Applied Industrial Technologies, Inc. (AIT) Earnings Call Transcript & Summary

Hi, everybody. My name is Jason Celino. I'm the Vertical Software Analyst here at KeyBanc. I spend a lot of my time on -- in the industrial software IoT side. Joining me is my colleague, Steve Barger, on the industrial side. He'll be co-moderating the panel with me. First of all, I want to thank all of our panelists for joining today on our impact of COVID-19 on -- and the transition to Industry 4.0. Just want to remind everyone that we will be taking Q&A throughout. So please ask your questions in the box below, and we'll try to get to them. Today, we've got a pretty diversified panel. Speaking from an end-user perspective, we have Neil from Applied Industrial Technologies. Speaking from a reseller integrator angle, we have Kelly Ireland from CBT. And then speaking from the company perspective, we have Craig Melrose from PTC. Maybe if we could just go around the individual squares and tell us, the audience, a little bit about yourself and your company. Maybe we can start with Neil.

Yes. I'm Neil Schrimsher, I'm President and CEO of Applied Industrial Technologies. When we first got the inquiry or the ask, I was kind of somewhat reminded by maybe my time with my young daughter during Sesame Street and the song. One of these is not like the other, potentially one of us doesn't belong. So hopefully, I'll keep up and be able to build the case as we go across. But Applied is a leading industrial distributor. We're all around industrial motion control technologies in bearings and power transmission, but also fluid power and specialty flow control. And so maybe in the industrial environment, that's everything around the cardiopulmonary system. And as there's greater connectivity now to intelligence in those operating systems, we think we're in a very good position to contribute and to play in the industry going forward.

Great. Maybe we can move on down maybe to Kelly.

Yes. Thank you. So Kelly Ireland, CBT. As you said, we started as a VAR, and we've had 20 years with that. I've been in the industry for 42, starting with coding way back then, but always been in tech. And when I opened CBT 19 years ago, I really wanted to focus on value add. The last 4 years have been specific to industrial IoT, being very focused on understanding the OEMs, the ISVs and being the integrator in the middle. Our biggest project right now has been refinery of the future. PTC is one of our key partners there in the consortium that has spent 3 years building out solution-specific industrial IOT.

And then, Craig. I think he might be on mute. There we go.

There we go. I was not allowed to unmute myself. Somebody had to give me an authorization there. Thank you. Craig Melrose, Executive Vice President, PTC. I think of myself as someone that's 25 years of operational improvement, industry improvement. Formerly Toyota North America, where I was responsible for new product introduction and then spent 20 years with McKinsey & Company, driving operational improvement and manufacturing, supply chain and product development. Primarily left that to bring that type of business thinking, operational improvement thinking to PTC to marry up with the technical expertise. Thus, the title around Digital Transformation Solutions, which is unlocking customer value, but doing so, leveraging the digital tools and software that's available to marry up the best of both of those expertise to get a new level of performance going forward for customers.

Okay. Great. And I'll ask one question, and then I'll pass it on to Steve. Whether you call it manufacturing 4.0, industrial IoT, industrial renaissance, there are many names for this one specific theme, but maybe as a level set, maybe can you talk about what industrial IoT or what this topic means to you?

I can start if you want. I don't know if there's an order. To me, as I think about it, it's going to be factory of the future or the industrial Internet of Things, facilities or industrials that are going to be nimble. I think that are going to have operating processes or procedures that could be self-healing. And their individual processes are going to become part of a larger enterprise, whether they are within one facility and they are being managed at the edge or if they are going to be across facilities and thus the Internet of Things. I think it's going to allow greater demand loading that can go on balancing workloads, which are important in these times and yield a more predictive, preventative maintenance of dealing with issues, maybe even before they occur. And then as we connect multiple sites, I think it also promotes or helps the remote monitoring and performance that can go on as well. So those are a few thoughts from my side.

From my view, it's -- our focus is operational technology convergence with information technology. So OT/IT. And what we're seeing is everything along with what Neil said is distinct culture differences between those 2. And so it's helping our clients go through the journey because it is definitely a journey. It's not just go in there and start doing digital transformation. IT has always been the legacy of supporting the infrastructure. Now you are having the combination of the 2 and the connections of the smart factories tying in with IT. So it's really a journey, and it's helping your client understand the journey, understanding what it is they are trying to achieve within that IT/OT convergence and helping them through that in the integration of the 2. It is not a simple thing. I can tell you that from what we've been doing, but the ROI is outstanding.

