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Earnings Transcript for SMIN.L - Q2 Fiscal Year 2023

Paul Keel: Good morning, everyone, and thanks for joining us. With me in London today is our CFO, Clare Scherrer. In terms of our agenda, I'll make a few opening comments before turning it over to Clare to walk us through the numbers. I'll come back and provide an update on our strategic and operational progress, and then we'll open it up to all of you for Q&A. By way of overview, we saw a continued improvement in the first half, resulting in meaningfully higher performance. We posted record organic revenue growth of 13.5%, which translated to nearly 26% on a reported basis. We've now delivered 7 consecutive quarters of accelerating growth as we capitalize on strong underlying demand in most of our end markets. Our earnings conversion was stronger still as we also delivered record EPS growth of 52%. And given this strong momentum, we have once again raised our full year guidance now to at least 8% organic revenue growth. Operating margins grew 20 basis points, reflecting strong volume as well as continued investment in future growth. ROCE expanded by 1 point. Our Smiths Excellence System is the centerpiece of our stronger execution and the impact of SES is now visible in our financial statements, as we're on track to deliver over £25 million of annualized operating profit from SES. Our people make this progress possible, and we have a number of initiatives underway across our company to advance our inclusive and high-performing culture. Our ESG plan is also progressing at pace as detailed in our inaugural sustainability report, which is available on our website. In summary, we delivered another period of higher performance, enabled by our strategy of accelerating growth, improving execution and investing in our people, the focal point of our Smiths value engine, which I'll recap on the next slide. Our value engine connects to three components of our success
Clare Scherrer: Thank you, Paul. Good morning, everyone, and thank you for dialing in. I'm pleased to share the half-year results, a half which provides more evidence of the progress we're making. On revenue, as Paul said, we delivered record organic growth of 13.5%, with FX increasing reported growth to 25.6%. We generated £241 million of operating profit, which equates to organic growth of 12.7% and a margin of 16.1%, up 20 bps over the same period last year. EPS growth of 52.1% was a record for Smiths. Cash conversion was impacted by investment in working capital, and I'll talk later about the actions we're taking to drive improvement. ROCE expanded by 120 bps, reflecting our increased profitability. And as planned, we're rebuilding our dividend cover post the sale of Smiths Medical and are recommending an interim dividend of 12.9p, an increase of 5%. In the first half, we returned £241 million to shareholders, including both our share buyback and the FY '22 final dividend. Now looking at the results in more detail, and starting with our record organic revenue growth. We've posted 7 consecutive quarters of organic revenue growth, and both Q1 and Q2 delivered growth in excess of 13%. First half growth was driven equally by price and volume and we delivered growth across all divisions, geographic areas and major customer end markets. Revenue for the half also surpassed our pre-COVID revenue, up 12% compared to the first half of FY '20. As per our guidance, this revenue growth translated into moderate operating margin improvement of 20 bps to 16.1%. We delivered 60 bps of margin expansion from increased volume and 50 bps of margin improvement from the targeted savings projects, which we announced at the full year, primarily in John Crane and Smiths Detection. These programs remain on track with expected benefits for the full year of approximately £15 million and annualized benefits in line with our previous guidance of between £25 million and £30 million. On pricing, we more than offset cost inflation, thanks to the positive pricing actions that we took throughout last year and going into this year. FX translation had a positive impact on margin of 30 bps. SES projects in this period primarily focused on pricing, customer service and productivity and generated £5 million of incremental profit. Offsetting these gains were three headwinds
Paul Keel: Thank you, Clare. I'll now provide a strategic and operational update, organized within the framework of growth, execution and people, and we'll begin with growth. New products are clearly playing a role and are accelerating growth. Our new product vitality index, which measures the proportion of revenues from products launched in the last 5 years, was just under 30% for the half, up 90 basis points year-over-year. The vast majority of our new products are developed to support specific customer needs. And as such, they are well aligned with key global megatrends, like energy transition, ever-rising security needs, or the world's insatiable demand for data. On this slide, you can see examples of new platforms launched already this year in support of these trends. Collectively, new launches delivered £32 million of revenue in the half or just over 2 points of growth on a gross basis. To continue fueling our strong new product pipeline, we increased R&D investment by almost 14% in the period. In addition to strong new product performance, we're making good headway building out priority adjacencies like those