FMC Corporation (FMC) Earnings Call Transcript & Summary

Great. So I'm here for the next session. Again, we're keeping in the theme of Ag and crop protection. And so today, it's my pleasure to host the session with FMC. As most of you know, FMC is an agricultural sciences company, dedicated to helping growers produce food, feed, fiber and fuel for an expanding world population through innovative crop protection solutions. With me today is Andrew Sandifer, CFO, Executive Vice President of FMC. And again, thank you for coming.

Thanks for having me today.

So obviously, a bit of news in the press this morning. So maybe if you would like to maybe provide some opening remarks in terms of management changes and sort of what we're doing here.

Look, I think everyone likely have seen press releases this morning. Late yesterday, our Board of Directors met and then this morning, named Pierre Brando, our Chairman as both Chairman and CEO. Pierre was Chairman and CEO of the company from 2010 through 2020 and has been Chairman of the company over the last 4 years. He's replacing Mark Douglas, who's been our CEO for the last 4 years, who agreed mutually with the Board to step down. So Pierre is literally starting off as a new employee of the company again today as CEO. Look, it's a big transition but it's not a big transition. Pierre has been involved with this business for nearly 15 years, ran it for 11, has been Chairman working closely with Mark the past 4. So he deeply understands the business. I and the rest of the senior leadership team, most of us have worked with Pierre for years. I've personally worked with -- for Pierre for almost 20 years. So he's someone I know very well and have tremendous confidence and faith in him. So I think investors should feel very, very calm that there's a smooth transition going here. And that certainly appears someone very well qualified to come back and lead the business.

Great. And I guess in terms of the process that occurred, I mean, is there any insight you can give us in terms of what's been driving this? Is it sort of internal decision?

No. Look, I can't really comment on Board deliberations. All I can say is simply, there was an agreement mutual discussion with the Board and Mark agreed with the Board that it was time for him to step down for there to be a leadership change. So with that change, we get the return of a very strong and seasoned leader in Pierre. And Mark will continue as a senior adviser to the executive team through September to make sure we have a very smooth transition.

Okay. And a lot of people have been following FMC in the past. We're very familiar with Pierre, obviously, in the growth that he has been able to deliver in the past. So looking forward to that. Also, in the guide -- in the press release, you reiterated your 2Q guide for revenue and earnings. Any comments on sort of the full year guidance in terms of what...

Sure. I said, look -- again, for those of you who had a lot of news flow this morning, but in the release where we announced the management change today, we did confirm our guidance ranges for the second quarter. So we talk a little bit more about that, if that's is interest to folks. We did not explicitly and are not confirming full year guidance at this time. And the reality of this. Pierre has been involved in this business as a Chairman for the past 4 years. So he is involved. But there's a different degree of engagement in the detail at the country and product level as when you become a CEO. So I just ask everybody, got to get Pierre a little bit of time to roll up the sleeves, get back into the deep -- into all of the details of the business. And we'll come back to you at the August call with more specifics around guidance for the remainder of the year. What I don't want to leave unsaid with that, although we're not confirming or reaffirming any previous guidance dates to the full year, we are still anticipating growth. We still believe this market is -- 2024 is very much a year of transition. We believe this market is transitioning from correction to recovery. The timing and magnitude of that is subject to a lot of volatility. And certainly, if we can talk about our outlook for more near term in the second quarter, where it's a pretty wide guidance range, and that's for a reason. We do think this massive correction. And maybe just if I could for a minute. Since perhaps not everybody is up to date on the FMC story as someone who follows more closely might be. We really have gone through a very massive correction of channel inventories in the crop protection industry over the past 4 quarters. It really started about this time last year, quite honestly. So it's just coming up on the anniversary. And it is the history and a product of only COVID disruption. Now in 2020 and '21, we had tremendous disruption of supply and rapid inflation and the inputs for crop protection chemistry. And it led to some significant overbuying by the channel in 2022, out of the fear of lack of supply, out of concerns rising -- rapidly rising costs. So both trying to hedge potential supply loss and rising for inflation. So we've got into 2023 and the world started settling down a bit and less -- became less disruptive from a supply perspective, interest rates took off. And now that inventory that people are carrying becomes much more expensive. So won't go through -- try not to make this a long explanation of the history, but I do think for folks who may not be as deep to the FMC story or the crop protection industry story. Important to understand, we had a violent reaction to an over buying an overreaction in 2022, with an overcorrection in 2023. 2024, we have said all along is a transition year. We were down significantly in Q1, consistent with the prior several quarters. In Q2, we're anticipating flattish to low teens growth, it's a pretty broad range. And it reflects the volatility that we're seeing in the current environment as we transition from this correction into a new stage of growth for the market. But the one thing you have to remember about this business, the long-term consumption of crop protection products by growers has been steadily increasing for decades, has grown at 3% to 4% compound rate for more than 30 years. We have a pretty long value chain. We as manufacturers -- model is different in every country, but a generalized channel structure. We sell to distributors to sell the retailers who sell to growers. During this period of disruption and then leading to overbuying in 2022, too much inventory built up between the manufacturers and the growers. In the last 4 quarters, we've seen a very rapid and violent correction of that inventory build. Depending on what part of the world and what stage of the channel and what type of product, we are seeing that correction come to an end. We're actually seeing in places where inventories are well below what has been historically held in the channel. We have a few places where we're a little slow to meet an order occasionally because we don't always have every single product on the shelf, someone might want. There's a reason these products are carried in inventory during the growing season. The demand for them can be fickle and hard to predict. When bugs show up in your field, you need an insecticide today. Not 2 weeks from now, not 5 weeks from now, you need it today. So we are seeing these things rebalance. The timing and the magnitude that rebalancing through '24 is a complicated issue we're working through. But I think fundamentals here, the end market demand is still strong. As the channel inventory corrects and we get more in sync, the flow for manufacturers through the distribution channel into the growers' hands, we will see a rebalancing and a rebasing of the business. And that's where we see a pivot back to FMC of old, in terms of our ability to drive growth with technology, with differentiation and with the closeness to customers. And there are certainly places we can flip down here around all those topics. So let me pause there for other questions.

