Mettler-Toledo International Inc. (MTD) Earnings Call Transcript & Summary

Good afternoon. This is Dan Brennan. I cover tools, diagnostics and pharma services for UBS. Glad you're with us on day 2 of the global healthcare conference virtually. It's 12:30 session, really pleased to be joined with the senior management team of Mettler-Toledo. With me on the phone is Shawn Vadala, CFO; and Mary Finnegan, Head of IR. So really pleased that both individuals could be with us today and as well as hosting meetings. Please don't hesitate if you're on the webcast to fire off a question or 2, feel free. I'm online. I could see them coming in. So if you do pose any, I'll certainly try to integrate those into the Q&A. So maybe I can just say, first off, welcome, and thanks for being here, Shawn and Mary.

Yes. Hey, thanks, Dan. And very much appreciate you hosting us today. And we hope everybody on the phone is doing well.

Terrific. Well, I know the quarter wasn't too long ago, and I have a series of questions to go through. Shawn, I don't know if it's worth -- obviously, it's worth it. But in terms of maybe you having, I don't know, lead in with 30 or 60 seconds of just how you would characterize things, whether recapping what was notable in the quarter? Or any incremental comp that you're providing since the quarter?

Yes, sure. So maybe just a couple of high-level comments on the quarter, and then we can kind of go to Q&A where, maybe, we focus a little bit more on Q2 and how we see things going forward. But I mean, obviously, in Q1, things were a little bit worse than expected with COVID in China. China was down 13%. But the bigger story was also the global spread of the virus. For us, in terms of things we can control, we were actually quite pleased with the agility in our organization. I think we had very good execution, very pleased with our operating margin, being able to hold the operating margin flat year-over-year despite the decline in volume. Also really pleased with our ability to pivot and leverage our digital tools to best guide the sales force to opportunities, and we can talk more about that and -- when we get to Q&A. And then being able to quickly adapt the organization to deal with today's realities with our cost structure actions, and how we plan for the second quarter. So, hey, otherwise, we were entering a very difficult time period with Q2 and Q3. But we expect to benefit from the diversity in our business, the low price points in our business. Our Spinnaker program, I think, is going to be really important for us in terms of our success. And I think we're very focused on positioning ourselves to ensure we have a good recovery when that occurs.

Terrific, obviously. Is -- I'm wondering, as we sit here May 19, anything, I don't know, notable or different or any color that you would provide geographically by business that might give us a sense of just kind of trends as we start off this quarter? Or I'm not sure if you'd be comfortable doing that. But just -- I'm kind of asking each company because there is such a focus on we're already with the stabilization, is it stabilizing or not? So I'm just wondering from a high level whether distinct color or any other comment you would make there.

Yes. I mean it hasn't been very long since we issued guidance for Q2. So certainly, nothing significant has changed in the last couple of weeks. At that point, we were looking for recovery in China, more mid-single digit in China with higher growth like mid-single to high single digit on the industrial side, more moderate growth, low to mid-single digit on the Laboratory side. That's how we continue to see things there. In terms of the other geographies, I think, we're going to see the global spread of the virus and the closures and government stay orders really have an impact on our results in Q2. And so we had guided Europe and the Americas to both be down kind of like mid-teens in Q2 with, maybe, Europe a little bit worse than the Americas. A big storyline in Q2 is going to be the closure of labs in the West. I think some labs are just starting to reopen, and I think it will be interesting to see how that plays out. I think some labs have more automation and will be up to full productivity maybe sooner. And then I think we'll have maybe other labs that are -- have less automation and might have less productivity because they're implementing new social distancing protocols. And then, of course, there's going to be a differentiation between life science labs and non-life science labs. So I think there's a lot of unknown still to see how things play out. But in terms of like recent developments, nothing new to report from our side.

Got it. No, that's great, Shawn. Kind of on the 1Q call, I think you characterized the recovery as U-shaped. Obviously, there's I think a fair number of questions on that. Maybe just as we think about the U and whether or not how long that U is extended for or could it be a little bit better than that? What are some of the variables that you would point to that we should be watching that will help us get a sense on kind of the slope of this stabilization and the recovery for Mettler?

