Lumen Technologies, Inc. (LUMN) Earnings Call Transcript & Summary

Great. Welcome, everyone. I'm Batya Levi with the UBS telecom team. Our next speaker is Chris Stansbury, CFO of Lumen. Thank you so much for joining us.

It's great to be here. Thank you.

Thanks. A lot of changes at Lumen this past year, new management, new capital allocation. I wanted to start off with maybe as we head into the next year, what's the strategic focus of the company would be and your main priorities?

Sure. Well, we announced a new CEO, and she joined about a month ago, Kate Johnson. And Kate and the management team are hard at work on a number of things right now. But I would say the big thing is just clarifying exactly where we're going, particularly in the enterprise space, where I think in a lot of legacy telecom companies, there's technologies and services that linger and they hang around for a while, and there's also the places we need to go. So there's a lot of work being done right now to clarify that. And I think that ultimately will drive the decisions we make around things that we'll stop doing, things that we need to start doing or get better. And then within that, what do we make, what do we buy? What do we sell? So there's a lot of work going into that. We should have a lot of that baked by the time we provide guidance in February. And then by mid-year next year, I expect we'll do an Investor Day and provide even more clarity around that in terms of where we head over the next few years.

And you already started to provide more disclosure in terms of your customer mix, your product mix, what the focus is and that's providing more visibility to the investment community. How should we think about like some of the areas that you would like us to track and to show that there is improvements in the underlying trends?

Yes. It's a really good question because one of the challenges that I think we have and frankly, a lot of legacy providers have is there is this cash-rich declining business that's at the end of its life cycle. And the fastest way we could get to growth would be for those businesses to go away. And that would be the wrong decision to accelerate that because there is a lot of cash to be generated which we can reinvest in our growth portfolio. So I think the key focus for me is to get a growth bucket, which within the enterprise space is the biggest of our, we call it grow, nurture and harvest, really to get that bucket growing faster. And I think if investors can see that happening, then they'll see a pathway to total growth. But really getting grow to grow faster is the primary focus.

Okay. And in terms of the customer mix, should we expect you to realign some of the customer segmentation as well?

So you will see some changes in how we disclose. So with the sale of the EMEA business, which hopefully we get to by the end of the year, the international segment pretty much goes away. So I think end state will likely be large enterprise, public sector, mid-market and wholesale. So you'll see that delineation, but I think from an opportunity standpoint, if you look at where Lumen performs really well today, it is in that public sector, large enterprise space. And I think there's more that we can do there. We can leverage that strength. But the real opportunity is in mid markets and we are showing signs of improvement. But I think continued investment in our digital interface with customers, the services that we're providing, so that they can do more self-service. Those will be the kinds of things that you'll see us continue to focus on.

Okay. Great. I did want to start with the largest segment enterprise, but it's a little blurry right now because it has the public sector in it. If you think about just a large enterprise, can you talk a little bit about the trends you're seeing if there's any macro pressure. We had AT&T and Verizon also presenting at the conference. And they do talk about that the trends are similar. The enterprises are not making quick decisions. They wouldn't really call out that it's getting any worse, but it's not getting much better either. What -- where are you?

Yes. And I think we'd say the same thing. I mean, if you look at the solutions that we're selling, I mean, first of all, they're very complex. So you think about a post-COVID world where there's on-prem, off-prem, the need for efficient network utilization, a security that goes around that, et cetera, et cetera. That complexity is good, right? There's margin in that. But the decision process, this is a question that people are taking a little longer, that's bad news. The good news is they're not descoping things. This is important infrastructure. And when those decisions get made, they stick to them. It's just the decision cycles are a little longer.

Right. I think you had mentioned that in last earnings call, is it getting longer in the last month? Are you still...

No, I think it's pretty much the same, not better, not worse.

And the sales funnel or the amount -- the volume of these discussions, how have they been trending?

I would say, it's not a number we'd disclose at this time, but I'd say that backlog and the funnel remains strong. So it's not where we're seeing a future problem that's starting to manifest now. It's continuing to remain strong.

I think you had mentioned that if you strip out public sector, enterprise is declining about 4% last quarter.

Yes. We put some words around that. There was a contract that went away and then a onetime event last year in results that is a -- that is something that doesn't happen every year. And so when you normalize for that, that's about, that's in the ballpark. So again, not terrific. That's where we want to see growth, and that will be driven by that growth portfolio. But I would say that from a competitive standpoint, we're performing better, and we think we can continue to do that and improve from there.

