Avantor - Q3 2024
October 25, 2024
Transcript
Operator (participant)
Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Avantor's third quarter twenty twenty-four earnings results conference call. After the prepared remarks, there will be the opportunity for you to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now turn the call over to Christina Jones, Vice President of Investor Relations. Ms. Jones, you may begin the conference.
Christina Jones (VP of Investor Relations)
Good morning. Thank you for joining us. Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Brent Jones, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our investor relations website at ir.avantorsciences.com. A replay of this webcast will also be made available on our website after the call. Following our prepared remarks, we will open the line for questions. During this call, we will be making forward-looking statements within the meaning of the U.S. federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today.
These forward-looking statements speak only as of the date that they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments. This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the press release and in the supplemental disclosure package on our investor relations website. With that, I will now turn the call over to Michael.
Michael Stubblefield (President and CEO)
Thank you, CJ, and good morning, everyone. I appreciate you joining us today. I'm starting on slide three. We delivered another solid quarter with inline performance across all key financial metrics. Reported revenue increased sequentially to $1.71 billion, while organic revenue declined 0.7% year-over-year. We were encouraged by another quarter of outperformance in bioprocessing and as strong order rates continue, as well as sequential and year-over-year growth in our laboratory solutions segment. Adjusted EBITDA margin was 17.6% and adjusted EPS increased to $0.26 in the quarter. Sequential mix headwinds were largely offset by strong realization of savings from our cost transformation initiative. Our disciplined approach to working capital drove another quarter of best-in-class free cash flow conversion.
This enabled us to pay down over $200 million of debt, bringing our net leverage down to 3.8 times. Given our strong year-to-date performance, we are raising our free cash flow guidance for the year. On October seventeenth, we successfully closed the previously announced divestiture of our clinical services assets, which provided support for customers engaged in clinical trial activities with kitting, biorepository, and archiving services. This divestiture allows us to focus on our lab and production platforms, where we have strategically advantaged position and scale, higher growth entitlements, and lower capital investment needs. After a highly competitive process, we are confident we received full value for the business. The $500 million in after-tax proceeds, combined with our strong cash generation, accelerates our path to achieving adjusted net leverage of less than 3 times.
In addition to our strong operating results this quarter, we also made considerable progress in advancing our long-term growth strategy. Recent highlights include: the expansion of our magnetic mixing systems portfolio with the introduction of a new tabletop mixer. We launched this new product at the recent BioProcess International Conference in Boston, where we showcased our innovation capabilities with multiple scientific and keynote presentations. In our lab segment, we launched several new third-party branded products, including Agilent Advanced Analytical Instruments for advanced battery and sustainable energy applications, Sarstedt Life Science and Blood Collection Consumables as their first major U.S. distribution partner, and Oxford Nanopore's GridION Long-Read NGS Sequencer, further expanding our collaboration with Oxford Nanopore to bring this higher throughput instrument to market in Europe and the Americas. We officially opened our new flagship innovation center in Bridgewater, New Jersey.
This 60,000 sq ft facility, staffed with PhD scientists, biopharma engineers, biologists, and bioengineers, is one of 13 Avantor innovation centers globally, dedicated to solving life science's biggest challenges. The Bridgewater Innovation Center includes capabilities for upstream and downstream process development, pilot plant for scale-up simulations, and analytical and bioanalytical labs that support multiple modalities, including monoclonal antibodies, cell and gene therapies, and protein peptide therapeutics. Our NuSil business received an award from the prestigious Kaizen Institute for Excellence in Process Improvement and Quality Management. I recently had the opportunity to visit this team in California and witness firsthand how their commitment to the Avantor Business System is driving tangible operational results and fostering strong employee engagement, consistent with our culture of continuous improvement. We continue to improve the efficiency and productivity of our supply chain operations.
In the quarter, we completed major technology installations at our Visalia, California, site and opened a new facility in Devens, Massachusetts, to support our fluid handling business. We advanced our sustainability platform and recently received an updated rating from EcoVadis, a global leader in business sustainability assessments, that places Avantor in the top 17% of over 130,000 rated companies globally. Additionally, we signed our first virtual power purchase agreement through the Energize program, a pharmaceutical industry-sponsored program that will reduce our energy costs and deliver renewable energy to our operations across Europe. Finally, our team continues to effectively execute our multi-year cost transformation initiative, with several critical work streams ahead of schedule. We are confident that we will exceed our in-year cost savings target of $75 million in 2024.
Turning to our segment results, Laboratory Solutions modestly outperformed our plan, returning to growth for the first time in two years. Within Biopharma, overall market conditions remained relatively stable. Year-over-year increases in biotech funding have not yet translated into increased preclinical spending, and large pharma continued their pattern of cautious spending and prioritizing their clinical pipelines. In our other end markets, core diagnostic testing demand remains strong, and we delivered growth in both our Education and Government and applied end markets, underscoring the strength of our diversified platform. Consumables and services performed well, and equipment and instrumentation demand improved modestly from first half levels. In Bioscience Production, Bioprocessing end market conditions continued to improve. Production levels increased, and this quarter, the FDA approved thirteen additional biologics and protein peptide therapies for various indications, including oncology, Alzheimer's, and ulcerative colitis.
In line with these strengthening conditions, our bioprocessing sales outperformed our expectations of a low single-digit decline, finishing flat year-over-year. Strong order momentum once again reinforces our confidence in mid to high single-digit bioprocessing growth in the fourth quarter. Outside of bioprocessing, we saw sequential growth in Biomaterials, offset by declines in our advanced technology sales in the U.S. In summary, we delivered another quarter of solid performance. Our cost transformation is ahead of plan, and we have raised our free cash flow guidance for the year. Order momentum in bioprocessing continues, and we are encouraged by the return to growth in our laboratory solutions segment. With that, I'll now turn it over to Brent to walk you through our third quarter results in more detail.
Brent Jones (EVP and CFO)
Thank you, Michael, and good morning, everyone. I'm starting with the numbers on slide four. Reported revenue was $1.71 billion for the quarter, declining 0.7% on an organic basis. Sales trends in our Laboratory Solutions segment were similar to second quarter levels, with a modest improvement in equipment and instrumentation demand. Within our Bioscience Production segment, Bioprocessing outperformed expectations, while Advanced Technologies were modestly below plan. Adjusted gross profit for the quarter was $573 million, and adjusted gross margin was 33.4%. Adjusted gross margins declined sequentially, largely due to mix. Key contributors were the increase in equipment and instrumentation in Laboratory Solutions and headwinds in Advanced Technologies in Bioscience Production. Year-over-year adjusted gross profit was impacted by mix and modestly lower sales volume.
