Agilent Technologies, Inc. (A) Earnings Call Transcript & Summary

All right. Good morning. We're going to kick it off with our next presentation, Agilent Technologies. Before I turn it over to Mike, just a quick reminder, if people have questions to submit them on the website for the Q&A. And with that, I'll turn it over to Mike.

Tycho, thanks very much. And while I'm sure all of you are missing the hallways of the St. Francis, really glad you could join us today in this call. And I'm very excited to be here today to share with you the Agilent story. There are 3 parts to my story today. First one is just want to remind you of the Agilent shareholder value-creation model, and then as we move forward, how we're going to continue to work that model we're delivering for our shareholders today. Then we're going to talk about growth, how we're going to continue to enable the growth of this company, what are our plans to even accelerate our top line momentum in the outer years. And then finally, we'll close with what can you expect from the Agilent in the future. Now I'm told you need to move along your slides, so we're going to go to the next slide. Before we get into details, for your viewing pleasure, our safe harbor statement. So let's now go into the meat of the presentation. So just a reminder, who is Agilent. We are a $5 billion -- over a $5 billion revenue company in a very attractive, large end market, $58 billion TAM; driven by investments in the human condition, healthy margins, a track record of being able to drive growth, drive operating margin and expand EPS, even during a pandemic. And by the way, this company is not content. This team is not content with our market position. We're really focused on even driving and delivering more growth and earnings expansion for our shareholders. So just a reminder of that shareholder value-creation model, I'm going to move on to the next slide. It's a very straightforward model. This model has been in place since 2015. When I came in as Agilent's third CEO, I believed in the strength and importance of this model for our shareholders then, and even more convinced it is the right model for us going forward. And that model, again, is all about driving above-market growth, expanding operating margins and a balanced capital deployment, really, to leverage the full capabilities of the strong balance sheet that Agilent has. What do you get? Great results, great earnings per share, as you'll see later on. And this -- again, this model has been with us since 2015, and we plan to stay with it as we move into the future. Next slide. You may have heard me use this term before on some of the earnings call, but just as a reminder, Agilent has been executing on what we call a Build and Buy strategy, and look at what's happened here at Agilent over the last several years. Since 2015, we've added $1.3 billion of revenue, and over 80% of that has come by building presence in new high-growth end markets, and that has really led to our ability to accelerate the overall top line growth of the company. We are building on a strong franchise business, and you see us how we've expanded our presence in the analytical lab by our CrossLab business and strategy, where we've looked at the whole laboratory environment as our addressable market. And then we've entered into new high-growth markets, such as biopharma tools, cell analysis and our -- what we call our NASD business, or you may refer it to as a GMP oligonucleotide business. And again, we'll get into some more details on those particular growth initiatives for the company. But again, this Build and Buy strategy is delivering for Agilent, and we're going to continue this as we move forward. Now in the last decade plus, we've been through 2 major economic crises. The one I think we're all familiar with, which is the 2009 financial crisis and then, obviously, what we're into right now with the global pandemic. And what I'm trying to illustrate in this slide here is the Agilent today is much different than it was several years ago. This is a much more resilient business. We have been investing in new high-growth areas and, along the way, also building a much more resilient company business model, and I think the proof is in the numbers. Bob shared this slide at our Analyst and Investor Day a few weeks ago. And if you looked at what happened in 2009 in the financial crisis, we moved in kind of lockstep with the global GDP. GDP was down. We were down about the same. Look what happened in -- during this pandemic. Global GDP was down by 4 points, yet we grew in 2020. So again, shows you that this is a much different Agilent today. And then finally, as you move to the next slide, this Agilent value-creation model is working. You see the numbers. The growth rate is up. 500 basis points of margin improvement and a track record of 14% CAGR in terms of earnings per share. So this model is delivering. Now let's move to the next slide. Enough about the history. Let's talk about where this company is going, where we're seeing momentum, our plan is to really accelerate that momentum in terms of top line growth, and then, finally, what you can expect to see from Agilent of the future. Again, when I've talked about this Build and Buy growth strategy. So what's it -- what are the components? There are 3 major elements here. One is to transform the analytical lab. Agilent is leading the transformation of the analytical lab, and you're going to hear me talk about this later on about how we're not only helping our customers with great scientific outcomes, but also the economics of the lab. We're going to continue to drive and gain share in our core cancer Diagnostics and Genomics business. And then we're going to continue to enter and expand in new markets. And today, you're going to hear me talk about our play in biopharma, inclusive of cell analysis, our CDMO oligo business as well as some opportunities we have opportunistically on the COVID-19 front. This