Good evening, everyone. My name is Greg Conrad, SVP on the Aerospace and Defense Equity Research Team at Jefferies. Welcome to our annual Jefferies Industrial Conference in New York City. We're very lucky to have Jason VanWees, Vice Chairman of Teledyne, with us today. We'll go through a little bit of a fireside chat. Thanks, Jason. Maybe just to start, and I'm sure you've been getting this question all day, but how do you think about the portfolio today, puts and takes? Where have you been surprised by the strength, and maybe where there's been some pockets of weakness?
Sure. So a quick little background. I know a lot of folks here, but I've been with Teledyne just over 25 years. I think my anniversary was a week or two ago, for what it's worth, and my primary responsibility is strategy, which really means acquisitions. So to the point of the portfolio, it's relevant. The portfolio composition hasn't changed a lot. It's grown in the last 10 years, but we've put it where it was circa 2012, and it's largely been the same spike growth. And what the portfolio is right now, generally speaking, is 75% commercial, 25% government. When I joined, we were essentially a defense company. Your top line was the investment accounts, can't run, can't hide, lower margin, more cost-plus business, less fixed-price business.
I think through cycle, a little bit different right now, government is maybe a 2%-3% grower, where commercial is maybe mid-single digit, maybe a little bit better, but on the other hand, most of our businesses, we don't have lots of pure play defense businesses. An average Teledyne company is a multi-market, high-spec product, sometimes with embedded software, but some of the same individuals that might design a sensor for space-based imaging might design a sensor for semiconductor wafer inspection. Seeing feet from space or nanometers from maybe an inch above a wafer, similar skill set, so we serve the defense market, and having a backbone of predictable, longer cycle defense, we view that as a nice shock absorber versus global macro.
Shock absorber, where when I joined, it was more of a ball and chain 'cause it was your entire top line. That said, if you maybe cut the portfolio another way, so defense is maybe 25% or so, but all things what we define as long cycle, more predictable, backlog-driven businesses, incidentally, all doing quite well right now. In descending order, it's about 40% of the company, but that descending order is defense. I already talked about that, maybe 25%. Then medical, very clinical medical. We have other things in life sciences or laboratory instrumentation, but think X-ray detectors, think devices that generate X-rays for cancer radiotherapy, so about $400 million. Think offshore energy and commercial aerospace.
That's about 40% of the company, 9-12 months of backlog, quite predictable, and doing quite well, the last, you know, 4-6 quarters or so, mid- to high single-digit growth. Again, in the case of marine, maybe double-digit growth, in offshore energy the last few quarters. The other part of the portfolio is the more commercial, industrial, short cycle. Some of that's kind of been flattish with, you know, weak PMI prints the last, you know, year or so. But some of the business, maybe $1 billion in revenue or so, has been in a little bit of a funk starting in Q3 of last year. That's things like industrial machine vision, industrial automation. I mentioned semiconductor wafer inspection.
Those markets have been sequentially better in Q2, but still comping down year on year, and you don't really get easy comps till around Q4, and parts of electronic test and measurement, so think, you know, Keysight, Fortive, Spirent, Viavi, that's kind of the comp group. That sequentially was better in Q2 than Q1. I think there was a bottom in Q1. Some other market participants are saying that, but still comping negative year on year in that sort of higher beta, sort of short cycle, billion dollars of portfolio or so. That's kinda where we are, so. Now, that said, I mean, it's sort of been an interesting time for us. Reminds me of twenty fourteen through twenty sixteen.
Sorry to get off on a tangent, Greg, but we've been sort of flattish, so flat revenue, flat margins, flat earnings, flat stock price, you know, the last year and a half or so. But that really doesn't describe any part of the business. You've had, you know, high single digits in the long cycle, coupled with contraction in the short cycle, ending up kind of flat. Ironically, the same exact thing happened in 2014 to 2016, but with a twist. You had the defense markets down, and you had energy markets down, and all those holes were being filled with things like industrial machine vision, electronic test and measurement. But we had a flat top line, flat earnings, flat stock price.
What we did back then is bought back $400 million of stock, and what we're doing right now is we're buying back stock, given that dynamic. You know, hopefully, we'll see if it's Q4, maybe Q3, maybe 2025, maybe later. But if nothing else, the holes that we have been filling cease to be holes. Hopefully, they grow, but even if they don't, we start getting better comps, more in Q4 than in Q3. I think we see us returning to growth, and hopefully, the next couple of years look like 2017 and 2018, which were very, very good years for us. But long answer, Greg, sorry.