Adjusted EBITDA was $303 million, and Adjusted EBITDA margin was 17.6%. Our cost transformation initiative continues to drive meaningful SG&A savings, nearly offsetting the sequential mix-related headwinds to gross margins. On a year-over-year basis, performance was impacted primarily by our incentive compensation reset. Adjusted operating income was $275 million at a 16% margin, in line with Adjusted EBITDA performance and the drivers just noted. Adjusted earnings per share were $0.26 for the quarter, a $0.01 sequential and year-over-year improvement. Our adjusted EPS performance in the quarter reflects the flow-through of our Adjusted EBITDA results, as well as lower net interest expense. Interest expense favorability was driven by incremental debt paydown from outperformance in free cash flow and the impact of our interest rate swap termination.
As Michael noted, we delivered another strong quarter of free cash flow, generating over $200 million in the quarter and approximately $550 million year to date, inclusive of cash costs related to achieving our transformation savings. Excluding those same costs, we have generated approximately $625 million of free cash flow in the first three quarters against our original full year guidance range of $600 million-$650 million. In Q3, we paid down over $200 million of debt, and our adjusted net leverage ended the quarter at 3.8 times Adjusted EBITDA. We closed on the sale of our clinical services assets on October seventeenth. After accounting for transaction costs and expected tax payments, we netted approximately $500 million in cash proceeds, which we intend to use for debt paydown.
As part of the transaction, we also transferred balance sheet capital lease obligations of approximately $50 million, further reducing our leverage. We now expect to finish the year at or below 3.4 times adjusted net leverage and continue to make meaningful progress towards our target of sub-3 times adjusted net leverage. Slide 5 outlines our segment performance. Laboratory Solutions revenue was $1.17 billion for the quarter and grew 0.6% versus prior year on an organic basis. Sequentially, sales grew modestly, due in part to an improvement in equipment and instrumentation. While biopharma and healthcare continue to be pressured by the cautious spending environment, we saw nice improvements in other parts of the portfolio. Education and Government grew mid-single digits year-over-year, and our applied and industrial sales grew again, with growth in both the Americas and Europe.
Adjusted operating income for Laboratory Solutions was $152 million for the quarter, with a 12.9% margin. Sequentially, Laboratory Solutions adjusted operating income was up modestly. We had a slightly negative mix at the gross margin line, largely offset by spend controls and transformation-related SG&A savings. Adjusted operating income margin decreased 20 basis points from Q2. The year-over-year adjusted operating income decline was driven by the impact of our annual incentive compensation reset, partially offset by savings from our cost transformation initiative. Bioscience Production revenue was $543 million, an organic decline of approximately 3.5% versus prior year. Sequentially, reported revenue declined modestly, primarily due to Advanced Technologies. Bioprocessing, representing about two-thirds of the segment, outperformed expectation and was roughly flat year-over-year, with another strong quarter of order intake.
Biomaterials performed in line, while Advanced Technologies was somewhat below expectations. Adjusted operating income for Bioscience Production was $138 million for the quarter, representing a 25.4% margin. On a sequential basis, adjusted operating income margin was impacted by mix and higher freight expense. Year-over-year adjusted operating income declines were largely driven by incentive compensation headwinds. Moving to the next slide. We are reiterating our full year P&L guidance, net of the impact of our clinical services divestiture and raising our free cash flow guidance. Clinical services was expected to generate approximately $200 million of annual revenue, which will no longer be in our results as of October seventeenth. Accordingly, we are adjusting our reported revenue guidance for the year by approximately $50 million to reflect this impact.
Clinical services was part of our Lab Solutions segment, so these expectations should likewise be adjusted. The divestiture is approximately ten basis points dilutive to our full-year Adjusted EBITDA margin and one cent dilutive to adjusted EPS. As a result, we now expect Adjusted EBITDA margin of 17.3%-17.8% and adjusted EPS of $0.95-$1.03 for the full year. Given our strong free cash flow performance this year, we are raising our free cash flow expectation from the original range of $600 million-$650 million to more than $750 million. This is before transformation-related cash costs of approximately $100 million. A couple final comments on organic growth.
We are reiterating our expected full year organic growth of -2% to +1%, as our organic growth assumptions remain unchanged. The midpoint of our guidance assumes an approximately 49%, 51% first half to second half revenue split, as we have anticipated all year. The low end of the range assumes a more muted seasonal pattern. By segment, we expect Laboratory Solutions organic growth to be flat to modestly up in Q4, leading to an unchanged expectation of flat to low single-digit declines for the full year. We expect Bioscience Production organic growth of low to mid-single digits in Q4, with strong order growth supporting mid to high single-digit organic growth in Bioprocessing. For the full year, we expect Bioscience Production and Bioprocessing both to decline low single digits organically, also unchanged. I'll now turn the call back to Michael.
Michael Stubblefield (President and CEO)
Thank you, Brent. Before we conclude, I would like to summarize the key takeaways from another strong quarter. We are encouraged to see our ongoing commercial intensity driving growth in our lab business, alongside continued outperformance in bioprocessing. Our order book continues to grow, positioning us for mid to high single-digit bioprocessing growth in the fourth quarter. Our Cost Transformation Initiative is delivering results ahead of plan, allowing us to substantially offset the mix headwinds we experienced in the quarter. We will exceed our in-year savings target of $75 million and will exit the year with run rate savings of more than $150 million. Enabled by the Avantor Business System, our disciplined approach to working capital resulted in another quarter of best-in-class free cash flow conversion, and we raised our free cash flow guidance for the year.
Together with the proceeds from our clinical services divestiture, our strong free cash flow is accelerating our deleveraging efforts and positively impacting our earnings. We continue to make progress with our new operating model, realizing significant commercial and operational benefits just ten months in. We are now a leaner, more agile, and more efficient organization. This new model is also enhancing both our internal processes and the way our customers experience our platform.
