Texas Instruments Inc Q3 FY2021 Earnings Call

Good day and welcome to the Texas Instruments Q3, 2021, Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dave Pahl. Please go ahead.

Good afternoon. And thank you for joining our Third Quarter 2021 Earnings Conference Call. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website. A replay will be available through the web. This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Our Chief Financial Officer, Rafael Lizardi, is with me today and will provide the following updates. First, I'll start with a quick overview of the quarter. Next, I'll provide insight into third quarter revenue results, with some details of what we're seeing in respect to the customers and markets. And I'll also provide details by end market, including some sequential performance as we have the last few quarters. As sequential data begins to be less insightful, we'll move back to reporting only year-over-year per our normal practice. And lastly, Rafael will cover the financial results, an update of our capacity expansion plans and our guidance for fourth quarter of 2021. Starting with a quick overview of the quarter, revenue in the quarter was $4.6 billion, an increase of 1% sequentially and 22% year-over-year driven by demand in industrial, automotive, and personal electronics. On a sequential basis, analog grew 2% and embedded processing declined 5%. On a year-over-year basis, analog revenue grew 24% and embedded processing grew 13%; our other segment grew 19% from the year-ago quarter. Now let me comment on the current environment to provide some context of what we're seeing with our customers and markets. Overall, the quarter came in generally as we expected across the product segments and markets and geographies. Lead times for the majority of our products remained stable, but hotspots continued to exist. However, customers are becoming more selective in their expedite requests, focusing on products that complete a matched set rather than expediting products across the board. This behavior is not specific to any product family and market, or geography. Discussions with customers confirm a high-level interest in our commitment to expanding our internal manufacturing capacity roadmap, including 300-millimeter wafer fabs, our R-FAB2 and Lehi (L-FAB), and the associated assembly and test expansions. These investments to strengthen our manufacturing and technology competitive advantage will provide lower costs and greater control of our supply chain. And while there is a growing recognition that the near-term supply-demand imbalance will end at some point, the secular growth of semiconductor content per system will continue to grow, and this requires a robust manufacturing capacity roadmap for 2025 and beyond. Moving on, I'll provide some insight into our third quarter revenue by end market. First, the industrial market was down mid-single-digits sequentially, and up about 40% from a year ago. The changes both sequentially and from the year-ago were generally consistent across the diverse set of sectors. The automotive market again grew sequentially, and was up more than 20% from the year-ago. When comparing to pre-pandemic levels of Q4 2019, revenue is up almost 30%. Personal electronics grew low double-digits sequentially, and was up low double-digits compared to a year ago. The strength sequentially and from the year-ago was due to mobile phones, PC notebooks, and tablets. Next, communications equipment was down mid-single digits sequentially, and was down upper teens from a year ago. Enterprise systems grew sequentially and from the year-ago quarter. Rafael will now review profitability, capital management, and our outlook.

