STERIS plc (STE) Earnings Call Transcript & Summary

I'll kick it off. Thank you so much, everyone, for joining. Patrick Wood, obviously run the U.S. Medtech team for those who may not know me. Exciting disclaimers. You have Morgan Stanley Research website, /disclaimers, I'm not even sure if that's the right hyperlink. I'm sure you will go there. So that's fine. And obviously, this will be a great discussion, Dan. Thank you so much for joining us, the CEO of STERIS. Going to be a lot of fun.

I think maybe if we can just start sort of big picture because one of the fun things about STERIS is you all see such a massive part of the health care system and I think a lot of other companies don't necessarily get. And you read obviously what the other companies are saying are volumes and [indiscernible]. What do you see in terms of your real customers and volumes?

Yes. First off, thank you, Patrick, for having us, both from you and also at Morgan Stanley. We really appreciate the opportunity to be here today. You're right. We do have a lot of different data points. We run many of the sterile processing departments across the U.S., U.K. and many other places in Europe. So we see what's going on in real-time as it relates to procedure volumes and have a pretty good gauge. In addition to that, one of our businesses are Applied Sterilization Technologies businesses, the global leader in industrial sterilization for single-use devices. So we have a pretty good pulse on inventory volumes and what's going on in the broader market as it relates to consumption of single-use device, which obviously is directly correlated to procedure volumes. So at a macro level, what I would say is this. In the U.S., volumes are back, in particular, very strong in the sunshine states, where we've seen migration over years and seen a lot more growth in the health care systems. But even in the older traditional Rust Belt communities in the Upper Midwest, we're seeing strong growth, high single-digit volumes in terms of procedural cases. So across the U.S., we see a healthy ecosystem as it relates to procedure volume. Outside of the U.S., it's a little bit of a mix and match story. Recovery across Europe has been slower, although we have seen in the last 5, 6 months, positive trends starting to materialize that are more than just one-offs and believe that they're on a trajectory. Although maybe 6 to 9 months behind the U.S. market, but they're moving in the right directions now. So nonetheless, we see positive trend outlook for broader health care going forward as it relates to procedure rates.

There's been -- for some of the other subsectors, things like [indiscernible] been a bit of anxiety from investors of -- in the U.S., could we see volumes a lot less healthy in the second half of the year? Have you seen kind of anything would indicate a change? Or is it just very consistent?

We haven't really seen anything. And there's still a lot of -- I think there's still a lot of pent-up demand as it relates to those type of electric procedures. And as my good friend who's an orthopedic surgeon says, who loves pickleball, it's the best thing that happen to orthopedics because a bunch of out of shape of old people think they're 21 again, and they need new hips and ankles and elbows from playing pickleball. So I do think that, that's a demand that's going to continue in terms. I don't think it's a short-term makeup.

I love that all those people are in pickleball tournaments are sponsored by like Stryker and Zimmer.

Exactly.

Phenomenal. Really -- you couldn't have that for any other industry. I mean, it doesn't really work. So maybe we shift into health care is pretty much the largest segment. Again, think about customer demand. You guys have an incredibly strong capital equipment cycle last year, did very, very well. Maybe if you could refresh the audience what drove such a strong replacement year, some of it was catch-up, but some was underlying, that would be helpful.

Yes. So well, let me start by saying we've been doing a really nice job with our portfolio, and we've probably been selling probably above our normal share counts in the past based on just performance overall. And then there's been increased demand as we came out of pandemic, and there's still a lot of expansion going on in health care. Like I said before, if you buy into the notion that procedure volumes are going to grow. And you see a migration away from large acute care downtown into community hospitals or ASCs. The capacity as it relates to sterilization has to move with that. So we've been the beneficiaries of that over time. And in addition, there's a bit of a false there because we had manufacturing challenges come back 2 years ago, which effectively caused us to shift 5 quarters of capital equipment last year. So it was a great year if you normalize it, but it was a silly great year because of the challenges that were somewhat self-inflected in 2022, I guess, is what I would say. But all in all, despite the current economic financial system in health care, where many of the hospitals have definitely crossed over to being cash positive but are still on the line or below breakeven from a P&L perspective, they see a path to profitability now, which I don't think they saw 9 months ago.

