Magna International Inc. (MG) Earnings Call Transcript & Summary

Pinch hitting here for Steve Arthur today for the Canadian conference. Very pleased to be joined by Magna, one of the largest automotive suppliers in the world. From the company, we're very pleased to have with us, Swamy Kotagiri, Chief Executive Officer; Vince Galifi, CFO; and Louis Tonelli, VP of Investor Relations. The format for this session is fireside chat. I prepared a number of questions and topics, but I highly encourage investors to get involved in discussion and ask questions as well. And to do so, it's quite easy. You type it in on the box on your webcast window. It pops up on my end, I can ask it anonymously and integrate it into the conversation. Before we get started with the discussion, I am going to turn it over to Swamy for some introductory comments. So Swamy, I realize it's an extremely busy time in the industry and always at Magna. So thank you for joining us today. Take it away.

Thank you, Joe, and good afternoon, everyone. Great to be here. But like Joe said, it's always an interesting time in automotive. And we kind of made it a little bit more interesting with the challenges that we have right now. Just if you look at the current market, there is a few bumps on the road, as I would like to call them, whether it is the shortages in terms of resin, semiconductor, other commodities and not even addressing the continuing challenges of the pandemic that we are dealing with as an industry. But I thought maybe it's worth just pointing a few things that could set the context for the discussion or questions today. We just had our Q1 performance despite all the challenges that we are talking about. The execution helped put up a strong performance for us in this quarter. The consolidated sales of plus 3% weighted growth over market, we ended up at about $10.2 billion. The adjusted EBIT margin was at 7.6%, which was 290 basis points higher. Similar trend in the adjusted diluted EPS, 1.86, which is a plus 116% and good free cash flow, about $414 million. A couple of key points that made that happen is the base at which we started off. We went through a lot of initiatives during the 2020 as we were addressing the challenges and helped us come in strong into the year. If you look at the current dynamics of the market, there is -- like I said, there's a few things that we are dealing with today as an industry. But I believe if you look at the inventory levels today and the pent-up demand, I foresee a pretty strong second half of the year, maybe even going into the beginning of next year from a recovering global auto production perspective. If you look at the increasing shift to light trucks in the -- at least from our perspective, as we see, 90% of our business is targeting that domain in North American market, which is positive. And obviously, in the near term, there is some headwinds in terms of supply constraints, as I mentioned before, and some commodity costs. And obviously, the ongoing COVID challenges. We also had an Investor Day on April 13. I just want to point out some of the key things that we talked through. The strength of Magna in the overall system knowledge, the ability to think like an automaker and how kind of it sets us apart, We are leveraging that foundation that we have from a culture perspective, the strong balance sheet, the strong management team. And our themes are the acceleration of the deployment of capital towards the high-growth areas, which are mega trend aligned, driving our continued focus on operational excellence that helps our margin expansion. And looking at, as I said, the overall portfolio of Magna, including the unique ability of full vehicle manufacturing and engineering to address the new business models and markets as our industry is talking about mobility as a service. So those are kind of some of the key points that we want to talk about. We have a strategic portfolio. We are really well positioned. And 90% of our portfolio is really agnostic to some of the trends. It actually helps address positively the trends that are coming up. So with that, I would like to open it up for discussion and questions. Joe, take it away.

Yes. Perfect. And very helpful comments there to sort of level set the conversation. I do want to really get into a lot of the stuff Magna is doing because I think it's really, really interesting and instructive for where the industry is going. Just to sort of back up and sort of focus on the here and now, you mentioned some of the supply challenges. Obviously, I think the semi shortage gets a lot of the attention. But if that makes us, I think we'd be having a lot more conversations about stuff like steel and resins and copper and other freight and other inputs. So I guess, maybe just to sort of get it out of the way, 2 questions. Really, what are you seeing for the year here? And maybe more importantly, how is Magna dealing with it? Because one thing we're hearing consistently is that the schedules are so volatile, and it can make it challenging, obviously, as a supplier to deal with some of the volatility. So what are some of the things that Magna is doing to manage through these supply issues?

