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

Okay. Good morning, everyone. Thanks for joining us on day 2 of the HealthCONx. We're kicking off the life science tools at the Avantor. And we have CEO, Michael Stubblefield; and CFO, Tom Szlosek; and I think Tommy Thomas, who heads Investor Relations, in the background. Michael, Tom, thank you for taking the time this morning.

Vijay, great to see you. I appreciate you hosting us today.

And it's -- for you guys, Michael, it's been a really interesting 3 months for it. I just -- like that Analyst Day was -- that there were so many bullish data points in that Analyst Day. And then we went through a month, 2 months of confusion. And I think the 3Q earnings cleared a lot of the confusion around debt financing and what was said or not said. But as I look at Q4, your guide, I think 10% to 11% for the annual implies, I think, low singles for the base. This is ex COVID, right? And some of the comps do get harder, I think, it makes sense, the guide. But maybe talk about EU restrictions. Is that a new phenomena and this Omicron having any impact on the business?

Yes, Vijay, great place to start and maybe even to take it up a level. The business has obviously performed extremely well this year, showing strong growth across the core. And we've been opportunistic in being able to capture some of the COVID tailwinds, particularly in the vaccine area. We've got a guide out there that we talked about at the -- in third quarter of 10% to 11% as you indicate. And that implies, I think, on the low end, low single-digit growth for the core and perhaps mid-single-digit growth of the core at the upper end. And we're a couple of months into the quarter and certainly haven't seen anything that would cause us to change our view. We remain quite optimistic about where we sit as a business. A lot of noise, obviously, over the last number of days regarding the new variant. And I don't know that we have any particularly unique insights. It's obviously early days in that. It hasn't had any impact on our business as of now. And there's obviously been -- even prior to the -- this new variant, we've seen an uptick in cases around the world, particularly in Europe, and certain measures being taken around lockdowns and other measures. And at this point, I think most of our customers have figured out how to run in this environment. And even the actions that we've seen over the last month really haven't materially impacted our business one way or another.

That's helpful comments. And maybe related to that, are you seeing any year-end budget flush, Michael? I know academia tends to be a little spotty, the business. I'm curious what you're seeing from your customers?

Yes. I think the -- when you look at this so-called budget flush dynamic, where that would impact our business would be in the equipment and instrument product category. Traditionally, this is where customers may have some flex in spending budget or making some discretionary decisions on capital purchasing. And that's about 15% of our overall revenues. So not a significant driver, but it can -- on the margin, can drive a little bit of upside or, as the case may be, a bit of downside. The equipment instrument category this year, just given the year-over-year comparisons, has been rather robust. We've seen strong double-digit growth of that category all year. And I think even in the second quarter, it was probably up over 30% on a comparative basis. That category continues to be strong for us in the fourth quarter and I think we would expect it to at least finish in that high single-digit level in the quarter. So which is, on a comparative basis, stronger than what we would traditionally see out of that category. That category would normally grow at that level. So it's a little bit hard to see through the strong growth that we're seeing as to how much you could attribute to a so-called budget flush versus just ongoing recovery from COVID. But nevertheless, the category continues to perform well. And we're anticipating a good finish to the year in that category as well.

Understood. No, that's helpful. Maybe one on -- the other thing that caught my attention on the 3Q earnings call was a commentary on fiscal '22, the mid-single-digit outlook. I think that was inclusive of COVID headwinds, right, which, I think, implies your base 6% plus, 6% to 7%, considering that your LRP assumed 4% to 6%, right? Maybe talk about some of your thought process heading into fiscal '22, why the business is trending? Or do you think the base should do a 6% to 7%?

