Ryder System, Inc. (R) Earnings Call Transcript & Summary

Okay. We'll go ahead and get started with the next fireside chat. For those I haven't met, I'm Justin Long with Stephens. I cover rail, intermodal and transportation equipment, and I'm excited to get started with this next fireside chat with Ryder. Joining me from the company is John Diez. He's CFO. Calene Candela with Investor Relations is in the room as well. Thank you for being here and continuing to support this event. I'll start with some questions, and then open it up. If anyone in the room has questions, feel free to raise your hand or chime in.

But John, I thought an interesting way to start things off was just to take a step back. This is a year where a lot of transportation companies have missed expectations. They've guided down, this freight downcycle has lasted longer than many anticipated. But Ryder has been beating and raising. And I know a good bit of that is just where the used truck market trended relative to expectations. But are there other areas you can point to that have been upside surprises or sources of resiliency in a pretty tough macro backdrop?

Yes. So as you all know, 85% of our business is contractual in nature. So clearly, there's been other bright spots this year, one of which is our supply chain automotive business. That's a business that's grown to the tune of 20% this year. So with the higher volumes, we've seen good profitability coming out of that vertical and supply chain. And then if you stay on the FMS side, on the fleet management side, we've seen -- we completed our multiyear maintenance initiative to take out $100 million of maintenance cost. But some of that momentum that we saw with maintenance continues, and we've had great performance this year so. When you think about where we started the year, we had guided down on UVS proceeds, proceeds that come in a little bit better, as you highlighted. And then we saw supply chain automotive and maintenance come in better, but that has been partially offset by what we've seen in the rental arena as well as our omnichannel, which is the e-commerce last mile space. So -- but the supply chain and maintenance initiatives are continuing to deliver for us.

Okay. Great. And I know one thing that you've talked about, really since the Investor Day, is this kind of core EPS number that takes out the outsized gains we saw from used and the strength in rental kind of normalizes for that. Any kind of update on where that core EPS number sits today? What's baked into the 2023 guidance, and thoughts on potentially growing that number going forward?

Yes. So when we first introduced that number, we were in the mid-9s on EPS, on the core earnings, and then we've been able to continue to grow that. We guided this year at the beginning of the year to 11% of core EPS. What we're excited about is, obviously, this year, rental has underperformed and UVS is still outperforming a little bit. So as we move forward, we do expect that core EPS going into next year to continue to grow. Our contractual businesses should deliver growth, both top line and bottom line. If you think about our ChoiceLease activity, that continues to grow at a nice clip in our target range of mid-single digits. And then our supply chain business continues to grow in that low double-digit territory, which we would expect that going into next year as well. So those are going to be the big contributors. If we get a little bit of a snapback in rental, you may see better performance coming out of rental, but it's still early to tell. We're expecting second half for the supply/demand imbalance to kind of calibrate. And hopefully, in the second half of next year, we see better rental performance than what we've seen as of recent.

Okay. Great. And so the $11 core EPS number, that was the expectation at the beginning of the year. It sounds like that really hasn't changed much...

Hasn't changed much.

In the latest guidance. Okay. Could you talk about just the competitive environment broadly across the business and areas where you see -- have seen pressure, areas where some of the secular trends with outsourcing and other things have maybe overcompensated for the competitive pressures we're seeing?

Yes. I'll begin with the secular trends because clearly, we continue to see growth for Ryder in the current environment. And that's really fueled by the secular trends of people looking to outsource, whether it's equipment or their supply chain networks. And what we continue to see there is a propensity for near-shoring, which is helping us grow our supply chain space. Labor challenges continue. It's still a tight labor environment. So we continue to see opportunities, both for the maintenance activity on fleet management as well as the supply chain and dedicated, even though things have gone softer in dedicated because the driver market has eased clearly, but those trends will continue. Where we have seen challenges is anything tied to the freight market. Clearly, rental has become more competitive. Then when you look at where excess equipment or excess capacity may sit, we don't compete necessarily with the truckload carriers on dedicated, but a few of them do compete with us on the dedicated side. Our specialized dedicated activity, we're still seeing good activity there. But a small portion of dedicated, we do some dedicated capacity where it doesn't require that specialized handling. It's a small portion, but that is feeling the impact. And then I would say the last piece where we are seeing some excess capacity is in the last mile space. So we participate in the last mile delivery of big and bulky. So as the housing sector has trended down, and probably there's more excess capacity than there is demand right now, we have seen some competitive pressure there. But we remain disciplined with our pricing approach for all of our businesses. We're going to pursue opportunities that create value for our customers, and they're willing to pay for that value.

