Graphic Packaging Holding Company (GPK) Earnings Call Transcript & Summary

So good morning, Gabe Hajde here, Wells Fargo paper and packaging analyst, joined by Alex [ Moehring ] my colleague, and welcoming Graphic Packaging, Steve Scherger, the CFO, accompanied by Melanie, VP of Investor Relations. Welcome to the 2 of you. Some of you may or may not be familiar. We're conducting kind of a fireside chat. To the extent that anyone wants to ask a question, I think there's a microphone that can be passed around. But we'll just kind of start right off the bat.

One question that's pretty difficult to pin down, but I think a lot of -- circulating in a lot of investors' minds is like from your vantage point, where do we stand in terms of normalized consumption patterns? So obviously, we had a lot of bouncing back and forth in terms of prepandemic, postpandemic and what the new normal is. So maybe -- and then because you guys have a unique perspective, can you distinguish that at home behaviors that you're seeing? I don't know if Nielsen is the best teller and then your food service business.

Yes. No. Gabe, thanks for taking the time. I appreciate everybody that's attending and those that are listening in as well. And it's a good -- it's a great lead-in question because as we kind of back up and look at the packaging company that we're entirely focused on the consumer and entirely focused on really the day-to-day life of the consumer. And so we're literally in all of our lives every day, as we eat and as we drink, as we navigate around whether at home or modestly on the go. And what's interesting, if you look back over the last 3 years, whether the consumer was kind of navigating through more at-home consumption or they were navigating through an inflationary environment or they had more funds available because of government subsidies and the like, if you kind of stare back through all of that, the business we've built over the last, really, 5 to 7 years, actually has managed through that exceptionally well. So when we had more at-home consumption, folks were at home, we're there. When folks have a little more cash available and they're buying more branded products, we levered that direction. If you kind of run into an inflationary environment, and there's a little bit of headwind on whether it's branded or nonbranded, we're actually weighted that nicely as well. Point if you're on the go, we've got our food service business. So through all of that, we've been able to grow at 3%. And I think it just shows that in the true day-to-day lives of the consumer, there's a reasonable normalization to just the patterns that are happening. And so right now, obviously, we're in an environment where folks are a little more on the go. So our food service business is up nicely and at-home consumption has withheld quite nicely because post-pandemic, more of the working population is spending a little more time at home as part of their work life than they were before. And that -- and there is some positive benefit for us. So all of that, Gabe, just goes down to our confidence that we can continue to grow at 100 to 200 basis points that the consumer has a natural bias towards renewable packaging made from renewable resources that can be recycled because we're entirely a fiber-based packaging company, that the norms, if you will, of consumer behavior patterns really don't move around that much for what we do, just because we're literally operating kind of the nondiscretionary part of your life.

And I guess piggybacking on this, and it's very nebulous at best. But maybe pantry destocking versus kind of your customer destocking. It seemed to maybe hit the boxboard industry a quarter or so later than the corrugate, I'll call cousin, if you will, in fiber-based packaging. But we're also seeing, obviously, that elasticity that we talked about hitting the consumer a little bit. So just how are you seeing that kind of flow through your business at a high level? I don't know whether it's customers managing inventories differently, their discussions with you about kind of planning over the next 2, 4, 3-month period, whatever it is.

Yes. No, it's a great question. And I'll now talk about it maybe a little bit in the here and now because you were touching on it. We're fundamentally about a $10 billion job shops because basically what you need has a born-on date, typically, whether it's a package that is something you're going to consume at home. And so our business is not one where there's a lot of inventory that is built. That being said, if you kind of circle back to a year ago, Q2 a year ago, supply chains were highly disruptive, everybody was ordering everything they could to try to keep themselves in product. And so actually, if you go back a year ago, demand was actually kind of awkwardly high. And then 2 quarters later, Q4, folks kind of stepped back, if you kind of look at our customers and our customers' customers, so CPGs and retailers. And so as we look underneath that, the consumer buying patterns are actually very steady and consistent. But supply chains are moving around a bit because now that we're back in a little bit more of a normalized supply chain environment, which we're in here in Q2 of this year, retailers are doing a little bit of an inventory step back, maybe rather than carrying 6 weeks, they're carrying 4, and that's having an impact on our customers. And so we've talked a lot that occasionally, we may have a quarter where we're either right within our 100 to 200 basis points or somewhere we're modestly below and some over the last few years, we're modestly above. This actually could be a quarter where we're modestly below because you've got heavy demand last year, more normalized this year, the comps are a little more challenging. So that's an example of a little bit of the vagaries that are happening. But for us, that happens a couple of 100 basis points at a time, and our confidence in the 100 to 200 basis points over the mid- to long term is extremely high, which is good. I think it kind of goes to a little bit of -- there is definitely some normalization, which I actually view as good in terms of inventory levels and kind of -- we're servicing our customers better than we were a year ago. And that just speaks to kind of the stability of the business. So I think actually, this normalization is net positive, and it will play itself out for us over a very short period of time.