Okay. A lot of crosscurrents in the enterprise side. I guess there is the shift to maybe from legacy products into more hybrid products. Where do you think we are in that shift?

I think it's early. I mean if you -- there are certain aspects you think about communications, obviously, voice is well down that path. But if you think about broader compute environments, I mean the next growth area unquestionably is edge. There's a lot of companies talking about the growth and need for edge compute as you get to more smart solutions, whether that's smart retail, smart factory floor, where data latency is a real issue. You can't have that. And so that's something that I think is still early innings. And there's a lot of opportunity for growth there, and we're well positioned for that with our edge compute infrastructure in place. But I think the shape will continue to evolve, and I think that's the new world of tech. It's not one solution that you sell over and over again to the same customers. If you think about each of the wins that we've had in public sector, which we can publicly talk about, in large enterprise, we can't but they're similar. Customer by customer, the needs are different. And I think that's the key. So depending on how many locations, how many people working in office, how many people working remotely, whether data latency is an issue for a piece or for all of that, all of that content, that ultimately drives the solution, and that's what we excel at.

Great. That's definitely a topic post pandemic where enterprises are looking to retune their real estate, how many branch offices they need, the hybrid working environment. Do you say -- like the read-through for us seems -- oh, that's not great for enterprise, right? They don't need as much as connectivity as they needed to. How do you view that change?

Yes. I'd say it's the opposite because, again, complexity means margin. And so if you think about the business that we're in, if you -- the United States Postal Service, for example, they've got multiple locations. And there is a need for on-prem compute, but there's also a big need for remote connectivity and security around all of those [indiscernible] and you could be selling VPN for part of the solution and SD-WAN in another part of the solution. But making all that work in a very orchestrated manner is not easy. And so I just think it's different. And I think that difference drives complexity, which ultimately is a good thing.

Okay. How do you view the -- maybe the competitive environment in large enterprise? Because there are the legacy providers, which have been mostly the connectivity providers. But now you're competing more and more with the tech companies on more complicated solutions. How do you see your ability to compete with some of those?

That's really where the future is. If you strip it all back, the underlying nature of connectivity, I think, ultimately is being commoditized and we see that. And so doing more of the same thing isn't going to be enough. We're going to have to continue to expand that service layer, frankly, in the space that we either own today or should own. So it's not about going far afield, but there's a lot of connectivity as it relates to security or edge compute as an example, and I mentioned earlier, that needs the network and vice versa. And that's the space we should own. And I think that's where you're going to continue to see us focus. So we'll be providing more clarity on that as we get into the new year with Kate's vision and focus. But I think it's safe to say what you're going to hear from Lumen is it's going to be a very customer-focused, a company that's focused on customer problems. And ultimately, those problems are solved on the backbone of connectivity and what is a very strong network, but really being enabled through services.

Right. So -- and I just say how -- you have been making some progress in that in the last few years. But as you go to an enterprise, how do you ensure that they don't think of you as just the connectivity pipe and you can participate in that layer of applications?

That's a great question. And I think when you think about the success we've had in public sector, which is very visible, I think it's because we've got a dedicated team of people that are focused on public sector and understand that customers' problem set. That kind of focus is what we're going to have to have as we look at different verticals and we come to market with solutions. So I think you'll continue to see us to ramp those kind of capabilities. I think you'll see us do everything we can to shift resources within Lumen to focus more on that selling effort and educating our sales force to sell to those specific customer problems as we go forward. So I think we're well set up to do that. But to your point on the ultimate ability to deliver a solution, it also depends on product. And I think part of what we're working on right now and what will come as we get into the new year is, how do we solve that? Are there things that exist inside of the company today that we can invest more in? Are there things that we feel we should be doing that we either have to make or buy. And I'm sure partner network will be part of that conversation as well. So that's really where Kate excelled at Microsoft and that's the work that's going on right now inside of Lumen.

And do you think that, that could be sort of the main priority and start with that from the get-go? Or is it going to need some investments, some planning before you can really move into that?

I would say it's both. I mean, there are certain things that we can do right away, and we are doing where we have capabilities, and we know that those are winning capabilities that we'll continue to expand. But there'll be other things that we have to sort through. That said, I don't think we're going to be slow about how we approach that. We're going to be quick. We're going to test things and we're going to move from there. So this is about, I would say, a cultural shift inside Lumen. It's very non telecom, I would say, in terms of the way we're thinking about it. It's definitely with more of a tech angle and being aggressive and making sure that we know we can scale businesses as we invest in those.

