Sonoco Products Co Q2 FY2025 Earnings Call

Thank you for standing by, and welcome to the Sonoco Second Quarter 2025 Earnings Conference Call. I'd now like to turn the call over to Roger Schrum, Interim Head of Investor Relations and Communications. You may begin. Thank you, Rob, and good morning, everyone. Yesterday evening, we issued a news release and posted an investor presentation that reviews Sonoco's Second quarter 2025 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website, and we'll post a transcript later this week. If you would turn to Slide 2, I will remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations. Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is available under the Investor Relations section of our website. Joining me this morning are Howard Coker, President and CEO; Rodger Fuller, Chief Operating Officer and Interim CEO of Sonoco Metal Packaging EMEA; Jerry Cheatham, Interim Chief Financial Officer; and Paul Joachimczyk, our new Chief Financial Officer. For today's call, we have prepared remarks followed by Q&A. If you turn to Slide 4 in our presentation, I will now turn the call over to Howard.

Thank you, Roger, and good morning, everyone. Our second quarter results reflected the growing strength of the new Sonoco as we produced strong top line and bottom line growth along with margin expansion. However, we were impacted by global macroeconomic pressures which affected consumer and industrial demand, and by the delay of the European packing season compared to last year. As Slide 5 shows, net sales grew 49% and adjusted EBITDA was up 25% while adjusted EBITDA margin expanded by 100 basis points to 17.2% due primarily to improving margins from our industrial business. Total adjusted earnings grew 7% and were impacted by higher-than-expected interest expense. The 115% growth in adjusted EBITDA in the Consumer Packaging segment reflects 10% gains in volume/mix in our metal U.S. business and the addition of Eviosys acquisition, which we have rebranded as our Sonoco Metal Packaging, SMP EMEA. The segment also generated solid productivity savings. Our industrial segment grew adjusted EBITDA by 16% due to a favorable price cost environment and productivity. Industrial segment EBITDA margins expanded to 19%, which was the seventh consecutive quarter of margin improvement. This performance is a tribute to our industrial team's efforts to drive value-based pricing and focus on productivity savings. Jerry will go through all the numbers and business drivers for the quarter in a few minutes. But I also want to formally introduce Paul Joachimczyk, who joined us as Chief Financial Officer at the end of June. We're really excited to have Paul join us, and he will discuss our guidance before we take your questions. Over the past 5 years, we've been progressing a transformation journey to create a more focused enterprise providing value-added metal and fiber packaging. Slide 6 illustrates our strategy, in particular, what markets we will participate in and how we expect to win in these markets. We're focused on businesses where we can drive a competitive advantage through advanced material science and technology expertise, where our products possess high functionality and where we can best leverage continuous process improvements to drive productivity. We now have a portfolio of businesses with a mix of large growing global consumers that value the competitive advantage we provide. As always, Sonoco wins through superior customer service, strong operational execution, innovation and a culture that is built on our guiding principle of people build businesses by doing the right thing. As illustrated on Slide 7, we believe we have now focused our portfolio along the competitive strengths that will allow us to win in the marketplace. Our core businesses include Metal Packaging, Rigid Paper Containers, and Industrial Paper Packaging. In each of these businesses, we check the box on our key strategic principles, including focusing on markets where we have market leadership. This slide also illustrates why we decided to divest Thermoformed and Flexible Packaging and why we plan to sell ThermoSafe, our temperature-assured business. Both have developed into meaningful, profitable and attractive businesses. However, we felt they lacked certain aspects that will allow us to best deploy our operating model to our advantage. So we believe monetizing these assets to redeploy capital back into our core was the right capital allocation decision. Now turning to Slide 8. We continue to progress our transformation journey in the second quarter with the successful divestiture of TFP and the utilization of proceeds and cash to reduce our net leverage ratio to below 3.8x. We're preparing ThermoSafe for a second half sale process, with the expectation that proceeds will be used to further reduce net leverage towards our target of 3 to 3.3x by the end of 2026. As a result of our portfolio changes, we're in the process of further optimizing our operating footprint and reducing support functions to align them with the needs of our fewer bigger businesses. We've actioned approximately $20 million in annual savings from stranded costs left by the divested businesses, but we are now positioned to better leverage shared services strategies for some of our global administrative functions to better serve our businesses, our customers, and to reduce costs. Our successful integration of SMP EMEA continues, but the team is now projecting between $40 million to $50 million in run rate synergies by the end of this year. We also have line of sight to achieve greater than $100 million in cost savings through 2026. At the end of June, we were saddened by the news that Tomás López, CEO of SMP EMEA, had died in his hometown of Murcia, Spain. Lopez was a legend in the European can-making industry dating back to his leadership and developing Mivisa into the largest food can producer in the Iberian Peninsula and Morocco. He later became CEO of Eviosys and stayed on in that role when we acquired the business last December. Rodger Fuller, our Chief Operating Officer and who has been leading the integration of SMP EMEA, was named interim CEO. Most of you are familiar with Rodger's 40 years of leadership experience at Sonoco. He has been deeply engaged since day 1 of the acquisition and worked alongside Tomás to build strong customer, employee, and supplier relationships. While Tomás will be missed, Rodger is providing leadership stability, working with the team to continue our strategy of building global leadership in Metal Packaging.

