Howmet Aerospace Inc. (HWM) Earnings Call Transcript & Summary

Okay. Great. Good morning, everyone. Thank you for joining 43rd Annual Aerospace/Defense & Industrials Conference. My name is Gautam Khanna, the research analyst that covers Howmet for Cowen. We're very pleased to have with us the management team of Howmet, John Plant, Chairman and CEO; and Ken Giacobbe, Chief Financial Officer. We also have P.T. Luther who runs our Investor Relations effort. Many of you know all these guys. This is meant to be free-flowing Q&A with me. So if you have any questions, feel free to shoot me an e-mail, and I'll try to channel those up to the team here. Welcome, guys. Thank you for joining.

Good morning. Nice to see you again.

Thank you. Well, let's just get into it. You just had the earnings call. I wanted to just first ask about the changes in guidance just so we are calibrated correctly relative to the Q3 outlook. If you could just talk through kind of what changed quarter-to-quarter.

Okay. Well, first of all, when you look at the guide in its aggregate, it's not much different. I gave the range back in early November, and I said 12% to 15%. And as we refine that and just issued the guide for this year, on a volume basis, [ 611 ], and on a revenue basis, maybe it's 13%. So providing that ZIP code in terms of guidance, but at the lower end is my view compared to what we said. And you say what's changed? When we were talking in early November, that was when I think the whole industry was scheduled out on the 787 at 5 a month's. And then by maybe the second week of November, it became very clear that those aircraft were not being built. And also, I'll say, the apparent emergence of further delays for reasons that's probably best-known to Boeing and here we are in the early part of 2022, and again, no real clarity regarding the volumes for that aircraft. And so that's the most significant singular item I'd point to. And we've made an estimate of what aircraft will have by way of production this year. And as I said last week, it's our guess about in the absence of clarity of the Skyline from the customer. I probably said enough last week about that topic. And indeed, I don't know that my view is particularly informed or relevant or anything. I think everybody has their version of events. So that would be the singularly largest input into refining the guide. And then the other thing, I think when we looked at the final build of the F-35 for last year compared to where we've been scheduled out and even though the aircraft apparently will be built as higher volumes this year, I think [ 152 ] rather than [ 142 ], which is great, the input of materials last year was higher than they built to need to burn a bit of inventory of. So it's -- I'll say, it's an interesting item where build goes up, but they're going to burn a bit of inventory of the then for us. We'll take that probably more, I guess, in the first half could be the whole year depending upon the final [ year], I'll say, in gestation of parts into Lockheed and through the engine to Pratt & Whitney. And then hopefully, we'll see the volume improvements in 2023 because we won't have that inventory overhang. And then obviously, so the spares are going to be required for those aircraft, and so that will be also a benefit to us. So Gautam, that was a tough question to get.

Rookie mistake. Backing up on the 787 and then the F-35 one. On the 787, you guys sell to a number of different intermediary, subcontract manufacturers of Boeing, right? So I'm curious what level of variability are you seeing right now? Are you seeing folks at very different rates, some at 0, some at 3, some at 8?

I don't have that level of knowledge that we can track every part to every aspect of the different sub-suppliers on that aircraft. So I don't know. And I'd rather say I don't know, but it's -- the whole subject of inventory, obviously, has been fascinating over the last 18 months, 2 years about how much inventory is in the system. Where does it lie? It's -- clearly aerospace runs on a level of inventory, and it's always a judgment of exactly how much will be required and it also depends upon whether the build rates are going up or down. So we've been in this huge depletion mode over the last year or 2. Even though we thought we had a good handle on it, obviously, there's been more inventory around than people had probably realized. But the same as we go through 2022, my view is that, that picture will flip and particularly on the narrow-body side, commercial aerospace production, whereas build rates go up to give security of aircraft builds as we go through the year and certainly into 2023 that just for that security, people are going to want to rebuild some of those inventories that they had depleted. So we've been through this, I'll say, weak sort of a cycle of inventory over and above the actual build rate of aircraft. And within that, the particular issues of 787 and previously 737 were not just to do with the pandemic, but very much to do with very special certification issues.

Okay. No, agreed. And just -- so just to be clear though, we can't definitively say you guys were at 0 in Q4 on the 787.

