3M's (MMM) Management Presents at Deutsche Bank Global Industrials & Materials Summit (Transcript)

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3M Company (NYSE:MMM) Deutsche Bank Global Industrials & Materials Summit June 9, 2016 11:00 AM ET

Executives

Nick Gangestad - SVP & CFO

Mike Roman - EVP, Industrial Business Group

Analysts

John Inch - Deutsche Bank

John Inch

Thanks everyone. So I am miced up and I am in the bathroom. Well, when I was in college our economics professor was miced up she went to the bathroom and she was still miced up and you heard everything. It was one of those funny moments, now, with that so hopefully no one heard anything. With that it gives me great pleasure to introduce management team of 3M. Nick and Mike Roman who is the Head of Industrial for 3M, so I thought this would be a really good opportunity given that this is an industrial conference for one of the most interesting, unique, differentiated, and competitively advantaged companies in the world, 3M Company, I think to talk what’s their secret sauce and then we can get into some Q&A. So with that I am going to turn -- you’re going to it okay Nick take it away.

Nick Gangestad

Thanks John. Yes this morning we have the advantage of two of us from 3M speaking and sharing what we’re seeing in the world right now. I’ll start, I am Nick Gangestad, I’ll start with a overview of the 3M, where we’ve been, where we are, what are our strategies going forward and then Mike Roman will go into a big deeper look into our industrial business.

To really understand 3M I think it's good to start with our Playbook. Our Playbook is how we’re operating and what are the key things we’re working-on. On the left hand side, you see our strategies, our visions that support -- that’s driven by those strategies and then how do we operate as individuals within the company, our code of conduct as well as the behaviors that we operate with. Those things form a lot of the 3M culture that is a driver of our operations. On the right hand side, our three key levers for how we -- what we are investing in to enhance our ability to grow efficiently in the future. And you’re going to hear that term repeatedly this morning, efficient growth.

The three things that we’re focusing on is key levers, one is portfolio management, where we are modifying our portfolio, choosing things to invest more in and choosing to put less resources into other parts of our portfolio. The second is investing in innovation, where we’re investing in science. 3M’s investment in research and development is the heartbeat of 3M and we’re enhancing our strategies around investing in innovation. And then the third is business transformation. The third lever is changing the way we conduct our business processes to enhance our efficiencies and our ability to service our customers in the future. That has been in progress for several years and will continue in the next four years.

Our vision is really a statement of what we see is the capacity of 3M, and our ability with our technologies, our products, and our innovation, that we can and should be touching and advancing every company, enhancing every home, and improving every life. And when you look at our portfolio, you can see how we can be doing each of those things.

To achieve that vision we set in place a few years ago six strategies. Four of those strategies are focused on growth, one of them is focused on our people and how we're developing our people and then the last is on operational excellence. And I'll just point out under the strategies on growth how they're transformative and how we think within 3M. The first strategy is on relevance to our customer, that's something we value, though we just don't want to compete in marketplaces but we want to compete in a way and in positions where the technologies and the products and the innovation we have is relevant to our customers.

The second one on market share, we're not just trying to gain market share we have a focus on gaining profitable market share. And then the third and the last one I'll comment on is the -- our strategy is actually a statement, we will invest in innovation. It's something we believe in, it's something we've done in the past and it's something we're increasing our commitment to. What did 2015 look like for 3M? It's a year where we had slightly over $30 billion of revenue. We're made up of five business segments, ranging from industrial with just over 10 billion down to our smallest -- at approximately $4.5 billion of revenue. As you look across these five segments you see strong operating margins for all of them that contributes to our total company's ability in 2015 to deliver a 22.9% operating income margin.

We're pleased with this portfolio, it's a portfolio that -- they are not standalone each of them has technologies and platforms that have synergistic impact on the others. It's a group of businesses that makes sense for us given the technologies that we have within our company. In 2015 we had a continuation of our strategies around capital allocation. We are -- it was our 58th year of increasing our dividend over the last three years we've been aggressively bringing our dividend up from $2.54 to $4.44 estimated for this year. Over the next few years we expect our dividend to increase in proportion to our increase in earnings per share.

Also part of our capital allocation and capital structure strategy, we have been working to reduce our cost of capital. That is come by us adding some debts to our balance sheet. We've also been investing in buying back our shares. And our approach in buying back our shares is unchanged. There's a portion of capital that we are consistently deploying into buying back shares and then we have a larger portion that is -- that flexes up and down based on the relative value we see in 3M stock price.