Yes. Thank you, Howard. Good day, everyone. If you turn to Slide 10, I'll review some key points related to Metal Packaging EMEA's second quarter performance, third quarter outlook, along with a preview of some significant growth wins that will help us in 2026 and beyond. Second quarter results were impacted by the delay in the start-up of the European vegetable packaging season as compared to last year. As we've explained, approximately 40% of our EMEA sales are seasonal and dependent on the timing of the vegetable harvest. In addition, difficult macroeconomic conditions in Europe have slowed consumer demand, and we've also seen a decline in sardine availability in Africa, which has further reduced our volumes. That said, demand for pet food and certain premium food categories has remained resilient. Looking at the third quarter, which is by far our strongest quarter, we're seeing the harvest season ramp up. Our customers and experts are predicting a solid vegetable harvest that could extend through October, and we expect other food categories to be in line with our expectations. As Howard mentioned, the team is making tremendous progress to achieve synergy savings in the second half of 2025 along with generating opportunities for cost savings that benefit our U.S. Metal Packaging business. We recently integrated our U.S. and EMEA steel procurement teams into a single, globally focused organization based in Europe and led by a veteran Sonoco steel procurement expert. As we previously said, we expect significant procurement synergies in 2026 after they were delayed in 2025 due to the late closing of the acquisition. So let me close with some exciting new growth projects that our EMEA team signed in the second quarter. First is a multi-year contract with a pet food customer in Eastern Europe, where we'll provide up to 400 million incremental units annually. We expect to start providing cans for this customer from existing operations late in the fourth quarter, and we'll be ramping up production in 2026. Also, we committed to developing a new satellite production facility in Eastern Europe to help manage their large volume needs. Next is a new 5-year contract to provide unique-shaped cans for a powder nutrition product that will begin in the fourth quarter of 2026 and scale up in '27. The EMEA team is targeting several additional new customer opportunities that should lead to further volume growth in 2026 and beyond. I'm really excited to be working alongside such a strong international leadership team as we build upon their past success and drive future growth. With that, I'll turn the call over to Jerry for the quarterly financial review.

