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spk13: Hello and welcome to BD's first fiscal quarter 2021 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through February 11, 2021 on the investors page of the BD.com website or by phone at 855-859-2056 for domestic calls and area code 404-537-3406 for international calls using confirmation number 699-3448. I would like to inform all parties that your lines have been placed in a listen-only mode into the question and answer segment. Beginning today's call is Ms. Kristen Stewart, Senior Vice President of Strategy and Investor Relations. Ms. Stewart, you may begin.
spk12: Thanks, Stephanie. And welcome to BD's review of our first fiscal quarter results. Joining me today, we have Tom Polin, Chief Executive Officer and President, Chris Reedy, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer. During the Q&A portion of the call, we will have our three segment presidents joining us as well. Alberto Mas, President of the Medical segment, Dave Hickey, President of the Life Sciences segment, and Simon Campion, President of the Interventional segment. A few logistics before we get into the call. This call is being made available via webcast at bd.com where you can also find the accompanying slides for today's call. During the call, we will be making some forward-looking statements and it is possible that risks could differ, sorry, actual results could differ from our expectations. Risks, uncertainties, and other factors that could cause such differences can be found in our earnings release and in our SEC filings, including our 2020 Form 10-K and subsequent Form 10-Qs. In particular, there continues to be significant uncertainties about the duration and contemplated impact of the COVID-19 pandemic. This commentary we are providing today includes our best estimate based upon the information that we currently have. We have made certain assumptions in how we are managing our business, but that could change as we move forward. We will also be discussing some non-GAAP financial measures with respect to our performance. The reconciliations to GAAP measures that include the details of purchase accounting and other adjustments can be found in our press release and its related financial schedules in the appendix of the investor relations slides. These are also available on the BD.com website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus fiscal 2020. When we discuss revenue percent changes, they are on an FX neutral basis, unless otherwise noted. With all that said, it is my pleasure to turn it over to BD's CEO and President, Tom Poland. Tom?
spk01: Thank you, Kristen, and good morning, everyone, and thank you for joining us. We are very pleased with our Q1 results, which were ahead of our expectations, reflecting the tremendous efforts and execution of BD's 70,000 associates, the essential role of our products and solutions in healthcare, and the greater resiliency of the healthcare system in treating both COVID and non-COVID patients. Well, our fiscal year has just started. I'm proud of the team for the momentum we are building and their dedication to our purpose of advancing the world of health. Revenues increased 25.8% on a reported basis or 24.3% on an FX neutral basis with 20.3 percentage points of growth coming from our COVID-19 diagnostic revenues. While we did see some benefits from timing in the quarter, we were very pleased with the performance of the base business, which was up 4% against the backdrop of COVID resurgences around the world. We are seeing the early benefits of some of the actions we have taken to drive our base performance. Our adjusted EPS were $4.55, or up 72% versus the prior year. This was also well above our expectations as a result of three factors. First, our revenues came in above our plan, driven by higher acuity driving increased demand, greater resiliency in procedural volumes, and exceptional execution in COVID diagnostics. Second, we benefited from favorable product mix, like Veritor, but also from our higher acuity products. Third, our investment spending, such as in R&D, was lighter and earlier in ramping. So as you can see, we started this year with strong momentum, and that is despite the COVID resurgence. We did start to see some impact of the resurgence on our more elective procedure-related businesses late in December, and that continued into January. However, we are feeling more confident in the resiliency of our base business relative to what we saw early on in the pandemic. While the healthcare markets continue to be dynamic with COVID-19, and there are a number of moving parts, the momentum within BD and our conviction in our strategy lead us to raise our financial guidance for fiscal 2021. Our focus is not only on fulfilling our near-term commitments, but also on advancing our strategy and creating value for our shareholders over the longer term. And I'm feeling even greater confidence with the progress the BD team is making in advancing the BD 2025 grow, simplify, and empower initiatives, and our ability to create substantial shareholder value. Today, I want to focus my remarks on three key topics, and then I'll turn it over to Chris, who will provide additional remarks on our quarter's performance and comment on our outlook. Then we'll take your questions. So let's jump right in. First, let me start with the Alaris remediation and our overall quality and compliance initiatives. Alaris remediation has and continues to be my number one priority. and the team is making strong progress. Our focus remains on submitting a comprehensive 510 filing for the ALERIS system and we remain on track to submit it in late fiscal Q2 or early fiscal Q3 2021. We also continue to make progress on executing our holistic inspire quality initiatives throughout the organization. Second, as you know, we have a very strong focus on growth and ensuring a durable mid single digit revenue growth profile. So let me share some of the exciting highlights in our pipeline and other growth initiatives. We continue to increase our investments and strengthen our pipeline across three innovation themes that leverage our core strengths. First, we're applying smart devices, robotics, analytics, and AI to improve care processes. Second, we're enabling new care settings to enhance patient experience and lower costs. This includes investing in products designed for use in the home markets, and in sales channels to support these patients. And third, we're investing to improve diagnosis and treatment of chronic disease. So in line with these innovation and investment priorities, in Q1, we acquired the medical assets of Cubex, which expands our medication management offering by combining a cloud-based, easy-to-deploy analytics platform with a smart tabletop dispensing device to create solutions for the fast-growing non-acute care market. This extends our medication management solution from the hospital into the long-term care surgery centers and other non-acute locations. Another smart device we plan on launching this quarter is the Sensica automated urine output system, which leverages BD's leading position in acute urology, along with BD's broad EMR interoperability capabilities and install base. Also within BD Interventional, the BD Purwick urine collection system and catheter continues to be a significant driver of growth for our urology and critical care business. PureWIC is a female external urinary catheter and urine collection system that we sell into the acute care and long-term care settings. But we're now actively extending that directly to patients with our new PureWIC dry dock system