Thank you so much. We are so pleased to have Lear Corporation joining us. I'm Dan Levy, the Lead Autos Analyst at Credit Suisse. Very pleased to have Lear Corporation joining us, and on stage with us are Jason Cardew, the recently newly minted CFO of Lear. You've been with Lear since 1992.
That's right.
You've been around. John Absmeier, CTO, joined Lear last year.
after spending some time at HARMAN, Delphi, so well familiar with the auto tech landscape as well. Also from the team is Alicia Davis and David Lynn from IR. Very pleased to have them. We're going to jump right into a fireside chat. I have some questions, but to the extent you have any questions, feel free to interject. Also, you can email my colleague Rob Moon, robert.moon@credit-suisse.com, and he can also ask on your behalf. Let's just start, and this is a standard question I've been asking everyone to start. Let's just start very basic end markets, because I think that's been dictating a lot of the investor conversations. What's the latest update, and this in terms of puts and takes into 2020, how should we be thinking from an end market perspective on North America, Europe, China?
Yeah. Maybe start with 2019 and how we see the rest of the year playing out, and then talk a little bit about 2020 as well. On our third quarter earnings call, we talked about the fact that we were in the middle of the GM strike, and we had made some assumptions in regards to when that strike would end. As it turns out, the strike did end the day of our earnings call. It ended up being about a six-week impact, and the high end of our range had contemplated seven weeks of lost production. We ended up with about 6.5 weeks of lost production. At the high end of our range, we had expected sales to be down due to the GM strike by about $420 million. That ended up at about $350 million.
As a result of that, we would expect to come in just above the high end of our guidance range. Just more generally on the markets, I think it's still a challenging environment globally, but they have stabilized a little bit. We've seen some modest positive improvements from what we had assumed on the third quarter earnings call. There's a bit of stabilization happening, albeit at a lower run rate than we started the year. As we look out to 2020, look at what IHS is suggesting, I think they have the market as roughly flat globally, with North America up, and China and Europe flat. If you look at our platforms, we see a pretty nice tailwind in North America due to the non-reoccurrence of the GM strike.
GM's a big customer for us, and so the fact that there won't be another strike next year, we're going to see a positive tailwind from that. However, in Europe and in China, we see our platforms down probably about 5%. If we were to call a global production number for next year, I'd expect when we give guidance in January to talk about something like 2%-3% in global production decline overall.
Great. That's, I think, the end market look. When we talk about things that are more Lear specific, how do we think about maybe some of the factors that were one time in 2019 that are non-repeater, any discrete items? GM strike, any inefficiencies related to that, any launch costs, I know there was some stuff with Mercedes on the GLE pricing actions on E-Systems. How do we think about any of these sort of Lear specific actions?
Maybe it helps just to give you a sense of what we see in terms of the operating margins of the segments next year. We would expect, given the production outlook that I just described, that our E-Systems business would continue to run in the mid sevens, maybe perhaps a little bit better than that next year in terms of adjusted operating margins, and our seating business to continue running around 8%, which is what both those businesses are running at in the second half of this year if you exclude the impact of the GM strike. In addition to that, just some of the puts and takes, starting on the positive side, we have the fact that the GM strike is not going to reoccur, and the revenue benefit associated with that is pretty significant, particularly on the seating side. We have the benefit of our restructuring program.
We've invested $200 million this year in restructuring. We talked before about roughly $60 million of savings associated with that. That'll be helpful. Also, launch costs will be lower in 2020 than they were this year in both segments. On the negative side, I talked a little bit about this on the third quarter earnings call, we have higher incentive compensation expense next year to the tune of about $60 million. That's really because we missed our financial targets this year due to the steep reduction in industry production volumes, that'll be a headwind for us for next year. That'll show up both in the headquarters strip and in the segments. Also on the positive side, we have a backlog rolling on next year that will help offset the lower production volume that we see in Europe and China.
Our backlog, at this point, we see it about $800 million-$850 million. That is lower than what we had initially anticipated for 2020, but that's our current outlook for the backlog for next year. I guess one more negative to point out is the continued strength of the U.S. dollar will weigh on revenue as well, and operating income to a lesser extent next year, too.
You said that backlog $800 million-$850 million for next year versus the prior outlook was?
