The Timken Company (TKR) Earnings Call Transcript & Summary

All right. Good morning, everybody, and good afternoon to anyone dialing in or tuning in from Europe or abroad. Welcome to our next session with Timken Corporation. I hope everybody is having a productive day so far, always very happy to have Timken at the Bofa Global Industrials Conference. You guys have been very loyal supporters to this event for the last 8 to 9 years. And we sure do appreciate it. It's a lot more fun being live in London in front of a captive live audience. Like always, hopefully, we can get back to that next year. But thanks so much for being here today. We're very fortunate to have CEO, Rich Kyle; CFO, Phil Fracassa; and Director of IR, Neil Frohnapple with us today. And I think we were just going to get into it. If anybody has any questions, I'll do my best to weave them into the conversation, feel free to submit them over the system. But thanks, guys, for being here.

Rich, maybe you can just start off by just talking about the key drivers to the transformation at Timken over the last 5 to 10 years, which has allowed the company to deliver higher cycle to cycle earnings and cash flow as evidenced by your performance in 2020. Maybe that's a good place to kick it off.

Okay. Thank you. Thanks, Ross. Thanks for the introduction, and thanks for having us today, definitely not as personal and maybe as entertaining has being in London, but a little more convenient to do it here from Canton, Ohio. So in your question, there will be a lot to that question, and I could probably take up the whole time segment answering that question. But boiling it down to a few key things, I'd say, first is mix, second would be consistency of execution, which I talk about more and third would be capital allocation. On the mix, our product mix, our end market mix, geographic mix, channel mix, we're more diverse. We're aligned with better profit pools within the industry as well as our profit pools of our capabilities and ability to extract profit. That diversity and end market mix has made us less cyclical, we're still cyclical, but significantly less cyclical. And then I'd say also, we're better aligned with growth both in the end markets as well as our ability to participate in that. So if you look back 5, 10 years, there were 2 really big moves within that mix. The spin of the steel business and then the shrinking of the automotive business to being the primary part of our company to what today is a niche business for us. An important part of the company, but a niche part of the company. There are a lot of small moves within that as well that in and of by themselves don't add up to be anything like the auto or steel move. But when you add them all together, the fact that we're -- we now have a good position in the marine business we didn't have 10 years ago. That was a big help last year. When you put them all together, they're very big. So last year, our revenue was down 7% and I can't say exactly where the Timken Company of 2010 would have been. But I'm pretty sure it would have been at least 3x that. We would have been -- the top line would not have been nearly as resilient with our heavy automotive mix, heavy steel mix, it would have been down quite a bit more than that. And then as we look to come out of this, I think, again, less cyclical recovery because we're not a seeing a lot of decline, but better aligned with long-term structural growth markets. So mix would definitely be #1. I think all the execution and the good execution that we had last year apply to our company portfolio of 2010. We couldn't have delivered what we did without the changes that we've made to the portfolio and the mix. The second on the consistent execution, and I really think this can't be emphasized probably enough. We were a company that were more than 20 years up to 2014 was perpetually in a transformation mode. We were trying to fix something. We were trying to exit something. We were trying to improve something big. Not unlike a lot of other industrials in the '90s and more than 10 years ago. But we had a big auto business that consistently didn't achieve its cost of capital. We had tensions. We weren't global enough, et cetera, et cetera. And we look today, we're more than 6 years into really focused on executing a very consistent strategy. So today, when you look at the activities that I spend my time on, that our management team spends their time on is product development, capital allocation, including M&A, footprint evolution, geographic expansion, digital investments. And you contrast that back to 2013, '14 the biggest projects we undertook was setting off the steel business. And there was value creation there, but I really think when you -- the things I get really excited about looking out the next 5 years, is we really been -- is the pipeline of things that we have that we're working on internally to execute the strategy, outgrow our markets and win in our markets is so much stronger and more robust than it was 5 or 6 years ago because it's been our focus. We like the portfolio we have, and we've got a lot of execution to expand that portfolio, improve that portfolio, et cetera. And then the third piece I would say is the capital allocation opportunity that lies in front of us. And again, you go back -- depending on how far you go back. But for much of a couple of decades, a lot of our free cash flow went into steel capital, went into pensions and went into transformational restructuring activities. Today, certainly, a part of that CapEx will -- that capital allocation will go into CapEx for the things I just talked about, expanding our renewables business, our digital platform, et cetera. But we will have -- we generate significant cash flow beyond that. Our cash flow generation today is better than it was looking backwards. And then the -- I think we have more availability of how to deploy that. And then we -- I think we've built a really robust process for allocating that capital, looking at the best opportunities. And I think as you look at the -- out the next 5, 6 years, we're very confident in the cash generation of the company and confident in our ability to redeploy that cash into value-creating opportunities. So from there, I could go on to a bunch of other things about opportunities in Asia and operational excellence and innovation, but that would be my short answer to the question, and I'll pause and let you ask another one.

