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

Okay. Morning, everyone. Thanks for joining us for the next session. Pleased to have Agilent with us. We have the CEO, Mike McMullen; CFO, Bob McMahon. And I think Parmeet and Mark, who head the Investor Relations efforts, so they're perhaps in the background. But Mike, Bob, thank you both for taking the time this morning. Thank you for being here.

Yes. Thanks for the kind invitation. Bob and I are very excited about -- to spend time with you and your clients today.

Fantastic. I think -- if I just reflect back on fiscal '21, it's previously been remarkable for Agilent, how the rate went from Q-on-Q. I just -- the execution has been picture perfect. And when I think about your Q1 guidance, I think I'll round it out to 6% to 7%, but that had the impact of, I think, COVID headwinds. Ex COVID headwinds, I think the organic is high single for the base. That's -- and the reason I'm asking this is the Agilent -- this traditional Agilent [ view ] is -- we'll be conservative, and then we'll put a number and we'll execute. But I'm just curious -- but Q1 seems pretty healthy to me. So maybe talk about what went into that Q1 thought process?

Yes, happy to do so, Vijay, and then I'll have Bob jump in on the discussion as well. So again, it's a real pleasure to be here to talk about the Agilent team and what's been going on at Agilent. So first of all, thank you very much for the kind opening comments. It was a record year for the company. We closed off very strongly, and I think you saw the execution prowess of the company in action. And I'm glad you've had the opportunity to kind of dig through some of the nuances, if you will, of our FY '21 guide, both in terms of the Q1, where we have a full week of impact, where we won't be able to ship anything to China because of the Chinese New Year, but also this 0.5 point of headwinds on the COVID side. I mean if you peel it all back, it's a -- we think it's a prudent first guide, but I also think is indicative of the confidence we have about the outlook for growth for the company. And as you may recall, I think it was just about this time last year, we have held our first Virtual Analyst and Investor Day, and we actually raised the growth outlook for the company at that point in time. And the message we're trying to send is we think we're well on the way to hitting those numbers and perhaps exceeding those. And then, Bob, I know we've -- Vijay used the word conservative, I think we use the word more prudent, but your thoughts. And I think our guide philosophy remains the same. So...

Yes, it really does. And Vijay, good morning, it's a great opportunity to talk to you and your clients. And specifically, on Q1, if you -- the 6% to 7% guide, when you kind of take kind of base business normalize, it's really closer to 8% to 10%, if you take out the COVID headwinds and the timing associated with the Chinese New Year, as Mike was mentioning. And that really -- the reason we feel so good about that is we have momentum going into Q1. And we talked a lot about our backlog. Our backlog actually grew faster in the last several quarters than revenue has. So we continue to build backlog. And we have a very strong or good visibility into a number of our end markets that give us confidence that the performance will be there, certainly, in Q1. And now -- and as I'm sure you know, that's on top of a strong performance of Q1 last year as well. So we feel like it's prudent, but we're going to be off to a very strong start.

And just to build on Bob's comments relative to the Q1 outlook, I forgot the momentum in my opening comments. That's -- we just had a manager call yesterday, and that's what I was talking about inside the company. But also, although we have this record really strong backlog, we are meeting customer delivery dates. So we're also -- it just speaks to the health of the business and the health of the marketplace right now.

Fantastic. And I know there are some budget dynamics heading into year-end. Is there any budget flush you guys are seeing either on the pharma side or academia side in the Q1, and whether the guide contemplated that?

I think we were looking at kind of the normal year-end budget phenomena. So we know that many of our customers are going to spend their money for the year, but nothing unusual.

Yes, that's spot on. I mean, we expect it to be a strong year, just like the rest of the year has been, but not anything extraordinary.

Understood. And I think maybe segueing on to -- from Q1 to the fiscal '22 outlook. Mike and Bob, I think your peers have noted that, look, given the current inflationary environment, pricing will be above historical trends. Maybe just remind us, I think your annual guide is 5.5% to 7% core, what is pricing versus volume? And how does that compare versus historicals?