No. I mean we did supply some parts, very small amounts. There has to be something and some of the parts, for example, some of our fastener parts are common with other applications. So it can never be absolutely precise. And we've tried to have level loading where we can just so again, maintaining our own production is important to us because, again, going to 0 termination of people and then expecting that you can rehire them back in really tough times for knowing you could have people available to you. I mean, again, that's another layer of, I would say, an interesting feature of this whole recovery that we've been going through. So where we do see critical skills, we need to try to hold on to them and certainly, we recruit them given the volume increases that we see coming at us in the next 12 months, 2 years.

Makes sense. Part of the reason I asked this question is because it's very hard to get a clear revenue buildup, obviously, for the company sitting here from the outside, right?

Yes.

And everyone looks at the guidance change of $30 million to $40 million of sales and 787 assumptions come down, F-35 assumptions come down. Some other things must have gone up presumably as well. Was it metal pass-through? Was it -- again...

Yes. I mean we gave you a number for metal pass-through, and I said it's a minimum of $125 million. And that number can clearly vary because metals have continued to move. And so at the moment, I'd frame it somewhere between the $125 million and $150 million. I felt that, that was an important number to give you such that you could see the scale of that metal pass-through. And if it's 1:1, $1 of pass-through for $1 of cost, then you can easily get to the dampening effect on margins that, that inflation has had or is having. So last year, when we, let's say, God, we went from, I don't know, let's call it 20.5% to 22.5%. I mean the 20.8% to 22.8%. But I mean a couple of hundred basis points of margin improvement also was adversely affected by the metal pass-through probably by 30 or 40 basis points. And so the important thing is we managed it. We're able to improve margins. And it wasn't a reversal of our margins because the inflation has just muted the upside. At the same time as what we've given you for 2022 by way of guidance, you said we'd take it up from 22.8%, I think we closed that last year out at 23%, and that's also taking on the chin that there's inflationary pass-through. So I think the thing which is most important is that we've been able to face into this inflation, deal with it, and it's only been a muting of the margin improvement. There hasn't been margins going backwards. And my expectation is that we shall see a lot of industrial companies, including aerospace companies, where margins go backwards because of the inflationary conditions that we are currently in. It's pretty good, Gautam, is really what I'm something trying to say.

Yes, that's good. I agree. The results are great. In Q3, were you anticipating as much as 125 to 150 in that framework you laid out or...

Well, what I tried to give you then was the only thing that you could ask a view about, which is what's the volume change. So maybe 12% to 15%, now it sounds like more like 11%. So at 11%, I still think it's, a, very healthy. And b, the most important thing is that the big picture, it's going up. What we're debating is the slope of the increase. And if we get lucky, maybe it can be higher by the end of the year. Who knows? It's just our best view at this point in time. And last year, we try to give you a guide. We -- I think we were reasonably close, maybe on the revenue side given the circumstances, and we were able to overachieve in terms of what I think are the really important things, which is how much profit and how cash we delivered. And so when I look in the rearview mirror, which I tend not to, for most part, I preferred to look to the windshield -- is that last year, it's -- it's over. The outcome was okay. Most important was we had extremely healthy cash flow. We deployed that cash flow across all aspects of our balance sheet and shareholders and set ourselves up well for what hopefully is a healthy 2022.

I wonder just -- also just understand the definition of pass-throughs. So metal, are we just talking metal pass-throughs. We are not talking about natural gas prices moving up and that affecting you guys, freight costs and what have you? I'm just -- what are you throwing in that bucket?

In that singular bucket that we've called out, we're just putting metal into that bucket. There will be additional costs that we seek to pass through to our customers over and above that as well, but we are not defining those publicly at this stage as we work our way through all of them. The only thing that I don't believe is really defining that bucket into any great extent is labor where we seek to offset labor costs with productivity for the most part. But there's one thing you referred to, so freight and, let's say, energy costs, et cetera. We are -- we'll seek to pass those through to our customer. But it's not in the numbers I gave you.

Okay. And just to be clear, do your contracts have some escalators that link to your actual cost or some indices?

I'm trying not to get nailed on this one. So it's like loosey goosey. But yes, we do have some.

Jumping back to the F-35...

I mean -- so the basic of the picture I think you should take away is, for the most part, we're expecting that to try to neutralize inflationary costs. It's a margin issue, not an absolute profit issue. And there's aspects of our business. So for example, if you went to our commercial wheel business, we have less of an ability for nonmetal to pass through. But then that's what I call out the pricing conversation there, and we are already taking action on those costs to move price through there. So it's not that we say just price -- is inflation costs, and we're not seeking to pass them through. But when you're in the midst of negotiations, you don't want to show your hand too much.

