Danaher Corporation (DHR) Earnings Call Transcript & Summary

Okay. Thanks, everyone, for joining us this morning. I'm Vijay Kumar. I cover life sciences and med tech at Evercore. A real pleasure to have with us Danaher. Representing the company, we have the CEO, Rainer Blair. We have the CFO, Matt McGrew. And plus from IR, we have Matt Gugino. Gentlemen, thanks for taking the time this morning. And Rainer, excited to have you on your first public, I guess, conference call with investors perhaps in a more formal setting, if you will.

Maybe we'll start with some topical questions, Rainer, if you don't mind. Second wave has been a topical question for people. How should we think about this rising second wave and perhaps impact on the business? It looks like the 3Q step-up -- sequential step-up in 3Q versus 2Q was pretty remarkable. It came in above expectations. But perhaps, should we be a little bit more cautious into Q4? How would you characterize second wave?

Thanks, Vijay, and thanks for the invitation. It's great to be here and also to see you in person. So as we think about Q4, we -- first of all, we are tracking to our expectations. And the reason for that is that we built our expectations prudently, I would say, really looking at the -- how we ended up at the end of Q3 and using that data to think about Q4. Now we've been watching -- even at the end of Q3, we were watching hotspots around the U.S. as well as elsewhere and have really not seen those materially impact some of those baseline assumptions, which we saw confirmed at the end of Q3. So as you think about lab reopenings as well as patient volumes, we did not plan for a meaningful step-up here in Q4, and we see that largely playing out.

That's helpful, Rainer. Maybe on the back of those comments, when you think about utilization, obviously, diagnostics comes to mind. Looking at GeneXpert, what a phenomenon here the GeneXpert had. You guys shipped 7 million cartridges in 3Q, expecting to ramp up capacity into Q4. Perhaps talk about where are we on the capacity front right now? And how should we be thinking about the 4-in-1, the panel test, if you will? Because I -- maybe I'm being naive. I feel like every one of us needs to be doing the 4-in-1 as against the stand-alone test, but I appreciate any comments there.

Fantastic. Well, Vijay, we're happy to help with that 4-in-1. But coming back to the capacity question, you might recall in Q2, we shipped around 6 million tests in Q3, 7 million, and we talked about 8 million tests here in Q4, and we're on track to do that. And in fact, we continue to expand our capacity going forward. Now in Q3, we talked about the expected mix of the 4-in-1 to be 40% 4-in-1, 60% COVID-19 test, and we see that largely playing out here in Q4. So we don't see any significant change at all to our perspective there.

That's 2 out of 2 for Danaher, Rainer. You guys got the assumptions off of Q4 with the second wave and the mix up. Perfect. That's pretty impressive. Maybe on the topic on vaccine. It's amazing when we look at some of the stock actions here with the vaccine data coming out, some pretty wide swings. I'm curious, when you look at the 90% to 95% efficacy that's coming out from some of these data we've seen from Pfizer, Moderna, how should we think about the demand for point-of-care tests like GeneXpert and perhaps more from a medium-term perspective when you think about '21? And the reason I asked is I feel like there has to be a differentiation between point-of-care test and centralized testing. Perhaps you might have question marks on centralized, but point of care should be really robust into '21. I'm curious, would you agree, disagree on those statements?

Vijay, that's largely how we're thinking about it. And I like to use a concentric circle analogy here where you have the most durable tests sort of in the center of the circle, and that's where I would place the GeneXpert, COVID and, of course, 4-in-1 test. And then on the outside, as you continue to put concentric circles around that bull's eye in the middle, the durability of that COVID test would be lessened over time. But we think that we're very well placed there at the point of care for a couple of reasons. One, you know that the GeneXpert test is very easy to use. The turnaround time on form 1, 35 minutes. You get an accurate result, and you are in a position as a clinician to make a therapeutic decision. So you know whether somebody has COVID or some other type of flu, and you can make the necessary call. We see that being really, really important. The other thing, and we talked about this in the Q3 earnings call, is that we've increased our installed base year-over-year by 35%. So we have 30,000 GeneXpert instruments now at the installed base, the largest installed base. And then as you take it a next step, whenever the day might come or COVID becomes less of a factor, we have the largest menu today in the U.S., 20 approved tests for the GeneXpert; and outside the U.S., 30. And of course, we're working to expand on that all the time. So we see that as a very important factor. Now coming back to that installed base, we have -- let's call it, 65% of that increasing installed base would be with existing customers who are using those GeneXperts more frequently throughout their network, and then 35% represent new customers that were converting to molecular diagnostics. And we do this really thoughtfully because, of course, we want to, in a post-COVID world where that's less of a factor, for the remainder of our testing menu, again, the largest in the marketplace for molecular diagnostics, to continue to pull for us. So we're really excited about the fact that we've been able to create not only a durable test that's at the right place at the point of care, so in the center of those concentric circles, as well as a market share increase here for the long term.