That's really interesting. I mean, equally in relation to that, what's the competitive environment been like again on that kind of capital equipment side because the chemistries fall about eventually, but the placements, how's that look?

Like I said, I think we've done a nice job building out our portfolio over a number of years to put us in a very strong position in what I would define as a very narrow space. So down in the basement where we do sterile processing, STERIS is the leading provider, starting from the washers to the ultrasonics, to steam and low-temp sterilization and all the accessories that go along with that process. So I believe that we've been in terms of share taking a greater portion each year for the last 3 years and hope to continue that based on the discipline we've built into our normal rhythm.

There's obviously been a bit of a volume shift to [indiscernible] from like a big inpatient IDN institutions to ASCs and [indiscernible]. What does that mean for you guys?

It means that capacity is going to move, right, and have to be reproduced in other places. And also, it has to be equipment that's easier to use from a compliance standpoint because you're not going to have as highly of a trained worker that use it frequently. So you got to make it so it's mistake proof. And so a lot of things that we're trying to do as we build in with our equipment is make it so the instructions for use for the different instruments are right there, front in mind and eliminates opportunities for errors or mistakes when doing the various process to get to a sterile product to ultimately get that instrument back to the OR for procedures.

One question, the inevitable one. The market seems -- some participants have fixated on the idea of the cap equipment growth this year relative to an incredibly difficult year. Assuming it's a valid question because the rest of -- like just that one area, anything you would like observe about the construct of the year and just high level to locate some of the people who seem focused on that area?

Yes. I think it's -- the problem is we've trained all the analysts and investors over the last 2 years to focus on that because we had this strange backlog situation because of supply chain issues and challenges. In reality, if you look back at STERIS 12, 14 years ago, 50% of our revenue came from capital equipment. Now 80% of our revenue is reoccurring or annuity-type businesses based on consumables and services and everything that we've built out. And not that capital equipment isn't very important because it is, it does drive some of our chemistry and annuity sales. But look, if I can take last year and get plus or minus 2% on that for the next 5 years in perpetuity in capital sales for health care, I'd sign up for it today. And the reality is, as we said we're going to have modest low growth this year in our equipment in health care based on the comps of last year. And if we're plus or minus 2% of last year, based on overperformance in the other parts of the businesses around the annuities, it's not going to matter. I mean, it's -- so I think it's something that some folks are hyper focused on. I understand it because it's math, and you want to model it. But in the end, it's the equipment that's in place is already in place and it's going to drive performance going forward.

Makes sense. Maybe shifting to endoscopy because it's an area that can get kind of miss, I think, sometimes for you guys. And it's obviously an area of multiple exposure to, both from the reprocessing side but also your own scope. I don't think people necessarily clock onto that. So what is it about that market has been attractive for STERIS and to focus on it?

Yes. I mean endoscopy is where STERIS arguably got their start back with STERIS System 1 doing endoscopes and high level actual liquid chemical sterilization. And but since then, we've put together a number of companies, a build-out in our endoscopy profile. So just a few examples. One obviously is Cantel that came in. There's 2 parts to that. They were the largest global manufacturer of AERs, automatic endoscope for processors to do high-level disinfection of endoscope. So virtually every clinic in the U.S. would have a Cantel STERIS AER. And with that comes all the chemistries that go through the cleaning both on the pre-disinfection prep work, but actually chemistries that go into the machine and then everything that maintains the drying and safety prior to the next patient use. In addition to that, original U.S. endoscopy, STERIS Endoscopy makes clinical devices that actually go down the channel in lumens of the scope. These would be snares, roth nets, polyp traps, all the things used in endoscopy procedures, and we have a strong position in that market. In addition to our IMS group, we do third-party repair for all the major scope manufacturers as well as power tools and things like that. Where we'll take apart and replace lenses, replace electronics and basically retrofit your scope. So it's effectively brand-new and ready for use. And then last but not least, we also do offer disposable [indiscernible] in terms of going after that very small diameter market of scopes.