Thanks, Rodger. I'm pleased to present the second quarter financial results. Turning on Page 12 of the presentation. Please note that all results are on an adjusted basis and all growth metrics on a year-over-year basis unless otherwise stated. The GAAP to non-GAAP EPS reconciliation is in the appendix of this presentation as well as in the press release. Sales and adjusted EBITDA bridges are also in the appendix. Adjusted EPS was $1.37. Earnings per share increased 7% year-over-year, mainly driven by favorable price/cost performance in our industrial businesses of $20 million and continued strong productivity of $15 million, driven by SMP U.S. and industrial businesses and the net impact of acquisitions and divestitures. This was partially offset by favorable volume/mix in our industrial business and all other businesses and higher interest expenses. Interest expenses were $0.07 higher than anticipated due to the pull forward of amortization fees associated with the term loan paid off in April of this year and higher commercial paper balances. Second quarter net sales for continued operations increased 49% to $1.9 billion. This change was driven by the impact of the SMP EMEA acquisition, strong volume in our SMP U.S. business and favorable price. Adjusted EBITDA of $328 million was up by an impressive 25% and adjusted EBITDA margins improved by 101 basis points to 17.2%, primarily driven by items that affected sales growth in addition to productivity improvements. Page 13 has our consumer segment results on a continuing operation basis. Consumer sales were up by 110% due to the SMP EMEA acquisition, favorable volume and price. Our domestic Metal Packaging business achieved double-digit growth, reflecting solid demand and continued commercial execution. Sales for our Global Rigid Paper Containers businesses were essentially flat as favorable price was offset by mix and lower volume. Consumer adjusted EBITDA from continuing operations grew a remarkable 115% year-over-year due to the impact of acquisitions, continued productivity gains, higher volume, and the favorable impact of foreign currency. Page 14 has our industrial segment results. Industrial sales decreased 2% to $588 million. Results were impacted by lower volumes and actions to exit the China market, partially offset by better pricing. Adjusted EBITDA margins expanded by 290 basis points year-over-year in the second quarter, primarily driven by favorable price/cost dynamics and productivity gains. These benefits were partially offset by negative volume/mix. Adjusted EBITDA increased by $15 million to $113 million, representing a 15% increase. Page 15 has our results for all other businesses. All other sales were $95 million, and adjusted EBITDA was $16 million. Sales were flat as higher volumes in ThermoSafe were offset by weaknesses in our plastic industrial business. Adjusted EBITDA declined 8% as unfavorable mix and price/cost were partially offset by favorable productivity and other nonrecurring items. And now I'll hand it over to Paul to walk us through an update on our full year guidance.

Thank you, Jerry. First off, let me say that I'm deeply honored to join the Sonoco team at this exciting time for the company. With the recent acquisition and divestitures, it is time to reinforce the core values that have made Sonoco successful for more than 125 years that are grounded in the culture of innovation, collaboration, and operating excellence. We are confident that our teams will drive the targeted synergies from the SMP EMEA acquisition and continue to build upon our global metal packaging foundation. In my first weeks at Sonoco, I have been impressed with the strong operational foundation of the company. I also want to thank Jerry for doing an excellent job as interim CFO and helping me transition into the organization. Looking at our outlook for the remainder of the year, as shown on Slide 17. We are maintaining our guidance with net sales in the range of $7.75 billion to $8 billion. While we have seen some softening of the market conditions due to global macroeconomic pressures, we are expecting strong results in our Metal Packaging and North American industrial businesses. From an adjusted EBITDA guidance, we remain confident in our range of $1.3 billion to $1.4 billion. Again, we see continued strength from our North American consumer and industrial businesses being partially offset by softness in Europe and other international markets. Delays in recovering rising input costs as well as impacts from tariff uncertainty are having an effect on overall market conditions. For adjusted EPS, we are targeting the low end of our range of $6 to $6.20. This reflects our first half performance and the projected performance improvements in the second half. In addition, we are expecting variability in FX and interest helping to mitigate some of the macroeconomic impacts mentioned earlier. Operating cash flows are still within our range of our previous guidance, but we are targeting the lower end due to higher-than-anticipated levels of net working capital usage, primarily from material inflation. We are extremely focused on improving our overall metrics and will continue to make the right strategic investments in the business to ensure we can hit our future strategic goals. I will now turn the call back over to Howard for closing comments.

