Q1 2020 Earnings Call

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Ladies and gentlemen, just the operator.

Since the scheduled to begin momentarily until that time your line well they can't be placed on music old. Thank you for your patience.

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We'll take her this morning at this time I would like to welcome everyone to Danaher Corporation first quarter 2020 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask the question. During this time. Please press star one on your Touchtone phone.

If you would like to withdraw your question. Please press the pound key on your telephone keypad I will now I'll turn the call over to Mr., Matt Good Gino Vice President of Investor Relations Mr. could you know please go ahead.

Thanks, Chris Dell.

Good morning, everyone and thanks for joining us on the call what is today or Tom Joyce, our President and Chief Executive Officer, and not Mcgrew, our executive Vice President and Chief Financial Officer.

I'd like to point out that our earnings release, the slide presentation supplementing today's call. Our first quarter 2020 form 10-Q, and the reconciliations and other information required by FCC regulation G relating to any non-GAAP financial measures provided during the call are all available on the Investor section of our web site later.

W. Dot Danaher dot com under the heading quarterly earnings.

The audio portion of this call will be archived on the Investor section of our website later today under the heading events and presentations and will remain archived until our next quarterly call.

A replay of this call also be available until may 21st 2020.

During the presentation, we will describe sort in the more significant factors that impacted year over year performance. The supplemental materials describe additional factors that impacted year over year performance.

Unless otherwise noted all references in these remarks and supplemental materials to can company specific financial metrics referred to results from continuing operations and relate to the first quarter of 20 Twond.

And all references to period to period increases or decreases in financial metrics our year over year.

We may also describes certain products in devices, which have application submitted in pending for certain regulatory approvals for our available only in certain markets.

During the call will make forward looking statements within the me the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.

These forward looking statements are subject to a number of risks and uncertainties, including those set forth in RCC filings and actual results might differ materially from any forward looking statements that we make today.

These forward looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward looking statements, except as required by law.

As a result of the sizes I T to acquisition and its impact on Danners overall core revenue growth profile, starting with the second quarter of 2020, we intend to present core revenue growth on a basis that includes <unk> as if the business had been known for the current period and the comparable prior year period.

With that I'd like to turn the call over to Tom.

Thanks, Matt and good morning, everyone.

I'd like to start off today by recognizing our associates around the world for their dedication and invaluable contributions during this unprecedented times.

Their response to the Cobot 19 pandemic has been humbling and inspiring.

They're working tirelessly to ensure our facilities are up and running.

So that we can continue to provide customers with the tools necessary to carry out there essential work.

Our suppliers have also been incredibly supportive as this crisis has unfolded.

Every one of our associates customers and business partners is making a difference today and I'm incredibly grateful for their collective efforts.

Given how top of mind the impact of the virus is we thought we would structure the call a little differently this quarter.

Before we run through our first quarter results I'll highlight the number of our innovative solutions that are part of the direct response, helping to fight Cobot 19.

I'll provide a recap of the trends we saw across our end markets through the month of April.

And I'll wrap up with a few words on our announcement about the upcoming CEO transition.

Deanna her we're incredibly fortunate to navigate these trials these turbulent times from a position of strength.

The resilient portfolio of businesses and extremely talented team and the Danaher business system as our driving force.

These recent events it certainly presented a number of unforeseen challenges across our businesses.

But they've also created opportunities for us to support our customers and the global community in the unprecedented fight against Cobiz 19.

We're proud to support frontline health care providers would much needed diagnostic testing capabilities today.

And to support the pursuit of new treatments in vaccines for the future.

As we collectively strive to contain there's no no not the virus.

Diagnostic testing provides a central information to help us better understand and ultimately curb the spread of covert 19.

I D was an early leader in this effort as their primer and probe kids provide a key detection component in Kobin 19 diagnostic tests.

Today I'd T has shipped kits to enable more than 30 million diagnostic test for the virus.

In March Cephea launched the first rapid molecular test related to Cobiz 19 that provide highly accurate results within 45 minutes.

With a leading global installed base of more than 23000, molecular diagnostic instruments, including 5000 in the U.S.

Happy its tests are being deployed on the front line.

Patient and protect healthcare workers.