Bob, I think I'll pass it to you. I know you've done a lot of look.

Yes, we -- you're spot on, Vijay, it's 5.5% to 7%. And I would say that, that also absorbs roughly 0.5 point of COVID. So if you actually think about kind of our core business, it's closer to 6% to 7.5%. And what we had talked about in our guide right now is about 1 point of price. That's more along historical lines, but greater than what we had last year, the year that we just finished. And what I would say is, it's to help cover costs. We are seeing inflationary elements. And what I would say is that there may be an opportunity to do more if we see more cost and because we do feel that the value that our products bring to our customers is very strong.

Understood. That's helpful. And I did want to ask one more on -- considering your peers are all setting pricing, which is running above historical trends at this point in time. Your philosophy on pricing, does that strengthen your customer relationship and perhaps allow some share gain opportunity? I don't know if that's a reasonable question, but I'm curious.

Yes, you want me take that, Mike?

Yes, yes. Go on, Bob.

Yes. One of the things I would say is, I think it's important to note, Agilent is a premium brand in the marketplace. So we are typically higher because of the value that we bring. And it's one about the instrument, the robust and reliable instrumentation. But increasingly, it's also about the full customer value. And so our relationship with -- the ability to establish the workflows and the service organization, the ACG business, that creates great customer satisfaction. And we just finished our fiscal year, and it had the greatest customer satisfaction that we've ever had. And so I want to make sure that people understand that we're a premium brand and we provide premium service, and our customers recognize that.

That's helpful, Bob. And then maybe one more, just on the numbers question before we move on to biopharma and NASD. Your operating cash flow guidance, that was a step down from fiscal '21. Any timing element going on in the cash flows, Bob?

Yes, it's a great question. We had a record FY '21 over -- almost $1.5 billion of operating cash flow. We're guiding to $1.4 billion to $1.5 billion. And really, the change there is we are expecting higher working capital, particularly in inventory, to ensure that we have assurance of supply, given the longer lead times for some of the raw materials and so forth. But fundamentally, the business is very strong, but we're taking a really smart approach to ensuring that we continue to deliver to the high expectations our customers have.

That makes total sense just given the current environment. And Mike, maybe for you, new Omicron variant, any impact on the business at all? Or how you guys are thinking about the new variant?

It's a great question. In fact, we were just talking about this yesterday, the leadership team. And from the business perspective, we're not seeing any impact at all. So it's not at all changing any of our outlook relative to diagnostics, testing volumes, lab access. In fact, I think, for better or worse, I think our customers in Agilent, we've figured out how to work effectively in this COVID world. As you know, a lot of interaction now is via digital means to ensure the safety of our customers as well as our team. Limited need to go into labs as possible. So I think, from a business perspective, we've -- we're not seeing any implications at all. And then relative to Agilent's own policies in terms of return to office, they remain intact. So we're still in a remote environment. So only essential workers are at the site right now relative to manufacturing. So we're still taking a very cautious approach to that. The health and safety of our team remains number one. So we're making no moves to return back to the office in any kind of meaningful way, to the disappointment of many people. But we're just going to continue to be patient, and we'll see how this one plays out.

Understood. And I think you guys gave a lot of details on end markets, which was really helpful for fiscal '22. The 2 things that stood out for me were pharma and C&E. Pharma is 1/3 of your revenue, so that is your largest end market at this point, with perhaps a 70-30 split between small versus large. Considering that, maybe at a high level, Mike, you guys just did north of 20% growth in fiscal '21. And I think the guide assume high single, so pharma, that seems like a big change. And all of your peers are saying pharma cycle is pretty strong. Maybe comment about pharma end markets.