Two months ago we laid out our five year plan. We did that on March 29th laying out what we see between now and 2020. There are several things to share there and I'll just boil it down to this one -- these next 2 slides. We see ourselves participating in the global economy that is likely going to be slower growth than what we've seen over the last couple of decades. We've adjusted our external view of economic growth and for us one of the primary metrics we use as industrial production index, we're looking at a world in the next five years where we see industrial production index growing somewhere between 1% and 3%. And in that type of economic growth world the 3M portfolio we see is capable of growing somewhere between 2% and 5% organically. That growth varies by business and we expect that growth to be driven by our highest growing business of healthcare.

As part of a 2% to 5% organic growth world for us in the next five years we also laid out our complete set of financial objectives. We have four objectives that we manage to, first which I've already talked about 2% to 5% organic local currency growth, second in a 2% to 5% organic growth world we see our ability to grow earnings per share between 8% and 11% through efficiencies and through deploying our capital into mergers and acquisitions and share buybacks. We continue to have an objective of return on invested capital of 20% and our objective to generate a 100% free cash flow conversion over the course of five years. That's a very brief view of the total company and at this point I'll turn it over to Mike, Mike Roman our Executive Vice President for our industrial business who will go into more depth on that particular segment.

Mike Roman

All right, thanks Nick. Good morning, it is my pleasure to present our Industrial Business Group. This morning I am going to give you a quick run through of who we are, where we play in the marketplace and a couple of insights on how we win.

So let's start with who we're, $10 billion business group the seven businesses you see depicted here make up that business group and one of the ways to look at that is we have four leading global positions in industrial product platforms industrial adhesives and tapes, abrasives, advanced materials which is our ceramics and our polymer businesses and product platforms as well as our filtration businesses and they serve a broad range of markets from those product platforms. We also have three leading market positions in automotive aftermarket, automotive and aerospace really around some high value 3M material science solutions into aerospace.

In addition to those three carved out businesses focusing on specific markets, we served a broad range of highly attractive industrial market segments and you can see our top 11 ranged here in order of our estimate of the addressable market size for our businesses and you can see also that all of them are expected to grow as we go forward in our next five year plan. Winning in these market segments really gets back to a couple of things Nick talked about is still as big three levers driving portfolio and prioritization around how we make our organic investments and how we make acquisitions to add to that technology manufacturing capability we have.

It also is about those fundamental strengths Nick talked about technology, manufacturing global reach and brand to enable those aspects, we really need to have a very effective and optimize frontend, a customer first model where we engage our customers. It's vital to getting insights more customers that really drive that innovation engine that leads to that leverage of those fundamental strengths. So I thought I would just give you some insights in how we optimize that go-to-market model. So at a high level, you can look at our products sale globally as a majority of it being designed in are specified products and these are products that come from an engagement with direct end-users sometimes large OEMs sometimes small end-users customers.

And we're working with them to really line ourselves up with their organization, get very close understanding their challenges, understanding their promise to their customers so that we can gain insights that can lead to new products, new applications fundamentally new product categories. And when we do that well we can leverage those customer-inspired innovations to build momentum that can outgrow the markets for sustained periods and we have a couple of examples, I'll share with you on how we're doing just that.

The other side of our portfolio of product sales is what we call consumables products that are often bought through distribution increasingly through e-commerce these are differentiated products as well. They are not always specified in but they are differentiated in terms of performance and quality. So it's important to innovate here as well and so we have the model where we have what we call our industrial market center where globally we deploy specialized engagement for a broad segment of customers. And looking across those broad segments we're able to get customer inspired innovation out of insights as well leading to enhancements in those consumable products used in the manufacturing processes, used in operations of businesses around the world.

So just a couple of examples of where we do that with some very good success and have some very good momentum right now, so automotive, in automotive we are aligned, our global organization is aligned around the top global OEMs. We have a very close relationship from the top to the bench in those companies. It allows us to very deeply understand what they're trying to do with their products for their customers as well what their challenges are and it's leading us new insights for new design in solution. We also get a very deep understanding of their tier suppliers and what they're looking for out of them as well and we can enable greater process efficiencies and productivities as well. From this we learn about the market trends more deeply it leads to insights to innovation for us and ultimately turns into high value products, products that solve problems for them that are specified into drive away kinds of filler materials for those customers.

