MSA Safety Incorporated (MSA) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody, and thank you for joining us for the MSA Safety Corporation presentation at our inaugural "What's Next for Industrials?" [ JI ] Digital Conference. I'm Larry De Maria, a research analyst here at William Blair, and follows MSA, required to inform you that for a full list of research disclosures and potential conflicts of interest, you can visit our website at www.williamblair.com. So we have from MSA Ken Krause, Senior Vice President and Chief Financial Officer; and Elyse Lorenzato, Director of Investor Relations. I'm going to have a presentation from MSA on the new technology road map and their platform, especially around the connected worker. Following the presentation, we will have a Q&A session, which I will moderate. [Operator Instructions] As you probably know, MSA is a global manufacturer and leader in the sophisticated safety products segment that helps protect workers and facility infrastructures. Company has been around since it was founded in 1914 and based in Cranberry Township, Pennsylvania. So with that, I'll turn it over to Ken for his comments, and then like you said, we'll have a discussion for a little while following. Thanks very much. And Ken, thanks for being here, and I'll give you the floor.

Great. Well, thank you, Larry, and thanks to each and every one of you that are listening here in today and have tuned into the Zoom meeting, as we embark upon this virtual presentation in this, as we continue to operate in this new normal that we're all operating under. I'm Ken Krause. I'm, as Larry had indicated, Chief Financial Officer at MSA. In addition to being Chief Financial Officer, I head up the corporate strategy efforts as well as our corporate development function and M&A activities. And so I'm excited to talk a lot about some of the things that we have on the horizon here today where I can, give a bit of a business update and answer some of the questions you might have about our portfolio. Before I do that, I just wanted to start here on Slide 2 with Elyse Lorenzato. Elyse is with me here today as well. She is Director of Investor Relations. And I'll allow her to just walk through the safe harbor disclosures for us.

Thanks, Ken, and hi, everyone. We would just instruct you as always to be mindful of the safe harbor and note that we've included reconciliations to the non-GAAP measures in the appendix. Back to you, Ken.

