O-I Glass, Inc. (OI) Earnings Call Transcript & Summary

Good morning. Welcome to Deutsche Bank's Global Basic Materials Conference. I hope everyone is doing well. I'm Kyle White, the lead analyst of paper and packaging here at Deutsche Bank. I'm pleased to have O-I Glass participating today at our conference. From the company, we have CEO, Andres Lopez, who has been CEO since 2016 and has been with the company since 1986. He's joined by CFO, John Haudrich, who's been CFO since 2019. O-I has a quick presentation that they will go through, and then we'll go into the Q&A session. If you would like to ask a question, please feel free to type it into the question box on the left-hand side of your platform. It will be anonymous. With that, guys, I'll hand it over to you.

Thank you, Kyle, and the Deutsche Bank team for hosting us today. Welcome, everyone, and I'm joined by John Haudrich, who is our CFO. Today, we will provide a few prepared comments, including an overview of O-I Glass, our key priorities and progress we're making towards those as well as some color on our ESG objectives. Following prepared remarks, we'll be happy to take questions. For those of you who are listening, but unable to see the materials we are presenting on the screen or who wish to later access the materials, the slide presentation we're using is available on the company's website at o-i.com. Please review the safe harbor comments on Slide 2 and various disclosures found on both the slides and the website. Let's move ahead to Slide 3, where we provide a high-level profile for the company. O-I is the global leader in glass packaging. We serve a highly stable and steadily growing food and beverage industry. As noted on the slide, we have a balanced product portfolio, including food, spirits, beer, wine and energies. Importantly, we serve customers within the beer category with product lines spanning multiple tiers, including craft, premium, super premium and mainstream. We support more than 6,000 customers across 40 countries. Our customers include major multinational companies as well as emerging local customers. Our 2020 sales were about $6.1 billion, with more than 70% of our sales generated outside the U.S., supported by our network of 72 factories across 20 countries. Not only our customers' highly valuized global reach and mastery of glass. While specialized in glass containers, which are the most sustainable packaging option and the only package that is infinitely recyclable. So it is ideal for the circular economy. Likewise, it is the preferred substrate by most consumers given its premium characteristics and their increased focus on health and wellness. Furthermore, O-I is developing MAGMA, which is a new proprietary manufacturing project that will revolutionize our industry and create additional business models for glass. In summary, O-I is the preferred glass supplier to many of the large blue-chip brands you know and use every day. Furthermore, we are well positioned to revolutionize glass as the best and most sustainable packaging option for food and beverages. We are focused on a bold plan to change O-I's business fundamentals. As outlined on Page 4, we are making great progress on our 2021 business priorities across 3 key platforms. First, we aim to expand margins. We have targeted $50 million of gross initiative benefits, with year-to-date savings of $35 million through the first quarter, we have accelerated this activity in the wake of the winter storms that impacted Texas and Mexico during the first quarter. Next, we seek to revolutionize glass. The successful start-up in March of our first commercial scale MAGMA line in Holzminden, Germany was a major milestone. These efforts will be complemented by reposition in ESG, expanding our glass advocacy marketing campaign as well as our augmented innovation and new product development capabilities. Third, we will continue to optimize our structure. This includes a number of efforts ranging from portfolio adjustments, improving the balance sheet, simplifying the organization and addressing legacy liabilities. We are optimizing our portfolio to properly align our business with the ambitions of our strategic customers and improve our returns. To support this, we recently announced our intent to invest $75 million to profitably expand in the Andeans where we are currently capacity constrained. Likewise, we are now more than 75% complete on our $1.15 billion divestiture program with a number of corporate development activities currently underway. Proceeds are being used to improve our balance sheet flexibility. As announced in April, Paddock Enterprises, LLC has reached an agreement in principle for a third and final resolution to our legacy asbestos-related liabilities. Specifically, Paddock agreed to a mediator's proposal for a consensual plan of reorganization regarding the Paddock Chapter 11 filing. The agreement provides for total consideration of $610 million to fund a trust on the effective date of the planned reorganization, subject to documentation and satisfaction of certain conditions. This is a major milestone. O-I has paid $5 billion in asbestos-related claims over the past 40 years. Just in the past decade, these payments have consumed 40% of our cash flows. With this agreement, we are turning a new page where we can place all of our focus and resources to enable a prosperous future for O-I and all its stakeholders. I believe