Avantor, Inc. (AVTR) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for joining us this afternoon. A real pleasure to have the management team from Avantor with us this afternoon. Representing the company, we have the CEO, Michael Stubblefield. Michael, welcome to the conference. It's good to see you albeit virtually. Hopefully, at some point, I'll get to see you in person and I think a lot of that depends upon how Avantor can help us on the vaccine front. So we'll get into the vaccine front in a bit. But perhaps, let's start with the second wave and that's been a topical question for most folks with the rising cases.

Have you seen any impact on the business? How has Q4 played out so far? Has it been in line within the range of expectations for Avantor?

Yes. Vijay, firstly, thanks for having this thrilled to be here. Appreciate your support, and you can be assured our team is doing everything we possibly can to help bring it into this pandemic. Nobody is more anxious for that than we are. We are in the midst of a second wave infections has been well reported or at a all-time high hospitalizations are at an all-time high. And obviously, it's pretty serious. Fortunately, for us, we've learned to run the business in this environment, all of our factories and distribution centers and R&D centers are all still fully functional, and our associates are doing a fabulous job in keeping the business running. Also, I think when you look at the response to the second wave in Europe as well as the U.S., most of the lockdowns. We tend to be more focused on our personal lives than what it would mean for our business. All of our customers continue to run and fortunately, through the first couple of months of the quarter, haven't really seen any incremental negative effects from this outbreak. And actually, quite to the contrary, when you look at the acceleration in testing and the role that we play there, both in PCR testing as well as the antigen-based tests that have really taken hold here in the fourth quarter, providing some nice tailwinds for the business. PPE demand continues to be strong. And as we talked about on the third quarter call, we're starting to see meaningful orders for the vaccines. Even at that point, that's carried forward into the fourth quarter. We're now starting to deliver commercial quantities for these therapies, even though we don't have any meaningful approvals, yet. I guess the Pfizer vaccine has been approved within the U.K. But across the rest of Europe or here in the Americas, obviously, nothing from an approval standpoint. But given the lead times for the production of our materials as well as I think the anticipation based on clinical results, several of our customers are starting to produce commercial quantities of these vaccines. And we share your enthusiasm. We hope we're on the doorstep of an approval here.

That's fantastic to hear. And just on that topic of COVID being a tailwind. I think in 3Q, it was about 300 to 400 basis points. Was it all perhaps in diagnostics and PPE? I know Thermo just preannounced they had really strong diagnostic numbers for Q4. Should I take a 1:1 correlation if someone else is seeing a benefit? Does it mean Avantor should have a sequentially strong COVID tailwind?

I think that's probably a reasonable expectation, Vijay. We're very well represented here in the sample prep workflow associated with PCR testing. And we have access to the antigen test, and we're seeing meaningful revenue ramp from those. So we're going to be well-represented here. And you should see a step-up in revenue here, linked, obviously, to the step-up in testing that we've all seen here as we've moved into the fourth quarter.

Understood. And then I guess switching gears to vaccine. Half your revenues are from biopharma. And I think you guys have had mentioned in the past, bioproduction revenues could potentially double given the vaccine upside. Maybe let's take a step back. What percentage of our revenues are bioproduction? And what exactly does Avantor do in that vaccine manufacturing side? Is there a difference between mRNA versus non-mRNA for Avantor?