And we see a roadmap out into the future, so we see an opportunity and we're working on a pipeline of new product development that can continue to sustain this organic growth rate above the bill rates, so we outgrow the bill rate in the automotive OEM business larger because we leverage this kind of relationships back through out of our innovation engine.

Another example is what we do in filtration, so here we're working again with global direct end-user customers in industrial markets and in life sciences and medical markets as well. In these spaces we're looking at how we can enable their processes that they're driving, filtration processes that are part of their manufacture of their products and we get deep insight what their needs are, we understand the market trends for not only higher purity requirements but how can they simplify their filtration processes in the case of drug manufacturing. They have many steps in the process how to simplify it leads to new insights and new high value products and allow us enables us to outgrow in those markets as well.

Our 3M purification business has a strong position standalone and now we're integrating the Membrana acquisition the Polypore’s Separations business called Membrana into this and I just thought I would give you a quick update on that as well. So the image in the upper left is the sign that went up over Membrana last August 3rd was when we closed the acquisition in their site, their main site in Wuppertal, Germany. This brought strong positions in life sciences and industrial products and market categories, hemodialysis therapy, blood oxygenation, gas transfer technologies, really based on a platform of ultrafiltration technologies that we were looking to add into our capabilities in our filtration business. The performance has been very strong. We are exceeding top-line and bottom-line expectations through, since the close of the business.

Another part that's really exciting for us is we've identified concepts and opportunities that Membrana have been developing that can leverage 3M technology. We have more than a dozen technology platforms that can enable entirely new product categories off of some of the technologies that we brought in with Membrana. An example here, where we're using advanced materials and polymer processing and precision processing to take a concept and turn it into feasible products that can lead the high-flux nano-filtration opportunities entirely new product category, so very exciting leverage of that fundamental strength around technology and actually manufacturing process capabilities as well.

So, that's just a couple of insights on how we're leveraging that customer first go-to-market and customer engagement to bring those fundamental strengths into real value for our customers and for our businesses. So, just in summary, I talked about the markets of customers in the business model, how we are using that to create sustainable competitive advantages, we are deeply leveraging the 3M fundamental strengths and those big three levers, especially portfolio management and prioritizing where we are making both our organic and M&A investments to drive that differentiated value in that efficient growth out into the future. So, thank you very much.

Question-and-Answer Session

Q - John Inch

Thanks Mike, and Nick, sort of a clanging in the back, you get what you pay for all right. So, let's -- I'm going to come to industrial in a second, I want to hit some bigger picture topics, with you again if anyone has any questions please put your hand. So, Nick 20% return on capital target, right? And I think you had made comment that, I think you had given us some numbers, I believe that was at EPG in terms of what the ROIC has been on acquisitions, that was just lower than that. Can you just remind everyone what that framework is again?

Nick Gangestad

Yes. As we lay out a 20% return on invested capital objective, it's a composite of many different deployments of capital. We're deploying -- our first draw on capital is on our organic businesses, we're investing in innovation through research and development, we're investing in capital spending to improve our manufacturing capability and capacity, we're investing in our brand. Those get our first drawn capital. And those probably over a longer period of time if you think about the value we're getting from our brand and from some of the innovation, probably in aggregate having return on invested capital that's greater than 20% right now.

We also are investing in M&A and our approach in M&A is not to -- you're likely not going to see us invest in a complete adjacency that's not related to 3M's portfolio. We're generally buying other companies that have technologies, products that we think are good compliments to 3M's fundamental strength, our own innovation, our own technologies, our own manufacturing, and where we see a synergistic ability to bring that in. So when we -- so often, especially in the short-term, many of these deals will have returns on invested capital that are at or slightly above our total cost of capital which is 8%-8.5% something like that. Overtime many of the franchises we have, if I look at our health information systems business, if I look at our oral care business, those are some examples, some strong businesses we have now that are generating fantastic returns on invested capital, but many of them, many years later.