Just remind us, 2017 and 2018 growth. I mean, I know we've been talking about this for the past 12 hours and in meetings, but just kind of how you think about those range given-
Yep
... the moving pieces.
Generally speaking, the bookends of organic growth for Teledyne, because the portfolio is diverse, again, it's not because we have lots and lots of different businesses and factories. We just have a fair number of factories that serve different markets. And given that diversity, so a good year for us when either all things are growing or we don't have major holes to fill, 2017, 2018, 2021, when you had easy comps with 2020, 2022, when you had both price and volume in an inflationary environment, that bookend tends to be sort of 7-8% organic growth.
I think we had a few 8.2s or an 8.5 here or there, but let's call it 7-8% when most things are good, or you don't have a tragedy that you have to fill. On the other hand, the other bookend, I mean, a tragedy, COVID, full year 2020 was -4.8%. So there's not a lot of, you know, the swath of all possible outcomes is relatively narrow. You know, our average guidance tends to be sort of 3%-5% organic, except in years like in 2021, when we had easy comps. I think the guidance was, you know, 5.5%-6% that year 'cause you had an easy COVID comp.
Street's at 5.2% for 2025, which seems reasonable, for what could be an easy comp in some of the commercial businesses. But again, those are the bookends. Something goes horribly wrong, -5%. Most things go well, 8%, most of the years are somewhere between. So-
And then maybe just digging into end markets. We'll start with defense. I mean, that portfolio's obviously been added to with FLIR. Maybe if you can just talk about what's driving that. You have defense electronics, you have, you know, space within digital imaging, and then the FLIR defense side. What's really kind of driving that high single digit growth?
Yep. Inside digital imaging. Well, maybe I'll talk thematically first and give some examples. So what we do, generally speaking, in defense is observation-related product. In defense electronics, that means things like radar or jamming. We don't do, you know, bullets, body armor, meals ready to eat. It's some kind of observation related items. In digital imaging, it is what one would expect. It's largely imaging. Now, some of the larger programs or thematic areas are space-based infrared imaging. Civil space is reasonably large, things like climatology, satellites, NASA, European Space Agency, but also classified satellites or non-classified government satellites. Greg, you know the programs, Space Development Agency, Space Force, wide field of view, tracking layer, we're the sole source sensor provider. OPIR, Overhead Persistent Infrared, we're one of two suppliers in that space constellation.
But tactical infrared via FLIR, that's the space-based legacy Teledyne FLIR, which we acquired in 2021. So think the gimbal systems that hang from helicopters or those camera systems, or full autonomous systems that use the FLIR infrared, small UAVs, small ground robots, the product is called the Black Hornet, but small, attritable UAVs, again, for observation. We just recently entered. It's still small for us, but we do have a loitering munition now. That's a new product, so that's not necessarily observation, that's observation, find and act, but we do have a loitering munition contract, as of earlier this year. But generally speaking, it's imaging or its components for radar and electronic countermeasures. Again, there's some exceptions to that rule, but thematically. Now, what we don't have is, you know, major, major programmatic concentration or rebid risk.
You know, I'd say a big defense program for Teledyne is, you know, $50 million-$60 million a year out of, you know, $1.3 billion. So lots of different programs. That's why I say thematically is more relevant. If there's an imaging satellite, probably uses some of our gear, and that's both defense. 96% of all the pixels on James Webb Space Telescope looking out are our sensors. So again, imaging, countermeasures, radar, but lots of different customers, lots of different programs. So-
And then maybe sticking with digital imaging, the other side of FLIR, which I guess is more commercial with a little piece of defense. I mean, what are some of the bigger end market drivers you're seeing there, and how is that portfolio kind of tracking relative to short cycle?
Yeah. So, in the FLIR core, infrared business is about $750 million or so. That's really more defense systems. So that's unmanned systems, counter unmanned systems, and gimbal imaging systems. Then there's about $850 million that we call commercial, also serves the defense market, but it's infrared components or cameras, and that one is pretty broad. One case would be, even though we call it commercial, we do the thermal imaging devices for an AeroVironment Switchblade, for example. That's defense, that's doing quite well. There might be higher end infrared systems as an example, optical gas detection, methane leaks, energy industry, or even things like carbon capture, you know, leak detection, things like that. That's doing quite well.