A great place to start. Obviously, biopharma is our most important end market. It represents more than 50% of our group revenue. And within that, we're going to be well-positioned to serve our customers in the R&D space. And that's obviously where all of these therapies and vaccines start, and that's going to represent about 2/3 of our biopharma revenue will, in fact, be in the lab. One of the unique aspects of our model is that we're able to scale our support with our customers from the lab through clinical trials and ultimately into the commercial scale production of any approved therapies. And that's the same model that we're using here with these vaccines. We engage with all of the leading candidates very early on in the fight here, going back into the second quarter, engaged with our R&D scientists in early phase discovery and process development. Customizing our products and our solutions to meet their needs. We've been supporting them through clinical trials. And for any of these vaccines that get approved, we'll support our customers with commercial quantities as that goes. There are -- you mentioned mRNA. That's obviously one of the 4 leading modalities that are being used to produce these vaccines that would be the technology that both Moderna and the Pfizer BionTech vaccines are using. And the workflow and the raw material and consumable requirements for that modality are, in fact, different than the other 3 vaccine modalities. And also very different from, I think, the monoclonal antibody workflows that drive the majority of our biopharma revenue. The types of materials that we're providing are unique and different. And this is a novel technology. In fact, there are no other therapies that are approved today that leverage this technology. So we're using new materials that we've had to develop to support these customers. In some cases, the purity requirements of these materials have been enhanced relative to what other platforms might require. So our teams have done a great job partnering with our customers to earn specifications on these vaccines. Our single-use solutions that are part of our fluid handling platform are also important here. So it goes beyond the cell culture ingredients and excipients and process chemicals, but we also provide a significant amount of single-use content that promotes the production of these vaccines. And so we're going to be quite relevant there. So our approach is very similar, whether it's mRNA or a viral vector or recombinant protein vaccine. But the materials are going to be different. And I think that's important to understand the amount of raw material content on an mRNA vaccine is going to be significantly greater than, say, a recombinant protein vaccine. And so we're excited that, a, there looks like there's going to be a vaccine that's going to work, but we're even more excited that it's -- it looks like it will be an mRNA vaccine. That speaks to our portfolio and the role we'll play here will certainly be important.

Those are helpful comments, Michael. And maybe just, what is the bioproduction? I think the numbers the Street had was looking at perhaps $1 billion. Is that the -- your current bioproduction business.

If you do the math that I just outlined a 50% biopharma revenue, and 1/3 of that being production driven. You get to roughly 15% of the group revenue would be bioproduction. And to your earlier point about the strength of our order book. On our third quarter earnings call, we talked about our order book more than doubling since the beginning of the year. And we just took a snapshot of the open orders for our bioproduction business on September 30 and compared that to what it was on January 1. And you can see that it had more than doubled. And it was interesting when you look at the makeup of where that growth in the order book could come from, there's kind of 2 conclusions here, 2 observations really. One, if you're starting to see the impact of the vaccine work that we're doing come into the order book as the lead time for most of our customized materials here are going to be 1, 2, 3, 4 months. And so customers were starting to have to place orders at risk even in the third quarter, under the anticipation of needing to produce late this year or early next year. So you started to see those vaccine orders beyond just modest quantities to support development or clinical trials come into the book. Importantly, also, you saw continued momentum of the core business. And with all the focus on COVID in 2020, it can be easy perhaps to forget that we still have a very strong core business that we're also running and investing in and executing our strategy there. And we've seen significant acceleration of that order book. Now part of that is a reflection of the commercialization of new therapies and new molecules. But I think you also see some risk mitigation from our core customers, recognizing that there's about a wave of vaccine demand that's coming our way, and they're wanting to [indiscernible] their place in line and make sure that we're also taking into account their requirements. So at the end of the third quarter, for example, it would be a little bit unusual to have that meaningful of an order book out to the second quarter of the following year, but yet that was the dynamic that we're starting to see here as customers placing orders were a significantly longer lead time. So what they might have otherwise in a more normalized demand environment. Your order book should typically grow kind of in line with the growth of the business. And so to see this kind of a build of an order book, there's obviously a lot of factors at play. I've been running this platform for nearly 7 years now. I've never seen an order book that looks like what we have today, that's for sure.

No. That's encouraging to hear. Let's parse out biopharma in terms of the base business and the COVID vaccine side. Starting on maybe the COVID vaccine opportunity. Streets try to do the math. We've all tried to sort of size the downside upside on the numbers, $1 billion at the high end, perhaps $100 million or a few hundred million at the low end. Now that we have the vaccine data, we know mRNA is going to be part of the mix. Are we now at a position to sort of talk about what this means to Avantor's business when you look at '21? Or are there still some sensitivities around what is being manufactured, contracting, et cetera?

