Rockwell Automation, Inc. ($ROK)

All right. We're moving right along here with Christian and Aijana from Rockwell. Thanks for joining us.

Thanks for having us. Yes, morning.

Absolutely. Maybe you just want to kick off with a few comments on -- I think your CEO was down at competitor conferences, made a comment about organic growth potentially this year being within the long-term range of 5% to 8% your guide is 2% to 6% or whatever it is right now. So maybe clarify whatever need to do on those comments and also we'll get into bid in orders, and we'll go from there.

Sure. Absolutely. So thanks for having us. I appreciate this. It's a good conference. Good to be in D.C. This is actually the first time for me doing an investor conference in D.C. So this is a good venue. So -- yes, we started off the year well for Rockwell. So we're -- we completed our first quarter at the end of the last calendar year. And our top line growth, double digits, really strong profitability. So we beat our own expectations from both the top line and the bottom line. So it was a really good start to the year. At the same time, as an organization, we typically do not change our guide after the first quarter. We did have an interesting benefit. It was a onetime benefit that we had from a perspective that helped us to the tune of about $0.10 in the first quarter. So we did update our guide, reflecting just that one change. So the midpoint of our guide went up by $0.10 from the initial guide at the end of Q4 to the end of Q1 guide that we gave. Now that being said, we did have an outperform on the top line. I think Blake was responding to a question. I wasn't actually at the conference, so I have plausible deniability here. But I think Blake was responding to a question around the fact that, well, you guys started off a little bit higher than what you had expected. The midpoint of your guide on the organic side is 4%, 5% if you include FX. And the question was around, do you see a scenario where you could get into that kind of more longer-term range, which for us, the organic growth range that we talk about, the CAGR mid-cycle to mid-cycle is a 5% to 8% organic. And so -- yes, potentially because that is, of course, covered within the band because the band on our guide for the full year was and continues to be 2% to 6% with 4% at the midpoint. So yes, if we edge higher, then it could take us into that 5% to 8% range.

Yes. And I'll just add that customer conversations are positive. Customer quoting consistent to be very strong, continues to be strong. ISM indicators are constructive. On the flip side, you continue to see trade uncertainty and heightened geopolitical volatility. And so there are puts and takes. But in general, we feel good about our ability to win. And once we see that broad-based order intake across a much broader set of end markets for us, that's what we'll be able to increase our guidance.

And when you think about the drivers and ISM, what end markets are you guys watching that could be swing factors on this front? And we're asking everybody, obviously, any early thoughts on what's happening globally? And how that's impacting sentiment or sales near term? There are some companies with a higher sales in Middle East.

Sure. I can start. I mean if you look at what's embedded in our guide, 4% organic growth, right, top line growth, mid-single-digit growth across discrete 'and hybrid and low single-digit growth in process. We have some outliers, some standout performers. E-com and warehouse supposed to grow 10%. And we have some that are flattish, like semiconductor. So if you look at what could actually improve to drive us to get to a higher end of our range, an improvement in automotive, even higher growth in some of the bigger end markets for us like food and beverage, more investment in process. So it's really around those. But in terms of where we're right now, we think those are good assumptions to have.

Yes. And then regarding the Middle East and what's been going on there for us, the Middle East is a relatively low exposure, I think low single digit -- very low single digits. And obviously, it's early days to really know what the exact impact for us and the follow-on impact. I think generally, themes around uncertainty and what that does to the broader macro environment, whether you're talking about that region or a broader part of the world, anything that brings uncertainty is something that is problematic. But at the same time, for us, the direct exposure is relatively limited.

How close do you guys have been talking about this kind of project pipeline and a decent amount of your revenue is CapEx related. It's not all new projects, of course, probably much smaller percentage of greenfield stuff. But the brownfield stuff still is a -- not an MRO, it's a CapEx type project. How close -- everybody talking about these pipelines, do you see all this news? How close are we to seeing some of that stuff really move in mass?

Well, certainly not close enough for us to change our guide, right? But certainly, we did see areas where there's investment. And it's not just brownfield upgrades and big migrations and new capacity, but also greenfields. And we talk about them on our earnings calls. It's data center, it's semiconductor, it's life sciences, it's parts of food and beverage. E-commerce and warehouse automation is not necessarily viewed as that kind of a big greenfield or mega project, but that's really good business for us. And there's a lot of modernization there, and it's continuing to be a driver of growth for us. So we do see it. We see it in parts of process that are tied to data center, right, power. The AI constraints are driving a lot of investment there by hyperscalers and colocation companies. So we see that, and we talked about these big projects growing strong double digits year-over-year. It's part of our guide. To the extent it becomes more a broader investment, more in mass, as you said, we'll be able to talk more about it and have higher growth.

