Doman Building Materials Group Ltd

TSX:DBM

Earnings Call Transcript 2020-Q3

[Operator]

Good day, and welcome to the CanWel Building Materials Group's Limited Third Quarter 2020 Financial Results. Today, this conference is being recorded. At this time, I would like to turn the conference over to Ali Mahdavi. Please go ahead, sir.

[Ali Mahdavi, Head of Investor Relations]

Hello, and thank you for joining us for CanWel Building Materials Third Quarter 2020 Financial Results Conference Call. Joining me this morning are CanWel Chairman and Chief Executive Officer, Amar Doman; and Chief Financial Officer, James Code. If you have a copy of the news release, which was issued yesterday afternoon -- it is available on the company's website at CanWel.com as well as on SEDAR along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight on November 20. Following management's presentation and remarks, we will open up the Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions. Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of CanWel Building Materials Group Ltd., and all of us are executives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I would like to turn the call over to Amar.

[Amardeip Singh Doman, Chairman & CEO]

Thanks, Ali, and good morning, everybody, and thank you for joining us on today's call. Let me begin by highlighting some of our key financial metrics, followed by some color on our operations during the third quarter. And then I will hand the call over to Jay Code who will go further into the numbers. I would like to start by highlighting the efforts of all of our employees across the various business segments during these extraordinary times in which we are living. Our team's steadfast focus and attention on health and safety, combined with solid execution on all business fronts resulted in the best quarterly results in the history of CanWel, with all key financial metrics surpassing previous record levels. The strength in our Q3 results came from the combination of continued strong pricing and volumes in all of our markets, which resulted in trailing 12-month revenues exceeding $1.5 billion, also a new record. Further, our ongoing cost management focused on operational efficiencies enabled the company to realize much of the revenue line gains to the EBITDA and bottom line. In summary, and to reiterate some of my earlier commentary, we are very proud of the strength of our Q3 income statement and believe that there is lots to be gained from the strength and momentum, which has resulted from our success in the quarter. During the third quarter, we experienced an unprecedented 26.5% increase in sales when compared to the same period in 2019. Our treated wood business had particularly strong performance during the period due to the positive impact from increased demand and volumes, coming from consumers spending more time and efforts on home renovation and repair projects. This stay at home and do-it-yourself for innovation in the repair market continued to be extremely robust, and we continue to see this trend moving into the fourth quarter, albeit at lower pricing levels, which are frankly closer to normalized levels and healthier from a sustainability perspective. As a result, I'm pleased to report that during the third quarter, we again achieved record results across our key financial metrics. Revenues increased to a record $472 million, gross margin dollars increased 66% to $86.8 million or 18.4% of revenues, EBITDA more than doubled to $57 million, net earnings more than tripled to $31 million, and a $0.12 per share dividend was paid to all shareholders on the 15th of October. We are extremely encouraged with our third quarter and year-to-date results and continue to build on the decisive steps we took earlier in the year. Through our responsive and focused efforts on operational efficiencies, cost savings, capital expenditure, focus on working capital optimization, we've successfully reduced our loans and borrowings by approximately $78 million when compared to the same period in 2019. We were able to deliver these strong operating results with leaner inventory levels while continuing to meet or exceed customer expectations of product availability. As I noted in my remarks, looking ahead, despite the pullback in the commodity pricing environment in the recent weeks, which is reflective of healthy historic levels combined with the robust demand we are seeing in our key markets, we remain excited about the prospects for a very strong finish in 2020. We remain confident in our ability to look through these extraordinary times while diligently -- while protecting our employees and serving our customers' needs with the highest level of service. We look forward to the future that optimism as our balance sheet provides us the flexibility to pursue organic and acquisition growth opportunities in support of our customers and suppliers. With that, I would like to ask James Code, our CFO, to take over and provide a review of the company's third quarter and financial results in greater detail, and then we will open up the call for questions. Thank you. And over to you, Jay.