So I think there's quite a number of variables that have yet to settle out, and it's obviously a complex situation, particularly given the the differences in the amount of content that would go on the various modalities. As we looked at it on the low end, a very combinant protein vaccine there's likely plus or minus $0.10 of raw material and consumables content for those. And by comparison, mRNA vaccine could have anywhere from, call it, $0.80 to $1.40 of raw material and consumable content do. So a pretty wide range of outcomes. And where we don't have any firm approvals, it makes the modeling a little bit difficult. One of the key variables is going to be, obviously, on the back end of approvals, how quickly can the value chain ramp production and how many doses can be produced. A lot of our customers have been on public record indicating kind of what their view of the maximum number of doses that they could perhaps produce in 2021 in an ideal situation. And I think in most cases, those are probably going to be a little bit aggressive given where we're at here, and we don't have any approvals yet. The sourcing strategy of our customers are also going to be important to consider. For the types of materials and solutions we would normally supply, it would not be uncommon for us to be the solar exclusive supplier to a therapy area or an indication for one of our customers. Given the volumes involved here and the scale involved, certainly, it's going to be important for our customers to have more than 1 supplier for more of the materials. And so although we've been working very closely to develop solutions and technologies to support our customers. There's not a lot of visibility yet as to ultimately how much of the share you'll end up with on an improved vaccine. So we'd like to have more visibility than we do. At the moment, it's really limited to those customers that are really far along in their development and are needing to place orders at risk to take into account our lead times for getting them materials. And so I would anticipate the order book would grow significantly on the back end of ending approvals as our customers are now able to lock in commitments and make a former plan for their ramp-up in production. So Vijay, so quite a number of variables at play. We hope between now and maybe we speak again at the end of the first -- or end of January to talk about our fourth quarter results. We would very much like to reinitiate annual guidance. And as we think about 2021, we're obviously going to need to talk about how we see our core business playing out. And as you remember, we target 5-plus percent growth of the core business. We were encouraged in the third quarter, our core grew 2%. We've seen sequential improvement moving into the fourth quarter, and we're going to have to take a read as to how we see the core shaping up next year. But we're also then going to have to layer in what we think the impact of the vaccine will have on the business as well as the other tailwinds, PPE as well as testing. And you have success of a vaccine will obviously drive, in our view, a reduction in the amount of testing that's going to be required longer term. So you're having to kind of synchronize those assumptions, and we'll try to be as transparent as we possibly can. But it's still a little bit too soon for us to exactly size the impact in 2021 from the vaccine on our business.

Those are helpful comments, Michael. Just maybe you've had 3 companies out for data. Are you now -- is Avantor part of the mix with all 3 of those vendors, but we're still just trying to figure out the actual approval process and share between those 3 companies who have some data? Is that where we are right now?

Yes. We've obviously not talked about any specific customer. What we have said many times is we're going to be exposed to most, if not all of the leading candidates, including those that are being supported by operations, so to speak, across all of the major modalities. And we obviously know what materials are being used in the trials across each of these candidates. And so that's a variable that is none at this stage. The shares are still kind of being worked out in terms of how fast each of us can ramp and what our partners or with our customers, how they like to run their supply chains. But we'll have a meaningful role to play in any of these approved vaccines for sure.

And just -- it's an interesting dynamic, given the customers they could place orders at risk, but it's at risk. How do you plan for inventories in this environment that makes it really tricky, either you have a really large order is there a risk where orders come in and perhaps Avantor, like you guys run out of stock.

