I'm Derik de Bruin, the Senior Life Sciences and Diagnostics Tools Analyst for Bank of America. Welcome to our 2023 Global Healthcare Conference. Our next company presenting today is West Pharmaceutical Services. With us today from West are, CFO, Bernard Birkett and IR, Quintin Lai. Gentlemen, welcome. Thanks for making the trip over from, Pennsylvania. Appreciate it.
Thank you, and thank you for the invite. It's good to be here.
Our pleasure. So what's going on? So I'm not gonna ask a question on general pills at all. So we'll 'cause nobody's interested in that. So we'll just skip that. Do you wanna sort of do opening comments in terms of where we are in terms of, like, just exited second quarter, you know, strong demands across the business, CDMO going. Just sort of, I just want to set the, set the stage, and we'll take the conversation from there.
Yeah. You know, this year we have been transitioning out of our COVID response. And, you know, things are progressing really well. We're seeing strong demand in our core business. You know, we, we saw that again in Q2. If you drop off COVID, you know, we're seeing that double-digit growth, and it, you know, it's across nearly all areas of our business, and everything is, you know, performing in the ways we would have expected this year, achieving all our targets. I think a lot of the investments that we're doing, they're coming online, performing in ways that we would expect. You know, the Kinston investment that we made, we saw that, that's come online this quarter, seeing making good progress there. So happy to see that. You know, the demand is strong.
We see it from across a number of areas in our business, and I know there's a lot of focus on one or two areas and, you know, that's important. But for us, I think to see it across all areas of our business is really encouraging. And again, particularly in biologics, you know, we're, I think, from a customer point of view, getting our lead times back to normal levels. You know, in certain areas, we were probably over 50 weeks. You know, we brought that back down now to about 14-16 weeks. Our target is eight-12, and, you know, we're making progress towards that, and by the end of the year, we should be pretty close on that. As we look forward, you know, there is still a lot of work to be done.
We have a number of investment projects that are going to be delivered over the next number of years, and again, a lot of those investments are informed by what we're seeing from a customer's perspective and the demand and the forecasts that they're communicating to us. So, you know, a lot of good work, the transition from COVID and out of that, it hasn't been seamless, it hasn't been easy, but from my sense, I think we've done a really good job on that. And, you know, continuing with revenue growth, the margin performance, managing through inflationary periods and how we've adjusted to that and reorganized our business has been very positive.
So I wanna touch on some of the headwinds that you'd seen or some of the roll-off from COVID and some of the other things and inventories and stuff like that, because those still keep coming out as questions. But your COVID number this year, I think it's $60 million, right? It's sort of there.
Yeah.
We're using roughly a $40 million-ish number for next year, just as a finger in the air. I mean, is it, is that—I mean, there shouldn't be... I mean, it's not gonna go to zero, but it probably doesn't grow either. It's like, how are you sort of thinking about it for next year?
Yeah. You know, COVID, in our view, it's gonna be, it'll probably be a decreasing number.
Yeah.
What it is, I can't really call out today, but when you look at it in the whole context of our business, now it becomes pretty small. Now, if there is a need, a future need from customers for us to be able to ramp back up, we have the capacity to be able to do that and to support any shifts, but as of today, we haven't any visibility on that.
Got it. Good. So, but that. And obviously, you when you talked about lead times coming down, and obviously there's a lot of concerns about inventories and stocking and such to that nature is like that, as it, it hasn't really seemed to impacted the company. I mean, there's obviously been some going on with it, but there, it hasn't really mattered because the other business has been growing so fast.
Yeah.
Or do we need to worry about any of that as lead times come down?
Where we saw it was really around COVID, in a number of other areas of our business, it was actually the opposite because we had to prioritize supply as we were going through 2021 into 2022. So that's why our backlog number, you know, part of it was growing and the lead times were getting out there. So we have been able to address that, and that's been important for us to be able to get down, to be able to level load our plants and have a more normalized production schedules, and to deliver to customers when they actually want the product and in the timeframe that they want it. And we have made significant progress there. So we didn't see a lot of customers essentially destocking. There it happened in pockets.
We saw it in certain areas, but again, you know, it was offset by us having to bring those lead times down.
Got it. You're, I mean, the industry is obviously going through a big, I wouldn't say, transition right now, but I mean, you know, we've covered this stock for a long time and, you know, we've always been waiting for these big inflection points in terms of biologics and just sort of things coming through. And it really seems like the last couple of years, we've sort of seen this coming through. This has, but that's also a delicate transition, as you've got to ramp up capacity, and you've got a timing, you've got to forecast what your customers are doing. So when you look at the demand out there and your capacity and what's going on with it, I mean, is that properly aligned, or is there still some risk of, you know, mistiming the?