When we issued our backlog in January of this year, we had called next year's backlog $1.425 billion. It is down pretty significantly, and it's down in both segments. The biggest single driver of that, there's a program that's launching towards the tail end of 2020 that we had initially anticipated launching at the beginning of 2020. That's about $200 million of revenue that's getting pushed out to 2021. We look at 2021, we see a really strong backlog coming there, and we'll describe that in more detail in January on the fourth quarter earnings call. I would expect, looking at 2019, 2020, 2021, still have about $1 billion per year in average revenue over that time period, which is very much in line with our historical backlog run rate, perhaps a little bit better.
Great. Just on a segment basis within that, you said $8 to $850 for next year is how we should think of it.
Yeah.
How do we think of that as E-Systems versus Seating? E-Systems, obviously, you called out sort of incremental or a sharper downturn there.
Yeah
versus Seating, where you've at least had some conquest business. How do we think about sort of the puts and takes around those two segments?
E-Systems backlog for next year is looking around $250 million, and Seating at the high end would be $600 million. That would be the composition of the $850 million. Both segments were impacted, as I mentioned, by that program that was delayed. It's about $100 million in each segment, and that's the biggest contributor.
Great. I think that sort of starts the discussion on the segments. Why don't we start, I guess, with the convergence of the segments? I think we've gotten some good updates on the financial outlook from you, Jason. John, on the tech side, I think we've heard a lot about the convergence of Seating and E-Systems, obviously, intelligent seating. If you could just give us a sense of the latest update on your view on synergies between these two segments. How real do we look at intelligent seating? Is that something that's sort of a nice concept, but it's not going to show up, or is this something that's actually starting to materialize now?
Yeah, it is starting to materialize. If you think about the evolution of the car, the in-vehicle user experience is becoming the key differentiator in the car. The seat, in particular, is obviously the cradle of that experience in the car.
Yeah. Hold on.
All right.
Tech difficulties. All done?
As we think about the evolution of the user experience of the car, the seat becomes a much more important part of that in terms of personalization, customization, and what it takes to do that is embedding technology into the seat. Bringing more electronics into the seat, more software-defined functions into the seat, more sensors into the seat, and of course, the electrical architecture, so the wires for power and signal that are coming into the seat. To get back to the question of whether it's real, we now have production programs for the product we call Sound Zone, which is one of our INTU products. That's bringing the sound into the seat. That's audio domain control, noise cancellation, individual audio in the seat.
We also have production programs for our Configure+ product, which is a powered rail system so that the seat is untethered from the vehicle and can be moved and configured for different use cases in the vehicle. We have development programs on the other INTU products with OEMs. Our BioBridge, which is a biometric sensing device, that's being used for driver distraction, for drowsiness, and even for measuring comfort levels so that we can implement our proactive capability, which is adjusting the seat to make subtle adjustments so that it keeps you comfortable before you know you're uncomfortable. We have development programs with all those, but maybe another one that's quite important, we announced in January a partnership with Gentherm.
We have our modular heat and cool program with Gentherm, where we're, for the first time ever, doing a highly integrated version of heat and cool in the seat. This is extremely important as electrification becomes more dominant for improving the efficiency of the vehicle overall. Instead of just blowing hot or cold air into the cabin of the car, now we can cool or heat the individual to their needs. This is now getting traction as well in the market, and this will be the first time that we have very efficient heating and cooling, much faster times to cool you down or to heat you up, and targeted at certain points on the body to make it more effective.
Great. If we're thinking about the two segments, should we think about Seating basically being the engine that's funding E-Systems growth and providing sort of a source of stability? It's very clear that E-Systems, there's clearly with electrification and connectivity, you are pushing more outside of the bounds of what was your traditional product set. Seating is still very much steady as it goes. Do you view Seating as the engine that funds E-Systems and that's sort of the harmony between the two?
Really both segments are generating free cash flow. Our E-Systems, this business can fund its own capital requirements, its own engineering requirements. Both businesses are high return businesses that can support themselves. I look at those sort of independently, and then when taken together, we're generating significant free cash flow for the company overall. We've described our philosophy around capital allocation in the past, and we have a strong track record of returning excess cash to shareholders. Both businesses can support their own growth needs with the cash that they're generating.
From a tech development standpoint, have the tech teams merged in any way or a consolidation of resources? Put it that way.