[James S. Code, Chief Financial Officer]

Thank you, Amar, and good morning, everyone. Sales for the quarter ended September 30, 2020, were $472.2 million compared to $373.2 million in the comparative period in 2019, representing an increase of $99 million or 26.5% due to the factors to be discussed. Despite the general economic impact of the pandemic sales for the distribution segment increased by $101.7 million or 28.1%, demonstrating the company's continued resilience of steady overall end market demand for its products. The year-over-year increase in the company's sales is attributable to improvements in both sales volumes and pricing. Quarantine-related home improvement activities resulted in increased demand from consumers spending more time and efforts on home renovation and repair projects. Additionally, construction materials pricing generally increased during the third quarter of 2020. The company's sales by product group in the quarter were made up of 65% construction materials compared to 57% during the same quarter last year, with the remaining balance resulting from specialty and allied products of 30% and forestry and other revenues of 5%. The gross margin dollars increased to $86.8 million in the quarter compared to $52.3 million in the same quarter of 2019, an increase of $34.5 million. Gross margin percentage was 18.4% in the quarter, an increase from the 14% achieved in the same quarter of 2019. The year-over-year increase in gross margin is mainly attributable to the previously discussed improvements in both sales volumes and construction materials pricing during the third quarter of 2020. Expenses for the quarter ended September 30, 2020, were $40.7 million as compared to $37.2 million for the same period in 2019, an increase of $3.5 million or 9.4% due to factors to be discussed. As a percentage of sales, expenses were 8.6% in the quarter compared to 10% in the same quarter of 2019. Distribution, selling, and administrative expenses increased by $2.8 million or 10.4% to $29.8 million in the third quarter of 2020 from $27 million in the same period of 2019. The increase was mainly due to increased sales activity, resulting in higher variable personnel costs. This increase was partially offset by a decrease in certain other nonessential operating expenditures as the company continued to take cost reduction measures in response to the pandemic. As a percentage of sales, these expenses were 6.3% in the quarter compared to 7.2% during the same quarter in 2019. Overall, depreciation and amortization expenses increased by $641,000 or 6.3% from $10.2 to $10.9 million, largely as a result of certain previously acquired assets within the distribution segment having been placed in use. Depreciation and amortization expense for the forestry segment increased by $222,000 due to the amortization of certain intangible assets recognized in 2019. The finance costs for the third quarter of 2020 were $3.5 million compared to $5.8 million in the same quarter of 2019, a decrease of $2.3 million or 39.4%. Finance cost reductions were partly due to lower interest rates on the company's variable rate loan facilities and partly due to lower overall borrowings. The decrease in average revolving loan facility was largely the result of the company successfully reducing its working capital levels in response to the pandemic, as the company reduced its total loans and borrowings by $77.9 million relative to September 30, 2019.EBITDA and adjusted EBITDA were $57 million compared to EBITDA of $25 million and adjusted EBITDA of $25.3 million in the comparative quarter of 2019, an increase in adjusted EBITDA of $31.7 million or 125.5%, largely due to the improvements in both sales volumes and construction materials pricing as a result of the previously discussed quarantine-related home improvement activities during the third quarter of 2020. As a result of these factors, net earnings for the 3-month period ended