Got it. Can you talk a little bit about the pricing environment in enterprise? Are -- it's very difficult to gauge the trends because there isn't a lot of KPIs that we can track. This is more kind of like talking to CIOs out there. But the thought is that legacy networks always come down. There is double-digit pricing pressure almost every year. UBS would tell us that our telecom bill is never going up, so it's going down. What's your -- and how -- like maybe different product sets that you look at, what are some of the product dynamics?

Sure. So again, back to the disclosures we've done around grow, nurture, harvest. And just to ground everyone, I'll give you examples in each of those. So if you think about harvest, think legacy voice, think about nurture, think VPN and Ethernet. And if you think about grow, think, IP, waves, edge compute, SD-WAN, those kinds of things. If you just run the businesses for the sake of connectivity, you're going to experience the commoditization of those businesses. And that's not attractive. Now in the case of legacy voice, there's a real pricing opportunity in many cases that I don't think we've been as aggressive about as we could be. And you saw some of that start to correct itself in Q3, where our declines in harvest revenue were improved versus previous quarters. And some of that was because of re-rate activity. Serviceability as you get to end of life and there's less price elasticity to do some of that. But the way to deal with the commoditization as things move from grow where there's less pressure into that nurture bucket is really around the service layer that I talked about. I think it's a fact of life. I don't think it's -- we're certainly not here to say, yes, we can stem the tides and everything is going to be fine. It really comes with bringing customers the solutions that they need to their problems, and that's where the margin is.

When you look at those 3 buckets, are you also aligning the resources for them separately? Or is it sort of 1 account that actually provides all 3 buckets of services to the same enterprise?

It's very much a change in focus. So I would say -- and this is before the activities that have really begun since Kate arrived. But when I came to Lumen, there was so much pressure understandably to grow that product managers individually were feeling the need to grow. So you may have had a product that was #4 or #5 in its category, and those product managers were fighting for CapEx, marketing dollars, all the things that they felt they needed to drive growth. And when we came up with the life cycle approach and got things in the right bucket, it dramatically changed that behavior. So we do have, for example, in the case of harvest when we broke that out, a dedicated leader who has been decades in the business knows it well and his focus is really twofold. It's on making sure that we're priced appropriately and it's making sure that we are managing cost aggressively so that we can maximize the remaining NPV associated with those products before they eventually expire. So it's been a big shift for the company and it's definitely benefiting us today.

Got it. In terms of -- we talked a little bit about the competitors, which are not just your typical legacy network providers now more tech. How do you view wireless getting into enterprise as a competitor?

I think wireless has a role to play and that's not to be questioned. That said, it's not a replacement for what we do. Jeff Storey used to say, and it was a great line, as I'll quote him on it, which is "data needs to find its way to fiber as fast as it can." And so you think about what underlies all the 5G networks today, it's fiber, right, in the ground. So wireless can be part of a solution. It may be part of a noncampus last few hundred feet piece of the solution. And we have relationships -- obviously, we talk about relationship with T-Mobile, where we can enable that. But it's really not replacing the core of what we do at all. And I don't see that as a threat going forward.

You wouldn't completely replace it, but is it eating away at the edges of the growth advantage that you could have?

Not really. Because again, if you think about that campus environment that I just talked about, it's fiber connecting the campus to the rest of the network. And again, the security and the services and whether it's VPN or SD-WAN or whatnot, if there's edge compute around that, that's where we're focused. So that little bit of 5G at the end, not as much of an impact.

Got it. IGAM, maybe just to go over it. Now that LatAm is sold and EMEA is pending, there's very little left. And I think what's left is really the domestic enterprise customers having that international connectivity needs. So as you put it all under enterprise, should we think about any changes on how you would manage the international connectivity needs?

Yes. Not really. I mean, frankly, some of the historical ways that we divided things up didn't make sense to me. It's one of the things that I asked when I arrived because I was trying to understand that business. And so if you think about the global accounts that are in that IGAM bucket, they're really large enterprise customers that have international operations. And our decisions on not being in the LatAm market, not being in EMEA are less about capabilities that we can sell to our customers and it's more about focus. And quite frankly, making sure that those markets could get to scale so those networks are as good as they can be. So said another way, if you think about LatAm and you think about EMEA, in the new world, they're going to be at a different level of scale than they were with Lumen, they'll get more investment. They'll make the right choices to ultimately strengthen that offering to customers. We can sell those assets to our customers. They can sell our assets to their customers. And it's just, I think, the way of the world. There's no 1 global network. So it doesn't really change the motion, it's probably, again, back to complexity, that's our friend. It makes it more complicated for customers because they're now in that example, dealing with 3 different entities. To the extent that we can make that easy for them and solve that problem for them, there's value in that. And that's really what our focus will be.