All right. Great. Thanks, Rich. I'd love to just hear, Timken's got a great lens into the broader industrial landscape across so many different end markets. And just from where you sit, what does it feel like in terms of the strength and potential duration of the recovery that's coming? I mean, of course, we had a very brief recovery and sharp recovery in early 2018 that sort of ended before it started, and I think a lot of investors are wondering if that's going to happen again. Fortunately, we're hopefully not going to reescalate the trade war, but in any event, I would love to just hear that more from your perspective, how it looks right now?

So I think, first, your comment of our lens is very accurate. Our products are in pretty much every plant in the world. They're often in the products that are being produced in that plant. If those products have anything to do with motion or rotating motion. But if not, we're in the equipment used to make those plants, whether it's food or garments or whatever it is. So we do have a look into a lot of industries around a lot of geographies. And my short answer would be, I think it's strong. I mean I think the revenue guide that we gave of plus 12 for the year. It's been strengthening since the -- really since the second quarter of last year, and it's come out of the gate strong this year. I think as you compare it to the other part of your question, compare to other cycles. I think there's more similarities than there are dissimilarities or differences in a pandemic recovery than the other recoveries. Commodity prices have gone up. Labor has become tighter, both for our customers as well as for us. Transportation has become tighter and demand is improving. And as you know, our markets tend to be momentum markets. They're rarely flat for a prolonged period. They're usually either expanding or contracting. And once they start expanding, as you said, they usually run for a period. We've had particularly with the depth of what happened through the second quarter of last year, we've had really good momentum in our markets to finish last year. We've got really good momentum in our markets to start this year. And again, coming back to the differences, COVID has probably made some of the issues a little more pronounced like labor. You've got the new variable of not only is it -- or people have maybe some challenges hiring labor, you've got some COVID absences and some people choosing to stay out of the workforce. So maybe a little more pronounced of such things, but I would also say much more similarities and these are normal issues that we are accustomed to dealing with. We're good at dealing with them. And we look forward to navigate -- successfully navigating in our way through them through the course of this year and what we expect to be a continuous expansion through the course of '21.

How long do you think it takes before industrial production is really kind of humming at its sort of full speed potential right now? And you get to the point where inventories at the customer level are really getting replenished?

I think some of that is definitely happening. So I think it depends on the market, but I would say between the middle of this year and early 2022, our markets are generally going to be, we believe, tracking above 2019 levels. There's some exceptions to that, like commercial aero, probably take longer. But in total, I think we're well on track to being ahead of prior year. And shortly after that, we'll be on track for ahead of '19 levels. On the inventory question, as long as momentum is positive, we should see some level of restocking continue. And our revenue should outpace the markets by a little. And I say a little -- because I do think the restocking and destocking is overplayed for us a little bit. It's not huge movements in this inventory. There's no doubt that we sell more into a channel than actual consumption and things are growing. And we sell less into the channel when they're shrinking. So it is a real effect. But it's definitely been less the last 10 years than it was the 10 before. Customers are better at managing inventory. We're better at managing inventory. People expect us to be able to respond faster and which we're able to. We've all made a lot of investments in our digital capabilities. So I think the restocking will -- has begun in most of our markets, and we'll continue through the course of the year, but again, probably at a little more gradual pace maybe than what some of the expectations are.

Timken's long had a strategy to grow the addressable market beyond simply bearings into these various mechanical power transmission applications, and you've done a lot of that internally. You've done a lot of it via M&A. But I was curious, are you at the point now where you're selling a lot of your products has more of a system? And is that a real growth opportunity for you over the next several years?