Yes. Great lead in, Vijay. You're right in saying or pointing out that our LRP is in that mid-single-digit level. We talked a lot about how we'd get there at our recent Investor Day. And you're right, I think we haven't given full guidance yet for next year. We'll do that early next year. But at least, as we sit here today, we would anticipate being able to deliver core growth in line with our long-range plan. And that would be inclusive of the headwinds that we would anticipate from COVID. But to frame that for you a bit, Vijay, I think it's important to recognize that all of our end markets have [ significant ] momentum as we exit 2021, and especially in biopharma, which represents a bit more than 50% of our revenue. And if you go back to pre-COVID times, which seems like a really long time ago at this point, our business was performing at the high end of this LRP on a core growth basis. So certainly, that's probably the right baseline to think about. Now during this COVID period, over the last couple of years, obviously, any comparisons to prior periods has been pretty complicated and noisy. But I think as we look at it on a maybe a 2-year stack basis, and you extract out the tailwinds we've been getting, particularly this year from things like vaccines and testing, and look at just the core on a 2-year stack basis, you'll see this year, we've been growing very solidly in that mid-single-digit level on a stacked basis. So all that to say the business, I think, has demonstrated its ability to grow in that mid-single-digit level. Now to unpack where that growth comes from, about 2/3 of that historically has come from volume and about 1/3 of that has come from price. And I think this is important to understand because it gets to why we're confident in being able to offset the COVID headwinds we would anticipate next year. It's no secret we're all operating in a hyperinflationary environment. And we're well into our 2022 pricing cycle at this point, both with our raw material suppliers as well as with our customers. And it's clear, pricing will have a heavier impact in 2022 than it has historically. And when we look at that incremental contribution from pricing, I think we're certainly confident that, that's going to be able to offset the roughly 200 basis point step-down in the contribution from COVID going into 2022. So you put all that together, core business, we think, will continue to grow mid-single-digit levels, going to get a bit of a tweak from incremental pricing that will offset the COVID headwinds, landing us back in that mid-single-digit level in line with our LRP.

Yes, that's very helpful comments, Michael. Maybe off of that comp, perhaps you -- when you think about the dynamics for next year with pricing perhaps coming in a little bit better, does that have any implications for margins? Or perhaps given the supply situation, your margin outlook for next year should be in line with your LRP targets?

Yes, it's a great question, Vijay. And as you know, we'll give our more detailed guidance on margins when we give the fourth quarter -- or sorry, the fourth quarter earnings release in the next year's guide, at the end of -- into January or early February. The overall model, as you know, and just to refresh your listeners, is we have a 50 to 100 basis points expected margin expansion each year. And historically, we've been on the higher end of that. And it's driven by a couple of factors, one being the good, strong contribution we have from leverage when we're growing at the high end of our 4% to 6% growth range. That certainly is a -- contributes. And then the mix of that growth has also been in our favor relative to margins. As we emphasize more proprietary products, whether it's the bioproduction that we've talked about, some of the biomaterials offerings, other things that we're bringing to market, those tend to be superior when it comes to gross margin. So you get a good mix on that as well. And we've got ongoing commercial focus. To your point, we've always had a very strong [ acumen ] when it comes to managing pricing relative to inflation, but also relative to position that we have and things like value pricing and next best alternative and the type of investments we've made upfront in some of these platforms that we get on. So we've been able to manage that. And it has been accretive, like the net pricing versus inflation has been a net accretive and a contributor to that 50 to 100 basis points. And as I've said, we've been on the higher end of that as well. As you look into 2022, all those same dynamics, I think, come into play for the most part. I mean, we're going to have to quantify them. But specific to the inflation that you mentioned, I mean, we're very cognizant of that and working various initiatives, whether it's in in-sourcing, productivity, consumption. But also the commercial aspects and working with our customers is an important part of this. We still are confident that, net-net, that should be an accretor to the margin rate, so contribute to that 50 to 100 basis points, maybe not to the extreme that it has in the past, given the enormous inflationary headwinds that we have. But I think it's something that this business has demonstrated a strong capacity to manage in the past, and we're focused on it. I mean this is kind of the make-or-break part of the year relative to setting 2022 expectations and getting agreements in place with customers and so forth. So more color to come, but that's how we're thinking about it right now. And then the other thing I'd add to that is the contribution from M&A. As you know, both Ritter, RIM Bio and Masterflex all have superior margin rates to our overall portfolio. So if you think of us as -- on a legacy basis is sort of a 20%-ish type of EBITDA margin. Those businesses are significantly higher than that, and they will also contribute. But that 50 to 100 basis points does not include the impact from M&A.