you see here. Energy transition described the $100 trillion multi-decade transformation of the world's energy supply from fossil-based to zero-carbon sources. John Crane is ideally positioned to help our customers along this journey with our leading installed base and our global service network. We're currently engaged in over 40 active hydrogen and carbon capture projects around the world and have seen our opportunity funnel more than double over the past 12 months. For example, in the first half, we won 100% of the gas seals, couplings and filters tendered to date for a $1.6 billion blue hydrogen facility being built in Edmonton, making it the largest ever in Canada, producing enough liquid hydrogen to power every public transit agency across the province of Alberta. The surge in demand is propelled by a number of market and regulatory forces such as the Inflation Reduction Act in the U.S. and similar programs in other parts of the world. For Smiths Detection, in addition to double-digit growth in aviation, we expanded our presence in other high security markets like ports and borders, defense and urban security. Our business in these adjacencies grew 23% in the first half behind major customer wins in markets like the U.S., Japan and Indonesia. Flex-Tek is helping customers meet their sustainability goals in a number of ways. In October, we announced a strategic partnership with Midrex Technologies and H2 Green Steel to build the world's first zero-emission steel plant in Northern Sweden. Midrex provides the hydrogen reduction process that powers the facility, and Flex-Tek provides the high-temperature electric elements that super heat the hydrogen. As Clare mentioned, we completed the bolt-on acquisition of Plastronics in January, leveraging cross-sell and new product synergies with Smiths Interconnect and extending our leadership into attractive adjacencies in connectors and testing. Now having shared some updates on growth, let me say a few words about our progress on the execution front. The Smiths Excellence System is the framework through which we're building a more aligned, consistent, and higher-performing culture here at Smiths. SES improves results delivery and accelerates talent development. We relaunched SES around this time last year, initially putting in place five full-time Master Black Belts to lead the program and 20 Black Belts to lead the projects. The first wave of projects have now been completed, contributing roughly £5 million to the bottom line. The impact of SES is scaling quickly. Our initial target was to generate £20 million in annualized benefit. And based on the good start in first half, we're now tracking to just over £25 million. And encouraged by our progress, we've added an additional Master Black Belt and 5 more Black Belts in key commercial and operational areas around our company. SES is fast becoming the way we work here at Smiths. To give you a feel for how this plays out on a day-to-day basis, we thought we'd share a typical project. I'll quickly frame the effort and then turn it over to the project team to walk you through the details. I mentioned on a previous slide that demand for electric heating solutions is growing quickly, driven by the same megatrends we just touched on. Flex-Tek supports customers in this area in a number of ways. The Green Steel program I mentioned is one example. Another is our electric HeatKits used in residential HVAC units. Around this time last year, high demand, coupled with supplier constraints, resulted in surging back orders in this part of our business. We pointed SES at the problem and over the span of roughly 6 months, increased our capacity by 1/4, cut lead times in 1/2 and fully eliminated the customer backlog. Now let's hear from Dane, Justin and Kevin, who led the project. [Presentation]
Paul Keel: Thank you, Dane and team, a terrific project. As growth accelerates across Smiths, we see variants of this opportunity in a number of areas and are quickly replicating the project, learning and building with each successive result. Our people priorities are focused in four areas
Paul Keel: Sustainability, it plays an important role in our growth, execution and people priorities. On the growth front, in addition to energy transition programs that I mentioned earlier, we have multiple green new product platforms in development. With respect to execution, we're accelerating emission reductions at the same time that we're growing our business. We're tracking ahead of plan on our 3-year targets for water, waste, renewable electricity and greenhouse gases. In terms of people, this is the first year where delivery of concrete ESG commitments are part of both our short- and longer-term incentive comp at Smiths. You can find a good summary of our sustainability strategy from John Ostergren, our CSO, if you visit the capital market site on our web page, and you can find even more detail in the sustainability report, which is also available for download in the same location. Sustainability is an area of both strength and competitive advantage for Smiths. So please, do have a look. Just a few comments by way of summary, and then we'll open it up to all of you for your questions. After a record start in the first half, we're well on track for a strong fiscal '23. Our growth is good
Operator: [Operator Instructions]. Now we'll take your first question. And the first question comes from the line of Christian Hinderaker from Goldman Sachs.