Okay. Great. So yes, maybe if we can sort of maybe dive into second quarter. reiterating the guidance, $170 million to $210 million is the EBITDA range. What are you seeing right now in terms of across the regions and what -- how that compares to what you're...

Absolutely. So yes, as Richard mentioned, our guidance were EBITDA is $170 million to $210 million. It's flattish at the midpoint, versus the prior year period that was pretty significantly impacted by channel inventory correction. We guided intentionally a wide range because we are in a period of transition. We know we're getting to the point where this market is turning, but timing the exact month and day is very tricky. Not only that, there is natural volatility in the Ag business with weather, in particular, in terms of the timing of use of products. So I just would note that. I think right now, we are in a situation where we are tracking where we expected to be at this point in the quarter. Now an important addendum to that statement. Our business is very third month loaded to the quarter. And the current buying behavior of growers, retailers and distributors is to delay purchases to the latest pretty much as they can. So our quarter is heavily weighted to the month of June. It's June 11, there's still 3 weeks to play here. But what I can tell you today, Richard, is that certainly, we are tracking where we expected to be at this time in the quarter when we gave guidance. We're confirming those guidance ranges, and we're going to play out this next 3 weeks. But certainly, there are a lot of factors. There's always weather, there's customer behavior. There's all these things that can impact exactly where in the range we're going to land.

Okay. Got it. And then maybe just briefly on the second half expectations for revenue of over 20% growth and I believe around over 40%, 46% or so in terms of EBITDA growth at the midpoint of your full year guidance. Does that still hold, I guess, in terms of...

So let me -- I'll repeat what I said earlier, but let me build on that. I think today, I am not in a position to really affirm or confirm or update guidance for the full year. I think we're going to give Pierre a little bit of time to get into the details and get comfortable where things he specifically believes things are. What I do want to leave you with, and I want to make sure everybody gets this, we believe we're making that transition. And we believe the market is turning, right? And importantly, we believe we're well prepared to accelerate out of that term. What have we done in the last 4 quarters? We've taken a lot of pain. And the short-term pressures are real, and we acknowledge the performance of the company and not been where we would like it to be. But some of the choices we've made, we've held pricing better than most of our peers. We have not devalued the value of our products and our technology, at a time when there was little to no demand to be had. We have rigorously managed our customer credit. While we've lost some sales, at times, or didn't sell as much as we might have, with less credit capacity, and the ability to respond with demand returns to grow with customers. We've continued to invest in technology and introduction of new products. We have new products, both new formulations and products based on fundamentally new active ingredients like products based of our fluindapyr fungicide, off of an Isoflex herbicide that are really strong performing products. And then as the market gets back to more normal buying patterns, I think you're going to see very, very strong response to it. We've done all that, and at the same time, we're doing a tremendous amount of self help. We're permanently improving our cost structure, improving the effectiveness and efficiency of our backlog, accelerating and getting efficiencies in the way we do early stage of discovery in R&D. They mean that every dollar of growth that we get will drop more to the bottom line. So while I can't be specific about the second half today, to acknowledge it and give me a little bit of room. I have a new boss starting this morning. He's the old boss, but he's the new boss and I want to make sure he is ready to put his marker down on where we are for the rest of the year, the trends underneath it. And going into 2025, I think FMC is very well positioned to rebound and be very successful.