Yes. So first of all, I'd just like to -- first, thanks for the recognition about how the end market mix of Agilent has changed. This has been a multiyear journey that we've been on. So it just didn't happen in FY '20. So we have been constantly working to push more of our portfolio to invest even more heavily in areas, particularly in the area of biopharma. And I think as our portfolio has grown and broadened and has become much more competitive in this biopharma space, you've seen it in the numbers. And I'd love to say the best is yet to come. We are not done yet what we think we can do in the pharma space, inclusive of the ACG story, which has been a big part of that in terms of the service and the consumers' growth, along what's been happening in NASD and mass spec and spectroscopy. So it's really an Agilent portfolio story. That being said, we had this tremendous growth here, I think probably the 24% Q4 off a prior year growth. So that's why you saw in the earnings call, talking a lot about stack growth because we're not a 1-year wonder. I mean, we grew in '20 as well in many of these end markets. We grew on top of that. So I think the thinking was, let's just see how the market plays out, but more again of a prudent guide. We perfectly set the company up, and I'll have Bob comment on this well, which was, we think the pharma market -- I mean, we're at this, as Bob mentioned, this 6% to 7.5% core business guide already as an initial guide, with [ potential ] upside in pharma is how we were thinking about it.

Yes, that's right. And maybe just a couple of data points there, Vijay. As you were saying, this has been a journey for us as we continue to increase our exposure to pharma, which is the fastest-growing market. And then within pharma, actually, the biopharma segment with our cell analysis and AST businesses and then our tools business. And you mentioned 70-30, it's now 65-35. 3 years ago, it was 80-20, 80% small molecule, 20% kind of large molecule. Now what we're seeing is just a transformation within that business. And I would echo what Mike is saying, I mean, it's a prudent guide. That's where the biggest source of upside is. I would say coming off a 24% full year performance, we just want to make sure that we're there, but there's nothing wrong with the end market in pharma. And if anything, we still fundamentally believe that, particularly the biopharma or the large molecule segment of that, is a faster-growing end market post COVID or in today than it was prior to going into the pandemic. And so -- and even on the small molecule, what we're seeing is extremely strong demand. That's traditionally the replacement cycle for LC, LC/MS and so forth. And we've experienced strong double-digit growth for both of those platforms and actually exited Q4 with our order growth more than 2-plus times the revenue growth. So that gives us that confidence going into Q1 and so forth. So we feel good about the pharma market.

Yes, that's helpful comments. And a couple of points I want to dive into. The -- these pharma CapEx cycles, do you have any historical trends, Mike, when these markets turn to the last 4 -- like 4 quarters or 8 quarters? I'm curious.

I think the capital trends that -- I think there's a history relative to, let's call it, traditional small molecule. And we've seen a bounce around between 4%, 5% to as much as 10% market growth rates. There's always a replacement cycle going on. There's some level of expansion, particularly in China as well in small molecule. So we think we're in one of those higher-growth elements of the small molecule replacement and some expansion going on with certain customers. And -- but I think that's sort of a mid-singles kind of end market for, I think, long term. But I think we're probably growing higher than that right now, Bob?

Yes, that's right. That's right, Mike. And in terms of cycles, what we've typically seen as an 18- to 24-month cycle, Vijay, and best we can look at, we're right in the middle of that. So we feel that '22 will continue to be a strong replacement cycle, absent any exogenous factors and so forth.

Yes. And we should have a similar conversation, if we have time to talk about C&E as well, because we're in one of those cycles as well on the C&E side as well.

Absolutely.

Yes. I will say, Vijay, just one thing because we're talking about that cycle. But biopharm is very different, and that's an expansionary cycle. And we're seeing capacity being built through a number of different therapeutic areas and modalities, not only our own on NASD as an example, but -- and I'm sure we'll get to that, but also just in terms of building capacity. And so that's a really exciting area. We're in tight with both large biotech, but also small biotech. The funding continues to be very robust there. And as those products in therapeutic move through the development cycle, we feel that we'll be able to continue to go downstream with that over the next several years. So that's in an expansionary phase, much more in terms of capacity builds as opposed to replacement in the pharma, and we think we're very well positioned there.