Well, great. Thank you, Elyse. And here on Slide 3, just a brief overview. For those that don't know MSA, we are a $1.4 billion provider of safety products. We manufacture, we design and sell safety products across the world. Over 55% of our business is outside of the U.S. with significant exposure into Europe, Asia Pacific and Latin America. Our largest single end market is firefighter safety, and we also participate in more industrial-oriented markets like personal protective equipment and gas detection. About 10% of our business is from air purifying respirators, and we've talked a lot about those over the last couple of quarters as we respond to the pandemic. Looking at how the products have tracked here since -- in 2020, firefighter safety has held up well, and the expected federal funding is flowing into the market. Fixed gas has held up well as that business has a significant amount of recurring revenue, and it has a nice global diversification in it. And our air purifying respirator business was up over 60% through the first half. On the flip side, the industrial PPE is where we've seen the most amount of challenges associated with higher unemployment, as we've all navigated through the pandemic. The portfolio has a lot of defensive elements to it. A few examples being respirators, our fire service footprint and the recurring revenue streams that we see across, most notably our fixed gas and flame detection space. Today, I'll give more insight into the work we're doing to build our connected products and technology solutions. We see this as a key area where we could build even more resilience in the portfolio over the coming years. As we invest in new technologies and evolve our portfolio, we do so with ongoing dedication to our mission. MSA's mission of protecting the world's workers is the foundation of our success. The importance of our mission and our employees' dedication to it is remarkable. The mission of MSA has been a constant for over 106 years in our business. To me, what the longevity highlights is how our company embraces change and evolves with the trends and customer preferences in the markets that we operate and compete, and we've done so many times over the years. Our people aren't satisfied with the status quo. We're always looking at how technology can help create a safer world. So as we looked at what's next, we're focused on helping our customers keep their workforces safe with the most advanced technologies, and we're also focused internally on our own ESG efforts and making -- and we're making significant progress in those areas. MSA has an ESG-oriented mission as we are making products and platforms to protect people's lives. As we look inward, social responsibility is deeply embedded in our culture and values as an organization. We've recently been focused on highlighting that in our disclosures more pointedly. In fact, we published our first-ever stand-alone sustainability report earlier this year. The report includes enhanced disclosures around our environmental metrics and goals, workforce, demographics and community partnerships. In 2020, we've continued to focus on those areas and have been also been very active in our response to COVID, while we've donated a significant amount of respirators to the medical community and have made multimillion-dollar investments to enhance our respiratory manufacturing capabilities. Our approach to ESG centers around continuous improvement, mirroring the approach we take in the rest of our business with the MSA operating system. I'm proud of what the team has accomplished from an ESG standpoint and excited as we continue to progress towards our goals. When Larry had asked MSA and myself to participate in this event, and we thought about the topics we could address in terms of what's next in safety, the standout opportunity that we see in this idea of how technology advancements are driving the safety industry forward. While we expect much to change in the world as the new normal continues to evolve, we certainly are confident that safety has never been any more important among our customers and our competitors. At MSA, it all starts with R&D investments in our leading market positions, as you see here on the Slide 6. Those market positions reflect a very large installed base. Our strategy has been to seed the market heavily with MSA hardware and then layer in and bolt on technologies and software solutions. We've also continued to invest about 4% of revenue in R&D to develop a new generation of connected products that help us advance this strategy. The pace of innovation continues to accelerate as well. As you can see here on Slide 7, we continue to make significant investments in R&D. Going back to 2016, for example, as you recall, we were all emerging from the industrial recession. But even despite emerging during that recession, we continued to invest heavily in R&D. During that time period from 2015 to 2017, we were paring back our SG&A, we were cutting costs, we were improving our business model. In improving our business model, we were heavily investing in R&D, investing in products like the X&S 5000, the new -- next-generation of fixed gas and flame detection monitors; continuing to invest in software around fire service and other really important and critical products, like our fall protection product portfolio, which has driven nice growth for us as well. And during that time period, you can see, we've heavily invested in -- you've seen R&D investment that's growing at a compounded at annual rate of about 10% since 2016, and that certainly continues to help us drive a very strong margin profile and allows us to continue to get benefits from strategic pricing and the benefits that come with the leadership market position that we have in many of our products. In addition to investing in R&D, we've made investments in areas like Sierra Monitor, an acquisition we closed early last year that allowed us to continue to accelerate and invest in the connected worker platform, especially on the industrial side of our business. The new product R&D and concept of accelerated innovation can be seen very clearly when you look at the sheer number of products that we've launched across all of our categories recently. It's interesting when you look across the portfolio, we -- and we've talked about this at past investor days, it's not one specific product. It's not one specific market, but it's a portfolio of products that we continue to launch, whether it be in the fire service with the fire grid or the MSA M1 SCBA or in the gas detection space, as I spoke about with the X&S 5000 gas monitors or some of the fall protection devices. We continue to invest heavily and launch new and exciting products, exciting products that are protected by IP with over 90% of our new products being protected by some form of IP protection. We have over 900 total patents that have been granted and just under 300 patents that are pending, and we continue to compete and invest around different safety standards around the world. And those safety standards are certainly standards that provide a bit of a secular growth opportunity. The enforcement, the compliance and the innovation around these standards are certainly driving the business and allowing us to create an even wider competitor or competitive advantage and moat around our business. Specifically, we look at