Christian Hinderaker: Very strong set of results, so forgive me for starting on one of the rare negatives in the print. Can we talk a little bit about inventories
Paul Keel: Yes, thanks for the question, Christian. As Clare mentioned in her comments, about 85% of that inventory increase went into John Crane and Detection. And what you'd like to see, if you broke that down was the components of inventory lining up with the growth. So we look at inventory by the 3 big categories, raw materials, work-in-process and then finished goods. In John Crane, the largest percentage increase came in work-in-process. These are orders that came in, materials that are moving through the factory and those will now progress on to customer sites. We're further along on the Detection side, where the largest percentage increase was in finished goods. So these are large detection systems that now are fully assembled, and we're just waiting for the customer to receive them. So that will work through naturally here as the businesses progress forward. For us, we think of it as an investment. In the same way that we're willing to create near-term margin on OE for the higher-margin recurring aftermarket, we're building and, in fact, excited to use our strong balance sheet for a competitive advantage to support this kind of growth. I don't know, Clare, if you have anything you wanted to add to that?
Clare Scherrer: I think that's a terrific explanation of where our cash conversion in the half reflects our investment in inventory and it reflects our belief that, that will, in turn, support medium-term growth. So nothing has structurally changed about our ability to generate cash conversion consistent with what we've done in the past.
Christian Hinderaker: Secondly, I wanted to ask Flex-Tek. We're seeing a bit of a softening in housing data, both in terms of starts and now year-on-year in terms of pricing. Can you talk about the positioning of the Flex-Tek business within the U.S. housing market? And what you're seeing in terms of demand conditions today on the ground? I note that 67% of division sales are now HVAC-related. That may provide a buffer perhaps in terms of spend being towards energy efficiency over general DIY investment. Grateful for your thoughts.
Paul Keel: So Flex-Tek is a fabulous business. Over time, it grows, regardless of what's happening with its underlying markets. It has double-digit 5-, 10-, 15-year top line CAGR and even better earnings CAGR over that same period. We have been anticipating this. The well understood slowdown in the U.S. housing market would have impacted Flex-Tek sooner. Flex-Tek came in stronger than many people expected. Now we do see, as you pointed to, those macro indicators on the U.S. housing starts. While it didn't impact us in the first half, in the first 6 weeks here, now, of the second half, we are starting to see evidence of that. So Flex-Tek will continue to grow, as it always has, just not at those same record levels we saw in fiscal '22 and then here in the half. They have 2 businesses balancing that, the construction impact that we just described. You noted one of them, aerospace. Order growth in aerospace was in the double digits in the first half, and that business will continue to grow here moving forward. And then the second is the electric heating business that we touched on in the call. The demand for electric heating elements, as all businesses like ours, have made net-zero commitments. A place you look early is on your process heating. And so we're getting a strong inflow of questions how we can help our customers convert from fossil-based heating to electric heat. So we feel pretty good about where we're at with Flex-Tek.
Christian Hinderaker: And then linked to my second question and, in fact, your comments on the net-zero ambition. I wanted to ask if you're seeing any signs of this incremental demand from some of the policy announcements we've seen. For example, the CHIPS Act, which might help Interconnect, and you flagged the U.S. IRA earlier on the call. Just wanted to think about how we should calibrate the impact of those policies on demand for your businesses.
Paul Keel: Yes. Well, energy transition is one of these giant global megatrends, $100 trillion the world will invest over the next 20, 30, 40 years, as we get to net zero. Whether that's in 2040, 2050, we'll have to see. And this is now playing out in our business in a number of ways. We gave an example of the blue hydrogen facility in Canada. It's a very clear example of that; the H2 Green Steel partnership in Northern Sweden, another clear example of that. And so legislation, like the Inflation Reduction Act and parallels of it in most major economies, all help accelerate that tidal wave of transition that is coming so we find that supportive, absolutely.
Operator: And the next question comes from the line of Andrew Wilson from JPMorgan.
Andrew Wilson: On John Crane, I'm interested in terms of what indications you're getting from customers with regards to demand. I mean, the orders in the first half, I think you said were up about 14% year-on-year, so clearly, very strong there. I guess I'm interested in terms of how much of that is a catch-up; maybe pent-up demand; supply chains, obviously been challenges, et cetera; and how much of it is real genuine underlying -- we're obviously expecting energy markets probably to be pretty strong for maybe the next year or 2 at least. But I guess interested in terms of what the customers are actually telling you, and interested from both sort of I guess I would describe sort of traditional market but also the newer markets as well in terms of into second half and maybe into in FY '24?