Importantly, we have significantly advanced our long-term growth strategy, achieving key milestones in the areas of innovation, new product introductions, sustainability, and supply chain infrastructure. I want to extend my gratitude to our Avantor associates across the globe for their dedication to serving our customers and their invaluable contributions to our success. I will now turn it over to the operator to begin the question-and-answer portion of our call.
Operator (participant)
Thank you. If you would like to ask a question today, please do so now by pressing Star, followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press Star and then two to withdraw yourself from the queue. Our first question today comes from Dan Brennan with TD Cowen. Please go ahead, Dan.
Daniel Brennan (Senior Equity Research Analyst and Managing Director)
Great. Thanks, thanks for the question, and thanks for the info on the call. Maybe just on the implied fourth quarter guide, just to start, guys. You gave some color, Brent, right at the end on the segments, but could you just kind of give us a sense of, you know, where we should be thinking about overall for the company? Because if you took the full year guide, you know, 0%-12% is what's kind of implied in the fourth quarter, so wide. So just help us a little bit on that. And then, B, just as it relates to Bioscience Production, Brent, I think you heard you say low single to mid-single. If I kind of plug that in, I think I come up with, you know, kind of down 3% for the year.
I think your prior guidance for the full year was not pointing us. Maybe just unpack a little bit of the overall guide and what it means for the segments for the fourth quarter.
Michael Stubblefield (President and CEO)
Yeah. No, absolutely. Thanks for the question, Dan. You know, we, you know, I wouldn't read much into the broad guidance point here other than we were, we're really updating for the impact of the clinical services divestiture there, you know, on the really the outlook broadly unchanged there. In terms of what we see in the segments, I think the important point is return to growth in Lab Solutions there, you know, flat to up a little bit in Q4, the mid- to high-teens. The mid- to high-teens growth in Bioprocess in Q4, and then, you know, the view really unchanged in BPS for the segment, down low-single-digits there in Q4.
Daniel Brennan (Senior Equity Research Analyst and Managing Director)
Okay. And then, yeah, I'm sure we can unpack that more on the call here. But and then maybe just as we, you know, turn the page, you know, I think some of your peers already, you know, or earlier in the week, gave some color on 2025, whether explicitly or implicitly. So I think the street sits at, like, 4.5%. You know, Michael, you talked about a lot of optimism on cost cuts and, you know, some of the initiatives you have, but, you know, still a tough environment. I mean, does that seem like a realistic starting point, do you think, at this point, from what you're seeing in your business trends?
Michael Stubblefield (President and CEO)
Well, Dan, I'd say probably a couple of things. You know, firstly, you know, I think it, as we've done in previous years, you know, where we sit here in the year is probably a little bit too early to comment on 2025. We'll certainly see how Q4 plays out, and follow our normal cadence, you know, as we get into our fourth quarter, you know, call for next year.
Daniel Brennan (Senior Equity Research Analyst and Managing Director)
Okay, great. Thank you.
Operator (participant)
Our next question comes from Doug Schenkel with Wolfe Research. Please go ahead, Doug.
Doug Schenkel (Managing Director)
Hey, good morning, everybody. Thanks for taking the questions. Actually, my first one, let me build off of Dan's question. So, Dan's second question. So, you know, as we think about Q4 EPS, you know, I think the midpoint of guidance implies something like $0.27-$0.28. Recognizing you're not going to guide for 2025 now, that's not what I'm asking. But, you know, if we just kinda annualize that, you know, for 2025, you know, recognizing, you know, the world's gradually getting better, your order book continues to improve, your cost transformation initiatives continue to take hold. You know, would just annualizing the Q4 number be a good way to kind of establish a minimum number for next year, you know, assuming things just continue to move in the direction they're moving?
Michael Stubblefield (President and CEO)
Yeah, Doug, you know, I'd say a couple of things. You know, firstly, certainly understand the math that you're trying to do, but, you know, would just reiterate, you know, for us, it's probably a bit too early to comment on 2025. But what I would, you know, probably draw your attention to is, you know, just what we've experienced this year, you know, in our lab business. You know, it's been a year of stability and, you know, some gradual improvement. Certainly, we're encouraged by the return to growth in the third quarter, as well as gradual recovery in the bioprocessing space. We've got a best-in-class platform there, and, you know, the outperformance for yet another quarter is encouraging.
I think we've got a good setup as we exit the year, but you know, structurally, our order book doesn't really give us the visibility to predict the timing or the shape of you know what you know how things are going to play out next year, but you know, I'd say the end market you know fundamentals you know are strong. We're encouraged by the momentum in our business, especially bioprocessing, and perhaps most importantly, you know, I think we're doing all the right things to ensure we're well positioned to capitalize on the growth as it presents itself next year.
Doug Schenkel (Managing Director)
All right. Thanks, Michael. Can't blame me for trying, hopefully. All right, and then I just I want to follow up on with an unrelated question on BPS. So, on the whole, BPS came in, I think, a little bit light of expectations, but bioprocessing was actually better than expected, which I think leads us to the conclusion that maybe, you know, the offset was NuSil. Can you just give us some color on what's going on there? And then, you know, I guess, higher level for the segment, I think margin was a smidge lower than the margin you generated in that segment in the second quarter on similar revenue. I'm just wondering if that was mixed or something else, like maybe you pulled forward some investment in the quarter or something like that.
Michael Stubblefield (President and CEO)
Yeah. Let me take your first one. Brent can handle your question on margin, Doug. You know, on the BPS segment, you know, we have, you know, kind of a broad, diversified platform there, probably three principal components there. Obviously, two-thirds of the platform is our bioprocessing platform. Again, another quarter of outperformance we delivered, you know, kind of flat performance year-over-year, as well as, you know, sequentially, you know, compared to a low single-digit decline. We're actually encouraged to see our Biomaterials platform grow sequentially, so another good quarter there. So the pressure, really, in that segment was within our Advanced Technologies platform, and primarily in a down quarter on US semiconductors.
Brent Jones (EVP and CFO)
Hey, Doug, on the-
Michael Stubblefield (President and CEO)
Okay.
Brent Jones (EVP and CFO)
You know, on the margin side, Doug, following there on the margin side, I mean, there are a few things going on. As sort of as we noted in the script there, we did have higher freight expense in that segment. You know, there are things going on in the world there. We worked very hard at that, but that was a headwind to us. And we also had, you know, the specific comments to Michael. We also had a bit of the mix of the mix there. Nice performance in bioprocessing there, you know, the headwinds in Advanced Technologies. You put that together with some mix of the mix, and that leads to that performance.