So that's a base, 50 to 100 basis points. I mean that's really impressive because I -- maybe just one more comment on this topic. Michael, I think I go back to the IPO -- post-IPO days. I think one of the questions was margin expansion for the company, right? You guys have done the cost actions, but it's -- perhaps there's not a whole lot of opportunities left. When I look at the comps for you guys, this year was really, really strong, north of 200 basis points of margin expansion. If there are ever was a year when I would have said that I want to remodel like it's below that LRP, like it should have been next year. But the expenses coming up, inflation travel picking up, I'm kind of -- this actually surprised me, your comments on 3Q call on margins. Maybe talk about that execution aspect of, Michael, and -- because I don't think it gets a lot of attention on the Street, the execution that you guys have done so far in managing -- navigating the environment. And what gives you the confidence in hitting those margin goals?

Yes. I think, Vijay, one of the hallmarks of the organization is its ability to execute. And one of the things we tried to do at the Investor Day was to kind of take the -- our stakeholders back to what we've said from the beginning of our journey in terms of growth and margin and deleveraging, even some of the governance commitments that we have made. We've delivered or exceeded our commitments all along the way here. And certainly, the pandemic has challenged our entire industry, given the rapid uptick in demand and all the supply chain constraints we've all had to deal with. But with being able to leverage the tools and the discipline and the culture associated with our Avantor Business System, our ability to execute has been on full display this year. And you see that in the results, not only in the strong growth, but also in the superior margin expansion that we've delivered. On margins, specifically, when we brought all these businesses together, we were around 14% EBITDA. And as Tom mentioned here, we'll do plus or minus 20% EBITDA this year, and it's going to grow from there as we start to bring the full power of our model together with M&A. But it's not a random watch here. This is a deliberate plan that we have in place. And when you think about things like productivity, that's not a onetime event in our culture. We're continuously driving for improvements in all of our processes. We have a rich and deep pipeline across our enterprise of efficiency improvements. And certainly, it's -- and part of our obligation to our customers to not just pass price through, but try to offset these things with productivity where we can. And we do all these things and we do it consistently. And whether there's inflation or not, we're focused on productivity. So it's a great business model, and I think all credit to the team in the organization for their ability to consistently execute using the business system we have in place.

Operationally, has anything changed for you guys at all? Like as you think about life as a public company, any of your practices changed over the past 2 years that's given you this confidence on execution?

Well, certainly, the -- these businesses that we installed about 3 years ago is maturing, and we're deepening into the organization where that resides. And I would say, if I look at -- when I go to our sites today, the depth and the engagement of our associates in that system and the understanding and the linkage of -- down at a work cell level to what they're needing to do on a -- literally on an hour-to-hour basis in order to align with our plans for the month and the quarter and the year is pretty impressive. And so I would say that's probably the biggest change, Vijay, is just the maturity of the organization and the deepening of and the engagement with our associates and the discipline that we're trying to carry out, much less being top down and now much more pervasive across the organization. So the organization continues to mature, and we'll continue to get better at it, but clearly proud of how our organization has stepped up in a pretty difficult and challenging environment.

Understood. And then maybe a couple of topics on -- housekeeping topics. One, I think, on COVID, you mentioned a couple of hundred basis points of headwind. That's the assumption where we are right now. I think that implies maybe a $250 million contribution for next year. Is that all vaccines? Or is that some diagnostic PP&E baked into that number? Or just talk about the different COVID moving parts for you guys.

