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

Okay. Good afternoon, everyone, and welcome to the 42nd Annual Raymond James Institutional Investors Conference. I'm Larry Keusch, the hospital supplies analyst. I recognize that it is getting late in the day and we appreciate everybody's attention and focus, but we are really excited for our next fireside chat. It is my distinct pleasure to welcome Avantor. Avantor is a leader in specialty chemicals, proprietary materials, high value-added services and third-party distribution to a broad array of customers, including life science and health care applications. We are joined this afternoon by Michael Stubblefield, who is President and CEO; Tom Szlosek, who is Executive Vice President and Chief Financial Officer; and Tommy Thomas, who is not visible on the screen, is there and listening, who is Vice President of Investor Relations. So Michael, let's just start out because the one thing that characterizes the Raymond James conference is that it is a generalist conference, and so there are probably people on the line who are not fully aware of Avantor. You guys have been public now for almost 3 years. It's certainly a complex business with large numbers of products and end markets ranging from health care to industrial to education, et cetera. So maybe a good place to start the conversation is if you could talk about the corporate strategy, your algorithm for growth and how you seek to drive long-term shareholder value, and then we'll dive in from there.

Yes. It sounds really great, Larry, and thank you for hosting us. And welcome to all those who've joined our presentation today. Appreciate your support and your interest in our business. I think where I'd start in kind of teeing that up, Larry, is just by pointing out that Avantor is deeply embedded in virtually every stage, the most important research and scale-up and production activities in the industries that we serve. Our model is unique in that it's grounded in supporting our customers' early-phase discovery activities, and we serve as a one-stop shop in providing scientists all that they need to conduct their day-to-day research. We have a very customer-centric innovation model that enables us to provide solutions for some of the most demanding applications, and we leverage this access that I referenced to the early-stage work to seed content and solutions that ultimately becomes specified into our customers' approved production platforms, giving us an integrated way to serve our customers. And in fact, with this broad portfolio of products and services that we do have, we're able to support our customers' journey every step of the way. You mentioned that -- some of the end markets that we serve. Nearly 70% of our revenue is earned in life science applications. And with that level, we have more exposure to life sciences than any of our peers. And I think when you look at our -- kind of our customer lineup and the penetration of those leaders, it's a proof point of our relevance. And I think this last year in the pandemic certainly proved the relevance of our business. We have a pretty robust and specific value creation framework that includes strong organic growth over the last 3 years. We've averaged 6% growth. We have multiple levers for margin expansion that enable us to drive expansion in the range of 50 to 100 bps year in, year out. We've done actually better than that in recent times, but I think we're comfortable with that as kind of a going-forward reference. And then the business generates a tremendous amount of cash. We generated nearly $900 million of free cash flow with well more than 100% conversion of adjusted net income, and it will continue to expand from here as we move forward. Pretty unique, at least here in the short term, EPS algorithm in that we've been driving 30%, 40%, 50-plus percent growth of EPS in recent years as our model has delevered on top of the strong EBITDA generation that we've driven. We've done a lot of work when to remake our balance sheet, delevering the company from more than 7x a few years ago to 4x last year as we exited 2020, cut our interest expense from -- by more than $300 million, and that deleveraging has added to kind of a mid-teens base EPS algorithm and given our shareholders a pretty attractive value creation model. Going forward, I think once we get past some of this deleveraging, which we'll get the full benefit of that in 2021, I think beyond 2021, we'd probably think about it in terms of mid-teens-type expansion. But when you look at the end markets that we serve, I think collectively, we've got more than $75 million in addressable market. So we serve really large markets that have some pretty attractive growth dynamics. Biopharma is clearly the largest market we serve, representing a little more than half of our revenue and would tend to grow high single digits. We're well positioned across the entire value chain. It was about 2/3 of that revenue in the early-stage research and product development activities. And then we'll scale with those activities through clinical support and then ultimately in the commercial production of approved therapies. And in the case of COVID-approved vaccines, we're an integral part of our customers' development pipelines. When we look at other important parts of our portfolio, our advanced technologies platform represents about 25% of our revenue and historically would grow roughly mid-single digits. About half of that platform will come -- or half of the revenue from that platform will come from growth-oriented production platforms and things like defense and semiconductors and electronics. And the other half comes from more GDP-driven end markets, such as chemicals, and food and beverage, and oil and gas, and agriculture. Health care is an important area for us. It's about 10% of our revenue, and we're probably going to play in that space maybe in a little different way than maybe some of the other companies that you cover. It grows typically mid-single to high single digits for us. Half of this platform will come from our NuSil-branded silicones platform for our proprietary offering into the medical device industry. That industry works a lot like the biopharma space in that you're accessing these designs and devices in their early-phase discovery. In development processes, you're customizing a formulation that gets specified into that platform, you work through the regulatory process and then you service that platform for the life of the technology. The other half of the revenue of the health care will come from hospital and point-of-care facilities, clinical labs, reference labs and undoubtedly supporting their diagnostic workflows with testing and PPE and other things. We're certainly a component of elective procedures associated with this health care offering that has had some -- that has certainly had some headwinds as we approached the -- some of the height of the pandemic late last year -- or early last year, but it's certainly been improving since then. Education and government is an important area for us, about 15% of our revenue, seeing a lot of growth in that area, particularly the government part of that platform through the last year with our COVID offerings or more classically being pre-COVID. This platform is going to grow low to mid-single digits, and this is where we would have -- kind of 2/3 of that platform would be our exposure to the university research labs and the academic environment, and about 1/3 of that platform or roughly 5% of our total purchases or revenue would be in the government sector, state, local governments, World Health Organization, NIH, UN-type-sponsored programs that drive the business. So those are kind of the core end markets that we service, and they're all certainly unique in their own right. But I would say the way we serve them is similar and our model is certainly grounded in this concept that I've teed up here around supporting our customers' early-phase discovery activities, and that serves as the foundation for each of these end markets that we do serve and it certainly served us well as we have driven 6% growth over the recent times. We've driven more than 400 basis points of margin expansion in the last 3 years. As I mentioned earlier, we would continue to have our model organically drive the expansion, and we'll be able to accelerate that through -- shifting capital allocation towards M&A over time. And as we see being able to grow organically as well as put capital to work via M&A, we would see this platform exceeding 20% EBITDA margins certainly in the next couple of years. And when I take a step back from the entire framework, this whole system is underpinned by the Avantor Business System, which really drives a disciplined execution of our strategy and kind of puts our organization on its front foot and embeds this kind of kaizen, continuous improvement mentality in all of our associates every day. I mentioned the strength of the balance sheet with leverage now inside of our target leverage range. We've talked a lot in recent public statements about our shift in capital allocation. We're going to generate more than $800 million of free cash flow this year. When you look at the timing of when we might deploy capital, we would see us having well over $1 billion of capacity this year to invest in this business and bringing capabilities to bear this out. That's kind of a summary of the strategy in the end markets and the business model, Larry, and maybe sort of a great jumping-off point for our discussion here.

