Wabash National Corporation (WNC) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to today's Wabash National Corporation Q4 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over today to Ryan Reed, Director of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, everyone. Thanks for joining us on this call. With me today are Brent Yeagy, President and Chief Executive Officer; and Mike Pettit, Chief Financial Officer. A couple of items before we get started. First, please note that this call is being recorded. I'd also like to point out that our earnings release, the slide presentation supplementing today's call and any non-GAAP reconciliations are all available at our refreshed investor site, ir.wabashnational.com. Slide 2 contains our Company's safe harbor disclosure statement, addressing forward-looking statements. I'll now hand it over to Brent for his highlights.

Thanks, Ryan. As eager as everyone is to move on to 2021, we’ll start today's call by providing some perspective on 2020. As we all know, we learned the most about ourselves and their organizations from the challenges we encounter, it is also through these challenges that we prove what we are capable of. First and foremost, our employees came through for us in 2020. Our team was able to see through the disruption caused by the pandemic and work through near-term challenges, like modifying our shop floor environment and managing a disruptive supply chain to safely keep our manufacturing running for our customers. At the same time, our employees remain focused on our purpose to change how the world reaches you and executing on our ‘first to final mile’ strategy. However, it was their resolve to structurally realign and reorganize our business that has left me in all and thankful for where I come to work every day. Together, we are creating a new Wabash environment where we are prioritizing ease of doing business for our customers, creating a growing portfolio of innovative engineered solutions that span from first to final mile and a culture that continually seeks for better process that creates value for our customers, our employees and our shareholders. Secondly, we learned about the resilience of our product portfolio we've created over the last decade, and the processes we've embedded within our businesses. Our process discipline enabled Wabash National to observe a notable reduction in volume while minimizing the impact to operating income as shown through 14% decremental margins for the full year of 2020. We generated $104 million of free cash flow during 2020, which enabled us to maintain our dividend through the cycle, a feat never remotely accomplished during a significantly challenging environment in the history of Wabash National. I hope our strong financial performance during 2020 indicates the structural improvements that have taken place within our Company over the last decade, but especially over the last two years. We aim to continue this improvement in financial performance as we leverage our customer-centric organizational structure, along with our opportunities for strategic growth. There is something special growing at Wabash National, and we are starting to see that this leadership team, our employees are buying into a new way to operate. This is a good point to circle back to our broader strategy. Our refreshed purpose to change how the world reaches you positions us with a renewed focus on being the innovation leader within the transportation, logistics and distribution markets. This clarification has our team pulling in the same direction. And we took action to streamline our portfolio by selling assets that do not offer strong strategic fit. As we finish pruning our portfolio, we are also setting the stage to backfill divested revenue by continuing the diversification of our Company with both, expanded and new revenue streams within this transportation, logistics and distribution markets. Our customers are some of the most dynamic participants in the industry and will be responsible for shaping future trends. This is another benefit of our customer-centric org structure as we seek to capture customer pain points that feed into our innovation efforts and develop unique solutions that add value for them. We have proven that we have enhanced our ability to operate. Now, we will show we can profitably grow this business in a more sustainable and interesting manner. Moving on to specific efforts to grow and diversify our revenue streams through product development, I'd like to start with an update on molded structural composite technology. MSC for molded structural composite technology, was developed as a revolutionary new material with lighter weight and improved thermal properties for the 53-foot refrigerated van market. As carriers continue to pilot this technology, to assess the value created by lower operating costs and reduced emissions, we have found interesting applications for MSC within the refrigerated truck space. In 2020, we worked with a major grocer that piloted MSC truck body design, specifically for home delivery of groceries. We believe that this is likely to be a rapidly expanding market segment where MSC continues to offer unique value to customers with its durability, reduced weight and improved thermal efficiency. Our expertise in composites will be a competitive differentiator within the electric chassis space as well. Our ability to innovate with lighter weight composite materials for truck bodies and trailers are all the more meaningful in the EB space, where total vehicle weight has a direct impact on vehicle range and payload. When you combine MSC's lightweight properties with superior thermal efficiency, this composite technology will be intriguing for customers looking for innovative and sustainable solutions in the refrigerated space. Consistent feedback from interested parties