And that's -- thanks for those comments, Rainer. On -- I guess that last topic that you mentioned, installing GeneXpert into new customers, perhaps talk about sustainability. That's been a big question when you think about the medium term. Are these new customers, are they motivated to use the GeneXpert just because there is ongoing pandemic? And how should we think about those customers perhaps making use of the 20-plus approved tests on the Xpert? Would they -- would it be a fair assumption to make that these customers, now that they've seen what the Xpert is capable of, that they would perhaps use the Xpert post pandemic for those other tests? And how should we think about pull-through, I guess, on that new customer base?

Vijay, that's exactly how we're thinking of it. We've been really thoughtful about the long term here and really moved at the intersection between the greatest clinical need for COVID tests at the point of care and at the same time, care settings that will have good utilization of the testing menu. Again, in the U.S., it's 20 tests; outside, 30. And again, more tests on the way. So that's exactly how we're thinking about it. And we would expect, as those customers then expand the usage of their menu, that we would have very good pull-through on that installed base.

And maybe one last question on this topic. When you mentioned the installed base is up 35%, is that 35% because you guys are capacity constrained on the manufacturing side -- is that the rate limiting step here? Because I don't see how that installed base can double up next year. If you have the opportunity to manufacture, I guess, another 35 tests and systems next year, perhaps talk about where you are on the manufacturing side for systems. And I don't see any end in sight for placing these systems next year, but I'm curious if you guys had a different view.

So manufacturing constraints on the instrument side have not really been meaningful for us. What we are careful to do is to ensure that we place those instruments where they're going to be utilized for the long term. And that's really, I wouldn't say, the rate limiting, but I would say the rate determining decision that we have made is that we want to make sure that we get those instruments there where they are needed most from a clinical perspective to make sure that we meet the clinical needs that physicians have today as well as in the longer term.

Got you. And I guess switching gears to perhaps my favorite topic, vaccine opportunity. The industry has been reticent. Now I've tried my best to ask the industry participants. And I guess the response have been, "Let's wait for the data. We don't know how many doses, what kind of vaccines." But now we do have an idea what kind of vaccines will be on the market. We have some numbers around the logistical challenges, what kind of business will be manufactured. Perhaps talk about, is there a way to size this opportunity for the industry or Danaher at this point in time? Or how should we be thinking about vaccines in general?

So I would start with we think it's really early days. So as excited as all of us are, both as industry players but as private citizens that are confronting this virus and trying to make a difference, it's very early days. We know and hope that a couple of vaccines here will be approved in the short term. But we also know that there are several other vaccine candidates out there. In fact, we are on and working on over 400 vaccine and therapeutic candidates around the world. And we do that and are able to do that because we have this very, very broad portfolio between Cytiva and Pall Biotech. They're really able to serve the industry's needs. We're also spec-ed into every one of the operation work speed vaccine candidates, including the ones that you know are in line here for shorter-term approval, hopefully, in weeks, not months. And so -- but there are still a lot of open questions. For example, what is going to be the uptake of these vaccines? Logistical issues aside, which I think you're very familiar with, how many people will actually want to take the vaccine? First question. Second, how many people are going to show up for the second vaccine? I think you know there are statistics out there for other 2-dose vaccination programs that are startlingly low in terms of the compliance to getting the second vaccination. So there are a lot of questions about that. And then, of course, there's the durability of the vaccination itself. Because we've had to rush to market with these pretty exciting programs, we actually don't know how long that vaccine is going to last. Is it going to be 6 months? Is it going to be 12 months? Is it going to be 5 years and then you get a booster shot? We're all over the map there as an industry. And those are quite important in terms of determining and calculating what the future vaccine needs would be. So we come back to the fact that we feel really good about the way we're positioned. We're working not only on the vaccines and spec-ed in on those and supplying even the current ones that are near approval. But two, we're also on the therapeutics, which are so necessary here in any transition period as we get to herd immunity and beyond. But as we go through the next months here, we expect to learn more. And of course, we're going to be as transparent as we can and update you along the way as we learn more.