Yes. So that was great. One question I get, again, from investors who are not necessarily coming at this from the life science tools space, they sort of ask the question of what differentiates Avantor versus their competitors? And lots of different competitors out there but nobody quite looks like you. Maybe Merck is the closest, maybe. But how would you answer that question of kind of where do you think your differentiator is?

Yes. I'll cover maybe 2 or 3 really distinctive capabilities that we have. But our model and our strategy is unique in that we're primarily a material-centric portfolio with more than 85% of our revenue being recurring. I think that is a distinct development of our model just in how we play this space. But it may be important to highlight as a starting point, given the reliance on our business model of accessing early-phase research and development activities, just important to highlight our customer access. Our global scale enables us to serve more than 225,000 customer locations in more than 180 countries around the world. We have a lot of innovation centers that are strategically located close to where our customers drive their research and development activities, and we leverage these centers to drive extensive collaboration and customization of our product portfolio. And this is a really critical aspect of our model, particularly the material-centric portfolio like we have for serving these highly regulated end markets and earning these specifications that create the stickiness and the recurring nature of our revenue. We have a very broad offering and positioned here as a one-stop shop for all of our -- or the scientists of our customers that they might need. The portfolio is important. And we have more than 6 million products in the portfolio, including a number of services and high-value, customized specialty products spread out across a broad assortment of consumables and equipment and instruments and various materials. But it's an agile portfolio. And it's -- with the access that we have, we've got an incredible platform to bring innovations and new technologies across. Just in the last couple of years alone, we've added more than 300,000 new products to the portfolio with well more than 100,000 coming last year alone and many in response to the COVID opportunities. And so it's a very agile platform that enables us to position relevant content for our customers to be able to solve their problems. And I think the last element that is quite distinctive here and that's an important value driver for our customers is just making it easy to do business with us. More than 75% of our transactions that we process flow across our e-commerce platform, and we make it -- we invest a lot in the platform and do everything we can to make it easy for our -- the scientists of our customers to find what they need and to be able to get it transacted and ordered and delivered in a very efficient manner. With the network that we do have, we can reliably incredibly get products to our customers anywhere in the world in 24 or 48 hours, and that's an important aspect of the offering here. So I think those are distinctive capabilities that we have that give us a real advantage in the market.