So on the last part first, yes, it is a growth opportunity for us. On the part before that, I would probably say we're more of a subsystem than a system. And to expand on that a little bit, there really isn't a lot that we engineer, produce or sell that is particularly useful in and of itself. It still needs to be a part of something. So a good example of how we moved upstream from part to subsystem. We sold bearings for decades to Philadelphia Gear. We acquired Philadelphia Gear. Our bearings remain engineered parts in their drives. But now we're selling -- there's more value-add there. But we still need a ship or an oil platform to -- for that Philadelphia Gear to be an engineered part of. And then I would also say -- so we're definitely outselling subsystems. And then I would also say we're out selling a package and through distribution channel, sometimes to an OEM and also to end users. We're selling package. We have more feet on the street. We have more opportunities for technical collaboration and a lot more technical selling opportunities. So I think it's proven that there's value in it, and it's certainly something I think you'll continue to see us both organically and inorganically, expand that potential share of wallet for again, end users as well as channel partners and distributors and OEMs.

Maybe you guys could talk a little bit about price cost. I mean there was potentially perhaps a little bit of disappointment coming out of the quarter on the outlook for this year. But what is your ability to price higher for the balance of the year across your -- the various pockets of your business if the need or desire arises?

Well, our ability is good. We certainly move pricing on a significant part of the portfolio at any time. There is still competitive issues with that, that we have to deal with. And again, we're not a company that sells hundreds or even thousands of parts. We're a company that sells hundreds of thousands of parts in currencies and geographies. So the complexity of that is one of the reasons why our -- one of the reasons why our pricing is sticky. I would say we're very focused and have been really some of the transformational activities that I talked about moving pricing in one direction, and that's up. And that generally comes more in a good market than a bad, but we're not looking -- we don't have a lot of cyclical pricing anymore. So when we had a steel business, even when we had an automotive business, there was more cyclical pricing in there. So as you look at last year's pricing environment, it's probably one of the worst pricing environments that we had up until very late in the year. Raising prices last year would have been viewed -- I mean could we have done it? Yes. If we got to do over, would we do a little bit more possibly, but it would not have been viewed very favorably at the time. A lot of -- even at the end of the year, the uncertainty level was much higher than it is today. So we took -- again, we came into the year, we've said it for some time, we expected flattish pricing this year. We do have the ability to move up more. Aren't saying that the cost pressures are so much now that we believe we will still be doing that. So that's why we still guided to flat pricing given this runs through this year and the next year, would expect us to be in a more favorable pricing environment next year. We also do have, as you know, Ross, we have some protection in there that when steel costs go up, we do pass that on. There's usually a quarter lag, but we will recover some of that as the year goes on, if the steel price increase that we saw at the end of last year holds. But we -- obviously, the fourth quarter, got a lot of attention around the cost situation. The fourth quarter margins dropped from earlier in the year. That's fairly typical for our fourth quarter margins to be the low water mark of the year. They were a little lower than what we anticipated. But we're very confident. We're going to see a step-up from margins from fourth quarter to the first quarter, a sizable one. And that's with all the same cost issues we had in the fourth quarter, and that's sitting here on March 15 or 16 that we feel good that we're going to see a sizable step-up from the fourth quarter to the first quarter in margins. So we feel good about the price cost volume dynamic in total, and that includes all the temporary cost actions that we saw last year. So I think the price cost issue got a little overplayed in the fourth quarter and maybe rightly so for the quarter, but for the year, our margins were good last year. We're going to have the step-up in the first quarter this year, and our margins are going to be good in 2021.

Yes. I might just add, Ross. I mean, I think we're managing through the current cost environment very well. And as Rich said, price cost doesn't always match quarter-to-quarter, even year-to-year. And I think we manage the price cost equation very well over the cycle. You look back '18, '19 and '20, pricing was positive, all 3 years, price cost positive all 3 years. '21 is that inflection year where it can be a little bit more challenging, but you jump ahead to 2022, I think we're going to be back in that mode of continuing to manage that price/cost dynamic really well and be back into a positive price/cost situation at that time, if not sooner. As Rich said, surcharges will kick in as we move through 2021. But we're obviously taking up spot pricing where we can. It's a very small part of our business. And I do think we'll continue to manage it very well.

And I would say that we're expecting to step up the margins from Q4 to Q1, good margins for the full year and that's what -- while we're continuing to invest in things in '21 that are dilutive to margins in the year, but will pay dividends long term. We're investing in renewables, we're investing in our digital platform, our footprint. We're investing in the marine business. This year, we're investing in Mexico. So all that balanced and we feel good about the long-term outlook for it.