And that segues nicely into my next question, Bob, is that expansion cycle, it's clearly -- it's on the large molecule cell and gene therapy area that's playing out. What is -- I mean, I feel like, in general, the marketing for large molecule is double digits, but there are parts of that large molecule, which is in 15% or 20% or 25%, like cell analysis, I think, is 20-plus. In that 35% of your revenues, which are large molecule, maybe talk about some of the different segments and what they're growing at?

I think we're probably -- we can probably just give directional growth. Bob, I'm not sure if you got these -- the percentages as refined. But I think the tool space is clearly probably growing high singles, low doubles. I think your cell analysis piece, where we've -- I think we talked about it in our earnings call, we hit $100 million in the fourth quarter for the first time on a quarterly basis, tracking well over $400 million business now. And then I'm sure we'll talk about it this morning as well, Vijay, about what's going on in NASD. So the GMP oligonucleotide business is growing faster than 10%. So I think there's certain segments that have higher growth rates. I don't think we've been that precise in terms of...

Yes, what I could tell you, Vijay, is for Q4 as an example, our biopharma business grew 31%. And that's pretty representative of where -- our growth rate was in the 20s to 30% all the way through the year. If you stripped out NASD, it was still 27% in Q4. So the strong performance in the tools and the ACG business as well as cell analysis. Cell analysis has been a real standout for us. Now it's largely in pharma and academia. But if -- we talked about that crossing the $100 million threshold for the first time in the quarter, so it's got a $400 million run rate. It grew well in excess of 20% for the full year and continues to have strong momentum. And so we feel very good about how we're positioned there, to build on what Mike was just talking about.

And again, just to emphasize the point that Bob just made to, it's an entire Agilent portfolio play across the biopharma end market.

Absolutely. And I do want to get into NASD, but maybe it does make sense to look at CapEx versus consumable services for pharma. Is there any difference when you look at pharma from that perspective?

We're roughly 60-40, 50 -- 58-42 for the company. And in it, it's in that same ballpark for pharma. But I would say the -- because of the consumables and the attach rate scenarios, that has continued room to grow. It's probably maybe a little -- a couple of points higher than that overall. But it -- if you think about NASD, that's all 100% kind of consumables. And then one of the highest attach rates that we have is in the pharma business, both on -- both large and small. And so that is an extreme area of intentional focus around our R&D efforts, biopharma and informatics and that ability to drive productivity and better insights for our customers. And we think we're well positioned there.

We also see, Vijay, as the portfolio may have its initial strong hold of academia, which is a lot of where some of the cell analysis products initially started. As they start to get broader adoption in pharma, we will see the consumables consumption go up. So I think we'll see the mix continue to move up, not only because of the attach rate and other discussions -- I mean, points that Bob just made, but all this a natural pull as tools and work lose from academia into pharma because we see those end markets is really closely connected. We see consumable consumption go up.

Yes. And that gets us to NASD, which has been a crown jewel, I think, for you guys. I think you guys overachieved your targets for fiscal '21, ending the year at $225 million of revenues. Would you comment on double-digit growth in fiscal '22? Perhaps that seems to -- maybe I'm reading too much. It sounded like a slowdown versus last year. And I'm curious, was that because of capacity constraint for NASD?

Let me lead off of this, Bob, and then you can jump in. Because I know Bob is on the careful math on this one. We were actually trying to communicate a very positive story because if -- when we were talking about NASD 12 or 18 months ago, the storyboard was, "Hey, can you fill up this new factory you just built? Can you actually get customers in? Can you scale it?" And we've -- yes, we can. "Oh, but then you're going to cap out until you get another round of physical expansion." And the 2 points we're really trying to drive home was that Brian and the team, who -- Brian leads that business for us and has done a phenomenal job bringing in new customers, showing the differentiated value, ramping that facility just flawlessly. And then also, been amazingly able to get more out of the physical plant we have, both at our Boulder site as well as our Frederick site. So what we were trying to communicate was, "Hey, things are going really well with the new capacity we put in place." And by the way, we're going to be able to continue to grow this business in '22 as we bring on yet another physical expansion of our plant. So Bob, I know you've done a close look at this as well. So anything you'd add to that?

