Danaher Corporation (DHR) Earnings Call Transcript & Summary

Welcome, everybody. My name is Matt Sykes. I'm the senior life science tools and diagnostics analyst at Goldman Sachs. Today, we have the pleasure of having Matt McGrew, the Executive Vice President and Chief Financial Officer; and Matt Gugino, the Head of Investor Relations from Danaher. I guess you have to be named Matt to be part of this panel. So I'm glad we all made it in.

But maybe Matt McGrew, I will start with you and just kind of maybe let you set the stage, talk a little bit about the recent quarter, some of the key drivers you see over the course of this year and kind of your views today.

Sure. So I mean I think maybe just kind of revisiting Q1 just to get people sort of grounded a little bit. We had a pretty good start to the year here in Q1. We talked about the base business being up probably about 10%, and that was fairly broad-based, if you look across the portfolio. So good start on that front. The COVID tailwinds that we had, and saw here in Q1, about 2,000 basis points, so continued sort of strength there. I think if you think about that base business being up 10%, and even, frankly, some of the broader underlying pieces of all of it, but I think we've looked at that and thought there's several parts where we think we're probably doing a little bit better than others and probably taking some share here in pieces of it. And then you kind of couple that with what was very strong margin performance, cash flow and most importantly, free cash flow here in the quarter. So it was a good start to the quarter into the year. So we did update our full year guidance as well. So now if you think about kind of the full year, we're expecting high teens core growth. The base business up, call it, high single digits. That was probably more mid-single, high single before. So kind of expecting a little bit better here as we move through. And then the COVID business, more kind of high single, low double, and that just is a frame of reference for people, that's about a $4 billion revenue number. And I would kind of roughly characterize that as split evenly between sort of testing and sort of the vaccines and therapeutics. As far as sort of just what we've see recently here, I think everything is driving very much line with what we thought. Base business continues to show kind of that modest improvement like we expected. And obviously, the COVID business has been sort of a hot topic lately. And as far as that goes, we're not seeing any decline in our testing demand really at all, and we still expect to ship 11 million tests here in the second quarter. And the vaccine and therapeutic demand is playing out, I would say, pretty much as expected as well. So I think we like where we're at here as we head into the quarter, let alone the rest of the year in both near term and long term. I think that the portfolio is pretty well positioned.

Great. That update, that's really helpful. Maybe we'll kind of start where you left off there on the COVID side. I think on the vaccine and development work, I think people feel that the durability there is fairly long-lasting. On the diagnostics side, you guys had mentioned in the last quarterly call that you plan to ship as many tests in '22 as '21. And I think everyone is aware of the strong presence you have in the point-of-care market, how global that business is. But maybe help us understand how you see that testing demand shaping up for next year as well as the end of this year.

Yes. Yes, I think it's sort of the same story. So I think for this year as well as we head into next year. And I think it starts with the unique positioning that we've got in the point of care, right? And we've talked about that a lot and talk about the workflows and the accuracy and the speed advantages that we've got with Cepheid. I know we have spent a lot of time talking to people about sort of the concept of the concentric circles or bull's-eye, if you will, or actually bull's-eye in that, right, sort of at the middle of that is that point-of-care PCR testing. And if you think back and you think back to 2019 and before, there was sort of really -- respiratory testing really was sort of just really that bull's-eye in the center kind of creep up, but it was more -- if you think flu, it was all pretty much done at the point-of-care somehow, some way. There is some other -- obviously, some other testing we done around it, but for the most part, at the point of care. And we think that eventually, those outer bands that sort of grew, if you will, out of the necessity for what we are going through from a testing perspective in pandemic, those bull's-eye bands grew, and we knew that over time, those would eventually sort of shrink. And that the point-of-care in the middle, the point-of-care PCR, was going to remain an important piece of what was happening because if you think about clinical decisions being made in a hospital, that is not going to change as we go forward. This is likely an endemic disease. We're going to be testing for it for a long time. When you sort of think about adding that into what will likely be a respiratory season as we move forward next year on top of that or as well, we just feel like there's -- we will kind of come back to our -- where we were. I think if you think about also the installed base here increasing by 40% last year, all of that, again, into hospitals. We didn't really participate in antigen testing or back to work, back to school, et cetera. And so if you think about sort of 65% of our sales went to existing customers and 35% went to new customers of that increase in the installed. So all very, very good as we sort of move forward. And I think lastly, just sort of remembering that today in the U.S., we are doing about 800,000 PCR tests. We -- in Q1, we did 10 million tests. So that was probably, call it, 125,000 tests per day, right? And we're doing 800,000 per day here in the U.S. About half of our tests are to the U.S. and then half are to the rest of the world. So of the 125,000 tests we're doing a day, call it 65,000 of that 800,000 that are being done today are being done by Cepheid. So we've got a single-digit market share, if you will. For context, in 2019, our respiratory share was 25%, 30%. So you can see that where we are today, given the -- kind of what's happened in those outer bands. And where we think we can kind of get back to over time, is really the opportunity that has allowed us to say that we think we've got really well positioned here as we head into '21 and heading into '22.