5 I don't want to belabor the point too much, but what's the hesitation to raise prices more now because I do sense some of that. I mean the demand is recovering. It feels like a lot of your customers are -- it's just hard to get things right now. The industrial challenges sort of feels tight in a lot of different places. So is there anything holding you back? I mean did you just set your pricing too early in 2020 and not for 2021 and then got hit with a wave of cost inflation towards the end of the year? I'm just trying to understand what maybe held you back a bit. And then looking to next year, I mean, could next year actually be an above trend pricing year if you have to do some catch up?

Yes. Well, first, I would say, I mean, the only thing holding us back would be where we have contracts, as we talked before, is generate something a little less than 50% of the business. And most of that's on an annual basis. So even that, we're not locked into long-term things. But there's good -- it's good to know you have consistency in that pricing. But to that point, yes, I mean, we have some 1-year contracts that again, I think are going to be fine, but we're priced last August, September, October, that the world was pretty different. Now with that, and we have material pass-through mechanisms in those. So you will see some positive price come through that. And besides that, I wouldn't say there's anything holding us back. And I think we're -- again, we're on track for a good year of margins. If our margins look like they did in the fourth quarter and 16.5%, you would see us be a lot more aggressive, I think, with that as the year progress. But our objective, again, is to grow the business high teens to 20% margins, reduce the cyclicality of the pricing as we go through, hold pricing in the down market, which we did in the latter part of '19 and through '20, we actually increased pricing in '20. So I think, again, we're in a good position on margins in total. So I don't know that there -- I would say there is anything holding us back.

Yes. And maybe just a reminder on that, too, is obviously, 2020 is in the rearview mirror. But 2020 is a year where we got 100 bps plus of positive pricing in a year when cost -- we actually have cost deflation in 2020. So if you look across '20 and '21, price cost is positive across the 2-year period, at least we expect it to be positive across the 2-year period. I do think it will normalize in '22. I do think, to your point, Ross, I think '22, if the markets are still trending in the right direction, '22 should be a good pricing year from that perspective.

And again, I think we had very similar situation earlier we've seen where our markets were improving. Costs were up. We had some locked in pricing. We didn't move pricing much in '17 and we expanded margins and grew earnings 30%. So -- and our guidance this year was -- at the midpoint, it was 20%. So I think we're sitting in a good spot.

Maybe you guys can talk -- and Rich, you alluded to this before, but just talk about the trade-off between driving further margin expansion versus growing in the business. I mean you made tremendous strides on margin expansion over the last 3 to 5 years as you covered in your earlier opening comments. And I think it's easy for a lot of companies to get caught in the wheel of just having to continuously drive that expansion when you've got a couple of really interesting growth areas in your portfolio right now that you seem to want to reinvest in. So maybe just talk about that trade-off and what specifically are you doing to grow this renewables business? And why should we be excited about that?

Well, certainly, yes. I did rattle off the list. We are investing heavily this year in renewables. We're investing in digital, our footprint, including the operation in Mexico. We're investing in Africa as well, not so much with physical assets, but with our channel and our sales force. We're investing in acquisition integration. So again, all those things tend to require expenses in the current, but will deliver results in the longer term, so we balance that. And again, we wouldn't expect those to be dilutive net to margins, but we're not looking again to break margins up to a level and widen the gap necessarily between the 2. And then on the pricing side, again, we look for sustainable pricing that we can hold and don't really have a lot of what I would call cyclical pricing besides the material pass-through mechanisms that we have. So on the renewables specifically, it's a breakout year for us last year, both wind and solar. This year is off to even a better start. We're seeing a step-up in the first half that we expected. We continue to broaden our products range. We continue to broaden our customer range, our application range, and we continue to invest not only on the sales and product side, but also, particularly on the bearing side. These are fairly capital intensive, unique processes that we're investing in. So the $75 million investment that we announced at the end of last year, it's a little bit of bricks and mortar, a fair amount of manufacturing equipment that will be coming on this year, early part of next year. And we have a lot of the -- we're able to deliver the step-up that we're delivering to start this year based on some of the investments that we made prior to that. So a lot of activity. And I'd say also a market that we believe will at least have a high single-digit type extended revenue number. We've been running well above that, but it will have some pauses as well. And we think, over time, the market's going to continue to grow, and we're going to be able to continue to increase our presence in it. And we've got a strong technology value proposition in the space.