Okay. One last 1 on this and it kind of goes back to the food away from home versus food at home. I think in 2016, food away from home kind of surpassed food at home consumption. And obviously, like I said, the pandemic changed that. As we're back to consumer mobility, like you said, is there anything that you're seeing in your business that, I guess, when you've said, I reiterated like, "Hey, we still feel really good about the 100 to 200." Is that a maybe graphic-specific opportunity that people should be exposed to by the interval in your stock maybe versus your competitors, that's something you're doing differently, running a different race I think you guys have said.

Yes. No. And thank you for using those terms. I mean we do feel like that we're running a different race and what that actually means is we're entirely focused on being a packaging company. 85% of our top line of our sales are making an end product that you'll carry home as a consumer. We happen to produce paperboard, which we use as our raw material to actually make the end packages, but we think about the business that way. And as such, we run our business to our supply and demand. We're not going to produce a marginal ton of paper just to produce it. We're going to make it because we want to turn it into a package. And we also, and I think it's really critical, if you look back over the last 3 years, 200 basis points of our 300 basis points of growth has come from new to the market products. So real products that were in another alternative, whether they were in a resin-based solution, a foam-based solution, and we've converted those over to fiber-based packaging. It's that confidence that there's a long runway of growth that even if general population, general folks that are eating and drinking stays quite stagnant, we're actually going to consistently take position in a way that it's taking it from other alternatives, not every one, not every case. There are plenty of resin-based solutions that are very ripe for the purpose they're in. But whether it's paper cups to replace foam cups like we're doing with Chick-fil-A right now that we can talk more about or it's other -- eliminating the plastic rings for beverage packaging. It's really that, that I think allows us to speak with some confidence that we can see consistent and steady organic sales growth because of a consumer bias towards our solutions, a recognition that they're more recyclable and made from renewable resources.

I think you guys have defined and I'm kind of going off script a little bit here, but define the $12.5 billion of TAM in terms of maybe replacing polymer-based and some other alternative packaging. Is there a funnel -- like is there a way to quantify that for us or a funnel that you guys look at or a pipeline of whether it's on a project by project basis or something like that? I'm sure there is internally just something that you guys have talked about externally?

Yes. No, it's important. I think one of the things we're really pleased with is when we brought Vision 2025 to life in 2019. We viewed about that there was about a $5 billion addressable market for fiber-based conversions. We now, through a lot of very detailed work, believe that number is about $12.5 billion. And within that, the majority of it is in plastic replacement, plastic foam replacement opportunities. What we've really tried to do is within our organization, it is literally by product, by category, by geography, things that we're targeting for conversion. So it's a billion of these, it's 5 billion of those. And so for us, we want it to be something that's achievable and identifiable. And so it falls within the market categories that we're in. So it's in food, it's in beverage, it's in food service, it's in health and beauty. It's real identifiable packages, perimeter of the store, on-the-go consumption, food service consumption, where something is in an alternative that we believe can be in a fiber-based solution and work effectively. And typically, it's a little more expensive. So the consumer has to have a preference for it and our customers have to see that there's value in making that conversion in the interest of the consumer. And these things take time to do. And then within, we literally, every month, our new product development team gets together, where are we on the pipeline, where are we on the projects, red, yellow, green, where are they in the stage gate, where are we and what we're working on. So it's a very rigorous innovation engine that allows us to track it and be able to talk about it specifically when we get the wins.

Yes. Getting back to the inflation and really shrinkflation is kind of the term that comes to mind. And to be totally transparent, I mean, we're sort of looking at the story, looking at guidance for this year and the Vision 2025 targets and trying to think about where the opportunities are and things like that. But to the extent that it's a smaller package, but the human needs to consume a certain amount of calories on a per day basis, whatever. Is that actually a net positive from a packaging standpoint or -- and again, I know it's a mix of things. Maybe when the price point gets too high in the cereal aisle, then they bend down, they pick up the bag and you don't no longer have a folding carton.