Okay. And I know in ChoiceLease, you took expectations down a bit in terms of the growth in the fleet for this year. It sounds like you expect things to rebound in 2024. Is that correct? And do you need to see a better freight market in order for that to happen?

Yes. So our ChoiceLease business this year is actually growing better than our expectations. So our expectations are to grow 2,000 to 4,000. In ChoiceLease, we're going to grow at 5,000. We trended that down from the 6,000 level, which is what we expected earlier in the year. What we're thinking is, going into next year, we'll continue to see growth there in our target range of 2,000 to 4,000, which will deliver that mid-single-digit growth trajectory there. We do expect second half of next year that things will start picking up and our lease sales activity will start picking up as well.

Okay. And maybe while we're on that business, could you talk about some of the regulations on the horizon? I know it's a ways off 2027, but if you're thinking about making a longer-term bet on a lease, it's something that you're probably considering. When do you feel like that could start to impact the market and your business?

Yes. It's a great call out. We talk about the secular trends. 2027, there's going to be an emission change. As we've seen with prior emission changes in the engine technology, they've created pressure for fleet owners to operate those fleets by way of higher cost. The acquisition cost of vehicles is going to be much more, and then the maintenance activity that's required to support those vehicles will also go up. So with that, we do expect the prebuy activity that we typically see ahead of the emissions changes to begin late '25 and into '26. Clearly, if the freight environment is stronger in '25, you may see even a stronger pickup in '25 ahead of the emissions change. So that will not only help our growth trajectory for that business, but also provide support for our used vehicle proceeds because the older technology will get support and will be more attractive in the secondary market.

Okay. And as we think about the freight cycle at some point positively inflecting, what's the typical lag time from that occurring to seeing a benefit in some of your contractual businesses like ChoiceLease and Dedicated and Supply Chain?

Yes. So the way we look at the cycle, typically, we first see it in rental. So our commercial rental usually will pick up as soon as we start seeing freight activity pick up. And then we typically see about a 6-month lag with our lease activity, where customers will transition from renting equipment to gaining confidence in the business, and then transitioning to a lease application. So typically, we could expect about a 6-month lag. It could come in a little bit earlier, but that's how we typically see the market.

Okay. I'll pause for a moment. Any questions from the audience? Just flag me down if you've got one. But maybe we could go back to UVS and the used market outperforming what you were expecting this year. It's a bit surprising. Just given my commentary earlier, I feel like the freight market has underperformed, and we've seen incremental pressure there. So was that just conservatism on what you were forecasting? Or is there anything else from just a mix perspective that's driving that? Because retail versus wholesale, used truck sales, truck versus tractor sales, I know there's some moving pieces that might impact things.

Yes. No. Look, our perspective coming into the year largely has been fairly accurate. We expected used vehicles to decline every quarter. It has declined every quarter. I think the one surprise when talking about mix, if you look at by asset class, the trucks have performed better than we expected. Truck capacity is largely still fairly tight, and I would say, a healthy environment for rental. So we're seeing truck performance still, even after the decline we've seen this year, above our historical highs. So that was a bit of a surprise for us. On the tractor side, it's been fairly consistent with what we expected coming into the year. We did expect a soft rate environment. We called for that. If you look at where used truck proceeds are for tractors, they're kind of approaching our historical average, our 10-year historical average. So not a big surprise there. The upside surprise has been on the truck side without a doubt.

How sustainable do you think that upside surprise on the truck side is moving into next year?

Well, we continue to see capacity constraints by the body manufacturers to get trucks out. So I think the OEMs are doing a great job of producing and getting the chassis out, but we're still seeing challenges for truck bodies to be produced. So as long as delivery cycles stay elongated, I think that will provide support towards the used truck space. I do think, over time, we continue to see demand for trucks continue to grow as people move distribution centers closer to the end consumer. I suspect that we're seeing the early trends of that where truck capacity is going to continue to be elevated -- or tighter, I should say.

And the other thing I mentioned was the mix between wholesale and retail sales for used truck. Could you just give some perspective on kind of how that pie chart breaks down today versus where it was in the prior cycle?