Fully agree. I have the unenviable position of trying to say something that Neil and Kelly have not already said. I would say the P&L of customers is the same P&L for the last 1,000 years as it will be for the next 1,000. And so it still is the same levers that it has always been, the same operational improvements that have always been present. It's just now we have the ability to either enhance those, reinforce those or even accelerate those levers, improvements to drive new levels of savings across the P&L. Again, different influences, whether it's a pandemic or whether they are just increasing for growth or decreasing cost or productivity, whatever it might be. But now we have the ability to leverage digital and technology to drive that further faster, higher, larger better than we have performed. And that's the real difference because the tools are allowing us to do something that we had met at a limitation prior to now, and we can break through that limitation and achieve a new level of success.

Craig, since you went last, maybe you could answer this one. Where are you seeing companies investing the most amount of resources right now?

Sure. Sure. I think you see a couple of flavors. One, we, PTC, have seen lots of investment around remote access, remote monitoring, leveraging cloud and SaaS-based solutions due to everyone being constrained from travel and in-person, et cetera. So just in the year 2020, there's been a massive shift investing in remote. I think also you are seeing an investment in piloting or trying to prove technology. I understand it, but I also think it might be the wrong path in the sense that you shouldn't improve the technology much like Kelly and Neil said earlier and myself. You need to prove the value. And so there's investment there, but I think the investment is shaking out to moving toward thinking about value more than thinking about technology. And last but not least, there's development and capabilities and skill sets, realizing that this expertise is not resident in a customer, and it may not be their natural inclination or their forte. And so how do I think about up-skilling or partnering or a blend of the 2 to get the right level of expertise to really take advantage of this opportunity.

Yes. I would say, from my viewpoint, what we are seeing is a heavy concentration in connected worker. We've worked on this project for 3 years, and we thought it was much slower than expected, and I think the entire industry did. We call it toe-dipping. We see the clients going, "Okay, I'm just going to try this," and connected worker is kind of the low-hanging fruit. It's not a giant investment. It is a very quick ROI. So connecting that remote work or having remote mentor or remote expert, allowing somebody to facilitate a repair and have the repair person halfway across the globe, real simple things like that, having doctors that can access patients that they are nowhere close to, that's what we are seeing, and it's been massive since COVID. It has been a transformational and clients actually reaching out back to us saying, "Can you help facilitate us?" So I think that's what we are seeing. And we expect that, that will grow and get more involved with deeper integration systems, like condition monitoring and the other things that you are going to see with OT/IT. But for right now, we're seeing it very much concentrated on the workers themselves.

And I think from my side, I would agree that connectivity of information and the operational technology, a lot of interest in legacy infrastructure and how do you connect to motors and pumps that are important part of the system but also take advantage of those new components that are coming in. And I think many manufacturers and mechanical power transmission products, we're adding sensors and adding technology, maybe that's not used immediate but it's going to be prepared. So as that comes in, I think users and applications can go there. I think many industrials have had their processes automated. The discrete side probably lags but I think offers a great deal of potential. And we spend a lot of time around that equipment today and keeping uptime and productivity. We think as intelligence comes into it more and more, we can help, we can contribute -- customers realize that full potential.

And you all touched on remote as being important, but can you talk about any of the other main use cases today that companies are inquiring about or buying solutions for?

I can tell you the ones that we are working on right now, and it involves Craig -- Craig's company. With the remote worker is -- even at the levels of documentation and audit trails, taking evidence, video evidence, something that's being rare, workers that are out in the field. One of the most interesting ones that we've seen is a fishing. It's one of the largest seafood companies in the world with medics out on boats. And they were just amazed to think that they could connect the medics on the boats to doctors on land, in case they need additional capabilities. Another one is actually supporting women's health and childbirth in Africa from the United States. That one is pretty key to us. We're actually going after a grant to support it, but just seeing the capabilities of that connection. They said over 500 women in Africa die daily because they don't have the support they need in childbirth, and this is something that can help alleviate that. You talk about an ROI, it's lives.