That's helpful, Rainer. I guess the point you made on compliance, the second dose, durability of efficacy, it's really interesting. When you think about durability of efficacy of these vaccines, could serology now make a comeback? Do we need quantitative antibody tests now to look at that? Are we protected enough? I'm thinking broader perspective. When we think about traveling, visiting near and dear ones, is this now -- perhaps serology, which has been left for dead, is that market going to come back now post vaccines?

It could be. And of course, ISI put on a note on this topic as well. And we're going to have to see whether viral or antibody load actually plays a role in the durability. These are open questions. Of course, they are being tested as we speak. And it could be that serology testing and quantitative serology testing become a factor here in the short term. And then, of course, to your earlier point about the durability of diagnostic testing, you had mentioned this, of course, there is this question around vaccine resistance strains, which will also require, certainly in the clinical testing situation, a diagnostic answer.

That's great. I guess on the topic, maybe at a high level, should -- the overall vaccine opportunity, should it be as large as diagnostic testing opportunity at the aggregate level? Would you agree, disagree with that statement?

I think that's a tough call to make. I really do. And the variation just in terms of the usage of various materials between the different vaccine modalities is significant. And so I think I would stay away from that and just say that we feel good that -- about 2 things. One, we think that both the diagnostic testing volumes as well as the vaccine volumes will be material and that we're very well positioned in them because we have diversified and are on all of these programs to one extent or another. And I think that's the best way to think about it. And as we go forward here in the next months, we start seeing what will be the most sort of dominant design in terms of vaccine that is best implemented, not just in the U.S. but globally, that will be important.

Understood. I mean the one way that we had been thinking about it was, diagnostics, you have hundreds of players. But when it comes to vaccines, it's a handful. It really is a handful. So perhaps the pie might be smaller, but the pie is going to be split by very few exclusive players, of which Danaher happens to be one of the preeminent players in that market. Is that a fair way to sort of think about when you think about vaccines versus diagnostics market opportunities?

It can be. I would say that there are more vaccine opportunities out there than you think, right? So when I talk about over 400 opportunities, both in terms of therapeutics and vaccines, what we -- what we're currently seeing are the ones that -- the head of the pack. But there are a number of those opportunities. And I think that we're really well positioned, whether that's from a vaccine or a diagnostic perspective.

Understood. And maybe one short-term question perhaps for Matt. Maybe, Matt, when we think about orders accelerating, Cytiva and Pall orders accelerated from 40% to 60% sequentially from 2Q to 3Q, maybe perhaps talk about your current trends in biopharma. Is -- when you see these orders accelerating, is this perhaps all vaccine related? Or is this -- are you seeing base business also perhaps flowing through that 60% number we saw in 3Q?

Yes. No, Vijay, it's -- well, first, can you guys hear me?

Loud and clear. Perfect.

Victory. So yes, I think the answer is we are seeing order momentum. In the core business, we have seen no change, right, to sort of -- from an order perspective there. So that is obviously part of the 60%. But I think the outsized part of that 60% order growth that we're seeing does relate to the vaccines and the therapeutics you guys are just talking about. And probably to think about -- how to think about how that breaks down, I'd probably say half is vaccines, half is therapeutics, and then maybe even a further cut of that is 70% of it is on the consumable side, with the remaining 30% on the equipment. So I would say, that core business is still very much kind of high single-digit-type core growth, but the bulk of that excess, if you will, up to the 60% is going to be the vaccines and therapeutics.

That's helpful, Matt. And perhaps and now with the vaccine data coming out, is there -- should we be thinking about an acceleration in order trends because now there's more certainty in perhaps an eventual approval, getting an EUA for these vaccines?

I think we sort of -- on the Q3 call, I think if you remember, we were kind of at 14% core. And we thought we would see, excluding the days impact, probably 100 to 200 basis points of acceleration in Q4, despite the fact that we do, like I said, have 3 less selling days, which probably cost us 400 basis points from a headwind perspective. So I do think that we're seeing an acceleration off of Q3 into Q4, partly driven by that backlog of new orders that we've talked about. As we head into next year, we'll have to, as we -- as you guys just talked about, we're going to have to kind of take into account what gets approved, what doesn't and sort of all of the other variables before we can kind of really get a sense of any further kind of acceleration that we might see.

