Danaher Corporation (DHR) Earnings Call Transcript & Summary

Good morning, everybody. I'm Tycho Peterson from the life science team. It's my pleasure to introduce our next company this morning, Danaher. Just a quick reminder for people that have questions, you can submit questions through the ask a question function on the website. And with that, let me turn it over to Rainer.

Well, thank you, Tycho, and good morning, and thank you also to JPMorgan for hosting. I certainly hope we can all be together in person again here real soon. Now I know we have some slides for you to view. So let's go to the second slide here. Just briefly, that's our forward-looking statements, and those are there for your reference. But we can now jump right into really the third slide. And let me start with an update on our preliminary results for the fourth quarter of 2021. As you likely saw, we made an announcement earlier this morning around our preliminary look at the fourth quarter, resulting in a very strong finish to 2021 and another terrific year for Danaher. In fact, for the fourth quarter, we estimate that our core growth will be high teens and materially better than our expectations of low to mid-teens. Now our stronger performance was across all segments with both our base business and better-than-expected revenue at Cepheid, both in our respiratory and nonrespiratory volumes. And particularly notable was the broad-based strength we saw in our base business, up approximately 10% in Q4 where our Life Sciences, Clinical Diagnostics, Water Quality and Product Identification platforms all exceeded expectations. We're also seeing the results of our focus on innovation paying off with several recent new product introductions, helping us gain share in many of our businesses, such as SCIEX and Beckman Life Sciences. Now on earnings and cash flow, we expect another strong quarter given the outperformance on the top line, wrapping up what was really a fantastic year for us. Now of course, we're going to share more with you when we report our earnings here in just a few weeks. Let's move on to the next slide. Now with that, let me spend a minute on Danaher today. And what a lineup we've built up over the past several years. For 2021, we anticipate generating right around $29 billion of revenue across our 3 external reporting segments, 4 strategic platforms comprised of roughly 25 largely independent operating companies. Now these operating companies tend to be #1 or #2 players in their attractive end markets, and they drive for share gain with a common set of recurring revenue-based business models. And we create leverage across our platforms with the Danaher Business System, talent development across the high-growth markets and of course, with our M&A processes. Now the Danaher, you see today is a culmination of a strategic transformation over the last several years into a science and technology leader. So let me go into some more detail on that transformation here in the next few slides. Let's move to Slide 5 here. Now we often talk about purpose-driven portfolio transformation. And today, we are a different Danaher than we were just 5 years ago. Now this was done organically through how we run the business with the DBS playbook but also inorganically. We completed Keystone deals, including Pall, Cepheid, IDT, Cytiva and most recently, Aldevron, which gives us a meaningful position in nucleic acid or genomic-based therapies. Now all of these acquisitions have higher core growth rates, higher recurring revenue, great margin profiles and are well positioned in attractive end markets. At the same time, we also created Fortive and Envista as stand-alone publicly traded companies. So these moves have not only resulted in a bigger company, but most importantly, a better company. And we often say, it's not only about being bigger just to be bigger, it's about being better and stronger every day. Next slide, please. Now our transformation has positioned us to higher growth verticals across the portfolio from our Life Science businesses through to Diagnostics, to Water and Product Identification. And I'll touch on a few of the more meaningful drivers in those end markets just right now. Now in Life Sciences, the shift towards biologics and the growing focus on genomic therapies is creating a market that will have accelerated growth for years to come. And to give you some context here, in just the last 5 years, we've seen the number of monoclonal antibodies in development increased by more than 50% and cell and gene therapy-based medicines increased by a factor of 10, an entire order of magnitude. These therapeutics are working for patients, achieving accelerated paths for regulatory approval and becoming more of a standard of care. Now if we think about Diagnostics, molecular diagnostics represents an area with significant growth runway. We're