Yes. So we've invested significantly to extend our retail capacity, and that's both physical sites as well as our digital used vehicle activity. And through that, we benefited from that over the last couple of years. During COVID, obviously, we had to get out of a lot of equipment, and we were able to benefit from that. We had record retail levels. This year, relative to last year, last year, we did an 80% retail/wholesale mix. This year, we're going to sell 30% more equipment than we did last year and 20% more on the retail side. So we should be approaching record levels on the retail side, which will benefit our shareholders and overall results this year, and we're benefiting from those investments without a doubt. So you will see, at the record level, volumes that we're going to dispose of this year will be similar to 2020 at that low 70% level, where we're having to wholesale some more equipment, primarily tractors that we're taking to the wholesale market.

Okay. And you took down your residual value estimates across the business. If you think about where we are today, and we'll maybe focus on the tractor side because that's where we've seen the pressure, how much further do we need to fall to get to that kind of normalized level that you've talked about on gains on sale that I think it's $75 million to $100 million or so annually?

Yes. So we've talked about our normalized, within the core earnings $75 million to $100 million. We'll probably be approaching close to $200 million this year. If you look at the mix of that, that encompasses trucks, tractors and trailers. I would say our tractors, like I mentioned earlier, are performing kind of back to historical averages, where our trucks are still outperforming. So you would still need to see a significant drop in trucks and some lower level drop in tractors, but we feel -- most important for us, we feel very comfortable where we're at late stages of a down cycle relative to our residual values and the exposure risk that we -- that may happen from dropping prices. So from that perspective, we feel good. I would say there's still considerable room before you get down to the $75 million level.

Okay. That's helpful. Maybe we can shift back consumer/rental. So you gave some commentary earlier, but that fleet has been -- the fleet size has been coming down. As we move into next year, and hopefully, we see a pickup in the freight market at some point in second half, how are you generally thinking about the right fleet size? Because you don't want to be over -- you don't want to have too much capacity today, but you also want to be prepared for that next step cycle whenever it comes. How do you balance that?

Yes. So for us, it's always about balancing that demand with the fleet size. And what we look at is the utilization trends for our fleet. We've targeted an ideal utilization of mid-70s to high 70s. We've been performing at that 75% level in the mid-70s for the last 3 quarters. We do expect a seasonal uptick based on the corrections we made in the fleet in Q4, but not nearly at the same level that we've seen historically for the seasonal holiday period. What I would say is we guided to another reduction. So our fleet was down 9%. In Q3, we guided to another 1,000 units coming out of our rental fleet, which will probably take us to about 13% drop in the fleet. We feel that's a good level of where we want to start the year and going into next year. And then as the year progresses, in '24, we do expect first half to be somewhat pressured. But second half, we want to be ready for that uptick like you mentioned. And clearly, we're positioned where we could get equipment if we need equipment to meet that demand.

Okay. So it seems like after this drop in the fourth quarter, you might say the fleet size is probably rightsized for the current demand environment and then [ the ] fleet can go after.

That's correct.

Well, one thing that I feel like you've been very successful in doing is redeploying assets during this down cycle, specifically with rental fleet moderation that can be reallocated to other areas. Has there been a structural change that's helped in that process? Or is this just better operational execution?

No. Great question. So we've got a long history from an asset management point of view of having a playbook that we execute. We have made some enhancements, but I would say, look, there's been a few structural changes to your point. One has been just the backdrop that we've been operating in. Clearly, the fact that OEMs were delayed in getting equipment out to us gave us more opportunities to redeploy on-ground equipment. Most of that was in the first half of this year. Now tractors are delivering at historical normal cycles. But I would say the other structural changes is the things we've been working on through our transformational strategic initiatives. One was we did shift more rental equipment towards trucks and less on tractors. So we have less equipment on the tractor side to redeploy candidly. And then if you look at the growth we've seen in our supply chain in the automotive sector where we do dedicated there and our dedicated business, those fleets have grown significantly over the last 5 years, and that also allows us to redeploy more equipment into those applications, which we control. So structurally, those changes have benefited us to not only from a speed perspective, but also the volume that we're able to redeploy within our network.

Okay. That's helpful. Maybe we could shift to the dedicated business. And could you talk about what you're seeing in the pipeline there? Freight market is more challenging, but you still have a compelling value proposition with outsourcing. What are you seeing in the pipeline? And how does that set you up moving into next year?