Okay. Terrific. Before we jump into some of the product areas -- I guess maybe Tom can weigh in here as well. Michael, what did you learn about the organization during this very tricky, trying time during the pandemic? You're a company that's manufacturing your own products. You're a company that's distributing third-party products. What did you learn about, yes, if you put these 2 VWR together and the other parts of Avantor together? But what did you learn about this organization and its resiliency and ability to execute in this really tough time?

Yes. Larry, you make a lot of really good points there. We've talked a lot, going back to when we put the 2 platforms together and through the IPO and since then, about just how resilient this portfolio and this organization is. If you go back to other downturns in the economy, whether that's the '08, '09 financial crisis or others that impacted the macro environment, through all those occasions and again through the pandemic here, we've been able to grow the business. And I think that speaks to the relevance of our platform and our offering and how much our customers rely on us in order to kind of keep the lights on and keep their activities moving forward. I think we've also learned an awful lot about just how exciting of a space this life sciences space really is to serve. And certainly, the value of science to society has been on display here. And being as relevant and well positioned in this space as we are has proven to be extremely beneficial. We're working at a time here where the potential to achieve breakthroughs in life science has never been greater. You have new therapies that are emerging, and it's enabling us to treat some of the most challenging diseases we all face, including COVID-19, and we've certainly learned and had it reinforced just how critical we are to making these things happen. You're not getting mRNA to the market as quick as we've been able to or some of the other candidates to market as quickly they've been able to get there without our involvement. We're going to be relevant across all of these modalities and deeply embedded in -- right from the very beginning of the development of these therapies, or vaccines in this case, an integral part of the production processes. We've partnered very closely with our customers, with various regulatory and government bodies around the world that are leaning in to help bring this pandemic to an end. And I think it's been great to see just how relevant the business is. You talked about the team and its ability to execute in a pretty challenging environment. I think our financial results last year bear that out. It was a very challenging environment, and this team is extremely passionate about the customer and doing everything they possibly can in order to meet our customers' needs and to keep them running because they know that behind that customer is a patient. In this organization and our -- all of our 13,000-plus associates feel a great responsibility for the role that we play in this value chain. And it's very motivating. We spend a lot of time talking about it, but it was great and really heartwarming to see some of the herculean efforts some of our associates engaged in, in order to keep our customers supplied, warehouse leaders that were delivering products to our customers on their own after hours or opening up facilities after hours to keep our customers supplied. It was just really great to see the organization band together with a singular focus in mind of helping people around the world, but it's a fantastic organization that's extremely customer-centric and extremely agile. And I think that's another thing that we learned about this organization: to be able to pivot as quickly as we did and to come out with a relevant portfolio and solution set to treat some of the requirements here, whether it be in PPE or testing or vaccine support. We brought over 100,000 products to the market last year, many of which were added specifically to address COVID, so very agile and nimble organization that's quite responsive to our customer needs. So certainly, the pandemic has put a lot of hardships on all of us and we're as anxious with anybody to see this pandemic come to an end, but it really did allow the organization to show how resilient it is and how relevant that we are to this space.

Tom, anything on your end, maybe on the finance side or anything that struck you? You're on mute.

Yes. Being relatively newer to the team and joining just right before the IPO and then seeing how the team can execute -- and Michael talked about the execution, but you can talk about the execution, the framework of integrating VWR and synergies that were created both from a cost perspective and from a channel and commercial perspective, we're -- really impressive, far exceeded expectations. And then just the overall transformation of the business model itself. I mean if you look at the growth rate prior to this combination and now if you look at the margin rates, you look at the sheer amount of cash that's being generated well in excess of 100% of adjusted net income, it's -- when the team is focused in the right direction, they really can execute. So it's very action-oriented, I would say, for sure.

Thanks. Terrific.

And I'm looking for what we can do on M&A, kind of -- yes.