Thanks, Dave, and good afternoon, everyone. As Dave mentioned, third quarter revenue was $4.6 billion, up 22% from a year ago. Gross profit in the quarter was $3.2 billion or 68% of revenue. From a year ago, gross profit margin increased 360 basis points. Operating expenses in the quarter were $800 million, up 1% from a year ago, and about as expected. On a trailing 12-month basis, operating expenses were 18% of revenue. Over the last 12 months, we have invested $1.6 billion in R&D. Acquisition charges and non-cash expense were $47 million in the third quarter and we will go to zero beginning in the fourth quarter of 2021. Operating profit was $2.3 billion in the quarter or 50% of revenue. Operating profit was up 43% from the year-ago quarter. Net income in the third quarter was $1.9 billion or $2.07 per share. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $2.4 billion in the quarter. Capital expenditures were $486 million in the quarter. Free cash flow on a trailing 12-month basis was $7.1 billion. In September, we announced we would increase our dividend by 13% effective this month, marking our 18th consecutive year of dividend increases. In the quarter, we paid $942 million in dividends and repurchased $139 million of our stock. In total, we have returned $4.2 billion in the past 12 months. Over the same period, our dividend represented 53% of free cash flow underscoring its sustainability. Our balance sheet remains strong with $9.8 billion of cash and short-term investments at the end of the third quarter. In the quarter we've issued $1.5 billion of debt in 3 tranches of $500 million each. The first is due in 5 years with a coupon of 1.125%, the second is due in 10 years with a coupon of 1.9%, and the last is due in 30 years with a coupon of 2.7%. This resulted in total debt of $7.8 billion with a weighted average coupon of 2.6%. Regarding inventory, TI inventory dollars were up $7 million from the prior quarter, and days were 112, up 1 day sequentially, but still below desired levels. For the fourth quarter we expect TI revenue in the range of $4.22 billion to $4.58 billion and earnings per share to be in the range of $1.83 to $2.07. The Lehi acquisition closed last Friday, but the costs are not included in our guidance. We will provide those details when we report fourth quarter results. Just as a reminder, the purchase price was about $900 million, and we expect ongoing cost of about $75 million per quarter through 2022. We continue to expect our annual operating tax rate for 2021 to be about 14% and our effective tax rate to be about 13%. As you're looking at your models for 2022, without any changes to taxable income, we would expect our annual operating and effective tax rates to remain about what they are this year, with a similar quarterly profile of discrete tax benefits that are higher in the first quarter compared to the rest of the year. In closing, we continue to invest to strengthen our competitive advantages and in making our business stronger. Our investments in our long-term roadmap for capacity expansion, both in L-FAB and R-FAB2, are great examples. As a reminder, our capex will be higher on an absolute level, as well as a percentage of revenue as we strengthen this advantage. We are working through detailed plans of our long-term roadmap and we'll have specifics of timing in capex spending and our capital management goals in February. We continue to believe owning and controlling our supply chain will be of growing strategic importance. With that, let me turn it back to Dave.

Thanks, Rafael. Operator, you can now open the lines up for questions. In order to provide as many of you as possible an opportunity to ask a question, please limit yourself to a single question; after our response, we'll provide you an opportunity for an additional follow-up. Operator?

Instructions on how to signal for questions. We'll pause just a moment to let callers have an opportunity to signal for questions. And we will go first to John Pitzer of Credit Suisse.

Yeah, good afternoon, guys. Thanks for letting me ask a question. Dave, I know in this sort of environment seasonality doesn't make a lot of sense, but when you look at the September quarter, I'm just kind of curious. The June quarter came in well above your guidance range. September was well above the midpoint, but still within the guidance range. We're hearing of logistical constraints and supply constraints across the economy. I'm curious when you look at the lower level upside in the September quarter versus the June quarter. To what extent might there have been supply constraints outside of your control? To what extent do you think it's customers just being more selective about what they're pulling from you? Any color there would be helpful.

Sure, John, and thanks for the question. Yeah, I really think it depends on the customer's bill of material. I think that there are supply constraints that are widely reported across the different components. And as we mentioned in our prepared remarks, the behavior that we're seeing is different. Our customers are showing up and requesting—we have meetings with them—rather than showing up with long lists of devices that they're asking us to expedite, they're really just short lists, so they're looking for particular parts that complete those matched sets so that they can complete those builds for them. It is a different behavior that we're seeing this quarter versus the prior quarters. So, follow-on?

As a follow-on, I know you're going to give us more color about L-FAB expenses and R-FAB2's expenses as we get into next year. But I'm wondering if you can just help us set the stage a little bit: next year is obviously going to be kind of a capacity build-out year for you. And, I guess, all else being equal, how should we think about the gross margin impact on calendar year '22 as you layer in these investments?

Yeah. I'll take that one. First, as you know, you've known us for a long time. We don't manage the business to gross margins. We manage for the long-term growth of free cash flow per share, and that's what we're driving the top line for, and that's why we're making this investment—to support revenue growth and extend our low-cost manufacturing advantage with 300-millimeter. Any addition to that, we're controlling the supply chain. Specifically, on your question, RFAB2, all in, that's about a $6 billion expense, about a billion of that is a building which depreciates over 30 years or so. The balance of the rest is equipment and we're going to be putting in that equipment starting next year and over the coming years. With L-FAB, obviously a $900 million purchase price. And some of that is building, some of that is equipment. And then on top of that, we'll put about $3 billion of capex over a number of years as we ramp that up. So, we'll give you additional details on that and a bigger longer-term picture of how we're going to support the longer-term growth. We'll give you those details in February on the capital management call.

Okay. Thank you, John. And we'll go to the next caller please.

And we'll go next to Timothy Arcuri of UBS.