is all enabled by what I'd call strategic enablers. Our innovation focus, our digital capabilities, our ability to expand geographically and the -- our M&A prowess, all built on a foundation of what I believe a very unique culture. The One Agilent Culture has given us differentiation moving forward. Okay. As I move to the next slide on Agilent leading the transformation of the analytical lab, this slide may need a little explanation here, but the concept basically is our customers are looking for some specific outcomes, and you see those highlighted in green, leading scientific outcomes, efficient operations. It has to be digitally connected and it has to have the right level of knowledgeable operational support. So we're driven here to not only help our customers with the science of the lab, but also the economics of the lab. And what that requires is what we're calling this integrated platform, this digitally enabled laboratory from intelligent operation, a digital ecosystem, the associated workflows, smart alerts, how we enable our instrumentation to communicate differently with the lab managers about what's going on in the lab environment, and data analytics, what's actually happening on an operational side in the laboratory. And with our industry-leading instrument position, coupled with our services, scale and capability and our workflow focus, what do you get? You get great results in terms of share gains in the core analytical lab market. Next slide is all about the cancer Diagnostics and Genomics strategy. So here, what we're trying to do on the cancer diagnostics front is really continue to expand our automation -- our menu on our automation platform and really to leverage our strong position -- or I would say, leading position in IHC-based companion diagnostics. On the genomics front, it's all about continuing to provide best-in-class workflow components on the sample prep side, but also on the back-end data analytics front. And then we want to make sure that we can enable clinical research and diagnostic testing. Some pretty exciting aspects of our genomic business, which we'll dig into a little bit later on. If we go to the next slide, we're talking about now moving into that third element of the growth strategy, which is expansion and entering new high-growth markets. And what this slide here illustrates to you is our fundamental strategy here of becoming a broad line player across the entire biopharma value chain. And we're executing 3 core strategies here to provide leading analytical workflows across that continuum from research all the way through to the bioprocessing side. Again, the ability for us to be a leading supplier in a very exciting end market, which is the ability to provide GMP-grade oligonucleotides for RNA-based therapeutics. And we hear a lot today, as you know, about mRNA, and we're on the siRNA side on the therapeutic side, very exciting business for us that we've built over the last several years. And then integrated cell analysis solution. So you're going to hear me talk about how we've built this business from really no presence in the market to a leading position today. So we now have over $600 million revenue business in biopharma, more than 10% of the company's revenues, and this is expected to grow in double digits moving forward. If you move to the next slide, I've talked earlier about cell analysis in terms of a new area for us. So in -- as we entered 2016, our revenues in cell analysis were 0. But yet, we saw the potential of this marketplace. We saw some of the developments in immunotherapy and new types of other therapeutic development, disease research. We all saw synergies between what we are doing with our customers on our mass spec platforms and saw that we really complement that with some other capabilities. So through a -- if you will, a buy strategy, we have built a $300-plus million cell analysis business growing double digit. We're super excited about the opportunities here and not only in terms of the end markets that we're now participating in, which are very exciting on, be on the forefront of various types of disease research, but at the same point in time, being part of Agilent, we can now make these businesses even better. So we are very bullish about our prospects of continued strong growth in our cell analysis business. And then I've mentioned this probably at least 3 or 4 times already in this morning's call, but I think that we're -- you're all quite aware of just the explosion in terms of the clinical research programs and product development programs around RNA-based therapeutics. The -- over the last several years, the number of programs has more than doubled. And we're also seeing drugs starting to come on market, so which points to -- on market demand beyond clinical research. We believed in this trend several years ago, and then we augmented our existing facility in Boulder, Colorado with a major investment, what we called our Frederick, Colorado site. That site came online at the end of 2019. I think, perhaps, I talked with a number of you last year about how we needed to ramp that facility, how we needed to build the book of business. I can report back to you very proudly one year later that we built the full book of business. The new facility ramped as scheduled. And in fact, we have over 20 different pharma partners with over 60 different programs we're supporting, where we see even stronger growth prospects in the future. So in addition to already fulfilling and driving the expansion -- I mean the growth in our expanded facility, we announced earlier in -- actually, that was late 2020 that we were going to make a further $150 million expansion of our facility. So this business is on fire, really strong growth, and we have high expectations about our continued ability to drive strong double-digit growth in this exciting part of the biopharmaceutical end market. And then finally, if we talk about what often is top of mind with both