Becton, Dickinson and Company (BDX) Earnings Call Transcript & Summary

Good morning, everyone. Happy to kick off the second day of the JPMorgan Healthcare Conference. I'm the medtech analyst here, Robbie Marcus, and I'm very happy to have CEO, Tom Polen, of Becton, Dickinson, leading our next presentation. A few quick housekeeping items before we jump in. Feel free to go ahead and grab the slides from the JPMorgan Health Care website, you can follow along. There's also an ask a question button, feel free to submit a question for Q&A, that goes just directly to me, or e-mail me or chat me on Bloomberg, and I'll do my best to ask all the questions once we get to Q&A. So with that, Tom, take it away.

Actually, Robbie, this is Kristen. I'm going to just jump in real quick and read some lovely forward-looking statements. For those of you also who don't know me, I recently joined as the SVP of Strategy and Investor Relations. We issued a press release this morning announcing our preliminary unaudited financial revenue results. We posted a presentation to the Investor Relations section of our website to also accompany today's presentation. This morning, we will be making forward-looking statements, and it's possible that actual results could differ from our expectations. We will also be discussing some non-GAAP financial measures related to our performance. You can read more about our forward-looking statements and the use of non-GAAP financial measures on Slides 2 and 3 in the accompanying deck. A reconciliation of non-GAAP to the most directly comparable GAAP financial measures can be found in the accompanying presentation or in our press release and the financial schedules attached thereto. With that, I'm really pleased to turn it over to BD's CEO and President, Tom Polen. Tom, take it away.

