CanWel Building Materials Group Ltd. (OTC:CWXZF) Q3 2020 Earnings Conference Call November 6, 2020 11:00 AM ET

Company Participants

Ali Mahdavi – Investor Relations

Amar Doman – Chairman & Chief Executive Officer

James Code – Chief Financial Officer

Conference Call Participants

Yuri Lynk – Canaccord

Paul Quinn – RBC Capital Markets

Zachary Evershed – National Bank Financial

Steve Hansen – Raymond James

Roshni Luthra – CIBC Capital Markets

Operator

Good day, and welcome to the CanWel Building Materials Group Ltd. Third Quarter 2020 Financial Results Call [ph]. Today’s conference is being recorded.

At this time, I would like to turn the call over to Ali Mahdavi. Please go ahead, sir.

Ali Mahdavi

Thank you, operator. Good morning, everyone and thank you for joining us for CanWel Building Materials’ third quarter 2020 financial results conference call. Joining me this morning are CanWel’s Chairman and Chief Executive Officer, Amar Doman, and Chief Financial Officer, James Code. If you have not seen 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 conduct a 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 following statements regarding forward-looking information, which is made on behalf of CanWel Building Materials Group Limited and all of its representatives on this call remarks and answers to your questions today may contain information about future events or the company’s future performance. This information is subject to risks and uncertainties and 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.

Amar Doman

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 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. Just going through our Q3 results came from the combination of continued strong pricing and volumes in all of our markets, which resulted in trailing 12 months revenues exceeding $1.5 billion also on the record further our ongoing cost management focus on operational efficiencies enabled the company to realize much of the revenue line gains to the EBITDA and bottom lines.

In summary, and to reiterate some of my earlier commentary, I’m 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 and 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 demands coming from consumers spending more time and efforts on home renovation and repair projects.

This stay-at-home and do-it-yourself renovation and 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 the $57 million, net earnings more than tripled to $31 million and the $0.12 per share dividend was paid to all shareholders on October 15.

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 successfully reduced our loans and borrowings by approximately $78 million when compared to the same period in 2019. We were able to deliver the 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 a 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 work 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 with 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 Jay Code, our CFO, to take over and divide 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 Code

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 and 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%.

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 non-essential 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 $64,000 or 6.3% from $10.2 million 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. 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’s successfully reducing its working capital response to the pandemic, as the company reduced its total loans and borrowings by $77.9 million relative to September 30, 2019.

READ ALSO  Hannon Armstrong Sustainable Infrastructure; CEO Is Selling After Great Ride (NYSE:HASI)

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 three-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 nine 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 non-cash 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 is successfully optimize its noncash working capital levels during 2020 resulting in a significant year-over-year increase in cash generated. The company generally experiences 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 nine month period this year was comprised of an increase in trade 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.

Revolving loan facility decreased by $71.3 million compared to increasing by $21.5 million the same period in 2019. The significant year-over-year increase in net repayments for the revolving loan facility is 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 nine months ended September 30, 2020. Scheduled repayments related to our non-revolving 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 nine-month period ended September 30, 2020 compared to $616,000 in cash consumed to repurchase common shares under our NCIB in 2019.

Dividends paid to shareholders during the nine-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 15th 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 payments made on October 15, 2020. 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 of acquirers to a net amount of $14.2 million with no acquisitions in the nine-month period ended September 30, 2020. The remaining decrease in investing activities of is largely the result of the company’s 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 non-core 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?

Question-and-Answer Session

Operator

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

Yuri Lynk

Good morning, guys.

James Code

Good morning, Yuri.

Yuri Lynk

Congrats on a very strong quarter. Amar, wondering if you can just talk a little bit about the current market particularly the availability of supply of building materials and how you feel about your inventory position heading into next year?

Amar Doman

Cautionary, you know, throughout the year, we were struggling to keep up as demand outpaced any sort of level we’ve ever seen before and that continues. So, as we had into 2021, we see that demand continuing. Supply has started to catch up, as you’ve seen lumber price’s cool. But we’re buying appearance grades and Q and better grades which are kind of the common grade, if you will. Supply is starting to arrive, but it’s still short on a lot of things and still being consumed as we’re in the — kind of in November here. The pace is 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 with our turns are really fast as we continued to work at this fast-paced of the environment that we’re in, it’s which is not slowed down at all for us.

Yuri Lynk

Good to hear. 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 three, four years?

Amar Doman

Correct, Yuri. That’s exactly what myself and the Board and Jay are working on. So, the excess cash will be 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. 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’ve effectively reduced the dividend in the more of a livable neighborhood for us which now seems like a very low hurdle marked matter what metric we’re out, 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.