Doug Schenkel (Managing Director)
Got it. All right. Thanks, guys.
Operator (participant)
The next question comes from Tycho Peterson with Jefferies. Tycho, please go ahead.
Tycho Peterson (Managing Director)
Hey, thanks, guys. You're gonna love this. I'm gonna ask another question about the Q4 range. I'm just curious, are you guiding us to the midpoint and high end is budget flush? Can you flesh that out a little bit? And then the applied margin in Q4 is also pretty wide. Just wondering if you can kind of give us some of the gives and takes on the Q4 margins.
Brent Jones (EVP and CFO)
Yeah, no, Tycho, thanks for the question. Look, the broad view on the guidance there is the midpoint of the guidance would get you to, you know, a seasonal ramp in the lab business. We talked about this some last quarter. The low end would be, you know, a more muted conditions of sort of similar to the exit rate we saw in Q3 there. So that's the reason for the broad band that's consistent with the environment that we had talked about before. You know, the flow through the margin, I mean, part of this, we haven't wanted to touch every piece of the guidance around there. You know, I think you could think of nice, consistent performance there.
When you think about what Q4 wants to be, that'll have similarity to Q3, assuming the expectations we talked about there. Again, in Q4, we talked about lab flat to mostly up, BPS, you know, positive low single digit to mid single digit there. You put that all together, the puts and takes with the headwinds of the clinical services divestiture, which is some headwind to margin, but then nice tailwind from, you know, the mid to high bioprocess there. That gets you in a consistent place there to Q3 on a margin basis.
Tycho Peterson (Managing Director)
Okay, that's helpful. And then, you know, going back to one of the questions earlier, from Doug on some of the other businesses, you flagged semi. I'm just curious, your outlook there, how much pressure you think this could, you know, put on numbers going forward? And then also, what are you thinking on NuSil going forward, as well? I know you don't specifically want to comment on twenty-five, but just curious on underlying trends there and how we have to think about what you're seeing.
Michael Stubblefield (President and CEO)
Yeah. So a couple of things to unpack there for you, Tycho. Firstly, on the NuSil platform, as we've talked, you know, about this in a lot of different forums, it's a really terrific, you know, platform, extremely well-positioned. You know, the business is running a bit ahead of plan this year. Again, you know, we saw sequential growth in Q3, which was encouraging. We've got a great innovation pipeline. You know, procedure counts are, you know, trending in the right direction here. So I think the setup for that long term, you know, continues to be quite favorable.
And you know we would anticipate over the long term that being a mid- to high-single-digit you know growth platform for us, and certainly nothing ahead of us that would indicate that's not- that's not possible. On the semi front that you referenced there, yeah, certainly some pressure you know building in that end market as we move through the you know the quarter. You know there are some bright spots in that space, and there's a lot to like about the tech- you know where the technology is headed there. But what we saw in the quarter was you know a stall in the recovery, particularly in the U.S., and you know a little bit of a...
Some traction getting lost there in the end market. You see that, you know, Tycho, in a lot of the recent public updates from some of the key players in the space. I think, you know, baked into our outlook for the fourth quarter is we would anticipate that to continue. Unfortunately, you know, that's a relatively small part of the business and, you know, given the strength in bioprocessing and Biomaterials, we're able to largely offset that weakness with strength in those other, you know, areas of our business.
Tycho Peterson (Managing Director)
Okay. Thank you.
Operator (participant)
The next question comes from Michael Ryskin with Bank of America. Michael, please go ahead.
Michael Ryskin (Managing Director)
Great. Thanks for taking the question, guys. I want to talk a little bit about the clinical services divestment and the impact to the guide. I know you only really talked about, you know, the last two and a half months of the quarter, but is it reasonable to just-
take that and prorate that to fiscal year 2025, meaning, you know, like you said, two hundred million a year. You're seeing one fifty of it this year, so you expect the other one fifty, give or take, next year. And then, in terms of EBITDA, it's a 10 basis points dilution to the EBITDA margin this year. So 30 to 40 basis points impact to EBITDA margin next year, or is there any other seasonality we should keep in mind or anything like that?
Michael Stubblefield (President and CEO)
Michael, really good question there, and I think the math that you've laid out there makes a lot of sense. Just to reiterate a couple of the points here. You know, we talked about the business being roughly $200 million on an annualized basis. There's not a lot of seasonality to that. So, you know, you see roughly a quarter of that impact being taken in Q4. And, you know, I think it would be safe for you to assume that you would see a similar impact as what we're seeing here in Q4 play out through the first three quarters of next year, and not just for the top line, but all the way through the P&L.
Michael Ryskin (Managing Director)
Okay, that's easy. And then the other point was, you mentioned a couple of times during the call, the cost savings. You're ahead of your $75 million target for the year. Is that a little bit of timing, like some pull forward from next year? You found a little bit more with the shop? Are you, you know, potential for upside to that number for next year as well? Just how we think about your - that comment in the context of this is a three-year program.
Brent Jones (EVP and CFO)
Hey, Michael, it's Brent. I'll take that. Look, you know, we appreciate the focus on that. You know, year-to-date realization is nicely ahead of plan for the full year. Again, you know, we still have hard work to do in Q4, but we expect to deliver comfortably in excess of $100 million in the year. This puts us nicely ahead of the $150 million exit rate that Michael noted on the call last quarter. Really, how we got there was year-to-date realization ahead of plan. We got more in-year impact. We started talking about that on the Q1 call due to being really quick execution in connection with that. I wouldn't read any more into what it means for the broad program. You know, it's three years, the $300 million.
We're obviously incented to get these things done rapidly, but, you know, we'll, we'll update you with the guide there, but I would say it's better than steady she goes there.
Michael Ryskin (Managing Director)
Okay. Thanks a lot, guys.
Michael Stubblefield (President and CEO)
Yep.
Operator (participant)
The next question comes from Vijay Kumar with Evercore ISI. Vijay, please go ahead.
Vijay Kumar (Senior Managing Director)
Hi, Michael. Good morning, and thank you for taking my question. I guess just one back on, sorry, the performance in the quarter. When you look at within BPP, ex-BPS, I think the other parts of the business are down mid-teens. I know you mentioned semi. Was this the timing? Was there some timing out impacts here? And you know, some of the peers. What's the read here? Should we be looking at companies like ASML? Is that the read here or how to think of semis?