That's a market with essentially one player at the moment.

Yes, but other entrants coming in.

Yes, I was going to say, like, presumably, you guys feel you can take a little bit of a shot at that from Boston. Over time, it's quite a quick [indiscernible].

Correct. And the opportunity there is really in small diameter, large diameter, colonoscopy scopes are -- they're very expensive and they're easy to clean and sterilize and then the cost and waste by making those disposable at the current price point just doesn't make sense in our view. Maybe at some point, there will be technological advances that making a possibility. For right now, we're focused on where there's smaller diameter, high break fix, what we call it, operational type scopes.

And then switching gears, the sort of consumables, chemistries and server side in health care has been very, very strong. Obviously, some of that is because of the prior year, you had a very strong hardware sale. But I wouldn't have thought that, that many of those hardware sales in the prior year would have been incremental like installs base. I would have thought some of them would have been a replacement cycle rather than new. So I guess the question is, how much should we tie the -- like the consumable side of the business, the overall health care volume utilization and how much is that installed base growth sort of competition side?

It's kind of one plus one equals 3, meaning we are entirely procedural driven. So to the extent there's more consumption in procedures that there's more consumption in sterile processing department capacity. Which drives use of our disinfectant cleaners and chemistries that go into the machines as well as everything in the prep and around that. It's really assurance and packaging. So that's that. Now we have the benefit as well of, like I said, maybe doing a little better from a share perspective over the last 3 or 4 years, and those machines then drive some volume -- incremental volume as we pick up share.

I think of like pricing and like customer churn. I'd had a couple of discussions, which has suggested that one of the cycles that can happen to the hospitals, they get you guys in because they have an infection issue. Generally, a sterilization issue. They get you guys in, you manage it, fix it. 3 years later, the hospital has a new CFO, whenever come in, who's like, "Oh, this is expensive. They go back to doing it themselves." A year later, they have an infection issue, you go back in. A, is that a characterization that exists in the market or was I misled? And B, is there anything you can do to kind of bridge if that does happen to sort of bridge that and stop that gap of happening?

Yes. What I would say is, no, it's not a mischaracterization. It does happen. But we're -- we take a very long view of our customer relationships, and they always come back is what we found. And I always say, we don't care how a customer buys from us, as long as they buy from us. And whether we're providing service or whether we're providing actual product and chemistries because ultimately, they'd still be using our equipment, our chemistries in that scenario. And when it's time to call aspect because they have issues, we bring the consulting team and we bring the on-site leadership and we'll take it back over.

How can you think about -- I would argue you guys have generally been a little bit more careful with pricing than some of your peers to a point about the long-term customer relations? How do we think about the interplay between price and volume with the customer?

I think that we still have an enormous opportunity to sell the STERIS enterprise solution into the health care facilities. And that's something that our customers are coming to us asking for. So in the absence of significant price escalation on product, we've asked for more volume and broader penetration into the accounts. And we've been successful doing that and leveraging that. The problem with getting too aggressive in the hospital on prices that's especially in our capital equipment categories, you open up sole-source contracts potentially and become dual sourced. And so we've done everything we can to protect those sole-source arrangements where we have them. And -- and I think in the long run, it's probably the best play.

The -- if you zoom out and you think of the health care business, STERIS in totality. Are there any interesting puzzle pieces you feel like you're missing the strategic next direction for the business areas you'd like to compete that you don't or geographies like from your perspective, the direction of travel?