Yeah, trying to get the timing perfect is like, you know, that, that can be challenging. From our, from our perspective, we are now in a much better position with matching demand with supply. And, you know, we took some decisions a number of years ago to layer in extra capacity and expand our Kinston facility, and we have further plans to invest in or continue the investments in our HVP sites across the network. But as of today, you know, we will be able to respond to any immediate demand that would come. And we'll, you know, as I said, this year, our focus is on reducing the backlog, and when demand comes, we will be able to respond.
We're working closely with our customers, understanding what's happening with the market, trying to get a sense of what those inflection points are and to layer in capacity ahead of time while not going way out over our skis either.
Yeah.
It's striking that balance. So one of the approaches, you know, we're operating at a certain level. We've targeted levels of utilization. But in certain areas, we know that if there was a spike in demand, that we could be constrained. So we're proactively layering in some flex capacity in those areas, particularly when lead times for equipment could be 24 months+ .
Mm-hmm.
And that will put us in a bit of a bind. So to address that, we're taking the learnings from COVID, and in specific areas, making sure we have that capacity, but we're not going to be overburdened with it either. The carry cost won't impact any of the guidance that we would give or our long-term construct. But it... And also, it's looking at how we're going to leverage our network and how can we optimize that in a more efficient way than we have in the past, by having customers to be able to pull product from different sites and not being constrained just by getting product from one site.
There's a number of different things that we're looking at, and plus, the levels of automation that we will be introducing will actually increase our throughput over the next number of years, and that gives us a level of flexibility that we need to respond to any kind of major spike that would happen in the market.
So it sounds like then, you know, you're, you're doing about $350 million in CapEx this year, so it should... CapEx should start to ramp down in 2024, 2025 as you-
We're going through our CapEx planning, like, really locking down 2024, so I can't give you guidance on it today. But what I would say is that the CapEx that we're deploying right now, 70% of that is targeted towards growth, where pre-COVID, 50% of the CapEx would have been targeted towards growth. So a different dynamic. And what we are looking at is to say that, you know, if the demand is there, we will deploy the capital-
Mm-hmm
To be able to meet it, and it maybe even a little bit ahead of time. So there are some of the things we're working through at the moment as the landscape is shifting. So again, as soon as we have more information on that, we'll share it.
The whole point of this being is like I've had some, you know, I've had some investors who are worried that you're adding capacity and it's not going to get filled, right? That sort of is the gist of all those questions like that. But you're pretty-- you feel like you're completely matched. You know it's coming, right? I-
We pressure test this on a regular basis, and even after we've made decisions, we will go back and review them as the market demand is shifting to make sure that the assumptions we based our original thesis on are correct. So it's an iterative process. It's not just a one and done, and we blindly go and add capacity. And again, we had to learn from the last number of years that if you get too far behind the curve, you actually start to constrain your business.
Yeah.
So it, it's striking the right balance. And what I would point to is the level of growth that we've seen over the last number of years, the capital that we deployed is needed to, for that growth. I think what I was saying to Quintin earlier, when I joined, West was circa $1.5-$1.6 billion, something like that. Today, it's $3 billion, and that's just over five years. And so that's considerable growth, and then it's investing. You're seeing it in growth in high-value products, which is different levels of technology.
Yeah.
So you have to support them. So I think we're pretty prudent in how we do it. And a lot, it is informed by customer conversations, what we're seeing in the market and where we see demand coming from. So we're not blindly adding capacity. And just look at the returns, look at the expansion and operating margin, the return on invested capital over the last number of years. It shows that those investments are paying off.
Got it. So this is all a setup then to ask the, you know-
Ask Quintin a question.
Ask Quintin a question, yes. Well, no, I mean, it's a setup, and the fact is, is like, obviously the stock has had a phenomenal move, and people responded to it. And because there's a lot of interest in some of the new modalities out there, there's a lot of interest in the GLP-1 s with this. And so you're growing 10% on your business is growing 10% this year, growing double digits this year, ex-COVID on the core business. I think the question is, is like, is that level of growth sustainable? As you sort of see all these different, you know, biologics coming through, the GLPs, all these things coming through, is that level of growth sustainable because your algorithm is a 7%-9% top-line growth, right, that.
