Dauch Corporation (DCH) Earnings Call Transcript & Summary

Welcome back, everybody, and thank you for joining us. Next up, we have American Axle, which is a leading supplier of driveline components and powertrain tech. American Axle has done a great job of diversifying its customer base but it's still overexposed to North American light trucks, which actually is a real point of strength at the company, and they're leveraging that to drive free cash flow to delever the balance sheet and ultimately invest in focused growth over time. Today, we are very happy to have Chris May, Vice President and CFO; and David Lim, Head of Investor Relations. Thanks, guys, so much for joining us. We really appreciate the time. I'm going to turn it over to Chris to give some opening comments before we start the grill session on Q&A. So over to you, Chris. Thank you so much.

All right. Thanks, John, and good afternoon, everyone, and thank you, John. Thank you, Doug, and Bank of America for hosting this event. We're certainly excited to participate here today. Before we begin, I would refer you to our forward-looking disclaimer comments that we have on our website at www.aam.com for any of the topics and matters we may cover here today. I just have a couple of very brief opening remarks. I know you all know the industry is facing some well-publicized challenges as it relates to semiconductors and some supply chain challenges and increase in input costs. Our business, as well as the industry as a whole, is being impacted by these items. I expect you'll probably have a little bit in the Q&A session to talk about those. So I'm certainly not going to dwell on those in the opening remarks. Our focus right now as a company, as a leadership team, as a modern enterprise, is really focused on 2 main drivers. On a longer term focus, a longer-term drive, it's certainly increasing and expanding and growing our electrification business. And as you know, we are in the global marketplace today with our product on the I-PACE, on the Baojun E300 Plus and a host of other product set in this space that we're launching during the course of 2021 and 2022. So participating in Europe, China and North America as well from a component side. And we're moving the needle in the electrification space in many different ways. Organically, first and foremost, in discussions with many different OEMs, getting very positive feedback as we display and tease out our next-generation of product set. From a partnership perspective, we continue to expand relationships with Inovance, where we announced a technical agreement to build our next-gen 3-in-1 with them, in addition to the 4 programs that we're launching with them in the China marketplace as we sit here today. We have joint ventures in China that we've begun to launch products set in, in terms of electrification. And then lastly, really to broaden our exposure in the electrification space, we have an investment in REE, which is an Israeli-based firm. Launching, I would call it, e-drive platforms, which is really broadening our application beyond just the light vehicle segment. So we're global, we're focused on next-gen technologies, with a broad platform application that is scalable across many different function sets. That was the first one. And the second item where our focus is today, really focused on very near term, it's of course, building on that momentum that we had on the back half of 2020 with a strong margin performance, strong cost optimization, tightly managing our business, delivering free cash flow and meaningful figures and reducing our leverage position. We think we're in a good spot today with our core book of business. We continue to expand that. We've recently announced long-term next-generation award of the Ram heavy-duty platform that will take us to 2030, which is a key pillar of our company, and we believe these products will sustain our free cash flow generating power for a long time to come. So in summary, we're excited about our participation in the global pivot to electrification. We have a strong core book of business with the potential to generate meaningful cash flow, and we're on a nice glide path for balance sheet improvement. So that's just kind of sets the table. John, I know you and Doug have a whole handful of questions I think you want to cover with us. So with that, I'm going to go ahead and turn it back over to you.

Well, Chris, thank you very much for the opening comments. And I definitely want to get into strategy but let's start maybe -- with maybe some near-term dynamics first. If we think about the disruption in the supply chain, it doesn't seem like it's necessarily hitting you directly on a first derivative basis, but it's certainly creating some volatility, potentially some risk to schedules for the entire industry. So what kind of impact are you seeing in schedules? How are you dealing with it? How are your customers dealing with it? And does this ironically create an opportunity for richer mix, which might benefit for you, specifically?