for the home. And this launch is exceeding our expectations. And in fact, PureWIC revenues now exceed Lutonix. An exciting launch later this year designed to improve the diagnosis and treatment of cervical cancer, is the U.S. launch of our new BD-Core with our BD on Clarity HPV assay with extended genotyping. With BD-Core, BD is going to enter the high-throughput molecular testing market with a very unique, fully automated sample-to-answer platform and a highly differentiated assay with unique claims that can improve risk stratification and support risk-based patient management. The system has been CE marked and has been very well received by our customers during our launch in Europe. These are just a few of the many products in our pipeline, and you can find further details on our new innovations in the supplemental earnings presentation posted to our website. As we've previously shared, we're investing a portion of our Veritor profits to advance our BD 2025 strategy. We expanded the size of the BD Innovation and Growth Fund, and additional innovation projects are being initiated on a rolling basis. We're investing to accelerate our simplification initiatives, including recode and enhancing our quality and compliance programs. We're also increasing funding in our BD university to support advanced employee education and leadership development as part of our strategy. As we always do with our spending, we're taking a disciplined approach and the timing of the spending was lighter in Q1. We expect it to step up in Q2 and remain higher for the balance of the fiscal year. As we've mentioned before, we continue to actively evaluate tuck-in acquisitions to supplement our growth strategy. And we executed on three strategic tuck-ins transactions so far this year, including Cubex's medical assets that I mentioned earlier. We continue to apply a disciplined financial and strategic evaluation process to these transactions and have a robust funnel. Lastly, I'd like to update you on our COVID diagnostics outlook and specifically Veritor. Antigen testing continues to become more widely used in both traditional and non-traditional settings. We have been highly successful with our BD Veritor Plus COVID-19 launch. Veritor has been well received for the ease of use, performance, and automated digital data and informatics capabilities that are provided with our handheld platform. We've nearly tripled our active reader base since the pandemic and now have more than 70,000 BD Veritor analyzers globally, which we intend to leverage in the future with planned non-COVID menu expansion, which we've already begun investing behind. As previously shared, we continue to make good progress on advancing new COVID diagnostics in our pipeline, including combination flu AB and COVID-19 assays on both BD Max and Veritor. We also continue to explore home testing on BD Veritor and has been our practice. We'll provide updates to these programs upon launch. Turning to the quarters performance, our Q1 COVID-19 diagnostics revenues were higher than we expected at $867 million, which included better than expected BD Veritor rapid point of care antigen test revenues of $688 million and higher BD Max COVID assays and collection swabs and transport devices. The higher than expected Veritor revenues were the result of our ability to scale our manufacturing faster, which is a testament to our manufacturing excellence, as well as realizing higher pricing than we anticipated. However, since we've been saying since last fall, we do expect pricing to move lower as capacity came online, and this is what's playing out. We recently lowered our pricing to allow the broadest patient access to our best-in-class BD Veritor Plus systems. We believe this price adjustment is in the best interest of our customers and patients around the world as we've now ramped our manufacturing capacity and there are emerging mutations that are making it more transmissible. We also believe this is in the best interest of our shareholders as we believe this move allows us to maintain a leadership position in the point of care market. With respect to our fiscal 2021 Veritor revenue guidance, as we've been discussing, there continues to be many variables at play besides the evolving pricing environment, including the rollout and adoption of vaccines and the circulation of new COVID variants. It's also difficult to pinpoint when the market supply for antigen tests will exceed market demand. For modeling purposes, we would suggest using an ASP in the low to mid-teens. Given all this, we expect Veritor revenues to be toward the high end of our previous range of $1 to $1.5 billion. We continue to expect Veritor revenues to be more weighted to the first half of our fiscal year. And given the evolving pricing and capacity environment, we would expect our fiscal Q2 revenues to be lower than our just reported Q1 results. Before turning it over to Chris to review the financials, I want to close with a few thoughts. While we were very pleased with the performance of Veritor and other COVID diagnostic revenues in the quarter, what excites us more was the improving momentum and resiliency of the base business. While we saw some headwinds in our procedure-based businesses from the resurgence late in December and that continued into January, the impact was much more limited than at the start of the pandemic. Moreover, given the momentum in our base business, the investments we are making, and our BD 2025 strategy, we believe we are positioned to emerge strong. remain on track to submit our LARIS 510 filing in late fiscal Q2 or early Q3. And we're making great progress in advancing our BD 2025 strategy. And I'm particularly pleased with the investment programs we've identified and initiated. These investments allow us to further fulfill our purpose of advancing the world of health, bring new innovations to patients and expand access. Increased spending will be more evident in our P&L later in this fiscal year, but we believe these initiatives will translate into revenue accretion beginning in late FY22 and beyond. The investments we are making are also towards simplification initiatives, which reduce complexities, drive cost efficiencies, enhance our quality programs, and improve cash flows. This quarter, we made several advancements on this front, including inventory reductions that we absorbed in our gross margin in the quarter that helped to strengthen our cash flows. Our recode efforts are on track to achieve our targeted $300 million in cost savings by the end of fiscal 2024. We're also advancing our sustainability initiatives because we view sustainability as a strategic imperative. And we recently announced the first of our 2030 and beyond goals, our climate change targets. We're committed to reducing scope one and two greenhouse gas emissions 46% by 2030 and to be carbon neutral across direct operations by 2040. This science-based target is aligned with the 1.5 degree C global emissions reduction pathway. And we look forward to sharing more detail behind our 2030 sustainability plan with you in future engagements. And finally, I'm very proud of the organization for being named for four consecutive years to the Human Rights Campaign Foundation's Best Place to Work for LGBTQ Equality List and for the second straight year to the Gender Equality Index. Inclusion and diversity is an important focus for BD as we continue to attract, develop, and retain the best talent, as well as benefit from diversity of background and thought. I look forward to answering your questions during the Q&A portion of this call, and I'll turn it over to Chris now.
