Republic Services Inc (RSG) — Q3 2023 Earnings Call Transcript

Thank you. I would like to welcome everyone to Republic Services' third quarter 2023 conference call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, for joining me as we discuss our performance. I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time-sensitive. If in the future, you listen to a rebroadcaster reporting on this conference call, you should be sensitive to the date of the original call, which is October 26th, 2023. Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited. I want to point out that our SEC filings, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on Republic's website at republicservices.com. I want to remind you that Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times, and presentations are posted on our website. With that, I'd like to turn the call over to Jon.

Thanks Aaron. Good afternoon everyone and thank you for joining us. Our strong third quarter results reflect our focus on profitably growing the business. We produced revenue growth both organically and through acquisitions, while generating healthy margin expansion across our business. During the quarter, we delivered revenue growth of 6%, including 2% from acquisitions, generated adjusted EBITDA growth of 9% and expanded EBITDA margin by 70 basis points, reported adjusted earnings per share of $1.54 and produced $1.8 billion of adjusted free cash flow on a year-to-date basis. We continue to effectively allocate capital by investing in acquisitions to create long-term value. Year-to-date, we have invested $947 million in acquisitions. All transactions were in the recycling and waste space. The M&A environment remains active with opportunities in both the recycling and waste and Environmental Solutions businesses. We remain confident that we will exceed $1 billion of investment for the year. Year-to-date, we returned $671 million to shareholders through dividends and share repurchases. This includes $201 million of share repurchases completed during the third quarter as our leverage ratio returned to target levels. We continue to make progress, demonstrating the value of our complete set of products and offerings to customers while increasing the profitability of our Environmental Solutions business. Pricing realization in the Environmental Solutions business remains strong, and we continue to drive organic growth through cross-selling. EBITDA margin in the Environmental Solutions business improved sequentially to 22.7% in the third quarter and expanded 390 basis points over the prior year. The results we are delivering are made possible by executing our strategy in support of our differentiated capabilities. Regarding customer zeal, our efforts to deliver industry-leading service continue to drive sustained customer loyalty and organic growth in the business. Our customer retention rate remained over 94% and we continue to see favorable trends in our Net Promoter Score, supported by our valuable service offerings and quality service delivery. Organic revenue growth remained strong during the quarter, with simultaneous increases in both price and volume. Core price and related revenue was 8.6% and average yield on related revenue was 7.2%, and organic volume growth and related revenue was 10 basis points. Turning to our digital capabilities. The team continues to advance the implementation of digital tools that improve the experience for both customers and employees. The next phase of our digital operations is expected to drive additional productivity savings through route optimization, further improved safety performance, and provide more predictable service delivery to our customers. For example, we now have the ability to provide real-time customer notifications regarding expected service time on a given day. We are in the early stages of deploying advanced contamination over time and drive incremental revenue. Moving on to sustainability. We believe that our sustainability innovation investments in areas such as plastic circularity and renewable natural gas are a platform for profitable growth. Development of our polymer centers remains on track. Construction of our Las Vegas Polymer Center is substantially complete, and we expect full-scale operations to begin in November. Our Midwest Polymer center will be located in India. This center will be co-located with a Blue Polymers production facility with operations expected to begin in late 2024. The renewable natural gas projects being co-developed with our partners are continuing to advance. Five projects were online by the end of the third quarter, and we expect eight additional projects to be completed in 2024. We are making progress in our efforts to reduce greenhouse gas emissions, including our industry-leading commitment to fleet electrification. We expect to have 12 electric vehicles in operation by year-end and more than 60 EVs to be added to our recycling and waste collection fleet in 2024. We now have six facilities with commercial EV charging infrastructure with more than 40 additional sites in various stages of development. We continue to be recognized as an employer of choice and are proud to be certified as a great place to work for the seventh consecutive year. Our team members remain highly engaged to ensure that we are delivering high-quality essential services that are valued by our customers. I now turn the call over to Brian, who will provide more details for the quarter.

