Ecolab Inc. (ECL) Earnings Call Transcript & Summary

Thank you. Next up is the team from Ecolab, Greg Cook, who runs the global institutional business, and we're joined as well by Michael Monahan from Vice President of Investor Relations. Greg has a presentation. We'll go through that. We'll go into the Q&A portion of the presentation. So Greg, it's all yours.

All right. Thank you very much. I'll go through just the traditional cautionary statement first that you can read right here. And maybe just a quick little introduction before, I'm going to get into 2 parts today. I'm going to briefly go through an Ecolab overview section, and then I'll dive a little more deeply into the institutional business. But as you mentioned, my name is Greg Cook. I run our Institutional Global business. I've been with Ecolab for 24 years. I had the pleasure of being in multiple functions, multiple regions, running multiple businesses, and then being with our institutional global team here now as well. So obviously, excited to present to you guys today and those of you that are online. So I'll start off with the Ecolab in general as a whole organization, we are really uniquely positioned to deliver on a lot of key things that matter to a lot of people do matter to the environment. If you think about it, we deliver healthy environment when you look at our business and our business structure Water efficiency is core to what we do. We clearly drive safe food and safe food preparation operation areas and then all leading to a clean climate and focus on sustainability in doing that. And you look at the impact that we have. We have a massive impact for customers that we help. And obviously, through our customers, therefore, then on the environment and their customers as well. Just a couple of fun facts. It would be great to share with you guys. Just last year, we produced almost 45% of the global milk supply, was produced and we had an impact on that. We prohibited more than 1 million food-borne illnesses. We served over 45 billion meals, clean 1 billion plus hotel rooms, generate a 20% of the world's power, clean 66 billion hands. A lot of things on the slide. At the end of the day, we've had a large impact on our customers that we serve. And then by result, the customers that they serve as well. And we do that as the industry leader in the segments we serve, and we operate within a large segment as well. You can see here almost $150 billion-plus opportunity. And us as being the market leader in our spaces at $13 billion, we have just under a 10% market share, 8% market share, as you can see on the slide. And so obviously, very proud of the position we play within the industries we serve. But really excited about the opportunity of the markets we serve and the opportunity for growth. And we do that with strong enterprise technologies that we leverage across multiple, multiple organizations really anchored in the food surgery segment, the food and beverage processing areas we serve, the health care and Life Sciences segments and then the industrial and commercial and water services parts of the business. And we do that with a lot of common crossover attributes like hygiene infection prevention crosses all of those spectrums. Innovation and digital platform innovation and technology, we can leverage to drive multiple innovation and multiple benefits across those segments. And it's a really extremely strong business model with a strong operating principles that we've historically had, and we continue to build on. And all those businesses combined, when you look at it, 90-plus percent of our program offering to customers in those segments are through consumable revenue, i.e., chemistry and other things like that we sell to those customers, so repeat sales going forward. And we do that in many, many different ways, but we anchor through kind of really with the end objective of being is delivering the best results to our customers in those segments at the lowest total cost to them, including production costs, operation costs, other things that we do not directly sell, but we directly impact. And we do that through breakthrough technology that we develop. We have developed and we continue to develop. We do that for providing Ecolab on-site expertise. That's part of consulting, part of training, part of execution of that proposition. We do it through a global know-how that we anchor in some of our large mega areas, but we span around the world to deliver that know-how and that expertise. And then we provide a lot of predictive analytics and insights to our customers, things that are directly related to our programs and things that are related to their operations that our programs impact that. Again, with the total ambition and objective of delivering the total lowest cost to our customers and providing value. And so we've had an extremely long history of growth that we're very proud of. If you look at this pre-COVID 15-year double-digit EPS in the 10% to 12% range, consistent reliability performance on delivering on those customer expectations. When you look at, obviously, COVID, we'd be remiss or we'd be naive if we didn't say we were clearly impacted. In one of the segments, the segments that I represent, and manage the global institutional was clearly one of those segments that was impacted the most. The Lodging segment, the Restaurant segment, many of those customers for periods of times were shut down. And obviously, that had an impact on our delivering of the EPS. But that being said, we've got a very well-balanced portfolio that was also able to deliver strong when you think about the food and beverage segments. If you think of the health care and life sciences segments and an alpha piece of the business to take advantage of some of those downturns and actually offset that. So we like even though challenging times, sales recovery in 2021 and into 2022 is underway within all segments and then particularly in the institutional segment. Now