Yes. So at a high level, Vijay and important to remember that the COVID tailwinds for us in 2021 are relatively immaterial, less than 5% of our overall revenue, and it will come in around $400 million this year. Comprised of 3 components, roughly 50% of the contribution will come from vaccines, 40% to 50% will come from diagnostics and the balance will come from PPE. As we look ahead, we would anticipate the contribution from the vaccines to be in line with what we've seen this year. And I think we'll continue to see the headwinds will then come from continued step-down in PPE and diagnostic contributions. We don't see either of those going to 0 next year. I think we'll see a steady-state level of contribution coming from both of those. But when we look ahead, the step-down in both of those categories, we think, is where the 200 basis point headwind will come from. And obviously, that's an assumption. We don't know what the impact of the new variant is going to be. But I think -- it's early days, but I think it's -- I think somewhat supportive here of the view that this is going to be more endemic than not. Certainly vaccines are going to play an important role. And whether or not the current vaccines or you need a different vaccine to address these new variants, I think that even gives us more confidence. Because when you -- if you listen to the comments from the 2 primary mRNA producers, it's really just kind of a lift and shift, if you will, of their technology. The process technology is going to be the same. We will provide the same materials, same specifications to them regardless of what the molecule is going to look like. And they're going to need to do it at a speed that isn't going to allow for changes. So I think we feel very, very good about the durability of our role in serving these vaccines. And certainly, our order book would support that. We have an order book for bioproduction at this stage, which will include what we'll do for the vaccines that goes out a full year at this point. And so I think we're quite bullish about the vaccine durability here. And I think perhaps there's going to be some upside on the testing or PPE side as you see flare-ups from time to time, but we're anticipating a continued step-down in those areas, Vijay.

Understood. And then, Tom, maybe one for you on -- I know on the 3Q earnings call, you made some comments on share count perhaps. How should we think about share count for fiscal '22?

Yes, I mean, that's a great question. We've been getting some questions on that. As you know, since the IPO, Vijay, we've used a consistent -- for -- this is for adjusted EPS as opposed to GAAP EPS. But for the denominator on adjusted EPS, we've used the same share count outstanding, 642.7 million shares since the IPO in May 2017. And when you compare that adjusted share count, that 642.7 million, to our GAAP share count, it's consistently higher. So it's more conservative, adjusted EPS basis versus GAAP. The reason we did that, for the most part, was to reflect the dilution that we'll get in 2022 -- in May 2022 when those mandatory convertible preferred shares convert. That will add roughly 60 million to the outstanding share -- the GAAP outstanding share count. And then you have, of course, the Masterflex, the share -- about 25 million shares that were issued for Masterflex. That will also increase the GAAP share count. And then also -- which has been reflected in the GAAP share all along is the slight dilution from employee equity-type issuances. So long story short, beginning in 2022, we're going to utilize the same share count for both GAAP and adjusted earnings per share and sort of take out the noise. Because by the time we get through May, it's going to be roughly the same in any case. So if you look at 2022, we expect roughly a weighted average share count of probably in that, call it, 685 million, 690 million shares. For simplicity, we'll continue to use the same 642.7 million for the remainder of 2021. And as always, we'll continue to reconcile the 2. Our earnings release materials, it included a very clear reconciliation of GAAP share count to GAAP EPS, which we obviously won't need as we go forward here.

Yes, that's helpful comments, Tom. I think I'm looking at my model as we speak, we're, I think, at 693-ish, so we should be okay. Maybe, Michael, I do want to spend some time on biopharma, which, I think, has been -- it's been phenomenal for you guys for a couple of reasons. But I do want to knock off one near-term question. I think the FDA issued some regulation on breast implants. Does it matter for the NuSil brand when you think about '22, either from a customer demand, et cetera?