Got it. And while we're on this topic, a question from the audience, are you able to talk about what percentage of the Cepheid COVID testing is for pre-procedure testing, just given the point-of-care side?

It's difficult to tell because it's not standardized, right, Matt. So we've got some customers who are doing pre-procedure assessment. We have some customers who are doing pre-admittance testing, but it's not everybody for sure. And it really does vary sort of hospital to hospital, let alone network to network. It's very hard to tell. But yes, there is some of that, that is happening. And I suspect it will vary regionally as well. But I don't think -- we don't really have -- I don't have great detail into that from a customer perspective.

Got it. And another topic that you guys have talked a lot about and people bought up is just the growth of the installed base, which you outlined previously. And then the menu expansion plans in order to keep those instruments at a high-capacity utilization. I'm sure a lot of the instruments are going in and they're retiring old ones. So that's an element to it. But just wondering in terms of menu expansion plans, how are you thinking about it just given the increase in the installed base you've seen?

Yes. So the way that I think about the increase in the install base, like we talk about 65% existing, 35% new. That's going to be a combination of some new customers, the 35%. Some of that will be replacing existing molecular, and some of that is existing molecular from competitors, and some of that is going to be more maybe the hospital for the first time using molecular, right? And so it's a little bit of a mix of both. So I'm not sure it's all necessarily sort of taking out an existing box or even with our existing customers is necessarily replacing old for new. And I do think we're seeing a lot of -- because of the value proposition, what they have seen if they were new customers or have used us for a while. The value proposition, I think, is pretty clear to those customers. And so during this time when they're expanding, maybe it was for respiratory initially, but with plans to be able to use, obviously, their increased capacity as they go forward to your point on other -- from a menu perspective. And that's a big part of it. We've been pretty thoughtful about where we made those new placements, making sure that we kind of -- like I said before, we really stayed in the hospitals, didn't go after some of the sports leagues and some other things, the back-to-work, back-to-school. And that existing menu, which we've got north of 20 tests in the U.S., and we've got 30 here globally, across the globe, can all be used on the GeneXpert. And so now that we've got more customer base, higher customer base, higher level of install as well. That does provide us with the opportunity to further kind of penetrate more assets. And I think if you -- we already have, obviously, a franchise in HAI. We have a franchise with women's health, sexual health as well as what we're doing in kind of some of the emerging infectious diseases. I think you will see us continue, as we sort of think about that menu go forward and trying to port that, grow it from 20, 30 up, what we have today, and then get that into those new customer base. I think you'll see sort of in the near term, maybe, I'd characterize it as kind of women's health as being the primary focus. HAI would probably be after that. And I think you'll probably see an updated COVID test as well as we get a little closer to the second half here. And then I think a little bit more midterm and beyond, you might see some things around more some of the HBDC stuff. And we've got a very limited cancer portfolio today. I think over -- again, over a longer period of time, you might see us address that. But I think it will kind of be focusing really on the core -- expanding what we've got in that core HAI and women's health area.