Thanks, Kristen, and thanks, Robbie, of course, for having us at your conference, and a special thanks to all of you for joining us virtually. In the interest of time, I'm going to jump right in and start with the key takeaways on Slide #6. So today, I'm going to walk you through several exciting updates. As Kristen mentioned, this morning, we released our preliminary Q1 revenue estimates. We're extremely pleased with our performance across all 3 of our segments, which we're ahead of our expectations as well as the very strong performance of our COVID-19 diagnostics platforms. I'm going to dive into the results in just a moment. But let me walk through, again, some of the key points that we'll talk about this morning. First, our COVID-19 response efforts continue very actively globally. We're an essential partner to health care providers and governments around the world, and I'll provide a few updates on our efforts supporting patients across the full continuum of care, from diagnosis to treatment and prevention. Our Alaris remediation efforts remain our #1 priority. And I'm very pleased to report that we've made steady progress, and we're on track for our late fiscal Q2, early fiscal Q3 2021 510(k) submission. While we're executing on our near-term priorities, we're also advancing our strategy to drive our long-term success and value creation. Building on our unmatched global breadth, scale and reach with a market-leading portfolio, we significantly advanced our growth initiatives through very purposely expanding our innovation pipeline in near-adjacent high-growth markets. Over the past year, we've established our BD Innovation and Growth Fund, and we've allocated the first several tranches to new programs across each of our 3 segments. We're reinvesting a portion of the Veritor proceeds into initiatives that are going to drive our future growth, and we're increasing our focus on tuck-in M&A. Our simplification initiatives, which are also a key part of our strategy, are well underway and are on track. We're enhancing our quality programs, driving cost efficiencies and improving cash flows, all while providing superior customer experiences. We've also made great progress to improve our cash flows and strengthen our balance sheet. We finished fiscal 2020 with a net leverage of 3x. In fiscal Q1, we repaid $265 million of debt. We now have greater flexibility to direct more of our cash flows towards additional growth opportunities and shareholder return. If there's one thing I'd like you to take away from today, it's this. And that said, while there continues to be a large amount of uncertainty in the world with COVID-19, there's one thing that I'm very certain of, and that's that we've started this fiscal year with strong momentum and that our very strong outstanding team here at BD is advancing our strategy right on track and that we're positioned to emerge stronger than ever. So let's turn to Slide #7 and discuss our preliminary results. So our fiscal Q1 preliminary revenues were an estimated $5.3 billion, up 25.6% on a reported basis or up 24.2% on an FX-neutral basis. This includes COVID-19 testing revenues of about $865 million, which contributed about 20 percentage points of the reported growth. Our performance, I think, demonstrates our central role in providing care during this critical time. Now while we're still analyzing our preliminary results, there were 3 general factors that contributed to the better performance in Q1. The first was that the COVID resurgence we see driving a greater acuity of care across the U.S. and Europe, and this is driving a greater usage of critical to health care products. We also see this causing some hospital systems to increase inventories of these products. Second is we saw greater resiliency in both elective and routine procedure volumes in the outpatient setting. And lastly, I'm very proud of the BD team for another quarter of strong execution as demand for COVID-19 diagnostics and vaccination devices continued. So let's look further at each of those drivers. So first, as you think about patient acuity, we certainly saw an increase with the resurgence in the last quarter. We saw a higher demand for products such as our vascular prep and maintenance, our PICCs, our IV sets, and other medication delivery devices. We also had elevated shipments of our infusion pumps in the U.S. under medical necessity, and we continued to see very strong demand for our pumps in Europe. One trend that we observed, and we're continuing to monitor, is a move from what I'd call just-in-time to just-in-case inventory management, particularly for our critical to health care products. And we saw several large health systems take this approach in the past quarter. We're still going through our review process, but we estimate that up to $100 million of revenues may be attributed to stocking or timing. In other words, some revenues may have been pulled forward into Q1 from future quarters. Again, we're still analyzing our preliminary revenue, but we'll plan to have more to discuss next month on our earnings call on that topic. We observed -- secondly, we observed that hospitals were better able to manage both elective procedures along with treating COVID patients compared to the earlier days of the pandemic. So we also saw more resiliency in outpatient elective and routine procedure volumes. These trends, of course, translated into better expected revenues across several of our business units, and volumes also benefited from practitioners working through patient backlogs in the quarter. Lastly, as I mentioned, our COVID response revenues contributed to the better results this quarter. And we expect COVID-19 testing revenues, as I said, to be about $865 million, that includes Veritor revenues of about $685 million with the remaining revenues being BD MAX COVID tests and specimen collection and transport devices. In addition to the very strong execution of our IDS sales team, our Veritor revenues benefited from the BD production system that enabled our manufacturing team to ramp up ahead of our expectations. And in fact, we exited the quarter at a run rate of 10 million tests per month. Our Veritor ASPs were also slightly more favorable than we originally anticipated. Our results also included COVID-19 vaccine injection device-related revenues. Again, we've not completed our financial close and forecasting process, so our GAAP financial results for the quarter have not yet been finalized. However, following our strong preliminary Q1 revenues, we do now expect that fiscal 2021 revenue growth will be towards the upper end of our previously disclosed guidance