Hi, thanks. Rafael, I was wondering if you could talk about pricing. Obviously, you're seeing some increases in your input costs. Can you talk about whether you're passing those onto customers and how ubiquitous any price increases on your side might be?

Yeah. What I would tell you is our strategy in pricing has not changed; we regularly monitor that. And our goal is to be competitive and it's really frankly independent of the input cost to the largest degree. But our goal is to be competitive and if prices move higher we're not adverse to adjusting those as appropriate, and we have been adjusting those over time.

You have a follow-up, Tim?

I did, Dave. Thanks. And I guess I'll ask the same question that I've asked the last I think three calls about share repurchase; it was pretty low again. I guess is there a sort of—can you help us think through maybe what the triggers might be for you to start to buy back more stock? Is there a target cash level where maybe you would say that the balance sheet is getting a little bit over-capitalized and you'd start to buy back more stock? I'm just kind of—obviously you're not buying back much, but I'm just kind of wondering if you could talk us through what triggers you might be looking for to start that back again. Thanks.

Yeah, stepping back and just to remind everybody how we think about our returns, our objective is to return all free cash flow to the owners of the Company over the long term. And we do that through dividends and buybacks. You look at our 18-year history on that and it's really consistent. In fact, many years we've averaged well over 100% of return. During that time, I would remind you we have increased the proportion of the return that comes in dividends. So that also plays into that. But as long as we think the buybacks are accretive to long-term owners, we're going to do some buybacks. As you have seen, in the last 3 quarters we have. In fact, I don't think there's been a single quarter in the last 18 years or so that we have not returned cash to the owners of the Company through buybacks in one form or another.

Okay. Thank you, Tim. And we'll go to the next caller, please.

We'll go next to Harlan Sur of JPMorgan.

Good afternoon and thanks for taking my question. On finished goods inventory, most of which I assume is sitting at customer consignment hubs, this has come down faster than overall inventories. Finished goods dropped 8% sequentially in Q3, dropped 9% in Q2. They're down 25% from the beginning of this year, and down 33% pre-COVID-19, I assume due to the strong demand profile from your direct customers. So how far below normal are consigning inventories relative to your customers' target levels? And is part of the muted Q4 outlook to replenish these regular inventories or does the demand profile backlog and forecast actually reflect a sequential decline here in the fourth quarter?

Yeah. So, I'll start and Dave, you want to chime in after that, but I think where you're going with that—let me take a step back. Obviously, inventory levels are below desired levels. We're at 112 days; our target is 130-190 days. So clearly, we're well below where we want to be. And inside of that as you pointed out finished goods—whether it's in consignment or at our product distribution centers—are the ones that are decreasing most. In fact, even though total inventory levels stayed about flat, slightly up second to third quarter, finished goods decreased and then WIP and raw materials increased a little bit to offset that. Our goal, as soon as capacity increases, if there's an adjustment in demand, we will build those inventory levels back up to be at more healthy levels. And given our business model, it's just a great bet, just given the low obsolescence of our inventory and the diversity of positions and products, that we can afford—not only can we afford it, it makes sense for us to build that inventory and have it ready for the secular growth that we're confident will happen beyond that. And I think, on consignment inventory, frankly, those tend to be pretty lean to begin with. That's how that process is designed, to just keep a couple weeks, so I wouldn't expect that, by itself, to build significantly. Pure consignment, where I would expect the build to happen, is more at our product distribution centers. And that gives us more flexibility to then ship where the demand is most needed.

Yeah. I think that's well said. I think just tactically where we—whether we keep it in our hubs where we would prefer it, or if we push it out to a consignment center, that'll just be reflective of our expectation that our customer will pull it. That's just a tactical decision. I'd also point out that, as you said, Rafael, we do plan to bring on more capacity incrementally, as we have each quarter through this year and through the middle of next year, and in the back half of 2022, R-FAB2 will come online and then that'll be followed by L-FAB as Rafael pointed out; we did close on that factory on Friday of last week. And so that is on target to come online in early 2023 to support growth in the future. Did you have a follow-up, Harlan?

Yes. Thanks. I appreciate the insightful answer. So, exiting last year, the direct business, which includes consignment, was about 65% of revenues. Where does that mix roughly sit today and did the team drive a positive book-to-bill ratio in Q3, if you could maybe quantify?