I'll just follow-up with what Kelly was saying. I think to link the P&L and the use cases, from a manufacturing standpoint, it's typically capacity, labor productivity or material productivity. And so certainly, capacity and labor productivity are high use cases from a capacity standpoint, just understanding where is a constraint? Why is it a constraint? How is that constraint occurring from a problem-solving standpoint and breaking down that data to be able to promise of more effectively and increase the throughput through a factory or these types of items? And with that scaling, right, the -- you save $2 million in one factory, but across 50 factories, that becomes $100 million. $2 million is wonderful. $100 million is a competitive advantage. And so just thinking about not only the use case but also the scaling of the use case. Similarly, labor, as Kelly was saying, with connected worker. If it's a operator, it's kind of a primary application, like work construction, standard operating procedure. It could also be secondary, like changeovers or maintenance or minor areas, like a jam and an operation, so an operator can do a quick fix rather needing specialized skills or even out in the field. Technicians in the field being able to repair something that's remote, a generator in the Arctic circle for a mine and being able to leverage expertise that's not co-located with them to be able to do that work more effectively, and so you have technician efficiency. And all of these are just different applications of that connected worker applied back to labor productivity or throughput in various different settings. And so I think it's nice that it all is starting to connect, but would emphasize we're at the front end of it and how to think about companies that are the most distinctive are actually putting that scale component with the use cases.

Even I'd say, from our side, there's a lot of focus on hardware and connectivity. If we think about some of these industrial facilities, it's not easy to pass information and data. I think in the facilities, a lot of data exists. As we work around, display is making it more visible. So you know key performance indicators and what to do with it and how to respond and have greater output and productivity. And then we think about there's more interest and work going on around robotics and perhaps vision-type products. As people deal with labor and workforce constraints and maybe some challenges that exist in any time, but especially during a pandemic and the desire or the need from a safety standpoint to socially distance. And then I think there's a look at greater material flow. And we've all used in lean practices and techniques, visual queues of that. I think RFID or RTLS and some other things can help further advance that. And I think some of the most progressive removing expensive componentry around, we will look to do that, more and more, going forward.

Okay. Yes, it's -- Neil, since you are speaking from the customer perspective, maybe we can start with you for this question. But if we think about the major hurdles of adoption, maybe before COVID happened, like, what were the main areas of reasons for yourself, your company or maybe others as to why they wouldn't go forward with some of these initiatives?

I think for one, there's just always a challenge on implementation and implementation time that there can be many, many good ideas. So how do you prioritize? How do you select? How do you sequence? I think many, from a customer standpoint, are not going to turn over their whole facility for entire transformation. They are going to experiment. They are going to solve portions of problems. They are going to want to see proof and evidence as that comes along. I think an aging technical side of the workforce challenges this and some of the industrial environment of having the expertise to pull it through because third-party providers eventually leave, and you need to be able to run and operate from within and have the training and the education. So as I think about that, ourselves and others, right, when you can be a provider and help bridge that gap that can increase implementation and use in application.

Anything to add, Kelly? I mean, you mentioned implementations, that's why.

When you really look at it, it's a new frontier. Taking the OT and IT. So you have to start with, like I said, the OT/IT culture. And you have to understand that there's been differences between the 2 of those. They don't normally -- they haven't normally, up until the last few years, really even spoken to each other. And in some cases, we have seen distrusts. So you have to start with addressing the culture and teaching them how to work with each other and be respectful of each other so that they are working together for the gains that the company is trying to achieve through this; we've seen that. We've also seen where I think some of the failings on the early in cloud, when cloud first came out, some of the challenges. There was promises that a lot of people don't believe where it will pickup. And everybody is saying, with the cloud, it will save money. It will be less expensive. It will solve all your problems, but that didn't really happened. It took a long time. And we've seen clients go, "No, we're going to take little steps," like, Neil said, it's little pieces. And that's what we are seeing right now. We've seen people that approach it in a very broad sense, like digital transformation, and they make it a massive project of boiling the ocean, and we see those get nowhere. We have seen very little forward moving on those. What we've seen being successful is, like Neil said, finding a business unit, finding something that has a very specific need and providing an ROI on that, and it's kind of the trust factor. You came in, you achieved it and then you go to the next step and it grows, and that's what we've seen as successful.