No, you said it well. We were -- when we initially had designs on the first plant, first train in Frederick, we've said that was going to add $100 million of capacity with the existing capacity. So we were thinking that maybe the max capacity was $200 million. We already passed that this year and are adding on to that with the existing productivity and so forth next year. And then Train B, which we've already announced about a year ago, comes online. And so we feel super, super positive about our ability to continue to fill that factory and continue to drive the demand there.

And we have nothing to -- yet to announce, but there are more letters in the alphabet beyond B.

Okay. I'm already thinking about V, Mike. Fantastic.

But we're really excited about this business. And by the way, we also think there's a really nice connection into -- because we also do GMP-grade CRISPRs. And we do think there's really a nice tie-in to our RUO side in the genomics house. So although we often talk about the vertical of NASD, it also links very nicely into our genomics core business, where our customers really would like to be with a vendor from research all the way through to, hopefully, on market for their therapeutic.

Got you. And now the B train coming online, is that end of fiscal '22 or calendar '22? And I'm -- net pricing but...

End of calendar.

Calendar.

End of calendar. Yes.

Okay. And how much capacity is coming online with that? Is that another $100 million? Or is that perhaps more?

Yes. What we said was Train A on steroids. So it's more than that $100 million. It's not $200 million, but it's not $100 million either.

I realized I forgot to wear my NASD swag for the call, Vijay, but it's called Project Synergy. And it's how we said we've taken all we've learned from Train A and really have, in the same physical space, are going to have even a more higher throughput area of production. So it will be higher than Train A.

Got you. And Mike, maybe -- this might be a simple question, but it's -- there's been like -- when it comes to oligo manufacturing, there are different kinds of oligos, and not oligos are the same. You have mRNA, siRNA and DNA oligos, right? What -- when you talk about NASD, what is differentiated about your AST business? And do you have a competitive advantage in this market?

We sure think we do. Because -- as we're in the siRNA side of the house here, and we see -- first of all, when we look at the market, this has gone from, "Hey, would these drugs may be therapeutics actually ever work? Will they ever get to a truck?"

No, you go ahead now.

My apologies to the audience, my Zoom seems to be chewing up a lot of my bandwidth here at home. But -- and as we think we're really well positioned here because I think we're on the RNA side. But the -- how this market itself is -- let me contact -- let me paint a picture of how we see the market and get to your question about the competitive advantage. So when we first started making the bets on this place, most -- almost all the activities of clinical trials, lots of questions about would these therapeutics ever be able to gain on-market access? And also, would these therapeutics ever be in a situation to be able to go beyond orphan drugs into more large population therapeutics? And I think the questions of those have been answered, which is, yes, there's going to be more on-market drugs. And we're seeing more drugs that will be coming to market that have larger populations that they can help. So we see this really great end market demand for years to come. At the same point in time, how do you win in this market? Which was everybody is looking to say, "Hey, this is great." But it takes more than just the willingness to invest capital. And I think our competitive advantage is twofold, which is it starts with the Agilent team. You talk to our customers and say, "Why are we winning deals?" It's because we have the technical expertise. We work very closely with them. We go back and forth. We're integral to their activities, and they see us a true partner. Of course, there's a commercial relationship as well. But that -- it starts with that. Then couple that with building world-class facilities, where you can produce high-quality reproducible product on time. That combination is a winning combination. And once you get momentum, once you get market momentum in the marketplace, the reputation is out. The only thing that's been holding this business back, even for higher growth rates, has been the capacity. And that's why a little over 2 years ago, we said we're going for it big time. And that's why you saw us start to put out a couple of hundred million dollars of capital investment. And we're dropping a lot of little breadcrumbs here, but we think the investment train will continue just based on what we see as a promise in the market. But I think this is -- we talk a lot about the physical plant, and that is obviously, you have to have that, but it's really this combination of team and expertise in our physical plant and the high-quality product that comes out of that facility.