the company is at an important inflection point as we advance our strategic plan, reflecting our efforts to increase stability and agility we have demonstrated a step change in our resilience as well as our ability to consistently perform and deliver on our commitments. At the same time, we are removing the constraints of the past, including legacy asbestos liability, while moving forward with breakthrough technologies like MAGMA. We expect these and other key strategic actions will usher in a new period of prosperity for O-I. Let's move ahead to Slide 5 to discuss recent volume trends. As you can see on the chart, demand has been relatively stable over the past 50 months, except for the second quarter of 2020, which was the onset of the pandemic. Our first quarter 2021 shipments were flat with last year, but up around 1.5%, excluding the temporary impact of severe weather. In fact, nearly all markets improved on an adjusted basis. As we have discussed in the past, demand for healthy, sustainable glass containers has remained strong, despite significant swings in on-premise and retail channel activity. We have shared some additional insights in the chart on the right. It illustrates the expected trend, including various consumption by channel, before, during and after the pandemic. Naturally, on-premise dropped during the pandemic, but was substantially offset by strong retail sales. Going forward, consumption is expected to remain elevated at the retail level, while there should be a strong rebound in on-premise consumption. Overall, total consumption Is anticipated to normalize at an increased rate, given changing market dynamics and heightened social activity post-pandemic. For O-I, we expect double digit demand growth in the second quarter compared to 2020 levels as we lap the onset of the pandemic. In fact, shipments are up more than 20% quarter-to-date through May. We remain confident that second quarter shipments will be up 15% or higher from last year, which is consistent with recent guidance. For the full year 2021, we continue to expect demand will be up between 3% to 4% as shipment recovered to 2019 levels. Likewise, we expect further demand growth in 2022 and beyond. Advancing to Slide 6, I would like to take a moment to update you further on MAGMA. Key trends in the food and beverage market have shifted over time. Consumers are increasingly looking for a more premium experience. Health and safety is a top priority, and interest in sustainable packaging has skyrocketed. This evolution is mostly good for glass. Glass conveys a premium image that is preferred by consumers. Glass design is highly flexible, which is great for brand building and increasingly important for customers. Likewise, glass is highly sustainable and protects the product taste and integrity. So it fits well with the emerging green economy and trend towards health and wellness. The value chain has responded to these factors. Years ago, major brands dominated the marketplace. Today, the store shelf is exploding with new brands looking to fit the needs of changing consumer preferences. Our legacy network was mostly built for consistent longer product brands, yet the proliferation of new brands and SKUs, favor flexibility, agility and innovation, these changes underscore the need to create additional business models for current and future market trends. As such, we have designed MAGMA to complement our legacy assets and address some of their limitations. In particular, it will reinvent how glass is made, enable O-I to address emerging market dynamics as well as unlock new and profitable growth for O-I and our customers. With MAGMA, the entire production process will be redefined and glass production will no longer require a large-scale industrial plant. MAGMA leverages a new state-of-the-art melter with a lower capital intensity and total cost of ownership. MAGMA is scalable, which will allow us to support growth and entry into new markets at lower increments of capacity. It also can be prefabricated. So it supports rapid deployment. MAGMA can be located at or near our customers, providing better service alone with significantly reducing logistics cost. This new technology is very flexible. It can be turned on and off quickly adapting efficiently to jobs and color changes, demand, seasonality as well as economic cycles. Finally, MAGMA will improve our sustainability profile, it is designed to support future green energy inputs such as biofuels or hydrogen and enable greater lightweighting and increased cullet usage. MAGMA is being developed over 3 generations. Generation 1 focuses largely on the new melting. Generation 2 addresses other important steps of the manufacturing process. In particular, Gen 2 focuses on its scalability, flexibility to deploy, improved capital intensity, digitalization, lightweighting and other aspects of sustainability. Generation 3 is a full reinvention of the production facility. As a result, it would be fully modular, affordable, compact, scalable and prefabricated for quick deployments. As noted, our first full scale Gen 1 MAGMA line started production in March, and we are validating key assumptions now. Generation 2 will be piloted in the second half of 2021. Generation 3 will be developed and piloted in 2022 and 2023 for large scale deployment in 2024. I hope you can see why we are so excited about MAGMA and the future of glass. Now, I'll turn it over to John.