Michael Stubblefield (President and CEO)
Yeah, a couple of things there, Vijay. Thanks for the question. Again, we're just, you know, make sure it's crystal clear for the call today. You know, bioprocessing continues to outperform. We did grow our Biomaterials platform, the NuSil platform, sequentially. So the pressure really here is within our applied segment, advanced technology segment, as it were. You know, primarily in the U.S. semiconductor sector. You know, we provide formulated solutions that go directly into semiconductor manufacturing processes. So, you know, I think the read-through to the end market probably best to look at the manufacturers of the semiconductor chips themselves, Vijay. Not really timing related.
I think, as I said, the answer to one of the other questions, you know, this has been a, an end market that had, you know, significant headwinds throughout all of last year. We had been on a pace of recovery as we've moved through the first half of this year, and even into the early days of the third quarter. And what we really saw as we moved through the third quarter was that that momentum, you know, stall out and, you know, we see a bit of a pause here in that recovery, and our assumptions for the fourth quarter would contemplate that continuing based on the forecast we're getting from our customers.
Vijay Kumar (Senior Managing Director)
Understood. And, you did bring up, bioprocessing, Michael. It's I guess, the order trends gives us the ability to mid- to high singles in Q4. What were order trends? And, you know, I'm getting to maybe something like a 2% organic for overall companies, you know, based on your bioprocessing outlook for Q4. Is that like a reasonable jump-off point for next year?
Michael Stubblefield (President and CEO)
Well, yeah, thanks for bringing up, you know, a really important part of our story here. We are encouraged, Vijay, by the continued momentum that we see in our order book with another really strong, you know, quarter in that regard. And I'd also say, you know, importantly, it's not just about the order book, but we're certainly seeing that order book translate into revenue, you know, which did, you know, enable another quarter of outperformance in bioprocessing. And then, you know, based on the orders and momentum that we have, you know, I think we see a lot of confidence in our ability to deliver on mid to high single-digit growth in bioprocessing within the fourth quarter.
You know, our year-to-date revenue and order trends, you know, validate that we have a best-in-class, you know, platform with a sustained, you know, track record of share gains, so I think we like our positioning and the setup for Q4 is strong, and you know, when we look against our long-term algorithm, there's still some room to go here in terms of, you know, getting that platform all the way back, but we really like the trajectory and certainly are encouraged, Vijay. So thanks, guys.
Operator (participant)
The next question comes from Dan Leonard with UBS. Dan, please go ahead.
Dan Leonard (Managing Director and Equity Research Analyst)
Thank you. On that 20% EBITDA margin exit rate for 2025, that target you have, can you remind me what growth do you need to achieve that? And does the clinical services divestiture impact that target at all?
Michael Stubblefield (President and CEO)
Yeah, great question. You know, Dan, when we look at that target that we've set of a 20% exit rate for next year, excuse me. What we've said about that is, you know, we had a high conviction, and we do have a high conviction in our ability to achieve that, primarily based on the many different ways that we can get there, including you know, the self-help measures and the things that we can control. Brent's you know, given some color here on you know, how our cost transformation initiative is trending, and that certainly gets you you know, most of the way there.
And it doesn't imply, you know, a full recovery of the end markets, and, you know, we don't need a lot of heroics on the top line to get there. So, we still got a lot of conviction about that. The fact that we're ahead of plan on the cost transformation will certainly help. Now, you know, it is worth pointing out, you know, when we set that target, we didn't, you know, contemplate the divestiture of our clinical services, you know, platform. So as we get into our planning for 2025, we're certainly going to have to take that into account.
But our original assumptions, I think, are still, you know, very much in play here, and, you know, we can get to that level, adjusted for the clinical services divestiture, you know, with things that are primarily within our control.
Dan Leonard (Managing Director and Equity Research Analyst)
Understood. And as a follow-up, Michael, can you give your updated view on the competitive environment in lab solutions and the market share picture there?
Michael Stubblefield (President and CEO)
Yeah, great question. You know, Dan, you know, first, we'll just reiterate, you know, how encouraged we were to see our lab business return to growth for the first time in a couple of years. You know, the activity levels there have been improving and, you know, we finally, you know, we're able to push that into growth territory. You know, the sustained commercial intensity that we've referenced in a number of different forums here over the last, you know, year or so, you know, I think is certainly correlated to the outperformance we're seeing in that segment.
And when I compare, you know, our disclosures here around lab to other, you know, disclosures that others are making on lab, I think you see a platform here that continues to outperform. You know, we're confident we certainly have a, you know, a leading platform here, and we remain focused on leveraging our capabilities to continue to grow share. And I think there's, you know, certainly a lot of data points here to support our view here that we've got a nice share story, particularly in things like academia, when you look at our performance in that end market in the quarter. So, you know, it's a highly fragmented space.
You know, we're clearly a leader, and you know, we like our positioning and momentum here.
Dan Leonard (Managing Director and Equity Research Analyst)
Great. Thank you.
Operator (participant)
The next question comes from Conor McNamara with RBC Capital Markets. Conor, please go ahead.
Conor McNamara (Equity Research Analyst)
Good morning, guys, and thanks for taking the question. Appreciate it. First, just on the implied guidance for Q4, that range is about $200 million based on your reiterated guidance. What do you need to see over the next couple of months for you to hit the high end of that guidance? Or should investors really be focused on the midpoint of your guidance as they think about Q4 results?
Brent Jones (EVP and CFO)
Yeah, Conor, thanks for the point. Look, again, I go to my other comments on, you know, we haven't wanted to overly tweak things here. You know, the lower end assumes muted, less seasonality, really continuation of the exit rate out of Q3. To get to the midpoint there, you'd see more of the seasonality that we discussed on our last call there. You know, so you need to see. And I think another important point around that is we're really talking about the laboratory solutions piece of that there. We have absolute high conviction on what we talked about for bioscience production as well as bioprocessing specifically there, and that just would be greater activity in the lab in that channel. Again, we like the exit rates we're going at.
You know, to get to the mid or better, you need, you need to see an acceleration in activity there.