Yes. No, great question and some pretty interesting points you make through that. But from a broader spectrum, our primary impact to us, at least as it relates to the semiconductor shortage, is more as it relates to our shipments to our customers as they have taken some downtime on select platforms, more focused maybe on the passenger car, crossover vehicle applications. We've experienced some downtime with GM, with Ford, with Stellantis, associated with products we supply through our EcoTrac. On a direct supply basis, we have very minimal impact associated with that. A little bit, but not a whole lot. Manageable at this point. But what is kind of the silver lining for us and you refer to it as a positive mix is about half our book of business is exposed on the full-size truck platform, and you can clearly see our customers very focused in maintaining solid production schedules as it relates to those platforms. And that's really kind of a statement across all of our customers. So we're pleased those schedules continue to remain strong and robust, even in light of the recent chip shortages. And as I mentioned, a little bit of downtime on some of the smaller platforms we supply. So many of our customers have articulated that they intend to make some of this production up in the back half of the year. We see from a capability standpoint, capacity standpoint, certainly a willingness and desire and capability to do so. So I think that's positive for us as well. And we'll continue to navigate through this over the next couple of months. But what it does do, I think it creates a strong production environment, again, on our core products through the balance of '21 and even pushing some of that benefit into '22, with light inventories in the field, strong consumer demand for the products that we supply into -- to our customers. So that's again, from a positive standpoint.

I mean -- and you alluded to maybe making up some of this volume in the second half of this year, some of the stuff that's going on in semis, foam shortage. Once again, the stuff that's outside of your first derivative to you, it seems like some of that benefit may be getting pushed out to 2022. And your products are going to be prioritized or the products that you supply to that are most important to you. But do you see some of that expected recovery in the second half of the year more realistically getting pushed into 2022? Which means that this mix environment stays better-for-you through the course of this year and probably spills over into next year? And then also maybe in addition to that, and thinking about this more structurally, the automakers have been forced into an environment where they can't produce everything, yet demand has been really strong. And they've seen as they produce a richer mix of vehicles, their total profits are going up as are their margins, in some cases, to record highs in the second half of last year. So I mean, we're talking about, hey, I'm giving you -- I'm trying to figure out what you're thinking about this recovery that gets made up. But are you sensing any maybe shift in the thought process that your customers might be willing to lean on maybe a little bit less volume, but a better mix, which is really good for you?

Yes. From a mix perspective, clearly, weighting towards that full-size truck applications that we support is certainly very beneficial to us. You've heard us articulate our margin profile associated with those platforms. And as you mentioned, looking to continually focus the attention on that build both this year and into next year as they simply cannot make enough vehicles to meet demand, they're running all out, and that will create a nice long tee for a long time to come on that full-size truck platforms. In terms of the vehicles that they have lost production on due to semiconductors, making that up in the back half, given the time to make -- to catch up and replenish inventories takes time. So that will also create some level of benefit into '22, as you mentioned as well. As they focus on mix, clearly, their large profit pools are on the full-sized trucks, they do try to push higher mix content from them that benefits the OEM. When they push higher mix content as it relates to full wheel drive or all-wheel drive applications, that creates breakdown into us because that's our core breakwater product that we supply into them, whether it be a crossover or a full-size truck applications. So we certainly see a residual benefit, if you will, as they promote higher trim levels, higher mix, higher concentrations in the four-wheel and all-wheel drive applications. If they're promoting and pushing on the electronic side of the business, infotainment and things like that, that doesn't really directly relate to our platforms. But as they push all-wheel drive, four-wheel drive, higher mix there, absolutely a beneficiary of that, no doubt about it.

Got it. One of the other short-term factors that's spiking is not just demand, but it's raw material prices. So I'm just curious if you can remind us -- I mean, obviously, steel is your -- by far, your biggest raw mat exposure. How does that work? I mean, you're on a 3-year rolling contracts indexing, I think a lot of it is directed buys. But if you could just remind us how you're set up to deal with that, how that flows through to the automaker, a bit of what your exposures are?