We still have a lot of opportunity in Europe. Our portfolio over there has vastly improved, but it doesn't have the exact market fit that we need yet. So there's still opportunities to refine and do that. And we're fairly large. I mean, we're a $450 million business in Healthcare Europe. It's not insignificant. So we have scale, but we have work to do there. In terms of the broader U.S. market, it's really around compliance and anything that we can do to digitalize, take data and use that to help make the job easier for our customer, make it less likely to make mistakes, reduce labor and drive compliance. So things that we can do in that area are really short-term focus. And then in terms of other ancillary things that we add in there, we'll talk about that as they come up.

Let's try. I think you've like to be moving to ASP, I think of the big medtech business and as other things. It -- correct me if you feel differently about the world, but it feels like some of the sites of production have been moving a little bit whether it's the DR or [ makeup ] or [ Mexico ] or things like that. Are you seeing a sort of shift around where production is happening and does that ever mean implication ...

We do. We have global locations. We have a major presence in Malaysia where we built out 4 plants there in the last 5 years. We've seen a lot of migration from some other Asian countries like China to nearshoring over to Malaysia and then for the European and U.S. export market for certain products. Costa Rica, we have a major plant down there with sterilization plant that we've expanded 3 times in the last 5 or 6 years based on significant growth that we've seen mostly from U.S. multinationals. In fact, the business [ chart ] park that we're in down there is 30 med tech companies, and it's the top 25 out of 30 that are in that group right there. So that's definitely the case. And I do think as we've seen challenges from a regulatory environment in our industry as it relates to ethylene oxide, you're likely to see some migration into Mexico, even for some of the sterilization. But clearly, some of the manufacturing, and then we're well poised with multiple plants on the border as things come across to capture that product as it comes into the States.

People move to Mexico and keep using EO as a -- not a way around [indiscernible]?

Yes, I think so. I mean I think that the regulatory environmental standards are a bit less onerous, but still at a high level, and it can be done safely. But clearly, some med tech companies may elect to do their own processing across the border.

Do you get given a little bit of a heads up from some of your partners about relocation? Because you're committing quite a lot of capital to building new cities, right?

Yes. We kind of have 2 models. One is where -- if we have a regional network of 4 or 5 plants and they're running near utilization, high utilization, we'll often expand on speculation based on the pool of customers that we work with in that area. And we can do that at limited to no risk. It's a little different if we have sort of a plant that's near customer site manufacturing that's not necessarily near their end patients or end customers. That typically requires a much higher level of communication and commitment. But nonetheless, our large customers because they use us across the global network, are very communicative with us of what their supply chain challenges and changes will be in time to let us adapt and change and partner if it makes sense to build or whatever it may be.

In the ASC side of things, are you seeing any change in the rate of insourcing or outsourcing in terms of the sterilization, whether it's the big or the small business?

No, I would say there is a push where it makes sense to do high-value, low-volume product in-house with the right technology. And we offer -- we have -- we take a technology-neutral location neutral position. And if the customer has a high-value product that lends itself to vapor hydrogen peroxide sterilization that can be done in-house, we believe they should do that, and we'll help them do that and happy to sell them equipment. And the same thing with electron beam, we're happy to set up small e-beam and let them run it in-house operation. We're also happy to have them outsources or us build something and run it for them, whatever makes the most sense. It's just finding the solution for the right thing. On the whole, though, high-volume sterilization because of the complexity and the regulatory environment, over time, over a long period of time, it's likely to continue to shift more to outsource than it will be in-sourced. It's just -- it's not core to the medtech manufacturer who's really good at designing and selling high-technology, life-saving devices versus doing sort of the back manufacturing distribution sterilization piece of it.

Yes. That makes sense. I mean within ASC alone as well in the competitive environment, any changes there? How are you seeing things customer discussions new versus [indiscernible]?