spk15: Thanks, Tom, and good morning, everyone, and thanks for joining us today. We are very pleased with our fiscal first quarter revenue and adjusted earnings per share performance, both of which exceeded our expectations. Total revenues were over $5.3 billion in line with our January 12th pre-announcement. Revenues increased 25.8% on a reported basis and 24.3% on an FX neutral basis. COVID-19 diagnostic revenues accounted for 20.3 percentage points of growth. The better than expected performance came from three areas. First, our base business performed better than expected. This was a result of stronger execution from our associates, greater resiliency and procedure volumes as healthcare facilities managed both COVID and non-COVID patients, and higher acuity resulted in both favorable product mix and increased demand for several product lines. Keep in mind, though, that some of our business segments are still operating below pre-COVID volume levels. Second, our COVID diagnostic revenues were higher than expected. This included not only Verador revenues, but also MAX and swab and transport revenues. Lastly, we estimated about 100 million in revenues were attributable to stocking and timing. As COVID-19 surges were occurring, we observed some of our customers moving to more of a just-in-case level of inventory and maintaining higher levels of our critical need products on hand. We also saw some of our UK customers buying more ahead of Brexit. The $100 million includes higher-than-expected revenues in our MMS infusion systems business due to COVID-19. BD medical revenues totaled nearly $2.3 billion and grew 6.9% on an FX-neutral basis. Our outperformance was primarily in medication delivery solutions as well as in medication management solutions. MDS revenues were up 5.6%. While hospital utilization remains below pre-COVID levels and has been an ongoing headwind, we benefited from the acuity of care associated with the treatment of COVID patients. We saw increased demand for PICs, vascular prep, and maintenance. As I mentioned, we believe stocking of critical need products helped the quarter. Finally, as expected, there was $37 million in revenues associated with COVID vaccination syringes and needles. Now, turning to our MMS business, revenues grew 8.4% with growth in both medication dispensing and infusion systems. In dispensing, we had strong growth internationally and once again exited the quarter with strong committed contracts in the U.S. In infusion systems, we continued to support U.S. customers' response during the pandemic under medical necessity and experienced another quarter of strong demand in Europe. In diabetes care, revenue growth of 5.4% was above our expectations, reflecting distributor inventory stocking in addition to an easy comparison to last year. We still view this business to be more of a flattish business on a normalized basis. Farm system sales remain strong, growing 9.5%, driven by ongoing demand for our market-leading pre-filled syringe portfolio. BD Life Science revenues totaled nearly $2 billion and were up 74.1% on an FX-neutral basis. As I mentioned previously, COVID diagnostic revenues were $867 million in the quarter. Excluding COVID diagnostic revenues, BD Life Science revenues were down 2.4%, which was better than we expected. Integrated diagnostic solution revenues increased by 106% due to COVID-19 diagnostic testing revenues. Excluding these COVID diagnostic tested revenues, IDS revenues were down just 1.2%. There were several puts and takes in the base business. We saw stronger than expected performance in our specimen management, blood culture, and women's health and cancer product lines. We also saw some element of distributive stocking of critical to healthcare testing. However, while we have seen improvements, routine diagnostic testing activities are not fully back to pre-COVID-19 levels, and a significantly lighter flu season negatively impacted the base revenue growth in the quarter on a year-over-year basis. Now, turning to biosciences, revenue declined by 5.2%, due to a difficult comparison as a result of prior year licensing revenue. In addition, clinical and research activities are not yet fully back to pre-COVID-19 levels. Overall, operational performance in biosciences was better than expected. BD interventional revenues totaled nearly $1.1 billion and were up 5% on an FX neutral basis, with all business units posting growth. We observed that elective procedures, particularly those conducted in an outpatient setting, had greater resiliency in Q1 compared to the initial wave of COVID. This was likely driven by processes in care settings that enabled elective procedures to continue despite the resurgence and a greater willingness on the part of patients to attend to their scheduled elective procedures. Surgery sales were up 1.3%, as strong sales growth in our infection prevention business was offset by the ongoing headwinds related to lower procedures due to the pandemic. Peripheral intervention sales were up 5.9%. Growth was driven by strong performance across our peripheral arterial disease platforms. Urology and critical care turned in another quarter of strong growth, with revenues up 8%. Purwick continues to fuel the growth in our acute urology franchise, while our new connected Arctic Sun system is driving double-digit growth in our targeted temperature management business. This is another example of BD leveraging our digital capabilities and broad EMR interoperability footprint to bring new innovations to market. Now, turning to the P&L, we were really pleased with our gross margin performance in the quarter. Our adjusted gross margins were 58.2%, which expanded 170 basis points year-over-year on a reported basis. On an FX neutral basis, our gross margin expanded 250 basis points, which was primarily driven by COVID diagnostics and higher acuity products. While SSG&A and R&D spending were both higher on a year-over-year basis, the level of spending was lower than we anticipated, particularly R&D, reflecting mainly timing. Operating margins were 31.6%, up 830 basis points on an FX neutral basis, which was driven by higher gross margins and reduced SG&A and R&D spending. Net interest expense was $118 million, down slightly on a sequential basis. Other income was $30 million versus $27 million a year ago. And the adjusted tax rate came in at 14.6%, which was in line with our expectations. Our adjusted non-GAAP EPS were $4.55. In fiscal Q1, the preferred shares are dilutive. Therefore, in calculating the adjusted non-GAAP EPS, preferred dividends amount of $23 million was excluded from the numerator, while the diluted share count would be adjusted to include the dilutive impact of the convertible preferred shares, and it would be $299.1 million. As we've been discussing, our BD2025 strategy includes a focus on driving cash flow, and we were really pleased with the continued progress of these initiatives and our cash flow performance. We generated $1.5 billion in cash flow from operations in the quarter and $1.3 billion in free cash flows. We have also been focused on strengthening our balance sheet. As we previously communicated, we paid down $265 million of debt in the first fiscal quarter. Our net leverage ratio declined to 2.5 times as of December 31, 2020, from 3.0 times at the end of September 2020. A few weeks ago, Moody's upgraded our credit to an investment-grade rating, and we are committed to maintaining a full investment-grade credit rating across the major credit rating agencies. We believe we're approaching a turning point in our capital allocation. In the past, a significant amount of our cash was dedicated to repaying the debt, but looking ahead, we expect to have greater flexibility to refocus our cash deployment on growth opportunities, including tuck-in M&A and other capital deployment options. Next, I want to address fiscal 2021 guidance. While we observed greater resiliency in Q1 as it relates to procedure volumes, We still view COVID-19 resurgences to be a significant risk factor to our forward outlook, as it could impact general healthcare utilization, procedure volumes, and diagnostic testing, including COVID testing. In the latter weeks of December, as the resurgences picked up, we started to see pressure on some of our procedure-based products. This trend continued into January. We have updated our guidance to incorporate some impact from the resurgence into our forecast for fiscal Q2, and we continue to monitor the trends. Our guidance continues to assume no major system-wide shutdowns of elective procedures. Now, given the strength of our Q1 performance, along with our outlook for the remainder of the fiscal year, we are comfortable forecasting FX-neutral revenue growth in the range of 10 to 12 percent, compared to our prior range of high single to low double digits. This would include our assumption of Veritor revenues being toward the high end of our original guidance range of 1 to 1.5 billion. Using current exchange rates, we expect FX to add approximately 200 basis points to revenue growth versus our prior guidance of about 100 basis points. We expect our non-GAAP EPS for fiscal 2021 to be in the range of 1,275 to 1,285 which is above our prior guidance range of 1240 to 1260, a raise of 30 cents at the midpoint of the range. So for these reasons, while we are extremely pleased with our strong execution in fiscal Q1, we want to caution against extrapolating our fiscal Q1 revenue margin and EPS performance going forward. While we are not giving quarterly guidance, we thought it might be helpful to provide some context on this quarter's strength as you contemplate phasing for the rest of the year. Our Q1 revenues, operating margins, and adjusted EPS are likely to be the highest absolute levels for the year due to two factors, Veritor pricing and the ramp of our planned investment spending. In addition, the stocking of $100 million will unwind in the remainder of the year. As Tom mentioned, we expect Veritor revenues in fiscal Q2 to be lower than Q1. As we've discussed in the past, we expected our COVID test pricing to decline, and this is playing out. We expect Veritor to be well positioned for broad access as we look ahead. Regarding our operating margins, our fiscal Q1 EPS benefited from the higher Veritor revenues and margin profile, as well as the timing of investment spending. We expect investment spending, particularly in R&D, to be meaningfully step up in Q2. The combination of these two factors will result in our operating margins moving into the low to mid-20s in our fiscal Q2. In the second half of the year, given our expectations for lower Veritor revenues and for investment spending to continue to ramp at a similar rate to fiscal Q2, we would expect operating margins in the low 20s. We're also seeing some impact from the resurgence in January, and like many others, we are also continuing to see pressure from higher shipping costs, as well as some other headwinds. However, due to the strength of our Q1 results, we're able to offset these headwinds and raise our full year EPS guidance. With that, I'll turn it back to Kristin, who will help moderate our Q&A.
