Q3 2023 Agilent Technologies Inc Earnings Call

Participants

Jacob Thaysen; Senior VP and President of Life Sciences & Applied Markets Group; Agilent Technologies, Inc.

Michael R. McMullen; CEO, President & Director; Agilent Technologies, Inc.

Padraig McDonnell; Senior VP, Chief Commercial Officer of Agilent & President of Agilent CrossLab Group; Agilent Technologies, Inc.

Parmeet Ahuja; VP of IR; Agilent Technologies India Private Limited

Robert W. McMahon; Senior VP & CFO; Agilent Technologies, Inc.

Samraat S. Raha; Senior VP and President of Diagnostics & Genomics Group; Agilent Technologies, Inc.

Brandon Couillard; Equity Analyst; Jefferies LLC, Research Division

Daniel Gregory Brennan; Senior Tools & Diagnostics Analyst; TD Cowen, Research Division

Daniel Louis Leonard; Research Analyst; Crédit Suisse AG, Research Division

Derik De Bruin; MD of Equity Research; BofA Securities, Research Division

Jack Meehan; Research Analyst; Nephron Research LLC

Joshua Paul Waldman; Research Associate; Cleveland Research Company LLC

Luke England Sergott; Research Analyst; Barclays Bank PLC, Research Division

Matthew Carlisle Sykes; Research Analyst; Goldman Sachs Group, Inc., Research Division

Patrick Bernard Donnelly; Senior Analyst; Citigroup Inc., Research Division

Puneet Souda; Senior MD of Life Science Tools and Diagnostics & Senior Research Analyst; Leerink Partners LLC, Research Division

Rachel Marie Vatnsdal Olson; Analyst; JPMorgan Chase & Co, Research Division

Vijay Muniyappa Kumar; Senior MD and Head of Medical Supplies & Devices and Life Science Tools & Diagnostics Team; Evercore ISI Institutional Equities, Research Division

Presentation

Operator

Ladies and gentlemen, welcome to the Agilent Technologies Q3 2023 Earnings Conference Call. My name is Bo and I will be coordinating your call today.
(Operator Instructions)
I will now hand you over to your host, Parmeet Ahuja. Parmeet, please go ahead.

Parmeet Ahuja

Thank you, Bo, and welcome, everyone, to Agilent's Conference Call for the Third Quarter of Fiscal Year 2023. With me are Mike McMullen, Agilent President and CEO; and Bob McMahon, Agilent's Senior Vice President and CFO. Joining in the Q&A after Mike and Bob's comments will be Jacob Thaysen, President of the Agilent Life Science and Applied Markets Group; Sam Raha, President of the Agilent Diagnostics and Genomics Group; and Padraig McDonnell, President of the Agilent CrossLab Group.
This presentation is being webcast live. The news release for our third quarter financial results, investor presentation and information to supplement today's discussion along with a recording of this webcast are available on our website at www.investor.agilent.com.
Today's comments by Mike and Bob will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year-over-year and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and any acquisitions and divestitures completed within the past 12 months. Guidance is based on forecasted currency exchange rates.
During this call, we will also make forward-looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors.
And now I'd like to turn the call over to Mike.

Michael R. McMullen

Thanks, Parmeet, and thanks, everyone, for joining our call. In today's call, I'll walk you through our Q3 results, share what we're now seeing in the market and provide context for our revised full year outlook. I'll then turn things over to Bob for more detail on the quarter and outlook before returning for some brief closing comments.
The Agilent team continues to execute well as we navigate our way through ongoing challenges of the current market environment. Our Q3 revenue was $1.67 billion at the top end of our expectations. This is a decline of 2% on a core basis against a tough compare of 13% in Q3 of last year. We continue to be proactive and are taking steps to help us deliver on our leveraged earnings model.
Operating margins are 29.3%, up 180 basis points. Quarterly earnings per share of $1.43 or up 7% and above our expectations. The major drive behind our Q3 year-on-year decline in revenue is our China business. Excluding China, the rest of Agilent grew 2%, which was better than expected. We knew we're up against a difficult compare in China and had previously guided for lower China revenues in Q3. However, the economy in China continued to weaken during the quarter, translated into a more challenging market environment than we had anticipated. With the softer market conditions in China and continued global macroeconomic challenges, we have lower growth expectations for the remainder of the fiscal year.
We now expect core growth for the full year to be around 1%, down from our previous guide. Based on what we're seeing at this time, we're not assuming any improvement in the China market for the remainder of the year. We, however, view the near-term challenges we're experiencing as transitory and remain confident about the long-term growth prospects of our end markets.
We're turning now to our third quarter results, I'd like to touch on our 2 largest end markets. Our total pharma business is down 8%, driven by the pharma market in China being down 30%. Within pharma, our biopharma business grew 5%, while small molecule was down 16%.
The chemical and advanced materials market declined 3% versus a 22% increase last year. While we did see the chemical energy space being weighed down by macro concerns, slowing growth in advanced materials was more a function of a difficult compare as the volumes have remained steady and robust.
Looking at our performance by business unit. The Life Science and Applied Markets Group delivered revenues of $927 million. This was a decline of 9% of a very tough compare of 18% growth. Last year's growth was helped by the benefit of recovery from the Q2 2022 Shanghai shutdown.
LSAG's performance continues to be affected by the market environment in China across all end markets and pharma globally. Our sales funnel remains healthy and are up year-on-year, but deal velocity continues to slow as customers remain cautious in making capital purchases. We expect this market environment for new instrument purchases to continue for the rest of the year.
At this time, we are not assuming any benefit from a year-end budget flush or incremental stimulus in China. As we said before, we are continuing to prioritize invest in innovation. As an example, in June, Agilent's investment innovation were on full display at the Annual ASMS Conference. The LSAG team introduced new products and comprehensive workflows to enhance data quality and productivity for our customers. These include 2 new LC/MS systems, a new PFAS workflow solution and an AI software for data analysis, among others.
The Agilent CrossLab Group posted revenues of $396 million. This is up an impressive 11% core with growth in all regions and end markets, as customers continue to embrace our value proposition. We continue to see strong demand for our services as we help customers drive productivity in the lab.
The Diagnostics and Genomics Group delivered revenues of $349 million, up 3% core. Pathology grew high single digits as demand for our diagnostic test continues to grow. Our NASD business grew high teens. This growth was partially offset as we are continuing to see market weakness for our Genomics and Resolution Bioscience businesses.
Regarding resolution Bioscience, the market for kitted NGS-based Companion Diagnostics has not developed as we expected. Furthermore, we don't see a realistic path to profitability. As a result, we've made a difficult decision to shut down the business. However, our investments in future growth continue. For example, we achieved an important milestone during the quarter when our NASD business generated the first revenues from our Train B investment in Frederick, Colorado.
Now looking forward for the company, as we navigate this challenging macroeconomic environment, we remain confident in the Agilent team and our ability to continue driving leverage earnings growth, use our agile Agilent framework. We faced challenges before, and we're taking actions now that will make us stronger and position us well for the future.
As we stated last quarter, we are doubling down on delivering cost efficiencies and increasing productivity. The goal is to generate additional cost savings so we can continue to invest in innovative new solutions and support for our customers as we enable future profitable growth. We are on track to achieve the cost savings we've targeted for the second half of this year. We are in attractive markets that will produce long-term growth. Our innovation engine remains strong and the battle test at One Agilent team is driving outstanding execution.
Bob and I will provide the details on our results as well as our outlook for the remainder of the year. After Bob delivers his comments, I will be back to provide some closing remarks. And now, Bob, over to you.