Great. Got it. Maybe we can touch on sort of some of the comments on the cost side. So you have guidance of $50 million to $75 million in cost savings this year. Can you remind us how that is in terms of cadence this year? You're going to see a lot of that in the second half, that should help.

So Rich is referring to the restructuring program that we launched in November of last year. Our commitments to deliver $50 million to $75 million in P&L impact that is net of any headwinds in inflation in the year. We had a $20 million drop year-on-year in SG&A in Q1, and should expect substantial savings in SG&A in Q2. As we're doing some heavy lifting right now, utilizing in the back office, doing a lot of work on efficiency, using automation. And in some cases, some simple AI tools and doing a lot to drive efficiency and standardization. Look, we operate a similar business. We sell crop protection chemicals in 106 countries. There's a lot that we can do on a highly standardized basis. So we've made significant progress on SG&A. I think you should expect to see that kind of improvement. The comps get a little harder in the second half. We stopped spending pretty severely in Q3 or Q4 of last year, but you'll continue to see year-on-year improvement in SG&A throughout the rest of the year. Now we're also working on cost improvement and efficiency even in places like R&D. So to be clear, we are not backing away from our long-term investment in R&D. We are looking for ways to make it more efficient. We had our CTO out talking last week about some of the AI tools and some of the partnerships we have now to help make the discovery process more efficient. I'll defer and refer people to that talk rather than me trying to explain advanced technology that's a little out of my perimeter. But I will say there's a lot of exciting stuff that's going on in driving efficiency and being able to maintain impact and time line of R&D programs while being more efficient on a dollar-spend basis. And then the last piece that we don't talk quite as much about it because it takes longer to flow through our P&L. We're doing things with our manufacturing footprint. We announced a charge at a subsequent event after Q1, where we're making some significant adjustments to our third-party partnerships, including some of our long-term tolling partnerships that will give us some improved cost structure. We've also done some adjustments, obviously, in our manufacturing operations. In the short run, some of those are headwinds as volume variances where we have unabsorbed fixed cost in the manufacturing facilities. But there are some long-term structural things that are happening, not quite as -- not the same magnitude as the SG&A and R&D savings at the moment, but they're there. It's harder to see because there's so many other things moving through the gross margin line. So it certainly suggests you will see continued delivery throughout the year. Most heavy in the first half because the comparables year-on-year for SG&A were sort of undisturbed prior year versus had some pretty significant proved force reductions in the second half last year. But we're very confident that we're going to deliver that $50 million to $75 million in savings in the P&L this year. And it bridges on to the second part of our commitment there is $150 million run rate exiting 2025. Some of this, obviously -- look, we're doing short-term spend control Absolutely. When your volumes drop as substantially as they have, that's you've got to do that. But we are making permanent structural changes. Some of which again, in the manufacturing footprint, will take a little bit of time to flow through the P&L. So we are well on track to delivering that $150 million in run rate savings by the end of '25 as well. And we'll get some more updates on that in the year.

Okay. Great. So maybe turning to the business. Crop Protection, obviously, been very difficult 12 months. You did mention earlier that we are lapping sort of the start of the destocking. But -- and you are pointing to growth over the next couple of years. Can you talk about the new product introductions, NPIs that you've highlighted? Is that driving the bulk of the growth in '24? And then how is that launch? The launch is going to be sort of additive to that '25 as well?