Yes, Vijay, the biomaterials portion of our business that you're referencing continues to run at a very high level. That gets reported primarily in the health care end market that we report. And in the third quarter, that business was running at record levels. And we don't talk a lot about the order book for that business, just given the overall magnitude relative to the rest of the company. But similar to bioproduction, our biomaterials business has an equally impressive backlog of orders that will take us well into next year. That's a very diverse platform is that -- like the reconstructive implant market that you referenced is a piece of that, but we have several hundred application areas that, that business supports, things like pacemakers and cochlear implants, devices for deep brain stimulation and the list goes on. Very exciting innovation pipeline that fuels strong growth, and we really like the margins in that business a lot. So it's a heavily regulated environment that we operate that business in. You mentioned some of the requirements from FDA. We like businesses that have high regulation. That's -- our biopharma business is no different. We have a tremendous amount of expertise. And this particular area has probably been one of the more studied areas and one of the more heavily regulated areas. And we think that gives us an advantage, just given our experience, our purification technologies, our regulatory expertise and the work we do with our customers to support their registrations and their interactions with various regulatory bodies. So I think we're excited about the shape of that business, and certainly, the trajectory of that business has a lot of momentum in it. We're excited about the future of that business. In fact, I was out in our R&D centers. And our manufacturing presence for that business is primarily in California, and I was out there a few weeks ago and got to spend the day with our R&D team, looking at some of their more promising endeavors that they're working on. And pretty exciting pipeline, it's an extremely flexible material. And just given the number of applications that are going inside the body, very, very promising pipeline, Vijay, where, as a business, we like a lot.

Yes, that's very helpful comments, Michael. I think, again, these are in markets where I think, in general, investor awareness is -- it's low. So I'm sure people will find those comments helpful. And then switching over to biopharma. For me, personally, the Analyst Day had a lot of details. It was helpful in understanding the business. A lot of times, the questions we get is, what does Avantor do in biopharma? And I think you laid out the pieces quite clearly. At a high level, maybe if I look at biopharma outlook of high singles, Michael, 1/3 is production, which should be double digits, right? And you have research and the clinical piece, which is 2/3. But given all the acquisitions that you guys have done, I think you're getting bigger in production. So how should that mix look like 3 or 5 years from now? And should that biopharma growth accelerate because you're increasing exposure to production?

It certainly will, Vijay. You've got, I think, the setup correct. Biopharma for Avantor is roughly 50% of our revenue. And then if you unpack that, roughly 2/3 of that is R&D and clinical, as you suggest. And historically, about 1/3 of it has been production. The production piece has been growing well north of 20% this year, and if not, 30% relative to the R&D environment, which has been maybe high single or double-digit kind of levels. And so just that difference in growth rate of the 2 components of the biopharma end market for us is going to drive, over time, a stronger contribution from bioproduction. You then add to that our acquisition strategy. We've made 2 acquisitions this year that fit squarely in bioproduction: the RIM Bio acquisition, firstly, in China; and then more recently, the Masterflex acquisition. And when you put those into the business on a pro forma basis, you're going to see the bioproduction part of this business exceed 40% here in the near term, Vijay. And maybe even more interesting is when you look at then that portion of our biopharma exposure, kind of the mix shift that we see in our business and how much of that is going to come from single use. Historically, the single-use contribution for bioproduction for us was maybe 25% or thereabouts of our -- of the revenue and the rest being chemicals. With the acquisitions we've made and the focus and the investments in organic capacity, the single-use business, including the contribution from Masterflex, will approach 50% here over the next couple of years within bioproduction. And that's exciting for a lot of reasons, including the fact that, that part of the business grows most rapidly in that bioproduction workflow. So we're -- we like our positioning within bioproduction. We like the strategy, how it's playing out in terms of the repositioning of that portfolio, the investments that we're making to support organic growth, and then certainly, the acceleration with M&A and what impact that's having on the algorithm here. You're very correct to point out that the makeup of our biopharma exposure is certainly shifting in a pretty favorable way here that will be supportive of both growth as well as margin.

Yes, that's extremely helpful. I think I could spend the next 1 hour just talking bioproduction and biopharma. Maybe we should just start with biopharma, but -- with -- I think you mentioned bioproduction north of 20% year-to-date. I think one of the questions I get is, are we pulling -- is the industry -- and that's just not one, for the entire life science tools industry, is that pulling forward demand? Is that why bioproduction has been so strong? Or is there some pent-up? Or are we at a new normal? And maybe contextualize the bioproduction growth you're seeing in 2021 year-to-date and what we should expect.