Yuri Lynk

Okay, very good. I’ll turn it over. Thanks guys.

Amar Doman

Thank you.

Operator

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

Paul Quinn

Yes, thanks so much. Good morning, guys.

James Code

Good morning, Paul.

Paul Quinn

Amar, you described, you’re expecting a very strong finish in the Q4. So the question again, how strong? I mean, obviously in lumber prices stayed up until in September, at the end of September and but there still coming, they can go from high levels in OSB prices until mid-week, we’re really still way that that record level. So just to how strong Q4 will be?

Amar Doman

Yes, so I can’t put that in the numbers, but I’ll give you a flavor of kind of Q3 and the leading into Q4. So of course, whitewood started to come down to lumber. Our guys, as you know our model is very risk adverse, 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 and started to cool off like a lot of lumber buyers that we backed write-off of our buying unless we had to buy it or we sold. The treated lumber prices are sold ahead, so that certainly helps as far as having price risk eliminated. So that’s 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 the stratosphere for a short period of time.

I think everybody knows that was an anomaly and it was a true shortage in 17 weeks straight up, and we’re certainly leveling and we’re starting to see that strength come back in SPF now, which is boding well for us. And I guess, long story a 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.

READ ALSO  Every Time Is Different | Seeking Alpha

Paul Quinn

Okay, great. And then just on the capital allocation is you sound like you’re pretty happy with the new reduced dividend level and a balance sheet seems to be in pretty decent shape or we again look for greater number of share buybacks going forward?

James Code

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

Paul Quinn

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

Amar Doman

It really depends what in that the flexibility, it’s really the working capital line. We want to keep that working capital line loaded with availability for two reasons, number one, price gyrations in the market. Market opportunity buys on lumber panels. 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 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, in the threes is we’re very happy there. And again, knowing that our working capital is a little bit over the last is seasonality and pricing is a big factor in those things.

Paul Quinn

Okay, great. Excellent quarter. Well, going to have to look at my model and re-jig it now. Thank so much for that.

Amar Doman

Great. Thanks, Paul.

Operator

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

Zachary Evershed

Thank you. Good morning, everyone. Congrats on the quarter. Also, you can give us in the distribution segment, maybe an idea of the split between price and volumes in the lift and sales and the impact on margins.

Amar Doman

Yes. So the lift and sales; a lot of that was inflation on the commodity pricing. Our volumes were not significantly higher than last year being 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 mills, start the catch-up after that kind of two months 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 is complicated with all the different lines we have, but a significant piece of that a big uplift you saw in Q3.

Zachary Evershed

That’s helpful. Thank you. And we touched on the potential drag on gross margins from price is coming down, but it sounds like you guys back 12 away from that. So in Q4, we shouldn’t expect any undue drag on gross margins from having bought high and sold low.

Amar Doman

No. Correct. You will see it’s a more normalized gross margin levels as we continued into 2021. Obviously lumber spiking like impaired lifted 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 you know 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 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 nicer than Q1. We start to normalize a little bit towards more of the patterns that we’ve seen traditionally, unless lumber as it starting to firm up again, who knows, but we think we have a more normalized in lumber market in 2021.

Zachary Evershed

Sure, thanks. 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 balance?

Amar Doman

Yes, so Jay commented on personnel. It’s really more about our incentive plans inside the company. Company-wide all employees, both sides of the border are participate in bonus programs, if you will. So we are 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 in on our cost side, we’ve got a leaner and meaner, but there’s going to be higher bonuses paid out and Jay is accruing for those activities.

Zachary Evershed

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 and kicking tires?

Amar Doman

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’ve 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 in a fit in very nicely to CanWel. So we’ll stay tuned for those.

Zachary Evershed

That’s great color. Thanks. I’ll turn it over.

Amar Doman

Thanks, Zach.

Operator

Our next question comes from Steve Hansen of Raymond James.

Steve Hansen

Yes, good morning guys. 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 is really that normal, if that’s where we’re going to sell or even 450 frankly. I’m just trying to get a sense for — how does the gross margin trend if we sort of stayed and I’ll call it an elevated bands relative to prior levels down in the low tiers like, should we still think about gross margin has been higher or is it just the movement in the price intra-quarter that’s going to make a big difference? Like it’s lumber wishes to settle at just take a number of 450, will be still to come back to that normalized gross margin level or how we think about that?