Understood. I appreciate there's a big audience on these calls. I wanted to just jump to 2 other programs very quickly. F-35, we talked about, it's around $400 million last year or so, right, of revenue? I just want to...

I've not given -- I'm not sure I've given you an exact number. I think you're reverse engineering from total defense that was approximately 40%. And then you think of that then you'll try to divide it by some number of production try to get to a shipset, that's what you're trying to do.

You have the $3 million to copy.

Yes, I understand where you...

Okay. That's cool. I was just curious, I'm trying to get the scale of the headwinds this year. In terms of if -- how much destocking are you actually enduring? And then just broadly in defense, what are the offsets in the other $600 million of revenue related to defense this year?

It's going to depend upon what the total production turns out to be for '22 and '23. At this point, if I was going to call it just like for the sake of a number, I'd say it could be 20 shipsets at worst, I think, to deal with and hopefully, less than that. I would say it also depends upon not every F-35 is equal. There are different types of that aircraft, as you know, between those go to, let's say, the Air Force versus the Navy or the Marines, et cetera. So they have different content and different features within it in terms of capability of those aircraft and therefore, shipset values for us. I think the only constant amongst it would be the engine. The rest is all different.

Are you guys doing much in the way of spares now, spare F-135 airfoils?

There is a small amount. Previously, it's been gated by the, I'll say, fairly high levels of production just to do the, I'll say, OE level of demand. And if anything, there's been a shortage. What we can gather now is that there is availability of engines on the OE side, but a shortage on the spare side. And there appears to be an inability to take engines from the one side and movement to the other side it's a different bucket within the Department of Defense, I'll say, however they pass those budgetary buckets of money. So at the moment, there is a requirement for additional spares while they're burning off some of the OE side of the engine. But the theme being spares will improve as we go through '22 to '23 and '24.

Okay. So that's a partial onset is just spares.

Yes. So the broader picture is that, that build rate flattens at the 152 levels we get to this year to be the highest year then it's 152 for the next 3 years. And then within that, there should be a constant picture for our structures and fastener products, but with an increase in our spares business. So really small growth overall when we get to those flat conditions.

And then just quickly on defense, other programs growing to help kind of backfill for the transition here with F-35?

Yes. I think the 2 most important programs, which are -- I was going to say on the horizon, but they're not. I mean, one is here and now and, I'll say, starting in getting budget cover forward is the re-engining of the heavy-duty engine for the Chinook fleet that's been going through the, I'll say development, I'll say, program during 2020 and 2021, that will begin to have progressively increasing volumes between '23 and '24. And then at the moment, there are 2 levels of potential, it appears, for re-engining of the Apache and BlackHawk fleet, which is much higher volume. And it's -- so they do like 1/3 of the fleet or possibly, and I believe that it's more desirable for both the military and obviously, for the suppliers needs to have 100% refit of all those engines over a [ 5-year ] period. So those 2 rotorcraft should be quite interesting for us over the next few years and give our defense business a bit of a lift. And then the rest is mainly, for the most part, turbines for tanks. We've got all these, I'll say, spares for F-14s, F-100 engines, F-18s, F-22s and so on. There's a huge amount of military equipment, which requires support for.

Can we switch to the 737 real quick? You guys did identify a build rate you're tracking to as of -- I guess, as of Q4. What is your visibility on rate hikes and what's sort of embedded within your forecast?

We've assumed that it's going to be just over 20, so I'll just say 21 in the first maybe half of this year and then 31 in the second half of the year. The start will be -- we've anticipated we'll be actually supplying a little bit below rate just because still on the -- pick on the LEAP-1B engine burning off inventory. If you look at the course of last year, we went from being I'll say, progressively 40% below build rate because of inventory consumption to 30% to 20% to about, I think, about 10% below rate in Q4. So our assumption is we'll still be possibly a little bit below rate in the early part of the year. Then getting to rates, then rate lifting we've assumed in line with Boeing's plan, so second half goes to 31. And then if they go to the rate 38, which has been speculation above 31, then my assumption is that inventory would actually have to go back into the system at that point. So we've been going through this whole cycle. I talked about earlier where liquidation of inventories have been a huge issue with fairly limited visibility over the last year or 2. And we're at that point of getting towards matching rate where we are currently with Airbus on asking more match rates, and then we expect inventory will have to go into the system. So we say for Airbus to go to the mid-50s and certainly Boeing for it go above 31.