also seeing decentralization of health care move toward the point of care, aligning nicely with our businesses. And our solutions are incredibly important for health care with more than 70% of treatment decisions informed by clinical diagnostics. Now in Water Quality and Product Identification clean water and sustainability remain a significant issue across the globe, something our water quality products help to address. And there are ever more packages being designed that need both our packaging design and marketing solutions to protect, for instance, the food supply. And of course, high-growth markets, ever tightening regulations and workflow digitization add additional growth dynamics that cut across the businesses horizontally. So folks, this is an outstanding portfolio nicely dialed into the most attractive material and enduring long-term secular growth drivers. Next slide, please. So you can see here that our portfolio transformation has created a leveraged lineup by combining both attractive end market participation with outstanding business models. When you look to the right of this slide, you can see how well we've aligned our portfolio to the secular growth drivers and fastest-growing end markets that I just talked about. And within these markets, nearly 1/3 of the business is within biopharma and more than 10% is within molecular diagnostics, 2 markets that enjoy exceptionally high growth rates at high single digits and above. Now I'm going to go into more detail regarding our positions in these 2 markets in just a minute. But on the left side, you see that our businesses are united by a common business model, razor-razorblade businesses that have large, well-entrenched installed bases of instrumentation or proprietary equipment. And the revenue from these businesses is really durable with the recurring sales now approximately 75% of total revenue. So our portfolio is characterized by the commonality of our business models plus the attractive end markets in which we play, which together with the power of the Danaher Business System, provide leverage to our growth and earnings trajectory. Next slide, please. So how does this transformation manifest in our performance metrics? Well, for one, it has really changed the growth dynamics of the portfolio into a stronger and better Danaher, low single-digit core growth 5 years ago to low teens when you average the last 3 years. Now we've had some benefit from COVID these past couple of years, but very strong underlying base business growth as well as that has rerated our growth rate meaningfully higher. Recurring revenues, including consumables, now represent 75% versus 45% and are very durable. So we are more predictable and have reduced cyclicality. And this, in turn, also has created a very different margin profile with our operating margin expanding by more than 800 basis points. So the operating margin expansion is the result of both portfolio moves, higher-margin businesses like IDT and Cytiva coming in and Envista moving out. So as we think about this as well as substantial growth improvement in our core business that is also driven through the Danaher Business System. Now finally, let me touch on our strong cash flow generation, which is a Danaher hallmark. $8 billion of operating cash flow expected in 2021, which is double from our 2015 cash flow. Now as you know, we have a bias for deploying our free cash flow into M&A, an important driver of our portfolio transformation and creating a compounding effect, which helps create even more long-term value. So we've transformed into a $29 billion plus revenue portfolio with higher growth and recurring revenue comprised of tremendous businesses in highly attractive markets with an enhanced growth and earnings trajectory. Next slide, please. So let's have a look at bioprocessing overall, how we play and how we win as Danaher. Starting with the breadth of portfolio, Cytiva and Pall Biotech together make Danaher the leading player in bioprocessing with the flexibility and capability to help customers manufacture many therapeutic modalities, including monoclonal antibodies, cell and gene therapies and other genomic-based medicine. Now this picture shows our breadth, both upstream as well as downstream in the workflow, with Cytiva holding leading positions in bioreactors, chromatography and cell culture media and while Pall leads in downstream filtration. In fact, combined, Pall and Cytiva have the largest single-use technology business at well over $1 billion. Now we offer our customers a differentiated value proposition across the entire workflow, including our best-in-class service and support, capabilities that range from building a new plant to optimizing complex manufacturing processes. And our technical service team of over 1,000 associates helps our customers accelerate time to market of these life-saving drugs