Thanks Jon. Core price on total revenue was 7%. Core price on related revenue was 8.6%, which included open market pricing of 10.4% and restricted pricing of 5.7%. The components of core price on related revenue included small container of 12%, large container of 8.6% and residential of 8%. Average yield on total revenue was 5.8% and average yield on related revenue was 7.2%. We continue to price new and existing business ahead of cost inflation to drive margin expansion in the underlying business. Volume on total revenue and related revenue increased 10 basis points. The component of volume on related revenue included an increase in small container of 50 basis points and an increase in landfill of 3.5%. Landfill was primarily driven by an 8.2% increase in special waste revenue. Volume growth was partially offset by a decrease in large container of 1.7% and a decrease in landfill C&D volumes of 6.2%, primarily due to a slowdown in construction-related activity. Moving on to recycling. Commodity prices were $112 per ton during the quarter. This compares to $162 per ton in the prior year. Recycling processing and commodity sales decreased revenue by 20 basis points during the quarter. We continue to see a steady recovery in fiber markets and plastics pricing has improved from recent lows. Our current average commodity price is approximately $120 per ton. Next, turning to our Environmental Solutions business. Third quarter Environmental Solutions revenue increased $8 million over the prior year. On a same-store basis, Environmental Solutions contributed 40 basis points to internal growth during the quarter. Adjusted EBITDA margin for the Environmental Solutions business was 22.7% and an increase of 390 basis points compared to the prior year. Total company adjusted EBITDA margin expanded 70 basis points to 29.9%. Margin performance during the quarter included margin expansion in the underlying business of 100 basis points and a 30 basis point increase from one less workday. This was partially offset by a 20 basis point decrease from acquisitions, a 20 basis point decrease from recycled commodity prices and a 20 basis point decrease from net fuel. Year-to-date adjusted free cash flow was $1.8 billion. Similar to prior years, we expect to spend a disproportionate amount of our full year capital expenditures and cash taxes during the fourth quarter. Year-to-date net capital expenditures of $935 million represent 56% of our projected full year spend and year-to-date adjusted cash taxes of $152 million represent approximately 60% of our projected full year spend. Total debt was $12 billion, and total liquidity was $2.3 billion. Our leverage ratio at the end of the quarter was 2.9 times. With respect to taxes, our combined tax rate and effects from solar investments resulted in an equivalent tax impact of 21.4% during the third quarter. The relatively lower tax rate included a $20 million favorable tax settlement from previous tax years, which added $0.06 of EPS during the quarter. We now expect an equivalent tax impact of approximately 24.5% for the full year. As noted in our earnings press release, we upwardly revised our full year adjusted earnings per share to be in the range of $5.46 to $5.49 primarily as a result of the lower tax rate. We remain comfortable achieving the other components of full year financial guidance that we provided in July. I will now turn the call back to Jon. Actually, we're going to open it up for Q&A.

Yeah, let me do one more section, please. We are proud of the results we delivered during the third quarter. A healthy contribution from our pricing strategy more than offset recycled commodity headwinds and cost inflation, which continues to moderate. Looking forward to 2024, we expect continued outsized growth in the recycling and waste and Environmental Solutions businesses, supported by pricing ahead of underlying costs, cross-selling our complete set of products and services and capitalizing on value-creating acquisition opportunities. We also expect financial contribution from the investments made in sustainability innovation, including plastic circularity and renewable natural gas projects. The fundamentals of our business remain strong and supportive of continued growth in revenue, EBITDA and free cash flow along with margin expansion. We plan to provide detailed guidance on our earnings call in February. Now with that, operator, I would like to turn it over for questions.

Thanks very much. Not looking for guidance in 2024, but just maybe, if you could just provide some initial thoughts on pricing, maybe separated into open market and restricted, how those should hold up? Thank you.

Yeah. We're not providing guidance today, obviously, on 2024, but we expect – the outlook is positive. So I think about high to mid- to high single-digit revenue growth, and we'll grow free cash flow and EBITDA margin faster than that, and that gets to your pricing question, pricing will come down nominally as inflation comes down, but we'll still be pricing ahead of our cost inflation, which should lead to that formula where we're going to grow the bottom line a little faster than the top line.

Great. And then just thinking about some of the expense drivers. We've heard from peers and from you as well in prior quarters that the equipment availability has been a little bit better, that retention has been improving. Is there any way to size some of those benefits? Just trying to think about those on a go-forward basis. Thanks.