And so that sort of is the big debate on the stock right now, is like, is that level of growth sustainable, or is there gonna be some sort of transition next year where there's capacity's not quite there, the timing is not quite there, right? So that's where, I think that's where, that's where 90% of my questions are coming in from investors right now.
Yeah, well, as I said, we have been layering in capacity, and it's for a reason, you know. So, my sense is we are much better aligned with demand and supply now and to be able to respond to the market. And if there is a spike in demand, you know, we're ready, and we have made the investments. Timing, you know, that can shift. That's not... There's some things in our control, some are not. What I would say is that we're as prepared as we can be.
Got it.
That would be the way to say it.
Yeah. Okay. Good enough.
But I would also say we're not reliant just on one shift in the market. We're supporting many customers with many products, many disease states. So our investments just aren't based on one thing, on one item either, so.
Yeah. Yeah, let me just add to that. So the long-term financial construct, Derik, people ask, "Well, why don't you move it?" Again, our long-term financial construct is based off of a combination of, you know, macro, individual customers, portfolio of customers, our ability to affect certain things. And it's not predicated on a breakout. It's not predicated on one customer or one drug class. We look at it from a portfolio because-
Yeah
... we deal with thousands of customers, and each one of them have potentially multiple drugs that are using West packaging and containment delivery. So now in the event that there is something that breaks out, you know, then, you know, that's additive to the long-term construct.
Got it. And, you know, that 7%-9% then sort of drives at least 100 basis points of operating margin expansion. And clearly, you're adding capacity for your high-value products, which is primarily going there. So, can we talk about the puts and takes on the margin in terms of, you know, you obviously have to absorb capacity, you've got the mix shift going on, you've got inflationary pressures. Just sort of talk about how we sort of think about that 100 basis points.
Yeah. The typical driver for the 100 basis points is mix shift and driving high-value products, and that still stands. That is the main driver. There is some price in there as well, and we have been able to, you know, get more price over the last number of years. This year, we're probably gonna do between 5%-6%. That's probably north of where we would typically be-
Yeah
... given that we had to cover some of these inflationary pressures. And that was part of, you know, being able to do that and manage that cost base. But we're also driving a lot of cost efficiencies and operational excellence within our business. So taking cost out, becoming a lot more efficient, introducing higher levels of automation, better throughput. So there's a number of drivers there. So you've got the mix, the price, and then the operational efficiencies, that they are essentially the main drivers of that margin. And that's been the story over the last number of years, but mix is always gonna be the primary one.
I mean, you know, are your competitors all, and where are you taking price, right? Is it mostly at the high end of the system, or are you doing it across even the lowers?
It's across the business, but it varies between different elements. Some areas on core legacy business, there isn't as much opportunity to take price there. It's just the nature of that business and the competitive forces.
And speaking of the competitive dynamics, I mean, well, I mean, obviously, there's a lot more competition at the lower end than at the higher end of the chain, on this. And I mean, are your competitors behaving rationally? I know you, you have two major ones, right? I mean, so are the competitors behaving rationally? Are they trying to discount? Are they trying to do that? Are they taking prices at similar levels?
Yeah. We haven't seen, you know, any change. We- there's always been an active community of suppliers-
Yeah
... that are supporting our customers. You know, we have a lot of respect for their, our, our supplier, the other suppliers in the area. We focus a lot on what we do, and I'd say that there hasn't been a real change in the overall market because they've always been there, and they've always been active in having active dialogue with the customers. I think from the customer's point of view, everyone has gone through the pandemic with a higher acknowledgement of the importance of supply chain. So that has, you know, that goes without saying. So everyone's looking at, you know, what can suppliers do to give them more confidence, right? What we've been doing is we've been expanding our network. We've been standardizing a lot of our processes.
We're getting to the point where you can source from a variety of different HVP sites, through more standardized processes. And so that's the assurance that we're giving to our customers. The other driver that is going on right now is that the regulators continue to raise the bar, whether it be on particulates or extractables, whether it be Annex 1, all of these things that are going out there that are pushing the level up higher. And when that happens, the customers then come back to the suppliers and go, "How can you solve that?" And that's where our high-value product portfolio, the vast amount of technical customer support we have, scientific insights, supports that we have, you know, that's where we think that we can provide a lot of value add, to our customers.
That's what we've been focusing on.