Yes, sure. So -- and, hey, of course, just to clarify, I always like to say like this is really -- this is our operating mode. It's -- I think there's a nuance in that, but that's how we're planning the business in Q3. We are a short-cycle business. So we don't have any particular insight to the second half of the year at the moment. But I think as we all kind of look to the second half of the year, I think, we're going to have to look at what does it mean to go from a health crisis into potentially a global recession? And so looking at things like manufacturing, GDP activity, PMIs, things like that, those are all things we're going to have to look at. But it's going to be hard to read the tea leaves between some of those things in the short term. And in the end, what we're looking for is a measurement that's harder to predict, which is when does the economy become good enough? When is it going to become good enough that people can get back to replacement cycles? Because we've talked about many times in the past, how such a large portion of our portfolio is based on replacement, particularly in the West? And so in times of uncertainty, we have people holding back on new projects. We have people holding back on investments. And so we need to have people return with more confidence with the economy. So that they can kind of kind of get back to replacement cycles. But nonetheless, too, if manufacturing GDP is down, there's going to be less wear and tear on equipment and things like that, that will have an impact on things.

That makes sense. And this is something you just kind of brought up, obviously, and you guys have talked a lot about the replacement cycle, kind of, business piece, if you will. Typically, when you're in an economic slowdown and then you're coming out of an economic slowdown or even in an economic slowdown, like, is there a way to characterize your business as a replacement business as opposed to maybe like a new one? And presumably your business should hang in better, certainly because it's a lot easier to say, well, I don't need to maybe -- it's -- I've already got this product here. And if I replace it, I could see a return on that versus going out and doing something I don't have. So it's just more of a conceptual question to ask about that replacement cycle nature of your business, any corollaries to point to. How that does versus maybe a non-replacement cycle instrument-oriented business?

Yes. I mean such a large portion of our business is replacement. I mean we've always felt like in the West, it's extremely high percentage. But even in like an area like China, it's still a large percentage of the business. I mean there's more greenfield in China than there would be like in Europe. But still, a lot of it is replacement. And so, for us, we've always tried to focus on how -- what are the things we can do to drive replacement? And how do the -- and then I think the second part of it is, is like how do customers approach replacement in a downturn? So if you think about our different businesses, like on the Laboratory side, what often drives replacement is innovation. And so whether it be functionality, whether it be automation, like you can imagine, as labs -- like I said before, as laboratories have less people, there might be needs for more automation going forward. So that could be something that could accelerate replacement cycles. Software is another one, and -- which also has an efficiency to it as well as a compliance side to it. And whether it's our embedded software or whether it's software that helps out with topics like data integrity. So I think that's always been important in labs. I think it will continue to be important. I think once labs get back and stabilized and up and running, we'll -- I would expect us to get back into that cadence again. And then, of course, you have other topics on the lab side, like investment that's happening in China. I think as we get into China, we're going to see things get back to normal with investment in Life Sciences and things like that. On the industrial side, the industrial side tends to have shorter life cycles on replacements, especially critical applications. The replacements -- I mean, innovation, of course, helps, and we have actually some good examples of that on the industrial side recently, but wear and tear tends to be a bigger topic in the industrial world. And so if manufacturing GDP is down and there's less usage of the equipment, that has an impact there. But what we've found in the past is that whether you look at like 2009 to 2010, or even if you look at like the downturn in China from like 2013 to 2015, you see that we tend to come back pretty well in both businesses and there does tend to be this kind of concept of pent-up demand that we've seen in the past. So kind of as we look forward, we feel like we will have a good recovery at some point. It's just hard to tell like the pace of that and, of course, the timing of that.

No, no, obviously, totally fair. And you guys elaborated that on the 1Q call. So maybe just on China itself. What can -- I think there might have been a question not so long ago, I forget, but when you think about with the government policies that are being implemented to help that economy recovering back on its feet, how do -- can you just maybe speak to a little bit whether or not how those could potentially impact your ability to recover in China? Like is there -- what's the government doing on the ground there that is kind of impacting your customers? And how is that potentially contemplated in your outlook for China?