Yes. And Ross, when we look at our businesses, and I'm thinking of our segments, in particular. If you look at Process Industries, it did close to 25% EBITDA margins last year, really top quartile margin performance when you look at companies that serve those sectors. So we really feel like we want to grow that business and maintain those margins. Mobile, on the other hand, we did about 14.5% EBITDA margins last year. We're looking to take those margins up this year with the volume and some of the cost initiatives we're looking on. But even Mobile is top quartile when you look at companies that serve those sectors. So we really believe -- we love the portfolio. We want to grow it. And I think the margin expansion, we'll see. We still have that 20% target out there that we're working for. I think we'll see margins improve as we shift the mix. Continue to work on the mix, continue to shift the mix more toward process, continue to shift the mix more towards the aftermarket. And that's totally consistent with the strategy Rich laid out at the beginning, and we believe in it.

Maybe we can shift to capital allocation a little bit. What's next? Is there more to acquire in renewables? I mean you've got a really nice portfolio in wind. What about solar? I mean and I have the multiples for these renewable exposed businesses just gone ballistic at this point. Is there stuff out there that's still affordable? And if not renewables, what are some of the more enticing growth opportunities that Timken could really lean into the next several years?

Yes. As I mentioned in the opening, capital allocation is a big part of the value creation opportunity over the next 5 years. I feel good about the pipeline, combination of the pipeline, the valuation expectations and our ability to execute that we will -- that it will continue to be a part of that. Whether it's all of our capital allocation or whether share buyback plays a role in that. I think probably depends on the valuation piece and the actionability, but there are a lot of opportunities out there. We continue to work it. And I believe we will -- obviously, we did one small deal even last year, but I believe as the impact from the virus continues to lift, activity in the space will grow. In Renewables specifically, I would say we still have some opportunities in wind, although inorganically, although we are probably more focused on that organically. In solar, there aren't a lot of moving parts in solar, and I don't see us getting into the panels or some of the other structural parts. So probably today, solar is more of an organic play for us, some possibilities, but it's. And we already have a market-leading position really in the small amount of moving parts and we're doing some things organically to make sure we keep that as some technology develops and changes. So I think probably more likely, you'll see it in other industrial markets. You go back the Cone acquisition, it not only had solar, it has a small piece of robotics. There's some interesting things there we're looking at. We had a couple of small deals that had pieces of food and beverage. That's still a market that we would like to scale. Marine for us has been largely a military play. There's the commercial side of that, that I think is appealing to us as well. So I think there are good opportunities, and I think we will be in a position to capture some of them.

Yes. And I think we'd really like to add -- continue to add scale in the products that we've added to the portfolio. With the M&A we've done -- we have a slide in our deck where we show we kind of added roughly -- that we kind of been into 5 verticals, if you will, our platforms around linear motion, lubrication, drives and gears, belts and chain and coupling. Obviously, lubrication, we now have a #2 position globally, and organic growth is really the thrust for lubrication as we kind of look ahead. Obviously, belts and chain, we just bought Diamond Chain in 2019, we're continuing to work to integrate that. But the other verticals around linear motion, around drives and gears and couplings, we love those businesses, and we'd like to continue to add scale to those platforms, whether it'd be geographically, whether it'd be product expansion, but the whole concept of the M&A strategy around diversification, we really believe in it in terms of making Timken better. And obviously, you're seeing it in our performance.

Can you talk about your manufacturing footprint a bit, guys? I mean, if anything, Timken has moved, I think, some capacity out of the U.S. into Asia over the last 10 to 15 years, if you look point to point. And maybe explain how that has evolved? And do you see more of your footprint coming back to the U.S. with just the general reshoring trend in the aftermath of all the trade issues that have been going on?