spk12: Thanks so much, everybody. And with that, I'm going to open it up to the operator, Stephanie. Stephanie, could you please read the instructions?
spk13: The floor is now open for questions. At this time, if you have a question or comment, please press star followed by 1 on your touchtone phone. If at any point your question is answered, you may remove yourself from queue by pressing the pound key. In order to allow for broad participation, please limit your questions to one and one follow-up. We ask that while you pose your question, you please pick up your handset to provide optimal sound quality. Thank you. Our first question is coming from David Lewis from Morgan Stanley.
spk06: Oh, good morning, and thanks for taking the questions, and congrats on a nice start to the year. Just two for me, team. So first is just earnings reconciliation, Chris. You know, obviously beat by more than $1.50, raised by $0.30, and I know you gave some parameters there, but We had pricing reductions in our model. We had 20% reinvestment of that upside in the model. Even when you make those kind of adjustments as well as the stocking, it's still a little hard to reconcile the upside in the quarter relative to the guide. So I appreciate it's a less visible environment. But is there anything else? Is that investment going higher or anything else we may not be thinking about that would explain why we're not getting sort of that pull through into second, third quarter? Because I think that's going to be the key question this morning of the call.
spk15: Sure, David. Thanks for the question. And I would say, first of all, it's early in the year, obviously, so we're raising. But some of the factors that you mentioned we do see playing out in the remainder of the year. So we had a few things going on. Obviously, we mentioned that Veritor, we would expect that revenue to come down in the remainder of the year and moderate, as we talked about. We also had timing in the base business that we would expect to moderate. And to your point, we do expect the investment spending, both in the Veritor reinvestment program that we've discussed, as well as R&D and quality, to ramp. So, you know, we started those programs in Q1. You know, we watched that spending with some prudence as we looked at the pandemic playing out. And so, you know, we... got started, but the ramp really comes in the second, third, and fourth quarter. And so when you put all of that into context, you also have to take into consideration a little bit of impact from the resurgence that we saw that we mentioned we have playing out in Q2. So with all of those factors coming into play, we felt that it was prudent to think about the guidance that we gave as appropriate at this point.
spk01: Good morning, and thanks for the comment. Just to reiterate what Chris mentioned, that other topic is that we still are in the middle of a pandemic. We want to be prudent. We did see some increases on impacts in procedure volumes in late December and throughout January. It was certainly less than what we had seen earlier in the pandemic, but there are new strains underway, etc. When we gave guidance at the beginning of the year, we said it excluded the impact of a resurgence. Well, there's been a resurgence, and we've been navigating that very well and actually are raising our outlook in the middle of a resurgence. So we'll continue to evaluate it as things go forward, but we're certainly pleased with how we started the year.
spk06: Okay, so the stated factors you've mentioned, but we're not missing anything, it doesn't sound like. Okay. The second question for you, maybe, Tom, more strategic. You know, this is obviously going to be a very good year. We'll see a significant upside. The balance sheet's obviously in dramatically better shape now than it was a year ago. As you think about 2022, Tom, how are you thinking about the durability of COVID testing. I know it's a challenging question. And then the ability to sort of manage through what's likely going to be sort of a volatile or void-driven earnings period as you head into 22. How are you thinking about sort of 22 and beyond COVID-wise and sort of managing the earnings process? Thanks so much.
spk01: Yeah, I'll start on that, and then I'll turn it to Chris as well to share some comments. Let me maybe focus on specifically COVID testing, and then Chris can make some broader comments on the broader business And we've shared it, by the way, in the past. We still remain very confident and expect our revenues, excluding COVID diagnostic testing and Alaris pump revenues, to grow in those mid-single digits on an FX-neutral basis for 2022. And that remains our aim and our expectation. In terms of COVID testing as we go into 2022, certainly, as I had shared before, as we got into COVID rapid testing last July, obviously, we didn't have a high expectation that there would be much testing in 22. And as kind of each quarter has gone through as past, you know, since that launch in July, we've said we're feeling more confident there's going to be some level of testing in FY22. And that certainly remains the case. I think what, you know, one of the ways to think about as our capacity has gone up in the space, as we recognize the new strains coming in the market, as antigen testing continues to increase in its, um, receptivity and people understand now the value in increasing ways of getting a test result in 15 minutes. You saw us take some actions this quarter to get pricing in that low to mid-teen level, which we think will be more actually position us well, as I said, to maintain a leadership position for whatever market continues to evolve going into FY22, right? That's part of the thinking. Where the actual market ends up in 22, I don't know at this point in time. There definitely should be some level of testing. And our aim is to make sure that we're positioned to be a leader in however that testing evolves. And other things that we're investing in as well, be it our combination assay, which is progressing well in our pipeline, the flu COVID assay, or our exploration of home testing are all aimed with that thought in mind as well. So maybe Chris, Just maybe some broader comments on FY22?