at lower cost. And our global scale allows us to reliably serve our customers, which is always important, but even more so over the last 18-plus months. So we're very fortunate to enter the pandemic from a position of strength, having authorized capacity expansions at Cytiva ahead of the deal closing, and are adding further to our manufacturing capacity with our planned investment of $1.5 billion in '21 and 2022. And this capacity and scale has really helped us to take share over the past several quarters, particularly in areas like cell culture media, but also in other applications. So our bioprocessing business and exposure today is $7.5 billion in revenue, representing more than 1/4 of Danaher's revenue today. Next slide, please. Now a large part of our differentiated positioning in bioprocessing that I just characterized came through the acquisition of Cytiva. Cytiva is an outstanding business with a highly talented and innovative team and a recognized leader in the bioprocess market. Now nearly 2 years in, we couldn't be more pleased with the team and the progress they have made as a part of Danaher. The team hit the ground running and really embraced the Danaher Business System from the very beginning to improve across multiple facets of the business. For example, in capacity, we doubled the output of our manufacturing plants and single-use technology. And in innovation, we accelerated time to market of innovations by reducing time to market of important R&D projects such as membrane chromatography and hollow fiber filtration critical to improving bioproduction yields. Now all of this was done and made a very complex carve-out process, which the team successfully navigated ahead of schedule. And through this transition, the team has kept a focus on the needs of our customers. Working hard to accelerate our capacity expansion to meet their needs and executing on the $1.5 billion of capacity expansions in bioprocessing, including both Cytiva and Pall. Now the financial results really do speak for themselves. Revenue has doubled over the last 2 years. And these are just outstanding results in the last 2 years, but equally important is the long-term revenue growth, which we expect to be high single digits plus of this larger revenue base versus our previous expectation of 6% to 7%. So in summary, this is just a terrific performance, and it far exceeds our initial expectation. Next slide, please. Now let's spend some time on molecular diagnostics. Another very attractive market where Cepheid is really uniquely positioned. Molecular diagnostics is becoming a standard of care and diagnostics, and it's a testament to its effectiveness and represents a significant long-term growth opportunity. You can see that from the penetration rates on the right-hand side of this slide. And within this market, Cepheid is the gold standard in molecular diagnostics at the point of care, in critical care environments close to the patients and critical to treatment decisions. Cepheid enables a simplified workflow. It's easy to use with very little sample prep or hands-on time. Think of less than a minute of sample prep time and a quick time to result. The elegance of the cartridge system and flexibility with scalability is unrivaled. The same test cartridges, so that little cartridge you see on the bottom left here, is used on a GeneXpert 1 or 4 and an Infinity-80 independent of the test type. So you can run all kinds of different tests at the same time, but you're using the same kind of cartridge. And we win with the critical combination of this easy workflow, speed and accuracy right at the point of care. And our menu of approved tests is the leading menu in molecular diagnostics, providing our customers with the ability to diagnose many disease states. So Cepheid was best-in-class before COVID and remains so today. Next slide, please. So let's have a closer look at Cepheid since we acquired the business 5 years ago, a business many of you know well before it became part of Danaher. And simply put, it's just really impressive performance. Today, Cepheid is a $3.5 billion business. It's 5x larger than when we acquired the business with the largest installed base on the global market. And this installed base has nearly quadrupled in size since Cepheid joined Danaher back in 2016, but it's doubled since 2019. And with this growth, we have invested heavily to add capacity, R&D capacity and manufacturing output to better serve our customers, and we're going to continue to do that going forward. Now of course, we're also extremely proud of the Cepheid's team's contributions to the fight against SARS-CoV-2. First, it's the first point of care and near-patient COVID test approved under the FDA's emergency use authorization program and the first 4-in-1 test approved under the EUA, combining 4 of the most common respiratory viruses into a single