Yeah. Our seating organization leverages our E-Systems organization for electronics, software, and architecture development when it comes to the electrical architecture of the vehicle. The teams leverage resources and capabilities, share resources and capabilities. Software, for example, developing algorithms both low level and high-level application software for our BioBridge product, for example, is executed together in collaboration with the E-Systems team. Yes, that happens.
Great. Anyone who has questions, feel free to raise your hand or email Rob, or otherwise we can just continue. All right. That starts the discussion on the segments. Let's go into seating. Now, I think you said seating next year, 8%, which is interesting because that would then be basically ex-GM strike this year, like the fifth year of 8% for seating, which is pretty impressive. It's just been very steady, even in spite of what's been a pretty choppy round of end market volatility. What is it that's really underlying this that's allowed you to hold in that margin? Is it the mix? Is it just exceptionally strong platforms? Is there a vertical integration piece of this? Good execution? What's going on?
Yeah, it's really a combination of all of those factors. It goes back to 2011, 2012, 2013, when Ray and I were in the seating business. We really spent a lot of time building the team and focusing on earning a return in excess of our cost capital on every program with every customer in every region. The way we built the organization up really gave us clear visibility to where we were earning a return, where we weren't. We showed a willingness early on to walk away from business that we couldn't earn a return on. We're very disciplined in our plans for taking on new business. We only take business on if there's a clear pathway to earn a return in excess for our cost capital. That's something that's in the DNA of the organization today.
We've been investing in that business consistently for a long period of time. If you kind of compare us to some of the competitors that have been in the business, they've been out of the business, they've been distracted. We've had a consistent emphasis on the seating business. I think we've built this really diverse, strong foundation of customers and product segments. We're not overly reliant on any one particular customer. We have seven or eight customers that have 8% market share within our seat business. We have a relatively small structures business, which is probably the most challenging aspect of seating. It's important to be a credible global seat maker to have some structures and mechanisms business. It doesn't have to be a massive business. We have what we think is the right size business there.
We have this really strong surface materials business that I think is unique to Lear, that combination of leather, fabric, and cut and sew. I think that's been a really high-performing business for us as well. It's that combination of factors, I think, that has allowed us to continue running in that 8% range consistently.
On the structures and surface materials, is that all to Lear, or are you acting as a tier 2 for anyone?
On the structure side, it's primarily internal sales. We do have some external sales, but it's fairly limited. On surface materials, on leather, for example, it is mostly outside sales and less so internally.
Right. As we think about, I guess, you're saying volume is down 2%-3%. I think it begs the question of decremental margins. How do we think about decremental margins in a down environment for this segment?
Yeah. For seating, it's 15%-20%, largely dependent on the level of vertical integration. Our more vertically integrated programs are going to have decremental margins of around 20% to cover that added investment in capital structure required to support that program. The less vertically integrated programs, the just-in-time seating programs are going to be on the lower end of that range, generally.
Great. Competitively, this is a segment Seating has sort of held in the growth right now or on a pure $ basis, certainly. You've gotten a good amount of conquest business. What's the competitive environment that you're seeing right now? To what extent is there, I think this year you said it was something like $1 billion plus of conquest business in the backlog, and you picked up another $300 million over the course of the year. How do we think of the limit of how much conquest business you can get?
Yeah, I think there's a lot of opportunity there. We had $300 million conquest awards this year. You probably heard Ray talk about this a lot in the past. Customers are reluctant to resource the Seating program in the middle of the program life. The opportunity to take advantage of missteps by our competition oftentimes takes four or five years to play out. I think we're starting to see the benefit of our long-term sustained investments in the space and strong performance, operational execution, and quality. Customers recognize that and are rewarding us with conquest opportunities. We've grown our market share from 19% to 23% over the last five years. We've talked about targeting 28%. I still think that's a very reasonable longer-term target, most of that will come through conquest business, taking share from competitors that have misstepped.
Great. Clearly share is an important part of this. How do you do this without sacrificing margins?
Yeah. If we wanted to grow this business faster, we've had ample opportunity. We've had opportunities to take programs, particularly on the structure side, that we just did not see a clear path to earning a return in excess of our cost of capital, and we've shied away from that. We're going to prioritize returns over growth. We're not going to take business just for the sake of top-line growth. That being said, it depends on the type of business you're winning. If you're winning a just-in-time seating program, you may see a lower margin there of, say, 5% or 6%, because that's all it takes in order to earn a return greater than your cost of capital.