Robert W. McMahon

Thanks, Mike, and good afternoon, everyone. In my remarks today, I will provide some additional details on revenue in the quarter as well as take you through the income statement and other key financial metrics. I'll then finish up with our updated guidance for the full year and our fourth quarter outlook. Unless otherwise noted, my remarks will focus on non-GAAP results.
Q3 revenue was $1.67 billion, a decline of 2.3% core and down 2.7% on a reported basis. This compares with 13.2% core growth last year. Currency was a 0.5-point headwind while M&A contribution was minimal. As you may recall, Q3 of last year benefited from roughly $35 million in revenue deferred from the second quarter as we ramp back up from the Shanghai shutdown in China. Accounting for this, our Q3 core growth would be roughly flat versus a year ago.
As Mike mentioned, pharma, our largest end market, declined 8%. This is in line with our reduced expectations coming out of Q2 with underperformance in China, offset by better performance in the rest of the world. The chemicals and advanced materials market was down 3% off a very tough 22% compare, but dollar-wise was flat sequentially. The academia and government market was up 5% with all regions showing growth except the Americas, which was flat. Our business in the diagnostics and clinical market grew 3%, driven by high single-digit growth in pathology, partially offset by genomics weakness.
The environmental and forensics business grew 2%, driven by double-digit growth in the Americas and Europe. The growth was generated by the build-out of water infrastructure projects and an expansion of funding for PFAS-related activities. The food market grew 1% based on strength in Asia outside of China and mid-single-digit growth in Europe, driven by new food testing regulations. On a geographic basis, while China underperformed, the Americas and the rest of Asia were better than expected, while Europe was in line with our expectations.
Moving down the P&L. Third quarter gross margin was 56.3%, down 10 basis points from a year ago. Like last quarter, this was largely due to the product and services mix, and pricing was slightly better than our expectations. Below gross margin, the expense reduction actions we initiated in the second quarter helped strengthen operating margins. We also benefited from a reduction in variable pay expenses.
As Mike mentioned, margins were 29.3%, up 180 basis points from last year. Below the line, our interest income was higher than planned, while our tax rate was 13.75% and we had 295 million diluted shares outstanding. Putting it all together, Q3 earnings per share were $1.43, up 7% from a year ago, a very good result given declining revenue.
Now let me turn to cash flow and the balance sheet. I continue to be pleased with our cash flow generation this year. Cash flow from operations was $562 million in the quarter, and is $1.3 billion year-to-date. In Q3, we invested $81 million in capital expenditures, totaling $214 million year-to-date, effectively flat year-on-year as we continue to optimize our CapEx spending.
Given the strong year-to-date results, we are increasing our free cash flow forecast for the year to $1.2 billion, comprised of operating cash flow of $1.5 billion and CapEx of $300 million. This is an increase of $250 million from the midpoint of our previous guidance.
Despite the challenging macroeconomic conditions, our balanced capital allocation strategy is intact. During the quarter, we returned $401 million to shareholders, $66 million through dividends and repurchase shares worth $335 million. This ongoing balanced approach to capital deployment is another example of the confidence we have in our team and our belief in the long-term strength of our markets.
Before getting into the revised full year outlook, I want to mention we have taken a $291 million pretax charge in Q3 associated with the decision to shut down the Resolution Bioscience business. This charge, which is excluded from non-GAAP results, includes an impairment write-down along with charges associated with the wind-down and exit of the business. We expect the wind down to continue through Q4 and into early FY '24.
Now to the revised outlook for the year in Q4. Given the more challenging macroeconomic environment we are seeing, particularly in China, we now expect full year revenue to be in the range of $6.80 billion to $6.85 billion. This represents a decline of 0.7% to flat on a reported basis and core growth of 0.8% to 1.5%. This is a core growth reduction of 260 basis points from the midpoint of our last guide. Roughly 85% of the change is related to reduced expectations in China while the remainder is due to some incremental cautiousness from our customers on CapEx spend as well as softness in Genomics and the shutdown of Resolution Bioscience. As Mike said earlier, we are not assuming any incremental stimulus in China or any material year-end budget flush in these revised projections.
Given the large change in China, I wanted to provide some additional perspective on how we are forecasting the rest of the year, recognizing that the market continues to be very dynamic. To provide some context, in Q3 through June, our business in China was tracking to a mid-single-digit decline in revenue, which was in line with our expectations. However, in July, we saw a further deterioration in China, resulting in the 17% decline for the quarter. And while the Q3 decline in China was centered in pharma, which was down 30%, we did see weakness in the other end markets as well. We expect the conditions we've seen in July to persist in China for Q4.
In addition, we are facing our most difficult quarterly compare in China, where we grew 44% in Q4 of last year. We are now expecting Q4 to decline in the mid-30s year-on-year. For the full year, we are expecting China to decline mid-single digits versus growing mid-single digits. With the change in revenue, we now expect full year fiscal 2023 non-GAAP earnings per share to be between $5.40 and $5.43, representing leveraged earnings growth of 3% to 4% and roughly 6% to 7% growth net of currency. The change in full year guide results in Q4 revenue being in the range of $1.655 billion to $1.705 billion. This represents a decline of 8% to 10.5% on a reported basis and a decline of 9.5% to 12% on a core basis. The recovery last year in Q4 of the remaining revenue deferred from the Shanghai Q2 shutdown negatively impacts the year-on-year results by roughly 1 point.
In fourth quarter, non-GAAP earnings per share are expected to be between $1.33 and $1.36.
Thanks for being on the call. And now I will turn things back over to Mike for some closing comments before taking your questions. Mike?