Okay. And maybe we'll adjust the question a little bit for you, Craig, because you are taking it from the customer -- company angle. How do you adjust for what Neil and Kelly talked about? Like, what is PTC doing to fill those gaps?

Sure. Sure, absolutely. So building on what Neil and Kelly said, Neil is saying, think of throughput and capacity and Kelly is saying thinking about IT/OT integration and cloud hosting, costing and these various elements. What you get too quickly is, what's the right item to focus on, and there's going to be an expense to it and can you justify that expense, right? And so if you just even simply broke it down into what is the cost per unit? The numerator being labor and material, simplistically. The denominator just being throughput, how much volume can you run through a facility. How do you think about taking that equation and optimizing the priority? So for example, a factory, you may have 100 assets, 10 of those assets may be bottlenecks. Unfortunately, today, I believe several customers are piloting technology on one of the 90, which is not a bottleneck or a constraint. And as a result, they may see a relative improvement but not an absolute improvement because it won't improve the throughput of that facility and impact that denominator on cost per unit. And it may not impact the numerator from a cost standpoint as it may be too small of a pilot and/or it's on the wrong -- it's on 1 of the 90 versus 1 of the 10. So what we're trying to do is help customers understand where should I focus and prioritize using the data to leverage that. So think about it from an IoT standpoint, the data telling you about performance and allowing you to understand the priority. And from that standpoint, then take the data and say, on that priority, 1 of the 10 constraints, not 1 of the 90 nonconstraints, why is it constrained and try to break that down to the point of then taking IoT and linking it to something like augmented reality and AR technologies to then say, "What could an operator do differently, more proficiently, this order or sequence, this quality check, this safety check, to allow that constraint to disappear and then actually it becomes a closed loop that you can repeat again. What's the next constraint? Why? How can I use technology to solve it? What's the next constraint? Why?" And technology is making that much more visible and much more transparent, but it's also forcing customers to think through. This needs to be a top priority area and then take the data and drive the problem-solving versus this is a low-risk, low-threat application. And actually, they don't see an ROI because it's the wrong area, not the wrong technology.

Okay. And as a reminder for the audience, please submit your questions if you have any. We'll try to take those as we can. Maybe building on kind of the hurdles a little bit, what from COVID-19 has maybe changed or accelerated? Maybe, Neil, I know this is a new initiative for you guys. Maybe can you talk about some of your processes and timing?

Yes. Well, I think in it -- and as we navigated through maybe the mid-March to the early April, as industrials get passed a little bit of the shock and awe of dealing with the pandemic and challenges, it was another level of risk, but then it also points out areas that automation and IoT can help. And perhaps to Craig's point, they start to see how technology can be part of the flywheel to keep a little bit of the momentum going and solution. And I think also in the use case, we're looking at the return on investments. As you saw some of the pandemic-driven challenges, it just adds to the return on investment. So I think as we look going forward, it's going to offer the opportunity or be a stimulus for acceleration of some of the technologies, some of the products and some of the applications. It's going to encourage business operators to widen their horizon about what they will consider and the types of paybacks and the returns that it will generate.

Jason, I'd say our experience. So last year, in 2019, we had a booth at PTC LiveWorx. It was packed, the entire time we were there. We walked away, I think, with 170 leads that we followed up on, and it was a continuing conversation throughout the year, that customers were engaged. We were having conversations but we weren't seeing them engaged to the level. It was kind of like, "yes, okay." Definitely interested, but not taking that next step. We have seen that completely turn around with COVID. Because I think, like Neil said, it took 6 to 8 weeks for people to go, "What is this?" and then realize we have a new norm. We have to figure out how to continue business. And so what we have seen since then is clients that have remembered coming to our booth and seen what we were doing and coming back or us continuing the conversations and them stepping forward, going, "No, we have to find the way in the new norm. We have to integrate that work remotely. We have to do something different." And so we see now where before it was just kind of a conversation that was good, but it wasn't that commitment. Now we are seeing multiple commitments on a weekly basis, which was -- it's just -- it's the hockey stick that go from the bottom to now where we are having probably 40 active opportunities of clients saying, "We have got to engage, we have got to deploy this," and having active deployments going on right now.