range. We also expect our fiscal 2021 adjusted non-GAAP diluted earnings per share to be above our previously disclosed guidance range. And we'll plan to release our full Q1 results on February 4 and intend to provide updates to our fiscal 2021 guidance at that time. As you can see, we're clearly off to a strong start, and we feel good about our position for the rest of the year. We're very confident in our strategy and creating value for you, our shareholders, not only the short-term but also over the long term. So let's go ahead and move on to Slide 8. I think many of you are familiar with this strategy. This is our BD 2025 strategy. It's based on 3 key pillars: grow, simplify and empower. And today, I'd like to update you on the progress that we've been making over the course of the last year. Through our strategy, we expect to deliver mid-single-digit revenue growth, and we expect to drive operating and financial leverage to the bottom line. We're targeting at least 50 basis points of margin expansion. With the combined combination of our adjusted EPS growth and our dividend yield, we expect to drive double-digit total shareholder returns for you. Turning to Slide #9. We have strong category leadership positions in core markets that are essential to health care. In fact, about 90% of our revenue comes from categories where we are a leader. Our leadership position, combined with our recurring revenue base, provides a very strong foundation to generate consistent cash flows. Let's go to Slide 10. Our growth platform is further empowered by several unique capabilities, including the powerful combination of our deep digital capabilities with our unmatched global breadth, scale and reach. About 90%, in fact, of all U.S. hospital inpatients will receive care using the BD device. And about 70% of all U.S. acute hospitals have our connectivity and data platform installed. And this adds up to make BD a top strategic partner to most health care systems. COVID has allowed us to further strengthen our relationship with our customers. And with a team of over 2,000 software engineers and data scientists, we're leveraging our connectivity and data platform to help enable our customers to drive greater efficiencies and positively impact patient outcomes. Now we see connected care that we have as a competitive advantage. And as an example, we recently launched our new interoperable Arctic Sun for temperature management, which would have been a challenge in legacy Bard due to required infrastructure to establish and maintain electronic medical record connectivity. But we leverage that broad installation base of the BD connectivity and data platform, which we see as a difficult to replicate model for competitors, and we now have that system live and moving ahead of our expectations. And this is true -- the same thing is true for upcoming launch of Sensica, our urine output monitor, which will also go through that standardized BD connectivity and data platform. It's already established in 70% of the hospitals, lowering the cost to entry there for us and the cost to maintain that platform connected. Turning to Slide #11. You'll see a sampling of the products and innovations that make us a vital partner to the countries and providers in responding to COVID across the continuum of care from diagnosis to medication management and drug delivery and to prevention as our injection devices are now a crucial component of the global vaccination campaigns underway now around the world. Many of these contributed, of course, to the strength in the quarter as well. Turning to Slide #12. As we look forward, the actions we took to respond to the pandemic are building durable new kit capacities, capabilities, partnerships and collaborations. So for example, we've established leadership in digitally read and connected rapid testing through our BD Veritor and Synapsys platforms. And we're close to nearly tripling our BD Veritor reader installed base globally. We continue to have very strong demand, and we expect strong placements going forward. We've also significantly increased our testing manufacturing capacity. Prior to COVID, we made roughly about 8 million Veritor flu tests on average a year, maybe 10 million to 12 million tests during the very severe flu season. But thanks to the incredible execution of our teams and leveraging our BD production system, we've now successfully ramped faster than originally planned, and we're now making more in a single month than we previously made in a year. We planned to be at 8 million a month. We're now manufacturing 10 million Veritor tests per month, and we continue to expect to increase that to 12 million tests per month by March. We've also increased capacity of our BD MAX system and tests, our IV sets and syringes. In December, we also announced a $1.2 billion capital investment to expand our prefilled syringe manufacturing capacity. And while not all of that is specific to COVID-19, this does provide us with the opportunity to partner with pharma companies for prefilled COVID-19 vaccines in the future. Let's go on to Slide 13 and talk a little bit more about R&D. So we've been increasing our investments and in strengthening our pipeline across 3 focused innovation themes that leverage our core strengths. And these categories represent areas where we're very deliberately and disproportionately investing our R&D spend to move our portfolio mix into higher growth markets. So first, we're applying smart devices, robotics and analytics and AI to improve care processes. Second, we're enabling new care settings to enhance the patient experience and lower costs. And the third is that we're investing to improve diagnosis and treatment of chronic diseases. And we believe that these 3 themes represent a significant opportunity and runway for the company to create impactful new innovation and solutions across all of our businesses. And COVID-19, we see, may accelerate some of these existing health care trends and could present new opportunities for growth. Some of these projects have been funded for some time, some were acquired and others are programs that have recently received incremental funding from the Veritor COVID testing proceeds. Let's go on to Slide #14. So this slide provides a view into some of the new product launches planned for this fiscal year, FY '21, that support our durable growth profile. And just to highlight a few of them here on this page, and there's a lot, obviously, we don't have time to speak through. We're continuing to advance our combined flu and COVID assays on both BD Veritor and MAX. We plan to launch our Sensica automated urine output