Since the test became available the team has shipped approximately 2 million test cartridges and going forward. We now expect to be able to ship approximately 6 million tests per quarter greatly exceeding our initial expectations.

Recently published independent studies indicate the itself is test performance is best in class versus other point of care platform on the market today, providing superior virus detection with one of the fastest time to results.

The market leading caliber acceptance test combined with their significant production ramp up is a testament to this innovative team's commitment to tackle this global health crisis head on.

At Beckman Coulter diagnostics, the team announced that it is developing assays to identify antibodies to the virus.

We expect these anybody assays will play a critical role in understanding immunity and in turn improving the world's ability to manage cobiz 19 going forward.

Beckman, we'll be launching one of these athletes shortly a high sensitivity automated I GE GE serology test.

The team plans to ramp production capability to more than 2 million test in may and over 30 million test per month by the end of June.

This assay will be able to run on Beckman global installed base of more than 16000 immuno assay analyzers.

As we look at head toward potential new therapeutics and vaccines for covert 19, Paul Insightuba are supporting biotech researchers and manufacturers around the world, We're working tirelessly to find a cure.

Paul's filtration solutions are designed into the buyer production process of multiple leading vaccine candidates.

Insights Eva is supporting numerous vaccine programs in development, providing specific prototype affinity resins, and helping them prepare to scale up production volumes.

These are just a few examples of how we're helping to accelerate our customers important pursuit of cobot 19 testing treatment prevention and ultimately a cure.

Speaking, it's like Teva I want to take this opportunity to officially welcome the team to Danaher, we're thrilled to have them onboard.

With the addition of slightly but we've doubled our annual revenue in the highly attractive biopharmaceutical end market to more than $5 billion, which represents approximately 50% of our life science platforms annual revenue.

With a more comprehensive offering across the entire bioproduction workflow, we're better able to support our customers who are working to deliver more lifesaving drugs faster and at a lower cost an important endeavor that certainly accentuated by today's global health crisis.

So he was off to a great start here in 2020 and achieved approximately 10% revenue growth in its first quarter.

Given the significance of the acquisition into our operating results. We will include site Chivas performance as part of our overall core growth revenue metric beginning in the second quarter.

So now let's take a look at our first quarter results.

Sales grew 3% to $4.3 billion, driven by 4.5% core revenue growth.

The impact of foreign currency translation decreased revenues by 1.5%.

Geographically.

Hi single digit revenue growth in the developed market was partially offset by high single digit declines in high growth markets.

Revenue in China was down more than 25% as a result of extensive shutdowns related to covert 19.

While January and February were solid across North America in Western Europe, we saw a downturn in demand towards the ended the quarter when the pandemic became more severe across each region.

Gross profit margin for the first quarter was 56.2% and operating profit margin was 16.1%.

Adjusted diluted net earnings per common share were one dollar and five cents.

We generated $694 million the free cash flow, a 21% increase year over year, helping to support our strong financial position.

Now, we'll take a more detailed look at the results across the portfolio.

Life Science reported revenue increased 1.5% with core revenue growth of 2.5% led by high single digit for better core revenue growth at Paul I'd tea and Beckman life Sciences.

The global effort to develop cobot 19 related testing in treatment drove demand for our bio processing genomic and automation solutions.

That's strong performance was partially offset by declines in our more instrument oriented businesses like the microsystems and side effects, which were negatively impacted by deferrals of large capital equipment purchases.

This dynamic was particularly acute in academic research as most of these labs around the world remained closed due to covert 19 related shutdowns.

Moving to diagnostics reported revenue was up 6% with 8% core revenue growth led by very strong results at our point of care businesses Cephea It and radiometer.

That being achieved more than 40% core revenue growth with broad based strength across all major product lines and geography.

Particular strength Incepted flu essay was driven by the combination of a more severe flu season and increase testing during the Corona virus outbreak.

We also saw early strong demand Giuseppe is cobot, 19 test, which received USA FDA emergency use authorization at the end of March.

Our radiometer business achieved high teens core revenue growth.

Surges in hospitalized patients being treated treated for cobot 19 drove demand for radiometer blood gas instruments and test a key parameter to monitor and critically ill patients.

With the largest global installed base of blood gas instrument radiometer is well positioned to support clinicians and patients through this unprecedented health care challenge and beyond.

