帕卡 (PCAR) 2021 Q1 法說會逐字稿

Good morning, and welcome to PACCAR's First Quarter 2021 Earnings Conference Call. (Operator Instructions) Today's call is being recorded, and if anyone has an objection, you should disconnect at this time.

I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations. And joining me this morning are Preston Feight, Chief Executive Officer; Harrie Schippers, President and Chief Financial Officer; and Michael Barkley, Senior Vice President and Controller.

(Operator Instructions)

Certain information presented today will be forward-looking and involve risks and uncertainties, including economic and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the Investor Relations page of paccar.com.

I would now like to introduce Preston Feight.

Good morning. Harrie Schippers, Michael Barkley and I will update you on a very good first quarter results and business highlights.

First, my sincere appreciation to PACCAR's employees around the world for their dedication, hard work and upbeat spirit. Throughout the past year's challenges, they have delivered outstanding trucks and services that provide essential goods to our communities. Now as the world moves forward, we have many reasons to be optimistic.

In the first quarter, PACCAR achieved very good revenues and net income. PACCAR's first quarter sales and financial services revenues increased 13% to $5.85 billion, and first quarter net income increased 31% to $470 million. PACCAR Parts increased its first quarter revenues to a record $1.16 billion and Parts pretax profits were a record $251 million, 17% higher than the same period last year. Truck and Parts gross margins increased from 12.6% to 13.4% in the first quarter. And PACCAR Financial had a great quarter, delivering excellent portfolio performance and achieving pretax income of $76 million.

PACCAR is having a tremendous year of new product introductions. In February, Peterbilt and Kenworth launched beautiful new heavy-duty truck models. The new Peterbilt Model 579 and next-generation Kenworth T680 feature enhanced aerodynamics and powertrains that deliver up to 7% higher fuel efficiency. They feature new LED headlights, new Advanced Driver Assistance Systems and a state-of-the-art interior with a 15-inch configurable digital display. Truck owners and drivers will appreciate these and many other features in these great new trucks.

In April, Kenworth and Peterbilt introduced a new medium-duty truck lineup. These vehicles have an 8-inch wider cab, lower cab heights, which makes it easier to get into and out of the truck, best-in-class visibility for enhanced safety and a new premium interior with configurable dash displays. The new medium-duty trucks feature PACCAR's PX-7 and PX-9 engines and the new PACCAR 8-speed automatic transmission.

In April, DAF began producing CF Electric trucks, and Peterbilt and Kenworth expect to deliver their first production battery electric vehicles in the coming months. PACCAR has strategic partnerships with 2 electric vehicle battery providers, CATL and Romeo Power. These 2 excellent partners provide our customers with the right technology choice for their applications.

As the U.S. economy recovers, GDP and industrial production are each projected to expand 6.3% this year. The consumer spending, the housing market and the automotive sectors have strengthened. Good freight tonnage, high truck utilization and a shortage of drivers has created strong demand for PACCAR's premium trucks. The 2021 market size will be tempered by the industry-wide undersupply of semiconductors, and we estimate the U.S. and Canada Class 8 market to be in the range of 260,000 to 290,000 trucks.

The U.K. and European economies are also expected to grow strongly. Economists project U.K. GDP to increased 4.8% and European GDP to increase 4.2%. The 2021 European truck market is expected to increase to a range of 260,000 to 290,000 trucks.

Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services and other business highlights. Harrie?

Thanks, Preston. PACCAR has delivered 42,200 trucks during the first quarter. This was a 3% increase over fourth quarter production despite an end of supply of semiconductors. This was enabled by all the efforts of PACCAR's outstanding purchasing and production teams. Truck, Parts and Other gross margins improved to 13.4% in the first quarter.

Second quarter production has a higher than normal level of uncertainty. Depending on semiconductor supply, we anticipate second quarter global truck production to be similar to the first quarter, with Truck, Parts and Other gross margins also at first quarter levels.

PACCAR Parts had an outstanding quarter, achieving revenues of $1.16 billion, which is 16% higher than the same period last year. Parts pretax profits were a record $251 million. Parts gross margins were a robust 28.2%. PACCAR Parts benefited from strong freight demand and truck utilization, investments in distribution initiatives such as tier feel makes parts and stores and a growing population of connected vehicles with PACCAR engines.