spk15: So, yes. Obviously, we're not going to go through 22 with any level of precision, but I think it is important to give some high-level comments on it. And as Tom mentioned, the level of COVID testing is a variable that will have a big impact on 22. We do see the sustainability of testing, but at what level, it's really hard to guess at this point. You know, in addition, there's a lot of other uncertainty, you know, around COVID in general, the resurgences, mutations, the uptake of the vaccines. And in our business, obviously, Alaris and when that comes back in 22 will have an impact. I would remind you that on our November call, we said we expected our revenues, excluding COVID diagnostic testing and the Alaris pump revenues, to grow in mid-single digits on an FX-neutral basis. And we continue to see that as a reasonable assumption. We can't predict when the FDA clearance for Alaris and our focus on making a comprehensive filing to support a timely approval is there, but we would expect some clearance sometime in fiscal 22. We'd also not look at the second half of 21 as a proxy of what to expect in 22, because both the gross and operating margins are impacted by several factors. Our operating margin in fiscal 21 reflects these incremental investments we're making as part of the reinvestment program at Veritor that really helps drive durable growth aligned with our 2025 strategy. And we don't expect those investments to continue into 22, so they'll, you know, exiting 21, they'll roll off, and that should help margins going into 22. The other thing I'd point out is that Q1 fiscal 22 will obviously be the most difficult comp from a margin perspective, given the very strong quarter we just reported. For example, most likely face the most difficult comparison with COVID revenues, as well as from the impact of the timing and stocking that we talked about. So we would expect our operating margin to compress year over year from the 31.6% that we just achieved. So We'll update you more on our thoughts on 22 as we progress through the year, but we just thought it's important to provide some of those highlights.
spk01: Yeah, and as you mentioned, Dave, we feel really good about the progress of our strategy overall and the underlying business momentum that we continue to build upon. Thanks for the question.
spk06: Thanks so much for the detail.
spk01: Thank you.
spk13: Your next question comes from Robbie Marcus with J.P. Morgan.
spk00: Hey, Robbie. Oh, great. Good morning. Congrats on a good quarter also. And thanks for taking the question. I wanted to touch on, you know, on one of the slides in the back, you have that the underlying basis ex-COVID grew 4% in the quarter, which was a really healthy rate. How are you thinking about that base business ex-COVID growth through the cadence of the year here? You know, that's a pretty healthy start in what was a tough quarter. How should we think about that component of the business throughout fiscal 21?
spk01: Thanks, Robbie. I'll let Chris answer that.
spk15: Yeah, I think one way to think about that is what I mentioned about 22 is that we expect the base business to be ramping at a mid-single digit. So that's consistent with that. So I think that we feel the underlying business is solidly in that kind of perspective. And, you know, as we talked about the base business, we expect to be kind of in that low to mid single digit level for, you know, for the full year. And so there is some pressures in the second half of the year on a business by business basis. As you think about MMS, there will be some issues. It's going to be lumpy, you know, in the remaining quarters. MMS had, you know, a significant amount of revenue in the third quarter during the pandemic last year. Other parts of the business will ramp nicely. You know, China, for example, as we lapped the COVID impact that, you know, really was in Q2 there, you know, in China. So, you know, we'll start seeing some revenue growth from that. But again, that's more of a compare. It's not, you know, an indication of the underlying business. But the underlying business really is in that low to mid-single-digit basis. You know, we have some general issues with compared to the – based on the Alera shiphold. Some of that's been negated by medical necessity. So, you know, there's a number of factors going on. But the bottom line of it all is think about the base business, you know, for the remainder of this year in that low to mid-single-digits and exiting into 22 in the mid-single-digit basis.
spk00: Thank you, Rodney. Great. Maybe just a quick follow-up. You're generating a pretty significant amount of cash here. You got the balance sheet in a great spot last year when things were looking pretty down for COVID, and now things are looking up. So how are you approaching the uses of this cash, particularly as we go into next year? And to follow up on the last question, there is a question mark about how to bridge some of the earnings. What do you think about uses of cash, M&A opportunities across the business, and how much of that might get returned to shareholders?
spk01: Rob, I'll start with it and turn it over to Chris for some further details. Obviously, you see us investing behind our growth strategy. You see us making investments in capacity, for example, capacity investments in rapid testing, capacity investments in helping The vaccination campaigns, whether or not that's with needles and syringes or the billion two investment you saw us announce last quarter related to our pharmaceutical systems, pre-fillable devices. We're going to continue to invest in growth. Part of that investing for growth is also our tuck-in M&A strategy. And you saw us begin to accelerate our efforts in that last quarter. You're seeing that continue into this fiscal year. And you heard me mention we have a robust economy. funnel to continue that. We remain very focused with an emphasis on tuck-in M&A, as I've been iterating since transitioning into the role that I'm in today. As we think about more broad deployment of capital to create shareholder value, maybe Chris, comment on that.
spk15: Sure, absolutely. And I would just say a few things. First, we were very proud of the fact that we really focused on cash during the pandemic. And if you look back, in fact, at the third quarter, of last year, our cash flow actually increased year over year, despite the fact that the revenues were suppressed from COVID. And that was the result of a number of actions that we took in the business around inventories, receivables, payables. And so we're very proud of that. We really focused on cash. As we mentioned at your conference last month, Robbie, we paid down $265 million of debt. That kind of gets us down to the target. So we see the leverage ratio floating down naturally without the need to pay down debt, which really says that the $5 billion-ish that we've paid down debt over the last couple of years, that strong cash flow that we're generating will be available to allocate to other value enhancements. So we've talked about primarily the tuck-in M&A and share repurchase And as we get through this pandemic and as that safety net of cash that we've had to ride out the pandemic isn't as necessary, we'll have the ability towards the end of this year. And you've seen our tuck in M&A ramping up. The pipeline is good. We continue to look at a number of opportunities. And by the end of this year, I think we'll be also talking about giving that cash back to shareholders because Once we get through this period, we don't see the need to build up cash on the balance sheet, and so we would be returning that to shareholders after a certain amount of tuck-in M&A. So this puts us in a very good position. We've got great cash flow generation and better than ever, and that puts us in a great position to allocate that appropriately.
spk01: And we continue, just as Chris mentioned, these are all programs with momentum. You know, we have a cash committee that meets basically every week, and we continue to have teams dedicated to that work. So I appreciate the recognition there, Robbie, and we're going to continue that.
