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

All right. Well, good after -- or good morning, I guess. I'm Curt Woodworth, metals & mining and packaging analyst at Credit Suisse. Thank you for being with us today. I'm very pleased to have O-I Glass with us. John Haudrich, who's CFO of the company. I guess, no good deed goes unpunished, but great results, raised the guidance. So look forward to hearing more on that. Obviously, macro is kind of pre-dominating everything in the market, but I'll turn it over to you.

Yes. Thanks, Curt, and the Credit Suisse team for hosting us today. I plan to discuss how O-I represents an attractive investment opportunity as well as provide an update on our business outlook. Afterwards, we'll be happy to take your questions. Before we proceed, please review the safe harbor comments on Slide 2 and various disclosures found in our presentation, which is posted on the website. On Slide 3, you'll see a high-level profile of the company. O-I is the global leader in glass packaging. We serve a highly stable and steadily growing food and beverage industry, supporting more than 6,000 customers. These customers value our dedication to service in our unparalleled production network to meet their needs across the globe. As the industry leader in innovation, we are proud to make glass the most sustainable packaging solution. Likewise, it is the preferred substrate by most consumers given its premium characteristic, and their increased focus on health and wellness. O-I is at a unique inflection point in its long corporate history. We have achieved a fair and final resolution of our legacy asbestos liabilities following Paddock's emergence from Chapter 11 protection in July. As such, we expect to generate substantially more cash flow each year that will support efforts to expand our business, reduce debt and create value for our shareholders. At the same time, we are developing MAGMA, a revolutionary new glass production process that will enable profitable growth and boost our financial performance. Let's expand on this strategy starting on Page 4. I strongly believe O-I represents an attractive investment opportunity. As previously mentioned, we are dramatically reducing the risk profile of the enterprise. At the same time, the company is executing very well supported by the bold actions we are taking to transform O-I. As proof, our results have consistently either met or exceeded guidance over the past 10 quarters. I'm happy to report that our third quarter earnings should again meet or exceed our most recent guidance. We are enabling profitable growth by capitalizing on the strongest glass fundamental in decades. MAGMA represents a breakthrough innovation that creates a new paradigm for glass to meet the needs of an evolving market and expand our business. Finally, as the most sustainable packaging option, glass is set to win in the new green economy. Let's expand on each aspect of our strategy a bit more. Moving to Page 5. We have dramatically improved our balance sheet position and reduced our risk profile. As noted, Paddock emerged from Chapter 11 protection in July. This was a watershed moment for the company as around 40% of the company's cash flow was consumed by asbestos payments over the last decade alone. We are now free to use our strong cash flow to generate -- to create value for our stakeholders. Likewise, we have made great strides reducing our unfunded pension liability, which should be eliminated by 2024. In August, we completed our portfolio optimization program as proceeds from asset sales have been used to reduce debt and prefund our expansion program through 2024. As illustrated on the chart, we have made significant progress reducing our total financial leverage. While leverage peaked at around 5.5x in 2020, we remain on track to reduce total leverage by the mid to high 3s by year-end. Overall, we are well ahead of pace to achieve our leverage target of around 3.5x by 2024. Finally, our progress has been recognized by the rating agencies as both Moody's and S&P upgraded O-I's credit rating to BB over the last few weeks. I'm now on Slide 6. We have also been hard at work transforming our company. The team started by building a simple, agile and effective organization. We have streamlined the business, implemented world-class systems like integrated business planning and rebuilt critical capabilities. We are now advancing new technologies as well as have the highest Net Promoter Score and commercial pipeline in years. We are optimizing our structure. As discussed, we recently completed our asset sales and eliminated legacy liabilities. We are more cost competitive as a result of our margin expansion initiatives, which have generated $250 million of benefits over the last few years. Ongoing initiatives are expected to yield at least $50 million of benefits annually. As a result of these efforts, O-I has been able to overcome elevated market volatility, reduce debt, increase our adjusted -- and increase our adjusted cash flow conversion to around 35%. Now we are squarely focused on advancing -- which will enable a more flexible, scalable and sustainable production capability as well as increase our supply chain efficiency. All this will support profitable growth. Moving to Slide 7. Market trends favor glass, resulting in the strongest glass fundamentals in over 20 years. Let me comment on a few elements. Across Latin America, a structural shift in demand is driving sustainable growth. Customers and consumers increasingly favor premium products, and our customers are localizing international brands that have been successfully imported to these markets for several years. Premiumization favors one-way glass containers, while consumer affordability and sustainability considerations are prompting greater use of returnable bottles. For example, glass now holds 50% market share in the Brazil beer category as both one-way and the returnable glass gain share. As illustrated on the bottom of the page, we have improved our mix in North America by consistently shifting away from beer to other growth categories. In fact, U.S. mega-beer only represents around 16% of our North America business and 4% globally. In Europe, a large volume of glass historically imported from Russia and Ukraine is no longer available due to the recent conflict, which drives up demand of locally produced glass. Glass has demonstrated strong performance, both on-premise and off-premise over the last few years, redefining long-held assumptions about glass' resilience to channel shifts. Finally, strong demand is driving increased new product development in glass, which is up about 10% from pre-pandemic levels according to Mintel data. There are many reasons why glass has higher projected growth than other packaging substrates as shown on the right. Turning to Page 8. O-I is hard at work translating favorable market conditions into future profitable growth. As shown on the left, O-I's historic shipment trends illustrate improved momentum given strong glass fundamentals. Volumes