Good morning, ladies and gentlemen, and welcome to Baxter International's Third Quarter 2024 Earnings Conference Call. Your lines will remain in a listen-only mode until the question-and-answer segment of today's call. [Operator Instructions] As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may now begin.

Good morning and welcome to our third quarter 2024 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer; and Joel Grade, Baxter's Executive Vice President and Chief Financial Officer. On the call this morning, we will be discussing Baxter's third quarter 2024 results, along with our financial outlook for the fourth quarter and full year 2024. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the fourth quarter, full year 2024 and 2025, the status and anticipated timing and impact of our ongoing strategic actions, including the proposed Kidney Care sale and cost savings initiatives. Regulatory matters and the macroeconomic environment on our results of operations contain forward-looking statements that involve risks and uncertainties, and of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of certain non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and also available in our earnings release issued this morning, which are both available on our website. Please note, following the announcement of Baxter's pending sale of our Kidney Care business to Carlyle, the Kidney Care business met the conditions to be reported as a discontinued operation. Accordingly, the Kidney Care business is now reported in discontinued operations and the company's prior period results have been adjusted to reflect the discontinued operations presentation. Restated historical results reflecting the Kidney Care segment as a discontinued operation for the prior six quarters can be found on Baxter's website in the Investor Relations section. Discontinued operations for 2023 also include Baxter's former BioPharma Solutions or BPS business, which was divested at the end of the third quarter of 2023. Current and prior year periods now reflect the continuing operations of Baxter's Medical Products & Therapies, Healthcare Systems & Technologies and Pharmaceuticals segment. Now I'd like to turn the call over to Joe. Joe?

Thank you, Clare, and good morning, everyone. We appreciate you taking the time to join us today. I will start with a brief update on the hurricane recovery progress at our North Cove, North Carolina facility, followed by some comments regarding our third quarter performance. Joel will provide a closer look at our third quarter results and our outlook for the remainder of the year. We will also share some preliminary thoughts regarding our financial outlook following the completion of the pending sale of the Kidney Care business. Then as always, we'll take your questions. As you know, Hurricane Helene caused unprecedented devastation in Western North Carolina in the closing days of September. This region is home to Baxter's North Cove manufacturing facility, the largest plant in our global network and a critical source of IV and peritoneal dialysis fluids for the US market. I want to first recognize the amazing tireless work of our North Cove team, who have helped rapidly advance the ongoing site recovery efforts, while also navigating the storm's personal toll. Our heart goes out to the entire community and we are so proud of what our colleagues across the Baxter network are accomplishing daily to help return the site to normal operations. In just six weeks, the North Cove team has devoted more than 1 million hours collectively to restoring operations. This dedication was evidenced last week as our highest throughput IV solutions line in North Cove was able to restart production. We also expect to restart a second IV solutions manufacturing line in the coming week. Together, these two lines represent their peak operation approximately 50% of the site's total production. These key milestones were achieved ahead of our original expectations. However, I want to emphasize that in coordination with FDA, the earliest that…

Thanks, Joe, and good morning, everyone. Before I begin, I would like to reiterate Joe's remarks regarding the presentation of our financial results for the third quarter. Beginning this quarter, the Kidney Care business is now reported as discontinued operations. The company's prior period results have been adjusted to reflect the discontinued operations presentation and historical restated schedules are available on our website. For comparability purposes to previously issued guidance, commentary surrounding our third quarter performance will be provided on both a total company and continuing operations basis. Now turning to some specific comments regarding the quarter. As Joe mentioned, in general, we're pleased with our third quarter results, which came in line with our expectations on the top line and compared favorably to our previously issued guidance on the top line. Excluding the effect of BPS sales in the prior year period, third quarter 2024 global total company sales of $3.85 billion increased 4% on both reported and constant currency basis. Performance in the quarter reflected better than expected sales in infusion therapies, product therapies, drug compounding and US patient support systems, which more than offset softness in Injectables & Anesthesia and HST. Sales from continuing operations increased 4% on both a constant currency and reported basis with all segments contributing to growth. On the bottom line, total company adjusted earnings including continuing operations and discontinued operations were $0.80 per share, ahead of our prior guidance of $0.77 per share to $0.79 per share. Earnings growth in the quarter was driven by operational performance and lower interest expense as compared to the prior year period. Adjusted earnings from continuing operations, which excludes Kidney Care and BPS from both periods totaled $0.49 per share and increased 14% compared to the prior year. Now I'll walk through our results by reportable…

Thank you. We are now open for questions. [Operator Instructions] And your first question comes from the line of Travis Steed, Bank of America Securities. Please go ahead.