Yes. So our dedicated business continues to show good resiliency even in this down market. What we do from a dedicated perspective is specialized dedicated. So we assist in the securing of the load. We also unload the product and deliver it to our customers' end customer. So that specialized nature is less impacted by the freight market conditions. I would say our growth is primarily influenced by what's happening on the driver side. When driver market gets tight, we see a lot of growth opportunities. Companies that are looking to outsource. When the driver market as we've seen with the freight market conditions softening, it's easier to find a driver. So if you're a private fleet operator, right now, it's easy to operate your own private fleet. You can find seat drivers and deliver your product. When that turns around, we do expect, as we've typically seen, that the need for our specialized dedicated service is needed. So fast forward, the last 6 months from a sales perspective have been soft, as there's plenty of capacity out there, both from a driver as well as equipment side. We do think that will continue into the first half of next year and then we are expecting things to pick up both from a sales perspective and then longer term from a revenue growth perspective for dedicated. So we'll see what the second half of next year brings. But in the near term, we do see softness in that business.

Okay. But it sounds like you'll still grow just maybe at a slower pace.

Slower pace.

Okay. One opportunity that you have that you've talked a lot about historically was the ability to upsell ChoiceLease customers into Dedicated Solutions. If you look at Dedicated growth today, what percentage of it is coming from that upsell?

Yes, what's amazing through the ups and downs of the cycle, we continue to see over 50% of the sales activity comes from our ChoiceLease customers that are looking to transition to a higher level of service like Dedicated. That hasn't changed. That has been the case for at least the last 8 years for us, and that continues. So that's very exciting because that is part of the secular trends that we talk about. As it becomes more challenging, more people are going to look to outsource. And the more opportunities we give them to outsource, the better. The beauty of that for us is when you go from a lease to a Dedicated application, our revenue is 4 to 5x more and our margin dollars are 2 to 3x more. So it creates tremendous value for us. If you look at private fleet and private fleet activity, that accounts for more than 80% of our business. So clearly, as private fleets look to outsource, that's the benefit of our Dedicated Solutions.

Okay. Let's shift to SCS, and maybe I'll go back to the question I ask on Dedicated in terms of just what you're seeing in the pipeline of new business. And any particular service offerings or end markets that kind of stand out positively or negatively?

Yes. And there's a little bit of a mixed bag there. Overall, the secular trends that we talk about are propelling our supply chain business. We continue to see healthy growth in that business. We're organized around four verticals. So omnichannel retail, which supports e-commerce and last mile activity as well as traditional retail. Then you've got our automotive sector, our consumer packaged goods, which is food and beverage distribution, and then our industrial sector. If you look at automotive, that's been growing in the healthy double digits this year. CPG in the low double digits. And then if you look at our industrials, kind of in the mid-teens. From a growth perspective, the one element of supply chain, we are seeing that end market pressure is on the omnichannel side, so the end consumer clearly spending less. The housing sector, which impacts our last mile, big and bulky business, we do a lot of furniture delivery in that space, and that's been impacted. As interest rates moved up, we saw the housing sector decline and soften. So going into next year, we do expect that e-commerce and that last mile business should start picking up. And clearly, we would love to see the automotive sector continue at these healthy volumes. The industrial side, manufacturing continues to be strong. If we look at the different spaces that we support, that continues to be a bright spot in that portfolio. So overall, I would say supply chain continues to grow. We do expect that business to grow at the low double-digit level going forward, even despite some of the near-term challenges we see in that e-commerce last mile space.

Okay. And the UAW strike, it sounds like that didn't have an impact that was material in the third quarter, but some companies have seen an impact in the fourth quarter, a little bit of a delayed reaction and there's ratification that is going on now. But any impact that you're expecting in 4Q from that?

Yes, there's no meaningful impact, I would say, to Q4 or Q3. If you look at our automotive business, which is just under 1/3 now of our supply chain portfolio, we support both union and nonunion customers there. So it's a small piece that got impacted from our overall portfolio. But yes, not a material event for us for the second half.

Okay. You also recently announced an acquisition of IFS. Any way to kind of help us think through the impact to kind of top line, bottom line impact from that going forward? And maybe you could just go through the strategic kind of rationale and synergy opportunity from that deal as well?