Michael R. McMullen

Thanks, Bob. While today's macro environment is challenged for new instrument purchases, we remain confident in the long-term growth prospects of our end markets, the diversification of our business and in our proven ability to grow faster than the market.
I'd like to share a few examples why my confidence remains intact despite near-term challenges. In pharma, our largest end market, innovation and advance of medicines continue with new therapeutics flowing into the market. The demographic drivers of this market are on our side, a growing global population that expects access to health care and extending life expectancy to be key priorities from their governments. Our market-leading solutions are critical to innovation behind new therapeutics and ensuring the safety and quality of on-market drugs.
In the applied markets, growing PFAS testing and the electrical vehicle transition are here to stay, action in new opportunities for growth. Everyone wants to have a safer water to drink, food to eat and air to breathe and the search for and production of more sustainable materials and energy sources remains a global priority. Agilent is a diversified leader in a unique position to help our customers drive their solutions. We remain a trusted partner, our customers though they can rely on in both good and challenging times. Our combination of leading instrumentation and world-class customer support is a long-term competitive advantage.
At the heart of this long-term competitive advantage is the Agilent team and the One Agilent culture. You see this reflected in a recent recognition on Glassdoor and in being named A Great Place to Work in all 27 countries and territories around the world where we qualify for certification.
We have a company mission focused on advancing the quality of life. To learn more about this, I would encourage you to review the latest addition of the ESG report that we issued last month. We have proactively managed the company through the short term, always with an eye towards our customers and in the long term.
We have been proactive in managing our business to drive leveraged earnings but not at the expense of customer satisfaction and future growth. Yes, these are challenging times, but we have the team, the strategy and the right culture that would deliver long-term success.
Thank you for joining us today. And now over to you, Parmeet, to lead the question-and-answer session. Parmeet.

Parmeet Ahuja

Thanks, Mike. Bo, if you could please provide instructions for the Q&A now.

Question and Answer Session

Operator

(Operator Instructions) We'll go first this afternoon to Matt Sykes at Goldman Sachs.

Matthew Carlisle Sykes

I thought maybe I'd start just with China, sort of a high-level question. You guys talked about sort of the transitory impact of the current environment. You mentioned pharma. Could you kind of extend those comments to China. Do you think it's more cyclical versus structural? Are there competitive issues that you're facing or just your outlook on that region?

Michael R. McMullen

Yes, Matt, thanks for the question. So let me start with the last part of your question. This is a macro story, not a competitive story. So market shares continue to be very, very strong. I know there's a lot of discussion about increased local competition, but we've moved pretty aggressively on our made in China strategy. So we don't see that all as a competitive issue.
Transitory, the comment there is really about the fact that the China market is not going away. It's going to be a big market for years to come. It clearly is challenged right now. And we're not -- we're taking a sort of 1 quarter at a time, actually month by month. And as Bob mentioned in his comments, I think July, we actually saw the weakest performance within the quarter, and we're still seeing weakness in the pharmaceutical industry, for example, the level of manufacturing declined pretty specifically in the month of July. So we think the market is going to be there, but it's going to take a while for it to get back to growth.
And I think the other thing -- probably the other thing to point here is -- and again, I'm talking specifically around the instrument side of the China market. As you know, we have a very large, in fact, the largest installed base of instrumentation in the marketplace. So very positive on the ability to grow the aftermarket in our diagnostics business.
Bob anything else you add to that?

Robert W. McMahon

No.

Matthew Carlisle Sykes

Maybe just for my follow-up, just on ACG. So a good quarter in that business. And I know you guys talked about a year or 2 ago about sort of a goal of 30% plus margins obviously achieved this quarter. Can you maybe talk about sort of where you see the durability of that growth is sort of high single, low double, 30%-plus margins, how we should be thinking about the business? Or were there some one-offs in the quarter that you'd want to call out to kind of measure expectations there?

Michael R. McMullen

Yes. We've consistently communicated that we think this is a high single digit, low double-digit kind of growth business for us. It's been that way since pretty much most of my tenure as CEO, and we don't see that changing as we go forward. Of course, there'll be puts and takes by quarter, but we're continuing to see good growth in our connect rates, which we've talked a lot about. And we're also doing very well on winning the enterprise business as well to complement the other aspects of our portfolio offerings.
I would say that the profitability was probably a little bit higher in Q3 than -- but we do think that the high double-digit number you quote about is pretty manageable for that business, but not at the level we saw in Q3, right, Bob?

Robert W. McMahon

Yes. Matt, this is Bob. And just maybe to further what Mike is saying, when we think about the components of that business, the fastest-growing component is actually the contracted business, which is that connect rate. And it was in the mid-teens this last quarter and continues to be faster growing than the overall business. And as long as we continue to be able to drive that increased attach rate, we feel very good about that.
And that comes with -- that growth comes scale and being able to leverage our team with the work that the digital initiatives that we've had as well. And so as Mike said, don't book, I think it was 32% going forward because there were some variable pay true-ups. But certainly, what you've seen quarter in, quarter out is a nice, steady cadence of margin improvement there.

Operator

We'll go next now to Jack Meehan at Nephron Research.

Jack Meehan

Mike, I was hoping you could talk a little bit more about some of the more cyclical areas of the business in the CAM segment. Just what are you seeing from some of your chemicals customers. You've heard some conversation of budget cuts there. Are you starting to see that? Just how is your visibility into some of these cyclical areas?

Michael R. McMullen

Yes. So as we've talked earlier -- thanks for the question Jack and I'll provide some comments and then have Jacob jump in on this one as well. But we look across the CAM, I'd say the advanced materials segment of that market, which we've communicated is more driven by secular trends and cyclical trends continues to hold up quite well. And by the way, also, I just want to point out we had a really tough compare. I think we grew 22% last year in Q3 in CAM.
If we look at the chemicals and energy side of it, the energy side actually popped up a bit, particularly driven by the U.S. we are -- where we are seeing some weakness is in the chemical side where customers are looking at the macroeconomic environment and are slowing their capital investment there.
So I'd say that kind of puts and takes. But I think in terms of the quarter, Bob, I think we came in right about where we thought we'd be in CAM and I'd say it's a mixed story in terms of different segments growing at different rates.