is that our technology offers benefits they have been unable to find elsewhere. Additionally, within our cold chain efforts, we have completed an agreement to manufacture Gruau refrigerated inserts for the Ford Transit within the United States to serve the rapidly expanding food/grocery home delivery market. While traditionally constructed refrigerated cargo vans are insulated using spray foam, which can be subject to off gassing and mold intrusion, Gruau inserts are engineered to fit specific van models and provide a superior finish with 30% to 50% thermal efficiency than standard refrigerated body construction, thus improving total cost of ownership, reducing spoilage and improving food safety. This is an important space for Wabash to participate in with our technology as it sets us up to better serve the smaller light-duty upfit market compared to our larger, more traditional truck body product models. We expect that the rapid progress made in the home delivery of groceries and refrigerated home -- and within refrigerated home delivery will remain after the pandemic, and we're excited about how products like MSC and Gruau inserts position us to add value for customers in this space. This provides a natural transition into corporate responsibility, or some may say, ESG strategy, with a particular focus on the environmental segment because it ties in so much with our discussion on the benefits of our new products. Removing weight and improving thermal efficiency are not only ways we allow our customers to reduce their operating cost, we also reduce our customers' environmental impact in a world that is becoming aware of carbon net zero thinking. We are developing technology that not only reduces carbon impact, but the use of our products, but it also creates numerous opportunities to reduce our impact on the natural resource consumption within our manufacturing processes. We have seen many of our customers increase their commitment to ESG in recent years, and I'd like to echo our own commitment to these principles. Whether it's innovating with environmental impact in mind, ensuring diversity of backgrounds and viewpoints on our on our Board of Directors or simply standing up for what we believe is right on social issues like racial equality, for example, I believe our ESG focus sets us apart and uniquely positions us as a desirable supplier to customers who value ESG principles. We are a company well-positioned, well-led and with the values that align with the changing world. On that note, I want to take the time to reflect on the highly unfortunate result on our nation's capital. First, I would say that lawlessness riding and destruction of property and a threat to personal safety are unacceptable across the board. However, the events that occurred at the capitol were especially appalling to me, and I've insured both internally at Wabash and externally that my position is clear, it was wrong and embarrassment to our country and for our democracy to be so specifically assaulted while how peaceful transition of power was underway. CEOs and value minded companies have an opportunity to lead on social issues, and we choose to do so. Now, we'll move on to market conditions and backlog. Freight rates remained at strong levels for carriers throughout the peak season and have continued to remain elevated into 2021. As such, industry reports have shown strength in new trailer order activity, and we have clearly benefited from the recovery of demand in the marketplace. Overall backlog ended the fourth quarter at approximately $1.5 billion, up sequentially by approximately $500 million from the end of Q3. Our backlog reflects normal split within our businesses, which is to say that the backlog build was primarily Commercial Trailer Products. Orders to shipment cycles tend to be much more compact in both DPG and particularly FMP. And conversations with customers in those segments continue to indicate constructive market conditions for 2021 in those businesses. We mentioned on our last call that the availability of labor could be a headwind as we look to ramp our operations in 2021. While I believe this to remain true based on our own experience and feedback from suppliers, customers and peers, I do want to call out that we were able to successfully hire approximately 600 new employees across our business during the fourth quarter. This hiring activity equated to adding to our workforce by about 15%. We fully expect to add another 900 employees during the first half of 2021, based on our progress to date. I will now address our outlook for 2021. We are initiating our full year revenue outlook at just under $2 billion. In this environment, we are seeing earnings per share of approximately $0.75 at the midpoint. While early to talk about 2022, we believe that structural changes occurring across the industry as a result of asset imbalance, forthcoming regulations with the new administration in Washington as well as the further pace of logistics and supply chain disruption brought on by the current pandemic will positively impact our revenue outlook beyond 2021. I'd like to conclude my comments by saying that I couldn't be more proud of how our employees responded to the challenges that confronted us this year. But, I'm excited to turn the page on 2020 and begin to talk about what comes next. With early and significant wins with our new organizational structure, reducing friction for customers and allowing us to think in new and interesting ways, a purpose vision mission that provides common direction throughout our organization and the growth of the culture shaped by our Wabash management system, we are ready to act with a growing strategic purpose. The future is bright for Wabash National. With that, I'll ask Mike to provide additional color on both, our 2020 financial performance and our 2021 outlook.