So this has been really complex to try to plan for what's coming our way here. Going back to the second quarter when all this work was initiated, we stood up a control tower that was rooted in a pretty sophisticated simulation that's trying to give us visibility to the various scenarios as they could play out and what the impact would be on our supply chain. So what would be the requirements that we would need to pass to our raw material suppliers where we have bottlenecks in our production lines, where we might need to add labor to be able to add capacity through increased shifts and operating hours at our facilities. And so we've been running this kind of complex analysis now back over the last couple of quarters and have been making decisions all along the way here as we get better visibility. So we've been making commitments to raw material suppliers. We've been debottlenecking facilities, adding labor and getting them trained and onboarded. And there'll be a wave of capacity that we'll bring online here. We've got some that's coming online this quarter, both on the raw material and process chemical side of our business as well as significant [indiscernible] expansions that are important to our single-use assembly business. We'll have some of those coming online before the end of the year and then kind of staggered throughout next year. We'll have incremental capacities coming online. So it's been a challenging situation for sure, but the team has done a great job of trying to bring visibility to where the bottlenecks could occur. And we're obviously taking database decisions, trying to account for what the risks could be, and we haven't placed any big bets that would require things to fall a certain way. I think we've been prudent about how we've done that. And we've been very transparent with our customers around what we were able to do. And certainly, we don't want to be the bottleneck that prevent these vaccines from coming to the market.

And is it safe to say, based on your comments on orders growth should be in line with revenues. And if I look at year-to-date trends, biopharma has grown high singles. It accelerated to double digits in 3Q. We haven't yet seen those orders, that 40% increase in orders flow through the P&L. Is that a reasonable common assumption?

It is, but it's also probably important to not get too far ahead of ourselves, not all of the orders that we see in our order book would be kind of incremental to what we would otherwise normally have seen in a non-COVID environment. As I mentioned earlier, some of our core customers who are starting to plan production for 2021 and would have demand, say, in the second quarter, ordinarily, they may not have ordered products on me until February or March for delivery in the second quarter. Recognizing the stress and strain in the supply chain, you see more of these customers placing their orders earlier. So we would have seen in the third quarter and even here in the fourth quarter, demand developing for delivery in the second, third, fourth quarter of next year. So that's why it's critical. You can't exactly extrapolate the doubling of the order book to -- oh my goodness, the business is going to double. I think what I'd want you to take away from our comments on that are 2 things. One, the core business, the non-COVID business continues to be very robust. We continue to invest in capacity. The pipeline is good. We're putting more content on every molecule that comes out. And we see continued momentum in that part of the business. And we're also starting to see commercial quantity orders for the vaccine also come into the order book. I think those are probably the 2 things I want you to take away from that. And hopefully, by the end of January, when we're talking about our fourth quarter results, we'll be in a better position to help guide what the potential range of outcomes could be for 2021.

That's -- that makes sense. Those are fair comments. And the vaccine opportunity. When you look at the base business itself, that's been a consistent high singles grower for you guys. But I think within that business, you have a couple of nuggets -- hidden nuggets, which I don't think the street understands very well. You guys speak about single-use technologies. Maybe talk about the base business and how that portfolio is changing. I feel like that business itself is set for an inflection. Some of your peers are doing double digits. There's no reason why Avantor over time as the portfolio transforms can be perhaps a double -- low double-digit grower in that business?