cartridge. Now we've been working tirelessly to expand production over the past few years and shipped nearly 60 million tests this year, 3x more than the output from 2020. So we're very confident of significant future runway. Cepheid was growing at double-digit rate prior to the pandemic, and we expect that in a post-pandemic environment, Cepheid will also grow at a low double-digit growth, but off of a much larger base. Next slide, please. So let's talk about the Danaher Business System. You heard about our portfolio transformation, but how do we run these businesses? We have to execute, and fundamental to that execution is the Danaher Business System or DBS. And DBS is our source of sustainable competitive advantage across all our businesses at Danaher and is based on the foundations of our core values and our shared purpose. It's much more than just a set of tools and processes we use to run our businesses. The 5 core values of DBS represent what we believe and are the foundation of our shared purpose, helping realize life's potential. So we start with the best team wins, putting the best team on the field every day and by charging that team with the responsibility to listen to our customers, meaning when customers talk, we listen. We deploy that voice of the customer into the businesses with the certainty that it fuels continuous improvement or Kaizen, which is our way of life. And we validate progress with the metrics our customers value most: quality, delivery, cost and innovation. Now at the same time, the voice of our customers informs the innovation that defines our future and ultimately, by creating sustainable competitive advantage and market share gain. Finally, we compete for shareholders. We compete for investment dollars on the basis of our ability to drive compounding annual returns on a long-term basis. So DBS is our culture but it's also who we are and it's how we do what we do. Next slide. So let's put it all together. What does the portfolio transformation, the attractiveness of the end markets we play in, the Danaher Business System and capital allocation all mean? Well, first of all, we think we have rerated the core growth profile of Danaher. We've rerated that growth profile higher in a post-pandemic world versus where we were prepandemic. When we look to the future in a post-pandemic world, we think that our growth profile has improved significantly with Cytiva rerating to high single digits plus growing from 6% to 7% prepandemic, off of a much larger revenue base. Cepheid is now over 10% of the business continuing to grow at a low double-digit rate. In our core Life Science and Diagnostics platforms, Water Quality and Product Identification all operate in very attractive markets that I talked about earlier, but they also benefit from the accelerated investment spend that we have been driving into the business for further share gain. So we have rerated our long-term core growth rate higher by over 100 basis points and our now sustainable mid-single digits plus core growth grower for many years to come. Now with that higher core growth leverage powered by the Danaher Business System, disciplined capital allocation and the strength of our portfolio, you should expect from us mid-single-digit core growth -- mid-single-digit plus core growth longer term with 50 to 75 basis points of operating margin expansion annually, free cash flow that continues to exceed net income, biasing our investment of that free cash flow on M&A as well as to deliver double-digit plus earnings per share growth. So simply stated, our portfolio transformation and end market repositioning, coupled with the power of the Danaher Business System has materially enhanced our growth and earnings profile. Next slide, please. So let's summarize what you heard today. Our purpose-driven portfolio has transformed us into a science and technology leader building strong footholds in great markets with high-quality businesses. We now have sustainable leadership positions in bioprocessing, molecular diagnostics. And we're excited about the future of genomic medicine adding to our leading positions in Diagnostics, Water Quality and the Product Identification platforms. We've differentiated leadership positions within bioprocessing and molecular diagnostics. We have the broadest portfolio across bioprocessing workflows with leading positions in up and downstream application with Cytiva being a game changer and far exceeding our expectations, while Cepheid has the best-in-class molecular diagnostics offering. All this results in our long-term growth and margin profile rerating higher through our portfolio transformation and market repositioning powered by the Danaher Business System. So I think our future is bright at Danaher, and we have built an advantaged foundation for 2022 and beyond. So with that, Tycho, I'll turn it back over to you.