Thanks, Brent. Turning now to slide 4. On a consolidated basis, fourth quarter revenue was $404 million. Consolidated new trailer shipments were approximately 10,600 units during the quarter. We achieved our strongest shipments and revenue of the year during Q4 as a result of increasing customer demand. In terms of operating results, consolidated gross profit for the quarter was $45.5 million or 11.3% of sales. The Company generated operating income of $10 million and operating margin of 2.5% during the fourth quarter. Consolidated decremental margins were 12% during the fourth quarter, which is a performance we're very proud to have achieved. Our strong financial performance was bolstered by our cost savings efforts that have structurally reduced our SG&A footprint. Compared to Q4 of last year, SG&A expense was lower by about $5.6 million or 16%. Operating EBITDA for the fourth quarter was $25.2 million or 6.2% of sales. Finally, for the quarter, GAAP net income was $5.5 million or $0.10 per diluted share. Let's move on to look at the segments, beginning with CTP. From a segment perspective, Commercial Trailer Products performed very well with revenue of $283 million and non-GAAP adjusted operating income of $23.3 million. Average selling price for new trailers within CTP was about $27,000 in the fourth quarter, which is roughly flat with the same quarter of last year. Diversified products group generated $75 million of revenue in the quarter with non-GAAP adjusted operating income of $3.3 million. As a reminder, we completed the sale of a niche business in our tank trailer portfolio at the end of Q4. This business was responsible for approximately $20 million during 2020, which is revenue that will not be part of DPG's results going forward. This was a business that manufactured a narrow specification of aluminum tank trailers with a low center of gravity that was geared towards the train in the Pacific Northwest. With returns not made in our threshold and limited opportunity to grow the business, we felt it was best to redeploy our resources into more scalable opportunities. We continue to see our remaining tank trailer businesses that’s integral to our overall portfolio of first to final mile transportation solutions. As we discussed on our last earnings call, Final Mile Products continues to operate below breakeven volumes as COVID has impacted demand in this segment differently than other end markets. FMP generated $52 million of revenue during the quarter with an operating loss of $4.5 million. Due to the burden of depreciation and increasing amortization in the business, it's important to point out that FMP's fourth quarter EBITDA was a loss of only $600,000. We expect this part of our business to begin showing positive EBITDA in the first half of 2021 and to be solidly EBITDA profitable full year 2021 and around breakeven on the OI line. Slide 8 shows the walk to year-to-date free cash flow for 2020. With operating cash flow of approximately $124 million, roughly $20 million was reinvested to be a capital expenditure, leaving $104 million of free cash flow. We are extremely pleased with the work the team did to register $104 million of free cash flow during a pandemic. To put that number in a little bit of perspective, it is a higher level of free cash flow than the average of 2018 and 2019, which were peak years for the trailer and truck body markets. While we benefited from a reduction of working capital due to decline in revenues, we do believe our organizational structure has allowed us to permanently improve working capital efficiency which will help enable continued strong free cash flow performance into the future. During 2020, we made solid progress on our efforts to free resources from noncore assets. We successfully closed the sale of our Columbus, Ohio branch location. We also closed the sale of the Beall branded tank trailers. Streamlining our portfolio has positioned us to align internal talent around strategic growth initiatives, which include cold chain, home delivery and parts and services. With regard to capital allocation during the fourth quarter, we utilized $11.2 million to pay down debt, $8.7 million to repurchase shares and invested $6.4 million in capital projects, and paid our quarterly dividend of $4.2 million. Moving now to slide 9 with our outlook for 2021. We expect revenue of approximately $1.9 billion to $2 billion. CTP is clearly poised for a meaningful balance in activity. We also expect to see substantial rebounds in revenue, particularly for FMP and, to a lesser extent, DPG, as a result of the absence of divested revenue. SG&A as a percent of revenue is expected to be approximately 6.5% for the full year, and we remain positioned to sustain the reduction in our cost structure by $20 million from 2019. With around $15 million of that cost dollar residing within SG&A. Operating margins are expected to be 4% at the midpoint. While we've talked about both, incremental and decremental margins for the Company being in the 20% range on a normalized basis, the base on which we're calculating incremental margins for 2021 has considerable furlough savings included, which does temporarily serve to depress incremental margins. We had approximately $25 million to $30 million of onetime reductions in areas such as furloughs and incentive compensation in 2020 that will return in 2021. With that in mind, we would expect incrementals to be closer to the low teens in 2021, but we would expect 20% incrementals from 2021 to calendar year 2022. Last point I'd like to make on the full year consolidated P&L is that amortization of intangibles does step up again in 2021 by about $2 million. On a segment basis, the step-up in amortization will be seen entirely within FMP, bringing this segment's full year amortization to $12.4 million. Full year capital spending is expected to rebound in 2021 compared to the prior year as we catch up on projects that were deferred during COVID. In total, we estimate 2021 capital spending will be between $35 million and $40 million. As we return to normal seasonal patterns, I would like to remind everyone that Q1 tends to be our lowest quarter in terms of revenue and EPS generation. Combined those seasonal trends with the massive capacity ramp we are undertaking to keep up with the demand that has us adding roughly 1,500 hourly employees from September 30th to March 31st, and we would expect Q1 to be pressured. We should see increasing quarterly revenue, margins and EPS as we move through 2021, however. Our expectation is for first quarter revenue to come in between $390 million and $420 million with new trailer shipments of 9,500 to 10,500 and to be approximately breakeven from an EPS perspective. From a cash perspective, working capital become a use of cash given the volume growth we're expecting throughout the business as inventory expands and accounts receivable increases. We continue to look for opportunities to drive structural improvements to working capital growth in the short term. And we do expect in 2021 to consume upwards of $50 million of cash, most of which will occur in the first half of the year. On long-term targets, I'd like to circle back and discuss what was laid out in our 2019 Investor Day. We had outlined targets that centered around achieving a consolidated operating margin of 8%. While the world has obviously changed immensely since we initially released these targets, I do want to reiterate that the team still sees 8% operating margin as a reasonable goal in the medium term. Given our longer term planning, I believe the 8% operating margin is achievable over the next two to three years. In closing, I'm proud of the actions our employees took to deal with short-term challenges and also progress our longer term plans. I'm also excited by the financial results we've achieved this year. Excellent decremental margins, positive full year EPS and exceptional free cash flow generation, all illustrate our 2020 financial performance has raised the floor relative to prior trials. Just as critical, however, it is important to note that we do not slow down our growth initiatives or compromise our business in any way during the downturn, and we are poised to recover rapidly during the cyclical bounce back while also developing sustainable revenue streams for years to come. Our organization is excited to move forward with our one Wabash approach to the customer, and our strong backlog helps to provide visibility well into 2021. We look forward to ramping up capital expenditures to support our growth initiatives while maintaining our dividends and becoming more active with debt reduction and share repurchases. I'll now turn the call back to Michelle, and we'll open it up for questions.