So, on the book-to-bill, we don't think that's relevant, frankly, and we haven't disclosed that in a while, and we're not disclosing that anymore. On your first question on percent, I think you asked percent of our revenue from direct business, is that right?

Could you just repeat it, Harlan, so we got—make sure we got it right what you're asking, the first question? Harlan, are you there?

Yeah, just percentage of the overall direct business.

Oh, direct business, yes. We left last year with about two-thirds of our revenues direct. So, we expect that percentage will increase over time. We'll provide an update of what we've done with that this year in our February capital management call, actually what that looks like. But just to say, over time, we do expect that that will move up slightly over time. And just the other caller with Rafael talking about book-to-bill: as we've got a lot of our revenue on consignment, the actual backlog isn't quite as meaningful as what it used to be. So, as he said, it's just not a number that we look at or measure or we've talked about in some time. So, it isn't quite as helpful as what it used to be. So, thank you, Harlan, and we'll go to the next caller, please.

And we'll go next to Stacy Rasgon of Bernstein Research.

Hi, guys. Thanks for taking my questions. For the first one I wanted to ask you about the near-term Lehi impact. I know you said $75 million in cost impact in the model next year. Those costs don't go away, right? That $75 million a quarter is people, correct? And does it include the other costs or anything else because if it's people, how do you think about that incremental cost long term?

Very good, Stacy. Good direct question. So yes, that $75 million is mainly people and direct costs, not depreciation. Depreciation will not start until about first quarter of 2023 when we start production, just the way the rules work on that front. And that $75 million—we're still working through the details, but we currently believe that the most likely scenario is that most of that cost will go through restructuring charges/other line until we start production. And then those costs will be absorbed over time as we increase production, right? But I think where you're going is that that happens and those costs will be absorbed by revenue. How quickly they are absorbed beyond utilization just depends on how quickly we ramp that factory. Clearly, at the beginning there won't be a 100% absorption and we will get to that at some point, but we're not going to in 2023. So, we'll get to that at some point and to give you some details in February on the capital management call, I think we'll frame it in a bigger picture along with our other capex investments, and you'll get a better sense of how that's going to play out.

A follow-on, Stacy?

And it looks like Stacy has disconnected.

Okay. If you have a follow-on, let us know, Stacy. We'll go to the next caller, please.

And we'll go next to Ross Seymore of Deutsche Bank.

Hey guys, thanks for letting me ask a question. Dave and Rafael, I want to talk about the beat you reported and get into some of the supply-demand dynamics. It was the smallest beat to your original revenue guidance you've had in a year. I realize that it's been exceedingly volatile in the last year, but I wondered, was that the demand profile changing from customers, that selectivity changing that you're talking about? Or did supply play a role in there where you just couldn't meet up to the demand? Just trying to get what really changed versus whatever level of conservatism you had built into the prior quarters when you beat by bigger deltas.

Yes. I think you said demand from investors, I think you meant to say demand from customers, is that right Ross? That's okay. Certainly, if any investors want to buy semiconductors from us, we'll be happy to sell them, but yes, I'd just say that overall, the quarter came in as we expected it to, right? And that's a statement as we said in the prepared remarks and we looked across geographies and products and product groups and end markets; those types of cuts, so there wasn't one area that underperformed or outperformed what we were expecting. But again, the main thing of what was different this quarter versus last quarter was really where customers are coming in and requesting expedites and upsides from us, and those upsides were much, much narrower and more focused just on a few products. So that was really what the difference was. If you're looking for what was different this quarter versus last quarter, that's what I would point to as what's changed in the last 90 days.

Thanks for the help on that. This is my follow-up, a similarly toned question. You mentioned that lead times remain extended but are stable, and then you talked about that whole selectivity dynamic. What would you imagine would change the lead times? Is it going to be your supply incrementally rising or more so with Lehi or is the selectivity something—as you guys look back and are students of cycles—is the demand side and that selectivity side more likely to impact the lead times going forward?

Well, as you know, you've been through many cycles with us, right? It's always a combination of both. And we will and continue to add the incremental capacity, as we have planned for some time. And certainly, as we go out in time, as we get the bigger tranches of capacity coming on with R-FAB2 and then L-FAB, we'll be able to make more progress on that front. And at some point, we know that things will change from a demand standpoint. So, we don't spend time trying to predict that, but we'll be ready for it; we know what we'll want to do, and as Rafael talked about, one of the top things there is we'll want to rebuild inventory to prepare for the next time that the demand strengthens. We have a long list of things that we're doing to invest in the Company to make it stronger. We won't control the timing of that, but we'll be ready for it, for sure.