Yes. So the 15% of our group revenue that is bioprocessing has been growing low double digits to kind of mid-teens over the last, say, 4 to 8 quarters. Historically, where our business was more process chemicals, excipients, chromatography, cell culture supplements focused. The market for those types of products grows, call it, plus or minus 10%. And we were probably outgrowing the market by a couple of hundred basis points. And that's been consistent, at least since I've been here. As we've combined now with VWR over the last several years and been able to access a broader single-use portfolio. That's one of the triggers that has really driven our growth from, call it, 10%, 12% to more mid-teens to even upper teens in recent quarters is the performance of the single-use technology. That's obviously taking hold in our customers as they look for more flexible manufacturing solutions as you're seeing the introduction of cell and gene therapy, which tends to use more single-use. So that part of our portfolio has been growing at more than 20%, and then leading to a nice acceleration of the overall portfolio. So the core business, as I mentioned, is robust and it's growing in momentum. The access that we have through the channel now and to our customers has certainly stimulated growth of our pipeline. We're able to put more content on individual molecules, and we're excited about how our position -- positions are there and we continue to supplement that with our R&D and innovation activities. We've had some exciting product launches this year that have been a little bit masked from all the focus on COVID. But we've driven meaningful expansion to our total addressable market by the introduction of things like PROchievA, which is our proprietary protein a chromatography resin, which, just given the nature of how you earn specifications with a solution like that, it will probably be 3 or 4 years before you see a really meaningful impact to our revenue. But we're seeing those opportunities now. And I think we're excited about the work that our the [indiscernible] associates are doing and our innovation pipeline has never been more robust either. And so when you look at the access, you look at the capabilities and the and the products and solutions that we have, we're well positioned for the core business to continue to grow at a high rate. And we think that this COVID opportunity, it's obviously unknown whether it's going to be move into more of an endemic and become part of the core over time. Regardless, we think there are a number of positive outcomes that come from this activity that we've already engaged in one, we think that bio engineered vaccines and the efficacy that they've shown, at least here in the early days, will gain momentum, and you can probably think about taking these technologies into other vaccine areas that have not been used by these technologies before. And we also think that something like an mRNA technology, which has been being developed for other therapies and other indications that, that work will accelerate, for example. That we've been able to accelerate the development of some of these novel technologies under the umbrella of COVID that I think will now be able to extend into other therapies and accelerate those developments. So regardless of how the COVID opportunity plays out longer term, we think there's going to be some sustainable tailwinds that work the way into the core business over the longer term.

That has been now one of my fears. For tools group, I think, by and large, biopharma inflected over the last few years. That's the one thing that keeps you up awake as are we at the peak of the market? I mean it looks like those markets are very healthy and perhaps we could even see some acceleration in parts of the market as new technologies get adopted. Is that a fair comment?

It is, Vijay. And the way we think about it here is we were bullish on this space before COVID. And that was really driven by our view that the core monoclonal antibody workflow was still being well funded. There are a lot of candidates in the pipeline that are showing exciting early results for indications that would be important. Things like Alzheimer's, for example, some of the work that's going on there using that technology. And so we see a robust environment for kind of the core driver for this space, looking good for the significant years ahead. But you also now started to see the evolution of kind of the next wave of technologies that could drive that next step change. We've been talking about cell and gene therapy for a long time now. And over the last couple of years, we've seen some approvals in gene therapy, treating things like spinal muscular atrophy, for example, with some novel therapies here in the U.S. China taking a leading role in things like cell therapy. These are exciting technologies. It takes a long time to incubate these technologies, but you're now starting to see molecules coming out of the pipeline and into approval stage And so that's exciting. And we see that as a positive sign for continued momentum in this space. You now can add to that bioengineered vaccines as well as viral vectors and mRNA as kind of novel technologies that attract significant investments in the coming years, just given what we're seeing here play out in COVID. So we think -- I like the fact that there are multiple levers here that can drive the [indiscernible] that we've enjoyed here over the last 5 or more years. It feels like there's -- it's going to be a good environment for a number of years to come.

And I want to switch around my questions, Michael. But because one of the things that came out or not, the 3Q call was -- I know Tom isn't on this call. But I did want to give him a pat on this back for $700 million of free cash was up. That's a phenomenal number. I mean considering we're in the midst of pandemic, your guidance started at $500 million. Coming in at $700 million, that's an stamping number. At what level -- at what leverage level would you feel comfortable about M&A, Michael? And the reason I ask is you guys have a presence, you have a channel presence, and you reach a lot of markets, a lot of customers. And I feel like the power of the channel could be could be a compounding factor as you add more content on the platform?