some of those good momentums and sales recovery clearly being offset by some of the headwinds we're seeing on raw materials and the supply chain challenges that we're having to offset and we continue to offset today and going forward. So when you look at the time period, we're coming out and going into 2021, 2020 and 2021. In many cases, it's actually emphasized and only reinforced the value propositions that we provide to our customers in those challenging times. Hygiene and public health safety will never go back to pre-COVID times. Now will it remain at the COVID peak levels? Probably not. But we do know that we will remain extremely strong and will be on the forefront of all of our customers and their decision-making and their thought process, not only from their operations but on the customers that they serve. So it only strengthens the proposition that we've represented and we've talked to our customers about for many, many years. And during those time frames, we remained extremely focused on maintaining our strategic investments. We are amongst the few companies who probably could say that they maintain their labor force, was extremely important for us on a highly trained and highly service-focused type organization to maintain that expertise, and particularly for 2 reasons. It takes a long time to train those individuals. They're experts in the business that they perform, whether it be Nalco, whether it be in institutional and food and beverage. And honestly, especially in the institutional space, when many of those customers had to reduce or eliminate some of the workforce having our people trained and educated with a work staff that is tough to get in right now and is fluid was even more important. So we continue to invest in growth drivers. We continue to put on new solutions and record new business. And we've built out new business platforms like our Life Science business, our Global High-tech business, Transportation, Animal Health, et cetera. So we remain focused on growth drivers there. Like I said, we've added new business and wins and pricing has been an absolute focus during that time period. And clearly, in today's world, with pricing and surcharge, we've remain focused on that, and we've strengthened that muscle around not only North America and Europe and China, but in all geographies around the world. And we continue to be focused on strategic M&A as is the example with the acquisition of growing a new platform through Pure Light. So all focused on consistent, reliable double-digit growth that we're accustomed to delivering and performing in the pre-COVID area and what we expect to get back to. So that's from a macro Ecolab perspective. I think I'll pivot now here and turn more to the Institutional -- the global institutional side of the business. So to frame it up, Institutional -- or the Ecolab business of being $13 billion. The global institutional component of that business represents roughly 25% of total company sales, with the remaining businesses being, like I mentioned, in the food and beverage, Nalco, health care, et cetera, side of the business. So it's a significant component of what we hear an Ecolab do and how we contribute. And when you look at the history of the institutional business, next year will mark our 100th year anniversary from an Ecolab perspective. And part of the original Ecolab started within the institutional segments. So I like to think of it as a 100-year anniversary for Ecolab, it's also a 100-year anniversary for institutional, which is where the business originated and started. And we've had a great history. We've had great successes along the way, and we expect to have continued success going forward. But in that time, we've built a history of delivering for our customers. In fact, supporting over 800,000 customer locations, delivering with water, food safety, hygiene, really 2 of the biggest brands in the industry, which I'll reference here in a couple of minutes. But as we've also grown, we've helped grow our other customers or customers we serve globally around the world, almost in 135-plus countries around the world. So as we've helped them grow, I'd like to think of it as them helping us grow as well. So it's been a great combination. And we've really done that with core capabilities that separate us from others in our space. Many of those that have been in our space have come and gone, try to reinvent themselves. We've been delivering on the core capabilities that have separated us such as game-changing innovation in chemistry, dispensing equipment to make sure that we allow for the lowest use cost and really on the service expertise and the service coverage that we provide, which is unmatched within our industry. So who we serve and what we offer. If you think of the Institutional business, we're really anchored within 4 key segments or categories around food service, i.e., restaurants, lodging hotels, long-term care facilities and then commercial facilities. And we do that by providing our core anchor platforms largely around warewashing, dish cleaning, glass cleaning, silverware cleaning. So the warewashing category, laundry products and programs, largely, of course, obviously in the lodging segments. And then housekeeping and floor care products, which span through lodging, long-term care and facilities. So really anchoring 4 key segments of customers with 4 key areas of products and program platforms to serve those customers. And we're extremely proud of the customers that we do serve. And brands that have started in some cases, as small as 1 root beer stand that has grown into a multinational, multi-global lodging chain. So we've been proud to start with small but have grown big and many brands that are across the regions, whether it be in North America, whether it be in Europe, whether it be in Asia Pacific, in many different segments from full-service restaurants, the lodging chains, to cruise lines, contract feeders and distributor