And just taking a step back, there's been a bit of debate, I guess, around the order rates or the book-to-bill in the first quarter. Maybe you want to clarify, I know the Life Sciences book-to-bill seasonally was pretty solid. And I think the takeaway from the call was that book-to-bill in total was around 1, which would imply that the products book-to-bill is below 1, just definitionally. Maybe you want to clarify that right into.

I'll take a swing at that and Aijana, you can jump in if I miss any aspect around it. So Rockwell historically, if you go back pre-supply chain crisis, pre-COVID, organizationally, we've always had a book-to-bill that's in the neighborhood of 1. And when I say in the neighborhood of 1, it's a band, right? It's -- and especially for us, seasonality is important. So the first 3 quarters of the year tend to be a book-to-bill that's a little bit above 1. And the fourth quarter of the year, just because we completed a lot of project activity, it tends to be just below 1. But overall, for us, when we say about 1, that's really what we're talking about. That is a book-to-bill could be slightly above 1, and we'll still say that it's about 1. And so if you look at the -- sorry, so during the supply chain crisis, especially as we went through the destock time horizon, we were giving detail to the Street around what our incoming orders were, and we did that in order to make sure that there was really good visibility on what was specifically happening in the destock cycle. Once that settled in and we had gotten past that moment and that book-to-bill had gotten back to being right on top of each other at about 1, we decided that it was time to take that data point away because -- and we always intended that the data point was going to go away. We put it in there for that window of time. And so we did that, what, 5 quarters ago, I think now. And the reality is that if -- and we've got our own internal process in place that says, hey, if it goes outside this corridor, we're going to tell folks. We're going to give that visibility again, and it hasn't gone outside that corridor. So it's been right around that 1 number. So you certainly shouldn't look at the Q1 performance because I mean, when we say about 1, and we have Lifecycle Services that was a 1.16, which is one segment of our business, we do actually give book-to-bill for that segment because it is more of a project and solutions-related business. So we give that visibility. But just because that one was 1.16, you should definitely not take it to being that we are below 1 on the rest of the business because that is -- that wouldn't -- that would be the wrong conclusion to come to. So within the corridor doesn't necessarily mean at 1, it could be above 1 within that corridor which classified, and that's makes more sense. The ISM has -- obviously, people look at that as an indication, but I think it's obviously decoupled in certain periods of time. Are we kind of back to -- are we in a normal enough environment now where the ISM is more useful than it's been through the whole supply chain period?

I think it's more useful, but it's not -- it's one of many data points we look at, right? So ISM being constructive is a positive, it's not the only thing. We look at other areas. We talk about unemployment, we look at consumer health. We look at what are we hearing from our customers. Ultimately, they vote their wallets. And so that's what we talk about order intake across industries. That's what drives our guide and our confidence in getting there.

Yes. And honestly, there's lots of different data points for sure, there's nothing more important for us than what we had for orders in the most recent period, whatever that period is we're looking at. And I think Steve actually do a really good job of pulling apart the data points that make up the ISM. And I think not every ISM is equal as far as those data points go. So some of those are also really important for us as we those as well. And ultimately, how that translates to industrial production is also super important.

Like you're talking within the ISM, like new orders, inventory index or something like that.

Right. Exactly.

Yes. Yes. And the last ISM was a little bit punky with the prices paid and inventories. On the secular aspects of the story, maybe talk about what you're seeing on the whole onshoring theme and maybe which verticals are you seeing the most activity around.