I think in the increased regulatory environment around ethylene oxide, some of the smaller contract providers and some of the smaller in-house med techs are probably going to step away at the end before the compliance deadline is my guess. So I think that will have some impact and pressure on the existing network. Outside of that, nothing of significance at this point.

You touched on it better in terms of modalities for sterilization, obviously, x-ray and a whole bunch of different potential options depending on the device, the year litigation. How are you thinking about the ultimate direction of travel? And I guess within the U.S., what the FDA is likely to land on in terms of how sterilization looks midterm, let's say?

Yes. I think the FDA is trying to do everything they can to facilitate off ramp into other technologies from EO where it makes sense. But they also understand it's not that easy. It's very difficult. There's some percentage of what's in ethylene oxide now could easily move into other technologies with some work and validation, but it's a small percentage. I mean 2/3 of it is really, really hard to move and half of it almost can never go because of the material compatibility issues. But longer term, I think med tech is going to have to look upstream into R&D and earlier in their design process and be a little more mindful about sterilization and what materials could be restrictive early phase design and make sure we don't get down a decision tree where you can only do gastrosterilization, which has often happened in the past. So it's going to change over time, but it's going to take a lot of time, and it's nice that the agency has been helpful on trying to give supply chain options from a surety of supply perspective.

What are some of the characteristics of different device and product specifically lend themselves the EO relative to other?

Yes. There are certain lubricants that are used as well as electronics that if you run them through a radiation cycle, it's going to -- it's going to cross-link the lubricants or it's going to fracture the electronics, so they're not viable. So there's -- and then a lot of cellulosic materials tend to have challenges with radiation, which is in every surgical kit. And anything also maybe has iodine package, prepackaged solutions can be a challenge as well depending on the chemical composition. Remind me of the CDMOs on the drug side and small molecules rather than the biologics vital sterilization.

No, they're absolutely not.

Would be easy, if you could, right?

Yes. I mean that probably makes sense then to touch on the life sciences side of things. How do you feel like the volume side is looking? Maybe it's worth level setting people? Because actually, I feel like life sciences gets some of the least at time part by processing. But the rest of life science gets not a huge amount of time, maybe level set people on the kind of business that you guys do today on the Life Sciences side.

Sure, Patrick. So everything we focused on aseptic manufacturing, which results typically in injectable drug. So I think anything from Emerald to GLP-1s, basically type -- biologics to -- in anything in cell and gene therapy or personalized medicine, all those type of things are generally manufactured in a maintain aseptic environment, which is where we come in. And it's kind of 3 parts of the business. One is capital equipment, which is GMP-type sterilizers, paper for oxide for fill lines and pure water generators, pure steam generators. And then our largest business is our consumable business, which is everything focused on sterility maintenance and clean room maintenance in terms of chemistry. So I think liquid disinfectants, liquid sterilants, all the things used to clean the aseptic environment to ensure that the product is produced out of there for contaminants. And those are validated in regulated cleaners that have a high switching barrier once they're fully adopted by our customers. And the last piece is our services business. So generally speaking, production volumes have remained strong in pharma, really strong. And fact maybe seen some good growth, especially on the back of GLP-1s in the aseptic environment. However, there is some puts and takes. There's obviously a lot of funding that's dried up for start-ups and smaller biotech. So we're not seeing some of that activity now. And that's just normal pharma cycle. My guess is we've seen this play before, and it takes about 2 years, and then everything is back to normal, and we're a year plus into it at this point. So it hasn't affected us on the consumable business, but I think it will have a short-term impact on the equipment business.

It might be an unanswerable question, but how much on a sort of like-for-like volume perspective, how much more valuable is an early-stage biotech whatever customer that is going from the full service, everything from the hardware to the service side to everything versus whatever Pfizer is presumably -- just the hardware and the consumer. Do you see -- is there a big ...

Yes. All customers are valuable. But our large corporate partners where they can platform across multiple sites with the technology as we do validation work with them is really the biggest opportunity for us longer term.