partners that anchor many of the regions that we do business in with our customers. So very proud of the relationships, the long lasting and retention of those customers and the growth that we've helped them experience and also the growth that they've helped us generate and drive. So I talked about the Ecolab business and how institutional represents roughly 25% of that business. If you look at the Institutional business then and peel it back a little further, roughly 70% of that business sales by region is anchored within North America, second largest region being Europe, Middle East and Africa, another 15% and then the balance between Asia Pacific and Latin America. When you split those sales by geography into the segments that I referred to earlier, roughly 45% of our food -- of our sales are anchored around the food service categories, another 20% in lodging and then the balance being split between facilities, long-term care and obviously, other categories in there. So when we talk about performance. Institutional, if you look at the institutional is one of the largest segments, we've had a very strong and consistent path of growth. But even when you look back at some challenging times and particularly recession-type generated times or economic events such as 9/11 or The Great Recession in 2008, '09, '10. We've been impacted, but not to the extent of the market has seen an impact. And I think the thing here, too, is that impact has been muted, given the overall impact of the economy, we'd rather quick to return back to our normal growth levels historically there. Now like I said earlier, in particular, this business alone, it's different than other segments that might have been slowed for area. In this business, restaurants, many of them are shut down, and that obviously shows within the impact that it had on sales. Now as I mentioned earlier on the EPS slide, it's great being part of a larger portfolio that helps offset that. But nonetheless, the institutional business was probably one of the segments globally that was impacted the most, and it saw within the results of 2020, but it also is going to be -- has been and will continue to be one of those that is quickest to rebound on that. And so we're proud and pleased of the growth that we see kind of moving through COVID and hopefully exiting out of COVID as we get back onto that normal path of sales and profit generation. And in, I guess, a really twisted way, when you think of the challenging times we've been through, there's always some positive that comes out of the negative. And I would say from an Ecolab perspective and from a value that we provide, there is no event that is every curve that has actually highlighted and emphasized those key drivers in the environment. But also the value that we hear at Ecolab provide to our customers and those key drivers. For example, I mentioned earlier, hygiene standards, will they ever be at the peak of COVID? I don't know if they'll be at the peak, but I do know that they will not be pre-COVID. They are elevated from a customer's perspective, they are elevated from a consumer's perspective. And it's something that we have represented for our 99-plus years in the [indiscernible]. So we've really leveraged that to enhance and merchandise what we call Ecolab Science Certified. It's combining the expertise we have within chemistry. It's combining the expertise we have within the service and it's combining other programs we have like our audit programs, EcoSure. And combining it into a certification of a higher level of cleanliness, not only for assurance of customers and employees at most locations but also for guests who are going to be visiting these locations as well. It's actually enhanced digital adoption. This space, we've been very aggressive and we've been very active in driving digital innovations. I would say the restaurant space and lodging space historically has been kind of slow to evolve. Well, during this time period, digitalization has taken forefront and it's actually accelerated the level of customers need to accept digital and openness to accept digital, which has allowed us to provide even more digital solutions to customers to provide value at the same time, driving productivity within our own organization as well. Labor challenges have been a historical problem within these segments, the hiring, the retraining, the attracting labor, that's only been accelerated. And I've been in a number of industry events and sandwiched between CEOs of various organizations. And the first thing that comes in and out of that conversation is labor. Clearly, it is a topic that has not gotten better. It continues to be a challenge. They view it as a topic that will continue to be a challenge going forward. And it really has allowed us to highlight the value that we play to basically reduce and in some cases, eliminate labor. Let us do what we're experts in, you guys do the things that you're experts in, and it works for both parties. And then it also has created a renewed focus on sustainability and focus on that and the innovation to reduce water, energy waste and overall just gas emissions, which also fits very, very well into what I mentioned is one of our key pillars and the value that we provide. And we do that by innovating across multiple platforms. So chemistry, driving innovative chemistry, effective chemistry, through antimicrobials, water, hygiene, kill times, being able to have a kill time that's shorter than anybody in the industry to be more effective, and allow people to get back to work has been a huge innovation. We'll continue to leverage that. We leverage through our engineering expertise as well as creating dispensing and clean-in-place solutions that allow it to, again, take labor out of the equation to allow effective delivery of chemistry effective delivery of chemistry. And then like I mentioned, we've been able to leverage a digital innovations across the platforms to really provide real-time