Yes. Steve, it's really tied to the early discussion we had. We look kind of lump whether it's shoring, new capacity expansion, mega projects, all into this one bucket because it's really the same set of technologies we provide across those different types of projects and across different types of industries because we are largely horizontal from a technology standpoint. So we track and we talked about if it's a greenfield activity, a lot of it is data center, data center, semiconductor, life sciences, a lot of big brownfield expansions and projects we see in food and beverage, parts of personal care. warehouse automation is a big one. We talked about it, whether it's partial companies, whether it's e-commerce players, traditional retailers, there's a lot of need for automation there. So we see that. So process. So critical infrastructure, especially in the U.S., is aging. It needs to be upgraded. And whether it's more power that's needed to fuel AI needs, whether it's more resilience and energy management on the traditional oil and gas, whether it's chemicals and water and industrial water, again, to serve the needs, increasing needs of data center, there's opportunity to upgrade and provide that automation and digital and software and services to drive that upgrade. So we're feeling good about it. It's across different industries. But as I mentioned earlier, it just -- it hasn't happened where it's happening across a broader set of industries for us yet.

Auto is not a huge market for you guys anymore, but it still seems to be like a bit of a swing factor and obviously a good indication of an economically sensitive part of the economy where there's investments. What's the complexion of auto investments these days? And whether it's EVs or ICE and what types of projects are you seeing on the auto side?

Yes. What we're seeing there is a lot more focus now on traditional ICE and hybrid. Certainly, EV is still an area of investment, and we talk about Hyundai, we talk about Rivian and Lucid in terms of their investments in EV as well. But what our customers, the brand owners and the tier suppliers who support them, what they're doing is looking at what the consumer wants, right? They're looking at the consumer adoption and they want to be lockstep with their needs. And a lot of it is, okay, it's a combination of traditional internal combustion engine vehicles and hybrid. And our technology is very well positioned to serve those needs. Clearly, automotive customers have been challenged. First, they have to deal with the evolving consumer needs. And then, of course, we have this trade uncertainty, tariffs, geopolitical volatility. And they have to decide what their road maps going forward. They have a much better clarity on what they want to do, where they want to invest. Right now, what we see is a lot of investments in AI and MES and modernization and productivity. Once there's more stability, we do expect CapEx to pick up. We're not counting on it in our guide, but there's a lot of optimism there, of course.

And to your point, it's a little more I guess, software specific? Or are you seeing -- is it Logix rich? Is there upgrading the hardware as well?

Oh, yes. When we talk about whether it's productivity, modernization, it's a combination of hardware, software and services. You have Logix, you have our HMI, you have our drives, you have our software, a lot of -- there's a lot of opportunity to increase throughput, increase quality even in a very automated industry like automotive with software. That's where our manufacturing execution system software comes in. AI, process optimization. And so -- yes.

I don't think we can forget the -- don't forget the AMRs.

Absolutely. Autonomous mobile robots, they have been a game changer, especially with the labor force, scarce labor force and the cost going up. And so we see that in automotive, but also broadening across other industries as well.

And your AMR exposure, what's the revenue base now, and that's growing, I would assume, pretty fast.

We haven't shared the exact number, but we have shared it when we first acquired it. So it's not a big part of our Intelligent Devices revenue today, but it's been growing double digits, and it's slated to continue to grow in double digits. And importantly, we expect it to turn profitable later this year.

And maybe just talk about the applications there, just a bit of back up a little bit, explain the strategic rationale of the deal and then what you're seeing, what new applications you're seeing here that are driving growth?

Absolutely. And if you look at what this acquisition provided was really an ability to serve a white space. Production logistics is basically moving material from one assembly line to another assembly line or to the finished goods line in the production facility. So it's not necessarily in a warehouse or somewhere else, it's more in a manufacturing environment, which is what our customers do across many different industries. And so they might have very automated manufacturing cells, production lines, but you still have a person pushing a carton from one side to another or someone driving a manual forklift. So the opportunity was to see how can we make that movement more autonomous, more safe, AI optimized and also feeding all that information into our FactoryTalk platform. So at all times, we know what's happening, where are the opportunities for further improvement in productivity, would there be some safety issues? How can you continue to optimize real time? And that opportunity to integrate mobile automation, the mobile robot with our fixed automation, with our controllers, with the MES, right, with our FactoryTalk, that's something that no one else has. And it's a business that's slated to continue growing strong double digits. And so it's an opportunity for us to differentiate and none of our competitors have that.

And I think it's like born out of the warehouse environment, but you said you're applying it in auto. Is it something that can be really across the food and beverage...

Yes. Food and beverage. So we have wins in food and beverage, home and personal care, life sciences. We have some pilots in semiconductor. We even have some actual use cases in warehouse, it's just not the primary focus. But if you think about some of the irregular payloads that are needed there in the fulfillment. But it's really across the board. Anywhere you need to move things around.