E-commerce Parts sales increased more than 30% in the first quarter compared to the same quarter last year. Parts is a business in which speed of delivery is a major factor in customers' purchasing decisions. Each new distribution center that we open increases sales capacity, parts availability and delivery speeds to customers and dealers. PACCAR will continue its investments in world-class distribution by opening a new distribution center in Louisville, Kentucky next year. We expect second quarter part sales to be similar to the strong first quarter, with full year part sales up 15% to 18% compared to last year.

PACCAR Financial Services benefited in the first quarter from strong new loan and lease business volumes, improved used truck prices and an excellent portfolio quality. Revenues were $432 million, 13% higher than last year. Pretax income was $76 million, 58% higher than last year. The excellent portfolio performance resulted in low past dues of less than 0.5% at the end of March.

In the first quarter, North American Kenworth and Peterbilt used truck pricing increased by 30% compared to a year ago. Kenworth and Peterbilt truck resale values continued to come out of premium over the competition. PACCAR Financial has been increasing its retail used truck center capacity and now has 12 facilities worldwide. Selling used trucks at retail has resulted in higher prices and margins. PACCAR Financial plans to open another used truck retail center in Madrid, Spain later this year.

PACCAR has invested $7.3 billion in new and expanded facilities, innovative products and new technologies during the past decade. Capital expenditures are projected to be $575 million to $625 million and research and development expenses are estimated to be $350 million to $375 million this year. PACCAR is investing in many exciting projects. These include next-generation truck models, zero-emissions and ultra clean diesel powertrains, Advanced Driver Assistance and Autonomous Driving Systems, connected vehicle services and enhanced production and distribution facilities.

We thank our excellent independent Kenworth, Peterbilt and DAF dealers for their support to our customers. Kenworth, Peterbilt and DAF dealers are well capitalized and have invested $1.7 billion in their businesses in the last 5 years. These investments make a significant contribution to PACCAR's truck market share and support the growth of PACCAR Parts and PACCAR Financial Services.

Thank you. We'd be pleased to answer your questions.

(Operator Instructions) Our first question comes from Steven Fisher with UBS.

Great. Just looking back historically, the deliveries in Q2 tend to be higher than Q1. So just on your flat delivery expectations, are you anticipating kind of shutdowns already? And maybe, what's the risk that kind of you can see that delivery number go to the upside for the quarter?

Yes, Steve, good question. It's something that we're all looking at, obviously. You think about the way the industry is working right now, there is an undersupply of semiconductors globally that does affect the truck industry as well. It was what we -- why we delivered 42,000 trucks in the first quarter. I'm so proud of the teams all throughout PACCAR, who brought that up from 40,000 to 42,000. So a nice job by all of them, just really good work.

We do expect that the undersupply will continue in the second quarter, and then begin to improve as we get into the second part of the year. And so that could have some impact on our deliveries as we're in the second quarter, and that's reflected in the flat deliveries for the second quarter.

Okay. And then, I guess, you have the same industry retail forecast for U.S., Canada and Europe. Can you just talk a little bit about the relative confidence you have in each market? Any different risks that you see on either side, where you might see more upside or more downside risk in either of the markets?

Yes. I think both of the markets are performing really well. Our customers are doing well. The economy is doing well. Yes, utilization is high, freight tonnage is good. Spot rates are up. So I think we see a good economy. There's strong order intake. We've had 42% of the orders in the first quarter for Kenworth and Peterbilt to North America. So great order intake. We have a strong percentage of the backlog, 32% of the backlog. And so, our confidence is pretty good that the industry will be able to have the demand for the products, and probably build will be constrained by the supply as we look at the year.

Our next question comes from Jerry Revich with Goldman Sachs.

I'm wondering if you could talk about -- on the new flagship truck products that you're introducing here. Typically, you folks see assembly efficiency gains when you have new product rollouts. I'm wondering if you could just quantify what the increase in automation here is with the new models. And also, is there an increase in terms of proprietary parts content on these trucks versus the prior models that you might be willing to quantify for us?

Thanks for the question, Jerry. I mean, we are really excited about this year in terms of product launches. I can't remember a year where we've had quite so many new product introductions. New T680 and Model 579 are one beautiful -- but from a performance standpoint, up to 7% fuel efficiency is going to mean a lot to our customers. So that's going to be good for the business as well.

The medium-duty product is a brand-new cab, entire new platform. It's a fantastic truck. Both for Class 5, 6 and 7 markets for Peterbilt and Kenworth. And there is a higher degree of automation in the product. So it has more robotic assembly, which is good for us, good for quality and good for our customers. And there is more proprietary part count in the medium-duty and heavy-duty trucks as well. So that's all really good things for, I think, everyone.