If you're winning business that's a combination of structure, surface materials, and JIT, then we're going to continue targeting that sort of 8% operating margin rate, because that's what it takes to earn the return that we're after there.
Great. Let's pivot to E-Systems. We'll start on the financials, but then I want to jump into the tech, because I think this is presumably, John, where you're spending a lot of your efforts. Let's start on the financial side, the 10% margin. Obviously, E-Systems margins have been probably one of the core focuses for investors.
Yeah
over the course of the year. You're at seven right now. You're looking for 10% over the next three years. You said mid seven next year, and I think that sort of underscores a prior comment that the first 18 months in that three-year period, modest improvement, and then more of a sort of step function change. How much of this, I mean, just talk through the qualitative pieces of getting from seven to 10. How much of this is product mix shift, scale, operational efficiencies? VIVO is certainly a piece of this. How do you just give us some sense what's the confidence in hitting this target? How end-market dependent is that?
Yeah, I think the first step for us was to stabilize the business. I think the pace of industry volume reductions has slowed, and we have a little bit more visibility on what the production rates are going to be going forward, and that's allowed us to restructure our facilities, take some capacity out, and that's the first step to improving the margins. Now, sort of working against that, we have some added engineering needs for that business. We've won $400 million of electrification and connectivity business this year, it's a significant ramp-up of that high-growth area of E-Systems, and that's going to require some engineering investment. As I look at next year, we're not expecting anything in terms of positive from the production environment. If anything, it'll be maybe slightly negatives.
We are expecting to roll on $250 million in the backlog. That will be positive. We'll see the benefit of restructuring. We'll also start to see the first benefits of a renewed focus on terminals and connectors and other vertical integration opportunities in E-Systems. We've already identified some business that we're going to bring in-house. We'll see some initial benefit from that towards the tail end of next year. Part of it is just getting the team in place and executing the plan. We have the team largely in place. We're still looking for one additional piece to that puzzle, but we largely have the team in place. We have a head of E-Systems in Carl Esposito that's in place.
We have a new head of our E-Systems business in Asia that has great relationships with the customers there, and that's been a troubled part of the business for us. We've put in a great leader in our wire and Ts and Cs business, Mike Balsley, who joined the company, formerly worked at Delphi and Aptiv and ran that part of the business for them. We've got some of the key building blocks in place with the team, and we're starting to see some traction from that as well. Those are sort of the near-term building blocks to margins expanding.
From a mix perspective, I think a big piece of the margin step down was the roll-off of some very profitable Asia-
Yeah
China wiring harness business. How much can you just give us a sense of how much mix were you at before, and should we be comfortable that that mix has now stabilized?
In the case of China, the biggest issue we had was with Ford or CAF. That business was roughly 30% of our Asia E-Systems business. It's now 5%. It's 5% of our E-Systems sales in China. We've de-risked that. Certainly, there's been an 80% reduction in revenue on those platforms over the last 18 months. That's the single biggest factor. I think just in general, the China market has been our biggest challenge, not just the lower volumes on those mature customers, but some of the new customers we've added to the portfolio, where it's going to take some time to work the margin up. I think we did the right thing in trying to improve the diversification of our customer mix in E-Systems. We're growing with Volvo Geely, we're growing with FAW and SAIC.
Those are important customers for the long term, but they have been a drag on the margins initially.
Great. Let's talk about the tech side, because I think that on the E-Systems front, that's probably, John, the core of your work, and actually, I find if you go to the Lear IR webpage, it says growth in very big text, and I assume that is probably the growth. Let's start with just how we look at the portfolio. You've done a number of things, I'd say, in recent years. Some sort of predated you in terms of Arada, and Autonet, and EXO. Xevo was your deal. How do we look at the portfolio? Do you think it's complete? Is there more that needs to be done? Is there more capabilities, partnerships? How do we think about how complete that portfolio is, or what more you need to do to fill it out?
Yeah, let me talk a little bit about the technology, then I'll kick it to Jason. He can talk about capital allocation and things like that. If you think about the growth drivers, certainly Ts and Cs, as Jason talked a little bit about, are an area that we're looking at. More on the high-growth electronics and connectivity and electrification, there's a lot of focus there. If you look at where we've been bolting on acquisitions with Autonet, Arada, EXO, and now Xevo, that's been in the software domain. If you think about connectivity and domain controllers, the car is going through a digital transformation. A lot of the smaller ECUs and electronics boxes that have been in cars as single-function units are now becoming more rich, higher power controllers with more compute, more memory, and with all functions defined by software.