Robert W. McMahon

Yes. Before Jacob, maybe you I'll jump in. I think the one thing that I think is important is you really have story in China, which is its own and then the rest of the business. And so if you think about where Americas and Europe is, it's performed extremely well. And if you actually look, we mentioned this in the call, sequentially, the dollars actually were very stable. And so we are expecting a challenging Q4, mainly because we grew 70% in China.

Michael R. McMullen

(inaudible) 43% in Q3.

Robert W. McMahon

Yes. So it's a compare situation. But this business continues to be very strong.

Michael R. McMullen

Do you want to make the comments on the advanced materials side of the house there, Jacob?

Jacob Thaysen

Yes, I can say that. And Mike, I think you also started with that saying that we continue to see a lot of activities in that space, especially in the battery space, where, of course, there are also compares we are against, but there's still a lot of interest in that space, and we are doing very, very well. Semicon is also cycling down right now, but we are -- we continue to see business in that space, but not as strong as we did last year.

Jack Meehan

And my follow-up, I wanted to ask about margins. Just how you're thinking about some of the puts and takes for 2024. I think some of the cost savings you've talked about should extend to next year, should get some leverage out of NASD. But at the same time, some of the performance comp comes back and would think some of these top line pressures extend as well. I don't know, can you just talk about maybe relative to the LRP, how you're thinking about margins for next year?

Michael R. McMullen

Bob, do you want to lead that one? By the way, one thing I'd add to that before Bob's, the specifics, Jack, is our decision on the Resolution Bioscience business exit also is part of the story for us next year in terms of margin expansion. So Bob?

Robert W. McMahon

Yes. I would say that our view of leveraged earnings growth continues into '24. And so while we do have some things coming back to us, some of the actions that we've taken will continue to move into a full year for 2024. And quite honestly, that's kind of what we expect our job to be is to be able to drive that leveraged earnings growth.

Operator

We go next now to Vijay Kumar at Evercore ISI.

Vijay Muniyappa Kumar

Good job on the margin execution here, Mike. Mike, maybe I missed some of the comments here. Can you talk about the phasing in the quarter here in the China? I think I heard when you start off down mid-singles and was July off like minus 25%, minus 30%, is that the exit rate?

Michael R. McMullen

Yes. Vijay (inaudible) case within the quarter.

Robert W. McMahon

Yes, Vijay, this is Bob. Your math is in the ballpark. Yes. So we were down mid-single digits through June. So May and June kind of tracking as we expected, and then we saw incremental weakness in July, and we ended up for the full quarter down 17%. And what we're assuming going into Q4 is that, that performance will continue into Q4. And given the tough comp that we have because I think we grew 44% in Q4 of last year, we're estimating roughly a 35-ish percent drop in Q4 in China.

Vijay Muniyappa Kumar

Sorry. That's helpful, Bob. And just -- sorry, where I was going with that question was, can you talk about capital versus recurring? And I think when I look at your Americas and Europe, America is just flattish. Did you see a similar sort of phasing in ex-China, maybe talk about exit rates in July?

Robert W. McMahon

No. Actually, if you think about the ACG business, actually ACG grew in all regions and all end markets, inclusive of China. So there wasn't a change there. And I would say both in the Americas and Europe, we didn't see that same effect.

Michael R. McMullen

Yes. And overall, outside of China, the geographic performance was better than expected.

Robert W. McMahon

Correct.

Michael R. McMullen

We saw no trends like the China trend in our other geographies.

Vijay Muniyappa Kumar

That's helpful, Mike. And Mike, maybe one that you mentioned a couple of times on transitory. I think that's a new term that you're using, what have you heard on the ground on China...

Michael R. McMullen

I think I move away from prudent to transitory.

Vijay Muniyappa Kumar

Yes. Yes. What have you guys heard on the ground on China stimulus, maybe some positive commentary, but nothing is concrete and why use the word transitory? Is the implication here fiscal '24 should be a more normalized year when you look at the comps?

Michael R. McMullen

Yes. So a couple of thoughts here. I think relative to the China business, we're hearing similar things, but nothing really significant. And there's not enough to go on to assume it's going to have any kind of material impact on our outlook for the rest of the year.
When we talk about transitory, we talk about the fact that these markets are driven by investments to improve the human condition, as I mentioned, they're not going to go away. And while we're not going to get into specifics of an actual number, we actually see a path to growth next year for a full year for Agilent.
And of course, we have the tough compare in the first half of next year, we did coming off a double-digit print for the first half this year. But as we look at our business, keep in mind, we're -- what's behind my thought process here, which is we're an instrument company, yes, we have big instrument, around 60%, we have 40% of this in recurring revenue business.
I don't know if you caught it in my call script, but our sales funnels for instruments are actually growing. So that would say that at some point in time, those budgets are going to be released and the orders will close. We're not seeing deals come out of the funnel, we're not seeing an order cancellations, we're not seeing changes to our loan loss ratio. And we're encouraged by the growth we're seeing on the biopharma on the small molecule side. We know there's different rates of replacements during the cycles, but we think this will follow historical cycle.
I think the real wildcard for us as we look forward into '24 is really what do we assume around the China market. We're not assuming any kind of major further degradation, but at the same point in time, its path to return to kind of historic growth rates. That's the open question right now.

Operator

So next now to Dan Leonard at Credit Suisse.

Daniel Louis Leonard

Mike, I wanted to follow up on that last thought. You've seen a lot of cycles in China over 30-plus years. What would you compare this to? And how do we get out of it?