Thank you, Andres, and good morning, everyone. Let's switch gears to discuss why glass is the world's most sustainable package. I'm now on Slide 7. More than ever, consumers are looking for healthy choices, both for themselves and the planet. As we say often, glass is made from natural ingredients, it won't harm us, the earth or the oceans. Unlike other packaging is already 100% endlessly recyclable. Looking on the right-hand side of Slide 7, you will see the results of a recent survey by McKinsey that evaluated consumer views of packaging sustainability. While these do range by geography, glass is viewed as a highly sustainable packaging option across most of the markets. In fact, it ranks in the top 3 across the majority of geographies. Importantly, glass is perceived by consumers as much more sustainable than metal containers, such as aluminum cans. This underscores the importance of our ongoing glass advocacy campaign as we seek to rebalance the discussion around packaging substrates and sustainability. Thinking about O-I in particular, we are focused on being the most innovative, sustainable and chosen supplier of brand building packaging solutions. As you know, O-I was the first packaging company to issue a green bond. And in 2020, we were the first glass packaging maker to have an approved emissions target from the Science Based Targets initiative. Likewise, we enhanced the rigor of our Board governance on ESG, established a global sustainability network and created an Executive Diversity and Inclusion Council. We have expanded our sustainability initiatives to include 9 different dimensions and set several new goals. Last quarter, we refreshed our sustainability website, which provides more details, and we will have a new sustainability report later this year. As discussed, our MAGMA technology promises to improve glass sustainability across several dimensions. As noted, our glass advocacy campaign aims to rebalance the dialogue about packaging and, in particular, the sustainability of the glass packaging. On Slide 8, you will see some of our specific sustainability goals on 1 page. It's worth noting, we have increased our focus on creating and funding glass recycling solutions that we are working closely with industrial partners towards the goal of increasing U.S. glass recycling rates to 50% by 2030. Moving ahead to Slide 9. I would like to update you on our financial outlook. Overall, we expect our business performance will significantly improve in 2021 as markets stabilize and recover. Current business trends continue to support our full year earnings guidance, as illustrated on the chart. This includes full year adjusted EPS of between $1.55 and $1.75 per share and free cash flow of approximately $240 million. This was based upon a number of key assumptions, including a 3% to 4% improvement in sales volumes for the year. Looking at the second quarter, our business outlook is tracking at the high end of our $0.45 to $0.50 guidance range, supported by good sales volumes and strong operating and cost performance. Let me conclude on Slide 10 with a few comments. 2020 was a challenging year for everyone, but we navigated the pandemic well and continue to advance our strategy. Likewise, we are making excellent progress on our 2021 priorities, including MAGMA. Sales volumes are poised to improve this year, and glass is well positioned for continued growth in the years to come. The combination of demand growth as well as solid operating cost performance are driving improved financial results. We continue to believe our best days are ahead of us, and glass is a great fit for the new green economy. We look forward to sharing our plans with you, including more details on MAGMA at our Investor Day in late September. Thank you for your interest in O-I Glass, and Kyle, we're ready to take some questions.

Sounds good. Thank you for the presentation and the remarks and the current update. Just starting out with the kind of that last slide on the guidance and the current update, you noted that shipments are tracking around 20% quarter-to-date, which is similar to what you saw in April. How is June looking relative to those 2 months? And if possible, could you break that out between the Americas and Europe, kind of the trends that you're seeing by region?

Yes. June is tracking really well. It's -- we're seeing strong demand across all markets. As we said before, the only segment that was quite soft when the lockdowns were pretty high was mineral water, and that's now starting to recover because the lockdowns have been lifted for the most part. So demand is solid. June is progressing well. It's kind of confirming the trends that we've been seeing through the quarter.

Yes. The only thing I would add is last year, we saw that our demand was most impacted in April and May, and that's why you see the numbers, 20% of north. June last year was down mid-single digits because we were already starting to see things come out of that trend. So that's why we believe that the overall balance is 15% or more when we've been tracking at 20% the last 2 months. So still very good performance, and we're tracking where we expected.

Okay. Makes sense. I want to focus on the guidance a little bit. You're pointing to the higher end. It sounds -- you just kind of answered what the June maybe come down, and we get closer to that 15% number that you gave in terms of your initial expectations. But looking at the full year guide, if we go back to 1Q, you guys kind of expected to be maybe potentially below your target driven by the storm, and then you came in line with a very strong March. Now it sounds like Q-on-Q is trending a little bit above expectations. Why not kind of look to raise maybe or fine tune the full year guide, just given where the volume trends look to be going, everything seemed pretty positive on that front?