are up more than 5% last year and up more than 3% during the first half of this year. Quarter-to-date through August, our shipments were about flat with last year. This is in line with our expectations given record low inventory levels and significant capacity constraints in key markets. We continue to advance our capital expansion projects to add much needed new capacity starting in early 2023. Our updated capital expansion plan is shown on the right. This program will enable new capacity to support 5% to 6% profitable growth through 2024 with an average IRR of around 20%. As you can see, glass is a growing attractive market and O-I's hard at work, enabling future profitable growth. On Slide 9, you see the key benefits of MAGMA, which is O-I's new proprietary glass production process, leveraging new breakthrough technology. Our heritage network is a great fit for many of the categories we have served for decades and will continue to serve in the future. Given the trends of health, wellness and sustainability, there are significant future opportunities in a broad array of end-use categories, which tend to be more differentiated and fragmented. MAGMA is a great fit for these categories. MAGMA is more flexible, scalable and can be more rapidly deployed. It can be co-located to improve supply chain efficiency. It is more cost effective with lower capital intensity. Likewise, MAGMA enables significant container lightweighting and will enable future use of carbon-free energy sources like hydrogen or biofuels, so it increases convenience and sustainability. MAGMA represents a major leap forward in how glass is produced and will expand O-I's right to win in its addressable market. Overall, we are targeting returns in excess of 20% for future MAGMA expansion projects. Sustainability is another critical element of our strategy as glass is set to win in the new green economy. I'm now on Page 10. We believe glass is the most sustainable packaging option. Glass is 100% recyclable. Its infinitely reusable and a perfect fit for the circular economy. Glass is all natural and inert. Even if discarded is never trash. As such, it is both earth and ocean friendly. Importantly, glass is locally produced and sold without reliance on a carbon-intensive global supply chain. You will be hard-pressed to find a manufacturing company producing a highly sustainable product with so many levers to further improve its sustainability position. Currently, we have many efforts underway to improve our operating efficiency and recycling rates. As I mentioned earlier, MAGMA will significantly improve our sustainability position. We are making good progress advancing our ESG efforts, which have been noted by the likes of Sustainalytics and EcoVadis to name a few. Our full set of ESG objectives are illustrated on Page 17. Slide 11, we have laid out our key objectives for 2022 that are fully aligned with our strategy to increase shareholder value. Our margins are up 130 basis points year-to-date, supported by strong net price realization. Likewise, our margin expansion initiatives are off to a good start, and we've already surpassed our annual target. Amid the strongest glass fundamentals in over 20 years, we have revised and adapted our expansion in MAGMA development plan. This revised plan better fits today's macro challenges, further strengthens profitable growth and achieves our financial objectives. Our ESG and glass advocacy efforts are also progressing well. Nearly 1/3 of our electricity is now supplied from renewable sources. And our glass advocacy digital marketing campaign generated over $650 million in digital impressions in the first half of the year, supporting our strong commercial pipeline. Over the last 2 months, we completed our portfolio optimization program, and Paddock emerged from Chapter 11 protection having resolved its legacy asbestos liabilities. Overall, we are making excellent progress on our key strategic objectives. Let's discuss our business outlook on Page 12. O-I continues to perform well, and our outlook has improved. We now expect third quarter earnings, should be at the high end or slightly exceed our guidance range of $0.55 to $0.60. As discussed, shipments are about flat quarter-to-date. We continue to expect third quarter volumes will be flat or slightly up from last year despite record low inventories and capacity constraints. Stronger earnings primarily reflect more favorable net price as well as cost performance compared to our original expectations. We expect good momentum to carry forward through the balance of the year. As such, we increased our full year guidance range, which is now $2.10 to $2.25 per share. Additionally, we raised our free cash flow expectation to at least $200 million, given timing of capital projects around year-end. We will discuss our business outlook further during our third quarter earnings call. Overall, we remain on track or ahead of pace to meet the 2024 targets that we set at our Investor Day last year. Let's turn to Page 13. O-I is a much more agile and resilient company as we continue to navigate elevated market volatility, including a challenging energy situation in Europe and a potential recession. We have the strongest balance sheet in years and cash flow conversion is up significantly following the resolution of legacy asbestos liabilities. O-I serves the global food and beverage market, which is more recession-resistant than many businesses. Likewise, our business mix has improved over the years as we shift to more attractive end-use categories and U.S. mega-beer now represents only 4% of global volumes. Importantly, we are significantly oversold in key markets across Latin America and Europe, which provides a buffer for potential recession volatility. O-I is well positioned to manage Russia natural gas curtailments as we enable energy switching capabilities across half of our EU network by year-end. While Russia has curtailed NG, EU storage levels are ahead of schedule, reflecting very good efforts to reduce gas consumption. Finally, we have consistently demonstrated an improved agility amid significant market disruption since 2020. Let's turn to Page 14 for some concluding thoughts. First, O-I has a clear strategy to create value, and we have consistently taken the bold steps to advance our transformation. The company is performing well, and our business outlook continues to improve. In fact, the third quarter represents the 10th consecutive quarter we have either met or exceeded our guidance. Likewise, O-I is much more agile and resilient as we continue to successfully navigate elevated market volatility. Finally, I believe O-I represents an attractive investment opportunity as we reduce our risk profile, execute our transformation program, enable profitable growth, advance breakthrough innovation like MAGMA and further leverage our sustainability position to win in the new green economy. We are confident this strategy will create value for all stakeholders. Thank you for your interest in O-I Glass, and now back to you, Curt.