Michael R. McMullen

I am as old as the dirt and have been working in this marketplace since the mid-'90s. I haven't seen a cycle like this before. And we've not seen a situation where the there's really seems to be a lack of confidence right now in the macro economy outlook, and I'm not saying anything that the audience here does not fully understand already. So the way we get out of this, I think, is China led by the government, we'll get back to focusing on its long-term goals of making China an innovation-driven economy, which is going to require continued investments in R&D.
It's going to also get back to focusing on improving the health of the population, addressing some of the environmental issues. So we think it's getting back to fundamentals. We think that eventually will occur, but there's a lot of issues that need to work through within China right now. But we -- it's a very large market. The market is not going to disappear. And I think there'll be investments. And I think there's also needs to be a level of confidence in the private sector in China that it's good time to reinvest. And maybe I shouldn't wait on the sidelines hope for stimulus, but get back to work and get my business going.
So there's a lot of dynamics. I really have to say though, I don't know if I have a real comparable situation that we've been through for this long. I think Bob and I were talking earlier today, the change in the food ministries a number of years ago is -- was the biggest thing we've seen or [24 plus 7] some of the biggest things we've seen the change, but this is much more of a macro economic issue in China, which is different than what we've seen before. Obviously, you have an impact on life sciences tools, but it's a much bigger macro story is really driving the softness right now in our markets.

Robert W. McMahon

Yes. The only thing I would say, Dan, to build on what Mike is saying is as he mentioned, the demographics are with us. When you think about the aging population, the need to actually access health care, more important therapeutics and the importance of ensuring the water and the food supply. They are the world's leaders today in electric and clean energy. It's hard to believe when everyone thinks about that, but they are the leader, and they have more electric cars than any other region.
And so I think that investment is going to be key, as Mike talking about, from the government. But unless they change their strategic priorities, I think that's the benefit for life sciences in general.

Daniel Louis Leonard

I appreciate all that perspective. And just a follow-up, I was hoping you could elaborate on your decision to shut down Res Bio. I was surprised by that given that you've acquired the company only a couple of years ago.

Michael R. McMullen

Yes, sure, Dan. Happy to do so. So obviously, a very difficult decision, and I'll have Sam jump in on this conversation. But our fundamental belief was that our differentiation will be all around what we call the kitted strategy to have a distributed on market companion diagnostics for our pharma partners. And that market really hasn't developed as we had anticipated. Sam?

Samraat S. Raha

Yes, Mike, building on what you said. While NGS and cancer diagnostics is here, and we serve that market in a number of ways, right, just to be clear, too, we absolutely continue to serve cancer research, translational research and diagnostic test developer customers. But our -- core to our thesis, our differentiation is really the ability to develop and distribute these kitted tests in the market -- the pharma market and the testing market just hasn't evolved that way.
And we also looked at our recent analysis and concluded that even with more additional investment, this is going to be a business that's going to be undergoing significant losses for some foreseeable future. So it was difficult, as Mike said, but the right decision to make this move now. But again, to be clear, we continue to serve cancer research and diagnostics in a number of ways.

Michael R. McMullen

Yes. I think, Sam, when we've talked about this in the past. So we think we're still going to be able to participate in what we believe the strong growth of liquid biopsy market but to really providing a lot of the -- if you will, ingredients for the test developers themselves.

Samraat S. Raha

Here Mike, I'm going to take this opportunity also just to say beyond our core SureSelect Target Enrichment portfolio, which is used broadly for liquid biopsy testing today. Early next year, we'll be launching solutions from Avida Biomed, an acquisition that we announced earlier this year, which we think is really going to be a differentiated way to look at methylation as well as classic mutation analysis.

Robert W. McMahon

Yes. Maybe just one add, Dan, is obviously a difficult decision for us, but I also think it also looks -- it shows the discipline that we have in terms of our portfolio rationalization, and we felt we had better returns in other places to invest in. So...

Operator

We'll go next now to Brandon Couillard at Jefferies.

Brandon Couillard

Would you find a packing of mass spec versus LC trends in the quarter? And then based on your revised guide, what is the 4-year CAGR from 2019 for LSAG instruments exiting the year? And how does that compare to historical average over the cycle?

Michael R. McMullen

Brandon, I'm going to start with the response to your question. I'll let Bob dig through his notes to find the actual number. But first of all, I just started to say is that we believe what we're dealing with here in our core instrument portfolio, inclusive of LC and LC/MS continues to be a macro market story.
Our market shares are holding up really well. We're seeing in our 1 loss data. We're seeing it in the external reports from auto. And I think when we look at our performance in those core platforms versus our peers, we're reporting some numbers and kind of adjust for the timing of when we report. I think we're putting up similar kind of numbers.
And Jacob, I know you looked at this thing pretty closely and I'm trying to buy some time for Bob to check down the number.

Jacob Thaysen

We're trying to find the CAGR over last 3 years, which I don't have in front of me here, but you're right Mark -- Mike, we follow this very accurately. And we're doing -- we continue to do very well in this marketplace. We continue to innovate into it. And we have seen -- actually, we have taken share over the last period of time. And if you actually compare our calendar 2 versus competition, would actually see that we are approximately flat in the LC, LC/MS space. And I think that stacks up very well with competition.

Robert W. McMahon

Yes. Brandon, we can get that to you afterwards. I can tell you though, if you looked at the LSAG business over the last 3 years, it's been averaging 5% CAGR, despite being forecasted to be down this year. And obviously, those are 2 large businesses.

Brandon Couillard

Okay. And then I guess, 2 housekeeping questions for you, Bob. You talked about NASD growth in the third quarter, I imagine it might have been up sequentially with Train B coming online and then on the CapEx line, you pushed out $200 million spend. Did that just roll into '24? Or is there some projects maybe you decided to defer from the time being during the environment?

Robert W. McMahon

Yes, it's a great question. So NASD, we continue to be very pleased with that. We had our first revenue in Q3 from Train B, the first of many more revenues to come from that standpoint, and expect it to continue, and we're still on track for the numbers that we've been talking about through 50-plus for the full year.
And in terms of the CapEx, some of that will roll forward, but it's not -- we're not going to spend that $200 million in '24 as well. This would be -- we have deferred projects being very rational, really focused on revenue-generating programs. And so I do expect some of that will flow into '24, but I don't expect '24 to have an incremental $200 million show up in the forecast.

Operator

We'll go next now to Puneet Souda at Leerink Partners.

Puneet Souda

First one, so maybe, Bob, could you elaborate a bit on pricing here? I know pricing was a meaningful contributor initially this year. We're seeing China, obviously, you talked quite a bit about it, and we're seeing the headline for China deflation. So wondering if you are expecting pricing to maintain there? Or do you expect pricing pressure in China continuing? And also, we're seeing some of the peer sort of bioprocessing companies talking about local competition rising on the less high-tech product. And so wondering if you're seeing that on any of -- sort of your product lines as well?

