our optionality to deploy capital to acquisitions that add to our portfolio of specialized adhesive solutions. The actions we have taken in the 1st 3 quarters of the year have delivered sizable double digit top and bottom line growth. But more importantly, They position us to exit 2021 with significant momentum. Our business is well positioned for further market share and volume growth, additional to investors that the adhesive industry is a great investment. High customer demand for our solutions, high cash flow generation, Pricing resiliency and recently announced valuation multiples for Adhesive Businesses reinforce the premium value adhesive solution providers deliver across a wide range of markets.
As the only global pure play adhesive provider of scale, we believe we are uniquely equipped to innovate with Speed and agility necessary to help our customers address their most pressing adhesive challenges and to deliver significant long term value to our Investors, H. B. Fuller is a stronger company today than ever before, and we continue to take strategic actions to enhance our capabilities, Our productivity, our speed, our agility and our financial profile. I want to thank our shareholders for their continued confidence As we navigate some of the most demanding operating conditions any of us have seen, we remain laser focused on executing our priorities and creating value for shareholders and all stakeholders in the Q4, in 2022 and throughout the years ahead. That concludes our prepared remarks today.
Operator, let's open up the call to take some questions.
Your first question comes from the line of Ghansham Panjabi from Baird. Your line is open.
I guess
my first question, as it relates to raw materials and some of the scarcity issues that peers across the chemical coverage have cited, including in recent pre Maybe touch on what's different with H. B. Fuller. I mean, I understand the cost baskets might be different, but there's a broad sort of scarcity issue associated with Raw material costs. And then also if you could touch on some of the inventory buffers along the supply chain and is there Potential disruption risk over the next couple of quarters just given that I assume your inventories are pretty lean at this point?
Great. Thanks, Ghansham. Yes, I would say early in the year, We started a mantra inside H. B. Fuller that said that the team with the most raw materials is going to win.
And We had meetings in each one of our GBUs at 7 am, Tuesday, Wednesday, Thursday. Those meetings have continued. And it's been really a diligence on B. Lowe:] It's material by material managing what's a very complex global supply chain that's evolving every month, every quarter. It started with the weather event, there Fires at big events.
There's a couple of shutdowns now happening in China. But it's understanding what our formulating flexibility is And then working with our suppliers, working with our plants and working with our customers. And I think it's probably relative to other people. Ours is more diverse, which helps But it's more complicated. And I think it's really an execution story of understanding the problem, Getting ahead of it and then really working as a team.
It's not just a sourcing initiative, but these meetings have frontline commercial people, our sourcing People, operations and supply chain. So it's a really good execution story. I don't think the market is that different For anybody, but these times of COVID and the supply chain problems we have are really an opportunity for to differentiate companies. And I think our team has Done just an outstanding job of managing through this. And I just want to thank them, right?
It's really their great work. In terms of buffers and inventories, it's interesting what's happening out there. I was in Europe the last 2 weeks and I went to one of our factories Where we had a warehouse full of material because I couldn't get international shipping containers. The product one of the few products we ship outside of the region. And they have built up inventory because they're waiting for the international shipping containers.
But at the same time, I had a line in that plant that was idle because they couldn't get a raw material From a supplier in Germany. So managing that complexity is really what this is all about. And thinking ahead, the shipping containers are going to come in, how do we manage the customers in Supply chain. So I would say, in some cases, there are buffers in supply chains because people can't ship material. In other cases, There are shortages and again managing those details.
But broadly speaking, I think the point you're making is Supply chains are tight and any little issue that pops up creates a disruption that we have to manage and other Specialty chemical manufacturers have to manage.
Got it. Thanks for that. And then for my second question, it's just sort of 2 parts. I mean, your margins obviously are reflective of price cost and just like everybody else, it is quite a bit below 2019 levels. What's a reasonable timeline to get back towards that baseline, first of all?