And Preston, any chance you might be willing to quantify those 2 pieces, how much are labor hours per truck expected to be down and what's the magnitude of increase in proprietary parts? Would you be willing to flush that out for us?

I can't really flush that out for you in simple. Maybe if we were together, we could spend some time thinking about it, but I think it's a more complicated than a simple answer, Jerry.

Okay, I appreciate that. And then, nice to see the momentum on e-commerce. Can you just frame for us what's e-commerce revenue share of your Parts business today? And is it more profitable than conventional orders? Can you talk about that, please?

The biggest thing with e-commerce is really that the world is changing, as we all know and have experienced, especially in the past year, and we have a great new e-commerce system in place, which makes it very easy for people to order parts, find like-parts in the -- in models or even for other OEs parts. You can do that in your handheld device, you can do it in your laptop. And so the system is fantastic, and that's what's causing the growth and the up to 30% increase we've seen in e-commerce sales. So we just see that as a foundation to what we're doing, and it is continuing to grow as part of the business. And we think it's just -- it's a convenience and a strength for the Parts business in general.

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Okay. And lastly, I'm wondering if you could talk about -- as you look at your supply base, what's the critical count of suppliers that you're monitoring where we might see the issues that we're seeing on the microchip side? How -- in other words, how concerning is the broader supply chain picture outside of the semiconductor shortage that we're obviously experiencing?

Well, I'd start by saying we have a great set of supply base and partners for us around the world. And they do an amazing job of trying to supply PACCAR and supplying PACCAR. This specific issue, semiconductors, comes back to just a handful. And so it's in that handful that we have our concentration and they're located around the world, and we're working closely with our first-tier suppliers and our second-tier suppliers on this and looking for ways to solve the problems. And we've come up with some good solutions and we keep working for the future to get it all put behind us.

Our next question comes from Ann Duignan with JPMorgan.

Can you talk a little bit -- it looked like your deliveries were up quarter-over-quarter in the U.S., Canada versus down quarter-over-quarter in Europe. Can you just talk about the supply chain issues in both regions? It does seem like it's more exacerbated in Europe. Is that what you're seeing also?

And then beyond semiconductor chips, can you talk about input costs and pricing power, whether higher steel prices? I know you're more of an assembler, et cetera, et cetera. But if current input costs prevail, how much pricing power do you have, given where your backlog is and where your share of orders are? I know there's a lot embedded in there. Sorry, but if you could, Preston?

That's great, Ann. It's fine. To begin with on your EU North America question on the semiconductors, I would say that there isn't really any differentiation. This all kind of can come back to the -- really just a handful of suppliers that make wafers, and then those translate out into another handful of suppliers who make semiconductors and those are distributed globally for all industries, obviously.

I know you're really well aware of how the auto and truck industry both are using those components and are affected by it. And we don't see differentiation between the EU and North America. It's really about which chipset is used in whichever vehicle, and that's ubiquitous across markets.

From a cost standpoint, that second part of your question, certainly, there's raw materials impacts in costs recently, whether that's steel or aluminum. That's also true on resins as we saw in the first quarter, which affect plastics. There is good backlog across PACCAR and the industry. And so we do start to see pricing advantage in that. And we think that it's kind of balanced well right now.

So your backlog does include some price increases to offset higher input costs. Is that how I should interpret that answer?

Yes, you should. That's a good interpretation.

Our next question comes from David Raso with Evercore ISI.

In the scenario that you're -- the scenario that you lay out for the year and the industry sales, you're willing to increase your outlook. But where do you see -- just trying to think about '22 a little bit to set up. Where do you see year-end inventory versus however you want to define the historical norms and so forth? And then second part is the inability to ship as many trucks as you would like or the industry would like, how that play into the stronger Parts outlook? Because obviously, you raised that Parts outlook early.

You bet, David. From an inventory standpoint, as we think about it, inventory is relatively tight right now. The industry is at 1.9 months, we're at 1.7. I wouldn't expect to see a lot of change in that through the year, given the demand that's out there for product. So I think we would enter 2022 in kind of a similar fashion. As I mentioned earlier, there's a strong economy, there's strong truck markets, ,and working with our customers, they have the desire for our great trucks that we just have introduced. So we see that carrying through.

I think because there is limitations and build in the first half of the year. It's rational to think that there is a lift in parts just because people are running their trucks for longer periods of time, and that's advantageous to us. And I also think that it has to do with the great systems the team has built. I mean, probably can't overstate how strong a job our team has done putting in distribution centers that are close to our dealers, making it easy for people to get parts the same day, building this e-commerce system, introducing TRP parts and stores, which serves the all-make market very well. All those factors are important in the performance of the record-setting performance our Parts team delivered.