Got it. So I have to now go into the obvious GLP-1 question, so I'll get yelled at. Can you remind us how West is playing in that market and sort of like, how we should think about y- whatever you've said on sort of like remind us on unit pricing, remind us on this, is like because I think people are all trying to solve for X, given the, you know, given we're all seeing, we're seeing this demand. We know there's a limited number. It's like, how should we think about this opportunity for the company?
So, as opposed to talking about a specific disease state, what we remind everybody is that, you know, West is the market leader in elastomeric closures, stoppers, plungers, and those go to vials, pre-filled syringes, and cartridges. So if an injectable drug goes into one of those categories, West can participate. If it goes into the category of like a cartridge or a pre-filled syringe that would go into an auto-injector, then we'd also have another opportunity to participate because we have a contract manufacturing business, this high volume, high precision injection molding, plastic injection molding, so we can make the assembly, we can make the components and assemble. So if an injectable drug were to fall into those categories, then we would be participating on the elastomer and potentially on the contract manufacturing side.
Got it. Yes. Thank you for avoiding the questions. Yeah, that, like that. But I guess, so you've seen—I mean, you've seen some of the estimates that us and other analysts and, you know, the buy side has put out on there. This, are you... You know, you know, how do we sort of, you know, I mean, look, I mean, these are obviously not new drugs because you've been participating in these for a while, right? I mean, they've been on the market for a while. It's like, how should we think about the incremental opportunity from these that are sort of like, you know, you've, you obviously were building capacity because you saw demand coming. How do we think about that incremental opportunity, though, since the demand has always been sort of off the charts?
Maybe I can take a stab at the first. When we look at capacity, right, and we're talking with a variety of customers, we have a five-year strat plan, and that five-year strat plan is evergreen. So if you remember in 2020, when COVID was just kicking off and the vaccine manufacturers were starting to do their just studies to whether or not that, you know, they were already giving us feedback at that time, saying: "Hey, look, if it hits, we'll need this." So what we did was we proactively moved to move some of those plans forward, which meant that we then had to redo a new five-year strat plan because a lot of that got moved forward. And as COVID continued, we continued to move forward.
As COVID waned, we continued to move forward, but the reason why now is that the base business was also moving and, you know, the base business includes a lot of the new injectable drugs that are coming out. Because we do it in phases, it gives us that ability to flex because forecasts are uncertain.
Yeah.
I mean, yeah, that and so there's sometimes big variation, and sometimes the updates can be very varied. So that's why we have these different phases to be able to bring that in. But when you see incremental HVP sales, like you did with COVID, you see what happens to gross margins.
Yep, got it. You know, the outside of CapEx, you know, the company has—does not have a history of doing acquisitions. I mean, if you—we've always done internal investment like this, and you've obviously, you've looked at wearables, you've looked at so many things like this. I mean, you know, when you look at this, is the business going forward, is there any need—is there any sort of, like, technology, any reason to sort of move away from what you're currently core doing, to look for other opportunities?
I wouldn't say we'd move away from anything, from anything we're doing, but the opportunity to invest or further invest to build out some of these platforms is definitely there, and that will be around wearables, drug delivery, and expanding that product offering and platform. And we have seen more interest from customers around that area over the last number of years, and that interest is continuing to grow. And so that is an area where we are further exploring to deploy capital. We have nothing to really announce or specifically talk about today, but, you know, we're now in a much stronger position, I believe, as an organization ready to be able to go and do that.
Over the last number of years, it was really building out the organic story, making sure that we could deliver on it consistently, which I believe we're now doing.
Yeah.
Then responding to COVID, you know, that really put a lot of pressure on our organization. We've come through that, we've learned a lot, and, you know, we've built out a lot of capability within our organization. We've been adding over the last number of years from a personnel perspective. So for us now to be able to go, you know, we're in a position to be able to go and now pursue M&A more probably proactively than we have been doing in the past. And so that there are a couple of areas that we do want to target.
So on the CMO, man, on the CMO segment, you know, historically, you've talked about that as sort of like a mid-single digit growth rate business, just 'cause those contracts are not as long, you know, and as sticky as what you have. Is that still the right... I mean, yes, you're currently doing some syringe assembly like that, but is that mid-single digit for that business still the right way? And I guess what others-- you know, you, you did some consumer product stuff at one time, and now you don't do it as much. You've, you've moved stuff in and out. You know, I'm old enough to have picked up the stock when the Exubera thing came off, you know, that, that years ago, and so knowing how the, how volatile that business can be going with it. So how...
What's the right way to sort of think about that segment?
Yeah, we would look at that segment as like a mid-single digit grower, over like... It's a much more competitive space.