Yes. I mean, I think we'll evaluate our full year guidance when we come into the quarterly reviews for the business. We do have a full year volume outlook of up 3% to 4%. And as we would look on current trends through the mid part of the year, assuming June plays out the way that we would expect it to be, we're probably at that range or a little on the high end of that range, we'll have to evaluate what the financial implications are for the business in the back half. The one thing we would say is we're very pleased with how things are playing out from a recovery of the business post-pandemic. Cost performance is really good. But what we don't know is just what is -- how choppy is demand going to be in the back half of the year because we are coming off of a period of rebuilding as markets open. And there's just a lot to not quite know just about yet for the back half of the year. So we'll evaluate that as we get closer to that one.

Sounds good. As we start to hopefully exit the pandemic here, I think besides ratio, the volumes, you talked about normalized shipments post-pandemic should be higher than pre-pandemic volumes. What evidence are you seeing that is driving that confidence? What kind of structural changes to glass are you seeing based on consumer preferences or behavior is changing in terms of how they view glass?

Yes. So demand in the off-premise channel has been stronger than we ever expected. And what we're seeing is with the increase in on-premise, we are still seeing the off-premise retaining some of the game. Now something very important to take into consideration is the consumers are emphasizing premium products as they consume, and that is very favorable to glass, we're seeing that across all categories.

When you talk about off-premise is still holding on to some of the gains, is that specific to the beer category? Or any other kind of beverage categories?

It's every one of the categories. In fact, beer has been doing better than it was during pre-pandemic for the mainstream. So we're seeing that the slowdown of that specific segment has been less than before. So it's been performing a little better. But then you have premium, super premium, craft, the performance of that has been very strong. We see it in food. We see in the NAB's in which we are present. We see it in the spirits. We see it in wines. So all categories have been performing better.

Yes. Obviously, beverage is a huge end market for you in North America. But I'm curious about food, which is some of the at-home consumption that we've seen on the food front and potential for more people to work from home post-pandemic, are you seeing any opportunities with glass in the food end market going forward in the U.S. specifically?

Yes, I think so. And I think that's one of the reasons or some of the reasons why some of the gains are going to be retained.

Yes. We saw double-digit growth in the food categories. And the last year, obviously, there was some channel activity going on with that regard. But once you get new products put in place and things like that, they hopefully get sticky.

Yes. Moving down to South America and Brazil, maybe just give an update there on kind of what's occurring in Brazil from the shift from 2 way to 1 way glass? And the dynamics on that front? And then also kind of talk about -- I know you guys have sold out in that region. So what's kind of the concern that you may be missing out on some volume opportunity in Brazil, just given your capacity constraints in that region?

Yes, we are capacity constrained, and we've been for a while now. There are important trends in that market. One of them being the conversion from returnable to one way. During the pandemic, returnable share went down beyond what we believe it will be because the on-premise was pretty much shutdown. As the on-premise resumes, we're going to see an increase. However, it will be lower than before, which, from a volume perspective, for glass is positive, right, because we're gaining part of that conversion. Now localization of global brands is a very important trend, which is driving a lot of volume as well as the focus on premium products, which can be substantially developed in all those markets, not just Brazil, but all the other countries and even Mexico.

Moving to Europe. Some of those markets are starting to reopen now. We're getting into the summer season with tourism. You guys have a presence in Italy and France. What are you hearing from customers as you go into that season? And how is that region performing? And then longer term, where do you think the -- what the growth opportunity is in Europe in terms of categories on the beverage front?

Yes. So the performance in both countries, Italy and France, is quite strong. And looking at Nielsen numbers, the growth of glass is quite high in those 2 markets and ahead of the alternative packaging. So that's happening in some of the Western countries quite strongly. All categories in Europe across the markets in which we operate have been strong. The recovery of the mineral water is going to be very positive for us. Beer, in particular, in the category is strong. It's very strong. Remember, we put in place incremental capacity last year that's been sold out. Our performance in beer is quite solid across the region, and we expect that to continue. One important characteristic of the European market is that it is a highly-branded market. And glass is a perfect fit for branding because of the ability to design with shapes and different types and colors. And branding is so valuable for this market that the potential of glass continues to be there. And as we are in a position to deploy market, we expect -- excuse me, MAGMA, we expect that market to realize its potential for us.