And then second, I mean, your balance sheet is going to be at a very good By the end of the year post royalty leveraging etcetera, what is H. B. Fuller in terms of capital allocation evolution as we sort of cycle into
We talked about it last quarter that we're going to have some decline. We're going to see a big uptick both in gross margin and EBITDA here in Q4, And we'd expect that to improve in 2022. I can't tell you exactly when and where it will get to, but I can tell you that our fundamental Objective is to grow our EBITDA dollars. So we started this year saying we were going to grow double digit, 9% or 10%. We're going to end the year growing 14%, 15%, 16%, and we're going to target whatever market conditions we get, doing that same thing again next year.
But I think the long term projection for our margins and whether that's 'twenty two or beyond, that High teens is what we see this adhesive business moving to. So we've moved Fuller up to this 15% margin company, And we see our future being closer to 17%, 18%. As far as capital allocation, We've done a great job with the debt pay down over the last few years. We're looking at what the right opportunities are out there, and I'd say in 2020 Not big deals, but we'll allocate more of our money towards acquisitions if we can get the right opportunity at the right price. So, yes, I think that's a shift you'll see in 2022.
Thanks so much, Jim.
Thank you, Ghansham.
Thank you. Our next question comes from the line of Vincent Anderson from Stifel. Your line is open, sir.
Yes. Good morning, thanks for taking My question.
Good morning, Doug.
So I appreciate the detail on the price versus raws, but I actually wanted to dig into mix A little bit. Just is there anything meaningful coming from that right now? And what kind of potential there is for us to see it And margins going forward, just assuming this price versus raws volatility comes down.
Yes. Maybe I'll let John, see if he wants to dig into that a lot deeper. I'd say broadly speaking, we have ups and downs on mix across product lines That are working their way out. So certain market segments are growing faster than others. Some of them are higher margin, couple of them are Lower margin, but I don't think when we dig through the details, there's a big mix effect in this.
The big drivers are volume growth through wins, Raw material cost increases and price increases.
Yes, absolutely. I think anything there may be a little mix in there, Vincent, but it really gets swamped by those bigger items that Jim talked about. Longer term, we expect Engineering Adhesives and Construction Adhesives to grow at a faster rate than HHC, certainly Engineering Adhesives and they have higher margins. So We should get a beneficial mix impact over time.
Okay. All right. Understood. Thanks. And I guess are you seeing any impact on your new product pipeline from these shortages?
Maybe potential customers holding off on adopting a new product in Favorable of something they already feel comfortable about being able to source or just even their bandwidth to evaluate new products right now?
Yes, I'd say bandwidth is good. It's a new way of qualifying new products. So I think with think about our business, we work with a lot of engineers around the world And development chemist, those people, some of them are working from home and remotely, and our team has to connect in a different way. So there's a different way of selling and qualifying products that we've gotten very good at, I think. So but in terms of adoption, I think customers are continuing to try to find ways to innovate.
The sustainability agenda drives a lot of that, whether that's more energy efficient buildings, Lightweight cars, EVs, and then certainly in the packaging space, there's a lot of that. So I would say, No, it hasn't slowed it down at all in terms of adoption. And in terms of raw availability, maybe a little bit if they don't have chips or But really that's not what's driving our customers. Our customers want to find a way to innovate to win in their markets. So that's a big driver.
All right. Thanks very much. Thank you.
Thank you. And your next question comes from the line of Jeff The call is cast from JPMorgan. Your line is open, sir.
Thanks very much. Sequentially, Your margins improved in Engineering Adhesives and they contracted in Hygiene and Construction. Why was the performance better in engineering? What went right there? Because it looks like You're containing your inflation pretty well.
Yes. I would say there's a little bit less inflation sensitivity in that business. So that's probably the biggest driver. There's a little bit of positive mix in there with some of the wins that we've had in high value. John, you want
to add to that? Those are the main things we did. We had a recovery of a receivable that was reserved for that was A onetime benefit in the quarter, but the bigger items are the ones that Jim talked about.