Robert W. McMahon

Yes. Let me take the second question first. We can compete against the Chinese local competitors each and every day. And nothing has changed from that standpoint. We continue to feel very good about our portfolio and continue to drive that growth.
In regards to pricing across the board, we were slightly better than what we had expected. It was roughly over -- a little over 4% for the quarter. And that was driven across all 3 of the groups. So we continue to drive positive price across not only our DGG and ACG business but also our instrumentation and that's globally. And we expect to be able to continue to demonstrate the value of our instrumentation across the globe. Obviously, in a deflationary environment, that will put a little more pressure on the instrumentation business, particularly in China but we've incorporated that into our forecast and are still on track for positive price contributions for the full year in excess of 3%.

Michael R. McMullen

Bob -- maybe Bob, Padraig also going to maybe comment on some discounting trends you may have been seeing?

Padraig McDonnell

Yes. No, I think it's -- the pricing holds -- discounts has really held stable as well. We haven't seen any increase in that rate of it, and we continue to monitor that, but it's been very stable, Mike.

Puneet Souda

Got it. And then if I could ask an academic and government here, a smaller segment for you, but it did solid in the quarter. Maybe could you talk a little bit about what you're seeing across the globe in different geographies for academic and government and your expectations here going forward?

Michael R. McMullen

Yes, Bob, I think this is an end market that is holding up reasonably well. I mean we're seeing that on a global basis, in most cases, with the exception being China, where the funding is there, the funding is stable. And it's been a positive surprise for us so far through this year. And I don't...

Robert W. McMahon

No, it's really across many of our instrument platforms as well as the service business. And from what we're seeing, Puneet, is funding continue to be available and it's flowing from governments. They're -- I think they're seeing the strategic nature of many of the investments that they're making. And our expectation is that, that funding will continue.

Operator

We'll go next now to Rachel Vatnsdal at JPMorgan.

Rachel Marie Vatnsdal Olson

So first off, one of your peers have flagged that they were actually seeing some early signs of pharma spending recovery. I appreciate that most of the incremental this quarter is really related to the China weakness. So maybe ex-China, can you walk us through if you're seeing any signs of recovery of spending with biopharma customers. And then you've previously flagged for us that historically, when pharma spending slows down like we're seeing today that it can take 12 to 24 months to recover. So how are you thinking about the timing and recovery given the incremental weakness this quarter?

Michael R. McMullen

Sure, Rachel. So while we saw signs of stabilization in our European and U.S. business, stabilization relative to expectations. We're not hearing anything along those lines yet in terms of recovery or desire to increase spending, the fact we're hearing exact opposite right now from our large major pharma companies. So I hope that commentary from others in this space is correct. And there's going to be a big recovery here from year-end, but we're not seeing any kind of indications of that. If it does happen, great. It would be upside relative to our current outlook, and we know we do well in these markets. But Padraig, I don't think we're seeing or hear anything like along those lines.

Padraig McDonnell

No, I think it's spot on, Mike.

Robert W. McMahon

The only thing I would say, Rachel, is if we look at our funnels, they continue to be growing. So it's a question of when, not if, and particularly in pharma. And as Mike and Padraig just mentioned, we're not assuming a budget flush into our Q4. And if it happens, that would likely happen in our Q1 in any event from a revenue perspective. But what we see at least from our funnels is they continue to be helping.
And let me just answer Brandon's question from a couple of times ago. If I look at LC and LC/MS on a 3-year CAGR, they're between 7% and 9%, so higher than the overall LSAG average.

Michael R. McMullen

And Rachel, I think the second question relative to -- I think you're referring to the small molecule replacement cycle. And as you know, coming probably at least for the last 12 to 18 months, we had been indicating that we were expecting to see a slowdown in the rate of replacement. And in fact, we've seen that occur this year. Actually, given the weakness in China even beyond our expectations with a minus 16% number overall in the quarter.
That being said, we do stay with our view that these tend to be 18 to 24 months, 12 to 18-month cycles, and we'd expect that to start to see movement back towards a higher growth rate. And that's one of the reasons as we look into '24, we're saying some of these markets will start to turn as the replacement cycle gets back to more of a growth phase in that cycle. And as we've mentioned earlier, we see that particularly in liquid chromatography it's probably about a 5-percentage kind of growth market long term.

Rachel Marie Vatnsdal Olson

Great. Maybe just following up on your small molecule comments there. So small molecule declined 16% this quarter. So can you talk to us about how much of your China exposure is really tied to those small molecule workflows? And then what else is really driving incremental weakness on the small molecule side? We've heard of IRA pressuring some of pharma decisions and potentially leading to them reprioritizing the pipeline. So is there any risk that you won't see a recovery? Or could the growth rate for small molecule really be reset in? What are your conversations with customers on that trend?

Michael R. McMullen

Okay. So Rachel, I got it. So relative to China, I would say it's probably the same ratio as the global business, right? That's probably what 60%, 65%.

Robert W. McMahon

Yes.

Michael R. McMullen

It's probably related to a small molecule. And relative to what's happened in large pharma, what we're seeing is in medium-sized pharma is, again, a continuation of this cautiousness about deferring capital. I'm sure they're thinking through implications of IRA and also other expenses are running hotter in their P&Ls where they need to make some offsets with capital purchases.
That being said, if you believe, and I know pharma believes the importance of having safe on-market drugs. You have to have the instrumentation QA/QC environment to support that. That requires you to have modern liquid chromatography fleets. So I don't think it's a question that they can -- that this market is going to go away and won't be an area that the pharma will need to invest in. You can defer for a period of time, but then only last for so long.

Operator

We'll go next now to Patrick Donnelly at Citi.

Patrick Bernard Donnelly

Mike, maybe just given that commentary around the instrument cycle, not really seeing much improvement yet. Obviously, the China piece transitory, but certainly seems like it's going to linger. You only have couple of months in '24 for you guys here. How do you think about some of these impacts lingering in? I think you said there's still plans for growth next year, but it certainly sounds like some of the headwinds at least will linger into the first half, given some of those costs. I just wanted to talk through that top line setup given some of these headwinds lingering into next year?

Michael R. McMullen

Yes. We still have a few more months till we finish off the fiscal year, and we'll give you our guide in November. And I think we'll know a lot more by then. But I do think we know that we'll be able to grow this company in '24. That said, I was very careful in my comments to make sure that there's a full year growth rate. We do expect the first half of the year to be a challenging year just from a comp standpoint to begin with, but also some of the things that we've been talking about today in the call, we don't expect a quick snapback to be occurring in the next quarter or 2.