I want to get -- yes. I want to get to that discussion. So just a couple of things here. So look, I guess you can't have a discussion about Avantor without at least having some discussion around vaccines. And I want to get to that, but I also want to talk about perhaps before we do that, if you look at -- so again, I cover a lot of the hospital supply companies, and so very focused in on kind of what the manufacturers are doing, kind of how are they starting to think about when elective surgical procedures will come back towards 2019 levels. You guys obviously interface a lot with them particularly in the new sales side of the business. So what are you seeing in your order book there on the non-vaccine pharma side but more of the medical device side, the implantable side that might give us some clues as to how they're starting to think about when this may all start to normalize again?

Yes. So one of the headwinds that we've been tracking pretty closely since we kind of bottomed out in the second quarter of last year, that part of our business is off well into the double digits. And in fact, in many jurisdictions, particularly here in the U.S., these elective procedures you're referring to were prohibited just to preserve infrastructure capacity to treat COVID patients. So it's obviously the right thing to do. But we've seen a steady recovery of that business moving from the second quarter sequentially into the third quarter. And by the time we exited the year, we were kind of mid- to high-single-digit decline in that part of the business. As we looked ahead and we were talking with our customers about what to expect for 2021, I think they were optimistic. And as we have talked about how our full year will shape up, we've talked about our business growing 4% to 7%. And embedded in that would be continued sequential recovery of our NuSil business and other solutions for some of these diagnostic tests that might be considered to be a bit more elective with an expectation that sometime in the second half of the year that those platforms would get close to back to normal if not back to normal all the way. Given the proprietary nature of our offering to the medical device space and the lead times for a lot of those solutions, which can reach into the -- several months, we've obviously been watching the order book very carefully to look for signs as to -- is this assumption about that business maybe getting back to normal in the second half, does that seem realistic. And I would say we're well on our way there. The order book is building rapidly and has been building rapidly, and it's probably as strong today as I've seen. We've been running that platform since late 2016, and it's probably as strong in order book as I've seen for that part of our business. And so I think we're highly encouraged about the trends that we're seeing there and the pickup of business that we've even seen in the first quarter. I don't think that we'll be at a normal growth rate in Q1, but I definitely see a path to getting that business back on track within this calendar year for sure.

Okay. That's great. All right. Switching gears to the areas of the business that were benefited by COVID, you talked about this $250 million to $350 million benefit split between sort of diagnostics, PPE and, of course, vaccine exposure. When we think about where your head is at this point as to the durability of the vaccine revenues -- I mean I don't know if we're at peak right now, but I certainly feel like there's a more durable revenue stream. Whether it's 2 years, 3 years, 5 years, I don't know, but probably more durable than diagnostic. So we'd just love to get some sense of how you're thinking about that.