Conor McNamara (Equity Research Analyst)
Great. Thanks for that. And then on the cash flow generation, really strong quarter. Congrats on that. As we think about next year, you're going to, you know, you said you're going to exit the year at 3.4 turns times leverage. You know, is it realistic to think that-
Brent Jones (EVP and CFO)
Yep
Conor McNamara (Equity Research Analyst)
That you could start being active in M&A next year? And what does the M&A environment look like right now?
Brent Jones (EVP and CFO)
Okay, you know, just on the exit rates, I mean, it is absolutely very likely during next year we'll be below three times net leverage there. You just look at the cash generation as well as getting there on the EBITDA side of things. That will put us in a position there. Now, we want to comfortably stay below our leverage target there, so that adds complexity to that, but I would say, you know, we'll be in the position where to start looking at inorganic growth for sometime next year. Michael, I don't know if you want to supplement that.
Michael Stubblefield (President and CEO)
Yeah, no, I think that's exactly right. You know, we are laser focused on, you know, deleveraging and getting ourselves in a position where we have, you know, room under three times to be able to, you know, sustainably, you know, be a consolidator in this space, and M&A remains an important part of our long-term growth strategy. You know, playbook. We're not in a playbook. We're not in a hurry. You know, we'll see how it plays out next year. You know, we've got a lot of things in flight here around our cost transformation and standing up our new segments.
You know, we like the momentum in our end markets and our positioning, and, you know, fortunately, we can create a lot of value with, you know, all the organic levers that we have available to us. And, you know, whether it's next year or a future year, we'll certainly get back to M&A at the appropriate time.
Conor McNamara (Equity Research Analyst)
Great. Thanks for that.
Operator (participant)
The next question comes from Dan Arias with Stifel. Please go ahead, Dan.
Dan Arias (Managing Director)
Good morning, guys. Thanks. Mike, at the Investor Day last year, you talked about the potential for an above-average growth period once the recovery is underway and once orders sort of turn the corner. How do you feel about that idea today when you look at the evolution of demand here and just the way that the dynamics are playing out as things slowly get better?
Michael Stubblefield (President and CEO)
Yeah, I mean, it's a really good question. And, you know, as we've talked about here today, you know, unfortunately, our business model doesn't give us the visibility to call the timing or the shape of how that does recover. But I just kind of point you to what we've experienced this year, you know, which is, you know, a year of stability, gradual improvement in the lab. You know, probably a little bit ahead of the curve on, you know, some of the applied markets and the academic, you know, space getting back to more normal rates. You know, we still got some room to go here with activity levels in, you know, preclinical research. But there are some, you know, some things to like about that.
You know, there are some, certainly within large pharma, that are, you know, doing pretty well there. You know, there are some green shoots, you know, even in the biotech space, not across the board, but certainly some of the larger biotech. You know, we see, you know, some of the step up in year-over-year funding starting to translate into, you know, a step up in spend on that. You know, we like that, but there's still, you know, some headwinds there that we need to overcome. You know, the trajectory is encouraging. When you flip over to the production side of the business, you know, our exit rate here of mid to high single digits is, you know, certainly compared to where we've been this year, is quite encouraging.
But against the long-term algorithm, that would have us in a double-digit range, there's, you know, certainly room for improvement here. And, you know, we'll see how that, you know, that plays out. You know, we've got, you know, high confidence in where things are going to go for Q4 based on, you know, our order book, and, you know, the fundamentals are strong. We've talked about that all year. You know, demand remains great, great regulatory environment. I think we had another 13, you know, approvals in the quarter on new molecules for new therapies. And, you know, the production rates are continuing to improve as the destocking subsides. So I think the setup is good.
We'll see how, you know, Q4 ultimately plays out, and we'll build that into our plans for next year here. But probably a little bit too early to call, you know, how we see 2025 playing out yet.
Dan Arias (Managing Director)
Okay, helpful. And then maybe just a follow-up on the overall consumables piece. I mean, it feels like the inventory drawdown phase that we've been talking about has kind of run its course, but there is a level of restraint out there, just overall on budgets. When you look ahead a bit, and I know you're not trying to raise expectations or get people's hopes up or anything, but I'm curious if just sort of conceptually, when you think about the beginning of next year and Q1 consumables orders, do you think they could have a bit of a catch-up feel to them? Maybe a little bit larger than normal, if just spending into the end of the year was muted to a degree, and, and now these companies are working with a fresh budget and, and maybe need to restock a bit.
Does that seem plausible to you at all, or, or just not really?
Michael Stubblefield (President and CEO)
Yeah, I'm not exactly sure. You know, when you look at a consumables portfolio, which we benefit from, you know, inventories from our perspective, I think we would agree with your view that, you know, the destocking is pretty much, you know, behind us. You know, for the most part, you know, inventories have normalized, and so, you know, we see our customers managing their inventories in line with their activity levels. You know, it feels like, you know, we have, you know, consumption, you know, and demand matching the orders that we're seeing at the moment. You know, certainly the activity levels continue to improve. I think that's, you know, encouraging.
On the flip side, you know, we have about 15% of our revenues or so, you know, on the equipment and instrument side of things. And, you know, that's probably been the bigger headwind, you know, across the space this year, you know, linked to your budgets and capital spending. And, you know, as you noted in our prepared remarks, you know, relative to where we're at in the first half of the year, we did see, you know, some sequential improvement in that, as we got into the third quarter, and that's, you know, somewhat reflected in our mix that we see this year as in the quarter as well. But I think that's another good signal.
You know, the pipelines and activity levels have been strong there all year. It's been taking longer to convert those pipelines to orders and revenue, but you know, there was a bit of a turn up on that area in Q3, so you kind of step back from all that, things are definitely heading in the right direction, and you know, the environment continues to improve.
Dan Arias (Managing Director)
Yeah. Okay, thank you.
Operator (participant)
The next question comes from Rachel Vatnsdal with JPMorgan. Rachel, please go ahead.
Rachel Vatnsdal (Executive Director of Equity Research)
Thanks. Good morning, and thank you for taking the questions. So first up, just on Lab Solutions. So I know you guys don't want to guide to 2025 at this point, but just given the hyper focus that investors do have on Lab Solutions into next year, how should we think about pricing in 2025 on the lab side of the portfolio? And what could that mean in terms of a floor for what the lab segment could do? You know, given some of these budget pressures that we're seeing on pharma and biotech and the pressure on volume, is there a world where lab could even be flat or declining next year? Or does that pricing power help define some of the performance and equate to some level of growth, even if it's just on pricing?