Beckman Coulter diagnostics core revenue decreased mid single digits solid performance in North American Western Europe was offset by significant declines in China as a result of the extensive shutdowns initiated in January.

These containment measures resulted in very few patients going to hospitals for treatments for procedures that were not coated real not related to cobot, 19, which greatly reduce core laboratory testing volumes.

Moving to our environmental and applied solutions segment reported revenue increased 1% with 2.5% core revenue growth.

Our water quality platform mid single digit core revenue growth was led by double digit core revenue growth at chemistry, our water businesses provide essential products and solutions used to test and treat water around the world a mission critical service in any economic environment.

Good demand for our consumables and Chemistries continued while equipment sales decline towards the ended the quarter as the broader macro uncertainty prompted many customers and municipalities to postpone larger expenditures.

Core revenue at our product identification platform was down low single digits with growth in marking and coding offset by declines in our packaging solutions businesses.

At Videojet equipment sales were down, but we saw strong demand for consumables across consumer packaged goods medical and food and beverage end market as widespread shelter in place orders drove a surge in consumer purchases.

So the first quarter was challenging on many fronts, but we believe that the combination of our outstanding team DBS, driven execution and differentiated portfolio enabled danaher to outperform on a relative basis.

So moving on to what we saw in April.

The trends across our end markets through the month were largely a continuation of the dynamics the began to take hold during the last few weeks of March.

We continue to see a bifurcation across our life science end markets.

Cobot 19 related research and development increased significantly over the last 60 days, among our pharmaceutical and biotech customers, particularly in areas like antiviral therapies vaccine development and immune response research and testing.

In turn this generated strong demand for our Bioprocessing genomic and automation solutions.

Good momentum also continued for other non cobot 19 related bioprocessing driving demand for filtration chromatography single use and cell and gene therapy products.

However, most academic research labs in the U.S. in Europe remained close and labs in China have only recently started to reopen.

These closures have resulted in significant installation delays for existing instrument orders and it appears that customers are holding off on new capital purchases until the labs reopened and they fully returned to work.

Looking across clinical diagnostics, we continued to see very strong demand through April for molecular point of care and acute care testing, which is also driving increased instrument placements globally.

This contrasted with lower activity in hospital labs, and reference labs, where the significant declines in elective procedures emergency department visits and wellness checks continued to negatively impact testing volumes.

We also saw delayed orders and deferred new spending on larger capital equipment in these labs.

In the applied markets, the divergence of demand between consumables and equipment persisted through April consumables remains solid as customers sustained essential business operations like testing and treating water and safety packaging consumer product goods in medicine.

But equipment purchases are being delayed as mission critical operating expenses are prioritized over larger capital investments.

The cadence of these end market dynamic appears to be consistent with the spread of the virus with the negative impact in North America in Western Europe trailing that of China.

China gradually improved in April as Lockdowns were lifted and business has started to reopen and revenue growth was slightly better than initial expectations heading into the quarter.

In North America in Western Europe, We believe it declines are beginning to stabilize and expect modest sequential improvements over the next few months as these regions begin to gradually reopened.

In light of these recent trends, we expect second quarter core revenue growth, including sites Eva to be in the range of flat to down 10%.

So to wrap up as I reflect on the event. The last few months I'm humbled by our team's dedication and innovative response to this unprecedented crisis.

True to our core values, our associates are listening to our customers and innovating to help address their toughest challenges.

Never before had these challenge has been more collectively urgent and abundant and I'm. So proud of our associates have risen to the occasion.

Looking ahead, we feel very well positioned to navigate through this uncertain environment.

We believe that the combination of our outstanding portfolio exceptional team DBS driven execution will continue to differentiate danaher in 2020 and beyond.

Now before we go to Q anyway, I want to address the press release that went out last night regarding our upcoming CEO transition.

After more than 30 years at Danaher, including the last six as CEO I've decided to begin the transition to retirement I.

I do this knowing that danaher has never been stronger.

The combination of our portfolio enhance execution around innovation and our seasoned leadership team driven by the Danaher business system create a strong foundation for continued outperformance.

I have Lub every day of past three decades and throughout my entire danaher career I've been privilege to be part of an incredible team.