spk15: I think that recognition also came, you know, from Moody's. We felt really good about the fact that they upgraded us to investment grade. In fact, not only did they upgrade us, but they kept the positive outlook, which we really appreciated as well. And so that puts us full investment grade across all three. rating agencies, and we fully intend to stay that way.
spk12: Thanks for the question. Operator?
spk13: As a reminder, please limit yourself to one question. Your next question comes from the line of Vijay Kumar with Evercore ISI.
spk15: Good morning, Vijay.
spk10: Hey, guys.
spk15: Morning, Vijay.
spk10: Morning, guys, and congrats on a solid print here, Tom. So maybe I'll limit to one question, perhaps a two-parter. On the revenue guidance, Tom, did anything change outside of the Veritor coming in at the high end? And the reason I ask is you guys just did 680 in Q1. The guide of one and a half implies a pretty drastic fall off in Veritor revenues in the back half. And Chris, the margins here I think would imply a sub-25% up margins two Q to four Q to get to the guide. You know, that's below your pre-pandemic levels. I'm curious if there are any incremental expenses in the back half. Thank you.
spk01: Hey, Vijay, and nice approach with a two-part one question. So on the revenue side on Veritor, so I think the key thing to talk about there is the pricing comment that I made is one big piece that drives that, right? We said we were above 20%. in the last quarter, and as we think about looking forward, we talked about modeling low to mid-teens. So that's the number one adjustment there. And again, that's not new news at all than the fact that we've been talking about that we expect pricing to head in that level as our capacity comes online and we're in better cost positions, et cetera, and as more capacity is coming into the marketplace. And so we've taken actions as planned. And that is why we gave guidance that said expect the revenues to be highly weighted to the first half of the year. And we've said that from day one. I think there remains uncertainty around the effectiveness and timing of the vaccines, especially with additional variants that are out there, et cetera. But we can't predict what's going to happen there on the second half of the year. And so we remain projecting that there'll be very strong demand for antigen testing. in the first half of the year and that the second half of the year is less certain. Obviously, if demand stays very high and depending on the dynamics with capacity and demand and how those curves cross over, maybe there could be opportunity in the back half of the year, but it's way too early for us to think about that because it's far from certain or able to be confirmed. So our aim is to position ourselves to be a leader in the space, however it ends up evolving. And as we go forward, there'll be more clarity there, but certainly a very dynamic environment. Maybe, Chris, on part two?
spk15: Sure. On margins, Vijay, Q1 margins were obviously very, very strong, and that was a function of a number of things. First, the COVID testing, obviously, but the base business was very, very strong as well, and we drove some synergy projects and continuous improvement kind of margin improvements as well. So all things were positive in Q1. As we think about the rest of the year, you would expect that COVID testing to moderate as you model that out, obviously. And then don't forget, you also have the unwind of the timing that we saw of the 100 million in Q1. That unwinds in the remainder of the year. But the most important thing is the ramping of investments that we've discussed. So we're investing in R&D, we're investing in quality, we're investing in the Veritor Reinvestment Program, and all of those things kind of ramp in Q2, Q3, and Q4. And so don't think about that as an indication of our pre-pandemic margins. It's just completely different. And then, you know, those investments go away into 22. The beauty of it is they begin to drive, you know, improvements in growth and, you know, revenue generation in margin, you know, expansion, and those things will kick in towards the latter half of FY22. So, you know, they get the pickup in margins by them going away, and then the benefit of those investments in driving revenue growth and margin improvement going forward. So, you know, you can't look at that as, you know, well, those are different than pre-pandemic margins. So that's the way to think about, you know, 21 as it plays out. Thanks, guys.
spk13: Your next question is from Bob Hopkins with Bank of America.
spk04: Well, thanks for taking the question, and good morning. Morning, Bob. Morning. I'll just stick to one topic. Especially, Tom, since you mentioned it's still your number one priority. On Alaris refiling, are you guys just waiting on FDA at this point, or is there more work that BD needs to do? And if there's more work, what still needs to be done? I'm just looking for a little bit more detailed update there. Thank you.
spk01: Sure. And thanks, Bob, and good to connect. So as I mentioned, we remain on track for the submission in late fiscal Q2 or early Q3, and we're not waiting on anything specific from the FDA. These are very comprehensive submissions, right? I think 1,000-plus page filings that take time to prepare and have a lot of comprehensive data in them. And so we've always said from the start our focus isn't in rushing into a submission. but it's around ensuring a comprehensive submission that is gonna achieve our ultimate goal, which is a timely FDA review and clearance. And so that remains our focus from that perspective. Obviously, Q2, Q3 is coming up upon us here. The teams are making great progress, and we continue to iterate that timeline. We'll continue, as we have in the past, as we get to those dates, We'll provide updates at public conferences or as appropriate.
spk04: Okay. So it's not that everything is into the agency and you're just waiting to hear back from them. You guys are still putting the package together to submit?
spk01: Correct. You can expect that once we submit, we'll communicate that in an appropriate form. But we're preparing to submit in the timeline that I mentioned. Great. Thanks very much. Yep.
spk13: Your next question is from Richard DeWitter with SVB New Ring.
spk07: Thank you very much. Just given that you're clearly accelerating tuck-in M&A from the capital redeployment standpoint, which makes a ton of sense, especially with the COVID windfall and your free cash flow generation, should we be thinking about the contribution for what you might do on a more aggressive kind of M&A front going forward as maybe bringing you more towards kind of a upper mid-single digit kind of growth profile or even maybe high single digits. I'm just trying to think through the shift and the reprioritization here. Clearly more aggressive, more on offense. Is that where we're headed once we return to a more normalized environment? Thanks.
spk01: Okay, thanks for your question. Obviously, our number one focus is on durable mid-single-digit revenue growth, and that's our aim here. And so we really see – we often refer to it inside as inorganic innovation. We look at our pipeline. We look at the market spaces that we participate in. I walk through three of our – our three key areas of innovation focus earlier in the call, and we evaluate – constantly what products and initiatives we can fund organically and drive in-house to advance that strategy and create shareholder value and value for patients and providers. And we also are constantly looking at the external landscape as well to see what may be out there that could get to market sooner than we could or maybe has some great talent that created some really exciting innovations outside of BD that we can bring in-house. And so we're going to continue to do that, but it's all in line with, I'd say, a more holistic approach to driving that durable mid-single-digit revenue growth profile that people really have come to appreciate from BD. Thanks for the question.