Yes. So some of the things that we hear coming out of China is that there's going to be a lot of focus on health care infrastructure in public safety, in general. And so as we think about those topics, we would expect our Laboratory business will benefit. And I don't think that's a surprise. We would have probably expected something similar back in January when we were talking about this. I think there's going to be different elements to that investment. I think there'll be -- I would expect, at least, there'll be investment and focus on continuing to grow their own Life Science industry. But I'd also expect there to be more infrastructure related to health care in general. And some of that infrastructure actually will benefit our industrial business. There's also other segments in the country that are -- I think that there's talk that there might be investment. These are more segments that aren't necessarily our core end markets, but they are markets where we have solutions for. And we've done some mapping into some of those areas to be able to benefit from some of that stimulus. It could be a -- there's kind of a range of instruments that would benefit from some of our analytical technologies in the Laboratory side as well as some industrial areas. The one thing that we're not hearing at the moment, which makes this one a little bit different than the past is that in the past, the government has tended to focus a lot on infrastructure related to economic development, especially as they'd kind of tried to invest in their economic zone going out West. And as we kind of like hear things out of China, there -- sounds like there'll be less of that as an emphasis with this next wave of stimulus. Not that there will not continue to be investment there. We're just not hearing it as much of a priority that we've heard about it in terms of the past. So that would have less of a benefit to the industrial business.

Got it. Got it. And -- right. Okay. And are there a lot -- I mean are there -- I haven't had my ear to the ground zone on kind of China and what policies are coming out right now, but is there a lot to still come like over the next -- is it Q2, Q3, Q4, would you expect over the next 9 months, we potentially would see more news flow? It's obviously, going to be in dribs and drabs, I'm sure. Or is it kind of like in the next quarter, things are set and then they move forward? Any sense on the pace of kind of some of the news flow out of China? And kind of how you guys are thinking about it from a stimulus basis?

Yes. I mean I think from -- my understanding is that there certainly have been some meetings at the senior levels of the government where they kind of convened to talk about these topics. My personal expectation was that we'd start to all hear something more officially in the short term. I don't know exactly the timing of how that's going to play out, but I certainly expect that we'll hear something in the near future. And then I would, like, if I apply the past, I would say that then we'll kind of start to see a program being rolled out thereafter. I wouldn't expect it to be dribs and drabs. I would expect a more formal program to be announced and then investment hopefully start shortly thereafter.

Got it. So obviously, 2021 is a long way away, but presumably, I would anticipate 2021, not having a crystal ball on what's going to happen, but there is certainly a case to be made that China in 2021 could be fairly strong given the comp and given all the stimulus spending.

Yes. Yes. I mean I think there's bull and bear cases on everything these days. But I think China, yes, I would think China should be well positioned for the future. But we always like to caution in the short term, there's always volatility there, and things can change really quickly. And we've certainly seen that recently. And the whole virus situation still is fluid. And so -- but I think we're all optimist at heart, and you'd like to think that the world looks a lot better a year from now than it does today.

Got it. Okay. Maybe just kind of taking a look at industrial, which I'm sure, every meeting you're in, folks are kind of ripping apart lab and industrial and kind of looking in time and trying to figure out some insights about the drivers. But it's expected to be the best performing in Q2, which is interesting, down mid-single, high single. So -- and I think this came up a bit on the Q1 call. But how do we think about the transition of that segment, Mary's walked me through many times, how it's kind of a less cyclical group. I mean if you think about pharma, food, chemical. Chemical, to me, doesn't seem too a cyclical, but nonetheless, maybe versus some of the cement and metals and mining. So could you unpack a little bit some of the exposures within that core industrial? And is that what is partially allowing that business to hold up better than some of your other areas right now? Just kind of be interested to understand how this business has kind of transitioned from '08, '09