Got it. And then maybe shifting over to bioproduction. Obviously, there's -- you've done a large business in the vaccine development. I think with boosters, potential modifications, I think there's certainly a durability to it. But just more broadly on that business, you've got 2 great assets in Cytiva and Pall. And the mRNA platform has achieved a certain level of validation. We've seen a really important drug approval yesterday. And just so can you just help us think about that end market for you, how Cytiva and Pall compete? And where you see that going in terms of growth rate or size potentially for Danaher? And lastly, because of your work on the COVID vaccines, have you been able to penetrate your client base more deeply or bring on new clients that you can then do non-COVID-type work for them? So I guess I'm wondering, is this going to be an appreciably better business on a post-COVID basis than it was pre COVID?

Let's start with the second question first, so just so I don't forget it. Because I think the answer to that is yes. I think what we have been able to do here in the last 12 to 18 months, particularly the combination of Cytiva and Pall sort of working together to collaborate on where that -- where the visibility is on, who is doing what, who needs what and our ability to meet those customer needs to meet them in a time of, if you will, crisis. That is super important to customers. And I think what we've been able to accomplish on the vaccines and the therapeutics has -- will lead to, in the future -- kind of a lot of future benefits, if you will. So I think there's no doubt that we've seen that. Take a step back to sort of the market in general and what we're seeing and how combining those businesses together would be -- what that means. This is a business -- I mean maybe simply thinking, the last several quarters, we've seen this business be a double-digit grower. Now that's outside of COVID driven by some of the things like you talked about, the approval yesterday. And that's sort of simply a validation, if you will, of the business and part of the reason, big reason that we got into it with Pall, right? We thought that this would be very good growth business, high single-digit-type growth business over the longer term. And that probably has been -- since we did Pall, my guess is that's accelerated from more of a mid-single. So when we did Pall and even Cytiva, we probably thought that biopharma was mid-single-digit plus sort of growth. And I think now over the long term, I think we feel like there's sustainability here at high single digits given, like you said, new stuff that comes on the market, given what we've been able to do with getting Cytiva and Pall working together to solve problems. And I think really, that's the key. When you think about chromatography, you think about filtration, not only on biopharma, but on mRNA and ADCs and all kinds of other sort of new modalities, if you will. There is some form, generally speaking, from target to filtration on all of those, and being able to combine our knowledge and combine that customer intimacy really across all of that workflow is solving customer problems and most importantly solving them faster. So accelerating their time to market, which is really important. And so I think that we've seen that. And we think we've seen it in sort of just a limited time here, but with what we've been able to do to help customers with the vaccines and therapeutics. And so yes, I do think it's proven powerful already, and I think it will be going forward, too.

Got it. And then just looking at the upstream portion. I tend to think -- I tend to look at that market as being fairly fragmented. There's a lot of folks that are doing an RUO for sort of preclinical. But as that cell and gene therapy in general pipeline starts to mature and starts to move closer to commercial development, you're going to need GMP grade large-scale facilities, which a few people have. And I'm just wondering how you think Danaher is positioned for that progression of the cell and gene therapy pipeline going forward.

Yes. No, I think we're -- I think one of the -- so we sort of have -- again, it comes back to Cytiva and Pall being together, if you will. We have a piece of that in each with the cell and gene therapy buildup with what we were doing at Pall and what we picked up when Cytiva came on board. And so combined, I think it's a pretty compelling offering that we've got. Obviously, still early days, sort of smaller numbers but high growth. And you're exactly right. GMP-grade facilities are going to be of utmost importance. And that will be, obviously, as we sort of build out the capacity there, that's going to be critical for what we do, not unlike what you probably saw us do at IDT, right? Same concept, right? They're supplying a lot of the inputs that go into that. And so kind of think about IDT, what we're doing there, we've got cell and gene therapy business now that you look at together in totality with Cytiva and Pall. And yes, I think while mAbs will probably still continue to be the biggest area in bioprocessing for a while given the size, other modalities will come about. I think you touched on it, mRNA really proved itself as a platform here. And I think this is another one of those legs and opportunities for us to go above and beyond just monoclonal antibodies as we move into new modalities. And I think we're pretty well positioned here to participate as it starts to get into commercialization. As you know, most of it today, Phase I, Phase II. But we are getting -- seeing things get approved, and that is a very, very good sign. So there's no doubt that, that is going to be part of our future.