On the other hand, yeah, maybe the low ASP product for the FLIR One you can buy on Amazon for maybe an independent contractor looking for a hot water heater leak in a house, yeah, not doing so great. But again, not a lot of surprises. In terms of the overall FLIR portfolio, in part because some of those higher value verticals, like optical gas detection and even the commercial leverage on defense, it's actually doing quite well for, you know, a sub-50 PMI. It's been flattish, as a whole portfolio, that 850. The 750 is growing. The defense systems is doing quite well. But the 850's been sort of flattish, but I'd say it's probably better than, you know, parts of global macro, but there's not a lot of surprises there.
Again, you know, hazardous gas detection, good. You know, more commoditized, you know, business, which is a very small part of our business we actively say we don't wanna be in. Markets that are commoditized or subject to commoditization. But the lower ASP stuff, lower value, more independent contractor, or a low-end FLIR product bought through a Grainger or something like that, probably minority of the business, but probably a little bit weaker. Net, net, about flat.
And then maybe if we can parse the vision part of digital imaging. I mean, that's been part of the weakness. I think it was down 30% in each one. It's obviously diverse, semis, warehouse, scientific, and other industrial markets. Maybe if you can talk about what you're seeing in each of those markets, and what kind of the swing factors will be as we head, you know, into next year.
Sure. So when I referenced the industrial automation before, what others would call machine vision, we really call it more industrial and scientific vision systems. On a last year basis, it was roughly $600 million of revenue, and as Greg said, comped pretty hard in the first half, a little bit better in the second half. But could be $475 million this year, maybe upwardly biased to $500 million, but down a lot, 20% from last year's $600 million, in round numbers. Largely serves three verticals. Again, these are not necessarily unique businesses, they're just multi-market, high-spec hardware and software businesses. But the one that probably is comped the hardest in the first half of the year, might actually do well in Q4, at least on a year-on-year basis, is... Again, we make specialty sensors, so think semiconductor mask and wafer inspection.
You know, customers in that ecosystem for that third would be people like, you know, KLA-Tencor, Applied Materials, one of their competitors, Lasertec, out of Taiwan, and ASML, for example. That ecosystem, while the outlook, you know, knock on wood, may be good and may be very good long term, you know, the last four quarters have not been very good. Combination of destocking at one point last year, not true now. The memory ecosystem, think Samsung, Micron, Western Digital, losing money a little bit. CapEx was tough for the last year or so. Sequentially, we've been up in Q2 versus Q1, but that's the biggest part that's been down. The rest of what we would call industrial and scientific vision, the reason we say scientific, there's about two hundred million of last year's six, this year's five.
That's pretty low beta. Again, another niche-y Teledyne application. Someone looking through a microscope, and they want to take a picture, so low light, high magnification, maybe a very fast frame rate, want to see a chemical or protein pass through a cell wall. Again, Teledyne niche, specialty sensor, something hard to see. That tends to be kind of lower beta. Didn't, you know, have big outsized growth in 2022 with supply chain crises or over-ordering, but hasn't really shrank much this year. The last $200 million is more sort of general industrial, and that's down a bit. It's been down for longer, though. Think sensors for the logistics, the ubiquitous 2D barcode. We sell sensors to other companies that people think are more machine vision market participants, someone like a Keyence in Japan and Cognex.
They tend to be more customers than they are competitors in that last $200 million, that is more general industrial vision systems, if you will. So...
And I guess just thinking about the correction in that business and, you know, from an outsider's perspective, hearing about all the investments in, you know, areas like semi, would you expect that to eventually get above that peak six hundred, you know, whether it's next year or the year over? I mean, how quickly in these short cycle businesses do you typically recapture those lost sales?
I'd certainly like to think. I mean, they're all, and my personal view, a little bit overused words, but first of all, it's never been. It's never really been down before. I mean, incidentally, it was the industrial machine vision and the electronic test and measurement that do lean a little bit semi, that filled all the holes of defense and energy in that 2014 to 2016 period. This is the first time it's actually been down a little bit. I don't think there's any reason to think it won't rebound and continue to grow. Again, I think all slightly overused words, but AI, hyperscale storage, cloud, 5G, terabit Ethernet, CHIPS Act, reshoring. There's no reason to think that both electronic test and measurement, as well as semiconductor mask and wafer and other niche applications, that won't be...