Hey, everybody. Can you hear me okay?

Yes.

Yes, we can, Travis.

All right. Great. I had two questions. I'll just go ahead and ask them a little upfront. One, I wanted to ask on HS&T in the quarter, a little bit light versus the Street. So I wanted to make sure what you're seeing in that business versus expectations this quarter and the confidence that the Primary Care market is going to improve under '25. And the second question I'll ask is on 2025. What do you assume for the hurricane impact on 2025? And how do you still get the confidence to reiterate the guidance of 4% to 5% and 16.5% on the margin, given the hurricanes and what you're seeing in HS&T at the moment. Thank you.

Thank you, Travis. Listen, let me start with US PSS. This was the biggest concern in the first quarter and throughout the year, a lot of questions. That business has grown now low-double-digits. We actually converted some really key competitive accounts. We see as not only stabilize, but start to gain market share. The team went through a lot of transformation. And I think it's getting to the point that it's really, really competitive. And the market share gain demonstrates our superiority in our product lines. Second, when I think about the orders coming in for that, we have a very healthy pipeline of orders coming into that. So about 20% growth at the moment on the pipeline. And the operational issues in PSS are all resolved. We have made a transition between two plants, and we see that going well. Care communications, we see a very healthy 14% growth in orders. That business had suffered from some delays in installation that we've seen mainly because hospital volumes are healthy, and those are an indicator that hospitals need a break to take rooms down so we can install our equipment. But the orders are in the book and the postponement of some of this installations will come into first quarter of next year and beyond. So let's focus on FLC because FLC is the core of your question in terms of we see the US Primary Care market weakness. That weakness and softness has been demonstrated by our distributors, which actually destocked some of our products throughout this year. And but we see that starting to stabilize and we see that normalize into 2025. So if I look outside the US as the third piece of this puzzle, China and France has shown weakness in their orders with capital being…

Yes. Thanks, Joe. And Travis, I'd add a couple of things here to this related to our confidence in 2025. Number one, we are certainly anticipating continued positive impact from pricing as we've talked about heading into the next year. And then certainly, in addition to what Joe just talked about, that doesn't change. We also continue to expect positive impact from ISC, the continued MIPs and again continued to drive efficiencies that we have from the growth that we're expecting next year. So that's a second part of the positive. Third is just what I'll call the benefit of expense leverage from the growth that we're anticipating having. I think again with the growth that we're anticipating in the businesses, we're certainly expecting leverage growth from that standpoint. And then finally, there is some headwind impact of the MSAs that we've called out before, but the work that we're doing in terms of cost attainment is to eliminate stranded costs, the TSA income that we're anticipating. And I guess I'd say in addition, there's some onetime issues this year that we had that were not expected to repeat next year. So all-in-all, the idea that we essentially reaffirming our confidence in the 4% to 5% from a top line perspective and the 16.5& from the bottom line.

Thanks so much.

Your next question is from the line of Robbie Marcus, JPMorgan. Your line is open.

Great. Good morning and thank you very much for taking the questions. Maybe to follow-up on Travis' question. I wanted to ask about the '25 guidance. It seems like there'll be a little bit of impact going into at least first quarter of next year. So I guess what gives you the confidence to be able to reiterate 16.5%? And do you view that as sort of a target you should be able to reach or in more like historical Baxter guidance philosophy, is that a margin that you should be able to exceed? And then I'll just throw part two of the question since it might be a longer answer. Maybe walk us through some of the initiatives you're taking to offset the stranded cost and over time the lost TSAs to be able to grow underlying operating margin expansion while offsetting some of the declining income from Vantive. Thanks a lot.