Thank you, Paul, and again, welcome to Sonoco. One of the key tenets of our strategy is investing in ourselves to drive profitable growth and productivity. For the first half of 2025, we've invested $188 million in capital and expect to be in line with our estimate of $360 million in total spending by year-end. If you turn to Slide 18, I'll highlight a few new projects. The first is a $30 million investment we're making to expand production capacity to serve the growing U.S. adhesives and sealants market. This initiative will add a total of $100 million additional units of annual capacity at three facilities in Florida, Kentucky, and Ohio. Sonoco is one of the largest producers of cartridges for adhesives and sealants in the U.S., and we are currently sold out. As part of the capacity additions, we will be adding new state-of-the-art technology, including digital printing. Recently, we expanded the robotic assembly of nailed wood reels in the Hartselle, Alabama facility to speed production, increase capacity, and lower unit costs. Sonoco is the leader in the production of wire and cable reels in the U.S., and this new automation project will allow us to keep up with our customers who are expanding the domestic energy and communications infrastructure. Overall, we're targeting $65 million in productivity savings in 2025. To achieve that goal, we're updating several of our manufacturing operations with automation to improve efficiency and reduce costs. A great example is the autonomous forklifts and robotic assemblers we recently added to our Jackson, Tennessee Rigid Paper Containers operation. New customers and product development is key to the Consumer Packaging business as growth as illustrated on Slide 19. Our SMP U.S. business is projecting 12% and 15% growth in food and aerosol cans, respectively. For the year, this growth is coming from both new and existing customers. And as Rodger mentioned, we have several new projects starting up in Europe in the fourth quarter and into 2026 and beyond. In addition, our Global Rigid Paper Containers business continues to launch new all paper and paper bottom cans for customers looking to substitute from less sustainable packaging substrates. As an example, we launched two new oil paper cans for pet nutrition products in the second quarter in Europe. The sustainability of our metal and fiber-based packaging is also getting recognition. As shown on Slide 20, Sonoco and our customers won three awards for Sustainable Packaging Business of the year, Sustainable Brand, and Sustainable Investment Projects at the Environmental Packaging hosted by Packaging News. Slide 21 and 22 were developed to better explain the key tenets of our investment thesis and to illustrate the new Sonoco, our businesses, our markets, and our geographic footprint. In closing, we are encouraged by our trajectory as we enter the busiest quarter of the year. We expect continued strong performance in our consumer segment with our SMP U.S. operation capitalizing on commercial wins to organically grow well above industry growth rates. And we continue the integration of our Metal Packaging EMEA operations and expect to exceed our synergy targets. And our legacy Industrial Paper Packaging segment should have another strong quarter as it continues to benefit from improved market conditions while focusing on driving margin expansion through operation and commercial excellence initiatives. Finally, we remain mindful of external risks which are leading to global macroeconomic uncertainty that may affect our customers and consumers. We will remain flexible and focus on meeting the changing needs of our customers while consciously controlling cost, capital and reducing leverage while creating long-term value for our shareholders. Operator, we will now take any questions.

Your first question comes from the line of George Staphos from Bank of America Securities.

So you mentioned you're pleased with the trajectory that you have going to the third quarter. Can you talk about, across your major businesses, what kind of run rate you're seeing on volume right now? And related to that, if you can talk specifically about SMP EMEA, what kind of organic volume growth or, it sounds like, declines did you see in 2Q versus 2Q and what are you expecting in the third quarter? And then I had a quick follow-on and I'll turn it over after that.

Sure. Let me provide an overview. I'll hand off the question about EMEA to Rodger, but I'll begin with the paper can business. We are entering what we expect to be our strongest period of the year, particularly at the end of August, September, and early October. However, we're not anticipating significant growth, perhaps around 1% or low single digits. Looking back at Q2, the business saw a slight decline, with Europe contributing to that trend, especially given the current conditions in the European marketplace. Interestingly, Asia also experienced a decline for the first time in a while. So, while we're not forecasting a robust recovery, we do see slight improvement as we approach the busy season. On the metal can side in the U.S., as I mentioned earlier, we observed roughly a 10% improvement in volume/mix during Q2. When looking at it on a unit basis, food cans increased by 15%, and aerosol cans by 25%. We expect to maintain similar performance, although Q3 presents a slightly tougher comparison, especially for aerosol. The pack season is strong, and we anticipate those gains to continue for the rest of the year. Regarding the industrial segment, we expect a slight increase in total volume in the third quarter globally, which I would describe as almost flat. In North America, our largest market, operating rates are robust and we expect that to persist, with good improvement linked to pricing and costs. Rodger, would you like to discuss EMEA?

Yes. Thanks, Howard. George, yes, thanks for the question. First, let me just say as expected, and it's clear to me now, we remain really excited about the fit of the SMP EMEA business into Sonoco and convinced that we can deliver all the value to the shareholders that we committed when we made the acquisition. So I feel like we're off to a good start with the team. We acknowledge the first half was softer than expected, George. Two primary reasons. Number one, the sardine catch we talked about. But if you look at the balance of the fish segment, it's been on expectations for the first half. It's on expectations for the second half. And sardines is a relatively small subsegment of that overall segment, a small part of the overall segment. The vegetable harvest, we talked about. We're getting a late start. It looks like it's about 3 weeks behind. So if you think about the fact that 40% of our volume is seasonal to the vegetable market, you push that 3 weeks out into the third quarter and potentially into October as well, you can do that math and see what kind of growth that we expect coming in the third quarter versus the first half of the year. July is off to a good start for our expectations. We're not building any kind of sardine recovery into our reforecast in the second half. Based on what we see now, it could be mid- to upper single-digit increases year-over-year in the third quarter. And so far in July, it looks like we're heading towards that level for those reasons that I've already talked about. There's been no material loss of share in the business for any reason. So pretty upbeat on the third quarter versus last year at this point.