And just to emphasize that point, when that adjustment happens, whenever that is, we will continue investing in R&D, focusing on areas like automotive and industrial for the secular long-term growth. We'll continue to invest on capex, and to set up the Company for the next 10-15 years. We have a great long-term roadmap and we will build inventory—that's what, as Dave has mentioned. Our range is 130-190 days; frankly, we'll probably end up being at the higher end of that range just because we feel so good about the business model and how good that inventory will be, and how it sets us up for the next upturn on the other side, given the long-lived nature of that inventory.

That's right. Okay. Thank you, Ross. And we'll go to the next caller please.

We'll go next to Vivek Arya of Bank of America.

Thanks for taking my question. I just want to get the supply side right. Are customers not ordering as much from you because they don't have enough from you on the component side, or they don't have enough from others that they need to complete the bill of materials?

It's both, Vivek. There are instances of both of those and sometimes it's not even semiconductors; it may be other components that they are missing. Supply chains are complex. It depends on the bill of materials and the systems that they're building. So, it depends.

Yeah, and the nuance changes—90 days ago, 180 days ago—they were expanding everything, almost regardless of matched set position. Now, they are more selective in what they're expediting.

Yes. Thank you. Could you talk specifically to the automotive market? This year it's clear the production has not been that strong, but auto semiconductor sales have been pretty strong. So, as it applies to TI, what do you think has been the interplay between content and mix? Or do you think that there is perhaps inventory stuck in the automotive supply chain somewhere that we should watch out for?

I'll comment on automotive, I think I'll even extend it into industrial. Those are two markets that we have long talked about where we believe there is content growth in those markets—content per system. It's easy to see in cars and well reported. In automotive, you can see the content growth; it's happening in industrial across 13 different sectors, so harder and harder to see. We invest in all the markets, but we have a strategic focus on automotive and industrial, so you're beginning to see some of the benefits of that strategic bias that we have: our channel advantages, the breadth of our products, and advantages in those markets as well. So there's components of that. But that said, anytime that we have supply shortages in the industry, customer behavior is always very consistent and that behavior is that they will want to build inventory to protect themselves. Whether they've already begun that or have already done that, they certainly will want to do that, and at some point, they'll have too much product and that's what creates the cycles in our industry. It won't surprise us if the cycle comes to an end at some point; we'll be prepared for that and we'll know what we'll want to do at that point. Thank you for those questions and we'll go to the next caller please.

We'll go to Joe Moore of Morgan Stanley.

Great, thank you. I wonder if you could talk to the hotspots. Is there any particular pattern that's driving which products you have in short supply? And it seems like we see most in areas like enterprise and some of the personal electronics, higher volume stuff. Is that something that you guys would agree with and do you think is it—are there more foundry versus internal fabs issues, is there anything in particular driving those hotspots?

Yeah. I wouldn't put it down to any one thing, Joe. Certainly, there's reports of tightness across the industry, so obviously we see that as well. There's tightness in some lead frames, so we see that as well. Other inputs—raw materials, more compounds, testers in some cases, some process technologies, some particular products themselves that have a large number of customers—so those hotspots move around as our operations teams will sometimes move capacity from one area to the other. So, they're not always consistent or persistent. Sometimes they are, but sometimes they're not, and there are things that we can do to mitigate those or actually completely alleviate them. And that's why as we describe them, it's not just one particular product area or one particular market, or even one particular customer that would be impacted; you may see different ones affected at different times.

And just to highlight something for maybe new listeners: Dave mentioned the foundries—only about 20% of our wafers come from foundries. The vast majority, 80% and growing, are our own wafers; we've had investments in 300-millimeter internal wafers, and that just gives us much better control of our destiny. And then the structural low cost that we get with 300-millimeter is a big advantage.

I think that makes it especially clear why we believe that continues to be a strategic advantage for us in times like this. Joe, did you have a follow-up?