Yes. Thanks, Robbie. It's Joel. I think a couple of things. First of all, I guess what I would say that 16.5% was set as what we believe was a good anchoring point for the organization in terms of how we see it, again, post separation, again, both from as we've talked about here from a growth standpoint, from a margin standpoint, again, both on the gross margin and then obviously that one all the way to the OI line. I think the -- it also was, if you remember, almost a kind of a starting point for what we said would be continued margin expansion over the longer-term horizon. And so again I just would reiterate the fact that, as Joe said, we are expecting some impact, but relatively minimal in the first quarter relative to Helene impact. And then all the things we've talked about in terms of just reiterating pricing, ISC, MIP opportunities leverage on expenses, which we continue to anticipate gaining. And so I think if you think about what how do we see our company post separation, that was the amount that we would anchor the company on for us to continue to build on over the next years to come. I think the some of the actions we're taking, certainly, if you think about these things as the what we call the elimination of stranded costs. One of the things we've talked about is this idea that we have a very dense distribution center network in the United States today because of our Kidney business. With the home deliveries of that business, we have a large number of distribution centers in the US. That ultimately will be something that we will rationalize down significantly based on our new business. This improves not only our operational efficiency. It improves our inventory management. There's a whole set of things from that perspective. We've talked about essentially the size of ensuring we are rightsized as an organization to support the size of the business going forward. And so as we plan for that, we'll certainly be taking those type of actions. And then if you think about some of TSAs, obviously, we've talked about the fact that we're anticipating TSA income in particular in 2025 to offset some of those expenses. But obviously, we are anticipating that, that's not something that will last over a multiyear time period. And so therefore, we're planning carefully on activities to ensure that as those start to fall off, we're ahead of the game and that we have the opportunity to eliminate the stranded costs, which, as we've said, we're planning to do by the end of 2027. So I'll pause there. Is there anything else?

No, that's it. I appreciate the insight. Thanks.

Thank you.

We have a question from Pito Chickering, Deutsche Bank. Please go ahead.

Hey, good morning. I guess two questions here. So the first one is, like a few months ago, like IV solutions was viewed as a commodity product. In a few weeks, after the facility was shut down, hospitals and GPOs were in a full-fledged panic mode and asking for governments to nationalize companies to solve this problem. So huge congrats to your team for solving what could have been a nightmare for the country. As you look back at sort of at what happened, do you begin to spread out manufacturing among other facilities to reduce this risk in the future? And we're talking to customers that couldn't do surgeries due to bag of IV. Do you think that it's going to lead to a new recognition and increased pricing due to importance of IV bags within the health care system or is it more of a headwind as hospitals look to diversify their suppliers to multiple manufacturers?

Pito, good morning. The recognition by Baxter has been a long coming. We recognize this is not a commodity. Commodity is defined by something that is readily available and where the barriers to entry are very low. We have invested over $0.5 billion in that facility since 2016 to date with highly automated. And our recovery and the time that we are recovering is very fast compared to what some of the competitors would have experienced themselves. So they spoke on our behalf. We never did. We are much faster than they are in recovery. This shows that not only we have the ability to come back fast after a devastating event. We are producing product as we speak today, by the way, to have a worldwide network of plants that can actually bring products into this country, cross registered at lightning speed. And that is the difference between us and our competitors. Our competitors have capacity constraints every place in Europe and other parts of the world. We are able to have capacity in other parts to bring together the plant in North Cove and augment the market even faster. So we have, of course, we have some lessons learned. We're going to get even better at this, but we have facilities in Spain, UK, Canada, Mexico, Brazil, Colombia, Australia, China, just to give you few names -- a few places that allow Baxter to bring products back. Our people have done a wonderful job and Baxter is an example why this product is not a commodity. I don't want to get into pricing. What I want to tell you is that what we have invested and how we do things is what made us come back so fast and having products being produced as we speak out of that plant.

Okay. Great. And then a follow-up question on 2025. Fourth quarter sales are impacted by the $200 million split between Kidney and Medical Products & Therapies. Because distributors and providers that are drawdown on inventories to supply patients when North Cove is offline, as you think about the first quarter of '25, shouldn't we get back the bulk of the $150 million to $160 million back from IV as you restock the inventory channel? Just looking at the revenue guidance for next year, it's implying revenue growth of less than $500 million. And I'm wondering why that $150 million to $160 million sort of loss in the fourth quarter didn't sort of recover next year so that revenue growth may be sort of conservative.