Joe, as you said, the situation is definitely fluid at this point of time. We have various work streams where we are trying to meet the requirements of the OEMs as they are figuring out which vehicle lines to continue producing, which ones to stop. And obviously, there's a lot of changes. It's volatile, but it's nice to see that the collaborative nature of how the OEMs are addressing with the suppliers has been really good. I think that's the only reason why we are able to kind of be able to meet the day-to-day changes that are coming in. There is obviously a lot of inefficiencies associated with it because of the start-stop. But I think if you sit back and look at it, the additional capacity is coming online. We're still going to have a challenging second quarter as an industry, right, as we are trying to meet the demand. But the information shows that in -- towards the later half of the year, there may be enough supply to meet the minimal demand at least. So it maybe helps smoothen the peaks and valleys. But if the demand continues to be -- the overall production, I think, will be positive in -- towards the later half and the first -- even first part of next year. I think as an industry, there is also a thought in -- if you look at the chips and semiconductors, automotive is obviously a small portion of it. So how does the industry provide visibility in terms of demand so it can be planned better? There is a part in terms of that. There is also a lot of discussion on additional capacities and in what regions. I think they'll unravel in the next 6 to 8 months. But a lot of work streams in Magna, we have been able to keep all production running. We haven't stopped any customer. It doesn't mean it's been easy. It's been tough. But we've been very disciplined and able to do it. And OEMs have been really helpful, too.

Yes. That's great to hear. Maybe one of the things you mentioned is demand looks strong. It looks like even in North America, if you look through production here over the balance of the back half of this year to '22, you really just sort of maybe producing to demand. So I think that's a pretty good backdrop for the industry. And one of the lessons, I think, that the automakers are saying they learned is maybe they manage their dealer inventories a little bit better. I guess I'm curious. From Magna's perspective, I hesitate to say when things are normal because I think it hasn't been a normal year for quite some time. But having gone through the global pandemic and now sort of the shortage, a lot of sort of stop-starts, lines changing schedules. Are there lessons learned at Magna that have made you a better company and leading to more sustainable practices going forward?

Yes. I mean you brought up a few good points. If you just look back what happened in 2008, 2009 and the industry came off it, there were some lessons learned. And overall, we got better, right, in terms of capacity, in terms of how to manage capacity. And I'm sure the same thing will come as a step function as we go through what we're going through right now, whether it was the pandemic or the supply constraints now. The inventory levels are kind of really low, which there has to be discipline and I'm sure the OEMs will look how to manage that going forward. From a Magna perspective, I would say, our decentralized structure and we really empower the business units to do what's necessary. So we have an overall strategy. All the senior leadership took various work streams and coordinated it across different parts of Magna, different groups of Magna during the COVID. And we kind of took the same approach as we are dealing with the supply issues right now. I think that has been a strength that has let us be very nimble at the same time, be very coordinated. I think we'll take that forward to see how we can leverage the overall strength but keep the decentralized structure.

Yes, that's helpful. And maybe it's a good segue Swamy, into sort of the strategy. So from the recent Investor Day, I picked up on 3 key messages. So you want to accelerate your investment into the industry mega trends, drive that operational excellence. And you touched on this in some of your prepared remarks, the third is probably unlock some of these new opportunities, these models and business markets. So can you talk about maybe taking each one individually, how you drive down that strategy through that decentralized structure to position Magna, the parts to really participate and benefit from where this industry is headed?