And
So do you give maybe about 3% more price to catch up to raw materials?
I have to think about that. I'm thinking about it in percentages. We're looking at this, Jeff, broadly in terms of what's The dollar impact of raws and dollars. But yes, I think to catch up, we would probably need 3 or 4 to just Catch up and I think we're going to expect to sort of to not just catch up, but make up for what we've been behind here. So that's why you'll see in the Q4 another 6% of 6% or 7% of price in the numbers.
Maybe a question for John. I think your pension income in the first half was up about 7,000,000 And it looks like you probably had another good result this quarter. So maybe for the year, you're going to be, I No, positive $15,000,000 What happens to that number next year? How does it all work? Yes.
Is it that you need like another good return from the market or there's a different underlying dynamic? What do we do about why is pension income so Hi. And what's the outlook for next year?
Yes. I mean the short answer, Jeff, is it is you're pretty much right on your numbers. It's an Outcome of strong returns on pension assets last year. So that number is really known coming into the year. And what we see right now, we expect the number for next year to be similar.
That can change depending on what happens in the market between now and But right now, we assume it will be similar to this year.
But it's right on the budgeted level.
Yes. And then lastly, you talked about the And I was just a little bit puzzled by that. In that, maybe your prices in the quarter were up 6%. So if you annualize that on last year's revenues, that would be about $170,000,000 But your actual prices Maybe we're up 3, which is, I don't know, 84. So I don't really understand where the 200 or 225 going to 400 is.
Yes. $225,000,000 is an annualized value. So you can look at that as what our exit rate was at the end of the year. So Using your math, Jeff, off of $2,800,000,000 that says that we exited the quarter at about 7%, Right. So it's the annualized.
And as I said, that's the way we look at this. Getting the timing is one issue, right, so that we deliver quarters. But the real Important value for our shareholders is we need pricing that overcomes our raw material increases. So year to date, we've agreed and executed $225,000,000 through before September 1 when we took this next big step.
Nice job on. Yes. Nice job on getting those raw materials. The other guys haven't been as fortunate.
It's different raw materials in different situations. But yes, I think it's a great job by our team, and I'll make sure I pass that on, Jeff. So thanks. Okay. See you.
Thank you. Next up, we have Mike Harrison from Seaport Research Partners. Your line is open, sir.
Hi, good morning. And let me add my congratulations on a nice quarter in a challenging environment. Thanks, Mike. Wanted to ask about SG and A as a percent of revenue. You called that out as declining versus last year.
Really looks like it was the lowest in several years. Is that SG and A number sustainable at These levels and maybe can you talk a little bit more about what actions have driven that lower expense?
I think one of the great leverage opportunities for us right now in this inflationary environment is that SG and A as a percentage of revenue is going to go Right. So we don't have as much inflation. And I would say the net net of all this is really positive for Our margin progression in the future. So I wouldn't expect I would expect that SG and A as a percentage in general to be lower going into 2022 and 2023. More specifically, John, maybe you can Sure.
Yes. I think
I would say, Jeff, it's We knew this was going to be a challenging quarter and then we managed expenses really well in the quarter. There were, I'd say, some More kind of one time items that probably won't repeat. We did some variable comp adjustments that had a year to date catch up. I think I mentioned earlier A bad debt recovery. So I would say Q4 will probably look more like Q1 and Q2 than Q3, But I think we're we recognize that in this environment we got to manage SG and A well.
But to your point of a percentage of revenue, it's down and we expect it to be down.
All right. That's helpful. And then a question on pricing. Obviously, you guys have pushed through a number of Increases and now the surcharge. I'm sure that isn't getting a super favorable response from customers, but maybe just So give us a little bit of a sense of how those customer conversations are going, maybe talk about areas where you feel like you're getting pricing a little bit Easily and where there might be some less favorable dynamics either because of weaker demand or competitive dynamics
There are other factors. Yes. You're right, Mike. The customers are frustrated not just by us, but by other materials and what's happening To their prices overall. So I think I said earlier in the year, price increases were going through more smoothly than they ever have.