Thanks, Rainer. Great presentation. I do think we'll maybe kick it off with the preannouncement. Obviously, great to see the base business holding up. Cepheid better than expected. Maybe I'll start there. You've been very consistent about your outlook on Cepheid for 2022. I guess based on near-term trends and what you saw in the fourth quarter, any change in thinking on that kind of $45 million test bogey for this year?

Yes. Just to level set, we are really thrilled with being able to ship those 19 million tests here in the fourth quarter, exceeding the 16 million that we thought we were going to deliver, being able to get ahead with our capacity expansions. And we also saw that skew towards 4 and 1 test versus COVID-only play out for us, in fact, slightly better. So I think we feel great about our momentum and we're going to continue to work on our capacity. Now as we think about 2022, we'll talk about that in much more detail here during our earnings call on January 27. But I think we're set up well here entering 2022 with the capacity that we've now demonstrated in the fourth quarter as well.

And if I go back to coming out of the third quarter, you had baked in some conservatism on supply chain challenges into the fourth quarter. Obviously, the numbers were better than you guided to. Did the supply chain challenges not materialize? Or was there just more upside on revenues? Can you maybe just talk to the gives and takes relative to what you've been expecting?

Sure. So first of all, I'd say our businesses just performed really well in the context of the marketplace and likely to share. That's the first thing. And of course, we think that with the Danaher Business System, we have a competitive advantage, which allowed us to capture that share by containing the supply chain challenges, which are real out there. But we really drive the Danaher Business System, offsetting some of the cost pressures on the one hand, getting ahead of supply constraints, making the necessary substitution where appropriate, and then, of course, also drive price here. In fact, price for us is 2x what we typically deliver at about 150 basis points in Q4 as well. So the supply chain challenges are real. The Danaher Business System allows us to differentiate here and get ahead of those and contain them. And I think that's also a part of the share gain that we've demonstrated in Q4 by exceeding those expectations.

Is that a good model for pricing for '22, 150 basis points? Or do you think you might even try to get more aggressive?

We're pulling all those levers to contain any inflationary pressures. Price is one of them, and we're going to continue to do that going forward, and we'll talk about it in more detail here later in January.

Maybe last one on the quarter, bioprocessing growth north of 25%. Anything to kind of flag there? I mean you've been putting up great numbers in that, but any capacity constraints or logistical issues or anything to note?

On the contrary, the team is firing on all cylinders. We've been expanding capacity all along. As I mentioned, we started back after signing and before closing, and we've been investing ever since and the $1.5 billion that we've deployed. Some of that came up on stream here in Q4, and we'll continue to ramp in Q1 along with other capacities that we're expanding in. So business, really strong team firing on all cylinders and the capacity expansions coming online as we speak. So we feel very good about it.

Maybe just thinking a little bit about kind of the overall portfolio, and you highlighted a lot of the transformation that's gone on. As we think about kind of your bioprocess offering on the back of Aldevron, Cytiva and Pall, how do you think about the comprehensiveness of the portfolio and any gaps that may still exist?

I would say we are thrilled with the portfolio that we've built here over the last years and really, I think the scope and the scale that we've built, the ability to drive solutions globally is unmatched on the one hand. And we really don't see any material gaps. Now we always look to strengthen our businesses and we continue to do so. And we think with our balance sheet in great shape, 2 turns here, net debt to EBITDA by the end of the year, we're in a position both from small to larger deals to take advantage of any opportunities that present themselves. But we think we're in great shape here from a portfolio perspective.

Can you talk a little bit at all about how Aldevron performed in the fourth quarter? Or do we have to kind of wait until we get their full results?

So Aldevron performed very well right around those 30% that we've been talking about. That team is also firing on all cylinders. Very excited about the Danaher Business System, grabbing onto our tool set and driving improvements in their business as we speak. So we couldn't be happier, both with the business performance as well as the team's responsiveness to the demands in the market.

And you've bumped up the outlook on the vaccine and therapeutics side from $1.5 billion to $2 billion. Obviously, we continue to see strength there. Can you just talk on kind of the nature and tenor of the conversations you're having with your customers about kind of durability of that book of business?

Our customers are very bullish about 2022 here. Clearly, the globe has not been fully vaccinated. We're seeing that booster shots are required. Just as we're getting booster shots, we're finding that antibody titers of individuals who have been vaccinated 4, 5, 6 months back are starting to wane. So our customers are very bullish on the recurring nature of the need for vaccination in 2022. And of course, we're prepared to fully support them.