data to not only our customers but also our associates, all with the intent of providing actions and value to those customers many times real time. It's kind of along the thought process of let somebody know they have a problem before they actually know they have a problem and driving solutions. And so we're leveraging our enterprise capabilities to deliver customer outcomes and drive differentiation that exists in the market and separating ourselves from competition. And at the same time, we're using that to empower our team. Digital is something that we can take our team away from the administrative side of the world and put them on the customer-facing side of the world and helping to create outcomes, visualizing outcomes, showing outcomes using digital training to educate customers within locations via digital means has been an absolute game changer for us. And maximizing our customer impact by allowing our teams to use routing mechanisms at the same time, transforming customer experience. I mentioned customers are being pulled into this space faster than they were historically because of other things within their space, which is allowing us to merchandise our value and our team's value to those in that space as well. And we continue to innovate through breakthrough technology. I've given just an example here of some of the chemistry innovation. But I wanted to share more so than the game-changing innovation we come to in differentiating innovation, it's really our approach of how we look at innovation. Obviously, innovation is there to drive customer value to eliminate challenges, like food-borne illness like labor shortage or labor challenges or reduce waste. And we do that by coming up with new chemistry. But then we take that chemistry and solutions, and we look for multiple means of application. So we take one solution, break it into multiple application methods and then we take those application methods, and we look at tailoring them to multiple segments. So it really is looking for customer benefits, customer challenges chemistry solution and then multiplying that to get maximum coverage within the markets we serve and the needs that are out in the market. So taking one and making multiple solutions, which means multiple solutions per account or increased sales. And obviously, innovation comes at higher margin because there's higher value to customers as well, which our teams are very, very good at capturing. Which is kind of shown through the case study. There's a term we used at Eclat called EROI, which is exponential return on investment. And it really is in its most simple terms, anchored around delivering innovation that provides value to customers. Value in the form of tangible savings, tangible benefits, energy reduction, water reduction, maybe tow linen asset protection really with the innovation driving to make sure that what they spend with us is paid for in returns in other areas and always targeting greater than 25%. And so we've got case studies with some of the largest lodging customers in the world where we work with them to actually show and explain and articulate the value we provide through introducing new innovation and the impact that it has on their organization, but also on their P&Ls. So we talked earlier about the institutional segment and some of the challenges, but I'd also say the innovation, the digital, the value we provide, we like because it helps us grow market share faster than market recovery. And we see that through the Foodservice segment. When we look at it, we know that the market is still challenged by foot traffic. Foot traffic being down 38%, 40% versus pre-COVID times. Now that's something we can't control. but something we can control is the number of solutions, the number of customers and the volume that goes through those locations to make sure we're providing adequate and appropriate coverage. And we like it because we see our sales within these segments accelerating faster than the recovery in the foot traffic piece. I don't necessarily control foot traffic, but I can control what we control and locations by adding locations and solutions, and we like the path that we're on in gaining market share and growing the business. So at the end, I would kind of wrap this up by saying we've had a historical good growth record. We're looking as we exit Q1 here at the 20-plus percent versus prior year sales growth and really, really getting us back on to what our ambition in here is, like I showed in the earlier slide, getting us back to that 6% to 8% sales growth, that reliable, predictable, 6% to 8% growth aspiration that we all look for. And we're positive about it because like I mentioned, we're $3 billion of a $13 billion organization. We have roughly a 10%, 11% market share. But we operate within a market that's $26 billion plus, and that market opportunity is split between customers that we don't currently serve. And opportunities that still remain in existing customers we do serve through new solutions, new programs or new anchor division sales that we can pull through. So we like the position we're in. We like the recovery we're seeing right now. We obviously are looking to accelerate that, but we're very excited about the opportunity to exist. So on that, I'd like to close it with 1 last slide. So strong sales and OI momentum. We do see this as a great market that continues to grow. It's a growing market opportunity that's big today, and we expect that opportunity to get even bigger. The industry challenges that we've seen over the last number of years only strengthen the value that we provide. It strengthens the big business model we have, and it really separates us from the competitors that play in our space today, which, as I mentioned, in many cases, have come and gone. And it really is to deliver on our long-term growth objectives, not only for the company but obviously for shareholders. So on that, I'd like to conclude and turn it back to you.