I've always considered the primary responsibilities of my current role to be focused on deploying capital efficiency enhancing the portfolio driving innovation.

In developing town.

And I can now look back finally on the tremendous progress we've made on all these brands.

I plan to see the corporation through the challenges of the next few months and I'm confident that our portfolio and the team are both in a fantastic positioned to thrive in the years to calm.

Many of you know Reiner Blair well from his days as president of side effects and more recently as our SVP, leading the evolution of our life science platform enhancing the platforms growth and margin profile, while leading the acquisitions of Paul IBT insight Teva to name just a few.

There is no question that Ryan or is the right person to lead us into the future with the support of our senior leadership team and our board I'm confident that reiners, well prepared to execute our strategic priorities and continue creating significant value for our shareholders.

So what's next for me well first off that question is one for several months from now.

But I'm looking forward to spending more time with my family.

I'll continue to serve on the board of Medstar help and the college of the Holycross.

I will remain in the CEO role through September 1st of this year and I'll be around into 2021 in an advisory role, but for now and as soon as we finished this call will be right back to work because we have a lot to do in the coming months with that I'll turn the call back over to Matt. So we can start taking.

Two questions.

Thanks, Tom that concludes our formal comments, Chris So we're now ready for questions.

Thank you once again ill ask your question. Please press star one.

First question comes from the line Derik de Bruin with Bank of America.

Hi, good morning.

All right there.

Hey.

So a couple of questions and then all all congratulate you on on the retirement I'm jealous by the way.

[laughter].

So to start off so.

Can you tell us what's you're embedding into the guide in the two Q4.

Kobin related contributions I mean, you're producing a lot of.

Separated test units to rowdies ramping.

I guess.

Our all those tests going to be used they all spoken for that's just curious in terms of reading about utilization its or what's embedded into the the guide. Thanks.

Sure. Okay. Thanks, Thanks, Derek happy to.

Walk you through that a bit so if lets go right to the cobot impact in Q2, and I would think about it as.

Largely a tailwind that probably represents.

You know 500 basis points of of improvement or growth bits associated predominantly with cephea. It radiometer in I'd TV and in terms of the related question about what spoken for UNICEF had were flat out at.

Seth.

We are we are continuing to expand our capacity.

But every test that we produce every single day get ship and the demand is continuing to build.

Radiometer also running flat out.

Not quite the need for expanded capacity, we had the surge capacity we needed there, but they are doing exceptionally well and I didn't see holding its own as well. So I think overall you'd consider cephea radiometer, an idea is certainly contributors on the positive side, what that really mean.

Means is that the rest of the portfolio is you know potentially down anywhere from 5% to 15% and those heavier headwinds are going to come in businesses like like Beckman diagnostics like the biosystems, a bit but are more patient volume dependent and we'll have to see whether that patient volume coming from loosening up a.

Elective procedures starts to return, but certainly the greater bit of headwind is in the equipment oriented business like LMS and side effects and a bit of P.I.D. no doubt. So now putting all that together you then partially offset that with would probably a bit a positive from Paul Insightuba that are showing positive growth it's not Ics.

Delusively cobot related, but certainly related to the future developments around therapies and vaccine. So I think thats the way I'd sort of generally frame up the that the pluses and minuses around the cobot impact in Q2.

And there and that it's Matt Hi, Eric if not expenditure also you'd kind of we mentioned serology, we're not assuming anything here in the quarter for serology, even though we're ramping up with backman I'm going to have some capacity here. Our view is that it's just a little too early to really kind of tell.

You know what the volumes might look like what a national testing program or any other kind of local testing programs might look like so that that kobin tailwind does not include serology just to be clear.

Oh, great that's really helpful and.

I guess, what just one question on site.

And in General did you see any stocking in the first quarter and I'm. Just curious what are you wouldnt assuming for organic revenue growth in the site, Cuba Standalone business for the second quarter.

Derek we saw.

Very little it's always hard to tell when it's you know a.

On the margins as to whether or not there was there was stocking going on there.

Generally we don't don't think it was particularly material, but I'd say tivo is off to a great start as I mentioned, a 10% 10% core growth in the first quarter really strong momentum in the core Bioprocessing business and that's really driven by folks working on solutions to cope with 19.