Patrick Bernard Donnelly

Okay. That's helpful. And then I know you mentioned budget flush is still a little bit away from that at the calendar year end for pharma and other areas. Do you have any view at this point? It sounds like you guys are expecting to be a more subdued budget flush, but whatever you're hearing from customers would be helpful just to [pull back] a little bit more on that.

Michael R. McMullen

Yes, sure, Patrick, happy to do so, and then I'll invite Padraig to this conversation. I know he's been talking a lot to his team about this. But as I mentioned earlier, we're not really seeing any kind of indication of customers saying, "Hey, listen, I'm going to have money. I'm planning to spend it this, this way." In fact, we've seen the opposite where sometimes orders that we thought were closed to actually keep deferring and require more purchases. In fact, I think one story we heard was we probably (inaudible) 3 times. One of CFO approved it and the third go-around and the CEO overruled it. So we know eventually going to get that business. But this is kind of dynamics ever seen. So we're not seeing a lot of indications of a strong year-end budget flush.
Again, we'd love to see the opposite happen, but we're not going to indication of that. And I don't know if you have something you would like to add there.

Padraig McDonnell

Yes -- no I think that -- what we're hearing from the customers is that we're not planning on a budget flush through the end of the year, but we're -- we will take the upside of [corsa.coms]. I think one thing is really clear that the funnels are very strong, and it's there, but we're not seeing them to be released through a big flush at the end of the year.

Michael R. McMullen

I think this comment, Patrick, on the funnel being strong and these funnels are actually growing is really important because this is one of the reasons why we think about full year outlook in '24. We know the business is there. It's just a question of when it's going to get...

Padraig McDonnell

Yes. We watch very closely our win loss rates. And we haven't -- we've seen them very, very stable. We had a strong funnel, which is very positive over time.

Operator

We'll go next now to Derik De Bruin at Bank of America.

Derik De Bruin

A lot of what I wanted to ask has been asked, so I've got some cleanups here. Just -- did you give a specific instrument core growth number in consumables growth or number for 3Q and then sort of your all-in number for this year, what you're expecting?

Robert W. McMahon

Yes. We didn't. LSAG for Q3 was down roughly 9% core. Consumables was up slightly.

Derik De Bruin

Got it. So what's the revenue contribution for Res Bio in 4Q? And what do we need to pull out for 2024?

Robert W. McMahon

Yes. So we've got a minimal number in Q4 as we wind down the business. And I would say it was roughly 1 point to a little over 1 point to the headwind to DGG going forward in FY '24.

Derik De Bruin

Got it. Okay. And so staying on the topic of M&A. I mean, you've done a couple of genomics deals, which haven't gone your way. And I'm just sort of wondering what's your thinking about deployment going forward? I mean valuations have obviously come in, industry is consolidating, you would say, but we have -- it's been relatively quiet across the space for the last 18 months. And so like how are you sort of thinking about capital deployment? And at what point do you decide you maybe want to buy -- start maybe doing even with the share prices, maybe doing some share buybacks. You sort of talk about your general capital deployment strategy at this moment?

Michael R. McMullen

Yes. I think Bob alluded to it a bit in his prepared remarks, but we still are staying with our balanced capital allocation strategy, and you saw us in the market opportunistically on share repurchases given where we saw the share price setting that. In terms of our -- an appetite for M&A, it remains unchanged given -- despite the Resolution Bioscience decision. We knew that was a higher risk acquisition for us, early-stage company in hot area based on a really differentiating new strategy that didn't want this to play out. But we've had some success in other aspects of our genomics acquisitions, including the AAT acquisition on the instrumentation side.
So we're still out there looking. But as Bob mentioned, we take a disciplined approach to not only to how we view our internal choices and our internal business performance in terms of what's in the portfolio, but we'll also take that same lens, if you will, on how we look at M&A. So really, nothing has changed beyond the fact that this is more of a buyer's market. And companies with a strong balance sheet like Agilent, I think they're in a good favorable position to work on opportunities, but we're going to stay disciplined and not get caught up in what once was a value of a company, either in the private or public space.

Derik De Bruin

Just one more follow-up, if I may. What are your orders in liquid chromatography? How is your order book? Are you seeing orders increasing?

Robert W. McMahon

Our order book was down, largely a function of China, but they were down year-on-year.

Operator

We'll go next now to Josh Waldman at Cleveland Research.

Joshua Paul Waldman

A couple for you. First, Bob, can you provide more context on the puts and takes within the fourth quarter core organic growth guide? I guess maybe the assumptions by business unit. And then curious what areas or in markets outside of China seem to be like slowing real time that you're trying to reflect in the guide versus areas that maybe have stabilized or improving over the last few days.

Robert W. McMahon

Yes. So Josh, just real quick. When we think about kind of the Q4 implied guide, the big driver is China. As I mentioned, down roughly mid-30s and that really impacts a number of markets you can imagine, both pharma and chemical and energy, which are -- or chemical and advanced materials, which are the 2 largest markets in China. I would also say that the diagnostics and clinical is also down. We've seen that softness in Genomics. And then obviously, the shutdown of Res Bio also impacts that business, and that's primarily a U.S. phenomenon. So we did see an impact in U.S. on that side. And then there's some puts and takes in other places, but those are the 2 big pieces for Q4.

Michael R. McMullen

Yes. Bob as I recall, I think 85% of the change was really China driven and bleeds over into pharma in CAM.

Joshua Paul Waldman

Got it. Okay. Then Mike, I guess, staying on China and a follow-up there. Can you unpack a bit more of what you're seeing by end market? I mean, like where demand is holding in versus like areas that you've seen come in lighter as the quarter progressed again. I guess, outside of China -- sorry, outside of pharma. And then I guess, a follow-up on Dan's question. I believe it was earlier. What are the variables within China, Mike, that you're trying to account for as you forecast the medium term? I mean, maybe beyond just the next couple of months. And I guess any risk that we need to kind of rethink the underlying growth rate in the industry if China remains light here in the medium term?