Maybe a good place to start, Vijay, is to kind of roll back the clock here a little bit and look at how it's evolved, though, even prior to the pandemic. When I first started to work in the business back in 2014, the bioproduction was probably growing in the low double-digit area, at least for the type of portfolio that we had. And we started to see that move up incrementally a point or 2, perhaps, as we move to the -- from 2014 into the 2016, 2017 time period. And then it really started to shift as single use started to become more prominent as part of the production workflow. And so any of us that had any exposure to single use started to get incremental contribution from the growth coming from those solutions, with maybe chemicals growing low double digits, single use growing 20-ish percent, leading at least in our portfolio to kind of a mid-teens growth of the core bioproduction solution. And we see that continuing. Monoclonal antibodies continue to be strong. Cell and gene therapy, they're really starting to pick up some momentum. And whether it's mid-teens, high teens [ part of ] debate, but it's certainly in that range. Where the north of 20% comes from then, of course, is the COVID tailwinds, so the contributions from vaccines. So probably too early to say that the core has shifted from where we were at kind of that mid-teens to upper teens level. But regardless of how COVID plays out, I think we have some confidence, at least, in the core continuing to grow at those levels. When you look at our customers' pipelines for new molecules, the approval rate of new molecules into the market is certainly supportive of growth continuing at those levels. I think the pipelines for new therapeutics have never been stronger. The approval rates have been -- continue to be high, even during the pandemic. The industry just passed the 100-molecule approval level here earlier this year. And based on the pipeline, it won't take that long to get the next 100 in place. So pretty robust environment we're operating in, Vijay.

Yes, that's helpful context, Michael. And one on single use, I want to make sure I got this number right. Within bioproduction, is single use, on a pro forma basis now, 50% of revenues and that part is growing north of 20%?

Yes. It's probably -- as we look at it on a pro forma basis for '21, if you were to assume we had Masterflex all year or maybe heading into 2022, is probably just a bit south of 50%, north of 40%, and then it'll probably get close to 50% here over the next couple of years. Yes, it's in that 40% to 50% range, Vijay.

Fantastic. And Tom, maybe off of that, that you mentioned acquisition in all the business, Ritter, RIM Bio, Masterflex having higher margins. Can you quantify, is that 1,000 basis points [ of corp ] or 2,000 basis points [ of corporate ]?

Yes. I generally think of those as north of 30% businesses, some even higher than that. So composite-wise, you can kind of think of it as EBITDA margins that would be versus call our 20%, that kind of 30% plus, 30%, 35% is what I think of.

That's helpful. That's helpful. And then, Michael, perhaps one for you, right? Like if someone had asked me this question 3 months before you guys announced that Masterflex [ lock-up ], there is a single-use company, who do you think is going to win in a list of companies? I just would have said, look, I mean, that space is hot and ability to compete for assets, it's intense. Like I was pleasantly surprised when you guys won the deal. What allows Avantor to win now for these kinds of transaction rate, given that it's a pretty competitive environment out there?

Obviously, there's a lot of things that go into deal dynamics. And obviously, every seller has different motivations. But I think, as we've said all along, we view ourselves as a pretty attractive buyer for a number of reasons. One, we should emphasize the value of our channel and the customer access that, that gives us in the platform that we then have to accelerate the growth of the target. I think we've got a lot of agility in doing deals. We've demonstrated our ability to get up and down on these things pretty quickly and to provide certainty. So we don't have a lot of conflict or really any conflict to speak of and deal certainly is -- deal certainty is certainly important. And in this particular case, deal certainty and being able to get it done before the end of the year was an important aspect of us winning that. And not having any regulatory constraints or concerns and certainly a strong balance sheet, where we didn't have to bring any financing contingencies to the deal either, were important factors. So -- and I think the last variable, probably less important in this deal, maybe more important in the Ritter deal, but just I think the track record we've had in how we bring in these businesses. In some cases, being able to preserve the legacy of the selling business and some of the branding and some of the cultural aspects, I think we've been able to demonstrate a pretty strong track record that I think speaks to the motivations of a lot of the sellers that we end up working with. We've proven to be a good buyer over time and have provided great opportunities. We've got a lot of examples of leaders of the target companies that are now playing a really meaningful role in the broader Avantor ecosystem. As maybe a great example, our Senior Vice President for all of our single-use activities across what is now 6 different acquisitions, was one of the leaders that came from one of these acquisitions. So I think if you put all that together and, obviously, different emphasis on each individual deal, but we do view ourselves as a pretty attractive buyer. And I think with the success we had in deploying over $4 billion of capital in 2021, I think we've got credibility in saying that.