John Inch

But there must be businesses that are not, I'll tell you where I'm going with this. so I just ran some back of the envelope number, so, I think from -- I realize, you've not been in this position forever, you guys came in, in 2012, but I think R&D from 2010 to '15 has been about 10 million and your CapEx during that period is about 8.5. Now just looking at these numbers, it seems like you're -- in 2010 you had about 5.9 of EBIT and today you've got 6.95, right. So, roughly speaking you deployed internally 18.5 billion but dropped profit over that period pre-tax, because then you obviously ROIC is an after-tax so is up about 1 billion, so, that's not hitting a 20% -- I realize this is not -- it's not a way to look at it, because it's just, it maybe comparing slightly apples and oranges but just trying to understand I mean how do we investors get comfort that these massive deployments of capital that you're making internally are actually generating at these ROIC numbers that you've articulated, because it's tough from -- what I'm trying to suggest is it's tough from an outsider to actually map to and track it precisely?

Nick Gangestad

Yes John I don’t know if I followed too much of your equation there, but you're only talking about parts of the equation.

John Inch

Of course right.

Nick Gangestad

As I'm trying to follow it’s all your math there but if you look at the track record overtime, a 20% return on invested capital is not a new phenomenon for 3M if you go back 10 years, 15 years, two years, three years ago, this is something that we’ve been consistently generating. In fact if you look at our return on invested capital over the last two or three years it's been a little bit quite a bit north of the 20% that we’ve laid out as a target, partly how we’ve been managing our balance sheet and the total capital deployed. In the short-term math that you were or the five year math you were deploying there is other things that have been impacting that. So, what has foreign exchange done to our total return.

John Inch

That is right.

Nick Gangestad

That has been a noticeable impact on that total. So I think here your total math might [Multiple Speakers].

John Inch

Well, you also had some events to sustain I understand it's not that the incremental CapEx and R&D is supposed to generate incremental returns because I think bringing a perpetual portfolio I understand it, so that -- I am just trying to question that a little bit sort of the -- because these numbers -- I get these questions all the time, is 3M getting sound returns on their investments making internally. I mean from your perspective you are?

Nick Gangestad

From our perspective part of how we look at it is, are we able to achieve growth rates that are exceeding the market growth rates. Can we grow faster than the economy we’re competing in. Can we deliver premium margins that is some of the metrics we look at are we getting a return. If I go down the project by project when we investment in CapEx, when we invest in merger and acquisitions, when we invest in research and development, each of those projects has its own objectives where we have a follow-up process where we’re ensuring that we are getting the return that we said we would get out of that.

John Inch

No, so going back to my earlier point, are there elements of your portfolio that are not generating satisfactory returns based on your internal processes and what portion of the mix would that be and is that either an opportunity or it's just a cost of being in your businesses?

Nick Gangestad

If you look at our -- one of our three key levers, one of them has been portfolio management. One of the guiding principles as we look at portfolio management as how well are these businesses contributing to our total returns on capital, some of the actions we’ve had where we have divested the small pieces or where we are pulling our internal investment resources away from those businesses and putting them into others, those on average would be ones that have been generating returns on invested capital below our average that we’ve been putting more of that capital into where we see more accretive uses and returns on that capital?

John Inch

And it actually makes sense to you put money into the businesses to try and drive the returns higher at the analyst meeting you laid out a framework though a lot of money to potentially put into M&A. How much did you again remind everyone, how much available you could deploy over the next five years?

Nick Gangestad

Over the next five years, we had a category that isn’t exclusively M&A it's $24 billion to $29 billion is what we feel is capital after we’ve invested in the organic opportunities, after we’ve invested in research and development CapEx, our pension, our dividend, that we felt there was $24 billion to $29 billion deployable to both mergers and acquisitions and share buybacks. And that’s a departure from how we have guided that in the past. We used to have two discrete buckets on that.

John Inch

And just to be clear that also includes the impact of raising financial leverage, correct? The 24 to 29.

Nick Gangestad

That is as we think about our total capital that we have deployable adding leverage is part of that, is part of how we come up with the 24 to 29.

John Inch

In other words that, that doesn’t imply that you could also go raise a bunch more get if you needed to, this is part of your capital deployment?

Nick Gangestad

This is inclusive of our capital structure strategy and the capital deployment plan. So the 24 to 29 as I was saying is a departure in the past where we’ve had discrete buckets for what we see over a long period of time to M&A and what we see to share buybacks. We’re in a position right now where we are retaining some flexibility depending on where we see the best values. We see the best values and best value creation opportunities in M&A that can get it proportionately higher percentage of that. If we’ve seen more opportunities in our own stock and valuation there, we can deploy more to that. But we’re retaining some flexibility in that deployment.