the strong market growth expected for connected worker devices over the next decade in the high percentage of companies that are already leveraging connected devices and platforms to drive workforce productivity, reduce operational spend and achieve better safety outcomes. It's interesting, environmental monitoring, wearing device and portable gas detectors reflect a large portion of our connected devices market already, and we continue to invest heavily in those areas. We also look at many of the secular trends in the fire service and how connected products provide cost of ownership benefits for departments by automating our fleet management, not to mention offering the life-saving technology that we're known for. Wrapping these trends together, the case for investing in connected products and platforms across industrial and firefighter markets is very attractive. And we're able to leverage our R&D investment in Safety io across both of these markets. Looking first at the connected firefighter, many of you have heard us talk a number of times about the connected firefighter, and we continue to benefit from having such a strong market share position with the firefighter. That fire -- that market share position really was enabled by the G1 SCBA. It's interesting, we view that system, the G1 SCBA and this system, the firefighter ecosystem as a -- as an opportunity to shift the discussion from SCBA replacements every 10 to 15 years to an ongoing engagement with our customers. Our global market-leading position in the SCBA has allowed us to launch complementary and disruptive technologies to our existing customers. One of those technologies is LUNAR, which we plan to launch in the coming months. We've talked a few times about that technology in past trade shows, and there's an incredible amount of excitement around that technology. It's a wireless, all-in-one device that creates a search and rescue network, provides edge detection and enhanced personal thermal imaging and really simplifies post-scene reporting and data retention. An added benefit for LUNAR is that it works with our -- with or without the G1 SCBA. So we're not really limited just to our market position. We actually can leverage this across the entire fire service market. We're excited about our ability to engage with customers who have historically not been able to use or have not used the MSA SCBA or other MSA products. This connected ecosystem is creating a new addressable market for us, and we're excited about what we can do with this business longer term. Continued investment in this ecosystem reinforces our promise behind the G1 as a platform for the future. It really is, and we think our customers will agree. Transitioning into the industrial side, similar to the fire surface, we're also addressing these needs of our -- of the industrial customers through our connected ecosystem approach. The first component that we focused on is connecting devices to the cloud, which our engineering team has made very seamless for the customer. Once connected, our Safety io platform drives better awareness and efficiencies for our customers by helping them manage 3 critical parts of their day-to-day operations. First, we're helping them manage their products. At a small work site, this might seem intuitive. But imagine a refinery, a refinery where there's thousands of gas detectors that require management to apply internal practices in response to external compliance and related regulations. Our system automates this and provides reports that arm our customers with insight to more efficiently manage maintenance and inventory management. Simply put, we're increasing the uptime. For customers, that means productivity and more time to focus on their core business. Secondly, we're helping our customers manage their people. In a non-connected industrial setting, a safety manager may not be aware of a potentially hazardous situation in the field. Through our connected ecosystem, we can now provide alerts over the air to quickly identify and address the situation down to the worker and their location. And lastly, we can use all this information and their information to help our customers better manage their processes. While the technology is complex, the goal and outcome is very straightforward. We're simplifying safety through connected technologies. As we transition into the balance sheet and some of the inorganic growth opportunities, we continue to be very active. And not only are we active, but we're positioned very well to use our balance sheet to grow the business. Just like we did with General Monitors back in 2010 or Latchways in 2015, Globe in 2017 and then Sierra Monitor last year, we've had a really consistent pattern of using the balance sheet. And what I think is really noteworthy here is the timing of which we've made past acquisitions. I think you'll see, in 2010, we were emerging from the Great Recession. In 2015, we were in the midst of the industrial recession when oil went from well over $100 a barrel down to $20 or $25 a barrel, we made the acquisition of Latchways. We doubled down, so to speak, in fall protection. And then in 2017, as we were emerging and as we were reducing our cost structure, we made another very valuable acquisition in Globe. And so you can see there's a consistent pattern here where we -- as we've emerged from recessions, we've used our balance sheet. We've continued to improve our business, and we've grown our market position, and we intend to continue to do that. We continue to -- we intend to continue to use the balance sheet. We intend to also continue to fund our dividend. We've had a very strong track record of funding our dividend and increasing our dividend for over 50 years. We increased our dividend back in May. Many others were cutting their dividend at that point, but we were in a position where we could continue to increase the amount of cash we were deploying for our dividend, and we were able to do that. We'll continue to do that as well as fund our R&D. R&D is certainly, as I've talked about throughout the course of this presentation, the R&D is a really important part of our business and how we differentiate ourselves in our markets. So in summary, as I close out the prepared comments, the pandemic really underscores the importance of protecting worker health and safety. It's continuing to increase the secular trends in our business and the awareness and the importance of safety. We continue to leverage our leading market positions. We continue to see very strong share positions throughout the pandemic, and we see an opportunity to continue to grow those positions in our core markets and with our customer base and with new customers. And our position with our balance sheet has never been any stronger. We made a decision to pass on certain deals as we came into this pandemic. We were fortunate, but we continue -- one thing that we've continued to do is remain disciplined. And that discipline helped pay off as we went into this pandemic and hopefully, will pay off in an even more great manner as we emerge from the pandemic and use the balance sheet going forward. We've got a deep pipeline of opportunities available to us, and we're hopeful that we'll be able to bring new and exciting acquisitions into the fold in coming years. With that, I'll turn it back over to Larry, who might lead some of the Q&A.