September 30, 2020, were $31 million compared to $6.4 million in the comparative period of 2019. Turning now to the statement of cash flows. In the first 9 months of 2020, operating activities generated $95.9 million in cash before noncash working capital changes compared to $49.5 million during the same quarter of 2019. Changes in noncash working capital items generated $36.1 million in cash compared to $7.7 million in the same period in 2019. In response to the economic uncertainty caused by the pandemic, the company successfully optimized its noncash working capital levels during 2020, resulting in a significant year-over-year increase in cash generated. The company generally experienced higher levels of noncash working capital during the first and second quarters, and a decrease in noncash working capital during the third and fourth quarters, due to ordinary seasonal factors relating to the company's business cycle. The change in working capital in the 9-month period this year was comprised of an increase in trade and other receivables of $91.5 million, a decrease in inventory of $87.9 million, an increase in prepaid expenses of $443,000, and a net increase in trade and other payables and performance bond obligations of $14.1 million. The company's strong operating cash generation performance translated into significant reductions in overall debt levels so far this year. Financing activities consumed $126 million of cash this year-to-date compared to $33.2 million in the same period in 2019. The revolving loan facility decreased by $71.3 million compared to increasing by $21.5 million in the same period in 2019. The significant year-over-year increase in net repayments to the revolving loan facility as a result of the previously discussed reduction in noncash working capital levels during 2020 in response to the pandemic. The company was not in breach of any of its lending covenants during the 9 months ended September 30, 2020. Scheduled repayments related to our nonrevolving term loan consumed $2 million consistent with 2019. Net repayment of equipment loans amounted to $1.9 million compared to $2 million in 2019. Payment of lease liabilities, including interest consumed $18.6 million of cash compared to $17.2 million in 2019, mainly due to certain additional lease contracts entered into during the period. There were no common shares repurchased during the 9-month period ended September 30, 2020, compared to $616,000 in cash consumed to repurchase common shares under our NCIB in 2019. The dividends paid to shareholders during the 9-month period amounted to $32.7 million, consistent with the same period in 2019. The dividends declared and paid on a per share basis were unchanged from 2019. As a reminder, on June 15, as a component of the company's balance sheet flexibility and protection strategy, the Board of Directors adjusted the quarterly dividend from $0.14 per common share to $0.12 per common share, effective with the payment made on October 15, 2020. The investing activities consumed $696,000 of cash compared to $19.9 million in the same period in 2019. Investing activities in 2019 included the Lignum acquisition and the related cash and cash equivalents acquired for a net amount of $14.2 million, with no acquisitions in the 9-month period ended September 30, 2020. The remaining decrease in investing activities is largely the result of the company minimizing its capital expenditures in response to pandemic. Cash purchases of property, plant and equipment were $1.9 million, compared to $5.7 million in 2019. Proceeds from disposition of property, plant and equipment were $511,000 versus $176,000 in 2019, largely due to sales of certain noncore forestry equipment. The company's lease obligations require monthly installments, and these payments are all current. This concludes our formal commentary, and we would now be happy to respond to any questions that you may have. Thank you. Operator?