Got it. And then just a key debate that I continue to have with investors is just looking beyond COVID and trying to do the math between the base business growing, COVID tailwinds receding, the decremental margins that might happen, and kind of looking at what sort of -- where you are on a post-COVID basis in terms of top line growth and in terms of margins. And I think people have gotten comfort that I think these are faster-growing businesses on a post-COVID basis than they were pre COVID. And on the margins, there still seems to be some debates. Maybe if you can just help us kind of frame how we should think about from a profitability standpoint on a post-COVID basis, to the extent you'd comment about it, just to help people think about it.

Sure. So I think -- because it's a good question. The way that we've been thinking about it is a little bit -- we sort of have been seeing in the last, I don't know, call it, 6 quarters, fall through that has been 40% to 50%, something in that -- roughly in that range. And that was largely due to a little bit of mix of where the growth came from as well as sort of the lack of travel, right, and sort of some of the other costs that we've seen. We sort of had better fall-through than we typically might see. So I think historically, in the past, we had sort of talked about 50 to 75 basis points of core margin expansion. And that probably translated into maybe 30%, 35% fall-through, roughly. Not every quarter is the same, but just roughly. And we've been seeing 500 to 1,000 basis points better in certain times because of the lack of some of the things that we're doing. I think as we go forward, in particular, I would expect that a longer-term view here is still back in that 50 to 75 basis points, more 30% to 35% depending on how you want to think about it from a fall-through perspective, annually. And part of that is because I think we found a pretty good sweet spot of being able to balance fall-through that comes through from an EPS perspective and the reinvestment. And I know Rainer's really -- doesn't want to take that back down, if you will, to sort of maintain something north of 40%. Because I think that there's a nice balance here of being able to deliver margin expansion while still investing in the businesses that then kind of generates the innovation that keeps the growth engine going in that kind of virtuous circle. Once you get into that pattern, I think it's a pattern you want to stay into. So I think that's our bias. And if we can do that, the OP dollar growth here is just as much of the story, if you will, about -- versus the expansion of the margins because you'll get the better growth and you get the better fall-through that will drive the earnings growth. That's sort of how we're thinking about it a little bit more longer term versus what we saw in the last, call it, 18 months.

Okay. That's really helpful to help us frame that. Then just pivoting towards EAS, an area that probably hasn't got as much attention lately, but obviously, a little bit more cyclical. But I tend to think that while maybe not quite the rate of sort of cell and gene therapy, it's got its own secular tailwinds in terms of water quality, pollution control, et cetera. Have you seen this segment -- how do you see this segment kind of trend as the economy has recovered? And kind of what level of spend have you put into this business during the downturn? I remember you and I spoke a while ago and you talked about, "Hey, please remember that we're also investing in businesses that we feel we can take share in a downturn." So maybe you could talk about the level of investment. And then what you expect EAS in terms of growth as you guys have moved through the recovery?

Sure. Maybe touching -- I mean first, I think you hit on it. I mean water quality and PID both have got long-term secondary attractive end markets, frankly. I mean they're not quite as attractive to some, but they're very, very good. You look at -- from a growth perspective, looking backwards, if we're sort of looking forward, over any 3-, 5- or 10-year period. If you go back and you look, these 2 businesses individually, both have been mid-single-digit core growers. And so they've done that over a long period of time. And I think as we sit and think about 2020 as an instructive example. I mean in 2020, EAS was only down 1.5%. And water quality was actually positive, right, even in 2020. So Q1, EAS was, call it, 3.5%, I think. And I suspect that as we move forward through the year, that trend kind of continues. And that we're sort of mid-single, high single here in '21, given that I think these are fundamentally mid-single-digit business coming off of a little bit of a down year in 2020. So I think mid- to high single digits in '21 and going forward. We continue, to your investment question, we did not stop investing there, both inorganically and organically, by the way. And I think that's -- it's an important thing to note. And we've done a couple of bolt-ons here at water quality recently, mostly around some of the digital offering. You had kind of seen what we did at Aquatic Informatics and other deals here just recently. So continuing to invest organically and inorganically because we like these businesses from an end market perspective. They've been solid mid-single-digit growers over a long period of time. Those are with attractive margin and consumable profiles. We like that.