Yes, John. No, great question. Obviously, a large component of our cost structure is purchasing components. We buy SBQ Steel, we buy some stampings, we buy direct-to-buy rates and so on and so forth. From a direct-to-buy standpoint, that's typically coordinated by the OEM customer, they handle any increases or decreases with that. So that's really not our exposure. From an SBQ standpoint, we're one of the largest purchasers of that type of steel in the industry and globally, to be frank. So we have some buying power. We typically have longer-term contracts with steel mills. And as you know, steel is tight right now. So we're able to, a, secure supplies that we needed, but also stable pricing going forward for at least the near term as our contracts continue to protect us for that for the course of the year, primarily. A key component, though, into our steel price is indices. So we also pay spot prices for scrap metal, nickel, moly, things like that, that go into the manufacturing of steel, that indexing related cost, we pass on in the form of a price increase or a price decrease depending on the indexing to our end OEM customers and that's by contract. And we pass on about 90% of that change. So we're pretty well insulated. So in a case of a rising environment, we're passing on that price increase, catch a little residual tail, not much. And in a price increase, obviously, we pass that benefit on to the customer as well. So we're protected from that standpoint. So we feel it's a great risk management mechanism for the company. That mechanically resets pricing depending on the customer, every 30, 60, 90 days. So sometimes there's a little lag between quarters on these type of activities. But over a period of time, pretty much neutral for us.

Got it. Then maybe shifting to strategy, sort of bigger picture items. There's a lot of EV OEM start-ups, which is a function of some availability of low-cost capital and some folks that have some good ideas out there. What kind of issue or opportunity do they present for American Axle? And also if you think about sort of the greater shift or the larger shift towards an easy focus by your core customers, is there more risk or opportunity with them as well? So on the incumbents as well as the start ups?

Yes. From a start-up perspective, John, those new EV entrants absolutely create a really interesting opportunity for our company, in particular, and really for a variety of different reasons. Obviously, the new start-ups, they're focused on a lot of different activities inside of their business in starting up. They need technical expertise, especially on the driveline side that would be either through the EDU or through the component side, which is absolutely critical to the function of vehicle, to the noise, vibration harshness of the vehicle. This is technical expertise we can bring. And we continue now to get inbounds to support and been -- participate in that market to support the new entrant OEMs. We've announced a couple awards, if you will, on the components side. We got a little bit generic in the name, but obviously, they've been reaching out to us to participate into that segment. But also, if you go back to some of the comments I made in my opening remarks, right? So we have an investment in green, which I would call a new entrant into the space. But really now expanding our flexible, scalable next-generation drive units, applicable to a platform, not just typical light vehicles. So a further served market expansion for us and a really opportunity to display our product set outside of just the whole light vehicle as well as meaningful content, as well as meaningful growth opportunities for us. So we're excited about the new entrant space. Obviously, there's challenges associated with that, but we think there's some real opportunity for us to participate in the core driveline skill set we bring to the table, is certainly front and center in terms of why they would go to us and select us. The second part of your -- I'm sorry, John.

No, no. Yes, on the traditional OEs, yes, and what opportunity you have with them on each side?

Yes. Look, we have a lot of opportunities with a traditional OEM, our traditional customers or any traditional OEMs around the globe. We've published inside of our -- all our materials you can see on our current IR deck on the slide. We envision by 2030 time frame, we have a certain market opportunity set of $18 billion to $20 billion worth of opportunities to supply full EDUs. We think that will be a balance between some done in-house, some done externally, vis-a-vis the external portion, significant component content opportunity to support traditional OEMs should they choose to do it in-house and not source the full EDU outside. So think of mirrors, differential sets, gearboxes, and it scales up to almost $500 in content per vehicle, just on the component side. So we see real meaningful contribution both on components and full EDUs to support a "traditional OEM customer."

So if we think about Axle's EV product set, can you kind of just give us a rundown of some of the major products, how robust do you think the total portfolio is? And do you need to step up R&D to maybe develop some components or technology internally? Or could this be the kind of thing where you go externally to make some investments in technology that you may end up commercializing yourself over developing -- further developing and commercializing yourself over time?