system later this year, and we plan to launch our new BD COR molecular system with the BD Onclarity HPV assay to enter the high throughput molecular testing market in the U.S. One of the other topics I wanted to talk about this morning is we're often asked about an update on our Lutonix BTK program. As many of you are aware, we have received 2 nonapprovable letters from the FDA, and we have decided to pursue an FDA panel review. We believe there is a very large unmet clinical need, and it's the right thing to do for our patients. Our Lutonix revenues today are less than 1% of total BD, and so going to panel does not change our financial assumption. Our financial guidance continues to completely exclude any BTK-related revenues for Lutonix in the U.S. -- Lutonix BTK in the U.S. In addition to our internal investment efforts, we're also very carefully evaluating the external landscape. So let's turn to Slide 15, which illustrates our recent tuck-in M&A history. So similar to our investment philosophy in R&D, where we're taking a very disciplined approach to our tuck-in M&A -- we're taking a very disciplined approach to our tuck-in M&A transactions. We target technology and solutions in high-growth markets that leverage our core positions and capabilities and allow us to generate value for our customers and shareholders. We're very purposely increasing our capabilities and focus on tuck-in M&A as an additional source of both innovation and growth. And so last year, we increased the pace of our transactions, completing 6 deals, including NATDx, which is expanding us into the point-of-care molecular diagnostic space; Adaptec, a product I talked about earlier, which leverages our leading position in acute urology and our strong connected footprint in U.S. acute care hospitals; and of course, Straub Medical, which leverages our peripheral vascular franchise and enters us into the high-growth markets of atherectomy and thrombectomy. In fiscal Q1, we've already completed 3 deals, including the medical assets of CUBEX to expand our medication management offering into the non-acute market, right in line with our strategy I just described. Turning to Slide 16. This slide highlights our simplification initiatives, which is a key pillar of our strategy. This provides us line of sight on cost reductions and improvements in cash flow, but also extremely importantly, enables us to enhance quality and our customer experience. So one of the key parts of our simplify initiative is our Inspire Quality program. It's a company-wide multiyear holistic, think about it as a find it once, fix-it-everywhere journey. It's really a transformative journey in the spirit of continuous improvement, and it's essential to achieving our long-term growth, and we're investing quite significantly behind that. We've also deployed the new BD production system now across 80% of our plants, which is intended to optimize manufacturing quality, delivery, safety and costs. And we're seeing these efforts really working to improve our capital and profitability metrics and operating cash flow. And in fact, you can see here in the chart on this slide, our operating cash flows have improved for the past 3 years, including last year, fiscal 2020, despite the contraction in our net income. And part of that is due to the impacts of this production system that we've really just been rolling out here over the last 2 years. We're focused, of course, on making continued improvements on all those metrics I just mentioned. And of course, at this meeting last year, you heard me talk about our ReCoDe initiatives, and ReCoDe really has several components. First is simplifying our sourcing, manufacturing and distribution networks; the second is simplifying our business processes; and the third is simplifying our global portfolio to meet customer needs and enable us to invest behind the winning offering. Our ReCoDe efforts are on track to achieve our targeted $300 million in cost savings by the end of FY '24, and these savings are intended to allow us to meet our operating margin goals and make the appropriate investments to ensure long-term durable growth. I'm really proud of the team's progress on this in FY '20 and continued momentum we have as we're going into this fiscal year. Turning to Slide 17. Of course, many of you know that BD has a long-standing commitment and track record of creating positive societal impact through our ESG leadership. And we've made great strides and see that addressing ESG issues such as climate change contribute to the resiliency of our business long term. Our 2030 sustainability plan brings into focus the areas where we can make the most impact over the long term. And we recently announced our climate change targets. We're committed to reducing Scope 1 and Scope 2 greenhouse gas emissions 46% by 2030 and to be carbon-neutral across direct operations by 2040. We look forward to sharing more details behind our 2030 sustainability plan with you in future engagements. Let's turn to Slide 18. Over the past year, we've taken steps to improve our cash flows and strengthen our balance sheet. We ended fiscal 2020 with a net leverage ratio of 3x, as I mentioned earlier, and we repaid $265 million in debt in fiscal Q1. We're committed to a full investment-grade credit rating and are targeting a net leverage ratio of 2.5x longer term. We believe we're approaching a turning point in our capital allocation. As you know, you can see here, a significant amount of our cash has been dedicated to repaying the debt related to our Bard transaction. So as we look ahead, we expect a greater flexibility to refocus our cash deployment on growth opportunities, including tuck-in M&A. We'll also look at other capital deployment options. Before we move to Q&A, let's just move on to Slide 19 to summarize today's takeaways. First is our preliminary Q1 revenues demonstrate that we're building momentum. Second is our COVID response highlights, our deep capabilities, advantages of our diverse portfolios of solutions and our team's agility in responding to the most significant health care crisis in generations. We're investing in meaningful innovations, and we're refocusing our capital deployment to supplement our internal efforts with disciplined tuck-in M&A. And lastly, we're well positioned to deliver mid- single-digit revenue growth and double-digit total shareholder return. I appreciate this opportunity to share the progress we are making towards creating shareholder value with you. And so we've got Chris, Dave, Simon, Kristen and I, happy to take any questions from you in the audience. And Robbie, I'll pass it back over to you now.