Okay. Thanks very much, Ken. Appreciate that. Great update. [Operator Instructions] I have a lot of questions about technologies that we talked about. But maybe just to get this out of the way, can you give us maybe just a quick point of view really, but a business update or what we're seeing? Obviously, your backlog, I think, was flat sequentially into 2Q and deployment situation while not great is getting better. So what are you seeing out there? And how -- what's the update?

Yes, definitely. Certainly top of mind with everybody, I'm sure, and we were on a webcast last week as well. And what we said is it's been choppy. I'd tell you, it's been a tough year, no doubt, and you see many others talking about that. The summer was tough. In July, we talked about, on our earnings call. And then August, that was a -- that was a tough period for us, and I think it was tough for a lot of folks as we saw COVID resurge in many of the heavy industrial markets of the U.S. We continue to see some recovery in our international segment, but it was certainly a challenging period of time in the U.S. We've seen a bit of it moderate here as you start into September. So we're hopeful that we saw the bottom during the summer, and we're now seeing a bit of a recovery. So we're hopeful that, that will pan out. But the biggest risk here is do we see another resurgence around COVID, do we continue to see maybe more slowdown associated with the resurgence. That's certainly probably the risk that's top of mind right now with me. But we feel like we're pretty well positioned, not only have we continued to invest in R&D, but we've continued to invest in restructuring. We talked about in July, our focus on restructuring, our focus on improving our business model. And we feel like as we move through this pandemic, we have the opportunity to continue to take out costs, make our business better. Our thought is that we want to get this business to a business with an operating margin with a 2 handle on it. And I've talked about that before. And we feel like that's realistic. We haven't put a timetable on that, but we certainly feel like that the things we're going to be doing here now and in the future quarters with restructuring activities will certainly help us get to those levels in the future. Our incrementals remain very strong. Even for the first 6 months, we were able to -- despite having, I think, revenues that were down 1% for the first half of the year, we were able to improve our operating margins. In the second quarter, we had operating margins that were just south of 19%. So it was good to see. But we feel like we have more room to go. We have more opportunity and more improvement opportunities ahead of us.

And when you said 20% margin, you were talking about International?

Global margins. I'm talking about global margins at this point. I think in the Investor Day, we talked about that. We talk about our proxy peer group, and the top quartile having those types of margin profile. And we feel like we have a business that will allow us to get there longer term and -- but yes, International also. I mean International, I don't know that I'm ready to put a 20% target out there for our International segment. But we feel like there's an opportunity to continue to invest in International, take costs out, and it's good to see the progress this year despite having a really slow growth or no growth environment in International, we're able to see margins in the second quarter, up 300-plus basis points and year-to-date, up over 200 basis points. So good results, Bob and his team are doing a fantastic job over there.

Great. So you talked about -- a lot about the investments, obviously, that 4% of R&D, which you've got it up to. Is that the number we should think about moving forward? Is 4% enough as a goal in the internal funding for this kind of technology? And how do you think about -- obviously, developing technology yourself with that investment, but how do you think about partnerships, joint ventures and other ways to leverage?

Yes. We're looking at all of those items. We've looked at technologies, things that maybe will accelerate our R&D pipeline. We've actively evaluated a number of those technologies. We've acquired technologies like that in the past. And we continue to look at that. From a pure R&D perspective, we certainly expect to continue to invest in R&D. The one thing that's a little different about software is that you have to -- there's a requirement to capitalize certain software costs and amortize those over a period of time. So I don't want to necessarily attach myself to a 4% target long term because the way that it's accounted for might be different. But what I can attach myself and I think the company, too, is our intent and our ability to continue to invest in R&D and deploy additional dollars there. That's going to be the focus. I mean that's really the lifeblood of our market share positions and our business model, and we intend to continue to deploy meaningful investments in R&D to grow that business. Those gross margins, if I go back over the last 8 or 10 years, they're up 700, 800, 900 basis points. R&D is up about 80 basis points over that same period of time. So it's paying off. The investments we're making there have paid off for us in a much better business model.

Now you guys historically have been, I don't know, [ healthy ] on the small side. But compared to your competitors, like the 3Ms of the world, obviously, a smaller enterprise overall. And you're very efficient with your R&D as evident in your margins improving, but like you just said, the rate of R&D spend has not gone off the same amount. So you're getting good payoff on that. Do you -- how much of a risk do you think it is? Or how do you measure yourselves against some of these better -- you guys are well capitalized, but these are bigger companies and will have maybe deeper pockets. How do you think about your R&D spend versus what they're doing?