professionally and in personal conversations about what's happening in the world today with COVID-19, Agilent is in this fight with the capabilities that we're providing today for virus research, components into virus testing as well as elements of therapeutic development. And in 2020, we got opportunistically about 2% of Agilent's revenues came from COVID-19-related activities. And as we look into '21, we'll continue to leverage that portfolio in an opportunistic way. And we're also working on some of our own capabilities of a new nature, if you will, where we like to come to market with some -- where we see still continued need for some aspects of new tests on the market. Okay. So we've been talking about the growth strategies, but I think one of the things that sets Agilent apart is our ability to execute and deliver. And really, what's behind that? That's really this innovation focus. It's in our DNA, our digital capabilities, how we approach M&A and then really supported by this One Agilent Culture, which really binds us together as one team on a common goal and, I believe, drives execution success. So let's take a little deeper look at those. On the digital front, topic de jure, COVID-19 has really accelerated the customer adoption of digital. But Agilent, we were investing in digital way before that, and we're now fortunate to be able to leverage those investments in today's environment. And when I talk about digital, it's about the growth side, adding new portfolio, new capabilities, such as the digital lab, to our customers. It's changing the way we interact with our customers via digital platform, both from sales, marketing and service. I'd point out to you that in -- during this pandemic, our customer satisfaction rates are at record levels, and we're able to respond in a very quick manner with our new digital capabilities. And then we're also investing very significantly on improving our internal capabilities, so that we can become much more efficient -- operationally efficient to drive continued margin expansion. If you move to the next slide, talking about M&A. We've built up capabilities over the last several years. When I came in as CEO, I'd say we were mainly a build company. But as you've seen and if you listened -- I don't know if you were listening, but if you recall my comments on the cell analysis, for example, where we've built a business via M&A, we now have built -- have deployed over $2.5 billion of capital in M&A, 8% of the company revenues. We've added great teams with great businesses, growing much faster than the overall company average, double-digit growth. And again, this becomes accretive to the overall growth rate. And we're in a position to make these businesses even better. So we really believe that our prioritization of investing our investors' capital in the business really pays off, whether it be the NASD capital expansion plans I've talked about earlier or what we're doing on the M&A front. We have a very defined framework that we've shared with you in the past, but it's all about making sure we're in markets that we know where there's clear strategic alignment with the target and our ambitions and then, also, that's got an attractive financial profile for our shareholders. If we move to the final slide on strategic enablers, I have to say, this is sort of where I'm tempted to brag about the Agilent company. I believe that our One Agilent Culture, how we work together as one team, our commitment to our core values, our genuine alignment as one company on common goals really is paying off. And I think you know that companies that have high employee engagement do well in the marketplace. So as I mentioned earlier, where am I tempted to brag? Well, we have best-in-class employee engagement scores. And if you look at the Glassdoor, you'll see they were over 4. So a lot of really good things happen in terms of how our employees feel about being part of Agilent, and that allows them to work as one team on behalf of our customers. And I think you see the results of that -- or the impact of that in our financial results. So you can't create culture overnight, and I believe the culture that we've created allows our differentiation to be sustainable and will be part of our success story as we move forward. Okay. So last part of my talk. What can you expect from Agilent in the future? We believe the best is even yet to come for Agilent. So on our long-term outlooks, we've raised our view on core growth from 5% to 7%. The first time in my tenure, there's been a 7 in our core growth outlook. We also are much more bullish on our margin expansion opportunities. 50 to 100 basis points would be our expectation. And this continued balanced approach of capital along growing cash dividends, share repurchases with the prioritization to invest in the business, it's working, and we plan to continue that. What can -- what does that lead to? Double-digit earnings per share growth is what you can expect from Agilent in the coming years. And then I'm going to close off on my remarks before I move to Q&A. If you didn't get a chance to catch it, yesterday afternoon, after market closed, we issued an 8-K. And we wanted to be able to communicate to our investors that the Agilent's business for the first quarter is expected to be much stronger than we initially had thought when we had done our guide back in November. And I want to make sure that I be very clear on my comments here, which is we expect Q1 revenues to be at least high single digits, which would represent more than double the core growth rate we had expected at the time of the November earnings call and guidance. So my guess is, Tycho, we'll probably have a few questions where people want to dig around a little bit more on that. But I think we're at the hour here in terms of the close of my presentation. So Tycho, I think we're going to move to Q&A. And Bob McMahon, Agilent's CFO, will also be joining me for the Q&A portion of today's event.