Yes. No, certainly, as it relates to our EV offering, if you will, it really runs a nice and broad spectrum to serve this market. So it starts anywhere with components in terms of high point gears and shafts, which can only be manufactured by like few of the tolerance levels that's required. That gives us, we believe, a competitive advantage in some of the component space, step up differential assemblies, which we do all day long on the driveline -- traditional driveline side of the house, which is very similar and comparable to the e-drive unit pace. The gearbox assemblies. Up to then, I would call, more of our feature e-drive units. So both front wheel, all-wheel, four-wheel drive applications from an e-drive unit with and without park lock systems, you see those on full display, as I mentioned, on the Jaguar I-PACE, for example, it's a 2-in-1 system that's on the road today, we supply, we were the all-wheel drive to EDUs up to our next-gen of P3 application that we're going to launch here at the end of this year, early next year on a luxury OEM in Europe. So very high-performance oriented, all the way down to our value brand EDU that we have on the Baojun E300 in the China marketplace. And that's very similar to the other products that we're launching in China now today. So scalable, modular, all different power spectrums as it relates to a full EDU application. So product set. Your question then goes to where do we go from here from an investment standpoint. So we are now, as I mentioned, working with Inovance on their next-gen 3-in-1 unit to design and develop. We also have an internal project in terms of another next-gen applications, so sort of 2 entering out into the marketplace. We feel with our technical arrangement with Inovance, as well as our current R&D spend, we are investing into this area the appropriate amount of dollars. It is very competitive in this space for the next-generation of awards with our customers.

So I mean, if you think about one of the great debates in the industry right now is the automakers are getting in-source all the stuff. The axles are not going to -- you're not going to have an opportunity on axles or either torque management or driveline opportunities that I think you probably will, but some people say you won't. Is -- what do you think about this debate? And could we be in a period where early on, the automakers in-source a lot, so maybe they learn and then ultimately boom, they turnaround and they outsource more of it as the investment dollars and the capital outlays are not necessarily something that they -- is core to them and becomes more core to the suppliers like it is right now? I mean, how do you think about this debate? And is it a question of just simply timing, which I probably think it is even if there is insourcing that goes on? But I mean, what are your thoughts and what are you seeing on the business opportunity side actually and bidding, you're actually seeing this stuff?

Yes, we happen to agree with you, by the way, that we absolutely participate with the OEMs in a variety of different fashions in this space. But in terms of our view of whether they're going to do it inside their own operations or do externally, we actually believe it will be a blend of both, we believe that's true. And before we talk about the different opportunity sets, I would like to remind everybody that's listening, on our traditional IC front, that environment exists today as well. The OEMs, our customers we supply to, some do in-house, some do externally and outside. We don't see that much different as we go forward in the EDU space in terms of application where some will do some inside, some will put some to the supply base, but those that do inside in their own operations certainly reach out to the supply base to support from a component applications as well. And they articulated that as much, if you follow some of their commentary that we've talked about, for those that have talked about doing some of the stuff in-house. So we see very competitive in that space in terms of quotation activity. We are seeing all of the above. We are in discussions, quotation activity to do full outsourced EDUs. We are doing quotation activities for gearboxes, for assembly, differentials. We won awards in the components space, both differentials as well as subcomponents. So back to that market value, we see a certain market presence, sort of $18 billion to $20 billion by 2030 would imply a lot of opportunity and a broad spectrum of product sets to support it -- this space. And what you're seeing and what we're hearing as well, is customers -- as they launch into the early days of their products that's obviously getting the technical know-how on their site, getting these smaller volume applications up and running is critical to them. It makes perfect sense, right? But as they expand, the volume expands, they certainly are going to reach back to the supply base to support that growth. We believe our product set gives them a very interesting, both technology and cost proposition, which I think will remain very compelling for us to continue to be a source on a go-forward regions as well as other suppliers as well to support the OEMs.

