MaxLinear, Inc. (MXL) Earnings Call Transcript & Summary

Good morning, everybody. This Ross Seymore. I'm executive analyst here Deutsche Bank. For our next presentation we're really happy to have Steve Litchfield, the CFO and Chief Corporate Strategy Officer of MaxLinear on the virtual stage with me for this fireside chat. As with all of these virtual fireside chats, if you have questions through the e-mail system, you can pop it in within the webcast. I'll see those in anonymously. You can also e-mail me at [email protected], if you want me to ask the question that way. So don't be shy about sending those over, and again, they'll all be anonymous. So with that, why don't we jump right into the fireside chat with Steve.

Steve, for all companies -- well, first and foremost, thank you for participating in this event. And then for all companies, we're starting with some macro-related questions. So I guess, first and foremost, on the COVID side of things, where have you seen headwinds and tailwinds from both the supply and demand side as we work through these unprecedented times?

Yes. Well, thanks, Ross. Really appreciate you guys having us this morning and glad to be here. So just yes, unprecedented times, for sure. I think just from a MaxLinear standpoint, we've been -- most of our businesses have held up relatively well. I mean the one area of business that we've seen some weakness is our industrial multi-market business that is a more broad-based business, had some exposure in China, specifically. And early on, we saw a big hit in Q1 of this year, started to recover in Q2. So that's probably been the biggest thing, and it's just been more broad-based. Now we're starting to see that recover as many others have. And so pleased with that. The other couple of areas of our business, and how COVID and just the overall macros impacted us -- the infrastructure business. The infrastructure business is close to 1/4 of our business, and it is a growing piece of the business. I mean a lot of newer products -- and these are also businesses, I mean, wireless infrastructure that have not been as impacted. There are some bits and pieces that have been impacted, but I'd say, they're pretty modest, and I'd say that most of our efforts have been really supporting those businesses as they grow and roll out newer products. And then the last one, the Connected Home area, that's the one that I would say we have seen some impact, I mean, a positive impact, clearly, with the work for home situation, our business in broadband, where there's more need for bandwidth in the home. I think there has been some benefit. There's been some things working against us as well. I mean we had some of our MoCA product that we sell into a Verizon platform had been impacted negatively just from the standpoint that they couldn't get into homes to deploy the newer products. So that's been tough. We do anticipate that, that will start to recover in the second half of the year, but I think overall, recognizing that -- I think homes probably had been, to some degree, underinvested in. I mean we've seen that over the last year, 1.5 years. Operators' spend here has been very low. And so I think as the demand for -- you've got more devices, which by the way, I think, was really happening regardless of COVID related activities, more demand, more applications, more devices that were using upstream capabilities, for example. And so that was driving some of this conversion over to DOCSIS 3.1 and then the other one that I think has changed in the home and some of this, again, was ongoing, and some of it was probably accelerated to a degree from COVID, and that was the WiFi or I think of the distribution within the home, right? So a lot of people, while they may have had a pretty good pipe coming into the home with their Internet, the distribution itself may have been challenging. And so -- and I guess I would add a note, I mean, I'm sure as all of us have found different areas of our house. I'm sure WiFi has become an important upgrade for many people, but I think this aligns very well with what's going on with WiFi 6. So WiFi 6 coming into the equation, there's a couple of things. It really does drive a need for an upgrade in the home. So that's good. And in a lot of cases, that's upgrading even the cable modem because there's a single box coming into the home in some cases. And in other cases, where it's just a WiFi router upgrade, then absolutely, you see a need there. So that's something that's kind of pretty exciting in our world. And as far as -- and I think I've covered most of the overall macro, I mean, we definitely have had trade impacts. I don't know if we want to go through that here, Ross, but I'll just hit it real briefly because it is an overall macro situation. So Huawei, for example, some of the trade regulations there. We've had some modest exposure to Huawei over the years in our wireless infrastructure, in particular, some of our backhaul and then soon to be access products, have been impacted by Huawei. Now it's not a huge number for us. I mean we've said that it's slightly less than $10 million a year. So it's not a huge impact overall, but it was a big part of our growth potential back in 2019 when this first came up, and we've since really moderated our expectations around Huawei. And so we haven't seen too much impact.