[Operator Instructions] Your first question comes from Justin Long from Stephens.

So, maybe to start, Mike, you gave a little bit of color on the first quarter. But, I was wondering if you could help us think through the operating margin cadence that you're expecting over the course of 2021. Because I'm guessing we'll kind of start the first quarter a little bit weaker and then the exit rate will be much higher. So, any color you can give around that?

You said it right. We will -- the first quarter will definitely be the lowest of the year, and it will step up as we go through the year. And the easiest way to think about that is the 600 employees we mentioned we added in Q4 and the 900 we're looking to add in Q1, which will obviously -- that ramp will pressure margins in Q1, probably slightly in early Q2, and then it will be more up at full capacity rates in the mid part of the year. So, you'll see that come through on the operating margin line in almost a sequential fashion from Q1 to Q4.

And could you share what you expect the exit rate to be from a margin perspective as we get to the fourth quarter?

It will be -- if we look at -- we mentioned that at the beginning of the year, we're going to end up at EPS breakeven. And our margins will go up to the year, I said 4% to midpoint. So, we're obviously going to be about 4% at exit rate. You can kind of do the math. You would assume it would be somewhere upwards of 5%, probably at the end of the year, going into 2021.

Okay. That's helpful. And to kind of stay with that same line of questioning. You mentioned that the 8% operating margin target longer term in the next two to three years. Could you talk about what that assumes by segment? And specifically related to the final mile business, how much of an improvement we need to see to get to that consolidated target?

Yes, absolutely. So, I'm not going to break out specific margins by segment. But, I will say, if you unpack my 2021 commentary around FMP, while still not nowhere near the level of performance we're going to achieve in that business, it's a pretty significant step-up in 2020. And you would expect to see another large step-up from '21 to '22 in that business, which should really help expand margins on a consolidated basis. The actual timing of when we would hit an 8% will depend on the market, obviously. But, we’d expect -- you'd expect CTP to be exiting 2021, and I would say, at near optimal levels of margin performance going into 2022 and FMP will still be stepping up in 2022. But, as we've talked before, we would expect to get that business to similar EBITDA margin levels of CTP in the '22, '23, probably more the '23 time frame. But if you kind of model that out, you could -- that would be a pretty good roadmap to get to 8% operating margins in that time period.