Great. Well, Mike, I'm going to pick up where you left off on the 8-K. And to your point, 2x the guide, it sounds like it was pretty broad based. Pharma, academic, still a little bit soft, but the core business overall doing well. C&E did well. But maybe for those that didn't get a chance to catch up with you last night, can we just kind of walk through what improved? What drove the upside? Any geographic color you can provide as well?

Absolutely. So Tycho, I think this is a very important discussion point, so I'll start off and then have Bob come in and add some color as well. So I think the headline here is broad-based growth across almost all of our end markets, the one exception being academic -- the academic market, although it is recovering. And the growth really was led by, on an end market perspective, the pharma marketplace, but we also saw growth in what we call high-value chemicals segment of more market, part of our C&E market, plastics, polymers, fine chemicals. So that's sort of the end market story. By business group, broad-based group across all 3 of our business groups. And I think the very -- the story is very similar geographically. China is leading the way, but we also saw a strong recovery of our business in the United States and strength in Europe as well. And what's going on here, there's -- we saw really a level of year-end budget moves, flushes, if you will, that we have not seen before, so much higher than we've seen historically. And we were really pleased to see -- I've been talking about momentum. I talked about it in the November call, and then I added some color in our Analyst and Investor Day and said, "Hey, we saw it through -- we were seeing it through the early part of December." And then as we close the books in December, we actually saw that momentum continue through the close of the calendar year. So all in all, a really, really strong start for the company. Listen, the books still aren't yet closed for January, but we're confident enough in our outlook to say we can at least do high single-digit growth for the quarter. And Bob, what would you add to that?

I think you covered it well, Mike. The only thing I would add is, as pleased as we are with the revenue, our order book continues to exceed our revenue, and so we're actually building backlog as well. And so it's been a nice start to the year. Certainly, the year is not over yet. But certainly, the first 2 months out of the gate, we feel very good and, as a result, raising the expectations for the first quarter.

So no evidence of pull forward. That's good to hear. How about geographically, any commentary on China, Europe, Americas?

I think China continues to be a source of strength for us. And I think we probably we saw -- what we've seen so far through the quarter, U.S. is looking strong as well and Europe growing also. So it really is just a matter of degrees of percentage growth rates, but all the regions are growing.

Yes. And anything that would kind of change your view at this point of the growth assumptions for the year that you laid out with guidance, high single digit for ACG and DGG, low single to mid for LSAG? Any kind of segment commentary that would change your views there?

I think we're going to...

I'd say -- yes. I'd say stay tuned, Tycho. But certainly, we are starting the year in a very good position. And as Mike said, all 3 of the businesses have actually exceeded our expectations in the first quarter. I'll leave it at that.

One that came in on e-mail was just about the budget flush dynamic. And does that mean that January could have a drop-off in pharma as budgets reset? I mean it sounds like maybe no based on the order commentary, but can you just touch on that?

Yes. When Bob and I talked about this, we said, "Listen, if the company comes out and says at least high single-digit growth rate for the quarter, I think that's the answer to your question." You can't do that with a huge drop-off of your business in January.

Okay. I know when we chatted last night, we didn't spend a lot of time in the clinical business, but I'm just curious if you could touch on what you're seeing in the pathology volumes and any kind of underlying trends there. And then a separate question just on the NGS portfolio and how you think about filling any gaps there now that you've kind of shut down Lasergen.