That's perfect. That actually was going to be my second question was on the trade side, but I think you hit on that. So if we want to go deeper into that, let's do it by talking about the segments of your company. So why don't we jump next into the Connected Home division. Historically, this has been an area that was strong a number of years ago, but has had some challenges more recently. But now you've doubled down in that business and more than doubled down by buying the Intel Home Gateway business. So let's talk about that M&A deal first, and then we'll get into Connected Home as a segment overall. So walk us through the logic of the Connected Home -- or excuse me, the Intel Home Gateway business, why did you buy it? And what do you think the growth rate of that business can be going forward?

Sure. Yes, absolutely. Good question. An important one that this is a very large acquisition for us. While I see it as large, I don't necessarily see it transformative per se. I mean these are markets that we're in currently, that we participate in. We know this customer base. And so we were selling -- for those who don't know, I mean, we were selling a front-end ship along with Intel's SoC chip. So this was a very natural fit for us. We've been going to market effectively kind of as a partner with them for years. And so just from a natural good combination, I mean, it makes a lot of sense, and it's easy for us to do. I've defined it as kind of a tuck-in acquisition because it is something that wasn't super strategic. As you highlight, Ross, I mean, we've been investing heavily in infrastructure, and that's an area that we see as a big growing market and a really great fit from a technology standpoint from MaxLinear. And so that really sets the stage for the next segment of growth. That being said, I mean, Connected Home, it's a business that we participate in, we weren't getting out of. There's not a tough competitive landscape, frankly, I think it's really a good competitive landscape. We've got a couple of suppliers, us and Broadcom. And so I think this is an area that I think we can really take advantage of and do very well. And it does bring another growth driver to us in WiFi. So that's a very unique asset and an asset, as you've seen in the market with others trading, they're not easy to find and not easy to develop. So this was a business that existed within Intel. It's new and growing. And so that is one of the big growth drivers. So think of MaxLinear, we've had these drivers of data center with our PAM-4 DSP, our 5G massive MIMO chip, that's starting to get traction. And then now we add on the WiFi 6 offering and future offerings as well. So those are 3 big growth drivers for the company going forward. The last piece of your question, Ross, talking about what is the growth expectation from this business. So the growth expectation, we've been pretty clear that this business probably grows at low single digits. Now could that be more? I think there's a couple of things that influence that and happy to address some of the sub-bullets there, that you raised. But I think this business -- I mean we're really very much focused on getting the WiFi up and going. WiFi been relatively -- I mean it's a sizable business this year. I mean call it, $25 million, give or take, just to kind of give you some place to calibrate from, but there's a big growth potential. And so as that business gets bigger, and some of the other growth drivers like in Ethernet, for example, or even in some cases, fiber, I think you can actually see this business grow at mid- to even potentially high single digits. The other factor that influences this is work from home. Now I mean, that -- in the short term, I mean, that could drive even more demand. And that's probably not necessarily taken into account here, but I think we've been consistent. We've been in this business for a long time. So I think low single digits with the potential to go to mid-single digits is where our expectations are for next year.

And just to be clear, when you size the WiFi business at $25 million, is that during the year that you guys owned it, so it's really 2x that? Or is it $25 million on kind of a normalized basis.

I'm sorry. Yes, that's an annual number.

Got you. So if we look at that business then from a profitability point of view, you guys have already you've -- like you said, you've been a partner, you guys are the front and Intel has been the back end of that business. I think there's some share gains that the combined entity was expecting to have and looks like should be occurring next year. How do we think about the margin profile of this? It's kind of a carve-out more so than just buying an entire public company and having big cost synergies, et cetera. How do you see the profitability and the margins evolving in this business over the next year or so?