John Inch

Now, Membrana and capital safety is decibel as we’ve initially experienced is pretty expensive acquisitions, is that the roadmap I kind of understand I think I understand what’s happening here. In other words you ultimately don’t want to move back down the pyramid to buying lower commoditized businesses, you want things that are higher value, that are ultimately going to stimulate growth. But is that always going to I guess come at a price and you might have a perspective in terms of M&A prospects within industrial. I mean is the 3M of the future in terms of doing M&A always going to be doing these, what appear to be very, on the headline basis, expensive transactions?

Nick Gangestad

The price we pay is important to us. I don’t want to discount that. But before I get to that, the 3M of the past versus the 3M today and of the future, one way I think I would differentiate that is that would be helpful is we have increasingly sharpened our focus in knowing what we want to invest in and where we want our portfolio to move, but we have sharpened that focus. That increases our clarity of knowing from a strategic standpoint where what -- where we're looking for inorganic ways to complement that business. So having that confidence of knowing where we think we can add the most value to inorganic ends up with us having some fewer opportunities that we're looking at, but when we're looking at them we know we are more committed to wanting to do that. Getting them at the right price is important to us, getting them in a way that they're accretive value creating for us is important. But we have narrowed some where we're looking. Right now our priorities, one of them is in industrial, one is in healthcare which typically has higher multiples than on the industrial front and the third is in the safety area. Doesn't mean we're not looking in other parts of our business portfolio but those three stand out as where we're the most active in our pipeline right now.

John Inch

And for the record you bought the companies I'm not suggesting otherwise, it’s just -- there's always a trade off of good companies come at a price, and how do you manage that [Multiple Speakers]?

Nick Gangestad

So, yes Membrana was the result of our sharper focus I would say on portfolio.

John Inch

Yes.

Nick Gangestad

Where we wanted to go with our portfolio, where we could get to you know accretive growth and strategic attractiveness to us in a broader sense and that was a big part of the strategy. We also, it was a result of understanding how we create value long-term and I talked about the example the technology but we see that Membrana acquisition hitting all four categories of our fundamental strengths, leverages technology that we can bring unique 3M technology and platforms, manufacturing processes that we can bring, you know trade secret processes that can add value to global reach plays a big value there, because we're facing broad based life sciences industrial markets so our global you know capabilities are a big part of that, and our brand played strong already, we have a position with our purification business combined with the Membrana brand in the marketplace it becomes 1 plus 1 is greater than 2.

John Inch

So should we be looking for more Membrana type of?

Nick Gangestad

Yes.

John Inch

Or is that a little bit of a one off [Multiple Speakers]?

Nick Gangestad

No, I think that's just the sharper focus and the strategy in a broader sense, is where it's more attractive for us in our portfolio that's where we're focused and where we can leverage those fundamental strengths to create incremental value as what we're going to be focused on.

John Inch

And is life science an area that you want to grow in through M&A.

Nick Gangestad

Well I think it comes out of our product platforms, we have a healthcare business that has a broad focus on life sciences and healthcare in general and this a bit of a unique one because it’s a business to business model where we are an application of product category going into medical and healthcare companies but that in filtration it's an attractive space. Outside of filtration it's not a big area focus, it doesn't have a big area of focus within our existing portfolio it does in filtration.

John Inch

Now, I have been asked by probably a lot of folks. You actually have a very large presence in auto I think it is around 10% of your portfolio. We had IBW up here this morning they're obviously a very large auto company. How do you, what's the 3M playbook for dealing with possibly you know declining U.S. dollar for a number of years, what's the strategy for keeping those sort of rates and content still robust?

Nick Gangestad

We have kind of two ends of auto too. We have the automotive OEM and we have the automotive aftermarket aspects of this business so they've got something that they are related in the market dynamics. But automotive OEM, we have built the capability with the kinds of strategies around customer engagement and I would say the leveraging 3M application of technology into those OEMs with a closer relationship that we're increasing our over the last few years, increasing our growth rates above the market, so even as the market is flat or negative we continue to drive growth in those market segments. Now we can't, we can't weather any downturn in the marketplace, but we can we are very strong in our ability to continue our growth the build rate.

John Inch

Have you changed the way you're managing the businesses because in response to what some of the sales data and rising incentives data are saying. Are you that you are still kind of in a watch and see mode?