Got it. Maybe let's pivot over to China. It was obviously the first recoverer from COVID. We've seen the level of spend on the green economy, and sort of the 5-year plans continue to increase. Could you give us an update on how you feel your positioning is there? And what you see for China over the course of this year in some of the different segments where you're involved?

Yes. No, I think over the long term, we feel like we're really well positioned in China, given what you talked about. Long-term secular growth drivers in China have matched up very well with all of our businesses, frankly, whether that be sort of thinking about the biotech kind of investments that they're making over there, whether it be about the research capabilities, whether it be about, frankly, even kind of the water initiatives that we have seen from them. So I think a lot of our businesses touch some of the important priorities of the government. 85% of our business in China is in life sciences and diagnostics, and really well positioned there with our kind of our applications and our business model is sort of recurring and sort of sticky. So very good positioning in China. It is 30% of our revenue today. Danaher high-growth markets, I should say, in China is probably -- I guess is probably about low teens number type, call it, 13%, 14% of our revenue is China. So nearing $3 billion of revenue. And I think we've -- over time, in order to do that and get to where we were, we've been there for a long time, and I think we have seen the benefits of making sure that you're there for China, not just there for exporting labor arbitrage. And so I think as we've localized a lot more here over the last several years, it has been really helpful from our growth perspective as well. So Q1 was not -- it was a pretty broad-based recovery. I wouldn't say they are fully back, but I think they're pretty darn close and probably globally, if you said to me who's the most -- farthest along, it's probably China. And I suspect that as we kind of move through the year here, that gets back to normal, and I think 2021 is probably north of 20% here from a growth perspective. So we like our positioning very much in China. We're there for the long term, for sure. And it's an important part for ours.

Maybe a pretty broad question. It's probably difficult to answer, but we've heard a lot of comments from peers and yours about taking share, whether that's in China or in other areas. Sometimes it's very difficult to determine the actual amount of share you might be taking. But just could you comment on how you feel Danaher is positioning in terms of taking share, whether it's in China or other areas? And do you feel that, that is sustainable? And are we going through some type of share shift going forward? The reason why I think about it, as I just think about one of the largest companies in the sector growing the fastest, generating the free cash flow that you're generating. It sometimes leads to share shifts over time. And so I just would love to hear kind of your view on how you think the market share is shifting, and what portion you might be taking of that.

Yes. So I think it's sort of -- it's going to -- it's business by business is the way that we think about it, right? And so when we kind of get our businesses together and go through operating reviews, that's one of the first things that we do, sort of go through and analyze from a competitive perspective where we're winning and where we're losing. That analysis is not always perfect because you don't always have public company comps. Then even within that, right, there can be different [ versions]. So trying to parse all of that out and do as good of a job as we can, but it's not perfect. But I would say that where we think -- there's a couple -- 2 main reasons for some share gains. One, I think, being, in particular, around what we saw in the last, call it, 18 months around -- to your earlier question around biopharma, I think our -- the ability to provide was really important, and that we did a very good job of being able to do that quickly in an environment that was difficult. And so I think we've been able to identify some spots in biopharma where we've been able to shift some share there. I mean as you know, it's pretty sticky. So that's a good thing. We're very happy about that. I think as you think about some of the other businesses, in particular, in the base business, I think that's where -- that's a bit more of a longer -- medium- to long-term story. And back to that margin question of the investments that we've seen in innovation, in particular, over the last, pick a number of years, 5-plus years, is paying off and starting that virtuous circle in a way that we saw it, for example, like Radiometer. That's been a business of ours that has been a net share gainer for many, many years. And that's their playbook. And we're starting to see that playbook being run at places like Beckman Life Sciences, for example. A business that when we bought it, it was very low single-digit growth and now has been a tremendous story for us. And it's that virtuous circle that you start to see because of the innovation that has been put in, and not just in and then stop and then in and stop. That commitment to it has been a really important part of the story. And so I think innovation has been a big share shift for us, or a piece of it, as well as this last year, by being able to do some things maybe that others weren't in the pandemic, has also helped here as we move forward. The big piece of that is both Cytiva and Pall's story.