Yes. So you're right. On the share gain point, I mean, there are some dynamics where we were seeing some catch-up last year with a number of operators and that has continued. And I think actually, the customer base has been pleased to see someone really dedicated here and committed to this space. And so hopefully, we'll see some benefits from that. You've also seen some of the other suppliers into the space struggle a bit. And so I hope that we'll see some nice upside related to that. Great question on the gross margin. So this is something that we've highlighted, and it's been very important. So yes, this business was dilutive to our gross margins. And it's one of the reasons why we really looked long and hard at this thing, whether this did make long-term sense from us. And the more we dug in and got comfortable with the cost structure of the business and our ability to get that cost structure in line with our peers and be able to meet that greater than 60% gross margin target. Then we were able to move forward on it. So there's a lot of efforts underway here. I mean I would start with the top line, right? And that's one that can have a big influence on gross margins. It's one of the reasons why when we came out in April that kind of forecasting on a midpoint of $65 million a quarter and then upped that to kind of $80 million to $90 million a quarter. So there was a big increase there. I mean part of the reason for that was some of the uncertainty that we saw in the market, but in particular, our ability to see revenues grow at that 60-plus percent gross margin number, right? And so that's a big task, and so we needed to get in and not only understand the markets and our ability to price products appropriately, but then also understand our cost structure and our ability to pull out cost. I'll give you a few points around what are those drivers, right? Because this business was running less than 50% gross margins. And then we've even said that even in this first stub period, which are a little hard to manage sometimes that we'd probably expect it to be close to 50% gross margins, which is an improvement, and some of that comes about from just the structure of the deal as well as the mix, but that 50% is really what it comes over at, and then we'll see kind of a nice bump up to the mid-50s in Q4. So we were able to negotiate a very favorable supply agreement with Intel. About half of this product is manufactured at Intel in-house. And then the other half is done outside of your traditional foundry suppliers and then all your back-end assembly and test houses. So we were able to negotiate the supply agreement on the piece that Intel was doing. And so that helps out in the near term, but there's other things that we're able to go off and address. One of those is pricing. One of those is distribution. So you can imagine, this was a very small business within all of Intel. And so they ran a lot of this business through distribution, so we would intend to move that over. And a lot of those cases, we're able to take those customers direct and see some cost savings. We're going to pull this into our system. Our team can manage this. And so we're hoping to be able to move costs down. We also see benefits from kind of a wafer assembly test house. When you talk about the size of the acquisition. This also has a big influence on the pricing that we can get from our own products, right? And so we do expect to see some benefits from the MaxLinear kind of proper pricing from our suppliers based on the additional volume. So these are some of the things that we're working on. Gross margin takes a little bit of time, but I do expect to see nice improvement throughout the year. I would expect this business to be approaching 60% by the end of '21, is kind of where our expectations are, given that our ability to go up and execute on those items that I highlighted.

That's great color. If I'm thinking about that gross margin trajectory from kind of 50% in third quarter this year to 60% exiting next year or maybe 5 points from 4Q '20 to 4Q '21 from 55% to 60%. In aggregate, is that exceedingly revenue dependent? Or is it the inverse of that, that it's -- the vast majority of those incremental 5 points are going to come from the cost side of the equation?

I mean it's a little bit of both to be honest. I mean some of it is -- some of it's revenue and mix that starts to play a role as well, but there's a lot of pieces of this. We also, Ross -- the other part of the equation. So we're -- this Intel acquisition is an asset purchase, so we got frankly, only the people that we wanted to keep on a go-forward basis, but there were a lot of support services that Intel was providing or is providing through a transitional service agreement. And so while most of that shows up on the OpEx side, there is a little bit of it in the COGS side as well. So that's another piece of the puzzle that helps us to continue to drive costs down. So I mean, the answer is really both revenue as well as the cost structure as well.

So two final questions on this. One, more kind of tactical and then one more strategic. On the tactical side of things, you described a little bit about how that $65 million a quarter went to $85 million a quarter. Was it mainly that the environment was better? Was it that the percent of the business you guys could ship at an acceptable margin was greater than you thought? And then I think the most important part of that question is going to be, how sustainable do you think -- is this the base off of which you grow the low single digits in that business? Or is the $65 million a more appropriate base?

Yes. So the answer -- absolutely, there was conservatism -- I mean we gave guidance kind of in the middle of some of the darkest days of COVID. And so yes, I mean, I think there was some conservatism. We did want to make sure that we could hit these expectations with regard to the gross margin targets that we've set for ourselves, right? And that's something that's super important to MaxLinear. I mean look, I think we're very comfortable with the revenue expectation here. I mean I think you -- this business has run quite a bit higher over the years and a lot of that I think that business, some of that share gain that we have and then throw on top of it some of these growth drivers like WiFi and Ethernet. Look, we wouldn't be putting out a guidance that we didn't think was sustainable beyond work from home, right? So I think that's -- I totally understand the question and understand the point around sustainability, but that being said, I mean, the run rate of this business has been quite a bit below the expectations. And so often, people are commenting around, work from home or it's not sustainable. I actually look at it a little bit differently. You've got some different drivers in the business that I think really imply that there is a bigger growth potential such -- I mean being driven by WiFi, being driven by Ethernet. I mean some of these other dynamics of the business. So by no means do I think that we go from $85 million back to $65 million on a run rate basis for this business.