Yes. No, certainly. I think at your Analyst Day, you noted $8 billion of firepower through 2025. I think those are positive comments in your -- why one should be able to close deals. I think, Tom, a quick one for you. I think the LRP noted the tax rate stepping down to 20%. Should we just straight line that as 50 basis points of annual reduction? Or is there some step-function cadence issues?

Yes, I think we'll give a little bit more color on that. I mean there's obviously some potential movement here with the tax legislation. We'll sort that out in time for the guide. But I would consider it maybe a 22% rate for 2022 at this early point.

That's helpful. And then maybe, Mike, last one for you. ESG, DE&I comes up a lot in conversations. Does Avantor track DE&I metrics? And is ESG perhaps, is that, in some way, being incorporated as part of management comp metrics? Maybe talk about some of the progress and commitments you're making in this area.

Yes, I really appreciate you giving me an opportunity to address this. This is an area that we're spending a lot of time in and one that I'm personally really excited about, the impact that we've had to date and the progress we're making. And recognizing that I think we feel like we've got a long way to go, but I think we're off to a really strong start. You talked about DE&I metrics. We've talked about our broader sustainability platform and the pillars of that strategy. Certainly, people and culture is one of the 4 pillars of that strategy. And clearly, DE&I is at the core of that pillar. We're really strongly focused Vijay, on building a super diverse, equitable and inclusive culture and providing development and opportunities for all of our associates and empowering them in a way that creates a lasting impact. When I look at the progress we've made and the focus that we've had, we've advanced in a number of areas. But relative to your question, one of our primary areas of focus is in increasing management diversity, both representation of women but as well as ethnic or racial minorities that are serving in management of leadership roles. And we've had some really great progress, and that's been an important area of focus for my leadership team. We announced specific goals in that area in 2021. And when we publish our sustainability report in the upcoming year here early in 2022, we'll certainly do a full reconciliation on how we're doing relative to the targets that we've set. But we've taken a number of focused steps in a number of other areas as well. We've offered, for example, 47 different training sessions and multiple languages for associates around the globe on DE&I. We've had a very strong focus on advancing our policies to reflect our strategy, self-identification programs, new inclusive benefits that account for IVF and parental leaves. And -- we've -- I'd say structured our holiday calendar to reflect the priorities of our associates, the diversity of our associates and certainly a lot of our code of conducts have been updated. We've added 5 employee resource groups that have seen really strong engagement from our associates across the globe. So that's just a sampling of the types of things that we've done this year to accelerate our focus here. And we've got, I think, a great road map of how we're going to progress going forward. You specifically asked about does it make its way into any of our employee compensation programs? What we did for 2021 is, given the focus around strategy and engaging our leaders in this, this has been part of individual performance objectives, certainly my own will be reflective of that. And then we're in the midst of designing our comp programs for next year that will get finalized in our early in the year Board meeting. But the expectation is that across the company then that our incentive program would now reflect specific, measurable, tangible objectives and metrics in this area of DE&I as well as the broader sustainability strategy. So I think we've got a good line of sight here on how we're progressing. We do a lot of benchmarking in the area. And we feel really good, particularly as a relatively new public company, the progress that we've made in this area. But I really appreciate you bringing it up and giving me an opportunity to highlight some of the great work we're doing here.

That's interesting. You mentioned measurable -- having measurable metrics, right? And I think it's one of the things that, as we went through our cycle, how do we measure. I think it's something that we had to brainstorm on. With that, I think we're at the end of the time here. Michael and Tom, thank you so much for taking the time this morning.

Vijay, great to see you. Thanks for the time.

Thanks, Vijay.