[Operator]

[Operator Instructions] Our first question today comes from Yuri Lynk of Canaccord Genuity.

[Yuri Lynk]

Amar, I'm wondering if you can just talk a little bit about the current market, particularly availability of supply of building materials, in terms of how you feel about your inventory position heading into next year?

[Amardeip Singh Doman, Chairman & CEO]

Good question, Yuri. Throughout the year, we were struggling to keep up as demand outpace any sort of -- or when that continues. In 2021, we see that demand continuing. Supply has started to catch up as you've seen lumber prices cool, but we're buying appearance grade and 2 better grades, which are kind of the common grade, if you will. Supply is starting to arise, but it's still short on a lot of things and it's still being consumed as we're in -- kind of in November here, the pace has not stopped on the takeaway on either side of the border, so we're extremely busy as we head in. I would say that we're not concerned about the supply levels, but our turns are really fast as we continue to work at this fast pace of the environment that we're in, which has not slowed down at all for us.

[Yuri Lynk]

Just switching to capital allocation. I mean, obviously, this is an unprecedented amount of cash coming in the door. How are you thinking about putting that money to use? And are you thinking at all about reducing debt kind of permanently, if you will, transforming the balance sheet to run going forward with less leverage than you have the last 3, 4 years?

[Amardeip Singh Doman, Chairman & CEO]

Correct, Yuri. That's exactly what myself and the board, and Jay, are working on. So the excess cash will immediately go to debt reduction. We don't have any other use for it, and we're going to look at certain pieces of debt that we have layered in and try to extinguish some of those, obviously, looking at the higher cost debt first. And we will continue to transform the company from earlier debt levels to where we are now and use that cash appropriately to continue to clean up the balance sheet and also less cash going out. We have effectively reduced the dividend to be more of a livable neighborhood for us, which now seems like a very low hurdle mark no matter what metric we're at. We're going to leave that dividend alone to continue to work on a much more cleaner cash flow model for the company and reduce that debt, Yuri.

[Operator]

Our next question comes from Paul Quinn of RBC Capital Markets.

[Paul C. Quinn]

Hey, I know you described -- you're expecting a very strong finish into Q4. So the question, again, how strong? I mean, obviously, lumber prices stayed up until -- until September -- the end of September, and -- but they're still coming -- they came down from high levels to North B prices. In terms of the week, we're really still blown up at record levels. So just wondering how strong Q4 will be?

[Amardeip Singh Doman, Chairman & CEO]

Yes, so I can't put that into numbers, but I'll give you a flavor of kind of Q3 and then leading into Q4. So, of course, Whitewood started to come down, raw lumber. Our guys, as you know, our model is very risk-averse. So we were not buying anything unless it was pretty much back-to-back, being bought and sold at the same time at those high levels. As it started to cool off, like a lot of lumber buyers that -- we backed right off of our buying unless we had to buy it or it was sold. The treated lumber prices are sold ahead. So that certainly helps as far as having price risk eliminated, so that certainly protects us as we're going into the fourth quarter and into Q1.I can tell you, October was extremely strong, and we're not seeing much of a difference in November. Obviously, the prices hit the stratosphere for a short period of time. I think everybody knows that, that was in an anomaly, and it was a true shortage, 17 weeks straight up. And we're certainly leveling, and we're starting to see that strength come back into SPF now, which is boding well for us. And I guess, long story -- bit longer here, Paul, we're not getting hurt on the way down, which is nice in this environment where it's starting to settle off here in the mid-500s.

[Paul C. Quinn]

Great. And then just on capital allocation. It sounds like you're pretty happy with the new reduced dividend level. And the balance sheet seems to be in pretty decent shape. Are we doing a look for a greater number of share buybacks going forward?

[James S. Code, Chief Financial Officer]

Paul, it's Jay here. We are not likely to be buying back shares, the priority, as Amar said earlier, is to bring down that debt.

[Paul C. Quinn]

So I guess the question is, what's the debt level that you feel comfortable with going forward?

[Amardeip Singh Doman, Chairman & CEO]

It really depends, again, that the flexibility, it's really the working capital line. We want to keep that working capital line loaded with availability for 2 reasons: number one, price gyrations in the market. Market opportunity buys on lumber panels. When we need to lock and load, we want to have that availability. And then, of course, M&A activity. We can do these tuck-ins out of our back pocket without having to really do anything to the capital structure of the business. So I mean having all of this room and continuing to pay down those long-term debt notes that we have, gives us a lot of flexibility. And to put that into ratios, I think today, we're dropping into the twos. Twos and the threes is -- we're very happy there. And again, knowing that our working capital is a bit of an elastic band, as seasonality and pricing is a big factor of those things.

[Operator]

Our next question comes from Zachary Evershed of National Bank Financial.

[Zachary Evershed, Analyst]

I was hoping you could give us in the distribution segment, maybe an idea of the split between price and volumes in the lifting sales and impact on margins?

[James S. Code, Chief Financial Officer]

Yes. So the lift in sales, a lot of that was inflation on the commodity pricing. Our volumes were not significantly higher than last year in 2019 up to the third quarter, and I'll tell you why, we couldn't get enough product. So, had we had it, we would have sold it, but everybody was sold out of plywood, OSB, most lumber items most of the year until kind of late August, September-ish, material started to show up as the mill started to catch up after that kind of 2-month shutdown. We would have sold more in volume, but certainly, the inflation was there. And the gross margins picked up due to the price expansion. I can't quantitate all of that for you in detail, it's complicated of all the different lines we have, but it's a significant piece of that big uplift you saw in Q3.