Got it. And then you alluded to a little bit my final question in this segment, and it's more of a strategy and an IP portfolio. You and I and Kishore and I have talked over many, many years about do you want to get in the WiFi business? Do you not want to get into it? You guys, obviously, now are in it. Talk a little bit about that assets and what it allows you to do strategically? And what gives you confidence in the ability to grow that? Is it that you're doubling down the investment versus what Intel did, that you're going to attack more markets like, I don't know, retail, for example. Just talk a little bit about the attraction to that asset and what it will allow MaxLinear to do going forward?

Yes, I mean, this is the exciting part of the acquisition, right? I mean WiFi was one of the big growth drivers, we had absolutely talked about it for years. It was a natural fit as far as offering more products, right? I mean the simple strategy there is just continue to build more products to sell to the same customer base and the same -- into the similar application as well, right? And so this really checks that box, if you will. And so did we -- I mean Intel ultimately have made this big investment, it allowed us to participate in it. And so it's -- I keep -- I've highlighted a number of times is this is really low-hanging fruit, right? So when you go into a new market, you have this new growth trajectory, seldom do you have like an existing customer that basically has to design you in, right? This is a classic case of where the customer said, "Hey, look, we want you guys to take more of this bomb, right? And so that's what's happened here. We've already got the SoC. We've already got the front end, we've already got the [ slick ]. I mean you've got all the other aspects of the solution. So dropping in a WiFi chip only makes sense. It enables them to continue to kind of clean up their supplier base. Broadcom has offered this over the years. Now we are able to do this in a much more meaningful way. So that's the low-hanging fruit. So where do we go from here? So we go up and take this operator business, which is truly very straightforward. I'm not saying it's easy. I mean it still requires that you deliver tremendous levels of performance, support. Support is crazy and important. I would say that, that's one of the areas that we're very much focused on right now for our customer base, making sure that they're supported on -- coming out of the gate, I think that's something that the customers are asking us. It's like, "hey, are you able to support this?" Absolutely. And that's an area that we put bodies and making sure -- I mean because this is a very substantial ramp, and we want to make sure that all of our customers get the proper level of engineering support as that product ramps. So that's really what we've been focused on, right? Is making sure that we can support the customer through this ramp and not lose a beat. I mean going back to -- if I think of the business itself and where we've been able to cut and trim, how do we get those operating margins up, right? Well, those efforts -- we don't want to cut around the WiFi business, right? That's where the growth potential is, and that's what we want to keep focused on. As we -- you'll see down the road in a couple of years. We're in the retail space today to your question earlier. So we'll continue to support that and drive that. And that's something interesting, right? As you see more demands on the performance side. So a lot of customers will go directly to retail and get a better performing product. And so we'll definitely be in that domain, are in that domain, selling products through that. Long-term getting into enterprise is another potential avenue that we can pursue. And then even longer term, I think of what else is going on in the home, what else can we expand through, we can definitely move over to the client side, do low power wireless, IoT devices. This is something that long-term would make a lot of sense.

Got it. So why don't we move over to the infrastructure side of the business. Like you said, it's -- depending upon pre- or post- the Connected Home side. It's kind of either 25%, 30% of the business pre- or kind of mid-teens-ish post, but either way, it's been a great growth driver and one that you expect to accelerate even more going forward. So why don't we get the challenging part out of the way first. Why was that business down in the first half of the year, given that so many of the competitors have seen growth, 5G investment, cloud investments, a 400-gig PAM4, that sort of stuff. What were the headwinds that you guys felt? And in the back half of the year, it looks like it's accelerating and going positive. So what's going from being a headwind to a tailwind as this year unfolds?