Yes. I certainly agree. The urgency has dramatically increased. There's a humorous graphic going around, I don't know if it's real or not, about a survey question that says, "Who's leading your digital transformation? Your CEO, your CFO, or COVID?" and COVID was circled. The point being, the issue has caused everyone to think differently. And to say, I no longer can wait on the sidelines to see what might happen. I actually need to jump in with both feet and get ahead of this myself or I'm going to get left behind. And so that urgency is certainly there. I'd also say, it's forcing a look into what could I do differently? So again, at least from a PTC standpoint, everything that is allowed to be accessed through SaaS and remotely, we have seen a dramatic increase, literally a year's worth of uptake in months or less timing. And so people are looking at it and saying, "Can I divorce myself from hardware and just plug-in a URL and get access to CAD, which is unheard of prior to recent years. And we have an offering that allows you to do that and just seeing a migration in a shift to that because of that ability -- it's similarly -- augmented reality, as Kelly has mentioned multiple times. It's just such a wonderful tool to be able to connect to people, but it's more than just video. It's connecting to people with the ability to annotate and provide additional information that was not available before. And people are thinking through creative ways to leverage that. I love the story earlier, I've not seen this personally, but Kelly shared just about childbirth and bringing medical expertise. It's any and every application that's leveraging technology to provide it a new and unique way. And so I love that the urgency is forcing the creativity but the 2 are very co-mingled, and it's a wonderful time to see it unfold. It's unfortunate that it took a pandemic to make it happen, but it's wonderful to see the reaction.

And Jason, one thing I think everybody needs to remember is this is not something that is just COVID-specific. Once these are integrated in, it's really to help the company and it's bringing the value that they are looking for, but it's not specific. It's facilitating for COVID, but it's something the client needs to do anyway. It's going to be an investment that will definitely take them to the next level. So that's another good thing because you are not just facilitating, taking care of what's going on like COVID. It is definitely going to continue after that.

Do any of you have any specific metrics you can point to, either internally or externally, that would point to that accelerating interest or demand level that you're seeing?

Steve, I'd say, for us, if I think about it internally, the activity that our sales engineers are having and the loading and the activity are very high, very good. It, in turn, is creating demand for our application engineers and then moves through to the production and assembly associates. So those are good. I look at our pipelines of the projects and the ideas that we're -- have been connected. I think about our legacy side of the business and larger strategic accounts and how that is coming into greater discussions around business reviews and quarterly business reviews about what can be helped and what can occur and be done. And so to me, I can think about the analogy of consumer spending on the Internet has been around a long time, but it's exponentially popping right now, and I can attest to the number of boxes that show up at my house. I think the same potential exists for these projects and these interests here in industrial automation, especially as people look to touch more of the discrete sides of their business that they haven't done before.

Well, I don't have the growth percentages at my access right this minute, but I would say, we've seen exponential growth, net new logos on weekly basis, which in our industry, normally, that's a 6- to 12- to 18-month job, and now we're seeing it on a weekly basis. We're doing, I think, the -- what's really interesting to me is the clients that had no clue about this technology, had no clue about augmented reality and are just doing everything they can to try and find something that facilitates where we are having people reach out to us. We're doing webinars and the activity on those where before you might struggle to try and get somebody on those or it might be very limited. We're seeing the likes of 30 to 40 to 50 people sitting on webinars with us and then reaching back out and saying, "Okay, I need to find out more." So I think just between all across the opportunities, engagements, the actual projects themselves and the engagement of them actually doing that commitment of stepping forward and saying, "We're going to go do this project." And what's even more interesting is seeing them then go to the next step. You go from connected worker to something like the condition monitoring or asset integrity in discrete systems. We're now seeing kind of the domino effect to go in, you prove out one thing and the next question is, what's next? What is the next technology that we can integrate into this because they are seeing that return on investment immediately and they are ready for the next thing.