Yes. So let's talk about some of the factors here, '24 and '25. Certainly as we're going through this year, we are -- as I've mentioned, we believe we are moving -- transitioning from correction to recovery, right? And so there is some return of volume and demand that will naturally happen. It's been a full year since this destocking event that began. That doesn't mean we're immediately restocking or returning to prior levels, but moving away from actively bringing down inventories in the channel, we think we're getting to that point. So yes, part of our growth in second half and going into '25 is a return to more normal buying patterns, right? And again, that long-term 3% to 4% growth in crop protection chemical consumption by growers as a base level of where should this market be growing at a minimum, after you get past this big adjustment what's happening in the channel inventory. But specific to FMC, I think a big driver has been and continues to be a new product introduction. So again, for those who may not be as familiar with the FMC story, we're in an industry that the development time lines for new products can be more than a decade, right? A new synthetic product can take 12 to 15 years from the time it's initially discovered to where it's fully commercialized. It's a long process. So when we look at new products, we look at the products that we've introduced to the market in the last 5 years, right? Just given that long development cycle. So the metric that we use, and we refer to as [ MPI ] as sales of products that have been introduced in the last 5 years. As products might be new formulations, improved formulations and improved products based on existing active ingredients or might be from fundamentally new active ingredients. So absolutely, a key driver in the growth in 2024 that we're still anticipating is new product introduction. And throughout this correction, every single quarter, our new products have outperformed the sales of the overall company meaningfully, right? So there's still value in the technology. The market desires and wants the new technology. And often, particularly with new-to-the-world products, there isn't channel inventory of that product sitting there already. This is a fundamentally new product. So it is a great opportunity for us to continue to grow. And it's a big part of our story from '24 to '25 to '26 and beyond. We have 4 fundamentally new synthetic active ingredients. We're in the process of introducing Isoflex herbicide, fluindapyr fungicide, Dodhylex insecticide -- actually herbicide and Rimisoxafen insecticide. Isoflex and fluindapyr, already in early stages of rolling out. It is country by country. It takes time to get registrations. You can't get it all at once, but it slowly builds. We'll be introducing Dodhylex in late '25 into 2026. Rimisoxafen starts in '27. Those 4 molecules represent $2 billion in peak sales by the end of the decade, right? Those are not trivial. And these are very strong differentiated products. In case of Dodhylex is the first new mode of action for a herbicide in 30 years, right? And it's specifically for use on rice as a primary crop. We'll talk a little bit about why that's something that's different about FMC in a moment. But I do think this new product here are a very, very important part of the story with FMC. And what I've talked on so far is just the synthetic side. We've also got a significant platform in biologicals. We have a leading pheromones business, leading technology that really changes the game in pheromones. We'll start commercial introduction with pheromones in Q4 of '25. And that gives a very different complement to synthetic insecticides. So I'll pause there. We can click down if there's interest further. But it's a -- certainly, there's another $1 billion over the next decade of potential peak sales in the pheromones franchise. That's another key driver of an upward tilting trajectory for FMC going forward.

Yes. That's a very great point. And in terms of the growth going forward past '25, '26, there's -- I mean the pheromones business is going to be one of the key drivers. Can you talk about how margins differ between those businesses and...

Yes. So if you haven't commercially introduced yet, what I'm going to talk to you about is what we're expecting, right? But I will say this, that the pheromones business -- just a very, very quick to tutorial. Pheromones amounts are sensing signaling chemicals that insects use to communicate with each other and often, particularly for helping males and females find each other to reproduce. Pheromones have been used in agriculture for many years. You use them to confuse the males. You throw pheromones out in the place, they can't find the females, they don't reproduce. It limits the rate of reproduction for the next generation of insects. They just happen to be very, very expensive to synthesize for traditional methods. We acquired a company in 2022, a company we invested several years before in as a venture investor has a biologically based technology using genetically modified yeast to produce pheromones, and its orders of magnitude cheaper than the synthetic products. So it's both an opportunity to come into a -- bring a product that complements our synthetic insecticides and can be used with them in a very effective way to manage insight pressure throughout a growing cycle, but also tremendously broadens the potential market for pheromone. Synthetically produced pheromones are on the market today, using high-value crops and in greenhouses and controlled environments just as it's so expensive. The real opportunity here is to bring the price point down to a level where you can use them in row crops. So our first commercially launched products is on schedule to be launched in -- soft launch in Q4 of 2025 in Brazil on soybean. So this is a place where there's a huge market opportunity. And yes, our belief economics that we see today, these are above average margin for the company products. And they will be a strong complement to our existing synthetic insecticide portfolio.

Great. One question I get a lot about is the coming patent expiration on the diamide. And you've spent a lot of time discussing this. So maybe if you can remind people sort of what the key drivers are to maintain and limit the impact on your business, the formulations and that type of thing.