And it but you know as we look forward I think we we have really as you can imagine skin. We just closed the the at the end of March 1st of April.

We're just getting in there to really understand what that funnel looks like and theres plenty of uncertainties about how much that volume will build over time, depending on the the progression of therapies and vaccine. So I think we've got an outstanding start here, but you.

In terms of where we are from a guide perspective, the on site T., but we're still trying to size up what that backlog is starting to look like obviously, we haven't even gotten face to face with the team yet from an operating review standpoint, given the the limitations we hear I have here on travel so right now we're going to focus on obviously good good deal.

Rebranding work that we need do we're going to stand up as a standalone operating company execute on the T. essay and exit those T.S.A. workstreams and cost and make sure that we're embedding DBS into those into the business and working on opportunities to continue to improve its performance. So we will come we'll come back and give you a better sense of what.

It looks like in the balance of the year once we get a little bit more stability here in terms of about how the other bookings trends look and that we round the corner here coming into the second half of the year.

Great. Thank you.

I think there.

[laughter]. Your next question comes online.

Tyco Peterson with JP Morgan.

Good morning, Tyco. Thanks, Good morning, Tom will start with congrats on the transition I think it might be helpful to hear from new why now we underwrite time I know you plan. These things out well in advance, but I think people got little bit off guard minimum a pandemic. After closing your largest steel. So can you maybe just talk a little bit about how long a transition have been branded why now right.

Sure absolutely Tyco I'd be happy too.

You know I can honestly say that you had that you would have to go all the way back to.

My very first year in the role where we along with the board made sure that we talked about talent development about ensuring that we are.

Progressing in various ways through our leadership ranks to get to the point, where we are today and had an outstanding choice and Reiner Blair to succeed me. So this has very much been the culmination of a succession planning process that really has gone on.

Over the last over the last five or six years.

We always want to two to do something like this when we're in it in a position of strength and I think the combination of where we are with the portfolio in our performance, where we are around driving innovation and growth and the strength of our team and talent really is what I think makes us very comfortable that this is certainly a good time.

To turn the rains over it was super important that we got slightly but closed and and that we gave ourselves time to ensure that the transition year of the role allows for both reiner NIE to to contribute to ensuring that site pubic comes into the organization. So.

Mood lease so I.

I think it's really a combination of all those things.

You know I think the Danaher board was incredibly supportive and constructive around this all along I am I I am really excited about about reiner and the talent and capabilities that he brings this role and he just going to do a fan.

Tactic job so we Ah, we all feel great about it.

Okay. Thanks, and then follow up just a question on on some of them longer term.

Related tailwinds for secure their presumed to be less room and rollout.

I tried to Kirby going forward. So I'm curious how you think about that and then how do you think about durability of that test when there was a vaccine in the market for Bacterin curious if you can put anything around pricing per serology, and then lastly, Chris I keep and Paul just curious how meaningful you can vaccine and therapy development could be for those businesses on a multi year basis. Thanks.

Sure. Thanks Tyco.

You know there's that we've got a lot going on as it as it relates to the future impacts of Covidien I think in many respects were pretty uniquely position both on the short term and the long term.

I think if you start with from a diagnostic testing perspective.

Seppi its impact along with IBT radiometer in terms of treatment on the front line as well as Beckman uncertain and Surajit NRG NRG testing I think that's a pretty unique combination of capabilities. Now you asked about the durability of the Cephea test I think.

As you know well we are one of the world leaders in flu testing and I think as we see the future here, you're going to you're going to look clinicians are gonna be looked looking for the opportunity in doing blue testing to also be doing cobot 19 testing and I think the ability to run those tests on the same platform in the same costs.

Our dream job at the same Partridge configuration is a real advantage in a real opportunity we have for Cephea. It of course is this surge in demand now it's happening we're seeing that not only in terms of the test cartridges themselves, but it's driving.

Significant increase in our install base and so is that installed base has grown you're also going to see that installed base driving not only cobot 19 testing, but continuing to support expanded flu testing and market share gains precept be it over time, and obviously, there's a broader suite of test that run on a separate architecture.

And so that's going to benefit as well, so we think theres exceptional durability.

To to the separate architecture in an environment, even in one where we have and God willing we will have booked therapies as well as as well as vaccines.