Yeah.
The number of players that are in there, how the contracts are shared out, you know, it is very different to our proprietary business. But what we're targeting is that mid-single digit growth, you know, probably at the bottom end of our construct. And again, it's also managing the mix, and-
Yeah
The returns on that business aren't the same as in our proprietary business. So we, we have to manage that carefully. But it's still, you know, it generates a lot of cash for us. The returns are positive, but we're very targeted in the business that we go after in that area. And so it's, it is, as you said, we used to be in consumer products and stuff. We moved out of that.
Yeah.
It's very healthcare-focused at the moment, and even within that, it is very targeted. So mid-single digits, and again, it's just managing it so it doesn't have the impact it had probably a couple of years ago, where it was growing faster than proprietary.
Yeah.
The mix issue, and we couldn't expand margins.
Yeah.
So it's understanding that it is, you know, a really good business for us. We get returns that we're happy with, given the level of investment that we have to make, but we manage it within the portfolio.
So I have to also ask the inevitable China question and your business exposure there, competitive dynamic in that market. How do you see that evolving? You know, are current dynamics there being a little bit uncertain. So how much is China? How important is China to your overall strategy and growth opportunity?
The customers that we work with in China, you know, are important to us, and we see a pathway to growing business in China over the coming years. You know, we have invested in infrastructure there and within Asia in general, to support growth in that market. Today, it's a pretty small part of our business. I think China, Asia, and Latin America is probably less than 10% of our revenues. What we do in China really is kinda local for local, so we're not overly exposed there. But from an Asia perspective, we do see the opportunity to grow faster in some of those markets, probably than in compared to some of our more traditional markets, but it's still relatively small.
Got it.
We're not overexposed. We don't have any major issue there.
Then, you're not, you know, the current economic slowdown shouldn't— Is that impacting the business at all?
Not really. We've seen a little bit of pullback in some areas, but from a, you know, an organizational point of view, it's not really material to us.
Yeah, given the small exposure.
Yeah. You know, as a reminder, we most of our sales are from the commercial production.
Yeah.
We do very little in clinical, even less in preclinical, if any, and none in discovery. And so in those areas that might have funding challenges upstream, we don't participate.
... Yeah. How much—so questions that I keep getting from investors, just, I mean, I know the answers to these, but I'm going to put them out there because I keep getting them. But how much of your business is take or pay, and how much of your business is tied to the price of the drug that's out there? I mean, given the, you know, given the concerns over drug pricing debates and people pushing back on it.
Yeah, we're not. Our price isn't linked to the price of the drug. They're like separately negotiated. So, you know, that wouldn't be an issue for us. I'm sure we could get pressure, but it's not tied. There's no mechanism there to just bring our pricing down.
Right.
In terms of take or pay?
Yeah.
Yeah, other than some cases in COVID, where for the most part on a proprietary business, really not a model that we use.
Yeah. Great. I knew that, so just thank you. But I get, I keep getting asked questions on it quite a bit, so let's just clarify it. Any questions from the audience?
Going back to the CapEx discussion earlier, can you provide any color on the CapEx investments you're making now? Are they. You know, I imagine they're geared more towards HVPs, but anything you can clarify there in terms of pre-filled syringes or where you're making those investments. And in terms of timelines, when that comes online, is that, you know, from initial investment to when you're still producing product, is a year or two, right way to think about when that starts to contribute?
Yeah. So most of the growth CapEx is targeted towards HVPs, and it, it's across at different levels, it's across each of our HVP sites. And we're continuously making investments that the largest one, obviously, that we just completed was Kinston, and that came online here in the third quarter. And, you know, we'll build up the levels of utilization over the next couple of months within that plant. But typically, if some of the capital projects, you could be looking at two years from inception to getting the equipment in, validate it, to when it goes into production.
So it's a relatively long period of time, and that's why we have to be planning ahead of the curve and making the investments now to be ready for, say, now we're 2023, so for 2025, 2025 and beyond, we're already laying down investments in many of our plants. And again, they're at various stages. The bigger ones we would typically call out.
The margin differential between high value and standard products is... Can you sort of, like, go through that? And because that's another one that sort of comes up in questions all the time. And also at the NovaPure high end of the range, is there much competition for that product? I mean, most of your competition, I think, is tends to be at the below that level. But can you just sort of talk about at the very high end of the range and the margin option?