Nick Gangestad

I don't think it changes our strategy with our customers, I mean we're still at a fundamental level trying to solve their applications and look for higher value and with our ability to outgrow the build rates, the build rates are stable, we do really well and we can be resilient in market cycles. We aren't adjusting our strategy because we see market cycles coming we're looking for high value because that is…

John Inch

Yes, I understand [Multiple Speakers] Yes. And your interest is here you're not assuming, and I think 3M hasn't, broadly speaking as part of your guide framework, assume some rebound in the second half of 2016, is that correct and is there, what's the application Mike to your businesses in terms of [Multiple Speakers].

Mike Roman

I think industrial production, we see it incrementally getting better as we go into the second half, and we're cautiously optimistic that we're going to see some improvements there, we also see some of the, the business cycles we've been in, in oil and gas and defense.

John Inch

Right.

Mike Roman

Our year over year comps gets better as you get in the second half of the year so adds that strength. Automotive the build rates look fairly steady through the second half projections of them and our ability to outgrow those give us confidence that we'll have continued good growth rate in that business.

John Inch

Now switching gear to your favorite segment, Electronic and Energy, it looks like you've just actually guided that segment down again very slightly as we would see which of course you didn't write about but I am asking you also?

Nick Gangestad

We did, we in April in our first quarter earnings call at that point we changed our total guidance for the year for Electronics and Energy and what we're expecting in that was after our first quarter where Electronics and Energy was down almost 12% organically. At that time we said that we expected Electronics and Energy in the second quarter to be down organically somewhere in between mid to high single-digits. Our view now is we're two-thirds of the way through the second quarter, we see ourselves landing more squarely on the bottom end of that range of high single-digit organic decline. So little early in the year for us to change out total year guidance but we're clearly seeing second quarter coming on the low-end of what we were guiding John.

John Inch

You've also had little bit of cushion from the accounting change right, so the recognition of the options wasn’t that like a $0.10 number or something like that?

Nick Gangestad

The recognitions impacting our tax rates.

John Inch

Right.

Nick Gangestad

For the year, yes, that created approximately $0.10 for the year tailwind mostly being offset by additional actions that we're taking movement of cash that keeps the total impact for the year neutral.

John Inch

But in theory if Electronics and Energy is both coming in worse and it's not really clear to me why people need to rush out and buy bunch of new iPhones, right so but it is what it is, if that is coming in worse in theory you have the $0.01 in your tax rate cushion that you said you're going to offset with the cost of repatriation but there is probably I am assuming a little bit of flex in that number not to follow through with that plan of management?

Nick Gangestad

But there is probably a lot of things that we have to flex with that being one.

John Inch

Okay anything else you guys would add with respect to kind of your own outlook, I mean ultimately because it doesn’t sound like a lot of things have ultimately changed, right?

Nick Gangestad

Yes, we -- four of our five businesses we’re continuing to see everything progress just as we thought at the beginning of the year just as we thought in April. At that time in April we guided that we expected second quarter to be slightly better than the organic growth that we saw in the first quarter. In light of our revised view on Electronics and Energy for the second quarter it is more likely that second quarter is going to be similar to organic growth what we saw in the first quarter. But for the year we're seeing four of the five businesses progress exactly where we expecting them to.

John Inch

We'll go one more minute, because I am in-charge, healthcare information systems so was on the block now you've retained it it's clearly a fanatics business. I won't quote PLT umbers but I am they're extremely robust right and now you're going to invest in the business, what exactly are you going to do with that business, I mean, it was clearly somewhat orphaned enough that you would have considered it for divesture now it's back in the full, how exactly are you, how do you bake a part of the 3M family through reinvestment and how much money are we talking about to spend? I think you just talked about this.

Nick Gangestad

Yes.

John Inch

So I just want to, can we put a more meat on the bucket here?

Nick Gangestad

There is four points John I would say on that first of all from a retain and invest standpoint there is an organic where just actually more of our capital that we're organically deploying into that business. The second place for retain and invest that you're going to see more differentiation is increased external partnerships that.

John Inch

Okay and that makes sense.

Nick Gangestad

We'll be doing more activity there. Third is M&A that I would not be surprised in the next two to three years seen more M&A dollars being deployed into that business. And then the fourth that is as far as integration into the business, there is some technologies and capabilities we have there. Part of our plan is how do we take even more of that capability and deploy it into other parts of our businesses that are seeing needs for that kind of technology to complete our material science.

John Inch

Perfect, we are out of time, but thank you both again. Mike [Multiple Speakers].

Nick Gangestad

Thank you.

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