Absolutely. So again, some level setting. Diamides are a class of chemistry insecticides. We have two products, Rynaxypyr and Cyazypyr. Rynaxypyr being the substantially larger product. They represent between 35% and 40% of the company's sales depending on the year. As Richard mentioned, they are protected by a broad portfolio of patents, but that patent portfolio is maturing. So the simplest patents to understand the composition of matter patents on the molecule itself for Rynaxypyr actually started expiring in 2022. And those patents have expired around the world. For Cyazypyr, they're continued to be in place for another year or so and then they'll roll off. But it's not just the composition of matter that matters. We have patents on manufacturing processes. Those patents continue on to 2027 and beyond, depending on the specific molecule and country. And importantly, many of the formulations that we sell are themselves patented, including newly introduced formulations that have brand-new patent life starting -- including some formulations we've introduced in the last year. So patents here are a very important part of protecting the strength of this franchise, but they're not the only part by any means, right? Big part of what we do is it's continuing to drive differentiation and understanding of the value of these products, creating growers' minds. We have very strong brands. So we're out there today and people understand that Coragen and Altacor, our products into brand names for formulations of Rynaxypyr. They're products that you know will reliably control your insect pest pressure, right? And that is something that it's not to be underestimated how much that does matter, particularly in markets that are more fragmented and where the communication with farmers has to be more broad-based. So that's a big piece of it. I would point to patents, brands and then continued innovation, right? So it's intertwined with patents. We've continued to introduce higher-value formulations of Rynaxypyr and Cyazypyr-based products. Whether higher concentration paired with other active ingredients to give you a broader spectrum of coverage and more efficacy, more efficiency for the farmer . The reality is that as these patents expire, we do in some certain countries, and will, on all countries over time, have generic competition. The generic competition will be able to enter with very simple older formulations. And I'll put a plug here for those of you who are doing some work to get to know FMC a little better or reacquaint yourself with FMC. I would suggest you might want to spend a little bit of time with our third quarter 2023 earnings presentation, which really lays out the whole patent time line. And with our November 2023 Investor Day presentation, our recently retired Chief Marketing Officer, Diane Allemang, went through how we're going to shift the mix of the diamide business to where more than half of the sales we have by the end of the decade will be from newly introduced formulations. So while we do expect and absolutely have, today in certain countries, generic competition, what they'll be able to compete with is older, lower-performing formulations. While we continue to shift the market to higher performing, higher value formulations on the diamide, and we've had very, very good response and very, very good growth with -- again, with high concentration versions of Rynaxypyr. Tremendous driver of growth in the Canadian market last year. Seeing with value-added mixtures, including patented mixture formulations. We're seeing some very good progress with those types of products in Brazil and other markets. So I think we're very much in middle innings with the story of the diamide franchise through the patent portfolio, through continued innovation, through branding. We will continue to drive significant growth. The reality is they're better performing products than other products in the marketplace, and they have a much more targeted impact. So they're much more environmentally friendly than many of the older chemistries that they continue to displace from the insecticide market. So again, this is a complicated subject, particularly around the patents. Lots of misinformation that's been out there at different times. I'd again refer you to those 2 presentations, [ Kurt ] and [ Pat and I], our team will be more than happy to walk anybody through that in more detail. But I would tell you this, there is a lot of room left for value creation and growth with the diamide for FMC.

Great. In terms of the current outlook in the environment, you've guided to low single-digit price declines this year. Would you say a pricing pressure, is it -- what's been the key driver of that has been competition? You talked about generics, but is it more about competition from other peers or has it been [indiscernible] command?

So look, again, I'm not going to be too specific about the remainder of the year, but where we are to date we've had 3 quarters in a row of low to mid-single-digit price reductions on average. It's not the same in every country or across every product. This is following 2 years of price increases. Just remember, we wrote up an inflationary way of recovering rapid increases in raw material prices. We're at a point now where we're anniversary-ing against in Q3 and Q4 of '24, we'll be anniversary-ing against price reductions we made in the prior year. So it's not that we haven't already taken the meaningful reset in pricing. I think the pricing dynamics are such, one, obviously, yes, you're less differentiated portions of your portfolio are often subject to more pricing pressure, and these products are subject to more supply-demand imbalances. When there's weak demand, particularly in times of very low volume when the channel is actively destocking, it can be hard to hold price. And that's where we've made some tough choices between price and volume over time. So I do think we'll continue to be [indiscernible] price pressure. I do think it varies, depending on the region and the products. But I think it is important to keep in mind, we're at a point now where we're anniversary-ing some of this downward movement in price. And some of that is moving back away from pricing that we put in place to recruit costs from that rapid inflation in '21.

Okay. So as we enter 2025, the expectation of that inventories at that point should be at a place where [indiscernible]?