Moving to kind of the margins and price cost, obviously, inflation is a hot topic right now, even today the CPI number came up. Maybe just can you talk about your costs and how they trended since the last quarter? Any input costs that have really moved since last update and kind of what is your price cost expectations for the Americas and Europe region going forward for the balance of the year?

Yes, sure. I mean, clearly, we're facing some pockets of cost inflation. Overall, our -- historically, our cost inflation has ranged between little over $100 million to, call it, $140 million or thereabout, that's kind of a relevant range. Last year was very low because of the pandemic. I think we are trending up towards the high end of that range, but still within a historic normal range. But we are, in particular, have seen some inflation, particularly on freight and logistics in the U.S., in particular, as well as certain areas in Northern Europe. And so that is obviously putting a little bit of additional price cost inflation pressure. We had indicated in the back half of the year, we thought that there would be some negative spread, as we would call it. We continue to see that outlook. Another reason, back to the earlier question, as we look to the balance of the year and full year guidance to keep an eye on that, of course, we also do have what we call our revenue optimization initiatives, which is how we look to get pricing and other mix improvement within the business. Heretofore that, that's been holding up against the increased pressure to kind of keep that view of price/cost spread kind of neutral even though we're seeing some increased cost inflation, but we'll have to monitor what happens with the transportation in the back half. Ultimately, all of these inputs are ones that we can pass-through our price adjustment formulas. The question is just how quickly we can get to that, whether that becomes opportunities to incrementally improve this year or whether that bolsters the price output for the following year.

Just a follow-up on the transportation, how much of it are you contracted out versus just on the spot market for that?

The majority of our business is contracted out and is higher in Europe than it is in the U.S. The challenge that we see is that the lanes are changing around. I mean as the supply chain -- in the U.S., in particular, the supply chain was somewhat disrupted with the winter weather. And of course, as we all hear that there's a lack of availability of truck drivers in many regards, right? So as a result, sometimes we have to shift our supply chain around and get different channels in different routes. And some of those can be contracted or maybe move into the spot market for those particular circumstances. So what we're seeing is a little bit of out of pattern activity relative to our historic contracting position. We're still majority contracted, but we've seen that drop off a little bit because of that mix change. We believe it's temporary. It might last for a few months, kind of a better part of the year or something like that, but it's still something that's well managed within the organization.

Okay. I want to move to sustainability. You guys had the survey from McKinsey on Slide 7, where glass rates very high among consumers on a sustainably front. Obviously, every beverage packaging substrate right now is trying to present their substrate as the most sustainable option. Why do you believe glass is better than the others? But more importantly, why do you think the volumes in the U.S. specifically haven't necessarily shown what that survey is showing in terms of consumers preferring glass? We've seen a lot of growth in other substrates. And those seem to suggest that it's driven by sustainability where glass hasn't necessarily seen the same amount of growth? What's the difference there?

Yes. I think it's very important to start looking at the characteristic of the product itself. So glass is 100% recyclable. It doesn't harm the consumer or the environment, so that -- those are very strong characteristics. The consumers are saying they consider glass highly sustainable, which is a very important aspect of glass. We are reinforcing that with the glass advocacy campaign to rebalance the dialogue around packaging. Now we believe the experience in Europe is very relevant with regards to the possibilities of recycling. The percentages over there are really, really high. The system is in place for that, and that's leveraging the potential of the package. When we look at the market in the United States, of the situation in the United States, is not in that position today. However, with all the emphasis that we're seen by consumers and by governments and regulation emerging, we believe the potential is there to reshape the system to really leverage the product to a standard, can be leveraged.

Trying to drive recycling rates in the U.S., is that something that needs to be done from regulation? Are you working with kind of some of the waste management companies on that initiative? Or just what are you doing to improve the recycling rates in the U.S. relative to Europe's?

Yes. So one example is, we're implementing pilots of separate stream by implementing drop-off locations. There is a case in James City County in Virginia, which is linked to our plant in Toano. We put these drop-off locations in place. We created a program that we call Glass for Growth, which is going to benefit the community as the community recycles. And then we are reducing the number of partners in between -- excuse me, the players in the supply chain, which is adding cost to the total recycling system in such a way that we make it more economic. We're also working on closed-loop systems with customers. So as those pilots are successful and are more widely known, we're going to be in the position to start implementing them more and more. One of the challenges in the United States has been with single stream, which makes recycling very complicated and expensive in some cases like the case of glass. In Europe, it is a separate stream, but is highly successful.