You know, it's been amongst the fastest growing thing in the last decade, probably only eclipsed by some of our specialty X-ray detectors, the last ten years, and maybe the fastest growing over the next ten years. But the last four quarters have comped year on year pretty ugly. That said, again, Q2 was marginally better than Q1. I think Q3 will be marginally better than Q2. When do we go back to six hundred or more? You know, stay tuned. But it's a short cycle business, so the real answer is, I don't know. But the drivers over the last decade, none of those have abated. They've actually been the same or gotten stronger. It's just been a combination of destocking and some individual customer demand issues the last four quarters.
And then I feel like the healthcare business within digital imaging maybe isn't talked about as much. I mean, I think that was pretty much started from zero back when you bought DALSA, and you've added to it. I mean, can you maybe just talk about the trends that you're seeing in that business and kind of the opportunity, given most of that, I think, is just share pickup?
Yep. So the really clinical medical, again, we have trace chemical analyzers that go into laboratory instrumentations that I could call life sciences. But when I say medical, it's $400 million in digital imaging, and it's largely two product sets: specialty X-ray detectors, where our niche, where we've gotten the share gains, 'cause OEM medical equipment, I wouldn't call it a growth market. But we make specialty X-ray detectors that have, again, what's a Teledyne niche, seeing things that are hard to see. So very high resolution X-ray detectors, but also at a very low dose. That's our niche, and we're fabulous there. We design them. They're CMOS-based. We have three foundry partners, but again, specialty X-ray detectors that are more sensitive at low dose. And yeah, that was zero in 2011, and that's now about half the $400 million.
The other balance of that is specialty X-ray generators for cancer radiotherapy, where I think our share is north of 90%. So Varian Medical, Elekta, Accuray, some smaller companies in foreign countries, they all use Teledyne magnetrons to generate X-rays for radiotherapy. That's been more stable, but that's largely and also growing above trend because it's both OEM equipment, but they burn out. They're effectively a consumable. Mind you, years, not months or weeks, but you need to replace the magnetron trying to generate X-rays. So you've got a consumable healthcare business in the case of cancer radiotherapy, and then you've got share gains both in OEM equipment and in the installed base with the CMOS-based X-ray detectors. So it's been a very good business.
And again, like I said, over the last decade, probably the only thing that's eclipsed industrial machine vision and T&M in terms of growth has been that medical business, that healthcare business. That said, the last quarter was not great because there's certain, like a little nitpick on segments where, yeah, you know, turns out rates higher for longer have not been great for dentists who buy equipment on financing. So yeah, there's, you know, little pockets here and there that were not great in Q2. Extraoral dental, you know, expensive OEM equipment bought on financing by what effectively are small businesses hasn't been great. But it's been great the last decade, and it will continue to be.
Where is that dental business trending? I mean, I think that was largely shut down during COVID, too, when people weren't getting work done and-
Yeah
Mostly closed.
Yeah, I mean, literally, the only time that healthcare business as a whole shrank was Q2 2020, when people weren't going to the dentist or they weren't, you know, having their knees done for surgery or things like that. But even in 2021, that business surpassed 2019, so that was a very, very short-term blip because people didn't wanna go to hospitals. Otherwise, it's been, you know, a very, very nice trajectory. Yeah. And again, it's largely been based on share gains. I won't, you know, get off on a long speech here, but the legacy technology for X-ray detectors, still all digital, has been what's called amorphous silicon thin-film transistors. They still work fine for someone like a chest X-ray, maybe a big, big panel. You don't care too much about radiation if you're a patient.
I mean, I've probably had a chest X-ray twice in my life. But if you're going to a dentist and you're getting lots of X-ray, you know, it takes more energy to penetrate teeth. It's near your brain. You know, low dose, high resolution turns out to be very, very important. Or surgery, where it's not a frame like a chest X-ray, it's video. If someone's working on your knee or they're doing it in a, in a cath lab on your heart, it's frame, frame, frame, frame, frame. Dosage and resolution matter a lot, 'cause you're taking lots of shots, if you will. So that's the niches that we're in right now, is largely dental, largely surgery, and just now starting mammography. We've got some design contracts on that, where that's all about resolution.