Yes. Your point here around the cash generation is noted. And certainly I appreciate it. Tom and the rest of the team have done just done a phenomenal job driving that. And I think there's a lot of things that we'll look back on 2020 on as we exit the year. But certainly, the experiences that we've had this year, I think, highlighted a couple of really important points here. One is the resiliency of our business model. The fact that we have 85-plus percent recurring revenue exposure to some pretty attractive end markets, certainly has shown its value as we've been able to weather the significant headwinds that we faced this year. The team has executed extremely well in a pretty challenging environment. Now when you extend that to cash flow, perhaps it's best manifested they're if you go back to when we had guidance for the year, our full year free cash flow guidance is $450 million to $500 million. We're going to exceed that by more than 40% this year. We'll come in above $700 million, as you suggested. And actually been driven by a number of critical factors. One, obviously, the business has continued to grow and generate positive earnings. We continue to expand margins and execute on that part of our strategy. But the team has done a remarkable job managing working capital. And on a year-over-year basis, that's contributed meaningfully to the improvement in our cash flows. And the team has done just a tremendous job restructuring our balance sheet as we head into 2021, our interest cost next year will be under $200 million. And we don't have to look back that far just a couple of years ago, and we were well over $500 million. So that's certainly been an important contributor to the step-up in free cash flow here. But all that certainly has helped us deleverage, rapidly. From where we started at more than 7x, together with the proceeds from our IPO, organically, we've been able to deleverage about a turn a year. And so that has us ending 2020 at roughly 4x levered. Our long-term target is 2 to 4x. So your question is a good one. When is the right time to start deploying capital towards M&A? And I would say we're there. We've been building capabilities in a pipeline throughout 2020. You have a team in place and an ongoing cadence. We participated in quite a number of processes this year, some more seriously than others. And I think you'll see us continue to be disciplined. But we would anticipate from this point forward, being able to add 1% to 2% to our revenue growth from M&A. Doing bolt-ons and tuck-ins, and certainly would have the cash flow to be able to do that. And we have a nice pipeline of transformative deals that we'll continue to work on in shape. But I would be helpful of being able to deploy capital via M&A in 2021.

Yes, absolutely. I think one of the themes that has emerged at the conference. Post pandemic -- I think brand name matters, service levels matters and customers -- there's been this theme of perhaps share gains could accelerate post pandemic. Customers remember who stood by them during tough times. So all of those bode really well for the tools players in general, and certainly for you guys. I think a couple of other end markets, which have kind of lagged in applied tech and materials, government and education. I guess government was up, but education, obviously, with the shutdown was down in 3Q. When you think about those 2 markets, when do you think those businesses normalize? Is that is that sort of a mid- of next year normalization until we get to easy comps? I'm just curious on when you see the base business normalizing to pre-pandemic levels?

Right. So let me take each of those end markets separately. So if you look at our education and government end market, that's roughly 15% of our overall revenue. And that's -- probably 2/3 of that is education, roughly 1/3 of that would be government. Our government business has actually been quite robust this year, kind of -- and particularly in Europe, it's been a reversal of several years decline actually. As we've been able to pivot and provide significant testing or PPE content to various government-funded initiatives. So that's been a bright spot for the portfolio this year. On the education piece, that really hit the bottom in April and in the second quarter as many of the university labs were stuck down and in the Americas, we also have exposure to the K-12 environment. And with many of the schools going virtual, that demand was off dramatically, well over 50%. Fortunately, we saw a nice sequential recovery in that end market moving from second quarter off of its lows to in the third quarter in Europe, for example, our education business was roughly flat. The Americas, we're still seeing some headwinds, maybe 5% to 10% behind a normalized demand environment. And we've seen steady improvement as we move here through the fourth quarter. I'm a little worried about the K-12 business with the second wave of infection, more schools are going virtual, and we would have hoped by now to have had more students in the K-12 classrooms and in science labs, it feels like that's going to be a 2021 event and perhaps even post vaccine before that recovers. It's a modest part of the business. It's only a few percent of the overall revenue. In the university sector, fortunately, we haven't seen any impact from the -- at least negative impact from the second wave, and we continue to see incremental improvements there. I suspect they're going to need to continue to social distance and constrain capacity in those labs, presumably until there's a credible vaccine and you have broad access to that. So we're going to have to factor that in as we bring forward guidance for next year. But those markets continue to recover. On the applied side of our business, that's roughly 25% of our revenue, and about half of that is in end markets that tend to be pretty resilient, and we see continued growth in that part of the business. The other half of that platform a little over 10% of our revenue is going to be more cyclical in nature. It's going to be associated with end markets like oil and gas or petchem. And I think that's one of the things that I think surprised the Street this year is how well that part of our business is held up. Even in the peak of a downturn in the second quarter, that business was only off modestly. And in third quarter, it was probably off low to mid-single digits. PMIs over the last number of months have been positive, which support kind of a steadying of that part of the business. And even in some areas, some incremental improvements. That part of the business, we would only count on that to be a low single-digit grower. In any event, and so we're not too far off of normal there, but it's only about 10% of the business. So that's how we think about some of those end markets, Vijay.