Thank you, John. Maybe you can just talk broadly to your financial performance and just the consistency and your ability to either exceed guidance for 10 consecutive quarters. So the business apparently has become much more stable operationally and maybe more predictable, and that's maybe coincided with supply/demand allowing better net price. But there's still a huge amount of volatility in the market. So can you just talk to maybe as an organization, maybe what has changed over the past 2 to 3 years in terms of being able to get this company into a much more predictable and kind of stable growth density?

It's a great question, and I think it's something that is underappreciated about the company. I think most people look back at it and see some of the challenges we've had operationally and performance-wise over the years. But I have to say the level of transformation that has occurred within this company over the last several years has been profound. This includes building important capabilities, especially on the commercial side and being able to have the foresight and insight into the marketplace, which is critical to be able to have that. I mentioned before, putting an integrated business planning. When I joined the company 12 years ago, it was difficult to manage beyond the month. Maybe you could have a view into the quarter. But I tell you what, every month now, we are looking at the company on a rolling 3-year basis. And so of course, we have to manage the day-to-day, but our ability to be more long term and proactive about the things, the levers that really make performance down the road and enables are done much more on a proactive basis. I'd say the final thing that we've done is we significantly changed our organization structure around. And there's much more connectivity between the top of the house and in the country groups that operate the business on a day-to-day basis. That allows us to have a much more sense and response about what's going on in the marketplace. So for example, when the recession hit -- I meant the recession when COVID hit, within 2 weeks, we had a response plan that had 28 different levers of the business to manage through a very difficult time. That probably would not have happened in the O-I of the past, but it's happening in the O-I of the future.

Okay. And then maybe we can take a minute and talk a little bit about the updated guidance for the quarter and the year. I mean, it seems like net price is a very important driver of what's going on right now as you're somewhat volumetrically constrained. And you've talked in the past about how you still feel like you're going to have positive net price into '23. Can you just elaborate more on kind of supply/demand maybe by region or what is getting you the pricing power? Is it -- help us understand kind of the contract duration of your business. Do the vintages re-price every year? And then the capacity you do have coming on next year, I assume a lot of that is presold. Would that be accretive to the business?