Okay, Rodger. Let me clarify that point and address the last question before I hand it over. Were SMP EMEA's raw numbers organically down 5% in the second quarter? If you could provide a range. Also, I noticed that the incremental margin in consumer was relatively low from my perspective, only at 12.5%. Is there any specific reason for that?

No, I don't think so, George. The business is performing well. Even with the volume shortfall in the first half compared to our expectations, the business showed positive productivity. The business is executing well, as I mentioned. There has been no loss of market share. So for me, it could be fine.

So were you happy with 12.5% incremental margin? Because that would be normally relatively light and with all the productivity. So I was just trying to get a sense there.

Yes, the seasonal mix did affect margins to some extent in the first half for SMP EMEA, George. That's likely what you're noticing. Could you repeat your second question? I think you're about to do it again.

So like mix effect on the incremental margin, I'm just wondering what was SMP EMEA's volume year-on-year in 2Q on an organic basis, down 5, down 10, down 3? Just a rough number.

Your final, the 12.5%.

No, no, no. Volume was not down 12.5%. We'll give you a range but it's probably in that mid-single digit.

Guys, I appreciate all the details. I just wanted to touch on, first, it seemed like you guys had some stranded costs, stranded corporate costs that were coming through in the quarter. We hadn't really factored that in. Is that something that would improve moving forward? Or maybe you can give us just some thoughts around that. And then the interest expense stepping up in 2Q here, is that something that we should see as more one-time in nature or a step-up kind of moving forward as you had a decent amount of debt paydown as well? So maybe just interest expense for the full year as well.

Yes. Thanks, John. Let me take the interest expense question first. On the interest expense, yes, we do expect to see some improvement on that in the second half, really in line with what we previously assumed for the second half of this year. And also in the second quarter, we were impacted by about $0.03 a share of a pull forward on some loan amortization fees that will not happen in the second half of the year. On the stranded cost front, yes, we do expect to see some improvement on that over the back half of the year and heading into 2026.

Yes. Let me just add to that. On stranded costs, we are laser-focused on that. We have a sub-team that has been working literally since late last summer knowing that we were going to be turning over or selling the TFP business. So we have a road map that will benefit us as we enter into next year. But it will take time. Some of these costs are pretty sticky. But we absolutely have a road map to full elimination going forward. The second half of this which is not for stranded costs is comments that I alluded to in my opening, that as a much simpler company where we're managing, in my words, basically two big businesses, a large can business, metal and paper, and a large industrial integrated converting business. The amount of resources that it should take to manage those two businesses versus our prior portfolio dating back not too many years ago, we should be able to simplify what we're doing in terms of how we support that business. So rightsizing that is a second work stream that we'll be talking about in more detail later in this year, early next year.

Yes. And John, just to be a little more helpful on the interest expense side, we're expecting that number to be around $50 million for the second half of the year.

Great. That's very helpful. And then just to move over to Eviosys for a second question here. Coming into the year, you guys had expected about 10% improvement on EBITDA for the full business. Obviously, a little weaker here in 2Q. It seems like synergy capture should be a bit better this year. Are you still expecting to be up year-over-year in that Eviosys business? And then just kind of adding on to that, the projects that were called out, $400 million of incremental units in one project and adding some of these other new projects that are going to be flowing through, it sounds more like a 2026 type of flow-through. How much does that actually add to volumes for the total business? I appreciate the details again.

Yes, to answer your first question, we expect EBITDA to be higher year-over-year compared to what we experienced in 2024. Regarding total volumes for the business, we are looking at $400 million and potentially an additional $100 million from incremental business, which is significant. While I won't delve into exact numbers, we produce around 8 billion cans a year, so you can do the math. I am very optimistic not just about these two wins but also about other potential new business opportunities that we can pursue. It’s clear that we are leaders in service, quality, and technical support in the market. We have a strong and experienced leadership team, combined with a robust business team in the U.S., which gives me confidence that we will develop into a global leader in metal packaging. Nothing has changed in that regard, and being closely involved in the business has only increased my confidence that we will achieve our goals.