Yes. Sure, Joe. I think I'll start off, and Vince and Louis can add. I always like to say, I've been a long time in Magna, but Vince all this comes back and says, Swamy, you've been only 22 years. I've been over 30. So there's a lot of experience around here. If you take each one of it, I think when we say we are decentralized, we are really giving the responsibility, accountability and the freedom to do what's necessary at every business unit level. But at the same time, we have a very cohesive strategy. We have guiding principles in terms of financial discipline, in terms of the product strategy, in terms of the, call it, the manufacturing operating system. We call it MAFACT. So all of this help bring everything together, know what their North Star is. And when it comes to execution, the accountability, the responsibility and also empowerment is at the divisional levels, and we strongly believe that's where it should be. They are the ones doing the day to day and know exactly where their product is going, what's happening in their division. So I think that's fundamental. So when we sit back and look at it overall, we like to see the whole vehicle as one entity. You cannot really design and define a seat without knowing how the vehicle structure is going to be or design a powertrain without knowing what the overall architecture of the vehicle and the power demands are going to be. So that system perspective is looked at from Magna, but it comes from both top down but also bottoms up as different product groups are formulating their strategy, right? So I would say it comes from both sides, and we come up to a baseline and draw action items and go forward with that. If you look at some of the things you talked about, some areas are accelerating faster and growing faster in the car of the future than the others, and that's how we base our strategy and assess our spends where we are, where the market and the -- how the future is going and come up with a strategy.

Great. Maybe let's go into the portfolio a little bit. Let's start with ADAS, which I know is sort of a subsegment for you in one of your divisions. But that business really seems to have gotten past some of the factors from a year ago -- from a few years ago, rather. How do you view the opportunity there? How fast do you think that business can grow? And what type of investment is needed to sustain that growth in that business?

Joe, I think when we talk about ADAS, we try really to think of it in a driver equip function and full autonomy, right? We believe the full autonomy has a different business model, a different half basis as you define and design what's required in terms of the software stack to compute in the -- and various aspects of that part. And it's really -- to comment commercial scale and in a material scale, it's still ways out. But if you take now the L2+ or what I call the driver assist functions, it's a fast growth rate, a lot of proliferation. And it's here and continuing to grow very fast. If you look at Magna, we are about 550 million in business there. We're -- over the planned period of 2021 to '23, we're talking about a 15% to 20% CAGR. Even beyond '23 to '27, we are talking about a 15% CAGR. If you step back and look at the overall industry now, we believe there are building blocks that make it possible to be relevant or the sense of fleet, whether it's the cameras or radar or LIDAR or ultrasonic. It's the compute, which is the least use of the domain controllers. And then obviously, the software and the fusion capabilities, right? So over the last 2 or 3 years, we have had a lot of core technology development and deployment in some substantial programs in Europe. They're coming towards launch into SOP. So as these core technology is done, we will see a lot more proliferation of applications, and we are starting to see that. I don't know, Vince and Louis, if you want to add anything there?

Yes. Joe, if I look back over last several years, we have been making a substantial investment in the ADAS area. We're also making a substantial investment in the electrification area. I don't really see that changing going forward. We just talked about an acceleration in certain areas of our business, which aligns with the big mega trends. So that's going to continue. The big change for us is actually growth on the top line because we've been making these investments and developing I call it -- I keep on calling it core technology or base technology that you can leverage over a number of platforms and the number of customers. So that, I don't think, is going to change. It's like I keep on talking about a fixed asset. You buy a press and you got to maintain it. We've developed some technology. We're going to continue to maintain it. So you have your ongoing cost. What's going to change is application engineering, which is a function of business awards. So I don't see that absolute level coming down. It will probably go up with business awards. But as a percentage of revenue, it's going to come down. If I go out 5 years, 10 years and we're significantly bigger, I'm sure the overall level of spending and investment this year is going to be higher. But we're not going to be talking about a $500 million business at that time anymore, that we're going to be significant [ than we are today ].

Yes, absolutely. Vince, maybe it's a good segue into -- you're talking about buying assets. And I think one the topics and concepts that sort of comes up a lot with investors is how flexible is a company's asset base or manufacturing base. And Swamy, I know you mentioned only like 10% of the portfolio or so is maybe tied to the powertrain with the rest being agnostic. But it is fair to say that the majority of that today is for ICE vehicles. So how does Magna go about sort of managing the assets and the manufacturing and the plants along that transition? How flexible is it -- are some of those assets?