Yes. Okay. So if we take a look at the supply/demand situation across our business, start with Latin America, it is significantly oversold, okay. And we've proven time and again that once we put capacity in there, it gets consumed immediately and then we're still in an oversold position. So that remains quite the case. And you go into Latin, I would say that we're moderately oversold for the reasons we talked about with the Russia-Ukraine conflict and that about 1 million tons of capacity no longer coming into the marketplace. And then in North America, I would call that a little bit more of a balanced market overall. And I would say that you start to see a little bit of -- little bit of softening in a couple of categories with the macros that are going on there. But overall, we -- if you take a look at the achievement in net price, it's across the board in the organization. Clearly, we're living in a world that's much different than where we were in the past, and we've acted much more proactively to get the value for our product and passed through the inflation. I mean we talked about it in the past, is that O-I has about 5 years ago, built an important competency around energy management. And even before the pandemic, we were putting in long-term fixed price contracts on energy that were well priced. And as we sit here today, we still are in a long-term position where we have those in place. And that allows us to have a lot more opportunity around net price realization. Now at the same token, we are still seeing cost inflation coming through the business, because you're seeing the energy impacts coming through in raw materials and things like that. So it still is an important market to continue to focus on net price realization. But I would say that probably the biggest component right now is the competitive position that we have in our energy positions relative to the general marketplace.

Is there any way to -- obviously, the cost curve has gone up dramatically for everyone, especially in Europe, and to your point on long-duration energy hedging and the ability to fix that price. Is there a way to quantify it? Like what's on a per ton basis or maybe a percent basis, what do you think or how do you think your cost position has maybe evolved in the last 12 to 18 months versus pick a percentile on the cost curve, if there's a way to do that?

Yes. I mean, I -- for competitive purposes, I can't. We'd be better rattling off numbers in that regard. But what I would say is that, we were able to set these agreements in place before all the run up and the day-to-day cost positions that you see. And as we stand here, there's a multiyear benefit and where we are relative to our long-term contract position.

Understood. Okay. And then in terms of pricing, can you just help us understand that -- and I'm sure it differs by region and by customers. But how are the mechanics of the deal? Do you have multiyear agreements in place? Are there reopeners each year for, say, GPI or energy? Yes, just what are the mechanics and…

Yes, let's start from an enterprise basis, about 55% of our business is covered under some form of long-term agreement. And they range -- they usually range from anywhere from 3 years to 10 years, okay. So it's a pretty broad range. The other 45% of our business is usually either annual agreements that we have with smaller customers, like wineries and things like that or they are the spot purchases. But it varies significantly from region to region. But I would say all 55% of that has annual price adjustment formulas built into those agreements, okay. Now over in Europe, about 30% of our business is under long-term agreements, usually, 3 to 5 years. And historically, those have been more annual price adjustment formulas. But given the extraordinary circumstances we have found ourselves in this year, we've actually had a couple of price increases this past year, okay. So regardless of that because of all of the costs coming through, especially on the raw material side. If you go over to North America, about 90% to 95% of our business is under long-term agreements, generally longer term, maybe 5, 7 or 10-year type of agreements, again, all with price adjustment formulas. Now those price adjustment formulas, again, are annual with the exclusion of energy, which is either a monthly or quarterly pass-through, okay. So in North America, we were structurally set to be able to pass through energy variation on a fairly quick basis.

And I would say Latin America, both power and gas.

Yes, yes, for -- exactly for the energy. And I would say Latin America is somewhere between them.

And then maybe switching gears to the growth prospects of the company. So you outlined kind of a change in how you see the footprint evolving from previously up to, I think, 11 MAGMA line, mostly greenfield versus now mainly 2. And you talked about kind of supply chain, macro and the necessity to ensure you hit your targets and you're actually going to do it in a more capital-light fashion. But I think there was some debate in the market about, was that signaling maybe potential delays in MAGMA. And I think you talked about sort of bypassing the Gen 1.5 stage and maybe actually getting to 3 quicker. But I think there's a lot of confusion to some degree around that specific transformation so if we could spend some time there.