Yes. A lot we can talk about there. First, I would say, the U.S. remains our largest market, both from a revenue standpoint and a profitability standpoint. That being said, to your point of the last 10 years, it's not been the highest organic growth market. I do believe there's a good possibility that the next decade for the U.S. is a more exciting organic revenue market for the Timken Company than the prior decade. And I think that's driven by 3 potential things. One is renewables. If we get some consistent movement in the renewable space in the country, I think Timken would be a significant participant in that. Second would be infrastructure. If there's some infrastructure spend there, we'd be beneficiaries of that. And then I think the third is the reshoring term you used, although from my perspective, I think reshoring is a little strong of a term. I think if you look at our customers, I mean, they're not closing plants in China and building plants in the U.S. But I think what we all went through with tariffs and then the coronavirus those who did well through that had a balanced footprint, us included, most of our customers. But you had all your eggs in the China basket from a supply chain standpoint when the tariffs went in, you were in a tough spot and then the virus hit and other issues. So I think what -- I wouldn't call it reassuring, I would call it, certainly, our customers, our global customers are looking to have a balanced footprint and recognize the need for a balanced footprint. Not perfectly balanced and optimized, but they have local content in the regions in which they sell, particularly for us as a parts or a subsystem supplier. We need to be where our customers are. And I think going back to your question on our footprint, that's what led our footprint to Asia. It wasn't going to Asia to bring product back into the U.S. It was going to Asia for the Asian market. And been pretty successful in that and built a really nice brand and market position and footprint there. So I think our footprint is really well positioned. It will continue to evolve as it has in the last 5 or 6 years in incremental type ways where we bring on capacity with more automation generally in lower cost areas, like we've done with renewables. But at the same time, similar to our portfolio, we like our footprint. It's pretty well aligned with where our customers are. And again, I'd wrap up, I do think the U.S. could be, I think, a significantly more interesting and exciting market for us in the next few years.

All right. We're down in the last 5 minutes. If we could, I have got a bunch of questions that I want to try get in from the audience. If we can do a little 5-minute speed round here just with a few key topics that I just want to touch on. One is just EV, and what does EV mean for Timken? And we've been recently writing about how EV is going to become a lot more relevant in the off-highway markets as well, which are important to you guys. If you could just touch on that. I realize you -- there's a lot to cover there, but if you can just touch on that for briefly. And then on end markets, anything in particular you would cite that's maybe changed at all since your outlook? I mean, automotive, with the chip shortages, anything you can say on the off highway markets, in particular, which are important to you guys. And then I would just love to hear what you're seeing in China as well because Timken's always a great read on what's happening in China.

Let me do the second one first. We're certainly not updating guidance today, but with a couple of weeks left in the quarter. And we started out like we needed to start out to hit or be on the high side, I think, of our revenue guidance. So we're trending ahead of where we need to be to deliver the 12%. The chip shortages have impacted us some deal, but I would say when we put that guidance together, we didn't necessarily forecast chip shortages, but we forecast some supply chain interruptions. But in total, the demand has been strong enough to overcome that. And our ability to navigate that has also been strong. And so we've had customers who have had some labor challenges and/or other part issues, not ours. And there's a lot of logistics backlog in ports and various things as well. So there is a fair amount of that. But again, we factored some of all that in. It's fairly normal. And in general, our markets have a good positive momentum. And if anything, more than what we would have thought when we came out with our guidance 1.5 months or so ago, whenever it was. Coming back to your EV question, I think in general, focus on energy efficiency, innovation, design cycles is a good thing for Timken. That is where, for decades, we've been able to win new platforms, et cetera. And it keeps certainly emerging competitors out of play. There's -- we have competitors that have technical capabilities, but it narrows the field dramatically. That being said, EVs have fewer moving parts than -- fewer bearings generally than the existing gas vehicles. But that's a trend that's been going on in a slow way for 10, 20 years anyway. I mean a car has fewer bearings in its engine than it had before in it's transmission, et cetera, fewer inches of belts, et cetera, et cetera. So I would say where we participate, it's probably -- well, it is. It is a little slower than what you hear in total, but it is happening. We are participating in future designs. I'm talking about the on-highway side at this point, both truck and automotive. But again, when you think about where we participate, more premium pass car, trucks, tends to be more hybrid solutions at this point. And -- but we will get there. And -- but again, where we participate, we're not in engines. We're a little bit in transmissions. We're mostly in wheel ends and the wheel ends, if anything, some of that plays in our favor because of the battery weight and some things like that. When you get into off-highway, I would say it's even, it's a more positive for us. There a lot of innovation and a lot of need for Timken to get in and help reduce weight, increase power density, et cetera, et cetera. And we've been in hybrid EV mine vehicles off-highway equipment for several years. Not a lot but a little less, but it is picking up momentum. And in total, I think it's a net positive for us.

Okay. Good guys. Why don't we wrap it up there. I think we're about out of time, but thanks for the rundown, as always, and really appreciate Timken joining us again for our event and always being a loyal supporter to the Industrials Conference. It's great to see you guys. Glad everybody is well. Everyone on line, thank you for joining us. Enjoy the rest of your day, hope it's productive, and we'll see you soon. Thank you.

Thanks, Ross.

Thanks, Ross. I appreciate it.