Yes, sure, sure. So hey, of course, we're very happy with the business. It's performed really well, especially over the last couple of years. I mean when you started to observe PMIs moderating around the world, I think, everyone was kind of expecting our industrial business, our core industrial business, to correlate downward with that, and we really didn't see that. And so we've been performing well now for the last couple of years. We've lapped tough comparisons. And now we're in the middle of a crisis, and we really get to see how well it's performing. So it's 25% of our business, as you know, and there's a lot of diversity in that business, as you refer to as well. But because of that diversity, there's -- in that high level of fragmentation, if you look at the industrial end market, we probably have a strong of a leadership position there as any division. But we probably also have the most fragmented markets of any division. And so with that combination, I feel like it's been very ripe for Spinnaker. And Spinnaker has really helped the division to not only identify opportunities, but to really guide the sales force towards the more attractive segments. And so when we say that, we refer to pharmaceutical. We refer to food manufacturing, and we refer to chemical. And we've seen a lot of progress in terms of pursuing those opportunities. These markets tend to be less cyclical. They tend to be faster growth. They tend to be more profitable. They tend to require services. They are more regulated industries. And they also have a lot of cross-selling opportunities with the rest of our portfolio. And so we've seen a lot of benefit from pursuing these opportunities. And even more recently, we found that these happen to also be end markets that are essential to a healthy society. And so these customers have been largely open throughout the different stay orders around the world, and the industrial business has been able to support them. So that's one thing. Another thing on that is innovation, like the industrial, we talk about innovation quite a bit with our Laboratory business. But with our industrial business, we've had very good examples of innovation over the last year or so. And we talked about one example on our February earnings call with a new product called Vision Weigh that still is -- will be released. But we have another product, and you typically don't hear us talk about transportation and logistics, but that is a segment within industrial. And we've had this -- a new product in the area of dynamic dimensioning, which has been really a wonderful solution for productivity for logistical hubs and very good market reception. Now none of these things are significant on their own or are going to be significant incrementally to the bigger company, but they all are things that very much help, and that's very much how we're built is lots of little successes that add up to a greater whole. But before we -- before I finish like the industrial, I think it's also important when we talk about industrial to also remember that China always has a little bit of a bigger influence on the industrial division versus the other divisions, it's probably about, I would say, about 1/3-ish of that product category, which is a little bit higher than the other product categories. And of course, we're looking at a better growth coming out of China also in the second quarter with being up mid- to high single digits. So that certainly helps as well. So in the end, it's a much better mix of businesses versus 2009. We have really good traction on Spinnaker. We have good traction on innovation. But in the end, it's still not going to be immune to a global recession. It historically was the business that was most correlated to manufacturing GDP. And if manufacturing GDP is going to be down, especially in a prolonged period of time, there's going to be just less wear and tear on equipment that will defer replacement cycles.

Okay. No, that's really helpful, Shawn. And those 3 segments that you mentioned today, 80% of core industrial, 50%, 30%, I mean, is there any quantification between pharma, food and chemicals? And those are the ones that come up to kind of distinguish maybe the more less cyclical, more structural growth areas within the core.

I don't have a specific number for you, but it would be below 80%. It would be well below 80%. Is it in the 50% range? Maybe. But I don't have a specific number for you.

Got it. Got it. Okay. And then kind of within product inspection, obviously, you guys have been dealing with pre-COVID, you've talked about some of the issues there that have depressed growth, and I think the expectation was eventually you guys would go back to a much better rate of growth. Obviously, now COVID is kind of thrown just kind of convoluted everything. But how is that segment doing with COVID? In particular, I know, I think Q2, we haven't modeled down 10% after being down, I think, high single in Q1. So maybe just again, do it -- I know you did this on the Q1 call, which wasn't that long ago, but maybe give us a little flavor for that segment. And then I can ask some follow-up questions with COVID. And then the ability to return to that high single-digit growth rate like any sense on how long that growth rate achievement could be delayed?

Yes, sure, sure. So yes, in our product inspection business, it's about 16% of our total company, 40% of the industrial business. That business is very interesting at the moment. If you kind of look at it in 2 -- and you almost need to look at it in the 2 time horizons, which, I think, you know you're kind of doing with your question. On one hand, probably 70% of that business is sold into food manufacturing and packaged foods. And so that business, those customers, have a significant surge in their business activity. So they're clearly having some direct benefits at their level. But that surge is also creating operational challenges for them. And so we've seen that in the short term, their priorities clearly are on their own operational challenges, their own supply chains, protecting their own facilities from contamination with the virus. And as a result, they're restricting a lot of access. I mean we -- they'll still call us for service support and we still support them. They'll call us to help support them reconfigure lines, as they kind of try to cater to more smaller packaging for consumers. But in terms of like doing fundamental projects and bigger rollouts, those topics are currently not their top priority right now. We do feel that once the situation starts to stabilize with them, we should come out -- there should be some favorability here. I think there's going to be a lot of wear and tear on their equipment during this period. I think they're going to have to make some strategic decisions about where they want to now invest going forward and how they see the future. And I think that there could be some upside. Now in terms of when that timing is, of course, it's harder for us to judge right now. I think it will still take a while. And, hey, hopefully, we have some more insight as we kind of finish this quarter in terms of how we're feeling about that.

Got it. Right. And that's kind of what I was thinking as well. So, I mean, so presumably, this could be a real boom for Mettler as we look out whatever it is later this year or maybe '21, '22 in terms of -- any characterization for where we are on the installed base amongst your customers? And I don't know, does that help us think about like whether or not there's been an ongoing delay? Because previous to this, it was like food manufacturers are facing challenges because they're center aisle and a lot of stuff is going fresh, so they're delaying things, and that's the pressure point. Now suddenly, they've got this surge of demand from everyone eating, buying except for supermarkets for 3 months. So I'm just wondering like, has there been a pretty nullable delay in their upgrade cycle? So that -- any color on that front?