We're certainly – we talked about cost inflation modulating in the second half, and we're certainly seeing that. So you can see that in some of the cost categories, labor, maintenance, certainly a bright spot. The supply chain there, maybe getting incrementally better, but still, we're not going to get all the trucks we want this year. But I think if you see the improvement in the maintenance, that really speaks to the underlying cost of parts inflation has certainly improved versus the first half. And we expect those costs to continue to modulate into next year as well.

Thanks very much.

Good afternoon. Thanks for taking the question. Jon, Brian, apologies if I missed this, but when I look at the EBITDA and free cash flow bridge provided in the press release, it seems like net income kind of steps up consistent with the tax rate changes we've talked about. But it maybe doesn't flow through to cash. Just wondering what I might be missing? Is it maybe a change to an adjusted number on how your cash taxes, is there changes to working capital? Any detail you could provide would be great.

Yes. Look, as you mentioned, we raised the full year EPS guidance predominantly due to the relatively lower tax rate. There is a cash component to that as well. That is somewhat offset by relatively higher interest rates than we normally thought, which is flowing through to cash interest, and that's why your adjusted free cash flow remains relatively consistent with what we previously provided.

Got it. Thanks for that detail. And last question for me. I'm just wondering if you can maybe try to characterize the M&A market within Environmental Solutions. You've obviously been very busy with acquisitions, but we haven't seen any deals yet. I'm just wondering if M&A is a little bit slower than you developed or if everything is moving along and maybe it just comes down to timing? Thanks gentlemen.

Yes, it really comes down to timing. The pipeline is strong, lots of opportunities, lots of conversations. And we remain incredibly disciplined in terms of our financial strategic lens and our financial lens on that, but we feel certainly optimistic through the remainder of the year and into the first half of next year that there's a number of attractive opportunities in that space.

Hey, good afternoon, guys.

Hey, Tyler.

So Brian, I think restricted pricing actually accelerated again to 5.7 here in Q3. Do you think that this is going to prove the high watermark, or do you think we get maybe one more quarter of acceleration?

I think we're near it, quite honestly, Tyler here. Again, we talked about the relationship between CPI-based pricing starting to step down, but water sewer trash and garbage trash stepping up. And right now, I think they're somewhat offsetting each other. We think that to the question earlier about as you look forward, we do think that the restricted base pricing does step down sequentially 2024 from 2023, but again, it still stays above that longer-term average.

Yes, that's helpful. Jon, last quarter there was some discussion about reaching a limit in certain areas of ES due to some pricing actions. You mentioned that progress was being made on that front. Can you provide an update? Is pricing strong in ES? Are you noticing any churn? Additionally, are there any effects from the economy impacting that business specifically?

Yes. No, pricing remains strong. We certainly remain committed on that. There's sort of customer churn in that portfolio. Some of that is permanent work, some of that is event work, and we're trading off some low-margin work, and we're adding to that very attractive cross-sell work. And so lots of really attractive growth opportunities in that space, but we're never going to do work for free, and we're always going to start out with price on that. So in the macro environment in manufacturing and Environmental Services broadly is a bit mixed. So the upstream oil and gas has been slower. Hopefully, a couple of big deals announced here that will ignite some increased activity there in Q4 and into next year. Automotive, obviously, has been a little bit challenged here with the labor activity. But then other parts of the petrochemical complex have been very, very strong. And overall, we're happy with the results and still feel very positive going into 2024 in terms of the demand environment.

Yes. Okay. And just my last one here, a couple of housekeeping items. But based on what we know today, what is the expected M&A rollover benefit next year? And then based on what we know today with the RNG and the polymers, what is the incremental benefit to 2024 EBITDA from those?

Yes. So first on the rollover, based on transactions that have closed to date, that'd be about 50 basis points of rollover into 2024. And then just on polymer centers and the renewable natural gas, you can think of polymer centers kind of the $12 million or so incremental contribution next year from an EBITDA perspective, and things around $15 million to $20 million on the RNG portfolio. That’s EBITDA.

Got it. Thank you.

Hey, thanks for taking the questions. So if the prints are right, then the economy grew 4.9% real GDP annualized for the third quarter, and it's really the consumer leading that. Can you talk about your view of the broader macro right now? And specifically, and I know you're not guiding for 2024, what kind of a volume environment are we in, on an underlying basis? Are we still in a positive volume growth environment from your view?