Yes. So we purchased a company out of North Carolina called Impact Fulfillment Services, IFS. They're a fulfillment supply chain provider. But what's unique here, they had some capabilities that add to our solution set. They provide co-packaging and co-manufacturing value-added services to their customers. They've got a great portfolio of blue-chip customers in the consumer packaged goods, health and beauty space that they support, which is a solution that we think we could take to our existing portfolio of customers and deliver some future growth. If you think about the immediate impact of IFS, it's about a $250 million business. So we'll add about 7 points of growth to our supply chain business. It's accretive to the overall earnings of Ryder. And at the same time, if you look at their margin profile, it's very similar to what we see today from our existing supply chain business. So overall, really a great fit for us, both culturally and from a strategic point of view to drive future growth for the company and be able to deliver new solutions to our existing customers.

And it sounds like the synergy opportunity is more revenue weighted from cross-selling. Is there any cost opportunity as well?

There's always some cost opportunities just based on our scale of what we do. But I would say the more exciting part here is more on the growth side and the revenue synergies that may come from taking this product or these services to our existing customers.

Okay. And as we think about your final mile business, that's a business you've scaled over time. A lot of it's come through acquisitions. Do you feel like that process at this point is complete in terms of inorganic growth and now we kind of leverage this new base? And how are you thinking about the growth opportunity for final mile as we look ahead?

So we scaled that business. That business obviously was a red line through the COVID period when everyone was moving out and getting home delivery of new furnishings for their homes. Obviously, we've seen a pullback. So we do have some capacity that we need to fill. So I would say that would be priority one for us. But I would tell you, we're still trying to look at opportunities that may be out there that diversify our customer base. Clearly, an opportunity for us would be to go into the appliance side of the home delivery side in a bigger way. And if there's a provider out there that has that kind of unique set, we would look to acquire them.

Okay. Got it. Pause. Any questions from the audience? Okay. I can keep going. So as we think about the cost structure of the business, specifically around OpEx, there have been some savings from maintenance and other areas. You also have strategic investments, so you're kind of counterbalancing those two items. When you net it out, do you feel like the cost structure of the business will track pretty close to inflation going forward? Do you think it's better, worse?

I think it's a little bit different across the businesses. Certainly, if you look at our supply chain business, that clearly, typically grows with inflation. Our fleet management business, which is more of a network business, there's always opportunity to leverage that, and you've seen that on the maintenance side. What we have done in the past and what we look to do in the future is continue to execute against our zero-based budgeting approach. And clearly, we've made strategic investments in certain areas that as things and conditions, market conditions dictate slower growth, we could pull back on some of those investments and save some money in the interim, while, at the same time, making -- continue to make efficiency gains in the business through technology and process improvements. So the opportunities are still there. I think they're more limited when you think about our supply chain business in comparison to our fleet management business, but across the board, there's good opportunities that we still see that we could take out from a cost perspective.

Okay. And you brought up technology and that was another topic, that I wanted to tackle just because I feel like Ryder has done a lot to invest directly in technology, also partner with other companies that are testing new technologies. When you take a step back and look at all the different areas where you're doing that, what are some of the most interesting opportunities as you look out over the next several years?

Yes. So we still continue to see the opportunities to deliver greater control for our customers through visibility. We introduced RyderShare, which gave our dedicated and supply chain customers visibility to their freight while in transit. We still think with RyderShare and the evolution of that technology, we can provide the same level of visibility within the warehouse, which gives our customers control better than they could do it themselves. So I clearly see that. We clearly see opportunities for optimizing freight even more, and we continue to look at opportunities there to deliver even greater value for our transportation customers in the supply chain and dedicated arena. And then clearly, the ability to serve our customers and improve the overall experience and technology is a big part of that, through automation and quicker turnaround times. Everyone talks about AI. I'm not going to talk about AI, but clearly, that's an area where you can improve customer service. And in doing so, you're going to have happier customers and should deliver better growth long term for our business.

Okay. Well, one of the last topics I wanted to touch on was just the balance sheet. And I wanted to start with the age of the fleet today and kind of where that sits versus targeted levels as we think about the replacement CapEx needs of the business.

Yes. So we have gone through two periods of, I would say, significant replacement activity for our lease fleet. So the age profile of our lease fleet is probably at the target level. It's, I would say, 3.5 years is probably about right for our fleet when you consider the length of our lease terms are anywhere from 5 to 7 years. So it's about right that it's sitting there at 3.5 years. We expect that replacement activity when you talk about capital, that will continue to come down now from the elevated levels we saw this year, which will give us a little bit of free cash flow that we could use that cash elsewhere in the business.