All right. Well, great. Appreciate it, Tom. And maybe I could kick it off with just starting on the fiscal quarter here. And it clearly wasn't all from Veritor upside. Veritor and COVID testing was phenomenal, but it also looked like the base business was contributing as well in a broad-based beat. So maybe just walk through some of the key growth drivers that we saw in the rest of the business beyond Veritor itself?

Sure. We've got Chris here. So let me turn it over to Chris.

Sure. Thanks, Tom, and good morning, everyone. So as you said, Robbie, a number of positives. And clearly, we are very proud of the way the Veritor product performed, not only increasing manufacturing capability, as Tom mentioned, but we were able to hold price. And we had indicated back in December that we were seeing that price hold. So that came through. But then equally as important, as you said, is the performance of our base business. And there were a number of things that drove that. Tom covered a few of them. Let me hit the highlights. Number one, we saw what we call the acuity of our products. And our products were more in demand as hospital systems were dealing with the COVID situation, full hospitals. And a good example of that is the fact that hospital stays were longer. And as a result, it was moving our demand up the value chain from catheters to PICCs, for example, as patients were staying in the hospital longer. So we saw a lift from that and more of a demand across our product line. In addition, we saw resilience in elective procedures and routine procedures, particularly in the outpatient setting, again, hospital systems were better able to deal with the COVID situation, and we saw that in our product set. And then we also did see some pull-forward of inventory buying, as Tom mentioned, moving from that just-in-time inventory management to just-in-case as well as a bit of medical necessity purchasing. So you put all of that together, and it clearly drove the core business to exceed our expectations. As we thought about that, we haven't closed the books for the quarter yet. So we haven't flowed that down to the bottom line. But clearly felt a good portion of that will stick and that we moved our guidance for the full year up towards the higher end of the range on revenue, and acknowledging the fact that some of that would flow through that we said we would be higher on our earnings for the year from the previous guidance that we gave. Specifics of that will come at our earnings call. We're still closing the books. We're still going through all that, but we'll update on our guidance more specifically in February.

And Tom mentioned in the presentation that -- I thought it was around $100 million was potentially pull-forward from future quarters. In which product lines is that specifically? And is it all from the next fiscal quarter or is it going to be spread out?

We -- yes, it's something we're looking at, Robbie, as we go through the specifics. That $100 million includes not only some of the pull-forward of inventory but some of the onetime buying that we saw, things like medical necessities. And as we look at it, typically, that unwinds over the course of the year, that will certainly depend on the COVID situation and how hospitals are seeing that. So we would expect it to unwind. Which quarter, it's not clear at this moment. We'll update more on that in February.

Got it. And was that all in medical? Or is that spread out across the entire company?

I think it's fair to say it was spread out. Primarily in medical, but I would think spread out across the other units as well, particularly in life sciences with some of the products there.

So as you go into the February call, I guess you have a high-class problem here, in that your first quarter did so well. I see a lot of upside pressure potentially to your guidance range, particularly your COVID testing ranges that you laid out on the last earnings call. So you guided to the high end here. Currency, it looks like the euro is 4%, 5% higher than when you gave guidance. Maybe just walk through some of the puts and takes and your thought process as you go into updating guidance in a more formal way on the February earnings call.