Paul Keel: Yes. Thanks, Andy. It's a good question. So Crane is seeing strong demand, both on the order front and on the revenue conversion side across all of its end markets, then it's seeing it both on the OE and the aftermarket side. And there's 3 pockets of customer demand. Yes, the traditional energy business right now is seeing very strong demand. Part of that is post-COVID. Part of that is the increased demand for supply out of non-Russian sources. The second piece, remember, John Crane also participates in a number of nonenergy segments, water treatment, pharmaceuticals, chemical, all of those businesses, demand is strong. The third piece of it is this energy transition wave again, which we had been thinking about as the future. But that future is very much here right now. 40 active hydrogen and carbon-capture projects underway right now; our opportunity funnel, more than doubling; and then some very big projects like the Canada project and then last year, we had the very large NEOM project. So it is a good time in John Crane. And incrementally exciting for us is there's good reason to believe for Crane the near-term demand will extend into the medium term for all of the reasons I just described. And then this long-term tailwind from energy transition, provided that we can respond to the demand, both in terms of operations, but also in terms of new product and service offerings, we should be well positioned here for some time to come.
Andrew Wilson: And I guess my second question is actually something similar I guess on the Detection side. It's a couple of aspects to it. Obviously, the first half was very encouraging in terms of that order conversion coming through and I think you've been fairly clear in terms of what we should expect for the second half on a slower growth rate. But in terms of the visibility that you're getting with customers, and the visibility that that's providing you with in terms of profitability, I'm interested if you've been able to, I guess, make any progress with regards to this sort of better understanding of the profile of the business going forward. Because historically, we have seen it being quite volatile and it has been quite challenging I think at times in terms of trying to understand what we should be expecting. And clearly, within the context of the group target, Detection has to contribute to that. So it's a very broad question, I appreciate, but in terms of your sort of confidence visibility around what we should be expecting in Detection, again, probably in the next 12 to 18 months?
Paul Keel: Yes. Well, we think of Detection in kind of 2x2 grid. You have aviation security, you have other security systems, you have the OE part of the business and then you have aftermarket. On the OE side of the business, you tend to have good visibility. The order book in Detection tends to be multiyear. So you can see forward across many quarters of what the OE side should look like. Attached to every OE order is typically a committed service period. And that service piece has both scheduled maintenance as well as break fix. So you can see the scheduled maintenance and model that out. What you can't see as well is how fast these adjacencies grow. So we have a pretty good feel on the aviation side, but the adjacencies we're moving into, other security systems had very rapid growth, in particular on the OE side in the first half. That's a little bit more difficult to predict. And then again, the other security systems side of that business also has the defense piece. Those tend to be very large orders. And so when those come in and those roll off in a comparable period, that tends to introduce a little bit of volatility.
Clare Scherrer: Paul, I might add, we entered the second half with our largest order ever in Smiths Detection, which is up double digit versus a year ago, and up high single-digit percent growth in order book versus the start of the year. And so I think that positions us well. As you mentioned, Andy, it is a programmatic business, so quarter to quarter, things don't always advance in a smooth fashion, because we do need to wait for customers to be ready to receive delivery. But overall, the order book that we entered the second half with positions us well for sustained growth in that division.
Operator: And the next question comes from the line of Mark Jones from Stifel.
Mark Jones: If I can start with a broad one and then a couple more specifics. The broad one is obviously, now you've roughly doubled your expectation of organic growth for the full year. If you were isolating particular parts of the businesses that have driven that, is it more about stronger demand, and in which case, what part of the business? Or is it more about better availability as you deal with some of the supply chain issues? Can we take that one first?
Paul Keel: So for, well, call it, 18 months now, demand has exceeded supply. And right now, both on John Crane and Detection, they have such strong order books that demand is still above our ability to supply it. We have been scaling supply in both Crane and Detection, both in terms of CapEx, adding capacity, but also SES, as you saw, a good example there with the Flex-Tek project. We're getting more supply out of existing capacity. So on both fronts there, that's supportive.
Mark Jones: Okay. And then this wave of OE we're seeing in Detection, what typically is the lag between one of those OE waves and the aftermarket coming through, because I know there's a period of time when the aftermarket stuff is effectively included in the sale process? So how long is that lag?
Paul Keel: Yes, for Detection, it can be anywhere from 6 to 18 months for an order to convert to revenue on the OE side. It's shorter, more typically, 3 to 6 months, for an aftermarket order in Detection to convert to revenue.
Mark Jones: Okay. And perhaps one quickly for Clare. Obviously, a lot going on, on the balance sheet. In terms of the benefit of seeing a lower finance cost coming through, can you give us some indication of timing and scale of that?