Understood. No, I do want to get back to the Q4 in a bit. But perhaps, Rainer, when you think about biopharma, I mean, I look at the entire tools landscape, this market has inflected. And I think the fear, if you will, what keeps me up awake at night is are we at peak in biopharma end markets. Maybe this is more of a bigger picture question. What's driving this biopharma core acceleration in that high single or perhaps even in the double-digit range? And how sustainable are these trends?

So I think, actually, we are again thinking long term in the early days of biologic drug development and efficacy. And if you look at the pipeline, so the IND registrations, to see what's the health of the pipeline, does it continue to grow, the fact of the matter is that it's growing as fast and as robustly as it ever has. It hasn't slowed down, both in monoclonal antibody-type biologics, but as well as some of the newer modalities, which you're familiar with, gene and cell therapy but also oligonucleotide therapy and so forth. So we feel really comfortable that we are really on top of a strong secular growth driver here, where it's early days not just in the development of these drugs, but if you think about the penetration of these drugs globally, it's still quite low. And as we continue to drive forward in this industry, accessibility is going to continue to improve. So we feel comfortable that beyond COVID, which has driven a great deal of activity and volume, that the industry is in great place. In fact, I think the industry is achieving more notoriety, and its importance is recognized more clearly today than ever and it continues to attract a great deal of investment.

That's a great segue to my next question. This optimism around cell and gene therapy, I don't know if it was a Nobel Prize for CRISPR, but it certainly is people are feeling optimistic. When I look at your IDT business, you guys certainly touched that part of the market on the oligo side. It was up 35% in 3Q. Maybe can you explain, does IDT play a role in COVID vaccine production? What's driving these strong trends for IDT?

So in Q2, in particular, what we saw, of course, is IDT playing a mission-critical role, supplying primers and probes to the CDC in order to ensure that those kits actually work. And then, of course, we continue to supply the industry more broadly. As -- and in Q2, the academic markets were down. Now if you think about Q3, we saw a broad-based recovery as labs started to open up, confirming sort of that hypothesis that 60% to 70% of the labs are operating and up at capacity. And we definitely saw that in our oligo business. So as you think about going forward, now from a COVID perspective or even a broader-based supplier in that we're supplying our oligos to those that manufacture diagnostic kits in its entirety. So the great majority of manufacturer of diagnostic kits actually use IDT in order to make their diagnostic kits. And as an aside, of course, our oligos are also used in the mRNA vaccine processes. So that's important to keep in mind. So the base business is -- recovered and continues to show that sequential improvement. And then on top of that, we have sort of a mission-critical role in the COVID fight.

That's helpful. I guess one more question on the IDT topic. There's been a lot of optimism around synthetic biology. Maybe talk about how IDT plays in that part of the market and perhaps on pricing in the industry. Is there anything going on, on pricing? There's been some noise about competition perhaps coming in at a lower price point. I'm curious on how IDT competes in that market. And are you seeing any pricing pressure in that market?

So IDT continues to grow well above market rates. We see that we are taking share. And that's based on the fact that we have the highest-quality product. So if you look at our coupling efficiency, all of those specific characteristic as well as the fidelity, so the purity of our oligonucleotides, it's by far the highest in the industry and allows scientists to get the correct answers in their scientific experiments or to build the genes that they are looking to synthesize, if you think about synbio. At the same time, we have the fastest turnaround time, which is incredibly important when you're conducting these experiments. You have to do the one experiment to know what type of oligo sequence you want to order in the next step. And so having that very fast turnaround time with that high-fidelity quality is critical. And at the same time, we customize products, so to the specific sequence that a customer can order on the Internet or modifying existing products that we have once again to ensure that we meet the need of each specific experiment with the shortest turnaround time. And then not to forget, we've launched 11 new products since 2019 in the next-gen sequencing application as well as in the synbio space. So we're really excited about those new products that we're launching there. And in fact, we think we're creating some new space there with those new products as well.

That's great to hear. You did mention that business was aided by the academic lab reopenings in 3Q. Has the pace of reopenings continued into Q4? Or perhaps the second wave has put a pause on academic lab reopenings?

So we see the academic lab reopening just about at the level that we saw at the end of Q3, and that's sort of how we built our guide. And that seems to be how it's playing out. Those are the indications that we have now. So we don't see any material changes to that here in Q4.