Right. I think from PTC standpoint, internally, the metrics on shape is our SaaS-based CAD system I spoke about earlier and before is our SaaS-based AR offering. Those 2 both being SaaS and able to be remotely leveraged from anyone, anywhere, on any type of device, we've seen a 4x increase in pipeline interest this year. Just dramatic reach out to understand how can I take advantage of this and what can it do for me. From a customer point of view, what we are seeing, and I agree with what Kelly said, COVID is not why this is happening but it's the -- it's created the inertia to say I need to do something sooner. And now that people are getting into it with such a leap into, 'I must do this faster,' what we're seeing is customers are actually unlocking double-digit impact. And that impact has the whole multitude of different flavors to it. It could be certainly financial, tens of millions, if not hundreds of millions, as we said earlier, but also operationally, 10-plus percentage points in throughput, OEE, overall equipment effectiveness, these types of things or labor productivity or maintenance productivity or uptime or improvement in quality. And so we've taken on the mantra of double-digit impact. If you're not aspiring for double-digit impact, whether it's the low end of the scale or the high end of the scale, and you're not aspiring enough. And so certainly, from a customer point of view, that's game changing. From our point of view, a 4x increase in demand. That's a lot of different data points on both ends of the spectrum, saying, it's upon us and so it's time to embrace it and drive it, and if anything, accelerated so we can really deliver a lot of value and impact for everyone that's in the ecosystem.

So if COVID is not the cause, but it is an accelerant that must come with its own challenges for all of you. Can you just talk about how your own sales force or engineers have transitioned to the work-at-home environment? And how that your ability to interact with customers has evolved over the last 5 months?

Sure. PTC may have it the easiest in answering this one, but it hasn't been easy, so don't let me pull you. Software in our business model being subscription-based has helped kind of weather the storm just from a business standpoint. From a personnel standpoint, everything we're doing is trying to enable the ability for people to operate and interact in a completely different manner. And so we're already in that mindset and helping our customers to be in that mindset as well. And then obviously, tools like this video conference that we're on now and coming from all different areas have allowed people to maintain that level of connection. Nothing beats being in person, and so certainly, there's been some items that just can't be addressed that take 2 people standing together, staring at it on a factory floor. But aside from those few elements, for us, we've made the transition quickly and it's working well. Would we all like to go back to the old normal? Absolutely. The sooner the better. Until that time, I think we're making do and making do well, call it, 90% plus type of environment and there's a few items that just don't work quite as well because it's just not in person and it's just not side-by-side, but everyone is experiencing that issue. And so if everyone is experiencing it, everyone is giving a little bit of grace that that's just not possible and let's try to find another way.

We have a lot of our employees that were remote anyway. We were spread out throughout the United States. So there's maybe 30%, 35% that were in an office. And being IT experts, it was easy for us to facilitate within a couple of days, making them remote. But what we saw was, we actually -- it allowed for better engagement. A lot of them had never been on a Zoom call, and we started doing 2 or 3x weekly, just 15 minutes pop-in and talk. It really helped the engagement of the employees getting to know each other because we kind of been on a hiring frenzy, and it really facilitated people getting to know each other, getting to understand what each other's jobs were, what they were doing. The good thing is, is being remote. We had already spent the 3 years kind of studying this at refinery of the future, so really understanding the remote nature of, like, connected worker. So we kind of had a leg up on that of understanding the technology and understanding what it could deliver, not trying to learn that real quickly while we're going through this pandemic.

And I think for us, as part of critical infrastructure and serving essential industries, we've been operational. Our facilities and sites have remained operational, our distribution centers at the same. Now with that, we did do things to socially distance, lower density of some of the facilities, enable more remote working, add right safety procedures and such. And then as we deal with customers, if you think about how they went down in some areas and started idling equipment in an unprecedented manner, and now as they think about bringing it back up, they are needing us or someone like us to be there to help them bring that back up. So we are connecting again with customers inside of their facilities or providing the virtual assistance as they work to do it themselves, but there's a little bit of challenge there back to the kind of the aging technical side of the workforce. So I like how we've migrated and using both, but I think given the nature of some of our business, there will always be a required physical presence. And then as I think about some of the transition, we had benefited, right, because we operated in a physical connected world. So as we go virtual, we know the mannerisms, we know what people mean. And so that's been a good transition. As I think about, as this goes further, the things that we will have to be mindful of, as you bring new people on, how you assimilate and integrate them into teams and cultures, and then I think when you have a big, broad, diverse team. I think small teams can transition very quickly. Larger teams on larger projects: one, I think we all will have to pay attention to and kind of reminded of that African proverb, I guess, right, "if you want to go fast, you go alone. If you want to go far, you go together." And so we're working to go fast and far, and so how we continue to bridge those 2 will be important, I think, for all of us.