Yes. Sure, Tycho. And again, Bob and I will tag team on this. But during 2020, our cancer diagnostics business was really affected by COVID, right, where there was a lot of restrictions about hospital access, also a lot of personal concerns about going to get what may be considered routine test, although, to me, a cancer biopsy is by no means routine, but it did put pressure on that business. And I think as we exited 2020, Bob, I think we're probably about 90% on a global basis at -- of prior year testing levels, but that business has continued to improve in the first quarter of '21. So it's -- and sequentially, we're seeing growth over the prior quarter. So it's on an improvement trend. Now this is an area we continue to watch because of the flare-ups and other things that are occurring, as we all know. But at the same point in time, I think work -- I mean practices have evolved, so that people are finding ways to safely get the biopsies done. So Bob -- and I'll handle the NGS question, but anything else on the diagnostics?

No, I think you're right. I mean we saw a sequential improvement into Q4. And actually, our pathology, our clinical business actually grew 1% in Q4, which was a nice recovery from Q3. And we're seeing continued improvement in recovery here in our first quarter -- our fiscal first quarter. One of the things I think that we benefit from is some of the underlying automation activities and really the menu expansion that we've been investing in over the course of the last several years. Our Omnis platform, we believe, is one of the best-in-class from an automation standpoint, and that helps with the productivity in the lab. And obviously, with less people in the lab, the longer you can have kind of hands-off as opposed to somebody manually doing everything, I think, helps us. And it's not back to pre-COVID levels in terms of testing volumes, but I think we're holding our own and seeing some nice recovery there from that standpoint.

And as you probably heard through on the genomics side, Tycho, the point that Bob made around the automation capabilities we have on our cancer diagnostics business, tie that with leading assays, we see that combination of instrumentation in chemistries is a powerful approach for it on the genomics side. I had to go fairly quickly during my earlier presentation, but when I talked about leading workflow components, that's where we have this Magnis platform, which we can then -- which was introduced last year, where we can do high-volume testing, help a customer do high-volume testing tied to our target enrichment capability, SureSelect. So we've got a really strong position on -- in that area as well as on the analytics. But to your point, in addition to continuing to invest organically, we would look to -- we're looking for opportunities on the genomics side for an M&A front as well, too. We've got really good core platform capabilities in the genomics business we're in today. We'd like to continue to expand our portfolio here, and we thought that we were better served by investing in that side of genomics as opposed to the sequencer itself.

Speaking of M&A, you've obviously done a lot in the cell analysis space as well. There's a lot of excitement over single cell, over spatial, over some of these kind of newer markets. Curious how you're thinking about your current cell analysis portfolio. How much you think you can grow organically versus is that still a focus area for bolt-on deals?

Yes. Tycho, thanks for that. I love that question. So first of all, organically, we're super excited about this business because I have -- as we've talked a bit last night over dinner -- or our virtual dinner, we're still early days, and what we see is a revenue synergy creation by bringing these what were disparate businesses together under one common leadership and really leveraging all of the things that we can do as a company, whether it be digital, whether it be platforms, whether it be our services platform and scale, other things we can do geographically. We expect that business to be a double-digit grower for years to come. And while we now believe that we have scale in a $300 million-plus business, this is an area where we'd like to continue to build out, both organically as well as through M&A. So this would be an area when the right opportunity comes along, we would look to pursue it. What I would say is, on the M&A front, and we talked a bit about this last night, Tycho, is we really believe that the private space is the part of the market where, if you will, is our sweet spot, where often, you're dealing with situations where the -- a founder is really looking -- really wants to not only get a good price for their life's work, but also to really ensure their company has a very good home for their people, is there a cultural compatibility. If you would talk to Briar Alpert, for example, from BioTek, that was a major consideration for him when he looked at selling BioTek to Agilent, which was, hey, what's it like to be part of Agilent. So we think there's a lot of attributes about the Agilent company that are, in addition to our balance sheet, that are important to prospective sellers. And I think you can expect us to continue to focus on the private segment of the marketplace, if you will, and then also keeps us out of big public bidding wars for public companies against some of the larger serial acquirers in our space.

What does it take to move that portfolio downstream? I know you've talked about that as part of the strategy, moving a little more into bioproduction, QA/QC. Do you have the right tools? Or do you need to kind of broaden the portfolio to move it into production?