With connectivity and domain controllers, the acquisitions that we've made have been to augment what we've done in the past with embedded software, moving into higher value application software and even out of the car into services and data monetization, bringing in things like e-commerce with Xevo. That's where a lot of the growth that we're seeing coming in the connectivity and domain controller space. In the electrification side, obviously, with emissions regulations getting stricter and consumers becoming more aware of and finding eco-friendly transportation more important, we're seeing growth globally. It's really China and Europe leading the charge with the U.S. in third on electrification, bringing in hybrid, plug-in hybrid, and now more recently, a very strong push towards pure battery electric vehicle.
We are one of one supplier that has both the E-architecture with low voltage and high voltage wiring and Ts and Cs, as well as power electronics, we are very strong in the energy management side of the architecture. Lear has been developing and producing onboard chargers, for example, for over a decade. We were first to market with onboard chargers with General Motors, that's continued to be a strong point for us. Also with battery management systems. Sort of from the wall to the battery is really where we have a big differentiator and a big capability, that's where we're growing significantly in connectivity and electrification.
On a partnership perspective, how much more do you need to do from an M&A?
We don't see any gaps in the portfolio. We feel like we can grow those businesses organically. We're not going to turn away if there's a great opportunity in front of us. In these uncertain times, we're going to be a little bit more cautious. We're not looking to do anything transformational, certainly. We can use partnerships and other investments, modest investments, to help kind of round out our capabilities. John, maybe you can talk about some examples of that.
We announced in January of this year our Lear Innovation Ventures activity, which is a systematic approach to leveraging innovation to create business results. As Jason said, sort of modest ways of using small amounts of money to put into startup companies or venture capital firms or work with accelerators and incubators and get access to new technology sooner and leverage that to basically accelerate our activities or educate us in what we need to do to be cutting edge and on the forefront of the changes that are happening in the car. A few of the things that we've announced, partnerships like Gentherm, our investment in Maniv Mobility, which is an Israel-based auto tech fund, our Techstars activity, which is an incubator. They've actually co-located in our innovation center in Detroit.
We've done some smaller direct equity investments in startup companies to get access to technology and have some commercial benefit from that.
How comfortable, from a tech perspective, are you in really going outside of your wheelhouse?
Yeah, I don't think we'll go far outside. I think we've focused on our core capabilities, E-architecture, electronics, core electronics like body domain controllers, domain controllers, electrification and connectivity. The farthest out we've gone is bringing in those software and data and services businesses like Xevo and Xevo. I think those are important because as hardware becomes commoditized in the long run, we have to find new value streams, and we're bringing in software and services to the OEMs that were previously unrealized value. As domain controllersSoftware-defined car becomes a reality, we have to make that a living product through the life of the car. Once you have software-defined features on the car and you have connectivity ubiquitously across a fleet, you can now update and serve that product over a 10, 12-year cycle.
On Xevo, what features about it allow it to really compete with Android Auto or CarPlay? How does this remain a relevant option for consumers?
Yeah, great question. It doesn't compete with Android Auto or Apple CarPlay. It lives on top of. Android Auto and Android Automotive and Apple CarPlay are a user interface and an operating system of sorts. Android Automotive is an operating system. Android Auto and Apple CarPlay are using the phone to project into the car. Xevo would reside on top of those applications as an application in the user interface. We've talked about our business with Toyota, with General Motors, and now with FCA, which recently launched. With Toyota, it's bringing in our Journeyware product, which is really a framework to deliver apps and services in the car. With General Motors and FCA, it's a marketplace. It's an application where the user gets recommendations for services like filling your car up with gas.
Again, that's sort of an unrealized value for the OEMs and for Lear. We split the revenue with them, allowing users to fill up very easily through the dashboard of the car.
Expansion beyond North America, is that?
We're actually already outside of North America with Toyota. We have a big focus with several OEMs, both in China and in Europe, to expand there. Our initial focus is on getting the platform in as many vehicles as possible. We're now on 33 million, well over 33 million cars across the 3 OEMs and more coming. That's the first step. It's really improving the user experience using the data that the users are generating by using the platform to make it seamless, make it better, and that will bring more merchants and more services to the platform. That's the next steps with it.