Yes. Joe, I think it's an interesting question as we talk to the flexibility. Even the 10% of the business that -- like all-wheel drive, 4-wheel drive business or the manual transmissions. If you peel the onion back a little bit, what you'll see is, example, differential shafts or a disconnect system or gears. And it still has visibility for the next 10 years or so. If you're talking of all-wheel drive, 4-wheel drive systems in our truck platform or VCT in various European OEMs, the visibility of awarded programs for Magna is still 2030 already, right? Now if you look at the capital base, not every part of it, but a significant piece of it. Like if you look at gears, maybe you don't have 8 gears, you'll have 2 or 3, you have the differential shafts that are today an all-wheel drive, 4-wheel drive systems that go into e-drives. We have the software, power electronics piece of it that is actually a carryover. In the Investor Day, I talked about a couple of concepts on our powertrain. The disconnect feature in one of our powertrain concept is actually carryover from our all-wheel drive, 4-wheel system today. So there is a significant piece of reuse in the base. Obviously, in certain areas, we're going to strengthen. And where vertical integration is needed, we kind of figure what's the best way to do it. And one such example was our JV with LG, right, where we call vertical integration was needed in machines and inverters from a manufacturing perspective, and that led us to the JV there.

I think that -- if I can. Joe. Swamy talked about kind of the asset base sort of moving over. I look at the same from a financial perspective and say, well, if we've got some business that is not necessarily completely aligned with the trends, how do I recover my asset and how do I generate the right cash flow as we're investing on some programs that may have a long sort of life. And that's where you kind of look at each one of the pieces of the equipment and say, can this reuse and go on to something else? And you deal with that in a certain way. And if you're not program-specific or exactly have a life beyond 7 or 8 years, you make sure you recover it. And as long as we're getting the right returns and the bulk of our business is growing in line with the trends, we're generally [ conscious ] to help support what we want to do at Magna.

And some of these brands actually are going through a process even today, right? The ones that produced manual transmissions and DCTs are producing DHTs, the hybrid transmissions and hybrid drives in the future. The plants that do all-wheel drive, 4-wheel drive are doing e-drives, too, right? So I think, Joe, there is a pretty seamless transition there.

The asset base and the employee base, we have a strong skilled employee base. And together, that can transition along with the change in the industry.

Got you. It's a great point. And I guess a good segue maybe since you started mentioning some of the electrified product. Maybe to sort of tackle this topic, it would be helpful for, a, to just remind us of what the electrified product portfolio looks like today, but you've also made a number of announcements. So what does the road map look like over the next couple of years or maybe through the end of this decade. And I guess if you could, touch on how does Magna go about selecting where they want to play within electrified powertrains. What are the areas you find attractive and why?