Nothing I'd specifically comment on. We had always felt like they were planning and preparing for some project activities, some upgrades. We were experiencing delays in some of those projects getting approved for some of the reasons that you just mentioned. I kind of envision that we're going to see a different situation once things stabilize here. And I don't think it's as much about replacement cycles as much as about them kind of getting through the situation and then reevaluating their own priorities in terms of investment. And I would expect that will be an important -- or at least we'll participate in that as we go forward.

And that business you've historically characterized as -- is it mid-single plus? Is it high single when things were on a normalized run rate basis, which I don't know if there's any normal now, given a lot of this is people buying fresh foods versus not? But I mean I know Olivier discussed, how do we think about where that business was in the past? And kind of what you guys had aspired to get back to?

Yes. I mean, I think, we still view it as a mid-single digit plus business over the medium term. I would also expect we'll see years of high single-digit growth there, too. I think we're very well competitively positioned there with the breadth of our portfolio, with the size of our service organization. I mean you've heard us talk in the past that our -- like in the U.S., we -- our service organization is, we'd estimate about 7x our next nearest competitor. These are really important advantages to a customer, especially to global customers. So I think we're well positioned there. I think the need is there, too. I think brand protection and food safety is certainly going to get more of a topic -- become more of a topic in the future instead of less of a topic. I think just health in general is going to be a trend we're going to see for a while here. And so I think food safety in terms of detecting physical contaminants is going to be important. And as you know, it's not just a topic in the West. It's a topic that will continue to occur in emerging markets. We've always felt like China and other emerging markets is a huge penetration opportunity for us. I would expect that will certainly continue as well. So we're very optimistic about the business for the medium to longer term.

Got it. That's great. And then maybe just getting back to kind of macro. So with the stimulus that's ongoing here and I haven't quantified exactly. We talked a lot about China and kind of what's going on in Europe, like what is the -- you've given us -- you've talked a lot about manufacturing B2B and PMI and the ability to be in the -- kind of these concerns over the significant economic contraction that we're seeing. But from a stimulus perspective, like our strategist was out today with a bullish call on industrial saying a lot of stimulus were coming off of ridiculously low levels, like this is a good time to buy more industrial-related cyclical names. How -- what's kind of the, not playbook, but how do we think about Mettler's exposure towards the type of stimulus that's being put in place, whether or not the stimulus today or in the past '08, '09 or other periods?

Yes. I mean if you're talking about like stimulus in the West, I'd say that our benefits tend to be more indirect. Things that generally help the economy will help us in terms of like direct benefits. I think when I hear and talk to my colleagues about, like the U.S. as an example, I mean there are some pockets there of things that we can pursue and go after. There are pockets of like infrastructure in the U.S. that might help out on the industrial side. There will be some so lab-type investment as well. But I don't think -- these things are difficult to judge, and I'm not sure how significant they really are. I mean, to me, we're much more -- the bigger effect to us is really going to be the overall economy.

That makes sense. Okay. No, that definitely -- how about in terms of -- I mean, just focusing on service a little bit. I figured as you kind of quantified this on kind of Q1 or in the past, but the separation between like break/fix and contract for you, obviously, you talked about throughout the discussion to the extent economic growth is weaker, there's less wear and tear in instruments that could delay some of the upgrade replacement that you expect. How about for service? Just kind of walk me through or walk us through again how your service business breaks down between different buckets? And how much of it should sell-through at this time? How much of it could see a benefit during this period? How much might see a bit of a risk given the less wear and tear on instruments?

Yes, sure. So our service business is about 23% of our total business. Our consumable business, which I'll put a plug-in for that, is about 10% of our business as well. So together, it's about 1/3 of our business. But if we just focus on the service business, probably just under half of that is tied to contracts -- to prepay contracts. And so that business should continue to do well throughout the crisis. We don't really see any significant changes in terms of behaviors or renewal rates with our contract business. The issue really has been more about the other part of the business, which is I'd characterize as break/fix, but, of course, it's a lot more complicated with that with a lot of other services, with calibrations and things like that. That business is hurt at the moment with all the government stay orders and lab closures and things like that. So if we look at Q2 as an example, I mean, Q2 will be down mid- to high single digit, which is a lot for that business. And service was definitely more resilient than the product business in past downturns. But this one is a little different with the nature of lockdowns and closures. But for the same reason, we'd expect this business to have more of a V-shaped recovery versus the product business. So as we kind of do look towards the second half of the year, absent continued closures or stay orders, we tend to think that this business will do better. But it still could be under pressure. I mean, especially with the same comment about wear and care, if there's less usage of equipment and wear and tear, then there's going to be less needs for service and support and calibrations and things like that.