Dose is still important, but it's really, really about resolution and early detection, so that's the next leg that we hope to grow.
And then maybe T&M, you know, I mean, I remember there was a while where it was seemed to be growing 20% a year. Can you maybe talk about oscilloscopes versus protocol analyzers? It seems like those have maybe switched, or at least one has stabilized-
Yep.
- what you're kind of seeing in the end markets tied to them.
Yeah, so the electronic test and measurement business, it's a standalone product line for us. Annual revenue. Yeah, yeah, Greg, you're right, maybe down 10%, will be about $300 million this year. Last year was $338 million, so maybe, maybe 11%. In terms of the product families, I mean, generically speaking, it's in the same ecosystem as parts of a Keysight or a Fortive Tektronix. We tend to be a little bit more narrowly focused in terms of products. Greg referenced, so half of it is oscilloscopes and accessories, but oscilloscopes are a high-end chip development sold to the research lab. That held up reasonably well last year. People were still innovating in semiconductor land. Some people are making a lot of money in that domain right now, so that held up.
We actually grew year on year in each of the four quarters last year. Bit of an anomaly for market participants, but that was because we had, you know, lots of strength in oscilloscopes for new chip development. What was down is the protocol analyzer business. Now, what's a protocol analyzer? Well, what's a protocol? You may know this, but a protocol is, you know, the rules of a road for data communication. It just could be Wi-Fi, Ethernet, Bluetooth, HDMI for television. It's one of the more exotic ones, but a bigger market is PCI Express. It's the language of the data center. The language of the cloud, if you will, is PCI Express. That's a data transmission protocol. That business was down for, you know, really starting in Q3 of last year for, you know, a couple of reasons.
But if you generally think that this may be more correlated with the network than with semiconductor developments, not that black and white, but if you think more, you know, even a sliver of the telcos, maybe a Cisco, as opposed to an NVIDIA or a Marvell. Again, there's a lot of gray ecosystem in all things electronics, but think the more network-focused products have been down for longer. And that's gotten a little bit better, where the oscilloscopes, to your point, are reversing, have actually a little bit tougher comps, 'cause that did reasonably well last year. So the print is sort of, you know... Sequentially, we're a little bit better in Q2. You know, we'll probably be a little bit sequentially better in three, Q3. But yeah, the narrative will look a little bit big.
Oh, my, heaven forbid, scopes are down, but protocol up, but it's really because the comps are, in one case, easy, one case, hard. So...
Then environmental, I mean, I think that business maybe experienced weakness a little bit earlier. I think over the last five or six years, you've done a couple deals in there. Can you maybe parse that portfolio a little bit in terms of end markets, drivers, and, you know, it looks kind of stable now? Like, what are some of the long-term drivers there?
Sure, and maybe just 'cause time's running out here, we'll round off the instrumentation segment. So T&M's actually the smallest that is talked about, at $300 million. The largest, I'll get to environmental in a second, but the largest at about $600 million of that $1.3 billion segment is what we call marine. Again, not a lot of factories, but a classic multi-market Teledyne company. That's been the fastest-growing thing in the portfolio over the last four or five quarters in terms of a large material business, $600 million a year. And that's 'cause it serves three markets. One is offshore energy. Same factories also serve subsea defense, so think components for Virginia Class or Columbia Class submarines. Think autonomous, complete autonomous underwater vehicles.
I mentioned small drones, you know, aerial for FLIR, but subsea drones is a lot of people are curious all of a sudden in the last year of what's happening in the North Sea, the Black Sea, and the South China Sea. That's been a quite nice business, and then sensors for climatology. Think looking for, throughout the water column, for El Niños, La Niñas, and the like, ocean temperature, salinity, important for environmental science. That's all three vectors have been going well there. Environmental is the last one, about maybe $470 million. Basically, environmental for us is trace chemical analyzers.
And half that business, you know, some same products, some same factories, but half the business that's correlated with air quality, water quality, methane detection, electrochemical, in this case, as opposed to optical, in the case of FLIR, that's been doing fine. The part that has been down for a while, but actually, yeah, it's getting better now 'cause it's been down for longer. We sell trace chemical analyzers to the laboratory instruments ecosystem, so think our customers, sometimes competitors, but more often customers, Thermo Fisher, Agilent, Danaher, Waters, Bruker, PerkinElmer, now Revvity. You know, that started getting a little bit harder in, you know, early part of last year, so yeah, we'll probably be on year growth in the environmental instruments, in part 'cause the comps are easier. But yeah, Q2 was sequentially a little bit better than Q1.