John, I'll sort of wrap up this section on tech with a broader question, and I guess this is maybe indication of the landscape. Obviously, you're coming from more of a tech background where software was very central. How difficult is it for you, or I guess maybe this is a comment on the industry, to compete with big tech software space to acquire top talent?
Yeah. There's always huge competition for top talent. Software is one area, but I think in general, in electronics and in architecture of the vehicle and in software and in data, those are all areas where we're competing for top talent. There's a number of things that we're doing to try to foster and support that. Certainly it starts at the top. Having Ray committed to innovation and technology helps, right? That shows the company and the people that we're trying to attract that there's real opportunity. Secondly, it's giving people interesting things to work on. More important than compensation, in fact. We have a lot of projects like with Xevo, for example, that are extremely compelling. People want to see those solutions get to market, and a car is one of the best ways to do that.
You get to work on something that people use in millions of vehicles. It's very compelling to an engineer. I would also add that we have looked at other locations for talent, right? We acquired Xevo. They have a strong presence in Seattle. We acquired EXO, they were Silicon Valley and Israel. Between Silicon Valley, Israel, and Seattle, we are finding that we can attract the best talent in those spaces. I would say another one last thing about that is that over the past five to seven years, the automotive industry has drawn a lot more attention from talent because you get to see what you do go out in the hands of the public very easily. It's easy to say what you do.
Cars, I think as its evolution is happening with the architecture, with autonomous driving, with the connectivity, with electrification, et cetera, it's a bit more of a talent draw as well. That's to our benefit.
Great. I don't know if folks have any questions, otherwise You can go.
Thank you very much. I have a slightly lateral question. Talking to some of your customers, the auto OEMs, they are embarking on their digital journeys for their manufacturing, which they tell us will require some kind of compliance by the supply chain. I wanted to ask whether you are working on this already. Is this kind of seen as a more of a burden or of an opportunity for you? I'm talking about things like being able to obviously feed into their PLM software systems, but also then to be able to feed straight into their IoT platforms that they're now kind of building or are buying.
Yeah. Maybe let me make sure that I understood the question correctly. You're talking on the product side or manufacturing side, or both?
Well, it-
Because it's happening, I guess, somewhat on both.
If we take one example that's been a big announcement, Volkswagen said that they're going to build Industrial Cloud together with Siemens and AWS. From what I understand is that the suppliers into Volkswagen would have to feed data on their products into MindSphere hosted on AWS.
Is this for you kind of a problem?
Yeah
look at digitalizing your own manufacturing?
It is, I would say, an opportunity, although it's something that we've been working on for years. Part of, I guess, my charge is cross-product process and business model innovation. On the process front, we definitely have a lot of innovation work going into understanding the data throughout the flow of our manufacturing process and, let's say, aggregating that across the enterprise. I think that ultimately that has to interact with the OEMs. From a privacy and security perspective, we've taken that very seriously. On the product side, we already now have with Xevo to comply with those regulations, GDPR, CCPA, all that sort of thing. We are contributing and participating in that.
Your product lifecycle kind of process is already digitized, and you run it through kind of CAD, CAM, PLM software that is fully compatible with that?
Yes. We do. Absolutely. The normal enterprise tools.
Great. Thank you.
Why don't we just wrap up? I wanted to wrap up finally with balance sheet. Just leverage, I think you're at one times?
Yeah. I think gross debt's 1.3 times EBITDA today, about $2.3 billion in gross debt.
What's the upper end of the range that you're comfortable with on the leverage front? I guess more broadly, how do we think about, you've obviously used a lot of your very strong free cash generation. You've used a lot of that towards share buybacks. Would you consider reducing share buybacks if larger acquisition opportunities come along?
Our expectation in regards to debt levels, and we've talked a lot about this in the past, we want to retain our investment grade credit metrics. For us, we look at that as 1.5 times EBITDA. Gross debt at 1.5 times, there's not a big gap between where we're at today and that level. We're not looking to lever up certainly not in this environment. In terms of our capital allocation philosophy, it remains unchanged. The first thing we're going to continue to do is reinvest in our business through capital expenditures, bolt-on acquisitions, if there's something compelling out there that we find, continue returning excess cash to shareholders through our dividend program and through share repurchases. I would expect that to continue.
Great. I think with that, we are out of time. Great. Jason, John, Alicia, and David, thank you so much for your time. We appreciate it.
Thanks, Dan.