Yes. Okay. So it's up on the screen here. So I mean -- to go back to -- go back in time, we laid out a plan, call it over a year ago that had supporting about 600,000 tons of growth, that's 5% to 6% growth over the next 3-year period of time, substantially supported by long-term agreements with our customers, okay. And at that time, it included up to 11 MAGMA lines and then -- which were going to be substantially an early version of MAGMA we called 1.5, and I can get into that in a moment. And the rest was going to be some legacy facilities. Now what we saw with everybody else in their brethren in the last year is all the impact of supply chain challenges and inflation and labor availability and the slew of factors that affect everybody. And what we needed to do though, is we needed to solve first and foremost to support our customers grow because we had those contracted with them to deliver on those particular dates. And given that MAGMA is under a development process, right, it's a fairly iterative process, that time line slipped 2 or 3 quarters. And so in just reality of very practical aspects, you try to get a part in because you want to test something, while it's a 9-month delay to get that part, your ability to optimize and get everything in place got delayed. No problems in the technology, just problems in the time line associated with that, in particular, with being able to meet the customer demand that we had contracted, right. So given the fact that there's maybe this 2 or 3 quarter delay in the timing of development and the inflation and all the other things that were going on with it, we decided our first priority is to put in smaller, less risky projects that can support the demand that we contracted, okay. Now at the same token, the development for MAGMA is going fine. And let me give you a view of that. So MAGMA includes several different pieces. We are building a -- the whole idea of MAGMA is to take the traditional glass factory and shrink it and be able to have more incremental capacity with lower level of capacity with a lot more flexibility, all based around a new innovation with how we melt glass, which we call the MAGMA melter. So that is a process of taking the traditional whole facilities and making it more modularized and small, all right. There's 3 or 4 pieces of that. One is developing a smaller batch system. Next is the MAGMA melter and then some of the hot end where we actually form the glass and then modularizing the cold end where we bring all of the different packaging and elements into a smaller scale facility. So the technology development is really very much on the front end of the new way to melt glass or a small batch system. Now where we are right now in that regard is we've proven out the melter over in Holzminden in Germany, which is up and running and producing over there. And we have the small batch system that was in the very front end of this over in Streator, Illinois. So our next step or -- which is at our first facility that we're going to be doing over in Bowling Green, Kentucky, is building our first fully integrated Gen 2 solution line. So it's going to take that batch system from Streator, it's going to take the melter from Holzminden, integrating all that, putting in the hot end and in the cold end, okay? Those remaining components might be more traditional technologies. So that's going to be there, and we're just going to start construction mid '23, fully online in '24 -- mid '24. And then we're going to do at that same location, the first Gen 3 line, which is taking all of that in modularizing and making the whole thing smaller. And so that's the full solution that has the full benefits of MAGMA. That should be on being construction in 2024, online in 2025. So as we stand here, we're very confident in MAGMA, and it's just a development time line delay because of the iterative nature of development itself.

And then at this point, do you feel pretty confident that the Gen 2 solution is pretty much fully engineered and technologically viable at least on a smaller scale, and now it's kind of just a function of getting it, producing at scale? Is that fair?

Yes. So what I would say is the -- that the melter that we have over at Holzminden, Germany is the commercial grade melter. The small batch system we have over in Streator is the small batch system. The next step is to integrate those 2 developments together, that will be Gen 2 first iteration. And like I said, both of those are all operating right now. It's kind of gluing them together to be able to have an integrated system.

Okay. And then Gen 3 seems to be the more step function change in terms of getting the glass lighter as well as getting the capital intensity much more meaningfully lower. So what are the milestones investors should look at in terms of the Gen 3 progression? Is it step one is just get Gen 2 commercialized and functional and then we kind of go to Gen 3? Or is there a parallel track that you're working on?

Yes. So the first milestone is to get Gen 2 put in place. And that is where most of the science is at, right, in that regard. I would say Gen 3 is more about engineering and optimization. It will have the digitization. It will have the automation aspects put in place. But I would say most of that's engineering whereas the science in the melting and everything is more on the Gen 2 side.

Okay. And then maybe just back to market fundamentals. I think glass is a niche product is viewed as a premium product. So on the one hand, I think there's concerns in general. We're seeing this in the beverage can industry and little bit too on consumers, are they going to continue to spend money for some more expensive things, trade down. Glass is considered premium, more expensive. But at the same time, consumers are getting out, getting out of their homes, glass seems to be a beneficiary of that. So what are you seeing in terms of demand? I know your capacity constrained to some degree, maybe you don't have the visibility that others would have. But what gives you confidence that even if we go into a recession -- and historically glass demand has actually held up well in recession, but that you will be able to continue to move this volume that you've outlined?