And how far above kind of normal replacement were you this year from a CapEx perspective?

Yes. If you look at our replacement activity, it's probably easily $300 million above normal levels. That will come -- over time that will come down. And our replacement is not linear. So you may have a year where it comes down $500 million. You may have a year where it just comes down $100 million. But relative to our average levels, I would say it's about $300 million to $400 million on the high side this year.

Okay. And just thinking about kind of the moving pieces with growth CapEx, you mentioned an expectation to grow ChoiceLease next year. We'll see on rental. Dedicated, hopefully, see some level of growth. Supply Chain is more asset light. Is there anything else from a growth CapEx perspective that you see on the horizon?

No, I think you covered it. Clearly, we'll continue to make investments in technology and continue to make investments to support the growth in our supply chain business. It's less capital intensive there, obviously, but that's the extent of it. Clearly, if we see opportunities for acquisitions that make sense and create long-term value, we'll continue to do that as well and deploy capital on that side.

Okay. So when I put all this together, leverage today is already pretty far below your target. It doesn't sound like that's going to change. So is that where you want to be, just given the uncertainty in the macro environment or could we see some more aggressive capital deployment as we move into next year?

Yes. So clearly, our target for leverage is 250 to 300, and we're sitting below that level. We expect to finish around 230, which is a great place to be. We have plenty of flexibility in this market environment, which is a great place to be. Really for us the earnings power of the business and the transformation of the business has given us plenty of flexibility. So clearly, we could deploy more capital to acquisitions. We'll continue doing share buybacks. We've been -- with the earnings power and the leverage profile of the business, we've been able to buy back 15% of the stock since 2021. So those opportunities will be there for us as we look ahead.

And you've got the two buyback programs, the anti-diluted program, but also the discretionary program. Is that discretionary program, are you anticipating that's pretty ratable over the course of that authorization? Or is that more opportunistic?

I think for us, right now, it's a little bit of both in that -- we have done a recent acquisition, if we see opportunities in the marketplace, we'll prioritize them between acquisitions and share buybacks at this point in time. But the level of the buyback feels about right. We do expect that to continue into next year. And obviously, we're limited to some degree by our trading volumes as to the amount that we could do. Clearly, we're going to do more when we see attractive prices for our stock and do a little bit less once -- if the stock keeps climbing up, which it has recently. So that's something we'll continue to monitor and evaluate the alternatives for that activity.

And on the acquisition front, what are you seeing in the pipeline today, just in terms of the level of activity? Are you seeing more willing sellers, given the challenges we've faced in the freight market? And are you seeing more interesting valuations as well?

Yes. I think the expectations have come down clearly on the seller side. So it makes it a little bit more attractive for us. We're competing now more with strategics and less with private equity, which levels out the playing field to some degree. The level on volume has been steady. We're still getting a good look at a number of opportunities out there. We'll continue to evaluate the once that makes sense and move forward with the ones that we think are going to create the most long-term value for our business.

Okay. Well, maybe to just wrap things up. I know there's a lot of uncertainty in the economy headed into next year. But as you talk to your customers across your different businesses, what are they saying in terms of the environment that they're budgeting for and planning for next year? And do you have any initial kind of high-level thoughts?

Yes. For our customers, it depends what sector you're in. Like I mentioned earlier, if you look at the industrial side and the manufacturing side, I think they still feel pretty good about the business outlook going into next year. If you're tied to that end consumer and consumer spending on the retail side. I think everyone's guarded. Clearly, higher interest rate environment is impacting the consumer. We're seeing evidence of that. I think on the housing side, there's a glimmer of hope that things will start coming up even despite the higher interest rate environment. So those customers are planning for some improved activity, but clearly still below historic levels. And then on the transportation side, on the freight side, which we support a great number of customers there, I think they, like many of us, are expecting that we're at the bottom of this freight market. And at some point, this needs to -- the equilibrium of supply and demand needs to reach that inflection point. And I think we're all looking forward to next year seeing an uplift in the second half of the year.

Me, too. Fingers crossed. Well, John, thank you so much for being here. Really appreciate it.

All right, great. Great to be here. Thank you.

Thanks, everybody.