Got it. So public sector, we're going to get some underlying trends in there, but press releases would suggest that you're taking share. And some of it is maybe extending your own contracts and getting new business in with the existing players but also taking share from, I think, the incumbents. How should we think about when that will start to show up in the numbers? And -- is this a segment -- I guess there's a little bit of uncertainty in terms of decision-making. But how should we think about trends going forward there?

Yes. Again, we play very well there. We've got a dedicated team. They're very focused on public sector needs, and I think that's why we're winning. And even though we're dealing with government, we're actually getting a lot of requests for these complex solutions that are cutting edge, where they are looking for edge compute and SD-WAN, for dealing with multiple locations. So it's interesting because the DoD doesn't make a decision based on price. It's got to be bulletproof. It's got to be secure. It's got to have redundancy. And our ability to bring that solution to them is why we're winning. How quickly it gets turned on is the challenge. And there's a lot of push from Kate, from myself on the ops team to get that done as quickly as possible. What I can say is that there's another government contract we announced earlier in the year. I won't pick on which one it is. We're -- where our ability to execute and get things turned on quickly has actually benefited us, and we're actually getting more as a result of that. So the answer is you will start to see it show up as we move forward in the next few quarters. But it's still, in many of these cases going to take 12 to 24 months to do the full conversion just given the numbers of locations.

And you mentioned they don't make the decision on pricing. What's the reason you're winning these contracts?

I think it's really 2, if I were to keep it at a high level. One is our ability to bring the right solution to their problems, that deals with this complexity, multiple locations, on-prem/off-prem security, compute. And the other is our ability to operationally manage that transition very effectively.

And do you think the incumbents who are losing it, is it because they cannot offer these? Or is it they don't pay attention? Or they...

I think it's really -- if you get underneath it, they don't have the capabilities that we have today. I think many will argue they do, but we do have a differentiated portfolio. And I don't -- our competitors don't break out products into the same life cycle products we do. But I feel pretty strongly that our growth portfolio is probably the strongest growth portfolio of our major competition. So...

Okay. Mid-markets, I think it had been under pressure, but we're starting to see a little bit of stability. Can you talk about maybe how competitive environment is there? And how can you continue to improve trends?

Yes. That's a real opportunity for us. Again, as I said, we play well in kind of large enterprise, public sector. The gap for us is we tend to be -- and this is part of the cultural change that we're driving. The gap is that we're very engineering and product focused. And I think for the most part, that has bode well for us in places like public sector, where they're very well engineered solutions to complex problems. If you try to transition that same solution to the same problem in mid-market, you end up with a big mess because the actual customer problem, if you really get underneath it is different. And so we've done some good work around bringing product to market that is more of a digital enablement approach for the mid-market customer, but there's a lot more work to do there. So there's I think, tremendous upside. I think we can also use partners' selling networks to help us sell that better. So the bad news is we're not starting in a great place. The good news is, to your point, it has stabilized somewhat, and I think there's a lot of upside there.

Is there more pricing pressure in that segment?

It's a good question. There's certainly more competitive players, but again, it's an interesting dynamic because you almost get a little bit of the Amazon effect when people are self-selecting and they're pointing, clicking and buying. It's -- there's a level of pricing that you've got to stay within, but it's also ease of use. And if you're solving my problem and you're making it easier to do -- for me to do business with you, then that's a good thing.

Okay. Let's go to your Quantum Fiber business. So I guess this year you had a lot of different things that you were juggling and the build was a little bit slower than expected. Let's go over why that was the case?