And for some quantification of your answer, for the 1.7 months that PACCAR is at for their inventory and let's say, that remains throughout the year full year-end, how would you quantify that versus F�llenbach normal over your desired levels? And again, if you can sort of quantify the Parts revenue increase, how much was that interplayed from less new sales?

I would -- let me take your second part first and say, I think the biggest percentage of the Parts performance is the team and the business of Parts and our dealers and our relationships with our customers, I think that's overwhelming. I couldn't kind of quantify beneath that. So -- and then from your first part of your question on inventory, I think that inventory is less than normal, but it's not an order of magnitude less, it's just less. So it's probably a fair enough way to characterize it, David.

Our next question comes from Nicole DeBlase with Deutsche Bank.

Just on the second quarter production outlook, I presume that you're kind of assuming that each geography is flattish from a production perspective Q-on-Q. Is that the right way to frame it?

Yes, that's probably fair to look at it. It will depend a lot on where we -- if we have spot shortages of parts, so that would have some impact. But for your generalization, yes, I agree with you.

Okay, got it. And then, you said on the 13.5% gross margin in 2Q, maybe (inaudible) but as we move into the second half and some of these supply chain issues abate and hopefully, production is able to step up again with the strong backlog, how do you guys think about the ability to improve gross margins as we move into the second half?

Sure. I'll ask you -- I'll take the second part of your question. We had some cutting out on the first part of your question, if you can ask that again after we go through this one. But as we begin with this, we look at the margin performance, we're really pleased with the year-over-year growth and the sequential growth that we experienced in gross margins. The teams are doing a good job on that.

We think as the situation gets resolved in supply bases and gets ameliorated in the second half of the year, then we will see improvements in margin. We have built capacity, and we think that there'll be just instructional for all of us to think of margins improving in the second half. And then, if you could just help me back with the first part of your question.

No, you actually -- you captured the whole spirit of it, so we're going to pass it on.

Our next question comes from Joel Tiss with BMO.

All right. So I wonder, can we just talk a little bit about sort of shape of cycle? Can the industry meet these zero-emission mandates by 2024 and 2025 without kind of over-the-road with just doing refuse and port trucks and things like that? Can you help us understand how the cycle looks?

Well, I think there's 2 questions in there. One is the shape of the cycle and then one is electrification strategy. I'd say on the -- where we're at in the performance of the truck market is, I think we're just at the beginning of a really nice steady growth in the truck market. Things are going well. Our business is doing well. Customers are doing well. And just to complement that and a very important complement of that is as these great new trucks we're introducing, the new medium-duty and the new heavy-duty trucks are going to be fantastic for our customers. So I think that's going to help PACCAR in the coming months and years, actually. So I would say, that's an important story.

And the second part of your question was around electrification. And I would say that there, we have great products. We outlined a little bit that in our earnings release and share with you that our thoughts are is we have partnerships with CATL and we have partnerships with Romeo Power in battery pack production, sell production for us, which gives us an array of different technologies we can put into battery electric vehicles. That's important because that enables us to meet different applications for customers. Some people will use the truck for 1 -- 8 hours a day and then park it overnight and can charge it overnight. Others will want multiple charge cycles in a day. That requires different battery types.

So we have that capability built into our systems, which will give us a strong product offering. That product offering will enable us to meet the demands of California, the 15 states or anything else, whether it's port, drayage, medium-duty or heavy-duty trucks.

Our next question is from Robert Wertheimer with Melius Research.

I had two questions. One is just a simple one. You probably saw a Scandinavian competitor reported pretty good orders in Europe. And obviously, COVID and inventories, there's a lot of disruption going on. Just wonder if you could characterize, does Europe feel like there's real and profound underlying strength in the orders, to the extent you're willing to comment?

Sure. I think that we do feel there's real and underlying strength in the orders. We work closely with our customers and our dealers. These are personal relationships and we know them all, and we pay close attention to what that -- what their needs are. So yes, we definitely have a clear eye on their needs and the backlog.