And just to be clear on this, we had GE here yesterday and they were kind of blessed the staffing forecast on CFM where there's 2,000 LEAP engines next year, 2023, which implies a 737 rate -- you can reverse engineer the math. It looks like it's average of 44 in 2023, exiting at like 52 in '23, I'm talking per month. Do you guys have -- and do you agree with that, you have a view on -- has Boeing conveyed anything in terms of how you should prepare for a ramp? What kind of visibility do you have beyond 2022?

Not a lot. Our assumption is we sort of hope, pray, rates going well above 30, but we don't have that visibility. I think it's an important part of what we need to get a depiction because it also is going to affect our hiring and our preparedness. We took some chances last year. And as you know, we recruited ahead. So we'd have a reasonable position on labor. We also put into Howmet, not as a customer -- into Howmet additional inventories at the end of life debt on the engine side so that we would be well prepared for more aggressive lift of production. So if we were to stumble on labor, if we were still on anything, we still have a next set of parts ourselves, which we've built, so we could supply. Again, I think there's a growing recognition of how difficult some of these parts are to manufacture, and so increased visibility is really important. And there's no -- I will say I have no time for when people say they're difficult and then drop us to 0 but then expect us to respond on a dime. That's not a sensible way to plan production. So if it is, as you say, 44 or 52, then I guess I would be really happy. Yes, so I might be more optimistic, Gautam. I might be -- I might get more optimistic.

I wanted your point on the difficult to make parts. We also had HEICO and GE yesterday say, "Geez, casting's importance are a pinch point currently, and especially in castings and they cite labor as the constraint at the various suppliers." What can you say -- I know you were asked about it on the earnings call, but are you guys late on anything? Are you -- have your lead times moved down a lot in these product categories? Or do you think they're talking about someone else?

If you want to pick, for example, in if you take Howmet across the tens of thousands of parts that we manufacture, maybe it's 100,000 loss -- I don't know exact quantity of all the different part numbers that we have. And if you look across all of our OE production and all of the spare production, at any point in time, there are always going to be certain parts where there's, I'll say, a deficit or where you get demand dropped in the last minute and suddenly, we weren't in arrears, but suddenly, well, the customer says, well, now you're in arrears because it's just dropped on it. We all recognize those things happen. And so there, if I'm going to be absolutely pure in my response to you, absolutely appears that, of course, there will be a few parts that's normal course of business but where there will be some shortage compared to the demand. But if I also look at the quantity of overdues and compare that to the quantity of overdues we had in 2019, which we well managed and we compensated for other pinch points in the industry in 2019, our overdues are minimal by comparison to that point in time. But if you want me to say, is there any part that you have where the answer is, I'm not going to say that because there's going to be 1 or 2. On the other hand, I'm very clear that neither are we causing a problem in terms of there is not an engine or there is not a build condition for an aircraft. And so I think we need to have a more balanced discussion about do you go back to the buy point. These things are very difficult to make. And it's great that there's an increasing appreciation of how difficult they are, and that's part of what the value we bring to the industry. And so we will have to recruit and re-recruit some special skills as we go through. But neither we're in the position where when demand was taken down to 0, which was though no customer was then saying to us, by the way, we're going to cover those special skills. For example, it's absolutely math. So the answer is, we thrifted labor. It was very clear. We did that to adjust our variable costs that we had in the company. And now we're increasing them and still trying to maintain the variability of our cost structure. So we're managing it that line of best fit, which is a very healthy results for the company, for our stakeholders of all types, and that includes our customers as well. And I'm hopeful that we'll continue to, I'll say, supply the improved delivery and improved quality levels that we've achieved over the last 3 years. And I'm very clear because I've had meetings with our customers and they recognize the improvement in Howmet's performance metrics operationally.

Which brings me to 2 other questions, I'll get to pricing in a second. But first -- we have to do that. But just quick -- if, in fact, the customers have this recognition, if people are in the supply chain concerned about forgings and castings as a pinch point, either it is now, maybe not at Howmet but elsewhere, are you seeing any emergent demand? Any kind of, "Hey, Howmet, you're going to get an extra order because XYZ company, Precision Castparts, whoever, is not able to fulfill it in the lead time we need it?" Are you seeing any kind of spot demand?