spk13: Your next question comes from the line of Brian Weinstein with William Blair.
spk11: Hey guys, good morning. Thanks for taking the question. Hey, just some things on Veritor. Can you just talk about your capacity now? And you mentioned making additional investments in testing. So where would that, in capacity there, where would that get you and just how to reconcile the capacity expansion that you're going through with the thoughts on the slowdown in demand? How do I reconcile this? Is this also about building for at-home testing and you tease some thoughts on exploration there. Can you just tell me what that means? Thanks.
spk01: Sure, Brian, and good to connect as always. So the capacity is as we've communicated in the past, right, that we're going to 12 million tests in March is what we communicated on our last earnings call. And we're on track for that. We're also on track for the max capacity expansion that we had described before. I don't think it's a fair thing to say that we continue to sell all of that capacity as we look forward. That's not known to us particularly in the back half of the year. But we're positioned, this is a global pandemic that's going on in the world. As we think about opening up businesses and schools and other things, people are going to look at what different types of testing technology they can use. And our aim is to make sure that things are available to health care systems as needed. So we're doing that. I mean, we've also shared, right, we're actually depreciating those assets within the year so that as things unfold in 22 and 23, those assets won't be burdened on our P&L because we're able to fund that within the profits that are generated within this fiscal year. So that's our approach. Nothing more than that. At this point, we probably don't want to comment more on the home space other than to mention that we are actively exploring that, has been our practice As we advance our work in that and the combination assays that we've shared that are in development, we'll really end up sharing more about those as we actually gain EUA and head towards launch if those occur. So I think that's it. Maybe we do have Dave Hickey on the phone. I can pause. And Dave, I don't know if there's any other comments to add from you.
spk09: No, I mean, Brian, hi. I mean, Tom, you've captured it eloquently. I think capacity, you know, we've moved to 12 million tests per month from next month. You mentioned max. So max, actually, we did increase capacity to 1.9 million tests per month for the molecular assay from, you know, from last month, actually. And there are a variety of additional topics like the, you know, claims, home testing, OTC that we're exploring right now. as well as additional menu to leverage the 70,000-plus veritors that are going to be out there. And as those decisions take place, we'll share more details as we get those decisions.
spk01: And those markets still are not well-defined today, as you know, Brian. So thank you for the question.
spk13: Thanks. Your next question comes from Larry Bigelson with Wells Fargo.
spk03: Good morning. Thanks for taking the question. Morning. Hey, just one for me on – you have – morning, Tom. You have the BTK panel coming up on February 17th. As you guys know, that tends to get outsized attention by investors. So it sounds like you guys requested the panel. What do you think the hot topics or key issues are going to be? Every panel has them. Do you expect FDA – you know, and the panel to debate, you know, whether it should be six-month efficacy, you know, that's the focus, or 12-month data, your level of confidence, you know, in the outcome, and do you still see this as kind of a $150 million opportunity, which is kind of what Bard, you know, thought it was, you know, before the acquisition. Thanks for taking the question.
spk01: Thanks, Larry, and great question. Let me maybe make a short comment here, and then we have Simon here. It can't be on the phone, and we'll turn it over to him, who's deeply versed in this. So first off, just as a reminder, we have nothing in our forward-looking plan for BTK approval, right? It's not in our 21 plan, and it's in no forward-looking outlook that we have as we think about how we model things within the company. Today, Lutonix revenues are less than 1% of our overall BD revenue, and this indication specifically, again, is not included in our forecasting. As we go into the panel, and Simon will share more detail on this, the one thing that we have is we know this is a highly underserved market, and we know that our clinical trial data shows very strongly that it's safe, that Lutonix is safe in this patient population. I think it's the first product that's gone through a trial in the U.S. that has the ability to do that. Now the question is, are the clinical outcomes that were shown in our trial sufficient enough for it to be warranted for an approval? And so, Simon, let me turn it over to you to Talk a little bit more about that. Yeah, thanks, Tom.
spk16: So as Tom just reiterated, the safety profile of DCBs and the BTK in particular has been, I think, has been well discussed. And the data that we're providing is demonstrating continued safety of the Lutonix product. In relation to, we did request the panel meeting, as you know, below the knee patients with critical limb ischemia are in a very bad way. It's the most serious form of peripheral arterial disease. They have multiple comorbidities. And some of the most important things for this patient population are A, options, and B, an opportunity to expand the gap between these frequent interventions that they will have. As we move into panels, certainly there will be a debate around the clinical data that we have acquired. But I think more importantly, this is another tool in the armamentarium of tools that clinicians have for BTK interventions. If you think back to 20 years ago and SFA or POPTETEED intervention, there were PTA balloons and off-label stents. And today, there's a wide range of technology available to them all the way up to drug-cooled balloons and drug-eluting stents. But in BTK today, as I said, the most serious form of peripheral arterial disease, there is one product available, and that's PTA. So we're not suggesting this is the silver bullet for all BTK patients. We're suggesting that this is another tool that can enhance the outcomes for different patients and equip physicians to assess each and every patient. and have yet another two to treat them with. So the panel's on February 17th. We've gone through comprehensive preparation for it, and we'll absolutely put our best foot forward on that date to convince the panel of the merits of our application. Thank you. Okay. Thank you for the question.
spk13: Your next question is from Larry Cush with Raymond James.
spk05: Good morning, Larry. Good morning, everyone. So, Tom, I wanted to just touch on the investment spend that you guys talked a lot about, and certainly you've really amped up the conversation around that over the past couple of quarters. And I guess I'm really focused in on the R&D side of things. I feel like I've heard this story in the past here at BD. And there's been some challenges with innovation and really getting products out onto the market that were considered to be more than just evolutionary. So I get the sense that things are probably different this time around, but I'm just trying to understand if there's a new approach or are you investing differently or anything that you can kind of speak to to help us get comfortable that these investments, you know, hopefully can lead to visible new product introductions.