Yes. Pito, if you think about something similar that happened to us in the past was Maria. So I think there is -- we have not factored that in the calculus yet because we need to get certainty that all lines are producing at pre-Helene volumes. But of course, you're going to have, you have a destocked situation, not only in Baxter's inventory, but also in the market. And I fully expect us to be producing 24/7 for many, many, many months trying to restock the market and trying to get things back at the level they were before and furthermore, also offer some alternatives for people to stock things that they need that they have not stocked in the past. So I think I see potential upside on that area, but we need to get our lines all fully up to speed, and then we go from there. But I find that as an opportunity that we have not explored yet fully.

Great. Thanks so much.

Your next question is from the line of Vijay Kumar, Evercore ISI. Please go ahead.

Hey, guys. Good morning and thanks for taking my question. Joe, maybe off of those comments you just made, right? What is the right framework for fiscal '25 guidance? Is the 4% to 5% organic growth coming off of a lower base? And if I understood you correctly, you're not assuming the $150 million of the IV fluid shortage impact to come back next year, right? Are those lost revenues or should they come back to Baxter? I'm just trying to see what is the conservatism being baked into this guidance.

Yes. Vijay, I guess what I would say is that, I mean, so and as Joe talked about, again, the revenue ramp again in the year, there's going to be some potential impact that we've talked about here in the first quarter. But again we're certainly comfortable holding our guidance of the 4% to 5%.

So I'll add, Vijay, what are the builders for this of 4% to 5%, okay? So first is in the very beginning of the quarter, of course, we have an impact of the plants coming up to speed. But as I said in the previous question to Pito was specifically, we will see a destocking and then a restocking and that balances out the rest of the year. So the first thing is you may see a dislocation of growth just because what comes in the first couple of months of that early in the year, picking up towards the end of the year, first of all. Second of all, the product launch that we have primarily in the three businesses. We have five remarkable product launches coming out at HST. We have several molecules that are slated for 2025, coming off a significant amount of launches in 2024 and our pharma team getting much more accustomed to a large number of product launches. And our pump, which is doing extraordinarily well in 2025, in 2024, following 2025 just to underscore, again, 50% growth in 2024 with significant potential for growth in 2025. So those are the main drivers then of the top line. Bottom line will be mostly driven by the drop through of this innovation. When you start restocking the market with IV solutions, those have disproportional better margins that go into the business. Thirdly is the efforts that we already started in 2024 is offsetting the stranded costs that we start to come in to -- which will offset the difference between our TSAs and our cost of doing the TSAs. So the strength of our conviction today at the moment are on the top line buildup I just told you and also the ability to offset that and the manufacturing cost reductions that continue like clockwork come in every single year is slightly better than we planned.

Understood. And maybe my second one for Joel. When you look at the operating margins in the third quarter, 14.5%, it's down optically I think 90 basis points year-on-year on a comparable basis. Is that like an apples-to-apples comparison, Joel? Any cost allocation which makes the comparison hard? And the reason I'm asking is when you look at the 16.5% for next year, that's a 200 basis points jump off. Are there the bridge to that 16.5% and any implications on free cash flows and guidance, excuse me, dividend policy? Is Baxter committing to hold the dividend yield? Thank you.

Yes. So thanks, Vijay. I think there are a couple of things here. First of all, again, one of the things that we've talked about previously is the difficulty of comparison, if you will, between what you'd see on a continuing operations basis and next year. Recall, please, that the continuing operations in the fourth quarter includes stranded cost that is essentially was previously allocated to kidney, but now is actually sitting in, I think, what we call unallocated corporate cost. And in 2024, that does not yet show the impact of some of our cost outwork. And so if you look as we head into 2025, that 16.5% still clearly represents the opportunities that we're taking on the things that Joe just talked about in the previous question. But in addition to that, starting the work on receiving TSA income against our expenses, starting the work of our cost-containment measures that we're already starting to take this year that will start to impact next year. And so I guess that's the way I would think about this thing. Again it's not necessarily a comparison that you can make based on what we have on a continuing ops basis here versus the 16.5% next year.

Sorry, on the dividends?