Sure, Robbie. So you put it well. It's a high-class problem. We do see a lot of positives going in the right direction. Obviously, we're also watching the resurgence. And as we said in our prepared remarks, we have seen a resiliency and particularly in the outpatient arena, but we did see some softness in December, and we're watching that very closely. So that is certainly something that we're watching how that plays out. As it relates to Veritor, we would expect the pricing to come down a bit as we extend out to some longer contracts, and we see the vaccine coming into play and competitors coming in. So we've been signaling that for a while. We would expect that price to soften somewhat from a Veritor standpoint. And we're looking at a number of other things, including, for example, FX, that seems to be headed in a positive direction. Resin looks a little bit more challenged, and the price of resin seems to be going up. Those 2 things will balance each other somewhat. So there's a number of factors that we're looking at as we look forward. And again, we'll update you more in February.

Got it. Tom, maybe over to you. You have a lot of COVID testing at the beginning of the year, potentially. You have vaccines rolling out, which is a good but not game-changing opportunity for Becton, Dickinson. And then hopefully, towards the end of the year, once those vaccines make it into the population, the underlying volumes of the rest of the business can continue to improve over time. But I guess my question is really, how are you planning for Becton, Dickinson through the course of fiscal '21 here into fiscal '22, where you might have a lot of mismatched comps and spending priorities that you need to address?

Yes. Just maybe 2 things there. First off, we -- as we had -- as a reminder, last November when we provided our initial fiscal '21 COVID guidance of $1 billion to $1.5 billion, we noted that the majority of revenues would be weighted in the first half of the fiscal year, and that remains to be true today. I think as you think about -- and that's we still think the right strategy to have. As you said, we all hope that around the world that the vaccine campaigns will continue to gain momentum, and that COVID testing demand could begin to go down in the back half of the year. We do see -- and we've also mentioned this in the past -- that over the last quarter or 2, we certainly became more convinced that there will be some level of COVID testing demand continue through FY '22, the level of which is uncertain, but we do believe more so than we did, let's say, 4 to 6 months ago, that there will be a level of testing that will continue certainly through FY '22, and products like the combination flu/COVID assay that we have in development will be well positioned in those future year markets. I think the other thing that you're aware that we're doing is, we're actually taking a portion of those Veritor proceeds and we're reinvesting them in the business. We're reinvesting them behind our growth initiatives, both in R&D, but also strengthening our channel and putting new novel channels in certain areas, be it digital channels or telesales channels. We're accelerating our simplification efforts as well, and we're investing also in our associates and our next-generation of leaders in the company. And so the initial was in that range, we had said we're investing about $200 million of Veritor proceeds behind our strategy that growth, simply and empower strategy. And those are 1-year investments, right, that we can turn off as we go into '22 if COVID testing demand goes down, that will be a source of partial offset. Obviously, the scale at which our ultimate COVID number is for the year could dictate that. And we've also shared that if our COVID testing is above that $1 billion to $1.5 billion number that we'll invest more than the $200 million, and we'll continue to keep you updated on that. I don't know. Anything else, Chris, to add in?

No. I think you covered it, Tom.

Okay. Thanks.

I like you guys are looking at different boxes, but it looks like you're all in the same room. Yes. Tom, maybe 2 product topics I want to touch on: the panel for below-the-knee that you mentioned for Lutonix, and also the Alaris resubmission to the FDA. Maybe give us the latest on where you are? Are the time lines still firm for fiscal 2Q, 3Q? And anything else you've learned in your discussions with the FDA here?

Yes. Nothing that we've learned new with the FDA. We continue to make strong progress on the Alaris submission, and we remain very much on track to the date that we've committed for some time now, which is end of fiscal Q2, early fiscal Q3. We do have Simon here, we're all socially distanced here in our boardroom. So I don't know if you -- did you have a question on BTK or I can turn it over to Simon to address?

Yes. So BTK, I guess, we've all seen the data, and I would say it's okay. It's not spectacular. I don't think that's offensive given the data we've seen. But what gives you confidence that this is an approvable product? And do you think you'll need any additional clinical studies to bring it to market?