Your next question comes from the line of Anthony Pentinari from Citi.

I'm wondering if you could talk a little bit more about any potential tariff impact, whether you're seeing them directly maybe in terms of steel or how your customers are positioning the food can or maybe indirectly in terms of consumer behavior, or just any impact that you're seeing directly or indirectly on any of your businesses.

Yes. Thanks, Anthony. Of course, I don't think there are many people that like tariffs. We certainly don't. We're doing all we can to mitigate those and we've said this multiple times. But unfortunately they're happening, and we have efficient ways to push those through. I'd suggest to you that our customers are saying that this is certainly going to be an impact in retail. When you start looking at the numbers, it doesn't sound material, but when you do it by volume, it is material. So more to learn in terms of how that impacts the consumer. Ultimately, our expectation is if there's a slowdown, and it's not going to be just in our categories, it's going to be throughout retail, throughout grocery, we see if there's a slowdown that drives consumers to the center of the store. And that's been something historical within our paper can business and our closures business and probably see more upside on the downside, if you will, in that regard. Jerry, you may want to talk about what we're seeing in terms of a financial perspective, just what is the magnitude of the numbers, etc.

Yes, I would say that we have managed to lessen the impact so far from both an earnings per share and margin perspective. We expect to fully recover that on the profit and loss side going forward. We are observing some effects on the balance sheet, as mentioned earlier, particularly with higher levels of net working capital balances.

Got it, got it. That's helpful. And then maybe switching gears on the industrial business, maybe just two very quick questions. Pulp and Paper Week recognized I think most of URB price increase, and I'm wondering if you can remind us on kind of the flow-through or timing around that. And then you called out strength in reels, which I don't think you've necessarily called out before in the slides. I'm just wondering what's driving that and maybe how big of a business that is for you on the industrial side.

Thank you, Anthony. Regarding URB pricing, we expect to see significant benefits starting in the third quarter and continuing into the fourth quarter. The timing of these increases, along with the successful open market increase, will positively impact our results as we progress through the end of the year and into next year. As for reels, while it isn't a major segment for us, it is noteworthy because it is highly profitable, and we are the market leader. Although we haven't discussed it much, it has been a part of our industrial converting business for quite some time. Due to the growth in fiber optics and the energy shortages across North America, we are experiencing strong demand and have reached our capacity limits. It's essential for us to inform our stakeholders that we are investing significantly to maintain our substantial market share in this area. The relationship within our industrial segment allows us to recycle scrap materials to produce core plugs for our tube and core operations, as well as supplying paper tubes for barrels. This integration fits well within our industrial business, and I wanted to highlight the capital improvements we are making in this segment.

Could you quantify how the guidance bridge has changed from last quarter? What is the incremental effect from the URB price or lower OCC costs, and how has foreign exchange changed? I believe productivity remained similar at $65 million, unless I'm mistaken.

Yes, Matt. Let me address the URB question first. As we mentioned earlier, every $10 change in URB prices translates to approximately $6 million in annualized benefit for us. We expect this to start having an impact in the third quarter. Therefore, we anticipate that the $40 per ton increase will begin to take effect. Each $10 increase indeed corresponds to about $6 million in annualized benefit, as we've shared before. Regarding foreign exchange, we forecast the euro to U.S. dollar exchange rate to be around $1.17 to $1.18 going forward, while we concluded the third quarter at $1.13.

Just a quick clarification. I don't know if you called it, but you do have a lot of CapEx projects going on. Did you give some sense of how much your CapEx is expected to step up in 2026? Did I miss that?

It's a bit early to discuss that. I don't anticipate a significant increase. In the past, we were operating within the $170 million to $190 million range and ended up at around $360 million last year, which is also our forecast for this year. The encouraging part is that we have a lot of growth and customer-assigned capital. We'll have to see how things look heading into 2026. A significant win could require us to ramp up to support substantial growth, so we'll just wait to see how it evolves. However, this year's performance is closely aligned with last year, so you should consider that in your modeling. It's really too early to make a definitive statement.

That concludes our question-and-answer session. I will now turn the call back over to Roger Schrum for closing remarks.

I want to thank everybody for your participation today. And as always, if you have any further questions, don't hesitate to give us a call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.