[Zachary Evershed, Analyst]

That's helpful. And then we touched on the potential drag on gross margins from prices coming down, but it sounds like you guys backed away from that. So in Q4, we shouldn't expect any undue drag on gross margins from having bought high and so low?

[James S. Code, Chief Financial Officer]

No, correct. But what you will see is a more normalized gross margin levels as we continue into 2021. Obviously, lumber spiking like it did lift at all boats that were in the water at that time, including ours. So we happily took that, but we're managing ourselves to, I think, an excellent spot here as the things come down, call it, 30% in lumber pricing. And we're not taking losses anywhere. We're continuing to move our inventories and we played it very smart, I must say, and we're proud of that. But we'll start to resume towards more normal levels as we get through Q4. Q4 should be nice. And then Q1 will start to normalize a little bit towards more of the patterns that we've seen traditionally. Unless lumber, as it's starting to firm up again, who knows, but we think we're going to have a more normalized lumber market in 2021.

[Zachary Evershed, Analyst]

Got you. And then in the quarter, SG&A ticked up a little bit as you guys brought on more personnel for the higher sales activity. Are they going to stick around, or should that pull back again as the market gets more balanced?

[Amardeip Singh Doman, Chairman & CEO]

Yes. So Jay commented on personnel, it's really more about our incentive plans inside the company, companywide. All employees, both sides of the border are participating in bonus programs, if you will. So we're earmarking more because, obviously, the numbers are gigantic this year, so that's what that is. So it's not that we hired more or we got fat or lazy on our cost side. We've got leaner and meaner, but there's going to be higher bonuses paid out and Jay's accruing for those activities.

[Zachary Evershed, Analyst]

Perfect. And then on the M&A, the tuck-ins that you guys and you had a pocket, have you been able to travel at all recently for due diligence in keeping tires?

[James S. Code, Chief Financial Officer]

Yes, good question. So we just started our travel activity about 60 days ago, and we have reignited our discussions with certain acquisition targets in the tuck-in space, if you will, that we were talking to pre-COVID. And we resumed those activities, and we're getting closer on a couple of tuck-ins that we'll be able to manage, I think. And strategically, they're going to fitting very nicely into CanWel, so we'll stay tuned for those.

[Operator]

Our next question comes from Steve Hansen of Raymond James.

[Steven P. Hansen, MD & Equity Research Analyst]

Amar, just a question to follow-up on the gross margins around normalizing. I mean, I guess I'm just thinking about the context of $500 lumber really not being that normal. If that's where we're going to sell -- or even 450, frankly. So I'm just trying to get a sense for, how does gross margin trend, if we sort of stay, I'll call it, an elevated band relative to prior levels down in the low threes? Like should we still think about gross margin as being higher, or is it just the movement at the price intra-quarter that's going to make the big difference? Like the lumber was just to settle, just take a number, 450, would we still trend back to that normalized gross margin level, or how do we think about that?

[Amardeip Singh Doman, Chairman & CEO]

Yes, it doesn't really matter. As I mentioned, that rapid 17-week one took everybody up into different gross margin levels, just because look a lot of woods bought ahead on contract, a lot of it mills were shipping late. That led to margin expansion. So when we think about a normal year, if we just -- just pretended that 2021, the thing stays at 450 all year, our gross margins would level back into what you've seen traditionally on our wood products business and our other businesses, treated lumber and everything else. So you would see a normalized gross margin, 14, 15, somewhere in there where we normally trend over time. So I guess the point I'm trying to make is, the gross margin shouldn't matter too much to the effective benchmark price. It should be more traditional, and that there's a bit of an anomaly. But having said that, heading into the fourth quarter, we still have some good steam on that gross margin level, so we're feeling pretty good about the fourth quarter.