I think Q3 will be a little bit sequentially better, but it's also been down for longer, so it should return to growth. But that's really a function of some of the laboratory instruments companies being a little bit down, and they're our customers. The safety, hazardous gas, the AQI, air quality index, on your weather app on your phone, we make the ambient air analyzers for that data for the EPA, and that's all been fine, so.
And you started the conversation talking about kind of the Teledyne playbook, and in the past, we've seen you pretty aggressive at taking out costs when you do have these downturns. I mean, when you think forward, you know, what do you think about the implications for margins, whether that's mix, productivity, you know, as some of this growth returns and kind of the runway for margins that you view?
Yeah. So we've been very good historically at protecting margin in downturns. I mean, I mentioned, you know, quote, "The disaster of COVID, where organic contraction was 4.8%." Margins were actually up, even on a GAAP basis with cost reductions in 2020 versus 2019. Margins were up the last couple of quarters with, you know, a little bit of organic contraction. So yeah, I certainly expect incrementals in the playbook, to use Greg's word, you know, grow the businesses that are growing. You know, add variable cost, maybe some direct labor, maybe a shift, but don't add capacity unless you absolutely need to. So let those businesses grow, get good incremental margins, but protect margins the best you can in a business that's shrinking.
And when they return, permanent costs, which is taken out, don't add that back. Add back variable as needed, but don't add back the permanent cost that you took out on the way down, and that's been the playbook and will continue to be the case. Now, so I do think there's margin runway, probably more so in parts like segments like digital imaging, where the margins have been flat. Instrumentation, despite you know, we talked about, oh, T&M is gonna be down, things like that, but instrumentation margins will probably be up a hundred basis points this year, in part on strength of marine, which I already mentioned. But that said, you know, the, what's probably really gonna happen to margins, I just described the base cases.
Most acquisitions we do now are actually margin dilutive, and, you know, you can look sort of at punctuated points in time, where margins go up a little bit every year, then we do a deal. Then they go up a little bit, then we do a transaction, and that's probably what's the logical thing. But every time we do this, it creates a lot of earnings. So there's the base case where, yeah, I could... The generic answer is, you know, 40-50 basis points a year, but it might be 40-50, then, oh, it's flat 'cause we've done a deal. But then the next year is 100, or something like that. That's, that's been the more likely case, so.
And then maybe in the minute we have left, you know, capital deployment, it seems like you're already tracking ahead of the $250 million-$300 million of buybacks that you had talked about when you initially did the authorization. Maybe just how you think about that going forward, you know, coupled with the M&A lever.
Sure. So the balance of this year, you know, Greg, you're right. So people ask me, you know, the dividend number, but we have a 10b5-1 share repurchase. It is a function of the stock price, so, depending if the stock is high or low, we'll buy less or more. But realistically, we'll probably buy about $400 million of shares this year, $200 million in Q2, when the stock was weak. Maybe to pick a number, $100 million in Q3, $100 million in Q4, but that could be more or less, depending on the share price, or depending on M&A. Bolt-on acquisitions have been good. We did $125 million of two bolt-ons in the front half of the year. The market for bolt-on acquisitions is reasonable right now.
A lot of founders we've been talking to for years, you know, have pretty good trailing numbers. Future is a little uncertain. If you're gonna make that once-in-a-lifetime decision to sell your business, you can buy treasuries or munis at a reasonable yield now, where you couldn't three, four years ago. So bolt-on M&A, there should be another one this year, maybe another two, we'll see. And we're looking at larger things, but acquisitions have been really pricey. Some of our peers have paid prices we're not willing to pay, and I think some have done well, some have gotten burned. So we'll be disciplined. So I'd say less likely, rather than more likely, just mathematically, 'cause there's fewer larger acquisitions, but we are looking at larger things.
But I'd say the base case is $400 million to buyback, maybe another $100 million in bolt-ons, and then, you know, even if we do a larger deal, it's probably more a use of funds at 2025, 'cause getting through the FTC or the EU in this environment just takes time. So-