Okay. That's helpful. And then, maybe just one last one. On the guidance, does that assume any buybacks? And maybe, could you talk about any debt paydown you have planned for 2021 as well?

Yes. So, in the -- it would all be in our guidance, what we just seem to do with our capital allocation. That's obviously somewhat fluid, depending on what the market will do. But, we ended the year with $218 million of cash on the balance sheet. We would expect to be free cash flow positive in 2021. So, we obviously have some cash that we can deploy. We'll look for opportunities to deploy that most exceedingly as possible whether that’s share repurchases, capital allocations internally, which we still have. As Brent mentioned in his commentary, the product development front is really picking up some steam and the opportunities with MSC specifically and FMP. So, we might have some opportunities to deploy extra capital there. But after that, we look at those two, we'll look to the share repurchase avenue. And we definitely see opportunities with our '22, '23, kind of implied guidance there with our targets. And where we sit today, we think there's opportunity to be active in share repurchases.

[Operator Instructions] The next question comes from Joel Tiss from BMO.

Can you give us any color around the backlog? Is there any part of the increase in the backlog from inability to ship, or is that just all strong orders?

It's all strong orders at this point, Joel. We are -- the way the market has materialized for 2021 is right in line with the expectations that we had roughly three or four months ago, as we saw quote order pick up. Generally, shipments are falling in, in line with how we thought that would materialize in the fourth quarter. And as we look at 2021, we don't see anything that is a structural impediment moving forward.

Okay, great. And then, as long as you're here, can you give us a little bit of a sense of what you guys are working on, like for the next five years? Where is the industry going to be? There's certainly a lot of moving parts between here and there, and even with like refrigerated transport for vaccines and things like that. Can you give us a little sense of what you guys are working on kind of longer term?

Yes. I can take you back. In the script, we talked about just three main headers, which is cold chain, home delivery, and parts and service. And so, let me talk specifically about cold chain and home delivery. While we think about these as, we call it, individual areas of focus, they really overlap in many different ways. And when we think about rapidly disruptive logistics change, you factor in this regulatory environment, the push for sustainability, impact of climate change, increase, I think of, we'll call it, time and change related regulation, at least for the next four years, I would argue, in some manner going beyond that. I think, it opens up a really interesting way that Wabash National can take the ideas that we generate from an innovation standpoint, technology that we have, and really bring sustainable solutions within those spaces. So, we think about the opportunity that e-commerce. We call it home delivery, but what we're really talking about is e-commerce and what it does to change logistics models across the board. It gives us some very unique opportunities in the first and middle mile to grow the portfolio, the product portfolio around these openings that began to open -- that open up. The other piece that we follow is that our largest customers on the truckload side are quickly moving into that middle mile and final mile space. And that allows us to get some, we'll call it, volume leverage as we make these improvements. So, we really bring those things together. And then, the other piece that I would talk about is, when we think about home delivery, there are so many different ways, which home delivery actually impacts the market. And it's not just the small parcel delivery that we see. I mean, it's everything from big and bulky. It's the return leg. It's the flow between fulfillment centers. There's so many ways Wabash National can play beyond just that parcel delivery piece that we can become fixated with. And it really is just this offshoot of our first to final mile strategy. It's a much broader way of looking at the world than just that small parcel delivery. So, that's the big picture of what we're working on. If I were to fine-tune that a little bit, we are pruning our product portfolio and the ideas that we have within it, so that we very, very discriminately focus on the areas that I just talked about. And by -- everything from what we do in our internal processes, to how we look to connect to the market, i.e., assets that don't match, everything is about creating significant leverage in those areas so that we can rapidly deploy in the next 24 months.

That's awesome. And then, just one little last piece. How much temporary cost comes back in the first quarter?

Year-over-year, the biggest quarters where there was temporary costs were Q2 and Q3. So, I would say Q4 is pretty clean year-over-year and Q1 is relatively clean as well. You're going to see the biggest moves year-over-year in Q2 and Q3 actually had the biggest flow. There's some -- it will be a couple of million, Joel, but the bigger pieces will be in Q2 and Q3.