Sure. Sure. Yes. So maybe I'll start with the backhaul business because that was one of the pieces that was impacted in the first half, a little more than expected. We typically see some seasonal slowness in Q1, throw in COVID on top of that. And I think definitely saw weakness in Q1 due to the backhaul business. And then we really expected to see that improve in Q2 in a pretty material way, and that didn't roll out, and that was a bit surprising now. It looks like it's just really pushed into Q3 and Q4. And so we've got backlog coverage. It looks like bookings continue to come in. So I don't it doesn't feel like anything has really changed materially other than, we definitely did see a shift in some of these big backhaul programs can be lumpy and they do push quarter-to-quarter from time to time. And so that seems to be what happened here. On the other parts of the business, I mean, so we've got some analog product that support infrastructure was impacted a little bit on the first half of the year to some degree, some COVID-related, some not, servers, have been fairly robust. So that's an area with our power management product that I think we see good strength in. We've also won a new piece of business there that's pretty material to our size anyway, and that's expected to start ramping in Q4 and Q1. So that's kind of exciting, but the question around why others have seen more strength. I mean so our PAM-4 DSP for 400 gig, I mean the one 400-gig data center for the largest data center guy in the world, 400-gig just hasn't ramped yet. So it's not a, it's not a MaxLinear issue, nor is it really a market issue where someone else has taken advantage. I mean I think we're running head-to-head with our competition there and doing extremely well. I mean I know Ross that you're aware of this, but I mean, there's -- we've got a couple of other competitors inside Broadcom. And I think we're very well-positioned to see this ramp, start to see revenues in the second half of the year. Yes, I mean, it does seem that Amazon is a bit delayed. But it doesn't seem huge by any means. And so we're very excited about that. We've got tons of -- talk about support. That's an area where we have a lot of support that's all dedicated to the customer to make sure that, that does ramp as the customer, in this case, the end customer would like to see. So that's going very well. The other one on 5G, I mean, you talk about this bigger rollout. So that also is a new product. I mean we have our 4x4 chip that came out last year. We've got the design ins. Design wins and expected to see production revenues from the -- in the second half of the year from that. On track, doing well as expected, and we start to see some bigger revenue numbers from that coming in early '21. So I'm very pleased with the progress there, and that's probably throw in a quick note on -- we also just did a small acquisition last week. We announced that we signed and closed the deal with an IP company that will accelerate some of our efforts, expand our product offering in the 5G area. But I think 5G is on track, we just don't have -- I mean these are new products. And so you referenced that others have seen growth, and we haven't. I mean these are new -- access is a new market for us. And so I would say that, that's very much on track to be realized as planned.

So if we think about this segment overall, it looks like in my model, at least, it will be pretty much flat year-over-year, about $85 million plus or minus, and I know you didn't guide for the fourth quarter yet. That's just my estimate, but if we think about next year, what sort of -- what are the big tailwinds? And what sort of revenue growth do you think is kind of a reasonable ballpark to -- for investors to consider for your infrastructure business?

Yes. So look, next year, I think we're finally starting to see the fruits of some of this labor. I mean the data center, 5G massive MIMO has taken a little bit -- I wouldn't -- in some cases, a little bit longer, as I just mentioned on the data center front, but in some cases, on track, and it's something that we've been investing in that we're very excited about. So next year infrastructure, I mean, I think it's strong double-digit growth. I mean we haven't guided that number, but I do think that, that's pretty substantial. We've already just kind of the way the year has progressed, I mean you're going to see some somewhat easy comps on like the HPA and even the backhaul side. And then you start to see material contribution from the 5G products as well as the PAM-4 DSP products. So yes, I mean we haven't -- like I said, haven't given out a number, but I mean, I think it's well north of 10% next year.

Got it. And for those that are listening and no endorsement from Steve, but just my model has it growing closer to 40%. So impressive growth and even the exit rate, like you said, Steve, from the back half of this year, if you sustain that will get you really good comps in the first half of next year.

That's right. Strong. And I -- and some have lost perspective, and I think you've done a good job of highlighting it. Infrastructure is a very big growth area for us. And I think we're really well positioned from a product offering standpoint and the early signs of this ramp happening. So this is a business that -- I mean you're talking about the $85 million. I mean I know we've said several times, I mean, if I look out 3 or 4 years, I mean, this business can be a $300 million, $400 million business for MaxLinear. And I think all the groundwork has been laid. Is there a lot of work ahead? Yes, of course. But I think we've got the right technology at the right time as the market starts to roll out.

So why don't we, in the last couple of minutes we have here, Steve, talk about the industrial and multi-market side of things, probably down closer to 10% to 15% of the company's revenues after the Intel Connected Home or Intel Home Gateway business is fully integrated, but talk about that, is there -- is it pretty much going to be a GDP-type business, broad-based peers, diversified shareholder base -- or customer base, excuse me? Or are there some MaxLinear growth drivers that investors should consider in that segment?