[Steven P. Hansen, MD & Equity Research Analyst]

Okay. That's helpful. I just wanted to clarify. And just on the broader environment, Canada versus U.S., noted that the sales level really did move much harder in the U.S., is there anything to that? Just the nuances that activity levels are better down there, you're capturing better price down there? And how do we think about just the slight deviation there between Canada-U.S. revenue growth?

[Amardeip Singh Doman, Chairman & CEO]

Yes. The U.S. revenue growth, up over 30%. It is incredibly busy as we speak. Nothing has stopped. It continues to -- I wouldn't say surprise us, but since April, it's just been full speed ahead, Oregon, California, Nevada, Arizona, which are markets -- we could hardly keep up. There were days where we virtually had hand to mouth out of our plants, whether it's composite decking, railing systems, all of our pressure-treated categories. We had people screaming at us for more product, literally screaming. It was that bad. It wasn't fun for our team. But those are good high-class problems to have during a pandemic, so we're okay with that.But we're starting to catch up a little bit down there. But we're looking forward -- from our retail partners in the U.S., they are scolding us to make sure that we're ready for what they think is going to be a multiyear home improvement, quality, long-term driven sector. So we have to behave accordingly and be ready for them. The thing is right now, it's just hard for us to even build inventory because it's going out just as fast as we're producing and still down there.

[Steven P. Hansen, MD & Equity Research Analyst]

No, understood. And a good problem to have. Just one last one, if I may, is on the forestry side, continue to see a few strains there. Can you just kind of speak to the challenge -- as I know in the past, I believe last quarter, you mentioned you were struggling against the type of demand and just trying to get the guys in the woods. Is it just an operational constraint still at this point, or what should we think about there?

[Amardeip Singh Doman, Chairman & CEO]

Yes, so, a couple of things. So when you see our forestry segment, it looks tiny, it's 6% of our revenue, but that's just the logging side. And of course, we were shut down for so long. All the mills were closed for, call it, 10 weeks. We couldn't ship a long back in the spring, into May almost. We started in June, but then it was tough to get employees back and get restarted. And then, of course, we get some soft weather, then some heat. We're going now well, we switched over almost to a full contractor model in BC and Saskatchewan, we're still using our own logging and trucks and equipment, so that was a bit of a conversion. We're going good now, which is nice. The other part that you don't see is it's mixed in the distribution is all the post and pole business, which is close to 2,000 trucks we're doing there. That was extremely strong off of our own timberlands. We've had a fabulous year in post -- both sides of the border. Binged stakes, hot poles, you name it. We've got a record year on post-sales margin, and that's continuing into the fourth quarter, and we expect a very, very big year in agriculture next year as well. So it's a little bit hidden, but that division is actually operating very, very strong with all the different ancillary products that come off the timberlands.

[Operator]

Our next question comes from Roshni Luthra of CIBC Capital Markets.

[Roshni Luthra, Research Analyst]

I just wanted to ask, how do you expect volumes to be, the year-over-year in 2021, are you expecting them to be higher?

[Amardeip Singh Doman, Chairman & CEO]

Yes. So we're listening to our retail partners. And a lot of them, if not all of them are saying that sales are going to be up significantly next year to get ready, as I was just mentioning the U.S. side as well. They want us to position for a lot of more, I guess, home improvement activity. In percentage, we've heard numbers, and this is just -- some of the retailers are not as bullish as some, but some are saying 35% to 40% up. And I'm not sure that's going to happen, but certainly, we're going to see growth. And also the restaurants, the patios. As we can see, the cases are getting higher, again, as expected, heading into winter. I don't think people are crawling back into their offices anytime soon. And more and more people as we see the residential home sales in the rural areas are growing rapidly in the big cities. That continues, that bodes well for our outdoor living space and all of our construction materials as well. We never really played in the condo market to begin with, with the steel studs in concrete. That was number of our business. So we're quite excited to see the migration go back out of the cities. And we think consumption is going to be up at all levels, and interest rates are going to remain low. So I think we're going to have strong growth on the takeaway side in 2021 as our retail partners indicate as well.