Yes. There is a lot of uncertainty in the economy. Looking back 18 months and considering the two ongoing wars and the upcoming election next year adds to the complexity. However, I believe we are closer to a soft landing than we were a quarter ago. Our outlook indicates we expect a positive year next year, as reflected in our numbers and forecasts, though we approach this with humility since circumstances may change, and we will adapt accordingly. In the recycling and solid waste sector, the underlying volume growth is around 50 to 100 basis points. We are currently on the lower end of that due to the state of construction, which has been a weak point. We noticed a slowdown in residential and commercial starts last year and earlier this year, but we hope to see a rebound soon. Overall, while we are not fully optimized, we are cautiously optimistic about our growth as we move into next year.

Very helpful. Given the progress that you and the industry have made in reducing some of the volatility around recycling commodities and the impact on the business, just curious to know how to think about whether as it relates to the polymer center or any of the vertical integration efforts you have, what the level of exposure is to commodities in that business? In other words, is this largely a processing and fee-based model for you? And is there any increased sensitivity to be expected from that?

No. The model is constructed. We're really making money on the spread, and that's something we were very mindful of when making this investment. We aimed to avoid increasing the overall volatility of the profile. There may be some variations in the margin, but generally, this isn’t an area where we're raising our exposure.

Yes, because you have that underlying commodity risk, as you get the value of the upside tackling you capture that spread, you have the same amount of volatility in dollars with incremental revenue. So as a percentage of volatility actually goes down.

Right, right. So it's really an infrastructure and spread play. Okay. That's really helpful. I'll turn it over.

Thank you very much. On the ES side, US Ecology used to have a decent exposure to the auto industry given its Michigan density. So how are we sort of weathering what's going on with the strikes and that business?

Reasonably well. There's been some slowdown in activity in certain spots. But as you can kind of read from the headlines, right? It's been walkouts on certain facilities where if it was a mass shutdown, we'd have a much deeper impact because it would be all the automotive plants that we serve directly, but then it goes straight into the Tier 1, Tier 2 and even Tier 3 supply base. It's been such a case, I mean, we're a very, very small portion of the overall cost structure. So you're not seeing people canceling service or even reducing service intervals outside of a few facilities that have been directly impacted.

And then, dwell on the RNG accounting since you're doing mostly partnerships. Is this going to be an add back into the EBITDA, or how are you going to account for this as we see printed financial statements?

Yeah. As we do the reconciliation, Michael, moving from net income to the definition of EBITDA, we will include our pickup in those joint ventures. Remember that this first round of facilities that are coming online, most of those are going to be predominantly royalty, so you're not going to see a lot of that in 2024. That will start being 2025 and beyond that you'll really start to see the accounting that includes the pickup in those JVs.

Okay. Great. That's what I needed. And just one last, you had a great margin expansion and yet you're reaffirming the guidance. It seems like you're then expecting a lot more seasonality in Q4 given the strength of the margins or we're at least at the very top end of the range. That's sort of where I - ?

I'd say, we have a positive outlook. Yeah, we're already in Q4, obviously, and we've got a positive outlook for that. But given that there is some seasonality of the business, where you do get some weather that starts to impact the business this time of year, given there are some moving pieces in the broader economy, we thought it would be prudent to reaffirm and we'll give you the results here in February, how we finish.

But to that point, Michael, if you remember, even when we began the year, we said the cadence of margin expansion was going to actually start negative, which we saw in the first quarter. And sequentially, year-over-year margin expansion was going to improve every quarter throughout the year, and we still expect that. So we still expect to see the most amount of margin expansion in the fourth quarter, ultimately driving margin expansion for the full year.

But margins might be down sequentially just because of seasonality.

That is correct.

Hi. Good afternoon. Thank you. So acquisitions were 1.7% in the third quarter. You said 50 basis points for 2024. It looks like maybe a couple of hundred million rolled off third quarter to fourth quarter last year. So we're looking at, what, maybe 150 basis points in the fourth quarter this year?

Yeah. Remember, when we talked about most of the rollover that we had for full year 2023 was the portion of US Ecology that we completed May of 2022 right? Coming in, which was a majority of the rollover for the full year. As we think about the actual impact within the fourth quarter, we're looking about 180 basis points.