In terms of your your question about Beckman and Surajit.

No I think we will where we see serology evolving over time is year, it's going to be primarily driven obviously with a blood draw and you're going to see the suralco GE test the IBG test integrated into more routine testing and therefore.

The cost per test is going to be quite reasonable and it's going to be in line with other immuno assay test and so we talk about the capacity to have 30 million test is I think Mack said earlier wouldn't build that into any models, but I think it's representative of the fact that.

Allergy testing that I GE test is going to become more of a standard.

In basic testing when it comes to immuno assay. So I think a lot of a lot of terrific potential there, particularly as it relates to advances in a in public health and population testing and some of the work that's being done by by public health authorities to look for hot spots over time.

In terms of your question about site, TV and and work around therapies invite vaccines I'd say, both Paul Insightuba are uniquely positioned to provide a pretty critical input, meaning filtration in resins to book vaccine and therapeutic candidates.

Right now, we would estimate that they're greater than 150 therapeutic in vaccine candidates today.

Paul Insightuba are working with a majority of those in some capacity and so obviously there'll be there'll be winners and losers, but we think we have a number of of exceptional positions there with with folks that are likely going to be part of the future therapy and door vaccine.

Answers, so I think a good good spot to be in.

I appreciate it and congrats again on the return.

Thanks pickup.

Your next question comes from the line Vijay Kumar with Evercore ISI.

Morning VJ.

Morning, guys I know, Tom Congrats on a uno well earned that fast I.

I think up maybe starting with the leadership question here, Tom you mentioned that rain or not.

No because the street, but perhaps you know not everyone knows them well and you did mentioned that he was the right person. Maybe contrast, your leadership style horse without bringing our leadership style what does rayner bring here.

What's the investors look forward to under this transition.

Sure well.

I'd start a BJ with the fact that Reiner and I have worked together closely for virtually all of his his 10 years.

No I don't know if everybody knows that when when Reiner with first at first hired at Danaher there.

He came in initially as the as the president of Videojet and I'm not sure Reiner and his wife delaying it actually unpacked their bags when not we had we're looking to succeed me. It's I accepted OSI ex acquisition I was headed off the Beckman and we had this outstanding outstanding leader.

I would just come into Videojet in a real need its I accident, and not Reiner out repack and move to Boston and led Sai export for a number of years and just did an exceptional job and he and I have worked together literally every day since then.

Through the the work at Cyacq through the acquisitions of Paul and I DT, obviously throughout the tremendous work that he did identify and the opportunity that has become sites, but our largest acquisition ever.

And so when you worked together.

For as long as we have I guess, there there do tend to be quite a number of similarities.

About the two of US, but you know BJ you can have plenty of time to add to ask Reiner that question and he'll probably have more thoughtful contrast between the two of its been then I will he that he's an outstanding individual he is super smart. He is steeped in the domains not only in life science, but but across Dan.

On a her.

Unbelievably well respected across danaher as the DBS leader, a grade teacher, DBS practitioner and somebody who lives and breathes the danaher core values and our shared purpose of helping realized life's potential every single day.

His track record relative to M&A and his bias towards driving innovation by being willing to get to place bats.

Both early stage bats, as well as more mature bets to drive innovation is a is unparalleled so I.

I hope and believe that you'll probably see a lot of similarities between the two of us in terms of what we value.

But you know reinert will that will put his own mark on Danaher, and I am supremely confident but that mark on dannenberg danahers going to be an outstanding one and an indelible one.

That's helpful perspective, Tom just maybe up one a housekeeping question, perhaps from that Matt. Thank you know the press release had a couple of hundred basis points that contribution from psyche left.

That perhaps in place up double digits, maybe even up low teens growth and the business I just want to make sure where the business doing 10 person that thinking that Q1.

In a continuum double digits and not to queue up is that just up the business.

You know growth as usual or was there any contribution perhaps from.

Covert related adopt business and then perhaps up also dress up in a detrimental margins here for Twoq you. Thanks, guys, yes sure. So.

You have a perspective I think grew 10% there in Q1, I think thats, probably a reasonable place for the business to be here in the second quarter as well. So I think your math on that is pretty correct.