And another question we get a lot is what is hub motor technology or architectures mean for American Axle? I mean, do you have an opportunity to deliver content there? And also, I mean, I just logically think about hub motor technology, it might not have the same loading and toning capabilities that a traditional body on frame, axled ICE vehicle or maybe axled EV vehicle might have. So I mean, is there a capability difference in what those vehicles with hub motors are that would be perceived as traditional trucks that might not be -- they're not traditional trucks because they're EV but they might not have the same capability? So your opportunity set and what those trucks might or might not be capable of?

Yes. Look, I think this is one of the more really -- it's interesting and exciting elements of sort of the next vehicle type in terms of electrification. There is a variety of different architectures in the space certainly being invested in, designed, developed, which I think creates an abundance of opportunities for those that supply into the base and I'll explain what I mean in a moment. But from a -- like a wheel end application, and there's a variety of different even architectures inside of that concept, our next-generation of e-drive units that we sort of teased up in our IR materials that you can see on our website, are actually capable of supporting that type of architecture, which is one of the interesting things about our next-generation pump technology. You can support pretty much any of these architectures that you're referring to. And when you get into these type of architectures, depending on the application, where you can have a situation where you have a vehicle with one drive unit, two drive units, if you have a vehicle with four, call it wheel end or near -- motors near the wheels, in the hub or otherwise, creates exponential content per vehicle as it relates to these EDU applications. So it's some pretty interesting stuff, some pretty cool technologies. And it depends on the ultimate end vehicle application. And whether they want a flat, strong platform, more space, whether they want to be a little more economical with one power unit sending power to two wheels, that's one of the interesting things about this, but even more importantly, we feel in terms of our next-generation product that we're going to supply into the market is adaptable to all of these different types of architectures that can support wherever the end customer goes. So we think it's pretty interesting.

And I'm sorry, the capability of that architecture on load and towing, I mean, is that something that could compete with a regular full-size ICE truck right now? Or are there some -- I'm just thinking about literally the span across the back of the vehicle in a typical hydroformed or formed frame with your beam axles or independent suspension, can you actually get the same kind of performance out of the skateboard platforms that everybody keeps talking about with these hub motors? It seems like it could be a challenge, and it might not be the same. And it might be too early to comment on engineering capabilities here. But I mean, is it the same or not the same?

You're not going to replicate -- what you're thinking about, you articulated a rear beam axle application on a pickup truck. You're not going to be able to replicate that per se on a skateboard design. But there are other engineering solutions with a battery electric vehicle that can replicate that for the pickup truck. So that would be the application to use more on a pickup truck or heavy-duty truck, if you will, for weight or for towing. Part of the challenge with the towing side isn't necessarily the power, it's the battery consumption, right? So the efficiency of the e-drive units is critical there as well, so it doesn't consume the battery power as it's towing. You're deploying the power for that. You'd have a different solution if you're looking for significant payload capabilities, things like that. More, I would call it, it would look more like a traditional axle and not -- but it's not a flat skateboard or a full axle.

Got you. And maybe just lastly on this. I mean, if you think about the content potential that you have on an ICE vehicle right now versus the content potential on maybe a full-size EV, how do you -- how does that stack up? I mean, maybe if you can give us stack numbers, that would be great. But directionally, is it higher or lower?

Yes. I would tell you on an apples-to-apples basis, the EV or electric vehicles, that vehicle will have higher content. So if you think about our North America full-size truck average, it's call it, $1,500, $1,600 of content per vehicle. If you think about our all-wheel drive application for an ICE crossover vehicles, it's $1,000 to $1,200, it's just where we are. If you take the comparable product we have in the marketplace today on an all-wheel drive application, it's $2,500-plus. If you put -- we've seen, as I mentioned earlier, applications with 1, 2, 3 or even 4 drive units, depending on the power requirements of the vehicle, I mean, it will clearly exceed our ICE content per vehicle. On an apples-to-apples basis as well as you may want more power even on the electrification side, which will create even further CPV opportunity.