Great. And shifting to capital allocation, I think the balance sheet strength that you guys have shown much earlier than I think people expected, just given the size of the Cytiva transaction is probably a pleasant surprise. And at the same time, there's probably a little bit more work to do on Cytiva in terms of the integration. But we're a little ways away from when that purchase was made. How do you think about inorganic investments? And I'm just wondering, in terms of valuations in the market, we've had other companies talk about moving maybe a little bit more -- less derisked, more risk and more private, smaller bolt-ons. How are you thinking about your, one, ability; and two, kind of thoughts on the competition and the valuation for acquiring assets in this market today?

Yes. Maybe kind of starting with the first part of the balance sheet. Yes, I mean we're in pretty good shape. There's no doubt that, that -- where we sit today is, frankly, even looking back a year ago, just we knew really, right? But no, we're definitely in very good shape. From an M&A perspective -- I mean maybe first before we go there, maybe comment on Cytiva. It's sort of interesting, when you talked a little bit about while -- that deal has been in the house for a while, it feels like it because we announced it in early '19, back when my beard didn't have as much gray in it. But we really didn't close that until effectively April 1 of last year. So we've really only owned that business for a year, right? And so still a lot of work left to do there, and we're doing it. They're off to a great start, obviously, with the top line. Obviously, a great start with their routine with Danaher, still plenty of work to do. The team's doing work -- a great job getting off of the GSAs and the things that go along with kind of the carve out. So still work to be done there, but everything, I think, is going really, really well, which then sort of kind of talks about your last part about the M&A and can we get deals done in this environment and how do you think about them. And while it's not been a huge dollar number, we got some deals done in Q1. And importantly, we got some deals done in places that we hadn't able to do it before, inclusive of the first deals that we've ever done for IDT and Cytiva. And if you think about Cytiva already doing deals only a year in, that sort of has been a barometer for us of when you're ready to do deals and integrate them in, even though there's still some -- a lot of heavy lifting done. That's a really good sign. And the fact that Cytiva is able to go and find some deals and get some stuff done in and around spaces that are very attractive, whether it be sort of fill and finish with Vanrx, and we've done some other things as well in the genomics area, if you will. That's an encouraging sign. And so I think we're north of $400 million in spend here in the first quarter. Outside of those 2 deals that I just talked about, we had, I think, 4 other deals. Like I said, we've done some in all 3 of the segments, given what we did in water. And so yes, I feel like we're in pretty good shape here as we go forward. And historically, I would also add that -- we have not -- and actually perfect examples, right? So maybe the perfect example is IDT. So we sort of shopped and thought about where our M&A landscape is, and bought companies that were private companies at times like IDT. We've bought businesses that were stand-alone public companies, like the Palls and the Cepheid. And then Cytiva, another great example of a business that was a carve-out, right? SCIEX, a carve-out transaction. So we've sort of done all of those, and I think we've always had that mindset to look around like that. And that doesn't change. And I think that helps us as we are going through periods where you've got valuations could be in flux. I think it helps us to be balanced, but we're not only looking for public companies, if you will. There's a lot of other things to do as well. I think that helps us.

Got it. And you addressed it already when you were talking about EAS and just more broadly about the market share comments, but just R&D as a percentage of sales has been around 6%. It seems like you're finding value in the market for inorganic investments. And therefore, I wouldn't expect there to be a broad shift into organic just because of valuations where they are. But just kind of help me think about sort of the R&D effort going forward.