Michael Stubblefield (President and CEO)
Yeah, Rachel, thanks for the question, and good morning. You know, first couple of things maybe on pricing for 2024. As we've said in a lot of different occasions, you know, pricing for us in the lab has played out, you know, in line with our expectations, which means, you know, we've been able to offset the COGS inflation that we do see, and fortunately, you know, the environment on pricing and COGS has largely normalized compared to where it's been over the last couple of years, where we've been having to take outsized price increases to the market.
You know, this year, I think the dynamics have been a lot closer to, you know, kind of pre-COVID times, and we're right in the midst of that process where we're working with our suppliers to understand, you know, what, you know, COGS is going to look like, you know, next year. You know, early indications would seem that it's, you know, similar to what we were seeing, you know, this year, perhaps, and you know, we'll roll all that together and, you know, come forward with our pricing strategy here for next year, you know, here in the next, you know, 30, 60 days, something like that.
And there's nothing that we see here that you would give us a you know, pause for concern that we're not going to be able to, you know, drive our normal pricing relative to, you know, the COGS environment into the market. Teams, you know, got a great process, a lot of great discipline around this, and, you know, I think, you know, as long as we're in line with that, you know, COGS, I don't have any concerns at this point on that topic.
Rachel Vatnsdal (Executive Director of Equity Research)
Got it. That's helpful. And then just on the Bioscience Production segment and this Advanced Technologies dynamics, can you just break down for us what percent of the Bioscience Production segment is exposed to silicon and Biomaterials versus Advanced Technologies? And then within that Advanced Technologies, for total core that grew mid-single digits this quarter, but I know there's a fair amount of exposure within the lab segment. So what did Advanced Technologies do within Bioscience Production segment this quarter, given the weakness you've been calling out in semis?
Michael Stubblefield (President and CEO)
Yeah, so just maybe to recast what we've said about the segment, two-thirds is bioprocessing. I think we've covered performance of that pretty well here today. And then the balance of that, you know, 33%-35% of the platform is, you know, kind of split between our NuSil platform, our Biomaterials platform, and, you know, the other applications and things like aerospace and defense and semiconductors. You know, overall, at the enterprise level, we've talked about semiconductors being, you know, roughly, you know, a couple of points of our overall exposure.
And you're right to note, there is certainly some, you know, applied exposure in the lab, where we actually saw growth in that part of the business in the quarter, which is, you know, I think, just a great proof point of not only the diversity of our platform, but certainly the resilience and relevance of our platform. So, you know, the weakness that we saw there really was isolated to, you know, the semi activities, and principally in the U.S., is where we saw the, you know, kind of the headwinds materialize as we moved through the quarter.
Operator (participant)
The next question comes from Luke Sergott with Barclays. Please go ahead, Luke.
Luke Sergott (Director of Healthcare Equity Research)
Great, good morning. Thanks for the questions. I just wanted to get a clarification up here on Dan's earlier question. So with the biosciences exit at a low single digit to mid-singles in 4Q, and you guys are still talking about doing the bioproduction exit of mid to high. I guess, as we think, and I know, like, you know, everybody's trying to figure out twenty-five, but like, if bioproduction exits mid to high, wouldn't you know, why would that not be kind of the growth rate in twenty-five? I just from a it sounded like the interpretation there was that it could be a little bit lower. I'm just trying to figure that out.
Michael Stubblefield (President and CEO)
Yeah, I wouldn't try to extrapolate, you know, our Q4 exit rates into whatever we, you know, think we're going to come forward with next year. I think it's a good data point to show the trajectory of the, you know, the recovery that we've experienced, you know, this year, starting the year down, you know, low teens, you know, progressing to kind of flat here in the third quarter to now, you know, exiting at mid to high single digits. So, you know, I think we're on a great course here for, you know, for bioprocessing overall, a lot of momentum in where we're going.
As I said before, we're not yet back to our double-digit growth rate there, so there's a bit more, you know, room to go. When you then look at, you know, the Biomaterials, you know, business, you know, we've outperformed this year, you know, relative to our expectations. You know, we grew that platform over 20% last year, so we knew this year was gonna be a little bit more challenged as a lot of the inventory, you know, restocking that we experienced last year was gonna be a headwind for us this year.
But we like the fundamentals there and, you know, anticipate a mid- to high-single-digit growth rate for that, you know, platform over the longer term, and we'll see where the semi, you know, business, you know, lands. But no, at the exit rates for, you know, for bioprocessing, I think are a constructive way to think about the jumping off point, and we'll have to, you know, then, you know, synthesize that through, you know, our process here as we come out with our full-year guidance. But, you know, we like the setup there. The pipelines are strong, order book momentum continues now for, you know, the last four quarters at least. And so, you know, I think there's a lot to like about that, Luke.
Luke Sergott (Director of Healthcare Equity Research)
Yeah, okay. I just wanted to clarify. Okay, that makes sense, and I just want to tease out a little bit here on the equipment drag on the margins. I know you said it improved sequentially, but and you know the E&I piece of the business has been soft across you know all peers and from every channel check. So talk a little bit about what you're seeing there. Like, what was the pickup? Was it still down year-over-year? Just, you know, what was the ultimate drag on that margin and ultimately, the outlook for the E&I coming back?
Michael Stubblefield (President and CEO)
Yeah, a couple of things there. You're right, first of all, in that it is a relatively modest part of the business. It's roughly 15% of the total, with a little bit more of that exposure in lab solutions, where we see, you know, roughly 20% of our lab revenues are linked to equipment instruments. You know, market conditions, you know, generally speaking, have been, you know, pretty similar all year, really highlighted by, you know, this more cautious spending on capital items, particularly within biopharma. We did see you know, some improvement, as we've noted in the third quarter. It was up, you know, low single digits sequentially. But to your point, it's still down year-over-year.
I think the first half of the year, we were probably down, you know, high single digits, low double digit kind of range. And so it, you know, it did improve to, you know, down, mid single digits in the quarter. So, you know, still a bit of a headwind, but, you know, as we've said, actually, the activity levels and the pipelines have been pretty, you know, pretty strong most of the year, all year. What we see, though, is just a longer cycle time to get that activity converted to an order and ultimately, you know, realized in the P&L. So, you know, maybe some green shoots here in the quarter as things, you know, seem to be start to moving in the right direction.