And how like connected you end up being a clinical trial log versus the bread and butter actual production side?

Now we're really bread and butter actual production. So I mean -- but we've become part of their filing and the regulatory process based on the processes that use our equipment chemistries. But we're not -- I mean we're in the clinic trial side of it, but we're a participant.

I should note it. Are you guys specified in the drug master file?

In many cases, yes. Which is great because if you're validated in, you're validated in, but if you missed the opportunity, you're out.

It's an annuity stream. And then if I think about the customer exposure from let's call it an end market perspective, small molecules [indiscernible] biologics, I don't know where you want to put peptides. But like is there like an obvious sort of from how you see it split?

Yes. We really don't play in the small molecule market with the exception of cleaning to some extent. Our 90-plus percent of our focus across all of our Life Science businesses and aseptic manufacturing. So your biologics, your GLP-1, your cell and gene therapies, everything along those lines.

And then on the biologics side, there's obviously the drug product and part of the market, but that's also the upstream by processing side and because there's so many public companies that compete in that space consumers a a lot of air time. So maybe it's worth helping level set people how you compete in, I guess, single use of stainless steel and ...

Yes. So -- you mean in general?

Yes.

So every company has got their puts or takes, right? So one of our biggest products in our life sciences are chemistries for cleaning the stainless steel the big fermentation tanks and lines that are sterile for aseptic manufacturing of biologics. Now the counter to that is that over the recent years, we've seen huge growth in disposable bioprocess liners, bioprocess valves and tank covers and piping, et cetera. And for us, it's kind of a put and take. We've seen a business that was nascent grow to $100 million in AST, where we're sterilizing those disposable products. And then we've seen our process cleaning business continue to grow, but at a lower rate because there's still going to always be a place for high volume, high production, stainless steel biopharma because it makes sense. But new age applications are much smaller campaigns and much more personalized lends itself to disposable. So puts and takes, but net-net, very positive for our company over the long term.

I'm sure [indiscernible] would enjoy being called New Age. The -- so within that construct, obviously, there's been a flip around on the bio pricing volumes. How has that affected you guys?

Well, more just a headache of explaining it, is what I would say. No, we purposed most of the market. I would say, generally speaking. And we saw for 2 decades, mid-double-digit growth, I mean just really impressive, consistent in these disposable liners and components for Bioprocess, single-use technologies as we refer to them. And then about the time of the pandemic between vaccine production and supply chain shortages, the industry just overstocked immensely, and we ended up seeing what was consistently 14%, 15%, 17% growth turn to 34%, 35% growth, which is great, but not sustainable. And what we all found out is that we were -- the industry was ultimately hording product and inventory and then it's taken 1.5 years to burn it back down as one would expect. And at this point, it's more or less leveled out, and we see volumes starting to return and most of our customers are saying second half of this year, which is now start to see a return, which we've taken a more conservative approach since the second half of our fiscal, which is later in the fall. But nonetheless, it's on the right trajectory and it's kind of reset off of the new low, which is where it was pre-pandemic. And my strong speculation is that, that trend of sort of mid-teens growth should continue. There's no reason it should not, if not accelerate based on some of the trends we're seeing in selling gene.

We're you surprised how long that destocking process?

Yes, it was. I truly was. It's -- you got to remember, though, these products are validated in. Many of them are in the drug master files. And so when there was scarcities, people bought everything they could buy. And I mean, we pride ourselves on being a lean company and lean manufacturing, lean inventory management. And we went from just in time to just in case on everything, too, and our inventories bloated up because we didn't want to have stock outs. And I think there was that fear factor that drove a lot of those buying patterns. And now that's more than normalized out, I think it was [indiscernible].

Obviously, for STERIS is a totality, you've got your 3 main babies like how do you allocate your time? How do you end up deciding where to invest in and spend energy between them?