So there's full transparency. There's the external factors with tough labor markets and permitting, but there's also some internal stuff as well. And when I came in, I wanted to make sure that the investments that we were making were in the right markets. We obviously, when we go into a market, we want to cover it well. But we want to make sure that long term, we're going to earn a return on that. And so we hit pause to double down. I wanted to make sure there was financial rigor around that. And as a result, we did make some adjustments in terms of what to do and what not to do. And so that slowed us somewhat. I would say the good news is, is I think it put us on a better path as we go forward. The bad news is it slowed us down. From here, I think it will take us probably 2, 3 quarters to get to scale. And scale is really, really important in this build because when you have scale, it's easier to navigate permitting delays. Because if I have a commitment for labor and I'm slow to get a permit in one market, I can shift that labor to a different market. If I'm not at scale, I don't have another market to shift that labor to, which makes it tougher for me to make a labor commit upfront. So that's really where we are right now is building that scale. And that scale is also important for us to do I think, effective marketing. So one of the things that is very encouraging about the Quantum product is very strong NPI scores from customers. And we haven't done a lot of marketing. So as -- and we're getting very good penetration. So as we go forward and the scale comes in our ability to invest in marketing those, I think you'll continue to see improvement there.

So there are a lot of different parties building fiber right now. And some of your peers suggest that the heavy lifting has been done in terms of the planning period. They know exactly which markets they're going to go and maybe labor has been secured. Most of the equipment has been secured. Where are you in terms of in that stage? When the plan starts, do you know -- like do you have sort of -- will you share with us, this is the plan, this is the pacing and this is how many homes we're going to reach.

Yes, we'll give more color around that as we go forward. I would say that the planning -- again, we had a bit of a shift because I hit pause for a few months, but we now know exactly where we're going, what we're doing and how we're going to go about that. So we'll give more color as we go forward. But I think there's no more debate as to what are the right areas to focus on. It's now going and executing.

And the majority of the 12 million or so locations will get the fiber build over the next few years. Is that...

Yes. It's a multiyear build. It's probably a 4- or 5-year build to get that done.

Right. And just given the macro backdrop right now, are you seeing higher costs or some delays that maybe you hadn't really seen a year ago?

There's no question costs are a little bit higher, but it's interesting because when you really look at the sensitivity in terms of the economic return, there's 3 important variables as we all know, right? It's the cost to enable. It's the penetration rate and it's the ARPU. And the only thing you know day 1 is the cost to enable, right? Our penetration target is 40%. We have disclosed that the 2020 vintage at 18 months was a 27%. And it's now over 30%. We'll give more color on that when we close the year. So I feel very good about our ability to get to the penetration rate, again, with no marketing dollars really to speak of, a lot of door hanger kind of activity behind that. So our ability to, I think, get to and potentially exceed that penetration rate, there's probably more tailwinds than headwinds. And then ultimately, the ARPU can come into play once we get a little further down the path as well. So economically, when we look at the sensitivity, the slightly higher costs that we're paying right now are really inconsequential in terms of the returns over the life of the project.

And as you start building, will the approach be cherry-picking where it makes more economic sense or focusing on the cluster. So as you build, you can open up for marketing and move that penetration.

It's really clusters. I mean we did have a micro-targeting approach initially, we've talked about that, but it is dense urban markets and we want to cluster the market. And ultimately, that gives us the ability to drive scale in operations and in marketing.

Okay. And the cost to connect, I guess, some of the industry figures we hear is like about $1,000 to pass a home. Is your footprint -- I'm sure if that's an average of a wide range. But is that in the ballpark as you can...

That's in the ballpark. Yes. And again, there's this huge variation to that, we're depending on whether it's off of a pole or it's subterranean. And obviously, when you go subterranean and you're in tougher environments, then it comes down to the density of those markets and everything else. The economics can work well above 1,000, depending on what the density is, the penetration rate looks like, et cetera. We did -- we pulled some data last night which is interesting and about 65% to 70% of what's getting turned on by consumers today is gig product. So they tend to be leaning more towards the larger product versus the smaller product, which is very good.

Right. And how do you manage the DSL base as you start to deploy the fiber? Is it -- like would you like to put them in sort of like a nurture bucket so that you can upgrade them when the fiber is ready?

Well, I'll give you a good news and a bad news story. The bad news is that our -- think about our copper penetration, it's at about 10% today, but that's also the good news because we're not really cannibalizing ourselves. There's very little loss there. So it's -- I would say the real issue is that there hadn't been investment in this space for so many years that cable took it down the flush out of Lumen and others. And so now it's our opportunity to go take share back. So it's really a share opportunity for us.

Got it. And today, you made some announcements that you're going to double the intercity fiber miles to 12 million. Frankly, I was surprised because I thought you dominated that already. So where is that new investment coming from?