[Roshni Luthra, Research Analyst]

And then just for the commodity or FTF declining now in Q4. How are treatise prices going so far?

[Amardeip Singh Doman, Chairman & CEO]

Yes. So on that, it's really more in negotiations around this time of the year. Certain customers are just on a plain formula, so it trails around and makes print very Friday. So it's a little bit all over the place. But lumber is settling now kind of in the last couple of weeks, it looks like it's found its home for a little while. We think we'll be able to base off of these prices with our larger customers and some of them are already on formula. So that kind of thinking of the market's taken out for both sides of us, and we just kind of roll on. So I think we're going to be okay at these levels and not have any issues as we head into the first and second quarter as far as price problems.

[Roshni Luthra, Research Analyst]

Okay. Great. And then I just want to clarify. I think we say that mainland U.S. has been up over 30% since April or [indiscernible] just want to be clear?

[Amardeip Singh Doman, Chairman & CEO]

It'd be year-over-year.

[Roshni Luthra, Research Analyst]

Year-over-year. And it's the whole region in general?

[Amardeip Singh Doman, Chairman & CEO]

Well, as we look at California, the West Coast of the mainland, U.S., Roshni, versus Hawaii, definitely, the mainland has outperformed Hawaii, and for reasons that are pretty obvious with the impact of the pandemic on the Hawaiian economy.

[Operator]

The next question comes from Steve Hansen of Raymond James.

[Steven P. Hansen, MD & Equity Research Analyst]

Just one follow-up. Amar, do you feel any degree of urgency on the tuck-ins that I know that you described and reentering negotiations? I only ask because it does feel like the market has really heated up on the M&A side recently. There's been a number of transactions across the space, both small and large. Just trying to get a sense for how quickly you feel like you have to act, if this is going to be a multi multiyear sort of sector in, if you will?

[Amardeip Singh Doman, Chairman & CEO]

Yes, it's a good question, Steve. And each acquisition opportunity that we're working on has a bit of a different theme to it. The couple of tuck-ins that we've been working on, we were working on, call it, a year ago. And then we're working into the spring to close. And then, of course, everybody backed up and watched COVID creep in and change everything. So when we look at those opportunities, the good news is, is pricing is still where it was. The businesses have run sound, if not trended up, like everyone has in this industry. So we're pretty excited. I wouldn't say there's a sense of urgency, but there's a sense of confidence now amongst us in the boardroom and with the business activity. We kind of -- everybody knows COVID is here. We know this is going to be difficult. It could be another difficult year, which bodes really well, and I hate to say it, for our industry. It bodes very well. So it's given us the confidence, Steve, to go out and close these transactions, which we're working on right now.

[Steven P. Hansen, MD & Equity Research Analyst]

Okay. And multiples, are they being influenced as well by some of the activity and confidence that you described?

[Amardeip Singh Doman, Chairman & CEO]

Certain sellers will now use this landscape to try and price up. As you know, at CanWel, we're very disciplined on our acquisition models and how we do things, and we're not going to change on that just because things have gotten quote unquote hot. We're going to continue to be disciplined buyers and not move out of our strength zone on those opportunities.

[Operator]

If there are no further questions, I would like to hand the call back to Mr. Mahdavi for any additional or closing remarks.

[Ali Mahdavi, Head of Investor Relations]

Great. Thank you. Once again, on behalf of the management team and the company. We appreciate you taking the time to join us today for the call. We look forward to speaking with you again on our fourth quarter year-end results call, which will be in the new year. That concludes today's call. I'll ask the operator to take over and wrap things up. Have a great day.