Amar Doman

Yes, it doesn’t really matter. As I mentioned, the rapid 17-week one took everybody up into different gross margin levels just because like a lot of boards bought ahead on contract, a lot of the mill were shipping late, that led to margin expansion. So when we think about a normal year, if we just predict — just pretend in the 2021 the things stays at 450 all year, our gross margins with level back into what you’ve seen traditionally on our Wood Products business and our other businesses and 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 what’s the point I’m trying to make is the gross margins shouldn’t matter too much to the effect of benchmark price.

Steve Hansen

Yes.

Amar Doman

It should be more traditional, and that was 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.

Steve Hansen

Thank you very much. That’s helpful. I just wanted to clarify. And just on the broader environment in Canada versus U.S. We noted that the sales level, really didn’t move much harder in the U.S. Is there anything to that just the nuances and activity levels are better down there, we capturing that our price down there, how do we think about just the slight deviation there between Canada and U.S. revenue growth?

Amar Doman

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 was days where we virtually had hand in mouth out of our plants, whether it’s composite decking, railing systems, all of our pressure treated categories. We have people screaming out 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 and 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 multi-year 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, Steven, build inventory because it’s going out just as fast as we’re producing and still down there.

READ ALSO  The Secret Weapon That Will Save Oil & Gas Pipeline Operators Billions

Steve Hansen

No, understood, indeed a good problem to have. Just one last one if I may, is on the forestry side, continue to see if you screens there. i just want to speak to the [indiscernible] I know in the past. I believe last quarter you mentioned you were struggling to get a couple of demand and just trying to get to guys and the woods, is it just an operational constraints at this point or which we think about there?

Amar Doman

Yes, 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 shutdown for so long, all the mills were closed for, call it 10 weeks. We couldn’t ship a lot back in the spring in the 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 doing now well. We switched over almost to a full contractor model in BC and Saskatchewan were 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 it gets mixed in the distribution. It’s all of the post and pole business, which is close to 2000 trucks, we’re doing there. That was extremely strong off of our own timberlands.

We’ve got a fabulous year in posts, both sides of the border [indiscernible] stakes — hop holes, 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 market timberlands.

Steve Hansen

Okay, great. I appreciate color, guys. Thanks.

James Code

Thanks, Steve.

Operator

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

Roshni Luthra

Thank you. Hi, good morning. Congrats on the quarter, Amar and Jay.

James Code

Thank you.

Roshni Luthra

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

Amar Doman

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. 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 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 out 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 the steel studs and concrete, that was never our business.

So we’re quite excited to see the migration go back out of the cities. And we’ve been 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 indicated as well.

Roshni Luthra

Okay. And then, you have just with the commodity or STF declining now in Q4, how are treated prices savings so far?

James Code

Yes. So on that, it’s really we’re negotiations around this time of year, certain customers just on a plane formula. So it trails the random links print every Friday. So it’s a little bit all over the place. But as the settling now kind of in the last couple of weeks, it looks like it’s found its home for a little while and we think we’ll be able to base off of these prices with our larger customers and some of them already on formula. So that kind of thinking of the markets 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

Okay, great. Amar, I just wanted to clarify. I think, we think that Mainland U.S. system up over 30% since April or as of reaching about Honsador which is getting clear?

Amar Doman

It would be year-over-year.

Roshni Luthra

Year-over-year. And are you — and it’s of all region in general?

James Code

Well, as we look at California, the West Coast and the Mainland U.S 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.

Roshni Luthra

Okay, great. That helps, Amar. I will leave it sir, good luck for the next quarter. Thank you.

Amar Doman

Thanks, Roshini.

Operator

The next question comes from Steve Hansen of Raymond James.

Steve Hansen

Hey guys, just one follow-up. Amar, do you feel any degree of verdancy on the tuck-ins that I know — that you described to re-enter negotiations? I only ask because it does feel like the market is really heated up on the M&A side recently. There has been a number of transaction across the space, both small and large. Just trying to get a sense for how quickly you feel like you have to act if indeed this is going to be multi-year sort of sector being, if you will.

Amar Doman

Yes, that’s a good question, Steven. 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 are working on, call it a year ago, and then we were 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 as pricing is still where it was, the businesses of 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 is a sense of confidence now amongst us in the boardroom and with the business activity. We kind of — everybody knows COVID’s here. We know this is going to be a 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.

Steve Hansen

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

Amar Doman

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 got quote unquote hot, but we’re going to continue to be disciplined buyers and not move out of our strike zone on those opportunities.

Steve Hansen

Okay, great. Thanks.

Amar Doman

Thanks, Steve.

Operator

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

Ali Mahdavi

Great, thank you once again. On behalf of our 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 should 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.

Operator

Thank you. Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.



Via SeekingAlpha.com