Yeah, I wonder, also with the hotspots, is there a situation where you can't respond to upside in demand and that's why it's tight, or are there actual areas where—on a broad scale—you're not meeting commitments that you would have made because of some of those things that are upstream from you?

I think there's probably both of those that exist.

At 112 days of inventory, it is harder to respond to upside than if we were at 150, 160, 190 days, of course, so yeah.

Yes. For sure. Okay. Well, thank you, Joe. We'll go to the next caller, please.

And our next question comes from Christine Lee of Citi.

Hey, thanks, guys. So, Dave and Rafael you mentioned that the lead times haven't really changed, but expedites are getting better or less bad. Why do you think that is? Do you think that now your competitors are reducing lead times? Do you think that the supply chain has had a little bit of a chance to build some buffer inventory? What do you think the situation is—getting either better or less bad?

Chris, I think that's a great question. I don't know that we know the answer specifically to that question, so I think we're trying to stick to the fact that we can observe that behavior change. I think you're offering some good theories of why that behavior may be changing, but what we're trying to do is to stick to the facts of what's going on. There are multiple reasons why it might be changing, and we'd rather not venture into guessing or predicting what's driving that behavior.

Yeah. I guess you can leave the guessing and predicting up to sell-siders. On the—since you guys don't talk about gross margin, but you do talk about free cash flow margin, I think you hit an all-time high in free cash flow margin in Q3, and it looks like there's some headwinds coming down the pipe in the near-to-medium term. Is there any reason for us to believe that you've seen your all-time peak in free cash flow margin or eventually could it get back above where it was in the most recent quarter?

I'll take that, Chris. And Chris, you know us very well. You follow us for a long time. You know we do not manage to free cash flow margin percent; those are not what drives long-term value for the owners. What drives value is the long-term growth of free cash flow dollars. And to your point, there are some headwinds on that with the capex that we're talking about to set up the Company well for the future. But of course, we're only doing that because we think that is going to drive even faster growth of the long-term trend of free cash flow dollars. So, we'll continue to focus on that because we think that is what drives value for the long-term owners.

Okay. Thank you, Chris and we've got time for one more call.

And we'll go to the next caller.

Yes. Thank you for squeezing me in. As far as the question on controlling the supply chain, you talked about 80% in-source now. I believe that's the more advanced nodes, but should we assume that that 80% is just going to grow and that you're going to rely less and less on foundries going forward?

Yes. So, to be clear, it's 80% in-source; 80% of our wafers are our own. And yeah, that should grow over time as we continue to add these wafer fabs that we're talking about, all in 300 millimeters, where the efficiency of 300 millimeters is large because a 300-millimeter wafer accounts for almost 2.3 times a 200-millimeter wafer in terms of capacity. In fact, R-FAB2 is going to be bigger than R-FAB1. So, it's reasonable to deduce that that percent will increase over time.

Very good. And as a follow-up, and I don't want to steal your thunder from February, but in the past, you've talked about capacity of $22 billion. Obviously, you're going to go through capacity expansion here for the next 12 to 18 months. Would you share any new numbers with those—25, 28, anything at all?

Yeah. Great question. Thanks for the setup for February. We will talk about that in February. Until then, what I would tell you is you've heard us talk about DMOS6 and our R-FAB1. Roughly, that's the potential of about $8 billion of annual revenue on 300-millimeter, though that's highly dependent on mix. R-FAB2, with that capex, should add another $5 billion of annual revenue when it's fully ramped, and Lehi should add $3 billion to $4 billion of annual revenue. So, we're thinking in those terms, and we're thinking even beyond that because as we look at the Company's potential for growth into the next 10 and 15 years, we're not stopping; we're thinking long-term. We'll talk about that in February in more detail.

That's great. And I think we can go ahead and wrap up. Rafael can you have the mic.

Okay. Let me wrap up by reiterating what we have said previously. At our core, we're engineers, and technology's the foundation of our Company, but ultimately, our objective and the best metric to measure progress and generate long-term value for owners is the growth of free cash flow per share. While we strive to achieve our objective, we will continue to pursue our three ambitions. We will act like owners; we will own the Company for decades. We will adapt and succeed in a world that's ever-changing and we will be a Company that we are personally proud to be a part of and would want as our neighbor. When we're successful, our employees, customers, communities, and owners all benefit. Thank you and have a good evening.

And this concludes today's call. Thank you for your participation. You may now disconnect.