It's funny. In terms of my time, we've got great business leaders across those. And that's one thing I'll say about our leadership team is yesterday was actually my 27th anniversary at STERIS. And but everybody else is running a business is 20-plus years with the business. And we all know each other, and I trust them emphatically and they're professionals by all means. In terms of allocation of money, that's a different story. That's friendship draws in terms of making the best business decisions. We have a rigorous process that measures risk against return, and we weighed those things. Fortunately, we're in a position that we've paid down a lot of debt and we throw a lot of cash. So we can be fairly aggressive with our reinvestment policies and practices in terms of how we look long term with the business provided we know they're relatively low-risk investments with decent returns.

I guess it's been a year or so since the PTO, right?

It was about this time last year.

It was this -- sure was. How has that been relative to our expectations and integration?

It exceeded our expectations. I think I might have said last year here that it's -- even if we screw it up, it's kind of an easy single. It's at least a double, if not a triple. I mean, it was kind of a low single-digit growth company for a long time. In our first year running it, we were over [indiscernible] digits consistently. And I think that's just with getting a little enthusiasm into the channel and also tying it to the rest of the [ stairs channels ] where we've got those opportunities. I think long term, it makes all the sense in the world to have the company that sells all the equipment that processes all the instruments also selling the instruments and also doing all the repair on the instruments, which we already have. So I think it puts us in a position long term also through data management to really understand what hospitals need in surgical instruments. So it's been -- I mean, look, it's not that big of a deal, it's couple of hundred million bucks of revenue or something like that. But culturally, the people have been great, the customers get it the investors seem to understand it as well. And it's kind of a yawn, but it's been a really good deal for us in terms of performance.

And so if you're thinking going forward and thinking about in a similar way to how we also health care in totality, like -- is there anything you feel like areas you'd like to be competing in or like little gaps you'd like to fill at the group level?

Sure. And we're scouting those both from an organic development perspective, but we also look consistently look to do little bolt-on deals or acquisitive R&D. And there's a pretty strong pipeline. There's a lot of PE stuff that's getting a little long in the tooth, that's ready to come to market. And we're in a good position if the right opportunities present themselves. And we have a long history of doing a nice job with acquisition and integration work at STERIS. So we're financially and also from a human capacity in a good position to do something in the future if the right things happen.

And then obviously, you spend your time internally doing a set of things in -- you don't do a lot of these meetings. These meetings that you do like with the -- or take off the table, you can't say health care capital equipment. What are you surprised gets a lot of ad time versus what they focus internally or vice versa, like internally stuff you spend a lot of time and energy on that you just don't feel really comes up very much externally. Any kind of a discrepancy between those?

Wel, I think AST has gotten a lot of airtime in the last couple of years because of the regulatory environment and also because it's a bit of a proxy for a lot of the other parts of the industry. So sometimes there's a bias in the questions, but that aside.

There's also a clearer peer in a weird way to sort of more directly, I don't know people for health care have as many clear peers to compared to?

Yes, there's really not, right? So I think that -- the one thing that I don't think that we talk about that much or get enough credit for is the consistency of performance. Not just in the last 5, 7, 10, 15 years, but over a long term at STERIS. And I do really attribute that to our ability to develop leaders internally and people to develop and own strategy for a long term. I mean AST would not be where it was -- where it is today if we didn't have a 20-year strategy in AST. And you can't do a 20-year strategy if you're only with the company in 2 years. And I think that same thing with our current portfolio and sterile processing with our [indiscernible] Prevention Technologies group, the 2 folks that have run that over the last 10 years have built out what I think is an absolutely brilliant portfolio that has really put up a moat from a competitive standpoint. And once again, that's long-term knowledge, strategy and implementation and ownership. And I think that's something that our company does a really good job at in terms of the tenure and the expertise and the ownership that we have in accountability for long-term success.

I think that's almost perfect time. And Dan, thank you so much for the [indiscernible].

Thank you. Really appreciate it. Thank you.