No, it's interesting because I know there's noise out there. And we've heard others saying, we have a 90% share. And we don't believe we're anywhere close to that. If that's what they believe we can be at, then I feel great. But I think we're probably closer to 1/3 today of that market. But the real point is that we have made significant investments over the last few years, where over 24,000 route miles, we've actually put in about 6 million fiber miles. That's about 250 fiber miles per route mile, I think if you do the math. And the cable that we're replacing is 10 years old. So we've done everything we can to future-proof the underlying network today. And we'll continue that going forward. That's all been part of our CapEx budgeting and will be. There's no real incremental to go do the remaining 6 million miles. But it's the most efficient fiber network that exists in the country. And that's what enterprise is looking for. They don't want old fiber that needs multiple powering stations and everything else. They want the reliability that current gen fiber brings, and that's what we put in the ground.

Okay. So you started to give a little bit of a glimpse of the '23 outlook and CapEx projected in there, $3 billion to $3.2 billion. Can we talk about what that includes? Maybe if you can break it into buckets. I believe this initiative was already contemplated in that.

Yes. Yes, it was. So -- and again, we tried to give some color. There's so many changes in the underlying algorithm because of the divestitures that we want to bring as much clarity as possible. And again, we'll firm those numbers up when we give guidance. But the $3 billion to $3.2 billion is about what we said for this year. But this year, about 10% of that number included LatAm and the 20 state ILEC sale. So in effect, it's freed up about 10% of the capacity for us to invest in further digitization and whatnot. But big picture, if we say $1,000 per enablement, maybe a little higher, you're going to get to the math that's roughly $1 billion for Quantum. We've said that there's a $0.5 billion for maintenance. And then the rest is really enterprise focused. And a lot of that is what we call success based. So it's a lot harder to determine where that goes at the beginning of the year because you don't know if you're going to win the contract with DoD, when that's going to take -- get signed, when the work is going to start and there's CapEx associated with that. So I'd like to say that there was a fine art to forecasting that, but it's a tough thing to forecast.

So as you approach new investment decisions, there's 2 growth buckets, 1 enterprise, 1 fiber, how do you decide to allocate CapEx? Is this the budget that you work on? Or if you see growth opportunity, you can put more behind that.

I would love to have the problem. I frankly told the Quantum Fiber team that I would love for them to give me the headache that they could double the amount of Quantum they could get in the ground, so we could get to the end of this journey faster because that's a problem that's solvable, right? We can talk about it. We can talk about how we pay for it and we go from there. So right now, it's not about having to make tough choices between growing here or growing there. We do have capacity, obviously, with the decision that we made around the dividend. And so right now, the #1 focus is growth. Let's make sure we're investing in smart areas and doing the right thing, like the hitting pause on Quantum to make sure that we were building the right markets. But then from there, we go. So the real focus today is making sure that we understand where the gaps are, where we need to invest and then building that into our guidance for next year. So that's what we're working on.

Okay. So as we go through the asset sales, you gave little bit of puts and takes in terms of how we should think about cash flow going forward. So we've been kind of like waiting for that stability for some time. And I think sort of like the pieces are in place to get into that motion. But can you high level talk about sort of like how should we think about when Lumen could start to see some stability and growth.

Yes. Again, I want to be careful not to give guidance, but I would say very big picture. I think the big, big decisions on divestitures are largely behind us. I think there could be some product choices that we make. And I'm not even sure that we would sell those businesses versus just take a different approach to managing them where we're harvesting cash from those as we go forward. So that has to be determined. But I think the big structural changes with the proposed announcement for EMEA are -- that pretty much sums it up. There's few other little things out there, but the big stuff, I think, is behind us at that point.

Okay. And maybe just to go over -- a couple of minutes left -- your priorities for capital allocation in the near term, like in the midterm, let's call it, and longer term, your starting point leverage is [ 37 38 ]. When do you think that you'd like to start to see that going to your target level? And part of that is going to be also coming from some EBITDA growth potentially, just like overall how you think about it.

Yes, lots of moving pieces. I would say the #1 priority unquestionably, and I want to make that as clear as I can, is growth. And so the first dollar of capital available to us will be focused on growth. Once that's been satisfied, we've got to manage leverage and the buyback opportunity really in a dynamic way because leverage is important. We don't want to risk debt ratings because that ultimately has a negative impact on equity holders as well. So 4 is the limit. We don't want to go above 4. And so you'll see us manage that in a very dynamic way, where is the stock? What's the opportunity, where is the leverage and making sure that we do that in a very balanced harmonic way.

Okay. Awesome. Great. Maybe we can end it there. Thank you so much.

Okay. Great. Thanks so much.