One thing I would add is, to the broader question of growth is, by and large, our system is capacity constrained. Whatever we can produce, we're selling right now. And we believe there's a good level of pent up demand for good sustainable glass packaging, we just need to be able to make those investments. Others who made investments earlier for capacity are enjoying the benefit of that. We need to make the similar investments, and we've seen when we put new capacity in whether it was in France last year or in Colombia, more recent -- the year before that, that capacity gets eaten up right away. And so we believe there's a lot of growth opportunities, but we are also looking forward to what MAGMA can do for us. And in particular, the ability to change the sustainability profile of our business going forward, more cullet utilization, the ability to use biofuels or hydrogen, the ability to co-locate next to your customer and cut out all the logistics costs as substantially associated with those logistics costs, the ability to lightweight the product and which also has a lot of benefits on carbon elements in that regard. Those are all in front of us, and we believe there's just a lot of levers we have as an organization to be able to continue to improve our sustainability profile. And as we grow and invest in capacity to be able to do that over the long run, we'll be in a very good position.

Sounds good. Moving to MAGMA. We're all looking forward to the Analyst Day that you're scheduled to highlight the technology more towards us. But can you maybe remind users who are maybe new to the story or new to MAGMA, what the long-term strategy is for this technology? And how do you plan to use it within your existing production footprint?

Yes. We believe that MAGMA is going to transform the glass industry. It addresses very structural constraints, the constraints that have limited the potential of this package. Obviously, it addresses, as we said before, the capital intensity of the business, it addresses the product cost of ownership, the ability to follow growth, the ability to get into new markets, the flexibility to be able to serve this market, which is becoming more and more fragmented with proliferation of SKUs. It is very -- a very quick deployment. It will be off the shelf. So we see a lot of potential in this new technology, and we are progressing very well. We're very encouraged by the opportunities that we are discovering as we implement it. Holzminden has been running. We've been confirming all the assumptions that we wanted to confirm to this point. There are a few more to confirm from now to the middle of the year, and then we're going to go commercial with the unit. At the same time, we are making very good progress to pilot Gen 2 in the second half of this year, which is going to enable quite a few things as we just described on the script. So that technology is going to be transformational. We've been working on this for several years. It was designed market backed, not technology forward. So we're very happy about the progress and encouraged by the possibilities that it will unfold for the glass industry.

And I think there's a good parallel to what happened in the mini mill system in steel to what we were looking to do with MAGMA going forward. So building off of that kind of background, but I think we had even more dynamics because we're -- we actually make a product that the consumer uses. And so there's more dynamics even in our story than any else.

That sounds good. Definitely looking forward to that Analyst Day. Kind of the last question here as we run on time. Andres, you've been CEO for 5 years now. You've done a good job of improving the operations, adding flexibility into the system as evident in terms of how you guys weathered the storm last quarter. You and John, along with Jan prior to you, have done a good job of getting rid of some of the noise on the balance sheet with the pension and asbestos liabilities. As you look out 5 years from now, what's kind of the next focus for you? Should investors expect you to be focused more on the operational, on the margin side? Or are you going to be a little more aggressive on the volume and top line? Just kind of the vision going forward over the next 5 years?

Well, I think the first thing is, over these few years, we needed to develop capabilities, the structural capabilities in this business to perform, I think, now we are in a position to enjoy them, and we're saying it with our ability to deliver on our commitments. So that's very positive. We needed to address some structural issues with legacy liabilities as an example, and we're taking those very bold actions and moving them forward successfully. And we needed to enable this product, which is a great product. And the technology development in which we have been focused is going to open a world of opportunities for us. So we see the ability to drive the top line in the future. Our margin expansion initiatives, which are multiyear initiatives are going to improve our cost position. That is our expectation. Obviously, our bottom line is going to improve. And with that and everything else we're doing, we're going to improve the cash generation of this business.

Sounds good. Well, that's all the time. Andres, John, we really appreciate your participation today, and thank you all for listening. Hope you all have a good day.

Thank you, Kyle.

Thanks.

Appreciate all your time and interest.