I got a couple on e-mail just about kind of the COVID roll-off dynamic. As we think about kind of margins beyond 2022, how do you think about kind of unaffected margins post-COVID? And then also, you're shifting of production as you move away from COVID eventually?

Well, let's start off with the capacity. First of all, we believe that COVID will be an endemic, but that it's going to take some time to do that. There are currently 5 different variants that are battling each other for dominance, if you will, circulating in the global population. And it's going to take some time for the global population to get to herd immunity, especially as these antibody titers tend to wane over time after vaccination. So we see an endemic vaccination and therapeutic need for years to come. On the other hand, we also see that the drug development pipeline is more robust than ever. We see not monoclonal antibodies, as I mentioned, the funnel there is 50% higher than it was 5 years ago. Gene and cell therapy, it's an order of magnitude larger the funnel than it was just 5 years ago. And so that puts an extraordinary amount of opportunity out there, both in terms of the capacities required for clinical trials, but also ultimately for those drugs that gain approval and get commercialized. So we see this as an incredible time where science is advancing what's possible in therapeutics, in biopharma, in particular, and the capacities will be required here for the long term. As we think about margin profiles here, Tycho, we've been running at higher levels of margin profiles, certainly from a mix perspective and a volume perspective, but also because operating costs just haven't been what they were historically in relation to the lack of travel and conferences and so forth. So we don't believe that those variable contribution margins are going to sustain at these very high rates. But we used to run at about 30% to 35% VCM. We have been higher than that at 40%, 45%, sometimes even a little higher. We do think that we're going to be at a higher VCM here between the 35% and 40% for the long term.

Maybe a question on China, 20% growth in the third quarter, robust strength in Life Sciences and Diagnostics. We talked a little bit on the earnings call about kind of the noise around tenders and local procurement. It doesn't seem like that's going to be a real headwind. But how do you think about the durability of kind of double-digit 20%-ish growth on the China side?

We had a great second half to the year here in China. In fact, in the fourth quarter, we were in the high teens growth in China again. And we really see China as a long-term growth opportunity as it has been. We're incredibly well positioned with our portfolio. If you were to design a portfolio that aligns with Healthy China 2030, I think you'd referenced our portfolio as a best-in-class example of that. Absolutely with our strength in Life Sciences and Diagnostics playing a key role there, but also with the infrastructure needs that are required in China from an EAS perspective. So we continue to see China as a great market here for the long term.

As I look at kind of consensus numbers, you'll guide obviously with the fourth quarter. But as we think about kind of the stream modeling 3.5% earnings growth, that's obviously a bit depressed. How do you think about the near-term ability to kind of grow earnings and how much focus you kind of want to place on that versus reinvesting in the business?

As you say, I mean, we'll talk about this in a lot of detail, obviously, here during our earnings call on January 27. But I think the right way to think about this is, as I mentioned in the presentation, that our growth profile has really rerated through this portfolio transformation. And we expect our growth profile would be higher by 100 basis points plus. That's the right way to think about this in the long term. And then as it comes to '22 specifically, we'll guide for that here on January 27.

A question that came in on M&A, and it's really about just liquid biopsy. And curious how you're thinking about that market? And maybe also just some of these other higher-growth markets. And I know you've got some VC efforts, so you can kind of approach it from a couple of different ways, but maybe just talk a little bit about liquid biopsy and how you're thinking about that.

I think that there are many, many applications out there that are currently, if you will, BC funded or also biopharma funded that are exciting opportunities here for the very long term. And some of those will play out and others will not. Liquid biopsy is an important tool. We're sure we'll see, which applications ultimately or, if you will, that killer application, finds a sustainable reimbursement and then ultimately become a real tool for clinicians in the long term. But certainly, there are a number of exciting developments here in science. And that's what we're all about as a life science and technology leader, and we'll continue to invest in across the board here as well.

Do you want to maybe just touch on M&A environment in general? Obviously, there's been a lot of volatility in the market. You're back down to kind of 2 turns-ish on leverage, and you've been very clear about your willingness to continue to do deals. How are you thinking about the current environment?