Maybe a more mundane question, it just doesn't -- isn't getting any airtime right now. As GM is shipping large full-size SUVs to China, to see what kind of market there is for that, I think they're kind of dipping their toe in the market. I don't know if you've got any insight into your product that is ultimately ending up in the U.S. or North America, in China, but has there been any sort of early indication of success there? Or has that had any change in volumes or production runs that you're seeing at the moment? Or is it maybe just too early days in that experiment?

Yes. I think it'd be a little too early days, and we're the supplier obviously on the full setting SUV. And that vehicle is exporting globally. That is my understanding from GM around the globe. Clearly, demand for that type of vehicle is popular. And I know they'll be pushing in China. They're running all out that facility. So it's hard to tell if they're increasing demand just for the China market. At that point, probably a little bit of early days. I would suspect that vehicle will be well liked in whatever market it's in to be frank.

Okay. No, I agree. I think China is probably an opportunity for trucks that's a bit untapped and maybe it's smaller than the U.S. for now or maybe it's bigger over time. But I think it's -- I think there's a real opportunity there. Okay. Maybe get into some financial questions in -- towards the end of the session here. Obviously, EBITDA margins last year were incredibly strong in the second half. And I think we were in like [18.2%] I think it was the fourth quarter number, as I recall, third quarter was higher than that. A lot of the dynamics that were going on back in the second half last year, are persisting a bit here, where mix is incredibly strong. You guys have -- are great executors. So I would imagine that's probably only gotten better as time goes on. So how do you think about sort of some of the stuff in the second half of last year that may be a bit more transitory and tough to repeat? Or things that seem like maybe they're sticking around maybe a little bit more than you thought as you're heading into 2021? And maybe not even on 2021 specifically, but just generally, maybe on mix and the like sort of normalized over time to be -- pretty impressive performance in the second half last year.

Yes. Well, first of all, thank you for that last comment. It was a tough year, but obviously, we invested a lot of time in tightly managing our cost structure. I think it paid off and the results will speak for themselves. Yes. To think about some of the strong ingredients that created for a very robust margin profile in the back half of last year. It was significant cost-cutting activity, both structural costs as well as temporary costs. There was temporary wage reductions. There was almost 0 travel costs, things of that nature inside of responding to the COVID pandemic that was going on. In terms of our product set mix, clearly weighted more towards North America, clearly weighted towards more full-sized truck in some of our weaker markets like Brazil and India, we're still impacted by the pandemic and we're not at the prepandemic level. So that blending of that mix was favorable for us on a profit standpoint. From a launch cadence perspective where you have some cost to take on new launches, as you know, the OEMs deferred some of that type of activity through the back half of 2020, albeit a few months or 6 months in some of the programs. So we didn't incur some of those type of costs. It was almost a perfect storm, if you will, from a margin perspective. As we stepped into 2021, and we talked some about this on our earnings call and some of our other guidance, right, our objective was to capture the temporary cost reductions that we benefited from in 2020 and convert those to more structural. So that was a top priority for us coming into 2021. We feel we're in good command of that situation in terms of controlling those cost activities and converting that to a more permanent structure to continue to have a strong robust EBITDA performance. Mix is still pretty good for us here in the 2021 time frame. But when it all settles in, we think we can continue to perform in very strong margin profile as a company. Our implied guide that we released in early February was somewhere between 16% and just under 17% EBITDA margins for 2021, which was higher than our original guidance for 2020 a year ago. So you can see us really getting traction on some of those cost savings initiatives, throughput and optimization, capacity alignment with market demand, which creates further margin performance opportunities. We're still attacking all those full force, still restructuring elements of our business to optimize it. And that we're feeling pretty good about it.

I think, Doug, you had a question on the balance sheet?