Yes. We feel like we're very competitive versus what they're doing. Sometimes the focus might be a little different, though. When you look at MSA, I mean you're right, you're spot on. We're not 3M, we're not Honeywell, but we are MSA, and we have a great culture. And we're very proud of our position and our culture at MSA and what we've done. And what we've been able to do is pretty impressive. When I step back and I reflect on some of the results, carving out niches in certain areas like fire service, taking market share position from 20-plus percent to over 40%, bringing -- and then bringing on acquisitions that complement that organic investment in fire service and now talking about how we can bring in new technologies and disrupt that market even more have been really a big part of the playbook. When we look at some of the other products, it's very similar. Gas detection. You look at gas detection and portable gas detection. You look at our ability to introduce what we call the XCell sensors, our own sensors organically that track 3, 4 or 5 gases at any one point in time as opposed to a single gas monitor. And that's a market that we find very interesting, very compelling and allows us to get a leadership position. We have invested in that market when others maybe have shied away from that market. And so we've seen great results and returns from there. So you're right. We're not those companies. We have all the -- we complement those companies. Those are great companies. They're very, very good companies, but we're different. And MSA, that difference pays off and allowing us to be nimble and quick, respond to niche markets, where we feel like we can -- what we can disrupt and make a difference in. And so it's -- that's been a big part of the playbook, Larry.

Yes. I think your agility has been pretty close over the last few years, especially, but obviously, it's been enduring for a long time for the company. You've talked about R&D and the investments in connected workers, et cetera. And you talked about firefighters and then the industrial side. How synergistic are these investments you're making now? Are you -- it's not siloed in that you're investing on the connected worker in firefighters and connected worker in industrial. How efficient is your R&D that it can be synergistic between the end markets?

Yes. We feel like there's definitely a synergy that occurs across the portfolio. And then that synergy goes back to the software engineering that we've deployed. A lot of the software engineering is addressing both the connected industrial as well as the connected fire service business. And so there's a lot of sharing of resources and leveraging of resources that makes it very synergistic. Our sensor technology, for example, we've developed sensor technology that historically was focused in on gas detection. But we've continued to evolve that sensor technology into other core product areas for us. And so there's applications for sensors in other areas outside of gas detection that we continue to look at and deploy. And so it gives us a sense of optimism around that area. And so it's not a siloed approach, and that's some of the benefit of MSA and the size that we have. We have the opportunity to look across that entire portfolio and allow us to leverage those synergies when it may have been more challenging in maybe another enterprise. So -- but yes, that's front and center. It's certainly the synergy across the portfolio is valuable to us and important.

And when you're thinking about M&A, obviously, safety is a pretty wide net, right, especially even individual safety is one of the important things we need to leverage that R&D spend. Or is that -- was it less about that and more about new markets?

No doubt. It's about -- when we look at synergies and we look at the opportunities, it's up and down the spectrum. But R&D is one of this. I mean we feel like -- Sierra Monitor is a great example. I mean they had some interesting technology, but they didn't have the resources that we have from an R&D perspective that we've been able to deploy and make that business better. Latchways was a great example as well. They didn't have the R&D resources, but we did. And we've been able to bring that business into the fold and make our combined business a much better business. And so no doubt about it. The R&D portfolio and the engineers and the resources we have there, we're leveraging across these acquisitions. We're also leveraging our shared service footprint. We've had a good track record of driving nice synergies in these businesses. Sierra, we went from low single digit to losing money now to have a 20-plus percent margin on it. And that's because of the synergies, not because of the fantastic revenue synergies, but a lot of the cost synergies that we were able to take out in the first year had a big impact. Now as we move forward, we're positioned to do even more business and drive it through our channels and drive an even higher-margin profile on it. So synergies are really a big and important part of that M&A strategy.

So same with the connected workers in various verticals, this is a potential sea change, right, for your industry and for your company, may not be hugely impactful next year. We're just starting to roll these products out. But what's your vision for pricing, right? And does this change the recurring revenue model for you guys? Maybe remind us how much you consider sort of recurring, what -- how transformative this can be and how you plan on pricing, if this is going to be annual subscriptions or the way it is now with units.