We haven't seen any spot business or any notes at this point in time. I'm expecting there will be more of it in the second half of the year, but are not planning for us. We're I know our customers have on occasions moved certain parts around. And I can think of 1 or 2 instances where maybe another company has not been able to come up to speed or rate production. And we have been asked, can we help out? And the answer is, yes, of course, we try to respond to that in a very positive way. But when that occurs, I'm more interested in not just meeting a very short-term need. Making a few extra parts is not really that satisfying whereas making those few extra parts but with a commitment to continue to supply then that becomes far more interesting. So that's more of a message for everybody. We're not here just to compensate.

So let's talk about pricing. Where are you on your LTA agreements for 2022? Like how much has already been done.

My view at the moment is we're above 75% through that. So let's call it -- it's always fluid, so 75% to 80% through the '22 LTA negotiations, so in pretty healthy shape.

And any sense for how you are on '23? Or is that still...

That's way out there. I mean, no doubt we'll have our first conversation in the next 2 or 3 months about it. But it doesn't -- it never really gets where I call into that real part of the negotiations until after summer. So it's more of a fall discussion into -- fall into winter. And it's too early to comment on '23, yes.

Can you give us a sense of proportion. So 2021 had x dollars of pricing. In 2022, the volumes are the same, mix is the same, order of magnitude, how that would differ? And then what's your view on '23's opportunity?

I'm going to be willing to tell everybody that it's a lower book to get to in 2022. And I've said that in 2021 -- 2020, called it out what the profile through would be. I said the 2020 will be lower than 2019. I said '21 would be higher than 2020 or 2019, and '22 would be lower than '21. So that's the sequence through these things. I haven't given absolute granularity of what those books are because I don't really want to grade that detail in public. And happy trying to get to this percentage, that percentage and guess which customers, I honestly think it's not healthy. The most important thing is what we've said is '21 will be higher. As you saw at the end of Q3 from our Q that we were at $66 million. Next week, you'll see the K. And I'm convinced that you will be happy, if you can be happy at this in terms of the outcome for 2021 and '22 will be lower. It's that simple, really. It's -- and I need to reemphasize again that those prices totally exclude metal pass-through or anything to do with the inflation we passed through at all. That is pure price. So we've tried to give you the building blocks of how to profile the company, and so we've given you price which is price, nothing to do with pass-through, and that's really important. And then on our cost structure, similarly, when we've called out costs, we've given you structural cost takeouts, and we've never confused it with variable cost takeout. So we consider that variable cost takeout is what we should do anyway in response to volume flexing up or down. And we've given you the ratio of x versus variable cost. We've given you a very detailed road map into the cost structure of the company that would get at a variable that's fixed. And we said that we would not be bringing back those structural costs. And if you look at that fourth quarter, we still have continued a couple of rooftops. We've said we're going to rationalize that would help our fixed cost structure going forward or maybe it will offset if we go -- we get weak and decide to add something back, so we weren't, in aggregate, cause a problem in that regard. And so again, I'd say that's quite different. So I think many companies have given cost numbers, and they're talking about bringing back 50% of those costs, but that's not our case. We gave you something which was clear, unequivocal in terms of those cost structures.

And just on '23, so order of magnitude, though, again, so 2021's going to end up whatever, almost 90 million, perhaps I'm making up numbers. Is '22 going to be half of that? I mean I'm just curious, just order of magnitude. And then 2023 is the opportunity set to be above 2022 and maybe close to where 2021 was. I'm just curious like how this cascades then.

Yes. My view is that 2021 was more of the outlier in scale and in these numbers. And when you see our K, I think you'll appreciate that even more. And then '22 and '23, I'll point -- I'll say at this point in time, when I look at '23 and '24, how about that? I'm giving you the optics in the future, it's sort of a similar order, I believe, to 2022.

That's helpful. On the call, you mentioned -- well, you were asked about Russian titanium and what have you -- and just geopolitical tension. Is there any movement afoot at RTI and engineered products to engage with Boeing? Are they considering any sort of contracts with RTI to help guard against this geopolitical risk?

My -- I remember engaging with them in 2020 time of the pandemic, and we were creating our titanium capabilities because, as you know, for the military work, let's say, for [indiscernible] for Lockheed, we supply the titanium. And Boeing, they've had this long-standing arrangement of buying from 3 SMPO in Russia, a deal which we've done a decade ago. And my belief is they've been very pleased with the sort of supply relationship. So -- I mean, it's not for me to say what Boeing should worry about. I'm sure they've got a very significant inventory parts so that they are protected, particularly on the sheet side. It's always more difficult to have protection on the forging side. But I would think that it should be up almost in their minds, depending upon not just the immediacy of this Ukraine moment that we appear to be in. But more importantly, it doesn't seem as though geopolitical risk has actually reduced much over the last decade. In fact, it still sees increased. And I think that's we are prepared to invest more than we currently have, and we have capacity at the moment. But again, I'm not really willing to invest to help for a moment in time. It's got to be a long-term relationship. And because that's what it takes to get me to commit capital.