Yes. So you're talking about our -- the tailwinds that we've indicated for 2021, being in that $250 million to $350 million. And we have deliberately added kind of a plus to the end of that range to indicate that, look, there is some fogginess, if we put it that way, in terms of the outlook. And it is a challenging space to try to forecast. But I think the way we see it, the kind of similar levels, if not maybe slightly stronger tailwinds in 2021 compared to 2020, but a much different mix of tailwinds for us. With now 3 approved vaccines in the market in the U.S., we're anticipating at least half of our tailwinds to come from supporting the production of vaccines. And given an outlook that would have tailwinds at roughly equivalent at last year's levels, that means that the growth in vaccines is being offset somewhere else. And in our case, we think that will come from testing. We ended the year at a pretty high clip and pretty high rate of support for testing across really both PCR as well as antigen-based testing. We see that continuing in the first quarter and our -- I think our outlook would have it reasonably strong in the second quarter as well. But I think for us, it stands to reason that as the vaccine becomes more readily available as more people around the world develop immunity that there'll be a significant reduction in the transmission rate of the virus, which means you'll have fewer people presenting with symptoms or suspecting some things that are going to need to be tested. And so that's kind of baked into the outlook. Now we would readily recognize or acknowledge, however, that there may be other areas of our life where testing becomes more profitable that isn't factored into that. So for example, we're obviously watching closely -- the new administration in the U.S. is driving increased and enhanced funding for testing in schools, so the means to get students back in classrooms. We've got -- most employers are having their employees working from home these days. And as that trend starts to reverse, do we start testing more to bring people back and giving them confidence to be able to come back to work? Does that become a way of life associated with travel or attending in an entertainment venue? You hear all these things being talked about that could potentially offset some of the decline that we've got baked in. But nevertheless, we would agree with a point of view that the vaccine is perhaps a bit more durable. I think when you look at 3 vaccines in the U.S. being now approved and if you look at the publicly announced production levels from those 3 manufacturers, it seems very likely that anybody in the U.S. that wants to get vaccinated will be able to do that over the next few months, which is a good thing. But it's also becoming more apparent that with the various mutations of the virus that are out there and the variants that have kind of crept into the system, I think they're -- the industry is kind of coalescing around a view that there's going to need to be a need -- or there will be a need for a booster shot to address these variants probably heading into the winter respiratory infection season. And I think there's been some widely publicized polls of experts and studies that have been published that would indicate that I think a lot of the experts think that this becomes somewhat endemic after that point. So it could be something to expect maybe an annual booster shot that we would need to get at least for the next 3 to 5 years perhaps and beyond that, somewhat uncertain. I think it's also important to recognize that while we'll likely be able to vaccinate anybody who wants to be vaccinated in the U.S., there's going to be large swathes of the globe that won't have access to a vaccine this year, and that's going to need to be rectified. And I think that will provide some level of durability to this vaccine trend at least for the next few years. And somebody like us who has a global footprint and is able to support these platforms and production around the world, we'll now be able to participate in some of that. The piece that I'm probably more excited about though because I think it's a bit more predictable here is just the rise of bio-engineered vaccines as a relevant category for those of us that serve the biologics space. If we've learned anything from the pandemic here, it's that things like mRNA, things like viral vector can be quite effective at interrupting transmission of some of these infectious diseases, whether it be things like flu or things like HIV, perhaps in the future that you might attack with these new technologies. And we know that many of our customers have pivoted their development programs to develop vaccines for some of these other areas that are using alternative technologies. And I think that's pretty interesting for lot of reasons. One, if we can get a flu vaccine that's 95% effective, that has substantial impacts on all of us, in our lives as well as on the economy when you think about the hit to productivity and GDP that comes from people getting flu every year. But it enhances and increases the addressable market. And I think there will be a lot of relevant vaccines that will leverage these technologies that we've had exposure to and as, collectively as an ecosystem, we've been able to develop and bring to market and improve the benefits of, I think, gives us another relevant technology that will fuel continued growth in this space. Monoclonal antibodies aren't going away anytime soon. That continues to be a very strong part of our growth story, and you're growing probably in and around that teens level with a very rich pipeline of new molecules being developed. And so we see strength coming from monoclonal antibodies. Cell and gene therapy, we're trying -- we're getting a lot of traction pre-COVID. And there's a lot of investment and promise from that as a technology. And now you have your bio-engineered vaccines as a category. And I also think you'll have things like mRNA as a stand-alone modality to go after things like neurodegenerative disease and oncology. And so I think investment and support for R&D is going to be pretty frothy given some of the potential outcomes here, which will drive the business. And so we were excited about the space pre-COVID. And given these dynamics I've just explained, I think we're even more excited today coming on the -- hopefully what happens to be the back side of the pandemic.

Great. [Operator Instructions] We've got, I don't know, 5, 6 more minutes here. Mike, I had one last one for you, then I wanted to just ask, Tom, a couple of quick ones here. Relative to -- let's see. It's been, I don't know, roughly a month since you've reported your earnings, and you certainly indicated that the order book looked very good on the vaccine side in terms of the raw materials that you provide. I assume as production continues to ramp up, is that order book firming up even more? So is that a fair thought there?

It is. The order book continues to accelerate day by day. And even since we last spoke publicly about a month ago, it's continued to build. So we've got great visibility well into the second half of the year at this point. And I think it just gives us an enhanced confidence in the outlook we provided for the year, and I think we're set up to have another really terrific year with positioning that we've got here.

Okay. Perfect. Tom, 2 questions for you. First, on margins, historically, the guidance has been in that kind of 50 to 100 basis point improvement in margin. I recognize this year is still -- even though it's 2021 and it's a new year, it's still cloudy. And you did guide to more like 50 basis points of margin expansion. Just the philosophy behind that. And is there something magic about that 50? Or is that just a good starting point? And hopefully, by the end of the year, we'll do better than that?