Yes. And from a free cash flow standpoint, I think, just kind of a couple of comments on this year, obviously, this year has been a choppy year from a free cash flow standpoint. We continue to have separation-related costs that are impacting this as well as, I'd call, some discrete items we've had in the first -- particularly the first half of the year. We do have seasonality in our cash flows that happens as we head into the second half of the year. And we certainly anticipate, as usual, some continued seasonal positive impact as we head into the fourth quarter. The one thing I would remind you also of those is that we do now have some cash flow impacts that were that are occurring from North Cove. And so while there is a -- we will have some insurance proceeds that will be coming back as an offset to that. There will be some impact from both the fourth quarter and heading into next year from a cash flow perspective for North Cove. But again, our cash flow as we head into next year, we anticipate continued leverage from an expense perspective, continued benefits from the improved working capital. And again just a generally beneficial perspective from the proceeds of the Kidney Care sales. And obviously as we head into the second part of the year, we've targeted again three times leverage by the end of the year. Again, with a combination of free cash flow, the proceeds of Kidney, we're certainly anticipating being on track for our cash flow forecast in the second half of the year.

And with respect to the dividend, do you want to comment on the dividend too as well then?

Yes. So from a dividend perspective, obviously, we are anticipating, as we've said, resetting our dividend from the perspective of essentially resizing it, if you will, based on the new size of our organization. We are committed to a dividend and we obviously will be coming out with that shortly here as it relates to what the sizing of it will be.

Understood. Thanks guys.

Your next question is from the line of Joanne Wuensch from Citi. Please go ahead.

Good morning and thank you for taking the question. I'll put them both right upfront. I'd love to get your view on what you're seeing in China and with that, the discussion of the week, the potential for tariffs and the impact. And then as a secondary question, just anything you could add on what you're seeing in new uptake of your Novum pump and expectations for next year. Thank you.

In China specifically, Joanne, China post Vantive for Baxter is going to be with some of the exits that we're having right now, less than 2% of our sales. So the impact for us is quite small despite the fact we had some impact this quarter for HST in the VBP. But it's remarkably different, the new Baxter versus the old Baxter. So the tariffs that we're talking about here would be very much related to raw materials, will be chips that we still buy there and other things that will impact the industry in general. But we do not make specifically products in China for the US as Baxter. Even today with Vantive, with the renal business, we don't have that. Post Vantive, we will not have that. And with the reduction in sales volume and some exits, we're going to be very much not exposed to future VBPs at the level that you see in the industry, first of all. And let me give you some context. I think your question about the Novum update is that it's going extremely well. The market share growth, we, usually in the past, used to gain about 1% market share every year just by Rule of Thumb. We are seeing 2% to 2.5% by the end of this year. And we're going to continue to accelerate that. The acceptance of the pump has been significant. And we're very happy how the team has launched the product. It's one of the best launches that I've seen in my career. Kudos to Heather Knight and her team. We've seen significant uptick in interest, not only the large water pump but also the syringe pump. The syringe pump actually market share growth is actually double that taken from incumbents today who in the past have supplemented our spectrum by not having the syringe availability today because we have it. We're going back to the accounts and actually gaining those back.

Yes. And I would just add to that. Our infusion hardware is actually up 50% this year and that's on top of actually a significant growth in the prior year as well to that point. So that's certainly been a strength of the business that we anticipate continuing on as we head into 2025.

Excellent. Thank you very much.

Thank you.

Your next question is from the line of Larry Biegelsen, Wells Fargo. Please go ahead.

Good morning. Thanks for fitting me in. Hey, Joel, obviously people have been trying to figure out the 16.5% for next year. Should we be taking kind of you have the year-to-date continuing ops operating margin of 13.4%. Should we be adding back the stranded costs on Slide 19 to get to kind of a 15.9% year-to-date because the TSAs will offset that? Is there any way to kind of help us understand what the year-to-date? What the '24 kind of underlying number is to bridge that 16.5%? And secondly, the nonoperating expense, I think you said $300 million for continuing ops in 2024. Any color on how much lower those could be next year? Thanks.