We think we have the right technology. I think -- and this is part of some of the initiatives that Jacob and the team are leading is, it needs to be, whether it be spectroscopy, chromatography, mass spec or, in this case, cell analysis, it often may require a different form factor a bit as well as making sure you work on the sample introduction side of things. So that's our focus, which is not necessarily to go out and buy another product line or platform. We actually think we've got the right core technologies, but they just need to be enabled properly for the bioprocessing side of the house. So we're trying to find ways to participate in the bioprocessing side of biopharma, where it really leverages the core analytical technologies we have as a company.

Up till now, you guys haven't had big COVID tailwinds. I know you're launching the serology test and then the PCR test. Just talk a little bit about the strategy there, why it took so long to get the PCR tests to market and how you think about contributions going forward.

Yes. So just as a reminder to the audience, we had about -- I think I had this in my comments as well, about 2% of our revenues in '20 came from COVID. And we're already providing some strong capabilities out there. The Bravo automation platform for PCR, we have our own PCR box, some of the things we're doing on therapeutic development, so that was really more just a leverage play of existing capabilities. And we moved really, really fast in that regards to get out there in line with our customers and really make sure that we can help them with their great work. Then we also said, "Hey, listen. We've got other capabilities inside the company." And we're moving this -- we're moving very fast, albeit we want to make sure we do things the right way. So you mentioned earlier the -- a couple of tests. I think they were shown on my slide in my formal presentation. By the way, just as a reminder, none of those test volumes, as they materialize, were at all assumed in our outlook for '21. So it's -- it will be purely upside relative to what we said we can do in '21. And we're working on 2 things, I think, that it would be really of note here, 1 -- or actually 3 things. One would be the -- we're working on an ELISA-based assay for serology. And what we're trying to do here is integrate the capabilities from our Dako antibody business as well as biotech instrument capabilities into an offering in this space, working on a PCR test. And then we also believe given our strong presence in the environmental testing market that there's a play for us in the wastewater monitoring side. So we want to move as quickly as possible, getting the whole team aligned on working across the company's opportunities. We're looking -- we're thinking we'll be able to submit for approval sometime in calendar Q1. Although I have to say, Tycho, we're kind of keeping our eyes -- we're pretty confident about the aspects of this that we control, we are keeping our eyes on the FDA in terms of how they're thinking about EUA approvals. And so that's the one potential fly in the ointment about how difficult it will be to get some of these EUA tests approved in this overall climate. But we do think, for example, on the serology front, that there's going to be a need in a vaccine world to still test for, if you will, immunity testing, what levels of antibodies do you have in your body. So we do think there's -- on the other side of this with vaccines, there's going to be a need for some level of testing. And then also as we -- I don't think I've commented on this yet, but some of our instrumentation are actually used as part of the vaccine testing world as well. So we do think there's some opportunities for Agilent, albeit I have to, again, just go back to the opening comments on the 8-K, the strength in Agilent's business today is coming from the core business, non-COVID-19-related. So this is more about a really good feel, good moment for our employee base to be part of the fight against COVID-19. But as you think about the future growth prospects for Agilent, I really would ask you to kind of look at that core Agilent business that we've been talking about for most of today's call. Bob, anything else on the testing front? I know that you've...

No, you've got it.

One that came in through e-mail was on kind of the consumable attach rate. Obviously, it's going to vary a lot by product and end market. But can you just give us a general sense of maybe where the biggest opportunities are to improve the attach rate?

Yes. So I think it's maybe forced us to kind of step back, and we've been using this word connect rate. So what do we mean by that attach rate? So part of our ACG growth strategy that was launched several years ago was, hey, we've got this huge opportunity if we could just improve the attach rate of our own services and consumables or instruments. And some of our competitors have done a much better job on that historically than we have. I'd say we've changed the game now relative to where Agilent is going. We've been picking up a point of attach rate every year, and I think that continued steady march will continue. That's been a contributor to the overall ACG growth. And it's not by just declaring a strategy. There's real plans behind it, whether it be digital capability enablement, how we're developing integrated workflows with -- between our chemistry team and software team and instrument teams, software teams and also how we're thinking about instrument design itself relative to consumables. So I'd say that the attach rate is probably in the -- what, the mid-20s, Bob?

Yes.