Perfect. So it's not just a catch-up work. Okay, perfect. The second question is a little bit more profound, and I'm not sure how far you're going to be willing to go on it. But you saw too simple kind of throughout a revenue share cents per mile kind of idea on autonomous. You guys are obviously working with folks on autonomous. I'm wondering if you'll characterize what the potential revenue stream for PACCAR are as the years go by. I assume, there's higher content per vehicle, maybe at a decent margin. Maybe there's some autonomous revenues that you get shared or service revenues or whatever. Just wondering about if you could give us any update on the strategy there and the timeline, the potential in terms of revenue for PACCAR?

Sure. On a strategy standpoint, we have a great partnership with Aurora. They're really strong to work with, and we're enjoying that early on. Our teams are together all the time. Our leadership teams are together talking about how we're going to develop these vehicles, and they're very complicated vehicles, we all understand that.

We also continue to have good partnerships with the other start-ups in the valley and others that are using our trucks and working with us on developing autonomous platforms. So our strategy is to work with the best of the best and to contribute an autonomous vehicle platform, which has a lot of technology in it. And then we would provide that to the market space, and that market space would be able to end up relying eventually on PACCAR's product lines and autonomous vehicle platforms in partnership with the autonomous driver to help our customers out. We think it's really going to work well.

As far as predicting revenue streams, I feel like it's a little bit early for that. I feel like there's a lot of development work. There's a lot of regulations, societal work that needs to be taken care of first, and I think we should let that sort itself out before we're making projections that are sure to be wildly wrong at this point.

Our next question comes from Jamie Cook with Crédit Suisse.

I guess just two follow-up questions. One, I think last quarter, when you talked about costs associated with COVID, you were embedding sort of 40 bps of margin headwind in your numbers. Is that sort of tracking where you thought, or what are the expectations for the rest of the year?

And then just a follow-up on Rob's questions on the orders. With Peterbilt and Kenworth, I think you said you're 42% of the order book. Just trying to understand, how sustainable that is? Is it just the new products, or what's driving that market share growth? And are you concerned at all that there's double ordering in the order book, just given the market's concern about supply chain?

Yes, on the corporate cost side, Jamie, I think those costs, as a percentage, have definitely come down over the quarters, and we expect those costs to continue to come down. We do see some more expense last quarter and probably also in the second quarter associated with the undersupply of certain components and the efficiency that those costs. And then going forward, we'll also have some start-up costs for the new products. But those new products will definitely generate stronger margins for us going forward.

Okay, that's helpful. And then just the orders, the sustainability of it and just concerned if there's any sort of double ordering just because of the concerns on supply chain.

I think we kind of tried to talk about that. I think we feel like we know the customers well, work with them and feel like the order board is solid. I mean, this is good backlog. I mean, we have confidence in it.

Our next question comes from Chad Dillard with Bernstein.

So can you talk about your price cost assumptions as we go through the year? Maybe you can compare first half versus second half and how are you thinking about that.

So I think if you just think about it, I mean, we mentioned that we're starting to see price realization that's occurring, and we would expect that to continue through the year. That's generally how we think about it.

All right. And then, can you talk about just your EV order book today? How far out does it stretch? And just remind us, when you think you're going to hit high-volume production in that product line?

I think that for us right now, it's simply about getting the right semiconductor supply in the second quarter. And as that stabilizes, we'll see builds increase, and that's how we're thinking about it. Good order book, good backlog, great production team has done a good job, able to raise production in the first quarter over the fourth, and we think that, that's kind of the trend for the year.

Our next question comes from Ross Gilardi with Bank of America.

Just a couple of questions. Just on the semiconductors press. I mean, what gives you confidence that they will, in fact, be more readily available in the third quarter? I mean, a lot of the recent news flow seems to suggest the tightness could be longer lasting. And previously assumed, I mean, are you actually seeing or hearing anything that supports the view that they're going to become more readily available in the second half than where you're at?

And in terms of general procurement practices, do you see yourselves entering to -- into more long-term supply agreements for semiconductors or any of your other critical inputs just to cope with this, what seems to be some real widespread tightness across any number of different components?

Yes. I think when I look at it, if I think about the third quarter and our confidence in recovery, you'd have to put into construct the fact that there's been a couple unique circumstances in the first quarter. There was a storm in Texas, which took 2 plants down in the Austin area. And so that's a big impact. And there was a fire at a supplier in Japan. That had a big impact.

So as those facilities are able to recover, that will certainly be a help. And I think that there's also been a lot of good work by the wafer manufacturers and understanding the need. So those together, along with our suppliers' forecast, gives us confidence that we'll see improvement into the third and fourth quarter. It's not -- I don't think tightness is going to be eliminated, but I just anticipate that there'll be improvements.