So Larry, first of all, I'll start with the first one. The 16.5%, again, I don't mean to sound unhelpful here, but the bridge between our fourth quarter continuing ops and the 16.5% is really complicated. Our whole purpose of setting the 16.5% out there was to give people something to really anchor on in terms of what our company looks like post separation. And I think the, again, the cost that we're seeing in the continuing ops basis, again, really is impacted significantly, as you said, by the stranded costs. That does not reflect any TSA income in 2024 and does not reflect any impact of cost containment measures in 2024. Now again, we are taking cost containment measures now that will impact '25, but you're just not seeing that in the results in 2024. And so that comparison, again, I wish I could give you a better answer on that bridge, but the 16.5% is really designed to be an anchoring point for our continued build going forward.

Larry, just one thing I'll add. I did include the stranded cost by quarter in our earnings presentation that's available on our website. So you'll be, there's a slide within the deck. So you'll be able to go and see what that impact is on a quarterly basis, both for 2023 by quarter and then for the first three quarters of 2024 as well. So that is available.

And the non-op expense, Joel, how should we think about that next year, how much lower than the 300?

Yes. I guess I'd say at this point, Larry, there's not -- we don't anticipate something materially different from that perspective, again, obviously, other than size proportionate to the organization.

All right. Thanks so much.

We will see some reduction, Larry, obviously, because we do plan, obviously, to utilize the proceeds from Kidney Care towards debt repayment. So we should see some benefit within our interest expense. But obviously, on the other income expense line, that's something we'll have to look at as well. So premature right now, but I'd say we do expect interest expense to come down a little bit next year.

Got it. Thank you, Clare.

We have a question from David Roman of Goldman Sachs. Please go ahead.

Excuse me. Thank you. Good morning, everybody. I wanted to come back a little bit to the revenue outlook on the 4% to 5%. And maybe if you can contextualize the bridge from kind of 2Q and 3Q of '24 where you grew 4%-ish in the Baxter business ex-Kidney Care from because those are probably be your two kind of normalized quarters this year, given the HST issues in 1Q and the IV dynamics in Q4. So as you go from the 4% to the 4% to 5%, what specifically changes next year that would give you an opportunity to see an acceleration? Because you're already seeing good price. You talked about 50% growth in hardware. Maybe just help us understand what are the levers to get from 2Q, 3Q this year up back into the mid or higher end of the range?

Other than compounding growth that you're going to see for the pump hardware sets and going back perhaps to IV pricing and other things that you're going to see that we already had to count on is basically HST getting to normality in primarily FLC. We're seeing the normality already in the US for PSS. And so we expect to see our Frontline Care business under HST to go back to a normal growth pace that had before normalized for the growth in '23 driven by the backlog catch-up and the impact of that in '24 plus the softness that we had in some operational issues. So that going back to normal is the main driver. So you have that level there. And that is our level of confidence that our operational issues will be behind us mostly by the end of the fourth quarter then the normalization of the Primary Care market and the resolution of some of the OUS softness that we saw primarily in the third quarter related to France and China.

All right. Got it. Very helpful. And then maybe just a follow-up on the capital allocation side. I think on a year-to-date basis, you've been growing SG&A and R&D in dollars to reinvest for future growth. But as you look into the fourth quarter, you're able to offset almost all of the IV impact through strength in the business elsewhere and maybe some proactive measures you're taking down the P&L. So how can you help us think about the trajectory of internal capital allocation around different spending levels, what that trends in Q4 and how we should think about that into next year?

Yes. David, thanks for the question. Look, I think the -- as you said, we are making some continued level of investment in our business in order to facilitate some of the growth that we're talking about, which is what you've seen throughout the course of this year. But I think as we think about going forward, again, we are anticipating both the continued allocation of resources to R&D and that we again anticipate continued modest growth in that area, but also gaining leverage in some of the things that we're doing from an SG&A perspective. Again, as we work through our cost-containment measures and stranded costs, as we do head into next year, we are anticipating some level of leverage out of our growth that we anticipate on our SG&A line in particular. So I think that's the way I would say it again. Innovation is going to be a big part of our story going forward. And the continued investment in R&D will reflect that. But again, you should expect some leverage out of the SG&A line as we go into next year.

Got it. Thanks so much.

Due to the constraints of time, we will close the Q&A session here. I would like to thank our speakers for today's presentation and also thank you all for joining us. This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.