And by the way, each point of improved attach rate is probably $30 million of incremental annual revenue, so you get a $30 million pop and that $30 million stays with you. So with -- this is a core part of our focus strategies. And again, this is why I keep playing over and over the story about how important our One Agilent Culture is because you can't do what I just described, unless the various business units work together across the company. And historically, we had issues in that area, where it wasn't a big material impact for the chemistry team to work with the instrument team on a solution. Now we completely changed that. So I think we have a tremendous opportunity to continue this march on connect rate improvements. And so we...

Yes. Hey -- yes. I was going to say, hey, Tycho, just to build on what Mike's saying, I think if we looked at end markets, the group that's kind of leading the way is the pharma market. That's probably got the highest attach rates. But when we look at some of the end markets, we're seeing increased attach rates in C&E and some of the other end markets. And so we actually see this as an opportunity to kind of leverage what we've learned in pharma and actually bring it downstream to some of the other end markets. And then from a standpoint of opportunity geographically, I would say the U.S. is also probably more sophisticated from that standpoint, at least internally. But if you look at our ACG business, as an example, in China, we've had strong double-digit growth there over the last several years, and we're expecting that. We have a overpenetration in terms of instrumentation there, but now they're starting to look for productivity uptime and things like that in their labs as well, and we're starting to see that in China. And then also in places like Europe, where, perhaps, we didn't look at some of the business around customer lifetime value, we're actually looking at it a little differently. And so tender business where we actually have both the instrumentation as well as an ongoing service stream, we see those are areas that are kind of ripe for continued development from an Agilent perspective.

Bob, thanks for that. The ability to see the -- we haven't talked much about China today, Tycho, but you can see there's a dimension of China on our ACG business. And then as Bob mentioned, this end market has been led historically by pharma, but we're seeing our C&E market move away from having self-maintainers and really resonating with the power of this operational efficiency, economics on the lab side of the business. So I hope what you're hearing is a fairly bullish tone about our ability to continue this growth rate we've seen in ACG.

Mike, one of the things you've highlighted last night was just the share gains you've picked up over the past year during the pandemic and even before that. How do you protect that -- those share gains in LC and MS, especially as some of your competitors have new management, maybe they're stepping up R&D? How do you protect your share there?

Yes. I think the share gains that we've seen over the last several quarters are a byproduct of the work that's been underway for a number of years, right? So if you go back to my early days as CEO where I talked about, "Hey, we're going to revamp entirely our R&D road maps." And so -- and what you're starting to see as byproduct of that is we've been coming to market, and Jacob and the team have been coming to market over the last several years with some very innovative new products. We invested in digital. We invested in field specialization. And then we've built this approach of transforming the analytical lab, where we're using the combined strength of our ACG and LSAG team. I think all those factors are -- have been paying off for us pre-pandemic. And then as we got into the pandemic, I would submit that the way we've handled the management of our own team, which is we said, "Hey, don't worry. You're not going to lose your job because of COVID-19. You got a lot to worry about outside of Agilent. Don't worry about your job. Don't worry about your base pay." And I think that's -- it was a real proof point to our team that people do matter at Agilent, that the One Agilent Culture wasn't just some kind of marketing message. It was real. And then what's allowed that team to do is stay really focused on the customers. And I think that combination of the things we've been working on over the years, plus how we continue to strongly support our team and our customers is paying off. And what does that mean? Listen, we know that our market share gains aren't going unnoticed. So that just means we can't be complacent. We have to continue to be aggressive. We have to continue to invest for the future. And all of the things we've been talking about relative to my strategy presentation today is we're not giving away all the details to our competitors, but we're going to continue to push hard, push aggressively because we know what we've been doing has worked, is working, but you just can't be complacent. We're going to be aggressive, and we're going to push forward.

Mike, just to add on to that. And I know we're running up against time here, Tycho, but just I would say to the audience, don't underappreciate the benefit of being a broad supplier to the analytical lab. And when you actually have that, coupled with the service in that attach rate that we've been talking about, you create stickiness. And then actually, the investments that we've been making to actually make it easier to do business with Agilent, the digital activities and so forth and almost making it frictionless, that -- those are some of the strategies. And I think they've been paying off, and we're going to continue to invest there. So...

Great. Well, we hit the end of the session. I want to thank you for taking the time. It's a good overview, and enjoy the rest of the conference.

Thanks, Tycho.

Thanks, Tycho. Thank you, everyone.

We just have to continue this on another day. Take care. Bye-bye.