Well, that's not happening anymore, right? And I think part of it is the And part of it is the magnitude. We were pretty aggressive from a timing standpoint with what we did on September 1 And also with the amount. But we have a good view into the future, and we understand what's needed. We've seen in the 30 days since we've announced Lots of follow on activity from others in the market.
So I think the truth is this has to be done. Customers have to manage it and they're going to manage it down their supply chain. So while the verbal reaction is Not real happy. I think most customers are understanding of the dynamics. They appreciate our straightforward, honest approach.
And up to this point, there hasn't been an impact on volume of any kind of appreciable size. So did you have a second question on
No, no, no. That's you got it. And then the last question I have You talked a little bit about the momentum that you feel like is setting up going into fiscal 2022. I know it's a little bit early, but the consensus number for next year kind of implies like an 11% EBITDA growth From your guidance midpoint for this year, anything you can share at this point in terms of assumptions around revenue growth or margin performance that might help us kind of sharpen our view on what fiscal 'twenty two could look like? Thank you.
Yes. Well, I couldn't have predicted what 'twenty was going to be like or 'twenty one. So predicting 'twenty two is getting more challenging. But I think what we've proven, Mike, it's a really strong resilience in lots of environments. So is it going to be bigger demand, less demand?
Is inflation going to continue? Are things going to abate? Our goal is we're going to deliver double digit EBITDA growth in 2022. We're scenario planning various things that can be happening out there. So No, I think that 10% target is the right target.
I think that's what our shareholders should expect from us. It's what we're showing. We started this year with a 10% goal. People felt like that was a stretch and we're going to deliver closer to 15%. We're starting this year with a 10% goal, and we're going to find a way to deliver that irrespective of the market conditions.
So I think it's certainly a fair way at this point to look at the year. It's certainly how I look at it as we're doing our planning for 2022.
All right. Sounds good. Thanks very much.
Thanks, Mike.
Thank you. And our last question comes from the line of David Begleiter from Deutsche Bank. Your line is open.
This is David Wong here for Dave. I guess in your 3 segments, where do you expect to see the most benefits from price increases and margin improvement in 2020?
I'm sorry, could you repeat the question? It was a little fuzzy here in the Yes. I think it's pretty broad based from where we are today. So I think the Overall, 'twenty one to 'twenty two, we see the same kind of uplift in each one of the businesses. John, do you want
to comment further? I think if you look at the quarter, pricing for all three were between 6% 8%. So there and the actions We took it at the beginning of Q4 are pretty similar in terms of percentage of revenue by GB. So it's pretty even.
Yes. And then just on the 10% volume growth you guys had in Q3, can you comment on how much That 10% was share gains and it seems like you guys are less impacted by raw material availability. So do you expect To get back some of that share gains, you gained during Q3 when the supply chain issues for the industry gets resolved?
Yes. I think I don't want to make it sound like we haven't had supply chain issues, right? We have a lot of them that we're managing. So there are some areas where we've got a little bit of a backlog and we've got some opportunities. So the share gains that we've got is new wins.
Our business is built on our ability to help And I think we're doing that we've always done that well. We're doing that extremely well here in 2020 2021. So those new wins are new products and new ideas that our customers are introducing with our adhesives. And that's broadly across the markets With the most amount of those new wins in our EA business and CA and HHC having similar levels. So But yes, I think there is a bit of pent up demand because we haven't been able to supply some customers.
Our backlogs are certainly as large as they've ever been. So there is some of that here that we see as an opportunity going forward, but our real goal is to supply customers product when they need it, as they need it.
That's our last question for today. I would now like to turn the conference back to our CEO, Mr. Jim Owens for any closing remarks. Sir?
Yes. Well, I just want to thank all of our investors for your ongoing
Thank you, speakers. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may all disconnect.