Greg, thank you very much for the presentation. We'll jump right into the Q&A portion of the session. Greg, you guys did preannounce an earnings shortfall yesterday for the second quarter. You go through some of the drivers of that shortfall. It sounds like demand is still pretty good, but you're still having some cost issues that you're trying to work through.

Yes, I would say 2 categories. I mean, we see some headwinds on raws, but I wouldn't say that was the key driver. What we knew we were going into Q2 is we introduced structural pricing and we introduced surcharge. And quite honestly, the surcharge for many business, I'll speak institutional particularly, has never done a surcharge before. We've always plugged forward with structural pricing. Given the frequency and the level of increases, it was the smart thing to do with the right thing to do across the company as a surcharge. That surcharge took a little time to go and execute and communicate. When you think of about 135-plus countries, you think of some of the divisions that didn't have the functional capability to add that to an invoice that needed to develop that. And when you look at our business, that was anchored through distribution as well. You've got a third party that also has to administer it. So that's something that we aggressively work to shorten our time lines. We've got a third party that we needed to influence as well. And then you think of the end user, the customer that we also needed to go have conversations with as well. And I say that because We, the company, and we institutional have always had a strong performance on pricing and has been built through trust and the credibility and relationship. And so it's important for us to do it the right way. So I'd say a lot of that was anchored around on the standpoint of -- it took us a little longer to get the surcharge in some of that pricing moving, but we're on the right path as we exit Q2.