Yes. Sure. So if we look at it right now, probably the backdrop fundamental demand for glass is low single digits, 2% to 3%, something like that. Of course, as you mentioned, because of inventory limitations and capacity constraints, we're having a tough time being able to meet that level of demand. Of course, in the first quarter of next year, we're bringing on more capacity with the first wave of activity that we have. So I think we'll be able to return to the growth profile at that point in time. If we look at where demand is, it's very good in Europe, very strong, especially Southwestern. Demand across Latin America is also strong, strongest probably in Central and Mexico in those particular markets. And in North America, I'd say it's probably in -- like I said a little before, we see a little bit of softness in a couple of different categories. But again, that's probably the more balanced market that we serve right now. So if we take a look at how we look at the marketplace, let's go back to the Great Recession and what we experienced at that time. Our demand was down during that period, but I would say it was -- the lion's share was -- it was in the mega-beer in the U.S., okay. And we know where that is, and it's down to 4% of our global demand right now. So it's not nearly the category of exposure. A lot of the other categories, the spirits and the wines and more premium food, actually did quite well. We've seen time and again that there is affordable luxuries that play out during recessionary periods. So maybe you don't take the kids to Disneyland, but you do buy that bottle of booze. And so those types of things play out, and we've seen those categories do well. So we're thinking that as likely the scenario. So could you see some dislocation in demand here and there a little bit? Yes, sure. Of course, anything could happen during a little bit of recession, especially as supply chains contract and adjust, and things like that. But we don't think that there is a meaningful downside draft here.

Okay. Let's open it up to questions from the room. Yes.

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I would say -- so the question just for those who are -- yes, rephrasing the question in that regard is actually unit demand going down for glass and is then, therefore, the approach on MAGMA, the ability to reposition ourselves to that? All right, Chris, you can go back to the previous page. If you just look at Page 7 and on the right-hand side there, this is unit glass consumption. So the percentages that are shown there, and this is our monitor projection. You're right, over the last several years, historically, the demand was kind of flattish on a per unit basis. But the projections by -- over the next 3-year period are actually showing anywhere between 2% and 3.5% growth in the markets that we serve.

[indiscernible]

Well, so again I think it's captured in the factors that you see, also shown on here on the left. The question is why? What is driving this change? As we started to see -- well, there's been ups and downs for glass over generations, right. And the last down shift that we saw was over the Great Recession and post Great Recession, and that was because there was a downdraft to value-based purchasing in that environment. That played its way out through about 2016-2017. Around 2018, we started to see just a change in the nature of demand by consumers. If you look at the store shelf today, there's 20x as many brands on the store shelf as there was a decade ago. And so there's a lot more differentiation and brand proliferation going out there. And with that, there's a lot more interest by our customers to differentiate their products around things that customers care about health, wellness, sustainability, premiumization. And so after a period of softness a decade ago, we're in fact seeing strength of those particular variables coming through. And you throw that in there with what our customers are doing with a lot of the international -- I mean, regional beer brands that were acquired by, for example, some of the big beer companies and localizing them in a lot of different markets, is creating new pockets of demand in those local markets that is also propping up supply. So there's a lot of factors, but those are some of the ones that I think are transitional from what we saw a decade ago to where we are right now. And as far as what MAGMA can do for us, it certainly feeds into the fact that there's 20x as many brands on the store shelf. There's more fragmentation, there's more differentiation. And so that is really what we're trying to go. It's small and the fact that even big customers are adding more brands and they're looking for differentiation of the brand. So maybe they had one brand in the past, but they're creating sub-brands that maybe have a premium aspect to it or also maybe a value aspect to it. And so we're seeing a lot more of that trend, and we're finding nuggets of opportunities that maybe we didn't really see in the past or pursue in the past, nor had the capability to pursue that we think we can with MAGMA going forward.

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Yes. Sure. So the question then is, we've obviously been active with finishing up Paddock and funding the after or delayed draw. First of all, we have renegotiated a delayed draw so that it now has a new term loan A. That ends in 2027 now, so it's no longer baked into 2030. And so that kicks out that maturity quite a bit. And we did redeem $300 million just a couple of days ago of the maturities due in 2023. Clearly, we want to continue to address the maturities. We only have a small stub next year, but we want to address that. But we obviously want to be opportunistic in the marketplace given the status of the credit markets. But clearly, our idea is to push out maturities and improve debt position.

[indiscernible]

No, no. We have about a little over $200 million of bonds due in the next 12 months. I mean we got certainly more than enough cash flow to handle that or the revolver. So we don't need access, but we'll see if we're opportunistic to continue to improve the capital structure.

Thank you very much. Appreciate it.

Okay. Thank you.