Yes, sure. Thanks, Chris. I think the last time we spoke, we're looking to take out about 1 turn of leverage in the next like year or so. I guess a few questions. One, where do you see like the optimal leverage for the company kind of as we get out of this COVID and we get a couple of years out? Two, we've seen companies do some balance sheet opportunistic kind of refinancing. You've got a couple over 6% coupons that are callable soon. And you've got that kind of large term loan B chunk out there. Maybe you could help us think about how you want the capital structure look in a few years, your bonds are actually trading very well, so there'll be opportunities. Just wanted to see what your opinion is.

Yes. No, good question. As it relates to our leverage, we closed 2020, right? We were 4x levered. Obviously, our EBITDA was depressed due to COVID, even though it came out strong in the back half of the year, good, meaningful cash flow generation through the course of 2020, but it's landed on a 4x lever. We articulated that through the course of 2021, we expect to improve that leverage profile by 1 turn or greater based on our cash flow and earnings guidance that we provided in early February, to get us towards the end of the year. If you go back a year or 2, you've heard us articulate, our objective is to get more towards that 2x lever, that objective is still a very meaningful objective towards us as a company. So 3x levers at the end of 2021 is not our end goal here, pushing more closer towards that 2x lever, certainly on top of our mind and is our -- and reducing leverage as our top capital allocation priorities as we sit here today. If you talk about where and how we can redeploy either from a debt maturity standpoint or a debt paydown standpoint, at the end of the fourth quarter last year, we took out -- we taxed our debt in a little bit of that term loan B that was put in place in 2017 to support the acquisition of MPG, and it was designed to be prepayable, no prepayment penalty, anything of that nature, easy to execute. That's still -- and it's a secured debt instrument. So clearly, that's in place and designed to prepay. Our unsecured bonds is, starting '25, a couple of them are now starting to fall, as you mentioned, into the callable future. They have a pretty hefty premium yet still associated with the callable feature. But we're continually looking at our maturity table and making sure that that's risk-managed appropriately. We still feel pretty good with where it sits today, right? Our nearest maturity is 2024 and it is those term loans, which are early sort of stuffed and their bonds don't start till '25. But if there's something that makes it economic sense for us to take a look at, we would do that. We have done that often over the past several years. But right now, I mean, we feel pretty good about our debt maturity schedule and time table. And if there's opportunity to improve that any, we would. But right now, we're focused on reducing debt holistically.

Great. All right. Thanks, Chris. I'll turn it back over to John.

Great. And maybe just a last question here, if I could sneak it in. It might be jumping the gun but if you get this leverage under control and get the 2 turns sometime in the next 12, 24 months, how do you think about priorities of cap allocation once you get there? Because it seems like that's something we should all start moving from the back of our brain a little bit to the front of the brain as you're getting closer. So I mean, how do you think about that as a CFO and a management team?

Yes, certainly. Look, I'd say, as I think about it today, right, I mentioned that from a capital allocation perspective, reducing leverage is our top priority. But again, after we've invested appropriately into the business for CapEx and after we have invested appropriately from an R&D perspective, investment in those drive future growth for the company. So those are really our top priorities. Leverage reduction is really from the residual free cash flow that we would deploy. But once you start to approach that 2x lever and start to really meaningfully derisk the balance sheet to where you're not an outlier, for example. I think that really opens the playbook for us to continue to grow the business to continue to think about other options on, I'll call them, shareholder-friendly actions, if appropriate at the time. Really opens the playbook, and it just creates flexibility, which is really what we want to do. But we'll continue to invest in and grow this business. We've seen us make investments in small joint ventures. We picked up a few distressed assets over the last couple of years. I think that's something that's still very meaningful for us. It creates good operational excellence for us, good growth in pockets of areas of our portfolio. We'll look to leverage those and continue to do so. But as we approach a much more delevered company, it creates a lot of flexibility for us. And that's -- we certainly look forward to talking more about as time would consent.

Great. Well, thanks for all the time and all the hard work last year and today. We really appreciate your time and look forward to seeing you guys in person, hopefully, very soon. Thanks so much, guys. Stay safe.

Thank you, John. Thank you, Doug, and thank you everyone, for your time and participation today. We appreciate it.

Thank you.

Bye. Take care.