Generally, products end up in the right size for the right purpose. And so while there might be a little bit of shrinkflation, for example, on that cereal box that you're referencing typically because that box, while it may have had 20 ounces in it, if it goes to 18, the box doesn't change. The labeling does what the contents do has to be obviously well managed in terms of the education of that, but it typically doesn't have a huge impact on the package because they may go back to it. They may go back to 20 ounces over time or what have you. I think more importantly, for us, it's more the natural conversion into fiber-based solutions that's really driving our innovation activities, as I was just describing.

Okay. I didn't give you the opportunity, but maybe just so we can get it out there, you talked about maybe Q2, the organic volume number being a bit below the 100 to 200 basis points. To the extent that you guys are comfortable or have made comments about anything to date or something on demand.

Yes. No, I think as I was mentioning, I think that because of a little more challenging comp that we were talking about earlier, I mean, it will be measured in low numbers of basis points. I mean for us, everything kind of operates in the 200, 300 basis points in terms of ranges of activity. So it's -- and I'm just bringing it up because when you stare through the quarter, and then probably look out towards Q4 last year, quite light. I think we'll probably see that probably normalize quite comfortably. But I'm just bringing it up because we talk very openly about there may be an occasion. And so if there is an occasion, it doesn't change at all the line of sight to the 100 to 200 basis points, but you're just managing through the vagaries and the realities of how volumes flow within the industry and within our business.

One of the questions that we get from investors often is compare, contrast your business versus one of your larger peers who has kind of both sides of the house in terms of corrugated and consumer packaging. And something that I didn't fully appreciate was kind of the go-to market. And really, at the end of the day, your product is viewed as like a billboard and a marketing tool versus a brown box that ends up in the warehouse or in the storeroom somewhere. So I'm just curious how that conversation goes with the large CPGs and the value add there versus, again, alternative fiber base?

Yes. I mean -- and I appreciate you raising that. I mean I'll just focus on what we do and it's a little bit when we talked at the beginning, I mean, we play a role in helping our customers, the CPGs win. And so the package needs to be highly functional, it needs to jump off the shelf. When you're actually shopping, it's got to be that moment of truth that it's printed well, it's glossy, it looks great, and you want to buy it. And as I mentioned earlier that literally 85% of everything we do is that. And so we're in our customers' lives. We're in their marketing organizations. We're in their innovation engines. We play a role in their ESG goals. If you look at some of the things that we're doing, which I think are quite relevant, many of our customers have set very significant goals for greenhouse gas reduction for recyclability, renewability. We're uniquely positioned to assist them with that mostly in their #3 in the 3 category, where we play a role with our investments in Kalamazoo, the inventional investment in Waco. We're taking material greenhouse gases out of our production processes. And as such, we play a role with them, not only in the design and innovation side, but also in their environmental commitments.

In terms of your customer mix, I think you guys have talked about something that again, that investors are sort of asking about and thinking about as we navigate, let's call it, the next 12 to 24 months. Your private label exposure versus kind of your branded and to the extent you do get the trade down. What that looks like for you guys?

Yes. No, it's important. I think much of what we've done over the last 5 to 7 years from an acquisition perspective was actually building a business, a packaging business that looks like the consumer when it comes to buying habits. So we're now nicely weighted 80/20 branded private label. We're nicely weighted big food service business, $1 billion-plus food service business and then an at-home business. We're nicely weighted North America, Europe. So that weighting for us, as I was talking to you literally going back to your first question, has allowed us to navigate through what are natural movements in how and where people consume. And the food service side has been very interesting because as we watched COVID play out and we went through the realities of COVID inflation at home back on the go, the drive-through is -- in the United States, has won. And that is a place where we're successful because we're making 30% of all the cups in the country. Cups on the go are something that work for us as consumers. And as consumers have had to deal with significant inflation, a lot of the away-from-home consumption has actually gone from what used to be your fast casual sit-down experience at Shoney's or an Applebee's to now being through the drive-through just because inflation has been very high on that other side. We don't play there. And so the drive-through winning the day has been important. You can see many of the QSRs are investing behind that in a way that we're participating in, whether it's cups or other containers that are moving towards fiber-based alternatives.