As far as decremental margins go I think the place that I'd start, it's probably about 40% decrementals. It can vary quite a bit depending on mix et cetera, but I think starting with 40 is good place to start.

I will tell you that.

Probably in Q2 in diagnostics, though probably need to be more like 50, or 60% Decrementals and thats all related to FX. So that delta will be because of FX tier in the quarter. So 40 overall, maybe a touch higher here in Q2 in diagnostics.

Thanks, guys.

Thanks Vijay.

We have reached the allotted time for questions.

Last question comes from the line of Scott Davis with many years research.

Hi, Good morning, guys and congrats Tom.

Thanks, guys good morning.

It's been a great six years I've already we I'm, a little surprised you're gone, but I don't blame yeah. It's a retirement sounds pretty interesting right now [laughter].

Got it was it would not informed by the current economic uncertainty if it's hard to my part of the plan.

Sure sure I believe [laughter].

Hey, guys I wish you the best and I will say everything but anyway. Thank you.

Great Ron.

Thank you.

Just switching to business what are the challenges of integrating sites. He that here in this kind of new world. I mean can you can't really teach DBS do cause ends all that stuff kind of don't assume video.

Yes, thanks for the question Scott.

Yeah.

Yes is the is the answer that why do I <unk> why would that be the case, given how important being it you know we use that term being again by being in the real place you know how important we talk about that being well, we actually kicked off a DBS training, what we call E C O executive champion orientation.

And we kick that off virtually using Microsoft teams.

Just two weeks ago.

I kick the Guy kicked it off Reiner was on the call Johnson Koski, who you know from our DBS office led the led the effort, we probably touch we got more people through that E Z go.

Over that.

Day day, and a half I forget the full duration it because of actually being able to use a virtual tool and so a digital tool and so.

The answer is we're working we're doing our best we're off to a good start we've got to get creative we got to invent new ways to get things done interestingly, our existing businesses outside of sites Eva are in fact.

Doing multi day kizende.

Using a virtual tools using zoom using Microsoft teams and it's not the same it's different.

We wouldn't use that as a standard going forward, we absolutely value being face to face but.

You know we challenged our teams to get creative and continue to drive continuous improvement even in this environment.

Okay, that's encouraging.

Just switching gears I know, there's been a lot of questions around.

Okay, then that should be but.

If you go down to environmental and applied solutions, you've got some kind of interesting business has a different cyclicality and.

Such as they're kind of a range of outcomes and a two Q that we can start to think about for those.

Businesses that are you made some encouraging.

Any comments on video chat, but.

And actually just water to but on an overall based facilities comments or.

Color you can get there yeah, I you know Scott.

These are fantastic businesses, even in a challenging economic environment I mean.

Hi, its leadership position in water quality analytics for to buybacks. Its nearest competitor Videojet you know a leader from a share perspective as well both.

Obviously heavily skewed toward their balance the sale skewed towards consumables.

North of 70, 75% in those businesses being aftermarket consumables and service when when water quality testing has to be done every single day and municipalities around the world when consumer packaged goods have to be marked and ship every single day around the world.

Those consumables continue to underpin you know reasonably steady performance I mean, there a safety net under the a under the revenue structures of those businesses then.

While there be some other dimensions the like the equipment side in in water quality for example, or even in P.I.D. in some of the some of the software businesses it will be a little bit more pressured here.

You know I think those are still really solid businesses. Even in these challenging time, so I wouldn't Doug I wouldn't trade those businesses for us for any in their markets.

I I should ask that differently I guess should well this segment be down more than your corporate average.

Yes, well, yeah, I mean, I think they would be down.

Down a bit more only because they're not buoyed by the terrific performance that we continue to see at Sep is good and I'd t. as well as radiometer and even with the you know what we think it's going to be pretty solid performance at sites, even Paul So.

Yes, I think these businesses would be at that at the lower end to the of the core growth.

You know component you could potentially see the segment eas down potentially mid to high teens.

Inside of the guide.

Okay perfect. Thank you and congrats again Tom.

The like Scott good to hear from me today.

[noise] Crystal that that concludes our.

Or questions did you want to give any final remarks.

Well, thanks, everyone for joining us today were around all day for questions.

This concludes today's conference call you may now disconnect.