Great point, Joe. Like when we talk about electrification, we've been talking about it for the last 5 years, I would say maybe even more. Why we have come to the forefront and how we think to right now. When first electrification started, you were talking parts of the whole driving experience, right, which is if you had an alternator and if you had a starter, you had to get to a parts drop system. So you would get into a crank-integrated or belt-integrated starter generator, and we were not part of that product portfolio because we didn't make those ICE components. Our product is really bringing power to the wheels, which is the transfer case or the all-wheel drive, 4-wheel drive system and then the transmissions. If we take the all-wheel drive, 4-wheel drive system, we are moving from that into e-drives. We have e-drive programs that are awarded. We are just launching one, which is the MEB program for VW in China. The second we drive for a North American OEM in China is one will be following shortly. We have a couple of other e-drive programs that have been awarded, but not publicly announced yet. So that's kind of the transition there. Now from a transmission perspective, we are moving from a DCT, a dual clutch to a hybrid transmission, which has the coasting and sailing function. And the next step would be to eliminate the first gear and the reverse gear and make it all electric drive at that point. And finally, to a dedicated hybrid drive in the future. So there is a very well-planned road map there, and we are sitting back and looking at the value chain to figure out what other things we should look in the vertical integration. So that's the 2 key pieces of technology for us, the e-drive, different parts of e-drive. So one key point to mention as we go away from the all-wheel drive, 4-wheel drive or the market goes away, I should say, in the long run, we had about 20% of the market today that has all-wheel drive, 4-wheel drive systems. But as we go into e-drives, we would be agnostic, right? We would be able to supply to front-wheel drive or rear-wheel drive. That means the addressable market is becoming significantly larger, and so is the content for vehicle increasing. So that's kind of the driveline, call it, transition into e-drives. And I talked about the transition of transmissions to hybrid drives in the future. And with our LG joint venture, we also have the DC-DC converter in place, right? The important aspect is now if we can bring the electronics, the ADAS systems and some of the input from there, the road conditions, the mapping and so on and so forth, we can even bring additional feature functionality to our power brands. So I know it's a long answer, but I would say those are some of the key aspects of our product strategy. And I haven't addressed other possibilities in Magna for electrification, right, which is factory enclosures for our Cosma division, which the content is pretty much similar or maybe even more than an e-drive. And every vehicle that has a battery needs a battery enclosure. It's a pretty complex product in terms of materials and process, so that's added to us. If you look at aerodynamics, that comes through our exteriors division, which adds further efficiency to range. So there is other things besides the more obvious powertrain side that helps our product portfolio.

Yes. It's a great point. I mean when you talk about things like battery enclosures, right, that's also completely additive, if you will, right? It's just something that didn't exist in the ICE world. Maybe just a minute or so on the LG joint venture. I know it's early days, but is there anything you could sort of talk? About customer reception? Or how should investors sort of think about the opportunity from that venture?

I think there's been a lot of optimism, Joe. I think very positive feedback in terms of the added capability to the existing Magna overall system experience from a design software side of things. Now we have the, call it, the platform technology for emission and inverter. The second aspect is where the OEMs are looking at integrating some of the systems in-house, like every time there is a new technology that's normal for the OEMs to do some in-house work before it proliferates into wider market and more vehicle lines and so on, we are able to even participate in that by providing the imaging and the inverter, too. So I think the numbers we talked about, 2019, 150 million, roughly, growing at -- sorry, 50% CAGR over the next 3 years. So kind of exciting for us and being viewed very positively by our customers.

Yes. Maybe -- this is maybe going to get a little technical, but Swamy, I think we have the right person answering the question, if you could put on your old hat for a second. So you also introduced an e-beam product, which is clearly more of a pickup truck type product. But we've seen -- and like there aren't a lot of these vehicles out today, but we've seen different automakers take some different approaches to sort of how they view sort of maybe powering a pickup truck, whether it's motors more towards the wheel ends or a solid axle beam or independent rear suspension. So can you talk about the benefits of maybe one versus the other? Why would a customer choose e-beam? And maybe if you could follow on anything -- I know I don't think you announced some of the awards or that, but maybe some initial reception to that product.

Yes. I think e-beam strategically, Joe, really, is to address the, as you said, the pickup and SUV market. So if you step back and look at what really is a pickup and SUV, call it, a nonnegotiable functionality, right, which is the towing and the capability of load-carrying capability, right? So we said if the fundamental requirement from the consumer is not to give up any of that, which is the towing capacity of the vehicle. At the same time, a lot of these trucks are built off a big platform. They have different variants come off it, right, SUVs, AUVs and pickups and different pickup trucks. Our intent was to minimize disruption, packaging disruption as well as architectural disruption to the rest of the vehicle. So I assume you have a truck platform, and you want to have a electric variant but don't want to give up any of the towability or the load carrying capability, how do we do it? That's where the e-beam came in. It is minimally disruptive for packaging. It fits in the current platform, don't have to change much of the other architecture. But now you have an electric variant, right? That's in a simple terms what we were trying to do. A lot of interest in North America, obviously, where SUV and wide truck pickup is big in the market. And we're really having some advanced, call it, conversations to bring that product to commercial awards.