Got you. And I guess on that related topic, diagnostics. I think for 3Q, the base diagnostics utilization was about 90%, 95% of pre-COVID, pre-pandemic levels. Have you seen any sequential improvements in the diagnostic -- core diagnostics ex the pandemic, if you will? Maybe talk about that part of the business when you think about Beckman, et cetera?

So again, we looked at the -- where we were exiting Q3 and used that really as our baseline, which was that 90% to 95% that you've mentioned. And in fact, that's how we see it playing out. Now we've been watching these hotspots very closely. But to date, we really don't see any material change to that. It seems to be 90%, 95% of the patient volumes are occurring as we speak.

And one of the themes -- or I guess how people are thinking about '21 from a procedure perspective, health care utilization perspective, '21 should get reset back to 2019 levels, which would imply the current 90%, 95% pre-pandemic level stepping up to 100%. Does that seem fair to you, Rainer? I'm just curious because it feels like Q1 will still be challenged here. And so it does implicitly assume back half should step up reasonably to make up for the Q1. I'm curious on how '21 should compare versus 2019 levels.

Vijay, I mean, we've made -- we've looked at all of these things and have to say that the further we get out with these assumptions, the less accurate they are. And so we really want to get through Q4 here with that 90%, 95% assumption. There's a lot going on. I'm sure every time you turn on the news, you see it. And I think it's prudent here to get through Q4 before we start talking about 2021.

That's fair enough. It's a little bit like my modeling exercises were -- it's -- surprisingly, the longer my DCF goes, the more accurate I become. Switching gears perhaps to China, up double digits in 3Q. And a number of your peers just saw high-teens growth in that market. Is China back to normalized growth levels? We always thought China to bounce back. It's going to be faster than other regions. But it's been surprising at how strong it's come back. Maybe talk about China. Did you benefit from any catch-up in 3Q in China?

There's no question that the bounce back in China has been much faster than in any other region, although I wouldn't say that they're back at 100%, right? There's still travel restrictions and so forth. So I think that in terms of patient volumes, it's also good to think about 90%, 95% there, probably closer to the higher end of the range than elsewhere. And I do think, as you think about research labs and that sort of thing, that probably 90% of labs are open there. Whereas we would generally say 60% to 70%, it's probably 90% in China. They're ahead of that. And so as we think about -- and we mentioned this in Q3, as we think about Q4, we're looking forward to another solid quarter of double-digit growth in China. And again, we feel really well positioned there. If you look at the 14th 5-year plan, focus on health care and the environment and life science research, those are the applications that we play to, and we feel really good about it.

That's great. That's great. And then the other thing we've been thinking about is if you do have the cyclical rebound in '21, should that perhaps be a tailwind for the industry and Danaher? If that thesis sort of plays out, what percentage of Danaher revenues are perhaps exposed to PMI kind of businesses? And maybe talk about the product ID. I feel like that's where PMI should have a role for you, guys.

So it's interesting that you bring up PMI. We actually don't see a strong correlation of our businesses to PMI. But to -- backing up to the more general part of your question there, if you think about our businesses, about 1/3 of it is consumer packaged good, packaging type of thing; 1/3 in applied markets, think pharma, food, that sort of thing; and then another 1/3 in the water business. So the EAS segment is comprised of those sort of 3 sections. In all of those, we're supplying mission-critical applications. So if you think about water, for instance, or sell by dates on food and beverages, these are, in many cases, regulatory required applications. And both of the businesses really aren't that exposed to the CapEx aspect of the current economic environment. In other words, even the instrument portions beyond the consumables tend to be purchased via operating expenditures because they tend to be smaller as opposed to being dependent on the CapEx budgets, which have been more constrained here. And then, of course, there's -- they're very strong service businesses. So we saw -- and you might recall this, EAS was essentially flat, maybe down 100 basis points in Q3. So that was already quite a significant improvement over Q2. And we would expect a similar performance here in Q4, only because we have 3 less selling days, right? So that's -- Matt just mentioned that, that's probably worth 300, 400 basis points. So we would expect those businesses to continue to improve. And as we go forward, and we'll see how the economy improves. There are a number of vectors to consider there beyond the vaccine. We expect those businesses to show sequential improvements as well.