Yes, I think as we move into 2025, look, I'm very careful about using the word normal because we've been through a period in the last 5 years. I think anybody who tries to define normal at this point is a fool's game. What we are seeing is improving conditions. We are seeing channel inventories reduced. We will see a rebalancing and resyncing of pull-through by growers from all the way back up the channel back to manufacturers, where that's been broken in the past 4 quarters as that channel -- the inventory that built up in between needed to be drawn down. For FMC in particular, as that rebalancing happens, new products, right, amplify the growth. They absolutely do. And along with that, and I'll repeat this, the things that we are doing today to put our cost structure in a better place for the long term, mean that more of that will drop through. And in particular, look, this year, because we've had so much lower volumes, we have meaningful unabsorbed fixed costs that are hurting our P&L. As we start to ramp up manufacturing volumes again, and we're seeing that in our forecast as we're looking forward to the rest of the year. Those go away. And that absence of headwind in '24 becomes a tailwind in 2025, right? So not prepared to put numbers around this just yet today. But I will tell you clearly, there is a tailwind in 2025 from normalizing production levels and the absence of unabsorbed fixed costs. So all of those factors make me very confident that there is a much better 2025 to come here.

Great. And then maybe if you could briefly talk about where we are on the balance sheet and free cash flow generation this year. I think you're targeting roughly 100% of net income in terms of free cash flow generation this year?

Yes. So this year, look, we traditionally look at free cash flow conversion against net income. This year, our guidance for free cash flow that we gave on May 7 would suggest at that time, around 100%. And again, we'll update guidance and give you guidance on the August call so I want to be careful out there about not being too specific. But I think the dynamics here, we were strongly negative free cash flow last year, right? With the drop-off in business, with the collapse in payables in particular, we were profoundly negative free cash flow this year. We have a $1 billion swing at the midpoint of our prior guidance range from free cash flow last year to free cash flow this year. It's driven by lowering inventories and rebalancing payables and inventories as inventory -- as our production normalizes. That range of cash flow that we're anticipating, again, about 100% of net income, 104%. We think our long-term steady-state conversion from net income over -- let's do it over a couple of years. There's always lumpiness in cash flow. It should be around 70%. That's historically what we've generated. We would expect that 3-year average to normalize by 2026. So I think from a cash generation perspective, it's going to be a strong cash generation year. I think that it won't be 100% in 2025. Our business doesn't work that way. We have working capital needs. We do have some legacy liabilities. But it can be substantially -- very substantially positive. So from a free cash flow generation, we'll get the reset this year and we'll turn to more of our patterns. From a balance sheet perspective in general, our leverage is higher than we would like right now. We are bringing that down. It will be through a combination of growing EBITDA. And through deleveraging from the free cash flow that we generate, we'll fund our dividend and then we'll use the rest in all of the other cash flow this year to reduce debt. We're also in the process of selling our global specialty solutions business. It's a small business line that uses similar active ingredients, but for nonagricultural applications like professional pest control that, that process is well underway, and we're progressing quite well in that process. I expect to have some news with that in the second half of this year. And any proceeds from that divestiture will also go to debt reduction. But look, I think as of the long term, and for those who look back at our history and certainly with the return of Pierre to the CEO chair, we've always had a strong philosophy of a balanced return of cash to shareholders between repurchases and dividends. Given the leverage situation right now, we're not in a position to do repurchases, we really need to get leverage back to a more manageable level. We will do that through 2024 into 2025. We'll keep evaluating that as we get leverage to better levels than where we are today. But just over the past 5 years, including the disruptions of 2023, the split of cash -- return back to shareholders has been about 50-50 between dividends and repurchases. So while repurchases are not something that's on the agenda for 2024, as we improve leverage, as we continue to build -- rebuild the balance sheet from that perspective, we will continue to evaluate and look to restart repurchases sometime in the future.

Great. And with that, any last remarks you'd like to make?

Look, again, I think I would just point to it has been a rough 4 quarters. We acknowledge the short-term performance of the company has not been where we want it to be. We are doing the right things to get the company's cost structure and organization prepared. We have protected the margins of our products. And importantly, we protected the quality of our balance sheet from a receivables and credit quality perspective to where we are well prepared to accelerate as market conditions improve. So while that timing and transition may be a little bit bumpy, I think we are very well positioned going through the rest of '24 and into '25 to see strong sales growth and even more importantly, stronger profitability growth.

Great. And with that, thank you for coming.

Thanks for having me. Thank you.