I think a little bit of interest in Europe, too, Swamy, on the SUV side.

You're right, Louis. Yes.

Great. Let's switch gears to Steyr. So a really interesting business. And it seems like everyone wants to make a car these days, and it also seems like more people want to maybe get into a contract manufacturing business. So maybe if you could talk a little about this business. To date, I think most of your business and your capabilities are really what establish automakers and maybe they're offloading some volume or some niche vehicles, but they're profitable vehicles and they come with -- from established customers. It seems with a lot of these new entrants, right, the business decision is -- or calculus you have to go through was a little bit different because you've got to commit capital resources capacity to these initiatives. And they're unproven, in some cases, unproven brands and unproven products. So how does Magna go about that capital and resource allocation decision with the new entrants?

So Joe, I think a couple of good points. When we look at Magna Steyr, obviously, it's unique in a sense that we can manufacture the entire vehicle, integrate and also engineer them. And as you said, it's only the tip of the spear that the world needs. I think it's not just only the assembly, it's the ability to understand how different systems interface in a vehicle and how they come together is equally important. Maybe the work we do collaboratively with our OEM partners is not as visible, but there is a lot behind the screen there. And just in graphs, we produced more than 3.7 million vehicles over time, and that experience -- those battle scars help a lot when you're going through. And when you talk about every program, we look at all the variables in terms of risk, like you said, volume, the brand strategy, the strategy in terms of their product line and what they're planning to bring at what level. And we kind of look at all of that before we make a judgment. And not only that, the capital allocation of what's paid when and how much it goes into the piece price, all of that is different in each of the case, right? It's not just a standard business model that fits for every opportunity that comes along. And that's how we assess all the risks that are out there and take -- make an overall business decision. Vince, anything you might want to add here?

Swamy, you're right. I mean you look at all that and you look at also human capital as well, how much human capital you've got, what's in your pipeline and how does it impact the rest of your business positively. It's just a whole bunch of things that go into it, Joe. It's not that straightforward, unfortunately. I'd say from my perspective, I think we've probably got a lot more opportunities that we can sometimes handle. And from a human capital standpoint, it's not necessarily the capital required from a cash perspective, but it's just having the right people around to make sure the projects go successfully. And working with the customer, too, is critical. Have never dialogued.

Yes. I guess maybe, Swamy, as an industry observer, if some of these contract manufacturing programs for these new entrants really prove successful, do you actually think we might see the number of brands in automotive at the automaker level increase before it decreases? Like there's lot -- there's been a long standing that there needs to be fewer brands, but this actually seems like it might be a path for more brands. And then maybe to follow on that, and Vince or Swamy, whoever is more appropriate to answer this question, like if that is the case, how do you go about expanding potential Steyr capacity? And what's the lead time that you need really to take on a new program there?

Yes. I think, Joe, if you look at our grants Hoce facility, we have about 180,000 to 200,000 units per year capacity. We have a paint shop in Hoce now. We can add more capacity there in terms of assembly. And if you look at China, similar 180,000 units per year. And again, we have the flexibility to take on -- use capacity for any opportunity that comes along. We have always said we'll add footprint in North America if there is good visibility and there is a good plan. I think we are excited about it, and that's only one piece of it, as I would like to say. It's not just assembling capacity. It's the -- even in our manufacturing footprint, I think we showed in our Investor Day, if there is good visibility and there is a upfront discussion, the capacity could be only starting with 20,000 or 30,000, keeping in mind that we are going to scale to 60,000, 70,000, 90,000 or 100,000 units, right? So we can go through it in a very judicious way, and there is a lot of, call it, manufacturing planning and expertise that goes with it. On your first part of the question, it will be interesting to see how much or how soon will mobility as a service become material, right, where people are looking more at the experience of getting from point A to point B versus ownership and looking at car as an asset versus as a service. Then I don't know the relevance, if the question changes, right? The brand, the brand becomes more an experienced than an asset. But it's not as easy to bring all things together to have a really good experience as a car. So yes, you might see some new entrants as we are seeing, but it's more on disruption of the model and what's being offered rather than the product itself, right? And there's a lot of changes happening with electrification and autonomy being discussed. The -- so the barriers or the mode to entry is a little bit different now than it was before. If connectivity becomes a big deal with 5G and everything coming in, the value chain will change. So definitely interesting times.