Yes. So it is down. I mean I can't help, but Ross kind of grab on to -- I know some people are adding all of Intel into kind of Connected Home. I mean you should expect to see us kind of split up the end markets differently because I think we want to highlight some of the growth potential in WiFi, some of the growth potential in the Ethernet. And there are some other products that may fit into some other categories. And so we're working diligently on that. And so as we roll out those numbers, you'll be able to see them. And hopefully, that will help investors really understand that combination because a lot of folks I mean the Intel CHC business really didn't have a lot of visibility, and so a lot of investors didn't understand everything inside of that. And so we'd like to highlight it more. But more specifically to your question on industrial multi-market. I mean industrial multi-market so we've historically said that this is a business that kind of grows with GDP, call it, 2% to 4%. I mean it's not these days, calling it, it will grow at GDP is a little confusing when you see GDP a big negative number. So I'm trying to come up with a better way to explain that, but I do think it's probably low single digits. This is -- I mean our high-performance analog business is a broad customer base, there's thousands of customers, hundreds of products. And we do -- we're continuing to grow this business. It's mostly power management and interface products. We kind of lead with these products into infrastructure, right? And so we'll develop a POL for a server application, but then a lot of those POLs can be used in broader markets. I mean Ethernet will end up being a very similar application where you're leading Ethernet into a much broader -- maybe it's a gateway application, but Ethernet absolutely be able to sell-through into the industrial markets. And so right now, we've got a number of new products, we've got a couple of new power management products that we're excited about that are coming out in the second half of this year. And again, while they lead with infrastructure, you're going to see a broader basin. So I think that we can get to the point where we're seeing higher growth rates out of this end market, but it's going to take a little bit of time. As you know, we've been revamping that product portfolio for a little bit. And that market moves a little slower, but it's absolutely following along our growth expectations for some of our power management products.

Perfect. And then in the 1 minute we have left, Steve, why don't we just quickly talk on margins and cash flow. You talked about the gross margin trajectory for the Intel Home Gateway business. Talk a little bit about the operating margin goal you have for the company overall? And then how should we think about cash usage going forward given that you levered up a bit to buy the Intel business?

Sure, sure, sure. Yes. I mean look, operating margins, the way I would kind of highlight this. I mean so the Intel business, what we had said that -- getting to that $80 million to $90 million that we on that run rate that we would expect to see operating margins able to get to low 20% operating margins for that business in about 12 to 15 months. And -- but I think longer term, I think it absolutely has the potential to go higher than that. And I don't see any reason why -- I told many of you. I know, Ross, you've heard this, but I mean, Broadcom is running this business north of 40% operating margin. So with the competitive landscape and the positioning that we have, I really do think that we can run this north of 30%. That will take a little bit of time, but I don't think it's a huge amount of time either. So that's pretty exciting. I mean MaxLinear has run north of 30% OP margins in the past. This scale is something that's super important to us. You also see us make some big investments historically, and I think we've been very disciplined around the OpEx spend going forward. So I do see this operating margin number moving higher from here. Not -- I know that's probably obvious, but I'm not willing to give you an exact number right now, but I think you can understand the direction that it's headed. On the cash flow side, I mean, look, cash flow has been -- historically, we've done a really good job with our cash flows and just general profitability. I see that continuing. The Intel acquisition will only increase that. I don't have any doubts on that. As far as uses of cash going forward, I mean, our historical perspective has been we want to use that existing cash for acquisitions as well as pay down debt. You highlighted that we did lever up -- the leverage really didn't change a lot. I mean net leverage, we did -- we had worked down to about 1.5x as of the last quarter. Now that will bump up a little bit. But we're still -- I mean you're talking gross leverage probably under 2x. It's a great thing about this acquisition. I think we've been able to negotiate a pretty reasonable multiple on this. And so we didn't lever up tremendously, which is great. And naturally, it's an asset purchase. We've got some working capital needs that we'll have to work through in the first quarter or 2, but once these revenues kind of start to roll in, the profitability, cash flow is going to increase nicely. And look, we'll pay down debt, and we'll keep looking at acquisitions. We just did -- we spent a little bit on a tuck-in acquisition that we announced last week. And so things like that, we may do, but quite frankly, you would expect us to kind of build that up and do something larger and more meaningful down the road sometime.

Perfect. Well, Steve, we are right on top of the time limit we have. We appreciate you not only participating in the event, but given these great detailed answers. So much appreciated, and everyone that will end this fireside chat.

Thanks, Ross. Appreciate it. Thanks, everyone.