Clare Scherrer: Yes. So we're planning -- and thank you for the question. So we're planning to repay our EUR 600 million bond when it comes due in April. So we'll have interest reduction from that repayment. When you think about the other bond which we will have which will remain outstanding which doesn't mature until '27, 1/2 of that is swapped to floating. And so you should think about right now the effective interest rate that we pay on that remaining bond of around 4.2%.
Operator: [Operator Instructions]. And the next question comes from the line of Andre Kukhnin from Credit Suisse.
Andre Kukhnin: I'll go one at a time as well. Can I start with the Smiths Excellence System that is clearly delivering results? And you've outlined very clearly what's expected for second half and then the increased annualized benefit of £25 million. But beyond that, should we think about SES as something that is a continuous process and think about that similar level of annual saving where you could generate in obviously 2024 where the full annualization and beyond that? Or is this something that you are still ramping up very actively and it's something that has got potential to actually deliver substantially more than the current run rate?
Paul Keel: So SES, as you see in other businesses that have deployed continuous improvement methodologies across the enterprise, it brings you 2 primary things. It improves your execution, your project management, the predictability with which you can solve problems. And then the second thing it does for you is it accelerates development of talent. Certainly, the Black Belts and Master Black Belts who are in full-time roles in the program, but all of the project participants learn that same problem-solving methodology. And then over time, you improve your culture, you get used to better execution and it becomes the norm. Now you can point that capability have a lot of the different things. Across the first half, we principally pointed it at customer service. Because of Mark's question regarding demand and supply, with demand exceeding supply, we have our SES teams focused on customer service. Also helps, of course, on the productivity front. So while we more than covered input inflation with our own price, there's still more margin to be captured. So moving forward, we're using a few more resources on the productivity side. As we get through that piece, I think you're going to see more emphasis, as Clare mentioned, on the working capital side. We start to bring our cash conversion numbers back up into that 100% range that you guys are used to from us. So SES does a lot of things for the company and you can point it at a lot of different problems.
Andre Kukhnin: Great. And I guess maybe to extend that a little bit, I know it's multifaceted, but we have some companies that talk about kind of a minimum level of productivity to be delivered every year; some talk about 3%, 4%, 5% at the highs. Is that maybe the way for us to think about Smiths going forward with SES being the tool and being flexibly applied to different choker points?
Paul Keel: Yes, I mean, of course, you like to see productivity both in your COGS line in your factors and then you like to see SG&A productivity. We look at both. We had good SG&A productivity in the first half. I think if you look at SG&A as a percent of sales, it was down 70 basis points or something like that. And then if you look at our margin walk, you can see examples of that factory productivity coming in. So yes, productivity on both sides is absolutely something we're focused on.
Andre Kukhnin: And if I may, just a couple of quick ones on John Crane. One, very excited to hear about, see some numbers on the new energy. Is there any chance you could give us an order of magnitude of like potential value of those, say, 40 projects? I know you wouldn't give it for an individual contract award, but just for us to have an idea what this 40 kind of projects could mean in terms of potential revenue even as sort of rough ballpark?
Paul Keel: Yes, at this stage, no, we couldn't give you an accurate answer. Because it is growing so quickly, it is tough to know what that growth rate will look at moving forward. If the current rate continues over several years, it will be a big part of our business.
Andre Kukhnin: Great. Maybe I'll follow up. And the final one was just on the margin for John Crane. Clearly, strong performance in H1 and you normally have quite healthy seasonality in the second half. Can that happen in this year? Or shouldn't we get too overexcited on that kind of sequential potential improvement in margin further from already healthy level in H1?
Paul Keel: Well, I mean all of our businesses have scale economies. So you put more volume through the factories. You get longer runs. You get shorter -- fewer changeovers and all of that shows up into the gross margin line. You saw that in John Crane. And then secondly, of course, is the SG&A efficiencies. You put more revenue over the same cost base, you get margin expansion from that. John Crane's high watermark is still north of where we currently are. So if we continue to execute as we have been, yes, we believe there's additional upside to Crane moving forward.
Operator: And the next question comes from the line of Bruno Gjani from Exane BNP Paribas.
Bruno Gjani: My question relates to orders and the order outlook. I recall back at the Capital Markets Event a couple of months ago, you indicated that 5% to 7% organic order growth was possible in FY '23. I was hoping you could share what organic order growth was in H1? And I was wondering whether you still expect to deliver 5% to 7% organic order growth this year? Or whether your expectations have evolved since then?