I'll do the margin, and then Quintin can do the competition piece. But yeah, for a standard product, you could be at the lowest end, 25% margin, and then you're building to margins on the highest end, be 78 % margin on those products. But what happens is, you know, on some of the standard product, you don't have as much R&D going in, SG&A.
Yeah.
So there's, once you get below the line, there's different splits. But yeah, it varies considerably, and that's why it's the mix shift is so important to drive revenue growth and then to drive that operating margin expansion. And we've seen the power of that as we went through COVID, when we got a lot of mix shift in a pretty short space of time. You could see the top-line growth was, you know, pretty good, but the margin expansion was, you know, very, very strong.
Yeah.
Way beyond 100 basis points. So it shows what an event like that could, if it was that extreme.
Yeah.
Now there's a lot in the middle as well, so we have typically, you know, probably 40%-50% margin on the High-Value Products would be the average. And so, but with the changes that are happening in the regulatory environment with Annex 1, you know, we're seeing the drive to move products up that high-value product curve, and that's what customers are looking for because they want to reduce the levels of particulates, and they want that guarantee. And that's these product offerings that we have in place, you know, deliver on that.
With respect to NovaPure, I mean, looking at NovaPure, it is the pinnacle of what we do. It's got all the various high-value processing. We do Quality by Design in every step of the manufacturing. My assumption is that other suppliers also do, you know, a lot of the different processing. They do, you know, various checks, but it comes down to comparing us versus somebody else. It comes down to the rubber, it comes down to the coating, it comes down to all of the technical support and all that. And so, it's one thing to say, "Yes, I have something similar," but the question is, is that it, is it apples to apples?
Right.
Is it, is it the elastomer that is being used on many of the injectable drugs that are being approved now? Is it the fluoropolymer coating that's being used? Is it the technical support that is being used to roll it out to various countries, right? Not just 'cause, 'cause, you know, these days, a drug doesn't get just rolled out into the U.S. Right after that, it gets rolled out into this and that and that. Do they have a regular, you know, all of the back-office things, that's it, it, that's what you get when you're getting a West product. It's not just a piece of rubber. It's, it's, it's quite a bit of that extra support that supports the, you know, all of that.
But I mean, that's a great answer because I think there is a misconception that-
Yeah.
all you do is sell chunks of stock.
Yeah. No, no. You know, the way we look at it, I mean, I was making the analogy with one of my colleagues as we were walking the halls, and I said, "You know, it's just the ice that you see at the top, the rubber. The iceberg, right? That's what everybody, you know, that's what the analytical labs are. That's what all this department is," as somebody who's new to the company, and we're walking going, "That is all that goes to support that piece of rubber.
So since you used the word iceberg, I'll ask, what makes you worried? Is there an iceberg out there that you look in the business and, like, what keeps you up at night? And, you know, because it's a great story, and it has been for years, and I think people just are, like, pinching themselves, like, "What can go wrong?
You can join me for a day, and I can show you. It's... You know, we have a great company. We're in a great space. But to keep at the level we're at, it requires to be at the highest levels of execution and performance. And you're running, like, we have to make sure that we're giving our customers what they want when they need it, and that becomes more challenging every day because the bar is raising of what they want, and we have to keep improving as a company to be able to do that. So there are challenges out there. Making these products is not easy. It's not a slam dunk.
People think, "Well, it's a piece of rubber, it must take a couple of minutes." If you actually go through and understand the process, and particularly for something like NovaPure, it's very, very technical, and you're dealing with, like, micro parts. So there are challenges there day to day, but my belief is we have the right people in place to deal with them. We have the right technology and infrastructure. That's why we keep investing and building on it.
Mm.
We're not ever standing still, even from an automation point of view, as to how we build a product. We're starting to push the boundaries on that and introducing these newer technologies, you know, making sure they work. Yeah, does it keep me up at night? You know, I, I've trust in the people that I work with, but it still keeps me up. And again, it's just meeting customer needs and demands and being able to respond. It's responding to the unknown, I think, is the challenge in today's world. And, you know, again, as I go back, the last couple of years taught us a lot. Nobody could have predicted that.
Yeah.
But we did it, but it was very difficult, and now we're learning how to respond in a different way so we can respond quicker and more efficiently in an ever-changing world. And I think they're the challenges. You know, do they keep us up at night? Yeah, we think a lot about them. But, you know, we are in a great business. We're in a great position, but we just have to keep executing.
With that, we're out of time. Thank you, gentlemen, for being here. Thanks, everybody, for listening.
Thank you, Derik. Really appreciate it.