And how much of the search charge is being realized versus, I believe, you announced 8% to 10%?

Yes. We look to it in the 10% range in total balance between structural and surcharge, and there'll be a little bit of a plus or minus. But as we exit the second half of the year, we'll look at maybe structural maybe 6% to 7% with the surcharge being for a total as we exit in the 10% range.

Got it. And what's the commitment to the customer on moving a surcharge? At what point in time did you commit to doing that?

Yes, we have. And I will say not 1 conversation fits all, right? So I think I want to make sure that we're smart about the conversation we've had. Obviously, we've talked about being pegged to oil. It was an opportunity in a way to have a very simple conversation. A simple conversation centered around what everybody knew was going on in the world, inflation. And really with Russian Ukraine, that being the Spark and oil being the most visible we pegged it to oil. So we did talk about if it were to drop below 75%, would go away if it goes above the 100 to 125, we'll have future conversations. So kind of a sliding scale when it comes to that. Now I will say, to some of the conversations we've been able to kind of turn the surcharge into structural pricing on that. And so that's not all -- not 1 size fits all, but the intent we all know to in the future, we'll be having conversations about some other driver that's going on in the world. So -- but that's the split.

Got it. So demand trends have been actually pretty good for the second quarter and Institutional, is that accurate?

I would say they're holding. I mean we're still fighting against some of the foot traffic that we're seeing. We see within the lodging segment, we see the recovery happening a little quicker in the limited service, not that full service isn't seeing return to rooms, but you see a lot of the food and beverage side of that business. Center ground maybe even like events like this that didn't take place in the first part of the year. And now they're starting to take place. And as hotels start to fill up with business travelers or events, that's pulling along within the food and beverage side of the business, too, that wasn't there last year in the recovery.

And what are you expecting in terms of lodging trends, restaurant trends? When do you think they might return to pre-pandemic type levels?

Yes. It's kind of a hard -- I mean have a crystal ball to see the future. I went I like the trajectory. I like what I'm hearing from many of the CEOs who represent that. Now I see even like right now before when foot traffic was a little softer on the in-store dining, you saw an acceleration of off-premise. Now off-premise, this is starting to decline a little bit. So I think you see a little bit of a tail off there. The one in the in-store is still holding through right there, but we expect to see continuation in improvement.

I'd like to commentary on Investing for the pandemic, would you say that Ecolab is in a stronger position today post pandemic and pre-pandemic, given the investments you've made and the changes on cleaning and sanitizing stands going forward?

I absolutely think we are. I think we are for multiple reasons. One being the macro drivers are there, right there. I think the investments we made were clearly -- we really didn't take our foot off the gas when it came to digital, which is going to pay future benefits and value for customers, but also for us, Ecolab. I also look at it from a relationship standpoint. We did some investments for our customers that are making pricing conversations having today, much easier on that. And it also goes back to the point they recognize and they realize that through those investments we made, we were there to help them, especially in the restaurant segment. We were there to help them open up sooner because of the people we kept and because of the expertise we have. And so nothing like a family-owned restaurant who needs to operate and get open. They can't wait 3 months. They when they want to open and start collecting revenue, they need you to be there and they need you to be there quick.

And would you say that your competitors do not have the same veracity of investing food downturn such that your competitive moat has widened over the last couple of years.

I think, yes. I would think that the level of investment we've maintained not only in innovation going forward but also within people, has strengthened us. I think the investments we've made to strengthen supply chain has also been 1 that has maybe widened that moat a little bit. Our ability to deliver not only when it comes to chemistry, but when it comes to Dish machines has definitely widened our capability from those that are much stronger, maybe don't have the size or the purchasing power or maybe the expertise.

Labor is a big issue for both your customers and for you. But maybe first, on the customer side, what are you seeing in terms of restaurant lodging. Are they getting any better with their labor constraints?

I would say, no. I mean that's still -- like I mentioned earlier, it's when you go and talk to CEOs of restaurants or labor is our #1 topic, not only ability to find labor, but the quality of labor, is also a challenge, which we train, we train their associates. And so when you have that many new people coming on, it's important that they're getting up to speed on what they do, especially when it comes to categories like public health and food safety, et cetera. So I think it still is there, and they don't see that easy. I think it even spans into the QSR side of the business. When you think about the restaurants, the days of hiring high school labors to do manual dishwashing, number one, maybe they don't want to any more, number two, they're hard to find, which is putting more value on the programs we sell. Dishmachines easier solutions.

And how about your labor issues and bringing new sales people into the organization, how difficult has that been?

I would say -- if I go back 12 months ago, we were having pockets of areas that was difficult. And so we've staffed up to make sure that we're casting the broader net to find it. But in some cases, we've also benefited from those in the industry who decided to leave the industry are very well in tune on how the industry. In many cases, those are people that we were able to recruit. And so in some cases, having hired somebody on our team who came from a restaurant, who knows the restaurant, who knows the value, it's been a little easier to find a talent on that side. So we've been very smart in hiring the right talent and very smart in trying to manage the talent in the markets with the most demand.

Innovation is critical to your success in Institutional. What are you most excited about from a new product or a new technology standpoint?