Part of that could be a labor availability issue or some times you go to -- open the door and it's not opened, so you got to go through the drive-through anyways.

It is absolutely right. And you're now seeing many QSRs who are literally building out their franchise around the drive-through, Chick-fil-A is a phenomenal example. Their service profile, 2 drive-throughs, multiple people at it, exceptional service, get you in and out and the less traffic through the store. It actually is a productivity tool for them as well because you have less activities labor-wise within the store to manage everything from pickup, cleanup, restrooms and the like. So I think that's a trend that I don't think changes anytime soon. And frankly, most folks don't mind if they can go through the drive-through and it works and they're heading to work or they're heading to the home. It's brought to them and it's in your hands at a time that works best for you.

I guess we mentioned or you have mentioned a couple of times maybe you're trying to beat me a little bit, but talk about the new opportunity with Chick-fil-A on the cup side. I think it was actually a national launch, which means that it's been in the works for a while.

Yes. We've been -- Chick-fil-A, we have a phenomenal relationship with them. We've been a supplier to them for quite some time, making some of their other product categories, making some cups, but not the ones that we're creating. We've been working with them for multiple -- for a couple of years. And because this is a significant decision to move away from a foam cup. That's been at the core of how they've delivered beverages for a long time. And I think they've come to recognize that there may be an alternative here that could be the solution we brought forward. And it's a unique cup. It's a double wall cold cup, I won't over pour you with the details, but in essence, it's 2 cups. It's got 2 layers to it, and there's an air pocket between the first and second layer, intellectual properties that we're actively pursuing. And the cup just works. It can sit here with the traditional 64 ounces of tea or something, who knows how much 32 maybe. And it isn't going to sweat. It's going to function. It's going to operate in a way similar to that foam cup that it has historically, but it's a better product made from renewable resources. So they're testing 10% of their store infrastructure right now that's going to play out over the summer. We're working hand-in-hand with them to make sure that it's working extremely well, and there's the potential for a very large rollout. And to put it into context, there's still 20 billion, 25 billion foam cups in the U.S. that are -- could be capable of being converted. Chick-fil-A would be a leader in that regard if they pursue the full transition. We're just chatting a minute ago, we just spent last week in Europe in 4 different cities with investors, and there's not a foam cup in sight in the whole of Europe. And so they've made the transition. This transition will take place here, and we've got a solution we're excited about.

And that's polystyrene specifically and then there's another 20 billion on top of that.

That's in plastic cups.

Polypropylene.

Yes. Yes. Yes, there's a $45 billion cup market out there, foam and plastics that are addressable. And like we said, we don't win every jump ball on plastic. There's been some instances where things moved around a little bit. But I think foam is definitely line of sight for conversion here over the -- certainly over the next several years.

And can you maybe size it up for us just in terms of, if you have the SBS predominantly, that's the grade that we're talking about. How much of that business, maybe 40% or so is food service today?

Yes, roughly of the 1.2 million tons of SBS that we produce roughly 400,000 tons or so kind of sits inside of what are cups today. What's great about the platform is that we can make cup stock across the whole 1.2 million. So if we need to make conversions out of traditional folding carton, we can make cup stock, which we're excited about, because it's a great mix enhancement for us. It's integrated. It's our end product. And it's one of the reasons, as you've seen us invest within our paperboard system, SBS, CUK, CRB. We're driving on our incremental capacity investment into CRB, holding basically the virgin paperboard grades pretty stable. And then growth will be generally supported by recycled products that we believe can be -- will be the place where the growth, where we manage it, which allows for incredible enhancement as, for example, if cups become the kind of growth engine even beyond where they have been into the future with the examples we've been talking about, where we can mix enhance that SBS platform in a pretty substantial way. That's very valuable.

Am I hearing that you wouldn't need a lot of investment on the cup side, on the converting side or across the board?

We really need no investment on the paperboard side. The investment would be on the cup making side. And that's the investment that will fit inside of our 5% of sales over time to support the growth. But it will be cup making capability, converting capability to make a cup as opposed to the paperboard, which is great, because as is well chronicled, that's pretty large investment to make paperboard investments. We don't have to make that here.