Understood. No, that's helpful. It absolutely makes sense to me. One of the points I made, Mike, was questions around how big this market can be beyond orphan drugs. And I think, with inclisiran, I think that question has been answered. This can be a mass market drug opportunity. I know I asked this question on the call, but just to clarify. When Novartis got their complete response letter, did anything change on the manufacturing process? Or is Agilent still providing the ingredient for other drug?

No change. We still provide the core ingredient, and it's actually part of a multiyear contractual agreement with them.

Yes. And to be -- to add on to what Mike is saying, the complete response letter had nothing to do with the purity or the efficacy of the drug. It didn't have anything to do with the [ IPI ], which we proposed. It was a third-party kind of fill finish now that they've brought in-house, but we're still providing the raw materials.

And back to the relationship between the Agilent team and our customers, we have a very close and very effective working relationship with Novartis. So very pleased to be able to work with them directly on this.

Yes. And then just given all the developments in the market, Mike, over the past 12 months, particularly in the field, I think back into your 2020 December Analyst Day, you had put out a service addressable market size of $750 million. Should that be perhaps $1 billion at this point in time, given what we're seeing on the clinical pipeline front?

I'm not sure of the billions number, but we're in the process of updating that. I would tell you, I think it's probably north of that now.

Yes, it's the -- to the $750 million is -- it's higher than that, for sure, as Mike was just saying. And all we're seeing is much stronger volume in these types of therapeutic areas.

Yes. So we'll continue to work that, and we'll keep you informed as we develop an updated view of the size of that market. But I think you're getting a tone here, a very bullish tone.

Yes. Yes, that was clear. Maybe just be back on some of the other segments, where sometimes timing can be an issue. I think academic, government and forensics were some that came up on Q4. They were a little bit soft, perhaps timing lumpiness. Maybe talk about this Avantor distribution and what it means for your business, right, for those markets?

Yes, it's great. In fact, I was just e-mailing earlier this morning with Michael Stubblefield of Avantor and said, "Hey, did you catch my commentary in the earnings call?" And he said yes. He said, "We're equally excited about it." So it's something that Michael and I and our team has been working on for the better part of the year. And as you know, we work with other -- some of our, if you will, competitors. We have a very effective agreement with Thermo Fisher, for example, on the cell analysis business. And then the Avantor's, what we saw there was, when Mike and I got together, wow, there are certain segments of the market that they serve very well, particularly academia and government. We have a very complementary portfolio. So why don't we see if we can come up with some type of agreement that benefits both companies? I think we've done that. It's still early days. I think Bob -- I think we just signed it. It's effective the first of November, so we're just a few weeks into it. But as I mentioned in our earnings call, we didn't do this because we thought it would be something on the margin. We think this is going to be a play to expand our reach for both companies into -- particularly academia, where, historically, they've been very strong, have the relationships. So now they're going to have a broader portfolio, maybe even at some point in time it's smaller instruments, but we think this is a win-win agreement that we've put together. And we're pretty excited about it, both companies are.

Got you. No, that's helpful, Mike. I think a couple of other maybe macro topics. Sort of the -- on the infrastructure bill that got passed, and then there's some noise about perhaps ARPA-H getting approved, does that mean anything for tools? I know the industry has changed in the past 10 years, but -- or perhaps for Agilent, is there some benefit here?

We think so. I think it's more of a question of timing when we might see that in our P&L. But we have a fairly sizable business. Often, discussion tends to focus on the NIH only. But if you think about the broad-based nature of our business from the EPA, USDA, the Defense Department, DoD, we have a very sizable business with the U.S. government. And we haven't seen -- we haven't worked through all the details where all the funding may end up going, but we would think it would be a net positive for our U.S. government business. I think we're kind of thinking more of a -- maybe a '22 order event, maybe a '23 kind of revenue event. So we were pleased to see it for a number of reasons. I think it's the right thing for the country to be going to invest in its infrastructure. But at the same point in time, from an Agilent perspective, it's positive news, albeit I don't think it will be material for us in '22 is our current thinking.