Okay. From a hardware perspective, also just Logix, where are we in kind of the Logix growth cycle? You guys went down a lot. I think you're up a lot. Where are we in that continuum?

Yes. Logix has recovered really nicely from where we were. There was -- certainly, when we talk about destock, Logix was definitely part of that destock cycle. That's definitely behind us. When we look at the volume of Logix, that is when you adjust for pricing changes that have happened, we believe that this year, we're going to be back at kind of around the 2019 level and that implied in that is that we're going to have some good growth the remainder of this year. It has been a good grower for us over the last several quarters as well. So Logix has been a really good story that's been part of the broader Rockwell good story that's happened over the last 4 or 5 quarters.

And from a mix perspective, I know it's accretive to the company average. Is it also accretive to the segment average from a mix perspective? You got a lot of software in there as well.

Yes, there's a lot of software in there as well. So they're both highly profitable, and we'll -- we're happy with the volume that comes, whether it comes in software or in Logix.

Is there a new innovation in Logix that could emerge in the next several years? Or is that refresh happened? And what kind of technology road map in Logix for the next 3 to 5 years?

Absolutely. We continue to innovate. In fact, we just launched our L9 controller that has even more performance features in a lot of different applications. We are talking about software-defined automation, and that's also slated to launch soon. We continue to innovate. And the important part is that innovation cycle continues to accelerate. What maybe took several years, if not more, to develop from a hardware standpoint for the next launch. Now it could be every year, every few years with a lot more features. And then, of course, on the software side and services side, we launched in a much more agile way, right, very frequent releases. Importantly, what we're doing is it's embedding AI across that whole stack, and it's not just controllers. It's not just the Logix AI, but it's Guardant AI. It's AI in our intelligent devices. It's AI in our control, AI in our software, including Plex and Fix and in our services as well.

Maybe we can just talk about that aspect where I think there was some chatter, I guess, I'd call it a couple of weeks ago about the threats from AI disruption in manufacturing from some venture capital funded things. Maybe your message about how defendable your software is and then obviously, how defendable your position is on the plant floor from disruption that has to do with the emergence of AI.

Sure. Just to level set, software, stand-alone software is less than 10% of our total revenue. We certainly have a lot of embedded software that's in our hardware that makes it very valuable and smart. We also have annual recurring revenue. It's a metric that measures recurring software and recurring services. That's in that 10% of revenue range as well. So if you look at the composition of our software, of our stand-alone software, it's a combination of our design and automation software, which is what our customers buy and use to digitally simulate to emulate, to design the automation systems and then to interact with them throughout the cycle. They are tightly integrated. Yes, they are sold separately, but they're tightly integrated with the embedded hardware systems that are on the plant floor. So very strong moat there and decades of expertise, domain expertise there. And we continue to innovate there using AI, for example, with Gen AI, how we help the productivity in terms of software development and how much quicker you can do that using natural language instructions, for example. So that's one aspect. The other part of it is really executing production orders on a plant floor. It's telling which part of the car to show up to which manufacturing cell at the right time to optimize the process to increase the throughput, right? So manufacturing execution system software, it's mission-critical. It's interacting with the processes that are moving in microseconds, right? Just think about high-speed packaging or processes on a plant floor that have people around them. So very strong moat there as well. I mean you don't have the luxury of having an AI hallucinate something or -- and deviate from the process because you can lose millions of dollars if something is not actually performing the way it should be. And also in worse, you can have a lot of safety issues with people that are interacting with the processes. So we have a very strong moat. The way we look at AI, whether it's software or hardware, is really as an enabler. It is -- as I mentioned earlier, we're looking at it from a very practical standpoint. Our customers already have a lot of our offerings, our controllers, our drives, our sensors, our software. We are working with them to figure out and to help them embed AI within that, right? So we have Logix AI, Guardant AI, Vision AI, [ Cote ] AI, so they can actually drive benefits. They can see that with what they have. Now of course, at some point, they will have to upgrade some of that hardware or if they're using our hardware from previous generations, they will need to have something newer to be able to handle the compute power, the cybersecurity needs, the safety needs that are inherent in the process. But we are looking at it in terms of what's the best ROI for customers, the best sequence of how to do it. And we have our digital consulting group to help them. That's what they do all day long. They work with our customers, the C-suite to figure out, okay, what's the best way to tackle it? What's the business case? Does it make sense? And importantly, we do it for ourselves. So we talked about how we do rock on rock. We use AI in our own facilities, in our plants. We use our AMRs in our facilities. We use our digital twin offering in our facilities to drive productivity. And we are an automation leader. We -- our plants are automated, but there's still a lot of opportunity to drive even more productivity and margin expansion.