Michael R. McMullen

Yes. So let me start with the view by end market. I think the academia and government market was a grew for us in the third quarter. But everything else was pretty much down. The big change really were in the pharma space. And as Bob commented earlier about how we exited the quarter, the July performance. Some weakness in chemicals, but I'd say the down there was really just a bio product of -- we're going off of 43% compared last year, and we're looking at a 70% growth compare in the fourth quarter.
But I'd say the concerns or the cost of this in the China marketplace is really across the board. And with varying degrees, but I think it's really mostly reflected in the pharma outlook. I think that's a $64,000 question. I think there's a case to be made that this market will get back to its longer-term growth rates, but it will take a period of years to get there. It's not going to be a snapback in 12 months. But again, that's work to be done.
The factors that we're looking at, I think are the same factors that everybody else is doing that, which is what's going to happen to the macro in China. Storyboard here is a macro story and is bleeding over into life science tools, but we need to see the China economy get moving again. We need to see consumer confidence coming back. We need to see investment commerce is coming back in China. I think those things will take some time. But I do think there are priorities of the government, and they'll find a way to make that happen. But we're not calling for a quick snapback here either.

Operator

We'll go next now to Dan Brennan at TD Cowen.

Daniel Gregory Brennan

Great. Maybe just one on instruments, Bob, I think you talked earlier, I think to Derik's question maybe you gave the LSAG, but I know there's consumables within that. Could you just break out what the instrument number is? I know we've got on the Q. Just wondering how (inaudible) as we look ahead, I think given your income exposure, it's always a key question, I know there's been various times asked throughout, but just how would we think about kind of the outlook for instruments, whether it be fourth quarter, if you want to point to go out a little further?

Robert W. McMahon

Yes. So to maybe add a little more flavor and clarity to my answer previously, LSAG was down 9% core. It was down 9% in instruments as well. So the consumables business was up basically 1 point.

Daniel Gregory Brennan

And as we look out there, I'm just wondering, I guess it really depends upon the type of product, which you guys already discussed. It sounds like you're optimistic on LSAG, given the funnel is going to get back towards that -- excuse me, that LC/MS is going to get back to that 5% growth. I guess, would you see instruments as the starting point grows in fiscal '24 from what you see today?

Robert W. McMahon

Based on what we see today, yes.

Daniel Gregory Brennan

Got it. And maybe one more question -- just 1 thing that...

Robert W. McMahon

There's no reason to believe when we think about kind of the level of investment over time and the importance of our instruments in the discovery of new therapeutic areas or food testing, we think about, as Mike was talking about, these new areas around applied markets. There's no reason to think that there's something fundamentally has changed, that they don't need instrumentation. And so I think we feel very good about our market share and our competitiveness and do expect our LSAG business to be a growth driver for us going forward.

Daniel Gregory Brennan

Yes. No, completely I know, it was just more just on the comp basis after mid-teens, but that sounds great, Bob. And then just one quick one, just on the applied versus the chemical, you mentioned some chemical weakening. Just that were concerned in the quarter, but the applied is obviously powering through. Can you just maybe unpack a little bit more how you're thinking about like how we exit the year across your different buckets within the chemical and appliance segment?

Robert W. McMahon

Yes. I mean I think if you look at Q4, it will be really an impact of China. So we're actually looking at chemical and advanced materials declining in Q4 because of that 70% increase that Mike mentioned in Q4 of last year. That was across the board. I would say the advanced materials will be much stronger than that down -- high or down double digits. And the chemical side, probably will have a bigger impact. If you recall, the Shanghai shutdown impact was centered in the chemical and advanced materials market because that's where our GC manufacturing was, and that's a workhorse for some of those products. So we do see it down in Q4, but up for the full year. I think that's a really important thing to make sure that people understand.

Operator

And we have time for one more question this afternoon. We'll take that now from Luke Sergott with Barclays.

Luke England Sergott

Great. Just real quick on -- so real quick on the NASD, are you guys seeing any pressure from the market, you're seeing any in-sourcing from the market? I know Novartis has talked about doing some of this as well. And then lastly -- additionally, with that, with the CapEx guide down, are you guys still investing in additional lines there for the year? Or is that really on pause? Does that have anything to do with that kind of CapEx step down?

Michael R. McMullen

Let me leave with this and then have Bob jump in and Sam as well. But from an in-sourcing standpoint, no, we're not seeing any material moves in this direction. And in fact, as we head into '24, we are going -- we continue to broaden our book of business and we're going to have more customers than we ever had in terms of breadth of customers as we go into '24. And yes, it's called project endeavor. So Train B, we went live, which had a different code name. And that's the live but we continue to move forward with our expansion plans on the oligo front, siRNA front along with what we like to do on the CRISPR side as well in antisense. So we're going to broaden network. So our stated investment plans remain unchanged.

Robert W. McMahon

Yes, to be very clear, Luke, to add what Mike said. We are not slowing that down at all. That investment is one of the highest priorities. We've trimmed back spending in another less -- more infrastructure kind of oriented projects as opposed to kind of revenue generating. I think what you're seeing actually is it's actually coming in better than expected because the pricing is better than expected. And you probably have seen that in other places. And so the availability of parts and the key materials is better than what we initially had planned as well.

Samraat S. Raha

Yes. I'll only add to what you guys said that, Mike, along with having more customers and actually a more diversified set of customers, we're going to be -- we're contracted to do more programs next year than in the history of NASD. So it's all full speed ahead.

Luke England Sergott

Got you. Got you. And then I didn't hear anybody ask about the ACG margin. Maybe they did, I missed it, but you guys had a material step up there. Can you talk about really what went on there? Is that -- is there any benefit that you saw from like lack of incentive comp? Just kind of break out where the drivers there and really how we should think about that in Q4 and that's a jump-off point.

Robert W. McMahon

Yes, we did mention that there was a benefit, Luke, of the variable pay comp, obviously, that's got a big component of people in it, but it's also a reflection of the scale and the continued growth of that business. We didn't say take that 32%, I believe it was in Q3 and kind of booked that as the new starting point because it had outsized growth, but we continue to be pleased and expect continued margin expansion for ACG going forward.

Operator

Thank you. Ladies and gentlemen, at this time, I would like to turn things back to Parmeet Ahuja for your closing comments.

Parmeet Ahuja

Thanks, Bo, and thanks, everyone, for joining the call today. With that, we would like to end the call. Have a good day, everyone.

Operator

Thank you, Parmeet. Ladies and gentlemen, this does conclude today's call. Thank you for joining. We wish you all a great day. Goodbye.