Yes. For sure. I tend to agree, it seems like going forward, brand has always mattered in automotive. But going forward, that experience and what you're offering whoever -- I'd hate to say driver, I guess, the occupant of the vehicle is going to really matter and differentiate. Vince, we can't have a CFO on and not sort of ask about the balance sheet. I think we don't do our job if we don't do that. So Magna obviously has a very strong balance sheet that target debt-to-EBITDA ratio 1 to 1.5x. You're investing for both growth, both organically and inorganically, and returning cash capital to shareholders. So can you just talk a little bit about the cash flow expectations over the next couple of years, the criteria for the buyback? And I know you mentioned R&D spend a little bit, but I guess more broadly, how you weigh or sort of think about potentially having to accelerate investments to capitalize and really sort of sustain the top line growth opportunity?

Yes. You asked a lot of questions there. We gave an outlook back in February this year. And as we looked out to 3 years, after capital and after the investments we're making in electrification, ADAS and new mobility, we're expecting to generate $5.5 billion to $6 billion of free cash flow. So what do you do with that from our perspective, both Swamy and I have the same view. If we could find the right opportunities to grow the business, whether that's organically or inorganically, that's consistent with our overall product strategy, that's what we want to do because that's going to create enduring and growing value for our shareholders. So that's by far #1 priority. We've talked a lot about some of the things we're doing. The other thing that's top of mind from a capital allocation standpoint is to reward our shareholders through a dividend that grows over time, and we've been doing that for the last decade. And you shouldn't expect that to change as it is a key priority for us. And then I think when you've done all that and you look at your balance sheet and you say, I might have 1 to 1.5x, where am I in that overall range? I think to the extent where we've got excess liquidity, what we've been doing, and I don't see why that's going to change, is continue to buy back stock. Now I get asked a lot, 1 to 1.5 is a pretty big range, where do you want to be in that range? And it depends really on how good we feel about the macroeconomic environment, what opportunities we're potentially seeing and they may never materialize, what we're potentially seeing. Where is the stock price? And it's no crystal ball, but those are the sort of the ingredients we look at to figure out what we do with our balance sheet. So I wouldn't expect any change. I do expect over time our investments in some of these emerging trends in the industry will go up. But so will revenue and so will profit generate more cash to continue to invest in the business.

Great. Swamy, maybe just to close, you're obviously a veteran to Magna, although as I mentioned earlier, maybe not as much of a veteran as Vince. But new to the CEO role, you obviously started, as we sort of covered in the beginning, a very interesting time. But anything that surprised you from the view from the top?

Not really. I mean, Joe, I think I've been at the table for the last 7, 8 years working with Don and Vince. And as a management team, it's a different chair, right? It gives you a broader perspective of the capabilities of Magna. But generally, very enthused about what I see. A little bit of what not -- you see from a financial perspective, you sit back and look at the capabilities and look at what could be possible. Really, really very excited and fortunate to have a great management team.

Great. Well, with that, we are unfortunately out of time. So Swamy, Vince and Louis, thank you so much for joining us again at this year's conference. We greatly appreciate it. Thanks to all the investors who joined in on the webcast. And that will conclude the session. Thanks again to Magna.

Thanks, Joe.

Thanks. Joe.

My Pleasure.