Yes. Maybe just before I turn it over to Simon, and I will in a second, it's just a reminder, when you use the term confident in bringing to market, we don't have this product in our outlook at all. So as you think about BTK, whether or not it is approved or not approved by the panel, there's no impact on our outlook, either for FY '21 or future years because we've taken it out of our planning. As I said, this product has a tremendous unmet need for patients, and that's why we're bringing this to panel as an obligation. Simon, why won't you talk a little bit more…

Yes. Just to build on Tom's comments, Robbie, if you think back to several years ago when peripheral intervention just started, I would say there was a lack of armamentarium for interventionists for iliac and SFA interventions. They maybe had a PTA balloon and that incrementalized to stents and stent grafts, DCBs and drug-coated stents as well. And I think if you look at the armamentarium of interventionists for below the knee, you will see that there's only 1 device that's approved there and that's a PTA balloon. So to your point about the data, you have a reasonable point there. But nonetheless, it is another -- we hope that it's going to be another tool in the armamentarium of interventionists so they can expand the well-being of these patients who, as we've discussed the -- numerous before, have a high rate of amputation in the first year and the second year and a high mortality rate. So we feel that any tool that we can put in the hands of these clinicians can benefit some patients to some degree over a period of time. So we are preparing very robustly, and we expect to put our best foot forward here with the panel in the not-too-distant future.

Great. And maybe Tom and Chris, not sure -- you'll both probably have comments here. But I'm looking at Slide 18. And Slide 18 is the cash allocation for fiscal '18 to '20. And half of it went to debt pay down, a quarter or so went to CapEx, a quarter or so went to dividends, and there's a tiny little sliver for share repurchase and tuck-in M&A. If we look at the fiscal '21 through fiscal '23 chart, how different is it going to be? Where are your priorities? And should we expect share repurchase and tuck-in M&A to be materially bigger slices of that pie?

Yes. I think the sliver says 0% for share repurchase.

It's a very small slice.

It was all M&A in that period.

Yes. And as you said, a lot of debt pay down, which we're now at 3x, and we're heading towards our goal of 2.5x, as I stated. So let me turn that to Chris.

Sure. So Robbie, that's the -- the point of the chart is that we are rapidly approaching an inflection point here where the future cash flows can be redirected, not to debt pay down. We paid down in the first quarter the $260-plus million, and that kind of gets us to our targeted level that we had promised. We will float down on the leverage basis. And our long-term target is 2.5x gross leverage. So that's something that we keep in mind, but we don't have to pay down debt to get there. We can get there with EBITDA increases. And so that gives us the opportunity to redirect that cash. Now as we think about that going forward, we'll be clearer on that in meetings to come, but we wanted to get that idea out there that we will have that flexibility. We have increased the dividend recently. That's something that we would look at and focus on the payout ratio. We're very proud of the fact that we've increased the dividend for many years. Even within these last number of years, we've increased it, but we have to look at the payout ratio. So more to come on that. We have said that we want to do more in tuck-in M&A, and we're very focused on that. We spent some time in the presentation talking about that. So you can expect more to go towards tuck-in M&A. And then as we look forward, once we start exiting this pandemic, and we would be generating cash, we clearly don't want to have cash building up on the balance sheet longer term, and that would enable us to do some share repurchase. So we're not in a position to give specifics of dollar amounts quite yet, but you can expect that as we move forward over the next several months.

Great. Tom, we got about 1 minute, 1.5 minutes left here. I just want to leave it with you. I would say you've done a great job managing through a very difficult first year as a CEO. What's top of mind for you as you head into the new year?

I just want to take this opportunity and thank all of the 70,000 associates at BD -- and many of them may be watching this, this morning -- for just the momentum, your commitment and the impact that you're making on helping the world battle the COVID-19 pandemic. I think you can see that the actions we took in FY '20 are building strong momentum into '21, that momentum is coming as a direct result in part of our contributions to helping the world work through the pandemic, but also the execution of the strategy that we laid out last year. So Robbie, obviously, a big thanks for allowing us to have this discussion this morning, and we look forward to the continued discussions we'll have here through the conference over the coming days.

Great. Thanks for joining. Wish you the best, and appreciate your participation.

Okay. Thank you.

Thank you.

Have a great day, everyone.