That's right. That's right.

Thanks, Mike. Because that was supposed to -- going to be my next question and now you preempted me. Going back -- sorry, go ahead.

I was like -- glad I could be of help this morning.

I think -- back to C&E comments, I think, in the context of CapEx cycles, I think you want to make some comments. Again, that was an area where 20% of revenues. Perhaps the guide looked a little light versus what you've done in the past few quarters. Maybe talk about CapEx cycles on the C&E side.

Yes. We think, and I'll have Bob jump in on this well, which -- we think we're in a cyclical upswing here in the C&E end markets. And as you know, we've been always very cautious about calling this too soon. But I think we're confident here that we're -- we've got enough evidence about actual growth that is being delivered, book of business we have in our backlog, plus what we know our pending deals that we're in a reinvestment mode with some of our customers, but also in expansion mode, things such as plastics and resins. There's the global -- when the global economy is growing, this is good for the C&E space. Because we often think about C&E sometimes as oil and energy, that's a relatively small part of the piece. It's really fine chemicals, advanced materials. So think about what's happened in lithium batteries, for example, the push for electric cars. There's a place in there for our tools in research. And Bob, I know that this is an area particularly just for you, so you might want to add a few comments there. But I think there's -- it's a big broad space for us. And there's -- just a question you asked earlier, Vijay, about biopharma, there are certain spaces growing faster in the subsegments. That's exactly what we have going on here in C&E.

Yes, that's right. I mean, we ended -- last year was a fantastic recovery year for C&E. The full year grew 12% core. We were projecting high single digits. And you talked about kind of sources of upside there could be a source of upside there. We are in that upswing. As I said, it's that same kind of 18- to 24-month cycle. And I would say we're on the -- in the early innings of that. The last several quarters, we saw it start to recover. Q4 of last year was our first time that it turned positive. And it just has continued to accelerate the growth, if you looked at it on a [ SAG ] basis. And I think some of those drivers that Mike talked about are going to be there for a while. And so we feel good about '22. And I think the one piece that's important here is we -- we're a big time leader in C&E. And so when that market grows, it disproportionately helps Agilent, just given our market share positions there. So...

I always like to say when...

We're not looking to give it up either.

Absolutely. And then you want to also chips, right? So that was the other part of my story I forgot to mention, which is our ICP Triple Quad. You can't bring on new facilities without an ICP-MS from Agilent. So we're the big dog in this space, if you will. And as Bob mentioned, we're going to -- we're aggressively going to not only protect that but grow our share in the space.

Fantastic. And you might be happy, Mike. Like I'm not going to ask you on LC market share versus your...

Okay. Thank you.

No, I'm not going to ask you.

Thank you.

I think my peers asked you enough of those questions. I'll stay away from it. So maybe in the last few minutes here, with the leverage levels being where they are, I mean, clearly, there's a lot of flexibility for Agilent, which -- maybe a 2-part question. One, as you now look at transactions, should we worry about Agilent running head-on against some of your more larger peers in competition for assets? Does it intensify? And if that's the case, what is the confidence that Agilent ends up winning these assets, right, in their ability to close deals?