Right. I mean that's what's been interesting about this kind of software debate is the indiscriminate nature of how they're looking at mission-critical [indiscernible] software?

Yes. One more thing I'll just add on the AI front really quickly. AI thrives on having a lot of data to be able to train the agents and the models. The data that's flowing through our PLC and the data that's flowing through our MES software, billions of transactions that are happening daily, its proprietary -- it's not available in the public domain. So we are using that data to train our models to be even more robust and effective, but it's not available for anyone else to train.

Right. And so while the customer has the data for their specific recipe of how they make Pepsi or Coke or something like that, the data that's coming off the equipment that relates to productivity, machine uptime, all this kind of stuff, you actually see that data and you can leverage that data into your development process.

Absolutely. We aggregate data and anonymize it, and we can drive a lot of great outcomes for customers across many different industries. Absolutely.

Yes. Okay. That makes a lot of sense. Just lastly, it's a big market for you guys on process. I know you touched a bit on what's growing there, but what's kind of the outlook for process? And it's a big market for you guys. What are you seeing there?

Yes. I mean we're not guiding to anything heroic. What's embedded in our guidance is low single-digit growth for the entire process segment. Within that, of course, we have some differences. You have energy, you have -- which includes for us, oil and gas, renewables and traditional power. You have chemicals, mining, pulp and paper, water and some of the other ones. And a lot of what we see really is focused on capital discipline and productivity. We haven't seen a lot of big CapEx investments yet. At the same time, we have seen investments to drive power for data center needs. And that is touching traditional power, that's touching energy, that's touching other areas of process. So we have a good opportunity. We also look at gaining share, and we look at competitive conversions, and we think we're well positioned. But we'll have to see what the CapEx environment is. As we mentioned before, it has been pretty tepid.

So just moving to the bottom line. I know that's been a big focus on the margin front and the productivity and the SKU rationalization that you guys have talked about some really strong strides here early on. Maybe talk about your confidence and timing on the 23.5% margin. And then how much opportunity do we go do we have?

Yes, absolutely. So highly confident that we're going to be able to drive towards that 23.5% segment operating margin for the total company. I haven't given a time frame on that. We did actually change -- this started off that target when we originally put it in place, we call it a long-term target. We changed it last November at our Investor Day to a medium-term target. So I guess we did pull that time frame in a bit. So we're still a couple of hundred basis points out from -- based off of our guide for fiscal '26 to where we need to go for that 23.5%, trajectory has been good. There's a lot of activity that's going on inside the organization. You hit on a number of them, and I think they're all important. Volume certainly drives that. We've got a really good pricing discipline and good pricing motion right now that's helping with that. We've got activities that are happening from an operational excellence perspective. So we have done some SKU rationalization. We probably dropped the number of SKUs by upwards of 10% over the last 18 months, give or take. There's more work that's happening there. I would say that the low-hanging fruit is behind us, but we are working on demand shaping because that demand shaping is super important for us to think about getting good flow through the factories and getting good productivity. And then we have the continuation of what originally was our cost reduction and margin expansion program to now a longer-term productivity and operational excellence program. That is we're not putting targets out there anymore for the public domain. We certainly have targets and they're very well known inside of our operations, but we're not talking about it publicly because this is a way of life for us now. Continuous improvement is never going to end at Rockwell. We're making it part of our livelihood. We want to make sure that we're doing that in every which way. So the number of projects, this is the most interesting part for me is that as you get into these programs and you go from transition from a moment in time to a way of life, you certainly can take your eye off the ball. The good news is that we've got a really good muscle memory that we've built. And so the number of projects that we have in our system right now are more today than what they were 12 months ago, 18 months ago. Now the average size of those projects, they're smaller. That's not necessarily surprising because, again, we've taken some of that early action where you're going after the bigger opportunities. Now they're smaller opportunities, but this is how you do it. This is how you build really strong margin profiles, both on the gross margin and the operating margin side, and you do it for the long term and you're not doing with little blips, you're instead doing it the hard way, you're getting it the hard way, and that's the way it becomes sticky.