Where PACCAR has done really well is that we -- early on, we already gave very reliable future outlook of our needs to our supply base. So that also means that when things start to recover, that we will get priority in those deliveries. That's what we're assuming.

And then the second part of your question, you asked about procurement practices. And Harrie just said, we do a good job with forecasting and we also do a good job of working with the second-tier suppliers in our needs so that we can have good supply.

Okay, got it. And then can you talk a little bit more about this new medium-duty transmission that you discussed? I mean, is this -- it sounds like a product you're making in-house versus sourcing externally from the (inaudible) of the world. But I just wanted to verify that, is it a fully automatic or an AMT? And just what's the longer plan on -- longer-term plan on transmissions? Are you going to in-source more of your transmissions, much like you've done with your engines?

Well, we have great partnerships in our transmission suppliers around the world. And this will be a -- this is a fully automatic transmission of a torque converter in it. So that's going to be a great, great help for our customers. It goes up to 1,000-foot pounds of torque, 380 horsepower. So it fits perfectly into the medium-duty space. It will give us the aftermarket parts stream that is really advantageous to us. And it allows us to integrate it into the powertrain in a very efficient way to help optimize performance for our customers. So all that together is good for PACCAR and good for our customers.

But Preston, you're saying you have great partnerships with your suppliers. But is this -- are you making this internally, or is someone making it for you?

We are partnered with ZF on this.

Our next question comes from Matt Elkott with Cowen.

I know you guys -- it's good to hear that you -- that the order -- the quality of orders seems to be pretty solid here. But I wanted to ask a question from a different angle. From your conversations with customers and dealers, do you have any reason to be concerned that due to the driver shortage, even though demand for equipment is there, you might some from cancellations because of people's inability to see trucks?

I guess, you could build that scenario, but no, we don't. Just to be simple with that, we don't see that happening. We see the strong demand for the trucks. We see the strong demand for our used trucks as well, which means that there is a need for freight movement. And the economy is doing well, which means people are buying things, and that is likely to continue. So our premium trucks, good used truck business, good order board, all bodes well for a steady good future.

Got it. That's very helpful. And just one more question on the technology front. You guys have been investing quite a bit in-house and through partnerships in technologies. But given the increasing interest in technology, whether it's autonomy or new energy technologies, would you consider kind of taking another look at your acquisition strategy, and maybe consider acquiring companies instead of the partnership model that you've gone with so far?

We look at all options. We don't have a single set of strategy. We just take the best approach that we think is going to provide the best returns for our customers and bring the right technologies to bear with the right economies of scale on a global level.

Our next question comes from Rob Salmon with Wolfe Research.

With regard to your delivery outlook, obviously, there's some supply chain challenges that you talked about earlier. Can you give us a sense of kind of the monthly cadence? Is it pretty similar throughout the second quarter, or are you expecting an uptick kind of later in the quarter, just to give us a sense of upside and downside risk?

Rob, I think it's a little hard to characterize that. I think the teams are moving things around, and we're talking with suppliers. So as there's parts that come available, and they've done a good job of finding parts and we're able to increase the cadence of delivery and other times, we're having to moderate that. And so it's hard to get to on a monthly basis.

Okay. But it's not outsized weighted to the second half of the quarter? Is that a fair characterization, or...

No. No, it's not. It just depends upon the chip and the supplier and where it sits.

Okay. And then...

these things come in batch -- maybe a way to think about it for you is these things come in batches as they're produced. So you might get a batch of parts, which alleviates the supply constraint. Then you might be tight for a little while, somewhere else. So think of it more like that, but it's not a continuous flow.

Got it. Helpful. So kind of the red-tagging effect, if you will, and ability to kind of make up or accelerate or decelerate depending on kind of how the supply chain is working. I guess, looking out in terms of the -- you talked a little bit earlier about kind of some of the new electrification partnerships that you guys have. When I'm thinking about kind of like the early models with regard to electrification, how should I think about the PACCAR kind of proprietary part mix initially? And then how do you see that evolving over time?

Good question. I think it's going to evolve over time to be higher content as we move along as volumes increase and as economies of scale makes sense to do that. So we have great partners, and that's working really well at the -- and we talked previously about hundreds of trucks and use of thousands of trucks. And as it grows, then we'll see probably higher proprietary content come along with it.

There are no other questions in queue at this time. Are there any additional remarks from the company?

We'd like to thank everyone for joining the call, and thank you, Lindsay.

Ladies and gentlemen, this concludes PACCAR's earnings call. Thank you for participating. You may now disconnect.