Yes. Like I said, I would not expect that we are going to -- well, I guess first, we don't -- when it comes to time to pull together a budget at the end of the year for the next year, we don't start top-down and say, well, let's have 6.3% of our sales as R&D. So we're very much bottoms-up from each of the businesses. But I think that's important because we don't want to put any constraints on people. And I think it leads to a lot more healthy discussion around what can be done and that innovation, better to say, can we do this and this is what we'd like to do. And so I think that dynamic is helpful. And so as you then kind of think about it in that, we turn it back and say, okay, yes, I don't put a target on you, but I do want to see how you're thinking about the impact on growth and the impact on margins. I think that's an important trade-off. Coming out with a new product that's less profitable than something we're selling today. And it doesn't really, really work, how can we have a better balance there? So we work on that quite a bit. And I think like I said, Rainer's got a pretty strong bias to continue that flywheel of how mid-single-digit growth, driving 50, 75 basis points of OMX, feeding back into the innovation engine, allowing us to keep that mid-single-digit growth plus going. I think it's a bias. And so while we don't target it, that's how we think about it. And given where we've sort of come from, there were days that our R&D was 3%, and it showed in our growth rates. And I think we've got a high level of conviction that, that higher growth rate is driven by the investment here in R&D. And so you should not expect that to be something that we look to pare back on.

Okay. And maybe as we start to close out here, the Danaher businesses and DBS has been an area that people have had a high regard for. And I think it's been an area of consistency in terms of its approach and what you've been able to achieve through integrations and your business process. We've gone through such an incredibly unique time for the industry and for Danaher in particular. I'm just curious, does DBS evolve over time? And did you learn some things during COVID that might change the way you think about DBS, and if so, make some improvements to it? Because I'm trying to balance the consistency of the approach we're always trying to learn and improve.

The continuous improvement, by definition, means you're changing things when necessary, right? And so I think you hit it spot on. It is -- DBS is -- it's not a set of rules, right? And so when I think about DBS and the evolution of it, it's always evolving. And if you just go back and you think about where we were, where we came from as a company. If you go back 10, 15 years, we were really -- DBS was heavily focused on lean. That's where it started. That was on the shop floor, that's the Toyota Production System, that's the genesis of really DBS. And then over time, I think what we've tried to do is take those principles and apply them then to other areas like growth and leadership. And so now when we think about DBS, it's evolved from lean to lean and growth in leadership. And within growth and leadership, we've got an evolution there of the tools that we have, some of which we have developed organically and some of which, by the way, have come from acquisitions that do things better than we do. We take no pride in ownership here. And so with that mindset of kind of continuous improvement and the mindset that we can get -- if other people can do things better than we are, I think you're constantly seeing DBS evolve. So how did that play itself out this last year? It was sort of striking how much we were actually able to get done that during -- from a DBS perspective during the pandemic using Teams and calls. Because I think our bias before was everything needed to be face-to-face and that you couldn't do some things that weren't. I think what we learned is there are -- going to gemba, which is the central tenet of it, right, which you have to do -- cannot be done virtually. And so it can be, but it's clunky. And so I think really, what we learned was that there are certain things that you can do. For example, to really trying to get training wide into, for example, Cytiva, a new company, we were able to do some DBS training remotely, but actually, we got really good feedback on it. It was pretty -- really well received that we didn't think would be that impactful, but it was. Now there will be follow-on training that will be the part that has to be in person just because some of it is, but at least we're able to introduce the concepts out there beginning virtually. So I think what we learned is that you can do some things virtually even in DBS that will be helpful and will stick around for us. But ultimately, at the end of the day, I think when you think about a permanent state, we're going to keep evolving, continuous improvement, but nothing replaces going to gemba and getting either to your customers or to the site of business, sitting with our folks. So still the cental tenant of it, but I think we are able to be -- again, as we always have with it, we evolved and will be better for it.

Great. Well, with that, we'll leave it. And I completely agree, some things are better in person, particularly going to a conference in Laguna Niguel versus sitting in our homes on Zoom. So hopefully, next year, we'll see you. Matt, Matt, thank you so much for the time. I really appreciate it.

Thanks.

Thank you. Take care.