I know we're running up on time. I've got 2 other ones. First, your view on Forged Wheels, not just this year, but kind of 2023, people are concerned about the trucking cycle, obviously. And do you expect that business to continue to grow in terms of volume over the next couple of years coming?

The concerns I believe during the trucking cycle is one of the most -- biggest spike of demand and the biggest backlog is there. So I don't think it's a concern because we need to put concerns, it was like a negative concern. It's more of a positive concern, and is there enough ability to build trucks. And it's very clear that the order intake has been subdued because the truck manufacturers have not been willing to take orders from dealers because they can't promise delivery and that one penalties and neither can be sure about committing to the price level given the inflationary conditions. So that is 2 major reasons why as a truck manufacturer, you would not take in orders above a certain rate at this point of time. It doesn't mean to say their fleets don't have the demand. So this year is nothing to do with demand. This year is just, are there enough parts available to make trucks. And the backlog that is already there and the backlog which will exist at the end of '22 is quite enormous such that at this moment, even if there were 0 orders from that, that '23 would be totally solid. The normal sequence through is when you have a year of emissions, I'll say, requirements if it's a 24-year, normally, fleets will try to buy ahead when you have an increasing emissions because they tend to make the trucks more expensive to be more fuel- or carbon-efficient. I really don't believe that opportunity exists in 2023 because given the underlying demand that is there, then the ability of having parts and the capacity to build ahead, I think, is really quite negligible. And so my view is increasingly coming to the point where not only will 2023 be a very solid year and a further significant up year on 2022, but I think 2024 will be another very solid year and over and above the immediacy of, I'll say, what I call the short-term tactical stuff, which is supply constraints are short term, it's tactical. The emissions, it's tactical. The most important thing is the long-term trends which are to have commercial trucking to be, let's say, more climate change friendly, so that you can have lighter trucks. And so when you go from a steel wheel truck to an aluminum wheel truck, you save 1,400 pounds for a truck and trailer combo. And that either gives you increased payload or basically an improvement in fuel efficiency, which is a fairly rapid payback for. And so I think that's a long-term secular trend of moving from steel to aluminum in the trucking industry. And not only that, but they look better. And beyond that is that we do have a high market share with clear scale advantage. And there's a one trend beyond all of that, which is in the case of future electrification of the industry, both truck and bus, is that you're not going to put an electric truck or bus out there, put steel wheels on it. They have 100% fitment of aluminum. And therefore, that's another long-term positive trend for the industry and for us. So there's a lot of, I would call, strategic vectors, which make it a really good business owned by the short-term tactical of what's the orders, what's the emissions, what's the supply situation, et cetera, et cetera.

And last one, I know we're on time -- beyond time. Is buyback, pace of buyback, magnitude of buyback, given kind of the multiyear story that Howmet has? What should we expect? And what's your thinking around that?

We had a fairly healthy level of buyback in 2021, over $400 million of stock that we bought back and healthy cash flow. And as you saw, we did a lot of other things in our balance sheet regarding debt terming out, reduction of gross debt and reducing our interest costs and also, as you saw on the legacy lives of pension and OPEB, where we voluntarily put money -- more money to work to reduce those liabilities. But when I look at '22, we've already guided due to a higher free cash flow number than '21. And as you know, there'd be no confusion over securitization because the accounting is much more simplified. It's just 250 at the start. 250 and it will be the same this year. So my guess is that as we go through this year, we don't need to do anything on the debt structure. If we did, it would be opportunistic for any interest benefit if it came available but with a specific plan at this point in time. I guess we will also think about during the course of the year, the rate of dividends, is that appropriate or not. But given the fact that we don't need to do anything, then the majority of our cash flow, I expect will be aimed towards buying back shares unless we have a rush of blood to the head to buy something well. But -- so I think that will be more of the focus. And as you saw, we already bought back in January, $100 million but have not given any view about what we're going to do for balance of the year and see how things pan out.

Well, thank you very much, guys. I appreciate you are supporting our conference again and all your insights.

Thanks very much, Gautam. Thanks for your time and interest. Bye.

Thank you, guys.