Yes. I think the 2 prongs to that. I think the innovation when it comes to chemistry, the simplicity of chemistry, the -- I mentioned attacking the needs of the customer, i.e., labor, water and energy are centered around there. I think the combination of that innovation tied together with digital and the insights kind of the -- providing -- those 2 things together, I'm really excited about. Because chemistry is fantastic. It drives margin the digital aspect of it in insights, which drives even more value from a customer perspective, telling them and showing them things that happen in their operations when you're there. And when you're not there, is very, very powerful combination. When you combine that with the digital with the chemistry, it's a real powerful combination.

The consumer has done a lot of pressure due to energy, food costs. If you pulls back on summer travel, dining out, has that impacted your business? Or historically, do they just go to lower price points when they under a little more pressure?

Yes, there could be some trading down obviously. And I think, again, that's where we play well because we've got that wide spectrum of -- if they're playing down, they're still playing within our playing field, right? If they go from a high-end restaurant to a mid-scale 1, we play there. If they go from a full-service restaurant to a limited service restaurant, we play there. So I think we've been, in general, fairly resilient during those challenging times, and we tend to lag those times too. Like so I know Mike has said many times, we're not going to be an indicator of a recession. We'll see it afterwards, and we tend to be kind of muted when it comes to that as well.

Okay. And if we do go into a full-blown recession, what the leverage you can pull on the cost side to mitigate the impact on your business?

Yes. I mean I think on the cost side, we will continue to anchor around total cost of operations from a customer perspective. And so even if things get more challenging, we will continue to emphasize that we are a very small component of the spend within an operation that has a bigger impact on the rest of the operation, which gets back to even if it's spending a little more for us, the savings are being generated are much more, which again goes back to that EROI, example of that. And digital pulls a lot of that stuff together to merchandise that.

You have a very strong push in the U.S., obviously, a less strong position in Europe and Asia. How do you think about those regions for future growth for Institutional?

I like it. I like it. And some things to be very specific. We've had a very strong pricing muscle within the U.S. That pricing muscle has been strengthened in Europe and as shown by the progress that the team is making there. I think the team's focused on driving not only sales growth but profitable sales growth will be in the results as well. I like the new business traction we're getting in Europe. I think, again, anchored through the things that we did through the pandemic, anchored through a lot of the supply chain investments we made and the reliability has resulted in customers we may not have had calling us and asking can we come visit them. It's also been very helpful in having those conversations to grow within existing customers as well in Asia Pacific, as we will start to see that to recover as well. I mean, we've got such a fragmented market there. But we have a strong position within a fragmented market, and we look to leverage not only DISH machines, but the differentiation in chemistry and service to grow.

ESG could be for you guys a very big opportunity with the customer base. How do you even begin to qualify that as a growth driver for you guys going forward?

Yes. I think Industrial probably more so right now in that progress, right? They're doing very well. So one of the ways we are going to look to leverage it is by learning through industrial on that. It's the communications, it's the capability. It's identifying opportunities to do that. But I think we have great opportunity to leverage that and to communicate to our customers.

Okay. Looking forward in the next 6 to 12 months, greatest opportunity most excited about and greatest concern perhaps.

I would say greatest opportunity. I'm pleased that we're kind of moving through the surcharge phase given status environment. I mean, you always say status environment. I mean we need to react, we'll react. But I like moving from execution to implementation stage, which means then getting even more focused on new business. So I get excited about that. That's something I can control, that's something the teams can control. We will react to the things we can't control. I mean I control that, but I can't control. So that gets me most excited, is leveraging what we've done over the last couple of years to drive growth in existing customers and driving the business and getting back on to continuing that path of new business. The thing that concerns me the most, I mean I'm not going to lose sleep on it because I don't control it. It's what happens in the external market. But we will be diligent, like I said earlier, to react quickly to things that we don't control. So it worries me, but I'm not going to lose sleep over it.

And does M&A have a role in your growth going forward, institutional?

I think it does. I mean I think we've got to be very selective on those things that drive margin and things that will get us there faster, but we always are looking at opportunities. And I think especially in some of the international markets, there's good opportunities for us to look at opportunities to grow through M&A.

Great. With that, our time is up. So Greg, Michael, thank you very much. Have a great day.

Appreciate it. Thank you.