spk01: Sure, Larry. Good and fair question. So let me start with just overall R&D effectiveness, and I can get a little bit of color on the types of initiatives that we're investing in here and also how we think about our overall innovation system. So as you know, John DeFord joined us as our chief technology officer about three years ago And really under his leadership, there's been tremendous progress within the organization and with the segment teams and the business teams in advancing our ability to drive innovation. Actually, over that time period, you know, we've gone from kind of the midpoint of not being where we wanted in terms of on-time milestone delivery or on-time launches to being – as we benchmark ourselves to being in the top quartile within the industry of hitting our milestones and, most importantly, hitting our launches. Our launches are now about 80-plus percent of our launches are on time, which is up very notably over the last three years, up over 30 percentage points or around 30 percentage points, in fact. So we see the progress being made. That's the result of a lot of system improvements, new capabilities brought in, taking some of the best practices actually from BART and the acquisition and applying those across the company. So that's something we're going to continue to build upon. As we think about the innovations that we're investing in, as we look at those, there's few, as I think about them, kind of new-to-world innovations that are in our pipeline. I mean, one of some of the ones we've already talked about, right, non-COVID menu expansion on Veritor and Max to capitalize on our expanded footprint. We have a strong track record of developing new assays on Max and Veritor, right? It's just examples of that. Other initiatives are accelerating programs that we already had in our pipeline and allowing them to come to market a year or two later. earlier than we originally projected. That's an area of investment that we're making, and there are a number of areas in each of the segments which were accelerating new products into the pipeline, but they're all very much in line with our strategy and areas that we're confident that we have internal capabilities in. Of course, what we are also doing that's complementing that is that tuck-in M&A strategy that I mentioned before. And we do think about often, and we'll have those discussions internally, if technologies are better developed in-house or that we should be going outside because we don't have those capabilities in-house. And we'll either look at do they exist today in someone else's pipeline, and is that an opportunity for tuck-in M&A, or do we need to be doing collaborations with outside groups? There's many R&D programs that we have today, I think probably a record level of R&D programs where we have external partnerships in place. Actually, the BD Core would be one that I mentioned before. We're very strong external partnerships with the robotics, because that's a very advanced automation system. And so we've brought in robotic experts that helped us with that launch, and it's going really well in Europe, and we're bringing it to the U.S. here, but that's one that we probably wouldn't have been able to develop in the same way if we had tried to do it on our own, but we're seeing successes. with that approach and we're seeing it in many other areas as well. So that's kind of maybe just a little bit of color Larry and how we think about it overall. But with that progress that we've made and the way that we've thought through making these investments and how we also think about where it's smarter for us to do tuck in M&A, we're confident in those investments.
spk05: Okay, very good. Thank you for that.
spk01: Yep.
spk13: Your next question comes from Matt Taylor with UBS.
spk02: Hi, thank you for taking the question. So I just wanted to ask about the Veritor pricing from the standpoint of how that came about. I usually would think about it as being more of a competitive dynamic, but it seems like from your comments, you're being a little bit more proactive to lower price to make it a better value proposition for stakeholders. And so I wanted to understand A, how that came about and B, do you expect it to go down further in the future? Do you think this is a point of equilibrium?
spk01: Yeah, good question, Matt. So yes, you're right. It's a combination of we've always said that we believe the pricing would head in this direction. Our capacity is increasing, and we want to be proactive in maintaining that leadership position. But there is additional capacity coming in the industry now as well, too. And there will be further capacity coming in. We're not the only company who's adding in capacity. And so we think about that you know, holistically and where pricing as a result of that is going today and where we best position our products to remain a leader in that. And that's how we develop it. And we spend a lot of time thinking those things through as to when and how we optimize our pricing, again, to also serve what is a continue evolving customer base as more nontraditional areas of healthcare. get into wanting to do antigen testing and making sure that it's appropriately priced to enable the broadest access to the product while we're still in the middle of a pandemic. And so we've gotten very positive receptivity to the pricing. We've already started to roll that out a couple weeks ago last month. And so good question. Thank you, Matt. Thanks.
spk13: Your next question is from Josh Jennings with Cowan.
spk14: Hi. Good morning. Thanks for taking the question. Good morning. Just one quick one on Veritor. Just with the UK and South African variants, I think the UK ran some studies on rapid antigen testing and confirmed that there was no change in sensitivity or specificity. But if we think about the South African variant and the UK variant and future variants, what is Beckton doing to just monitor those variants and ensure that the sensitivity and specificity aren't altered by some of the mutations in the virus and the subsequent antigens that you guys are testing for.
spk01: Thanks. Yeah, good question, Josh. And that's certainly something that our teams are all over. Let me turn it over to Dave Hickey, who we've got on the line, the president of our life science segment.
spk09: Great. Thank you, Tom. And, Josh, great question. So to your point, you know, there have been obviously several newly identified variants reported recently. And there could well be others, right, recognizing that this is an RNA virus very much like influenza and HIV that are known to mutate. And, you know, for us, we've got two different types of platforms, right? So we've obviously got the BD Veritor antigen test. We've got the BD Max molecular PCR test. So let me take Max first. So for BD Max and for the assays that we have on the Max, we've already completed an in silico analysis, which is a computer model based on sequencing. and, you know, to look at those mutations. And from everything that we can see around those mutations and the lineage of the sequence, we have no impact on the BD Max assays. The BD Veritor, which is obviously more amino acid based on the top of the protein, based on, you know, early analysis again there, we have no evidence to show that the UK, South African, and indeed Brazilian variant will have an impact on the test. you know, we continue to take actions to look at that, further confirm and monitor the performance. And, you know, and again, we've done that for the ones that are already out there and any potential new emergent strains. And this is a critical topic for us because, you know, I think the thing to remember here is as these variants come online and come out, which are reportedly more transmissible, it makes the importance of rapid testing and access to testing as important, if not more important, than ever. Thanks for the question, Josh.
spk08: Thanks a lot.
spk09: Okay.
spk13: Thank you. There are no further questions at this time. I would like to turn the floor back over to Tom Pollin for closing remarks.
spk01: Okay. Well, thank you, and thanks, obviously, to everyone for your questions. Just before we sign off, I would be remiss if I did not thank BD 70,000 associates around the globe who every day rally around our purpose of advancing the world of health. Your efforts and achievements this quarter were noticed. You continue to work tirelessly to make sure that our needed products reach the front line to combat this pandemic while executing on our strategic agenda. I'm proud of how we've started our fiscal 2021, and I'm looking forward to continuing to deliver on our goals of developing innovative devices and making meaningful health impacts to people around the world. On behalf of the entire executive team, thank you for your efforts and sacrifices. Onward we go. Together, and like you, I'm proud to be BD. Thank you for listening today, and we look forward to connecting at future investor meetings with everyone who's joined the call. And until then, I hope everyone stays safe and healthy. Thank you. Thanks, everyone. Thank you.
spk13: Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.
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