Luke Sergott (Director of Healthcare Equity Research)
Great. Thanks.
Operator (participant)
The next question comes from Tejas Savant with Morgan Stanley. Please go ahead.
Tejas Savant (VP of Investor Relations)
Hey, guys. Good morning. Appreciate the time here. Michael, I just want to double-click on mid-cap biotech a little bit. I know it's like low single digit exposure for you, but what are you hearing from that specific customer constituency, given the weakness called out by you know, some of the CRO peers and so on? When do you think the rate cuts start to filter through in terms of customer psychology? Or do you expect perhaps, like, election outcome clarity to move things along a little bit on that front?
Michael Stubblefield (President and CEO)
Great question, Tejas. You know, I'd say a couple of things about, you know, the biotech space. You know, it's a relatively modest exposure for us, but it is an important customer set, just given the science that they're developing, and similar to what we're seeing with, you know, some of the large pharma, it's a little bit of a mixed bag here in that, you know, particularly a lot of the smaller biotechs, you know, are still struggling under the weight of, you know, the funding headwinds that have been in play over the last couple of years, but, you know, we are starting to see some green shoots in this area.
And, you know, if I kind of segment, you know, the exposure here to the biotech space, we actually see some of the larger customers, you know, within that, you know, area, have a bit more access to cash, maybe benefiting from some of the early, you know, turn in funding on a year-over-year basis here, you know, actually starting to return to growth. So, yeah, still some headwinds there. We're not, you know, fully seeing all of the step up in funding translate into, you know, preclinical spend yet. But certainly, we're encouraged by some of the green shoots that we are starting to see there.
Tejas Savant (VP of Investor Relations)
Got it. And then my follow-up is, focused on Europe, Michael. Just talk to us about sort of any signs of, you know, stress in the system or perhaps like, sequential improvement, especially in important geographies like Germany. You know, you've got this dynamic of defense spending, crowding out other priorities for some governments. But then on the other hand, I think in the past, you've also talked about how you're relatively under indexed to biopharma there, versus North America. So just paint that picture for us a little bit in terms of what you're seeing exiting the third quarter and into October here in Europe.
Michael Stubblefield (President and CEO)
Europe, for us, has actually been, you know, probably the strongest geography, as we look across the business. I think even in the third quarter, it outperformed the Americas, and some of that, I think, you know, can definitely be linked to, you know, what you're talking about there on, you know, maybe a little bit less exposure to, you know, preclinical research and biotech funding and such on a relative basis, and when I look through to things like, you know, our applied exposure in the region, you know, we actually saw some, you know, some pretty reasonable growth in the quarter for Europe, so Europe overall, you know, holding up, you know, quite well, you know, despite, you know, some of the macro factors out there.
And again, I think it's just a great proof point of the benefits of a consumables-driven portfolio and the resilience, you know, that our platform offers.
Tejas Savant (VP of Investor Relations)
Got it. Appreciate the time, guys. Thanks.
Michael Stubblefield (President and CEO)
Thanks, Tejas.
Operator (participant)
We have time for one further question, and so our final question today comes from Patrick Donnelly with Citi. Patrick, please go ahead.
Patrick Donnelly (Managing Director and Equity Research Analyst)
Hey, guys. Thanks for taking the questions. Michael, maybe just to follow up on that last one, on the biotech pharma piece. You know, we've certainly heard from some folks that, you know, biotech continues to push things out a little bit. Large pharma, maybe slightly better. But I guess when you guys think about that, those customer bases, are you seeing a bit of a dichotomy at all? How are you kind of having conversations with customers and just viewing the go forward in terms of the willingness to spend both into year-end and then budgeting into next year as well?
Michael Stubblefield (President and CEO)
Yeah, you know, a couple of things to point out there, you know, Patrick. You know, biotech funding has been, you know, a headwind, you know, going back to the early days of last year. You know, we did see it tick up, you know, beginning in Q1 this year, and as we sit here on a year-to-date basis, you know, it is encouraging to note that overall biotech funding is up on a year-over-year basis, and we definitely see things heading in the right direction there, but it is somewhat mixed in terms of the picture out there. You know, as we talk to customers, particularly the you know, the smaller biotechs, we definitely you know, see more muted activity levels.
You see, you know, fewer, you know, startups coming in that you know generally drive, you know, some good activity when funding is strong. But the more established, you know, biotechs, Patrick, we actually do see, you know, this step up in funding, you know, translating into growth. When I look into, you know, our business, you know, we saw that, you know, a nice sequential improvement in that part of our, you know, business in the quarter. We still do need, you know, some of the smaller folks to step up to, you know, kind of get away from this being generally a headwind.
But, there are some green shoots here that we have our eyes on that, you know, give us some encouragement here and do align with this trend of, you know, funding being up year-over-year.
Patrick Donnelly (Managing Director and Equity Research Analyst)
That's helpful. And maybe just a last quick one for Brent, just on the gross margins in particular. Yeah, I understand mix was obviously an impact this quarter. Just trying to think about the go forward, whether it's price, mix, any moving pieces we should be thinking about as the right, you know, point for 2025, just given this quarter, it seemed like it moved around a little bit with mix. Just trying to get our arms around that one. Thank you, guys.
Brent Jones (EVP and CFO)
Yeah, look, you had another on 2025 there, Patrick. We'll come back to you on February there, but I think I would just have you focus Q4 and beyond. You know, we're going to have some headwinds from the clinical services divestiture. You know, we do have the mix variability you cited. Those headwinds should be, you know, essentially offset or more than offset by the growth in Bioprocessing Q4. You know, that's the real virtue of that mid to high. So I'd think about Q4 as something very similar to Q3, and we'll update you on all the mix and everything else for the guide for 2025.
Patrick Donnelly (Managing Director and Equity Research Analyst)
Understood. Thank you, guys.
Brent Jones (EVP and CFO)
Thanks.
Operator (participant)
Those are all the questions we have time for today, and so I'll turn the call back to the management team for any closing remarks.
Michael Stubblefield (President and CEO)
Yeah, thank you, operator, and thank you all for joining us today. We appreciate your support of our business and really look forward to updating you when we get a chance to meet next, and until then, be well, everyone. Have a great Friday.
Operator (participant)
Thank you everyone for joining us today. This concludes our call, and you may now disconnect.