We find our way to deploy capital into great opportunities, almost independent of the environment, and that's related to our discipline. If you think of 2021, as an example, we did 13-plus deals deployed over $10 billion of capital. And as we look forward here in the near and midterm, we don't see any reason why we wouldn't be able to do that again. Remember, we look at the long term and where we want to be positioned in the long term. And that allows us to think about which are the most attractive end markets, the kind of leadership role we want to play in. And then we look at the assets that bring competitive advantage or advantage that we can turn into sustainable competitive advantage. And then lastly, of course, we look at the business case here, and that's got to make sense for us and our shareholders as well. And when we see those 3 things intersect, that's when we act, and we continue to be able to find those opportunities here.

One of the things in the preannouncement you flagged was for Cepheid growth in both respiratory and nonrespiratory. And one of the questions we tend to get a lot is with the installed base expanding so quickly, where did a lot of these systems end up? And how do we think about kind of a post-COVID menu adoption? Can you just talk a little bit about the installed base of Cepheid today and how much ended up on kind of longer-term contracts, how much of incremental placements were in hospitals versus clinics? A little more color on the rollout would be helpful.

Sure. So as I mentioned, since 2019, we've nearly doubled the installed base, and we've been really strategic in terms of how we place those in the sense that the use cases have to go beyond COVID, and we want to be close to clinical decision making. In other words, when therapeutic decisions are being made at the point of care. Now as you think about our placements, it's fair to say about 65% of our placements go to existing customers who see the value proposition playing out, and they just want to deploy it more in their hospital systems and in their clinics, if you will. And then 35% are new customers that have seen the power of the GeneXpert and the solutions that we provide, but they also see the breadth of the menu, 20-plus approved tests here in the U.S., 30-plus outside of the U.S. with more on the way. And customers just see this as an absolutely fantastic way to provide clinical value for the long term. And we're starting to see that, and we mentioned this in our press release that our non-COVID testing volumes exceeded our expectations as well as we start to see our installed base picking up more menu items. It's early days because the COVID testing requirements, of course, are the priority of the day. But over time, we fully expect that the application of our broader menu finds more and more traction.

One that came in on e-mail, which I think is an interesting one is your peers tend to the value of an integrated offering. Danaher has historically been run more like a holding company, but are you starting to get more integrated in your approach to the businesses as we think about markets like diagnostics and bioprocessing?

This is where our core value, customers talk, we listen, comes to play. And we're incredibly pragmatic when it comes to that. When our customers are looking for solutions that cross over, if you will, operating companies or even platforms, we make that happen and we can do that seamlessly. And of course, that will happen more frequently when you're talking about, for instance, in bioprocessing, entire new plants being built and they want that to come from 1 company like Danaher. Of course, our teams will immediately integrate and work together for those solutions. So absolutely, we make that happen. And we see that, if you look at bioprocessing as an example, as one of our competitive advantages. Nobody else can deliver that integrated suite across the entire workflow, including digital solutions on top around the globe.

And is your thought around kind of the service side of things changed at all as you build out the portfolio? I mean with Aldevron, you do have part of that to CDMO. I mean as you start to think about what you can bring to your customers, how far down the service path do you go?

We really like the way we're set up today in terms of providing the inputs to many of these processes, including with the way Aldevron approaches the market and the Aldevron business model. And once again, we orient ourselves on our customers. So the degree of service will depend on what our customers are asking of us, and then we will seek to deliver that.

Got it. But at this point, no desire to build out a full-fledged CDMO or get into the CDMO market?

I think we continue to listen to our customers. And if our customers find that they need us in that role, that's something that we'll consider. We never say never.

Got it. Rainer, we hit the end of the session. I want to thank you for taking the time. It's good to see you. Enjoy the rest of the conference.

Tycho, thank you, and thanks to all listening. Thank you.