Okay. All right. Thank you for that. And second, on the RNG development. I think around now is when these facilities were scheduled to come online and maybe you could just remind me the financial targets and how those 39 RNG facilities with the BP joint venture are expected to ramp from here?

Yes. So let me just talk about the entire portfolio rather than just the subset, right? So again, five have already come online here that are going to start contributing here nominally in the fourth quarter, but really start to contribute in 2024. You can kind of think about the cadence in the $20 million to $25 million per year of incremental EBITDA beginning in 2024 and ultimately hitting run rate $28 million at which point we expect $100 million cumulative of additional EBITDA in the portfolio compared to our current baseline.

Got it. Okay. Thank you.

Yes, good afternoon. I would like to discuss the margin opportunity for 2024. As you mentioned, margin momentum is picking up this year on a seasonally adjusted basis. You are on track to expand margins by about 30 to 40 basis points based on the run rate from the third quarter compared to the full year average. Considering the various factors for 2024, it seems feasible to achieve double the typical margin expansion targets, especially with potential changes in OCC. Is there anything specific we should keep in mind regarding these factors and the margin trends you mentioned earlier?

Yeah. So Jerry, the one thing I would point out is just remember from the point in time in which we acquired US Ecology and we took several pricing actions, right? And as we sit there and move forward, we're going to get more in the cadence of more of an annual price increase on that portion of the business. So while we still expect margin expansion in the Environmental Solutions business and at a rate higher than what we expect in recycling and waste, we would expect that margin expansion to decelerate from what you saw in 2023. So you can look in just in the quarter alone, margin was up almost 400 basis points year-over-year. We would not expect that level of contribution going forward.

Got it. But the base business, the momentum, it sounds like is accelerating, excluding ES.

Yeah, correct. I mean if you take a look just right now, we're kind of in the 30 basis points. We talked long term in that 30 to 50, and you start to get some of the contribution from some of the other sustainability investments that we're making. So it's a little bit of push and pull and net-net, we would expect margin expansion in 2024 over 2023.

Okay. Super. And can we talk about capital deployment with the buyback announcement? Can you just update us on how much more runway do you think you have to deploy more capital towards polymers, opportunities to redevelop gas electric plants into gas plants and stock buyback from there? Can you just calibrate us on how to think about the opportunities in each of those areas?

Sure. To give you an idea, we've discussed several investments including the RNG portfolio, the polymer centers, and Blue Polymers. Some of these investments will come from capital, while others will involve investments in joint ventures. To break it down, we anticipate a total investment of around $300 million for the four polymer centers, taking place over four years at about $70 million per year. The investment in Blue Polymers is expected to be approximately $160 million, also directed towards joint ventures. Additionally, the investment in the RNG portfolio is about $375 million. These cumulative investments have been part of our ongoing operations. Following the US Ecology acquisition, where our leverage increased to 3.4 times, our focus has shifted to reducing that to three times before we resumed share repurchases. We have reduced our leverage to 2.9 times and have now restarted our share repurchase program. Recently, the Board authorized another $3 billion for the program, which will extend over the next three years from 2024 through the end of 2026.

Super. Thanks.

You bet.

Hi. Good afternoon. Thank you.

Good afternoon.

Hey, I appreciate the insights on the 2024 outlook and the margin opportunities. Could you share your thoughts on inflation for 2024? Not looking for specific numbers, but more generally, which areas you expect to see lingering inflationary pressures from 2023, and which ones might ease compared to 2023? Understanding these factors would be helpful. Thank you.

Yes. I think for most categories, thinking about macro metric like CPPI kind of puts you in the right zone. Maintenance will be elevated off of that, just historically, it's inflated a little faster than that. And we don't expect the supply chain to be fully caught up or reconcile in 2024, which means we're going to be driving some older equipment, and that's going to be at the end of the curve where maintenance costs are higher than they normally would be. So that would be the one, I think, is going to be elevated. Everything else kind of think about where you see inflation going? And if that's 4%, 4.5%, whatever that plans, that's kind of where we'll build a budget against that.

Okay. That's helpful. I appreciate it. And then I just wanted to follow up a little bit on the commodity basket exposure. Can you talk a little bit about how that basket is trending today? Maybe how that compares to Q4 of last year? I know there's some puts and takes to the various components. So that would be helpful. Thanks.