Paul Keel: Yes. Thanks for the question, Bruno. So we shared the number for John Crane, the 14% order growth. That business remains strong, and we expect similar kinds of levels moving forward. In Flex-Tek, the order growth is most relevant in the aerospace part of that business. We're seeing low double-digit order growth for Flex-Tek. Detection, Clare mentioned, it's a programmatic business. So looking at order intake growth probably isn't as helpful as looking at total order book growth year-over-year and as Clare mentioned, that was double digits here heading into the second half. The one business where we had negative order growth was Interconnect, and that relates to the slowing in semiconductor tests that we knew was coming as well as a little bit in our business. Some of our customers have delayed projects. We think they will come, but in the first half, they were delayed.
Bruno Gjani: Okay. That's helpful. And I guess I have another question just on investments and growth and the impact that has on the bridge. Could you help us think about how we should be thinking about the development year-over-year in H2 in terms of the dilution to margin? Because am I right in thinking that the year-on-year headwind in H2 '22 was more pronounced and so, therefore, this year when we're looking at that year-over-year impact, there should be less pronounced as you started to ramp up investments more meaningfully towards the back end of last year or the last fiscal year? Just the shape would be useful. And I guess just on the mix element as well, is there anything exceptional that was delivered in H1 that weighed down on that margin particularly that might not repeat in H2? Or would you expect mix within revenue for H2 2023 to be largely similar to that of H1, so to have a similar kind of mix headwind?
Paul Keel: For the full year, we expect to continue seeing moderate margin improvement. It will be the same trade-off that we talked about for the first half. We could boost margins more. We could back off on our R&D investment. We could be more discerning in terms of our OE tenders. But our current posture is that we'll continue to prioritize growth. So tenders that play our strength, that value technical differentiation, that value strong service using our global service networks, we're going to continue to invest in the OE piece, knowing that it's a near-term margin impact because we have a decades of evidence that it leads to higher-margin recurring revenue. So I think it's going to be, Bruno, the same sort of dynamic here in the second half as we talked about for the first.
Bruno Gjani: Sure, sure. And on Detection, I guess, we're seeing more airports install or rather order CT technology on the cabin baggage side in Europe. Could you perhaps talk about the upgrade opportunity that exists I guess in Europe. You touched on in it in terms of New Zealand. But what that opportunity might look like over the next 2 to 3 years?
Paul Keel: Yes. There's 2 sides of that business of course, the checkpoint and hold baggage. Hold baggage conversion to CT in Europe is largely complete. It's the check baggage that's now going country by country. And it's different in each part of the world. The U.K. has mandated CT for the checkpoint here, I believe by the end of 2024. The U.S. is just starting. There's only one purchaser in the U.S. That's the TSA. And for all intents and purposes, their major tenders right now are all for CT. So it's going country by country, has a different pace. The furthest ahead is the Netherlands, for instance. They're nearly complete on both hold baggage and check baggage.
Bruno Gjani: Sure. And just finally on Flex-Tek. So you noticed that you're seeing the slowdown. Does that relate to just volumes? Or is pricing starting to roll off as well, in your construction markets that is?
Paul Keel: I would say you should expect a slowing on both sides. We did not see price come off in the first half. We had good volume and price for Flex-Tek. But in particular, on the construction side, our customers are asking more questions around price than they did previously and that goes with demand. When demand is strong, they ask you when can you deliver. They don't ask you at what price. Now as that demand on the construction size is normalizing, price comes into play.
Operator: [Operator Instructions]. Dear speakers, there are no further questions at this time. I would like to hand over the call to the management team for any closing remarks.
Paul Keel: Okay. Well, thanks, everybody, for tuning in. As I think you heard on the call and you saw in the release, the very strong momentum in the business right now, that's 7 consecutive quarters of accelerating growth punctuated with record organic revenue growth, record reported revenue growth and record EPS growth. Also unique in that all 4 businesses, all parts of the world and all customer end markets were in growth in the first half. So we feel good about the momentum we currently have. We would balance that with an observation of macro uncertainty, which remains at a very high level. So the things that we can control, we expect to continue progressing in the second half. But uncertainties are pretty high. So you put those 2 together and you get the increased guidance for the full year of at least 8% organic revenue growth, which is our second raise now in 2 months. So thanks again for your interest and we'll be talking to all you guys in the coming days and weeks. Bye for now.