Yes. I always go back to -- it's a great question, Vijay. So -- and the markets are -- the balance sheets are strong for many of the companies in our space. And -- but the serial acquirers, it's not a new game for them, and they've done their -- executed their business model very well. Agilent is -- we execute our business model very well. So the idea of me competing against larger companies for acquisition targets is not a new story for Agilent. So I always go back to, what do the results show? I've deployed over $3 billion of capital. I've brought in 12 or 13 new companies. I've built a $400 million-plus growing cell analysis business. I've got a start into the liquid biopsy space with Res Bio. So we've got a track record of being able to win in the market and get -- buy very attractive companies that can come into Agilent and benefit by the scale of Agilent. And I think -- but what this really requires us to do is make sure we stay in a space that works for us where we can compete. And we believe very strongly that is the private space because there's lots of dynamics in terms of what will lead a founder to sell to Agilent. These are very competitive deals. I'm not saying that we get a bargain-based discount, but particularly founder-led companies, there's often other considerations in addition to price. And I remember talking at great lengths to Briar Alpert of BioTek or Mark Li of Res Bio, for example, about the Agilent culture, what would happen to their team, how we realize their vision. And they feel very comfortable with Agilent as being a really great home for their team. Again, so it's -- I think that allows us to play our game, if you will, so to speak. I think the competition has more of been with, let's call it, some of the elevated IPOs and other things that have gone out. So I think it's been more a question about making sure you don't get caught up in the moment and way overpay for something and, later down the road, have buyers regret that you've overpaid. So I think that's been more of that dynamic. But we're -- as Bob can echo, our balance sheet is very strong. And we don't intend to let the cash just kind of accumulate because our cash flow is also very strong, as we just talked about earlier. We would like to deploy that to invest in the business. Now clearly, some of it's going to go into CapEx. We're expanding not only our NASD facility, but we're also expanding a couple of other of our manufacturing sites to meet demand. But we'd also like to -- into that mix, we want to invest in the business and deploy capital for M&A that makes sense for the company. So Bob, probably a fairly lengthy response from myself. I don't -- anything else you want to add to that?

I think you said it well.

Okay.

Now it's -- I was just about to say, Mike, perhaps you and -- you guys and PerkinElmer [indiscernible] because they -- it's -- the message has been like on the private space is where you guys do well. Maybe last one, in the interest of time, Mike, a quick one. Do you -- what -- does Agilent track D&I metrics or ESG metrics? What commitments have you made? And perhaps even talk about any of the leadership team comp metrics tied to D&I and ESG goals.

Yes, I'm so glad you asked about this because this has always been part of the Agilent story and our culture, what we believe in. But we've -- I'd say we even further have stepped up our game here. We have a new diversity program inside the company, a D&I program, and this -- we have internal metrics where we track how we're doing on pay equity. In fact, we just went through the whole Agilent rewards program. And part of our assessment is we look to make sure that there's pay equity, and I think we do very, very well here. And by the way, I want to make some general comments here, you're going to have an opportunity to actually look at our report. And I believe it will come out about March of 2022, where you actually see some of the data, but we have data on pay equity, women in leadership. And I think if you look -- even look at the CEO staff, for example, in the last year, we have 3 new staff members, highly competent and who also are women. So we're really working on continuing to be a more diverse and inclusive company. We are getting recognition and rewards, but we think we can do even better. As you heard Bob and I talk about, we're pleased with our performance, but we can do better. So we have -- we do it on pay equity, women in leadership. And then also, we have an internal employee survey scores, where our own teams assess how we're doing in D&I. So you're going to be able to see all of these in our D&I report that will come out in 2022, and you can kind of judge for yourself. But as you can tell, I'm pretty proud of our track record. And also in the overall context of ESG, we have a very significant program that's underway. In fact, in typical Agilent fashion, I like to say is we like to execute. So we put out recently our commitment to net zero, and it's more than a press release. We actually have real operational plans and are working towards these goals. So there's a real subs behind these outside communications we made in terms of our commitments. We haven't yet moved to any type of significant change to how -- specifically goals for ESG at the exec level, albeit we know that if we don't do a good job in ESG, you'll see that reflected in our valuation. So the way I like to talk about it inside the company, I'd just share this today with the audience, we think this is the right thing to do and it's right thing to do for the business.

Fantastic. I think with that, we're at the end of time. Mike and Bob, thank you both for spending the time with us this morning.

Okay. Welcome.

Thanks, Vijay.

Okay. Bye.

Take care, and good luck with the rest of the conference.

Bye-bye.