Yes. So when we look at it, recurring revenue today is 20% or 30% of our business. It's not 50-plus percent of our business. And it's primarily in the fixed gas space where we're replacing sensors, and we have service around that. And so we see that as what the more legacy recurring revenue has been in our business. But we're like everybody else out there. I mean in that recurring business, that is a big focus of our strategy going forward. How do we make this more of an annuity? How do we make it more consistent? And so when we think about our business, there's 2 ways that we think about pricing these recurring revenues or this new business model. There's -- one is the hardware. We'll always sell hardware. I mean that's our -- I mean that's what's been our focus for well over 100 years and will probably remain a focus for some time going forward, is how do we sell the SCBA and the portable gas detector and the hard hat. Those are going to be important to us, and they'll be important to us for some time. And so you have a hardware purchase, which won't be any different than what you have now. But you'll have a service agreement around it as well. So we're looking -- we have service agreements and monitoring agreements. You look at the Safety io business where we're pricing out multiyear contracts to monitor employees in the field, the lone worker, for example, or monitor gas levels in an environment remotely or the fire grid, where we're trying to monitor the firefighter in the burning structure. And so on the fire service side, the hardware is the LUNAR device. The fire grid is more of the software device. On the gas detection side, the Safety io area is more of the recurring revenue, whereas the portable gas detector or the ALTAIR io360 is more of the hardware. So you've got both ends of the spectrum when you think about our business model going forward. And we feel like they'll continue to give us -- I mean when we look at our business in safety, pricing is not a way that we go to market. I mean we're not competing on price. We're competing on how we differentiate ourselves in the market. And I think these things will continue to allow us to differentiate ourself, create a wider moat and allow more improved pricing to come through the business model.

And do you think that this could structurally change your incremental margin portfolio? I mean it's already, obviously, 35% plus, so -- which is more than best in class for the industrial world. But do you envision a structural change to the incremental margin outlook given what you're talking about today?

No, there's -- I don't know if I'm going to call it transformational change because you're right, it's certainly already strong. Incrementals at 30 or 40 in the industrial world are very strong. But as you introduce software, as you introduce recurring revenue like that or in that area, you should expect improved incremental margins. It's going to take time to shift the business more into that software side. So it's going to take time. It will come over time. But we're hopeful that, that will produce higher incrementals. The other thing that will produce higher incrementals, quite frankly, is what we're doing now with our restructuring efforts. As we're taking cost out in a down cycle, and as long as we can keep that cost out of the business model or out at an appropriate rate as the business responds and grows, we should still -- we should see expanded incrementals from the 30% to 35%. So we're doing a lot of things, both on the product development side as well as in the restructuring in the business model side that will allow us to expand those incrementals going forward and go back to that point I made earlier about getting this business to a 20-plus percent operating margin business.

So it sounds like you guys, to some degree, are looking to have an ecosystem of products, right? You're going to have the hardware, software, the monitoring, all of it, right? So how are you going to work this with existing fire departments because that's the easiest example, right? Is it going to allow third-party API connectivity? Is it going to force more brand purity at fire departments? Is this all incremental business? How do we think about your model, which is really an ecosystem, but it doesn't necessarily have to be, I guess?

Yes. And it doesn't. I mean what -- it's interesting, when we look at this business, the G1 SCBA -- when a customer acquired a G1 SCBA, they were an MSA customer because of the G1 SCBA. But as you introduce the software, this is really independent of the G1 SCBA. So it allows us to open new market opportunities for us that we didn't have or new customer opportunities that we don't have today. So it allows us to expand that set. It's interesting. Before the pandemic occurred, we were actually showcasing the LUNAR technology to a department that was not an MSA customer. They did not own the G1, but as we demonstrated the LUNAR technology, and we demonstrated some of the things we were doing on fire grid, they said, we want to see that G1. And so we've unveiled the G1, and they became a buyer of the G1 and a buyer of the G1 well before the 10 to 15-year life. And so it accelerated the switching from their existing supplier to an MSA G1 and it also produced an opportunity to get back in front of them here later this year as we introduce LUNAR in the fire grid. So that's kind of the recipe, that's the approach, and that's what's worked for us over the last several years.

And are there a lot of tenders, let's say, the next 12, 18 months or 24 months? I know you guys did a great job at the G1 over the last 4, 5 years, right? Where are we in the, say, new tender process?