Just one on waters -- water quickly, Rainer. I know that business, consumables were up reasonably well this year, perhaps in the mid-single-digit range. CapEx was down strong double digits. Should next year be a normalized CapEx environment for -- when you think about water?

We would expect, as the economy recovers, those businesses to continue their sequential improvement. And that would be certainly on the, if you will, instrument or equipment side as well. You already mentioned this, the consumables are already at the mid-single-digit range. There might be some incremental improvement there, but we would expect to see improvement on the instrument side as well.

Got you. And Matt, coming back to the Q4 comments you made on the days impact. I just want to make sure I heard this correctly. So days impact you guys are assuming perhaps at the higher end at 400 basis points. Is that correct? And I guess my question is that with all the disruption going on in the midst of a pandemic, are days relevant for Danaher? Is that even a relevant, I guess, question? Should that impact the business here?

Yes. No, I mean, I think no different than what we talked about on the Q3 call. The impact is kind of 300 to 400 basis points. And I think that's been -- that is real still even in today's world. I mean if you think about the businesses that are mostly impacted, it's going to be the consumables businesses, which is 70% of our revenue. And in particular, when you think about businesses like Cepheid, Cytiva and even Pall Biotech, those businesses and those -- they are growing the fastest. Yes, losing 3 days has a real impact. No doubt. So yes, I do think it has an impact. And I think we are at that, call it, 300, 400 basis points, yes.

That's fair. And I guess the operating margins, you made some comments about expenses stepping up. Perhaps incrementals should step down sequentially. But maybe taking a step back, how should we think about incrementals for '21? Should it be the normalized levels? Is there going to be a margin headwind when you think about incrementals for next year?

Well, again, it's hard to kind of talk about '21 until we get a sense of what -- a big piece of it will be the vaccines and therapeutics. But just in general, as we get through the next month or so and kind of finish the year before we talk about '21 in particular, but I think the way we've kept it from a framing perspective, the way I would think about it, is that we have sort of talked about in the long term having 50 to 75 basis points of core margin expansion on an annual basis. Now we've been very much in the range the last 3 years, probably a little bit towards the higher end of it. As we move forward with kind of -- as we think about going -- like Rainer said, the post-vaccine world, I think our bias is to still make sure that we're investing to balance both kind of the growth investments that we're getting, that we're seeing right now as well as the pull-through that we're getting. And I want to make sure that we continue to feed that growth engine here by making those inorganic investments that are showing up in the better core growth in the core business, let alone what we're seeing at Cytiva and Cepheid. And so I still think 50 to 75 basis points is a good placeholder for us as we go forward given our bias to kind of reinvest back in to make sure that we're accelerating the growth to another level again.

Absolutely. You do have 1 quarter of Cytiva coming in. So mix up, perhaps that should help as well. Maybe one last question now for you, Rainer. I mean, Danaher, if I look back the last 15, 20 years, what a phenomenal job you guys have done on acquisitions. It's very rare to see companies execute on M&A so consistently on a very long time frame. Exiting '20, you guys will be sub-2.5 turns leverage. It's been an interesting question in a transition year. I had a lot of questions. Why is Danaher transitioning a C-suite in the midst of a pandemic? Is Danaher so confident of its business that they feel this is the right time to go ahead with the C-suite transition? Now that you've been in the seat and you've seen the business come along, how should we think about cap deployment for Danaher? What kind of M&A opportunities do you foresee? How is the pipeline shaping up for you?

So Vijay, thanks for that question because, actually, I didn't think I was going to be in a position to talk about M&A for some time after we close the Cytiva deal. So in fact, I still have our nice little trinket here. And thankfully, Cytiva has outperformed our expectations. Matt and the team have done a great job in having lower-than-anticipated capital costs. And our free cash flow, as you know, has been really strong. So we feel as though we have far more degrees of freedom than we originally thought at this stage, certainly, of the year. Having said that, we're going to continue our focus on small to medium-sized deals. We still have work to do here with Cytiva. We can continue to do that. But we're undoubtedly in a better position from a capital allocation perspective, and we're going to maintain our bias to M&A as it relates to capital allocation. So no change going forward.

Fantastic. With that, we're at the end of the time. Rainer, Matt and Matt, thank you all for spending some time with us this morning. I'm sure people appreciate your comments, and have a wonderful rest of the day.

Same. Thanks, everybody. Thanks, Vijay. Stay safe and healthy.