Okay. Switching gears a little bit. One of the things, I mean, obviously, kind of putting numbers down, the guidance this year has been raised or at least the low end, therefore the midpoint. From your vantage point, what's enabled you to do that?

Well, it's several things. It's executing on the things we control. We view the business as a business that we control that we're responsible for. And as such, consistently being able to grow organically and earn on it, getting returns on the large capital investments that we've made like Kalamazoo. Having $130 million of EBITDA improvement come in over a 2-year period of time, a big deal for us in addition to the high-quality CRB that we're now producing. Price execution, critical in literally unprecedented inflationary environment, getting the synergy value on our acquisitions. And so really, it's how we've allocated capital to drive real returns in terms of the capital that we've invested in Kalamazoo being a specific example, earning on organic sales growth, executing on price to offset commodity input cost inflation, acquire business as well, get the synergies. And that's resulted in a business this year that will be in the $10 billion range and have a margin profile consistent with at the midpoint of the guide, 19%, consistent with our aspirations and getting there is an important part of the journey. And as we'll probably talk in a moment, the where to from here is equally as important.

It is. So one of the things that's -- to be quite honest, and we were kind of coming into the year and thinking about the first half versus the second half, we don't get the data as much on a real-time basis, but the operating rates for the mill system, specifically. And is there anything operationally that you guys are doing differently? And I know kind of economic downtime or maintenance downtime is a little bit more -- it's easier to do for a recycled mill versus a virgin mill kind of continuous on digester. But is there anything that you guys have maybe done that you haven't talked about to mitigate kind of the downtime impact economically or just from an operational standpoint?

Yes. No, I think over the years, we've learned a lot. And really for us now, as we were talking a little bit earlier, it's have the ability to run to your demand and have good visibility over a reasonably short period of time with good visibility on what is that demand. And then when you're running large assets like paperboard mills, you take natural maintenance downtime. And so utilizing those events where you're going to take downtime to keep your assets well maintained and using that period of time to adjust and modify on the edges around, okay, do I need the demand or not to meet our packaging needs has really been a way that we've kind of dialed in to keep costs down, to keep margins where they are as opposed to kind of stop and start on that. And so I think we've learned a lot about how to, if you will, kind of dial in our 100 facilities that are doing the converting in the 6 major mills. We have more with the major mills that are doing the paperboard production and really kind of making sure that we're matching our supply with our demand based on what we know, so that we're not building inventory unnecessarily and keeping those backlogs and operating rates in good normalized levels.

Okay. Does anything -- I guess, something that we've noticed obviously over the past, call it, 2, 3 months is pulp prices have really come down. And for nonintegrated maybe paperboard producer in other parts of the world, one of which you're not, you're fully integrated. But does that maybe risk sort of the Goldilocks scenario that we've been experiencing. Again, sort of not in a negative commentation just thinking about some win blocks that could come up here.

Yes. No, you're saying it. In the world that we're in, everything is rolled over and we haven't. And so I think that really just comes down to what we're talking about earlier, which is a demand environment that is steady and modestly growing, that's important. A capacity environment where there's very limited capacity coming into our markets in terms of where we participate and industry structure, obviously, that has characteristics to it that are reasonably consolidated. And a growing consumer demand kind of as I was just saying. So I think all of that together has resulted in a stickiness to the pricing that we've executed on. If we just really kind of look out into the future, what you're seeing us do as a packaging company is earn the right to get to the margin profile that we're at, which we've kind of gotten there. Now the go-forward plan is really operate within a pretty narrow window of margins, EBITDA margins, kind of 19% to 20% is where we're at. Keep it in that kind of a ZIP code, manage supply-demand extremely well so that you don't have nearly the variability that would have been traditional in other fiber-based alternatives. And that requires demand for what you do in matching supply and demand for the things that you make, and that's really what we're navigating through right now is, in many ways, because true commodity input costs have kind of normalized, and this year, we'll experience pretty benign inflation on a relative basis that we've said low end of our range of $100 million to $300 million, that's pretty limited in inflation. So really, so much of this is about price stability. And so price stability is critical. And we've talked very openly. I mean we've raised prices materially $350 to $500 a ton across our substrates. I mean, could you see some wiggling around a few dollars here and there that's plausible because as you do get some commodity costs rolling over. But that will be done in the context for us of operating within a margin profile that's steady and consistent. And that's the testable hypothesis for the business that we're executing on right now.