Yes, sure. So as we said, our average commodity price for the third quarter was $112 per ton. Right now, we're expecting about $10 in the fourth quarter, compared to the prior year for the fourth quarter, we were at $88 per ton. So we're expecting a year-over-year increase of about $30 a ton in the fourth quarter.

Got it, I’ll leave it at that. Thank you.

Thanks for the follow-up on a recent question, but I’d like to approach it from a different perspective. Considering the pressures on margins for smaller players that might be potential acquisition targets, how do you foresee trends in various areas affecting their financial performance and possibly their willingness to sell? I’m particularly thinking about inflation concerning their costs, the ongoing need to invest in technology, and the fact that fleet and supply chain issues are unlikely to reach full normalization. Applying these factors to the potential acquisitions rather than your own operations, what insights do you have?

Yes. The pipeline for acquisitions is strong, both in recycling and Waste and Environmental Solutions. This cost pressure, which is started to abate for the smaller players is on the labor side. So they're starting to get less pressure there as we've seen turnover come down and labor availability go up. It's still elevated versus historical norm, but it's gotten easier relative to a year ago. The supply chain hasn't and that's certainly becoming constrained. And anybody who was a spot buyer of vehicles is really in a challenged spot certainly through the end of next year and probably in 2025 or 2026, depending on how fast the supply chain can recover because they're prioritizing all of their base customers who buy a large number and a similar number of trucks every year. So we certainly see that as an advantage. And then digital, I'd say, has just been a building trend over the last five-plus years that I think is going to be with us for at least the next five and probably a much longer period than that, which is that we're making over a series of years, between capital and OpEx, hundreds of millions of dollars of investment to our digital footprint to make the experience better for our customers and employees, and that certainly has a scale advantage for us and also a skill advantage of investing in the resources we want to take those technologies and apply them in a way that makes our customers' lives and employees' lives better.

And then just as my follow-up. I know it's been in the news, maybe even too much ad nauseam. But GLP-1s in the market, looking for second, third, fourth, all the way to nth derivative impacts. Have you looked at that in have any sort of preliminary view on what that could mean for volumes over what would probably be a very long-term? Thanks.

No. We've not done a lot of work on that yet, plenty in front of us right now, obviously, is that continues to be a major trend. We'll think about that. But I'd say we're in the tertiary or beyond in terms of the impact of those.

Hi, thank you for taking my question. Regarding the M&A pipeline in Environmental Services, in Canada, the Competition Bureau is trying to block a merger of energy waste service companies. It seems there will be some assets involved. I'm curious about how the pipeline looks in Canada and whether energy waste services represent an area of growth or accelerated growth for you in that market.

Yes. We're certainly looking at opportunities in both U.S. and Canada. That probably isn't at the top of the list. We'd be more opportunistic in that side of environmental services.

Okay. And just I get the pricing, I guess, it sounds like the pricing opportunities that you're going to move from something that you're doing it three, four times a year within environmental services to once a year, which is maybe more regular as inflation starts to or continues to subside here. But just given the pricing opportunities that you've talked about and the ability to get pricing more aligned with how you think about pricing within solid waste, just why not push that lever more if you can, or did you feel the customers were starting to push back on maybe the frequency in which you are coming to them with price increases within ES?

Yeah. No. I mean, yes, it's a big and diverse space. So there's been places where we've pushed past the price line we would have wanted to. We've lost some volume, which I congratulate the team, obviously. You don't understand the ceiling on price until you take it there. And listen, in certain parts of the business, we'll get into more of an annual increase for our bigger customers that's contracted, for example. In other parts of the business, particularly the more field-facing field services, those are things where it's dynamic pricing, because every opportunity event job, you've got a lot more flexibility there. And we'll certainly test the market and see what the market bears in terms of opportunity. I'd say underneath that, too, there's a big mix opportunity, which is just looking at the types of jobs we do, looking at the customer mix and making sure we're prioritizing our sales team around the most attractive customers and then conversely deprioritizing around customers who aren't willing to pay what we think is a very fair value for what we deliver.

That makes a ton of sense. Thanks for taking my question, and best of luck as you get through this year.

Thank you, Betsy. I would like to thank our more than 40,000 employees for their continued commitment to providing our customers with first-class service to create a more sustainable world. Have a good evening and be safe.