Yes. I would -- it's a good question, Larry. I think you've given the right context for it. This is a funny year. We're dealing with COVID headwinds, as we've talked through, in our education, government space and elective procedures and in the industrial space. We've got tailwinds. And the timing and exact weighting of each of them are almost impossible to predict. You could run all sorts of scenarios and come up with -- what we think the most probability-weighted scenario would be, we just said, "Look, we continue to be committed to expanding margins 50 to 100 basis points a year. Our internal plan for 2021 reflects that." But given those moving parts, we said, "All right, for starters, until things stabilize, let's just say commit to a minimum of 50 basis points." And that's how we arrived at the guidance. We actually -- we struggled with whether to provide guidance at all. And at the end of the day, we decided that it was something that I think would be useful to our shareholders and the analysts that follow the company. And so that was kind of the background.

It sounds like, Tom, the philosophy, just in the last point that you made, was if you're going to provide guidance in a year that again had some fuzziness with it, try to put out things that you've got high convictions in attaining. And if you do better than that, great. But it sounds like it's sort of a starting point for that point in time when you provided the guidance.

Yes. I mean our margin drivers that we talk about are all intact, whether it's the strong mix benefit that we're getting from a higher mix of proprietary products. And case in point, all the vaccine revenue is very much in that category. We've got really strong acumen when it comes to managing the pricing and commercial aspects of our business and managing that against the inflation that we do see. We've got the volume leverage. We have a fair amount of fixed costs, and those are -- we try and drive any inflation and -- for example, with merit, we try and drive productivity with some of the investment we make to offset inflation. So we've got that going for us as well, so a number of good things that we talk about that apply as much to 2021 as they do to the long term. And we think they will all contribute to a nice year of margin expansion, assuming the growth is there.

Great. In the last couple of minutes here -- so while I think the vaccine revenue stream is terrific and it probably will be endemic, again, if you look at -- I know there's been a bunch of journal articles. Nature was one that I happen to see. What gets me more excited is that that's a revenue stream that drives EBITDA for this business, drives your leverage down, and I think better positions you for M&A. So what I get really excited about is where are you guys going and when did that side of the story kick in, which has been precluded from over the last several years for obvious reasons. But this is a team that those -- had to do M&A, done large M&A. Now you're going to do, I think, bolt-on M&A. So you should have the competencies to be able to do it. But maybe talk, in the last minute or 2, just on how you see that unfolding as the pipeline sort of starts to get executed against.

Yes, do you want to take that, Michael?

Go ahead, Tom.

Yes. Sure. Yes. So Larry, I think your instincts are right. First of all, the capacity has certainly really materialized nicely. You can argue that all of our cash flow that we generate could be used for M&A, and we would still improve our leverage ratio by virtue of growth in EBITDA and the incremental EBITDA you'd get from the acquisitions. But we're -- to your point, we're in our leverage -- our targeted leverage range right now. And every month it goes by, we get deeper into it. So we're getting closer to 2 and further from 4. But remember, we started out around 7 not 2 years ago. So it's been quite a path to generating that capacity. We're excited about the areas that we've talked about that we want to invest in. They center around proprietary products, whether it's in the biopharma production area or in the research space that we support or in services. All of those areas, while we're happy with our position, there are a number of workflows that we'd like to be stronger and we'd like to participate more in, and we're intent on doing that. We have a pipeline for each of those 3 businesses, an M&A pipeline. We look at it and are taking action on it every single month with Michael, myself and the leaders of those businesses. And we're getting to step up to the plate in some opportunities. Ideally, we like to keep them just a one-on-one kind of thing and avoid auctions and processes but you never can do that. But we're starting to get some interesting things that would fall into those categories that I think will be accretive to all of our financial metrics that we've talked about, will be accretive to our growth rate, enhance our margin rate, enhance our return on investment and by themselves, generate cash flow from the get-go that enables us to delever for whatever incremental net leverage we would have taken on for that. So we've had the organization in place for over a year now, and they're getting good traction. These are long lead time type of things, you can appreciate. And sometimes, they suddenly can be ready -- ripe and ready to go. So we're prepared and we're actively engaged is what we can say.

Okay. That's terrific. Listen, I've taken you guys a couple of minutes past our allotted time. I can see, in the background behind Michael, it's getting dark out. So that's probably my cue to stop here. I could keep going with questions for another 15 minutes. But hey, look, I really appreciate the time this afternoon and attending the Raymond James conference, and we look forward to catching up in the future and at some point in person. So thank you again for your time today.

Thank you, Larry. Thank you, all. Have a great rest of your day.

Okay. Bye-bye.

Thank you, all.