And your next question will come from Felix Boeschen from Raymond James.

Hey. Brent, I was hoping maybe we could also start with a little bit of a bigger picture question here. But, in the release, you really talked about finding adjacent revenue streams. And I know we've talked a little bit about some of the product development opportunities in your prepared remarks. But, I was just curious if you could expand a little bit more on your approach here. Is this really organically driven, i.e., it sounds like you have a lot of product development going on, or would you also look to maybe participate in more M&A over the next couple of years? I'm just trying to kind of understand the bigger picture behind those comments.

Sure. Well, yes, first off, we are absolutely repositioning resources within the given company to accelerate the organic efforts that we have to create additional revenue, right, in a way that has never been seen at Wabash National. The focus is growing at an incredible rate than what I've experienced over the last 16, 17 years of being part of this Company. Now, with that, all part of the plan, which has been executed really in 2020 was to provide a different structural financial capability as we've demonstrated, right? So, when you come in with over $210 million of cash into this period, we're absolutely positioned, the balance sheet to be able to move forward in very interesting ways, whether it's partnerships, JVs, M&A, funding organic opportunities in a way we've never done this, and we've never been faced with the market that has this much potential. So, all the -- I'll call it, all the ways that we could potentially grow are on the table right now. And we have specifically invested in, we'll call it, our corporate development process over the last year, year and a half to begin to prime the idea pump properly for what's the best way to move forward in this market, right, whether it's in expansion of upfitting, acquisition of technology, maybe it's a product platform, maybe it's a geographical platform. That all remains to be seen. But, we are going to look smartly and aggressively how we grow going forward. But, we're going to do it in a way that assures profitability, which is core to why we're putting in the Wabash management system and deploying it and restructuring the organization, so that when we choose to act, we act at a much higher level of execution than Wabash has demonstrated in the past.

That's super helpful. And then, just maybe along the same line, if I think about molded structural composites, I just wanted to understand the time line a little bit better here. I know you've been testing the product for some time, and the grocery application makes a whole lot of sense. But, do you have anything in the guide as it relates to MSC contributing revenue this year, or is it still more of a two to three-year story until we see more meaningful impact?

Yes. That's a great question. I think, we are living in a world right now where we have a convolution of forces that are aligning right now where the technology is becoming a much more, we'll call it, a larger opportunity based on what's happened in the last year, coupled with the drive for sustainability. So, the willingness to accept innovation has really never been higher on this front. So, I would say, we have -- we are cautious in the way that we guide relative to what the impact of MSC is. And we are -- not only are we looking at how do we scale this through various, we'll call it, product platforms, when we think about internal uses of capital, we're also talking about how we would quickly expand the manufacturing capability within the next couple of years. And until we have sold that off, it is hard to say how I want to answer that question right now.

Okay. Yes. No, that's very fair. And then, maybe just last one for me. But, I know that the truck body business was kind of outsized impact from COVID, you had some nonessential exposure in there, and I think some pretty good SMB exposure as well. Just curious if you could talk about the current demand backdrop, what you're hearing from your customers as they're maybe thinking about planning for '21.

Yes. So, I think the impact is still very real and evident even within the backlog that we see today. And we have seen the leasing customer come back into the market because of just overall economic conditions and the ability to look forward within their businesses. The small business is still trying to figure out what they can do and how they move forward. And I think we'll see that play out through 2021. That really looks more like a '22 event when they're going to be in a position financially, and I will say even psychologically to move forward in a meaningful way. And that's why we think the step-up in revenue for final mile really is kind of a two-phase thing, right? We have a certain, we'll call it, demographic that's going to come back in '21. We see the rest of it come back in '22, accordingly. So that gives that muted -- gives a muted impact to all the disruption we hear around us an opportunity because we just have real financial and psychological issues that impact buying decisions. It makes up for a real interest in '22 and '23 in terms of how we look at capacity and how we choose to serve the market. Those are things we are evaluating and selling off right now in terms of how we deploy capital, and we'll call it, continue to refine that business going forward. But what I will say is that the larger customers have a much more positive output impact in perspective about 2021, and they've come in nicely at the beginning of the year.

At this time, I have no further questions in queue. I turn the call back over to Mr. Reed for closing remarks.

Thanks, Michelle, and thanks, everyone, for joining us today. We look forward to following up during the quarter.

Thank you, everyone. This will conclude today's conference call. You may now disconnect.