When you look at the different buckets of opportunity, where are you seeing the most success where you're ahead of plan? And where are you seeing maybe ones that are a little bit more of a heavy lift? Clearly, you're -- I think you're outperforming what I would have expected. So on net, it's better. But where are you -- where are the easy wins and where are the tough ones?

Yes. I mean the hardest one just from a difficult leadership perspective, but the one that, of course, is probably the easiest and the best yield possible is on headcount reduction. That's -- for the most part, that's behind us. So we did that very early on in the process. And the good news about what we're doing is that we actually have it staged out. So there are things that have kind of in-year, 4-year benefits, but then there's also longer-term benefits. So material cost, negotiating with -- on the direct material side, doing things with indirect spend, that all happened fairly early on, too. Now we've got a really good activity around trying to make sure those costs don't eke back into the business. So that part is good. On the medium-term side, we are doing some more in-sourcing. We're doing more things for ourselves. We're trying to take people out of our profit pool. So that's not just on the manufacturing side, that's actually happening in the SG&A side as well. And then the longer-term stuff, we're really looking at kind of reimagining our manufacturing footprint, reimagining how we actually build our own product. And that is really -- it's taking -- that one is more around a transition of mindset, going from an asset-light organization to one that's more asset-intensive and going back to pick up areas of the profit pool that have been left for others to take because we were outsourcing a lot of things. So that allows us to rethink of our manufacturing footprint while at the same time, bring more things in-house. That one is hard. It takes a long time to do it, but Rockwell's got great tools for that. Emulate3D is a big help, the digital twin technology that we're using in our factories. So it's a heavier lift. It's going to be a longer time frame. But again, these are the kind of things that give us the ability to be able to do this for a long time into the future.

So should we think about assuming you get to 23.5%? When you look beyond that, do we have another kind of like hard target? Or do you think about it more as the algorithm? And just remind us of what your algorithm is today from an incremental margin perspective?

Yes. So these are all -- they all kind of go part and parcel together. So it starts with our growth algorithm, which is a 5% to 8% organic growth, which is made up of secular growth, market share gains as well as ARR driving the top line. And then the incremental margins that we're going to get from that growth is in the 35% range. And that's what we're signed up for as an organization. And ultimately, that drives us to that 23.5% total company. We have that broken out by segment. You can certainly see that in our investor slides. And we have that in hand today. We know how we're going to get to that 23.5%. And we've got -- so we've got really good plans in place. When we do get to that point, when we achieve that and we come out with new targets, there will be tangible targets. There's going to be tangible targets around what the margin profile is that we're looking for by segment, again, we -- and so we'll give a corridor for each segment. We'll give a total company average number that we're targeting. We'll also talk about the incrementals and what we expect that to be. And while we're doing that, we will also look at the top line growth algorithm. I'm not sure we're going to change it, but we're going to look at it, and we'll have that conversation when we get there.

Okay. So that's -- and that would be obviously -- we'd be able to kind of figure out a time frame using an incremental margin, you can kind of back into what time frame, I guess, that would be.

Yes, you would have to obviously come and put your own view on what the top line is going to be by period to period, but yes.

On pricing, where do we stand? There's a little bit of inflation, not so much where you guys? What you guys buy. Correct me if I'm wrong on that. Are we kind of in a more normal pricing cadence? I think you're doing April?

Yes. So we're doing an April price increase that's known to our channel partners right now. We've given some visibility around that. We have 2 aspects of price that are happening. So that's our annual price increase, which is -- last year, we did our annual price increase early. We did it in February. This year, it's in April. So we are going through a window of time just for a couple of months where we don't have an annual price increase against our comparable, but not super worried about that. So that's one aspect of what we do on price. There's another aspect, of course, that we're doing on pricing related to what happens with tariffs. So if we can't avoid tariffs and ways using supply chain, we will go and we'll make adjustments to price in order to recover for that on both -- on the bottom line. And the objective around tariff-based pricing is we're looking for earnings neutrality. So that's in place right now. But overall, the pricing environment is still fine for us. If we enter into an inflationary period and we have to make other adjustments, we're in a position to respond to that.

Any questions? Okay. We're out of time. Thanks a lot, Chris.

Okay. Thanks.

Thank you.