Okay. Maybe just talking over to food retail, almost a similar discussion as product inspection, but that business, I know, has been under -- it's a small part of your business, but it's been a real drag overall on the company level growth. Is -- what's the silver lining from COVID? And kind of what can you speak to from demand from these customers given the demand that they're seeing?

Well, I mean, yes, 6% of our business and, as you know, we manage it for profit and not for growth, but it certainly has been going through a very difficult period here over the last year or so. And even entering into Q1, we had anticipated a difficult start to the year in that business. But if you look at COVID, like you said, I mean, there's really been a tremendous surge on grocery stores. And so at least the customer segment is able to have increased business activity, which should allow them to have capital once things stabilize to invest. And I think that's been one of their challenges is kind of going through with all the change going on in that segment. They've had to rethink how they prioritize and spend and invest. And so hopefully, as they come out of this, we'll be one of the beneficiaries in terms of investment as they start to think about equipment in their stores. So -- but if I look at Q2, Q2 is going to probably -- we're guiding it's going to be down in mid-teens again. So kind of similar to the previous discussion, even though, the customer segment is doing well, the customer segment is also under a lot of pressure at the moment with kind of managing their supply chain and trying to restrict visitors and focus on contamination of the virus, and they have other priorities at the moment. So I think we'll have to wait to see things stabilize a little bit there. And then hopefully, we see some investment coming out of this.

Right. Okay. But probably wouldn't be ridiculous to think, even this year, you could see an uptick there unless -- I mean the business has been so strong. I mean we're all looking in the supermarkets and seeing the lines and everything sold out, I would presume that they'd be more than willing to start to make the right investments. But I guess we'll have to see.

Yes. I think it's just a question of their priority and timing and what do they want to focus on right now. And they have limited resources, and I can imagine just managing the supply chain is requiring a lot of attention.

Got it. Yes. No. Okay. That makes sense. And then maybe just in terms of kind of closing out right now, I don't know, I mean we could touch up on pricing, but let's touch upon the margins, which, as you mentioned at the onset, was very strong. So as we -- obviously, within Q2 guidance, I mean, how do we think about margins and kind of revenue growth as we even get beyond Q2? Is there like an algorithm in this environment that you're going to try to manage to some kind of decremental? Or what's the kind of message about controlling costs, while at the same time trying to be prepared for the upturn?

Yes. I think it's going to be really fact- and circumstance-based. I think every quarter, like we -- like I said in the call a couple of weeks ago, like we have plans entering into Q3, but we're going to see how the situation looks before we actually commit to certain cost measures. And part of that's going to be based on how we assess the overall situation. And there's always this series of ingredients in terms of how we want to manage the margin, but also reinvest in the business. And so as we see those opportunities to invest, I mean, we're going to want to do that as well, too. So I think for us, our mentality is that we -- I think we're very focused on protecting margins and trying to remain very agile as an organization to that. But we are equally focused on trying to make sure that we emerge from this successfully. And I think we're very passionate about that. And I think once we get through that curve, whatever shape it happens to be, I think, we'll -- you'll see us kind of get back to our normal cadence of operating margin expansion. And we feel very positive about all the programs. We have to support that with pricing and sterndrive and our ongoing productivity and cost measures. And I think we are going to learn a lot from this whole experience. And I think we are leapfrogging our capabilities in a lot of areas like Spinnaker where, I think, it will also make us even more productive with all of our digital capabilities that we've been accelerating here over the last few months. So I think that will allow us to continue to reinvest in the business. And I think it will also help us to continue to drive operating margin expansion.

With that, we're 1 minute past, but Shawn and Mary, thank you very much, obviously, for being with us virtually today. Really appreciate it, and have a great rest of the day, and look forward to hopefully seeing you guys in person.

Thank you.

Yes. Thank you very much, Dan. Take care.

Okay. Take care.