No, I appreciate that. I mean, I think looking across the space overall and that this is the one standout where it's kind of going through its own evolution in a microcosm. So maybe focusing on the Vision 2025. And again, you guys are kind of within spitting distance, if you will, to the low end. And we were talking before a little bit about bandwidth. So you guys are executing a pretty big project, cultivating the returns from Kalamazoo. Waco is $1 billion investment or so that you're executing on. I think it comes online at the end of 2025. And that's supposed to get you some material returns beyond that. But to get to, let's say, the midpoint of your $2 billion to $2.4 billion of EBITDA might require some M&A. So right now, I think the target for the end of the year is 2.5 on the leverage profile. How do you manage that? And are there things maybe coming into the market now or that you see in the pipeline from -- that might be private equity sponsors or something like that as cost of capital go higher, might get some opportunities there.

No, it's a great question. And just to play it back to you. You said it well. We'll end the year because we're investing in Waco while we're paying down debt, just given the cash flow generation of the business, we'll end the year at 2.5x or below, which actually does open the window strategically and from a capital allocation perspective for very targeted M&A. And obviously, our bar is very high. Cost of capital is up, but we know the targets. We know where they're at in North America and in Europe. Those are going to be converting targets for the foreseeable future. We'd like the limited, but some converting alternatives that exist in North America that would make great sense relative to driving integration rates up. And then in Europe, which is much less consolidated with the 2 largest participants, ourselves and Mayr-Melnhof, having roughly 40% market position there, there's a lot of room. And we really like the value that's being created with the AR Packaging acquisition. Sustainability starts in Europe. It's the most sustainability conscious consumer in the world. We're learning a ton from those markets. The things that can be done in Europe first, 18 to 24 months, make their way to the United States, into North America. And that's an engine for us for innovation. So I think it will be converting for the foreseeable future. It doesn't mean that long term that there's not an integrated play in Europe, but some things need to play out in Europe on the paperboard front. There's some capacity coming in. The market isn't set up as an integrated market today. So that's more of the long vision. But we're actually, to your point, we're looking forward. We're working internally on what is Vision 2030 as we kind of march towards the Vision 2025 goals. And so we're looking forward to that. And Waco takes us beyond 2025. So that's something that we want to make sure that we're sharing positively on where we're heading.

I don't know if anyone has anything. I think we're coming up close to time, a couple of minutes here. And if not, I've got one that kind of came up earlier in our conversation here with labor. It's something actually I haven't heard you guys talk a lot about in terms of like having issues. I mean everyone was kind of hiring 3 to keep 1 during the pandemic and things like that. But again, something that's probably underappreciated from a lot of folks culturally. Is there something that you guys feel like you're doing different? Because it is a manufacturing environment, and I've walked mills before on hot days. It's not great, an environment. And I don't know if there's a lot of engineers that are going to school like, "Hey, I want to go be a papermaker." So maybe some stuff specifically at Kzoo that I saw that you could talk about culturally or the gamification of papermaking?

Yes. No, I think -- and thank you for that. I mean listen, we're not immune to labor challenges, and we've all been experiencing them and we have more inflation happening there. But we're incredibly committed to one, being a very good employer in the communities that we're in, 25,000 colleagues, most of whom are in small communities where we're a large participant in that community. We've got to be good community participants. We've got to do what's right for our teammates and our colleagues and giving back to the communities that we're a part of. So that we're an employer of preference in that community. That being said, to where you were going, we also have to create great career trajectories for folks and for our teammates. And we're working to do that by investing in automation, investing in the latest technology. We've talked a lot about Kalamazoo, which is an investment now that is fundamentally runs with technology and limited time on the floor when we occasionally have a paper break, but it's in a control room. It's in a control center. You're monitoring the metrics that are critical to running this. And it is appealing to an early or earlier career leader, then we can provide career progression. And you'll continue to see us invest in automation where we need to or what are the most challenging roles to bring into the company, which are the lower skilled roles. And when we bring folks in into -- through lower skilled entry-level roles, we tell them on the way in. We don't want you in this job for the mid- to long term. We've got to put training into your hands, move you into progression where you're more actively involved in the development of our products. And you will continue to see us, though, use some of our capital to automate. It's important.

Understood. I think that's it. Thank you sir.

No, thank you. That was great. Thank you so much. Appreciate everybody's time. Thanks for the attention. Have a good afternoon.