Okay. And great. We don't have much time left, but I thought I'd fit one more in. As you look at the different IoT providers, especially on the software side, where do you see the most differentiation? Or what is the biggest factor as to why you choose a solution?

I wish I could bring a proverb, and Neil just one-up'd me there. I'm jealous of his rapid power to be able to pull that in. For me, I would say it's a bit of a classic 80-20 analysis, right? From a functionality standpoint, most anything is going to be 80% similar. That 20% really matters, though, right? And so from a PTC standpoint, we feel like our 20% on our various offerings, whether it's CAD, PLM, IoT or AR, is differentiating because of some flavor, whatever it might be. So we mentioned earlier like a CAD system that could be used on any hardware and you're not bound to a desktop, you can pull it up on a URL. That is a game changing differentiating 20% or 80% CAD systems are CAD systems or AR as AR, but we would like to think our AR and the tiered applications of it from something simple, like Chalk, and just one-on-one as needed, where needed, to capturing expertise. As Neil has mentioned multiple times an aging workforce and capturing that before it disappears to share with the younger generation, all the way through to a fully integrated AR experience where you're leveraging CAD data and seeing almost x-ray vision into a piece of equipment and how it works and what you need to do to disassemble it and reassemble it, regardless of what the tier is, the ability to be able to share all of that as a differentiating 20%, where 80% is similar. I'd also say, somebody like PTC, the fact that we have CAD, PLM, IoT and AR, it's not every stop on the digital thread, but it's several of them. And the ability to work with one company and one type of thinking and one type of partnering, and then also just the ability for these items to connect together and roll all together to unlock another level of value. IoT is wonderful. AR is wonderful. IoT plus AR is like 1 plus 1 equals 3 in terms of -- and so lots of people can do that, but it takes different systems and integrating and some not perfect integration. The ability that you can integrate those with somebody like PTC, it is another level of offering beyond just what the individual products can do themselves. And then even just the last piece, I would say, my job is to take everything that we're doing and allow it to be more out of the box and get to first value faster and make that value even higher. So think about almost moving up the stack on the offering and how everything interacts. And so all 3 of those are pretty critical. And I don't know that there's many companies that offer 1 of the 3, let alone all 3. And so I think that's different ways of thinking about the offering. But all are -- at least from where I sit, I admit I'm very biased. But from where I sit, it's pretty powerful to be able to put all 3 of those together.

Okay. Anything quick from Kelly or Neil?

Yes. I completely agree with Craig. Our job, as the integrator, we do a thing called innovation delivery. And what we do is approach it in a very agile fashion as if we're almost creating the software for them because we need to gather their needs and their requirements and their goals. And by doing that, it allows us to get more than enough information to go out and match them up with the proper software, OEM hardware, whatever it is, bring that combination to them. But Craig is correct, having both the OT and the IT or AR side of the house, they've already got both those OT/IT convergence packages in there. So it certainly helps when we are trying to bring a full solution to a client.

And then I think for us, I can agree. Our approach is, hey, make sure we clearly understand the customer and their needs. The technologies that are available. We think we bring a sound understanding of the operations. I mean, we've been around that for decades and doing it. Now as we combine these very technologies and then how we're part of developing and communicating and implementing those solutions to again come back, make sure it's what the customer needs and what they want. I think that will enable more and more success. It will be repeatable. To me, that's part of the winning strategy that benefits all stakeholders that are going to be around this.

Great. Well unfortunately, we're out of time, but I want to thank all of our panelists. I think this was a pretty deep discussion. And if anyone has any follow-up, just please feel free to reach out. Thanks, and have a good rest of the day.

Thank you.

Thanks, everyone.

Thank you.