No. Those are helpful comments, Michael. And then maybe in the last few minute chat that we have left here, I'm looking at Street numbers here. Street's modeling about 6% revenue growth for fiscal '21. And it's hard for us to make up what Street models have in terms of vaccine, new vaccine. Assuming there is no vaccine revenues in the Street numbers, and that's an assumption. Would that 6% make sense given your comps are a little bit easier this year. Implicitly, I think that 6% assumes next year is going to be a normalized year. Your normalized cadence, mid-singles would be 5%, perhaps easier comps, it gets you to 6. I'm curious on your thoughts on Street numbers. Is that something you guys are comfortable with? Or perhaps should we be a little bit cautious given first half? There will be some impact from the pandemic.

Right. As I mentioned earlier, we would anticipate being able to reinitiate guidance as long as things don't change dramatically between now and the end of January when we do our fourth quarter call. But so I don't -- it would be difficult for me to comment on what the Street has for 2021, whether I agree with it yet or not. What I can tell you, though, is how we're thinking about building up developing that guidance. We will very likely split this into our -- what are our assumptions around the core business. And to our earlier conversation, the core was growing 2% in the third quarter. We'll see where it turns out in the fourth quarter. It certainly feels likely to be incrementally better here in the fourth quarter. So we'll look at what the exit run rate is of the core business in the fourth quarter. And we're going to have to make some assumptions about some of these end markets that we talked about that still have some degree of headwinds. There was one we didn't talk about. Within our health care exposure, we do have a medical implant platform that has some exposure to elective procedure surgeries that are off. And so we're going to have to make a call as to how we see some of these headwinds dissipating throughout 2021. But we still have high conviction around our long-term growth rate of the core of 5-plus percent, and we'll have to see how close we get to that for 2021. We're then going to have to take a look at COVID tailwinds. And when we think about 2021, the tailwinds will still be in the same 3 categories as we talked about this year, we're going to have to make assumptions around what incremental growth we see from testing how will the PPE supply-demand balance evolve and then ultimately and maybe most interestingly, what's going to happen with the vaccine? And what impact will that have on our business. And as I indicated earlier, good news on the vaccine may not mean so good news for other parts of these tailwinds. And so we're going to have to be balanced as we bring forward those perspectives, and we'll be consistent in our assumptions there. And hopefully, between now and when we're providing that guidance, we have one, if not more vaccine approvals to work from and helping provide the guidance that we would have there. But I would imagine there'll still be a lot of variables unknown at that point. So maybe the guidance has a little wider range to it than what you normally have in a more normalized environment. But that's how we would think about it, Vijay.

Fantastic. I think with that we're at the end of the time. Michael, thanks so much for the time this afternoon. This was enjoyable. And all the best to you guys. And happy and safe holidays for you and the team.

Yes. Thank you, Vijay. Really appreciate all of your support and for having us here today. Happy holidays to you as well. Thank you.

Thank you.