Q3 2021 PerkinElmer Inc Earnings Call

Good day, and thank you for standing by.

Welcome to the Perkins <unk> third quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.

Ask a question during the session you will need to press star one on your telephone as a REIT.

This conference is being recorded.

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I'd now like to hand, the conference over to your Speaker today, Stephen Willoughby Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone and welcome to <unk> third quarter 2021 earnings conference call on the call with me today are prolonged thing or <unk>.

<unk> and Chief Executive Officer, Jamey mock our senior Vice President and Chief Financial Officer, and Peter Wright, and Smith, founder and Chief Executive of Oxford immune attack. If you have not yet received a copy of our earnings press release or slide presentation. You may find copies of them on the investors section of our website at Perkin Elmer Dot com.

Please note that this call is being webcast and will be archived on our website.

Before we begin I'd like to remind everyone of the safe Harbor statements that we've outlined in our earnings press release issued earlier. This afternoon and also those in our SEC filings statements or comments made on this call will be forward looking statements, which may include but are not necessarily limited to financial projections or other statements of the companys plans.

Objectives expectations or intentions. These matters involve certain risks and uncertainties.

The company's actual results may differ significantly from those projected or suggested by any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

Any forward looking statements made today, representing our views as of today, we disclaim any obligation to update these forward looking statements in the future even if our estimates change. So you should not rely on any of today's forward looking statements as representing our views as of any date after today.

During this call we will be referring to certain non-GAAP financial measures a reconciliation of the non-GAAP financial measures. We plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release to the extent, we use non-GAAP financial measures. During this call that are not reconciled to GAAP and that is.

Sachin we will do so promptly.

With that I'll now turn it over to our President and Chief Executive Officer of prolonged thing a lot.

Thank you, Steve and good afternoon, everyone.

Reflecting on the third quarter of 2021, I can confidently say that our efforts.

<unk> and our business performance together truly reflected.

And impact of the new book in Edinburgh.

A concept we introduced at the analyst meeting back in June.

The operational improvements recent acquisitions in life Sciences and diagnostics.

R&D investments in food and applied markets.

Accelerated innovation across the board and have ramped up focus on culture employee engagement and technological innovation have collectively been bearing fruit.

While there is still significantly more to come I think between our very strong financial results.

Additional color that Jamie Peter and I will share with you today.

We will further illustrate.

Incremental value, we are delivering to all our stakeholders now and are positioned to do so well into the future.

To stay on this idea for a moment ongoing portfolio transformation into higher growth end markets continued during the third quarter.

As we closed on our previously announced acquisitions of Syrian biotech and immuno diagnostics system.

We also announced and were able to fairly quickly close on our largest acquisition to date Byron mentioned three months ahead of schedule.

I'll touch more on these great recent additions in a bit.

But im trying to see the initial deal more of that is already occurring between these businesses.

And the rest of booking that alone.

While collaborations are already underway.

They will only be expanded and turbocharged coming out of a company wide innovation summit.

Our hosting and a couple of weeks.

I'm very proud of how our now 15000 employees around the world have continued to execute during the third quarter.

Despite facing existing challenges and even starting to come across some new ones.

While Jamie will provide more details in a bit I'd like to highlight the 16% non covered organic growth we generated in the quarter.

Again solidly ahead of our guidance.

Our corporate revenues came in close to twice our expectation.

Testing remained similar to the levels, we experienced in the second quarter.

And our teams, but again, well supplied and ready to meet the incremental demand.

This led to adjusted earnings per share in the quarter, a $2 31.

Which was over 40% above our guidance.

Despite the ongoing strong investments back in the business.

Overall, we continued to see strong non COVID-19 demand trends across the business with double digit growth in all major regions.

So while we may be facing a few new headwinds I feel the team is proactively responding in executing for our customers.

As we have successfully done over the past few years went up against numerous other pressures across our business and the global economy.

While I'm pleased with our strong performance in the third quarter and excited about all of our recent acquisitions I wanted to spend a little more time today shedding some insight into two of the newer additions.

As we haven't had the opportunity to discuss them in greater detail with investors up until this point.

First I'd like to touch on Oxford immune attack, which we closed back in March.

As Steve mentioned.

<unk> founder and CEO Peter items Smith has joined us on today's call.

As many of you may know some it's Dave.

<unk> as a standalone publicly traded company.

<unk> is currently the number two player in the latent tuberculosis testing market globally.

And I think with some of our core capabilities and broader regulatory distribution and service offerings.

The business is well positioned to gain share in the years ahead.

In terms of what's been happening since Oxford joined the <unk> family earlier this year.

Im extremely pleased to share that it is on pace to exceed its revenue targets for this year.

It has been making great progress on rolling out its automation workflows around the world.

With the anticipated approval for this new workflow in the U S next year.

I thought it might be helpful to share just some of the ways. The two companies have been already been collaborating within the first six months of being under the same roof.

I hope it will give you a feel for the synergy potential we both believe exists.

With the help of our integration transformation office, which was set up last year.

Oxford and <unk>.

Although these are reaching each other's capabilities in a number of ways such as integrating our Janus liquid handlers.

Oxford medium throughput automation workflow.

That is currently seeking and receiving regulatory approvals around the world.

Or Oxford, utilizing <unk> <unk> <unk> cel counting instruments and this new high throughput automation workflow.

In addition.

<unk> also already starting to leverage <unk> existing field service force.

To assist with the installation of these automation offerings.

Oxford is now beginning to transition from being a developer and manufacturer of diagnostic kits.

Now offering customers fully automated workflows for TB testing.

While it is still early and we have many other plans in process that will play out over the longer term.

Those are just a few examples of the initial progress that we are quite excited about.

Now I'd like to turn it over to Peter to share some thoughts on the business since becoming part of the Bakken and my family and.

And maybe some perspective on where he sees the business going in the coming years.

Peter.

Thank you for labs.

Our strategy for advancing in the attractive growing latent TB testing market is based on a number of key pillars.

Firstly, expanding our commercial presence to maximize our penetration of existing and new countries.

Secondly, dramatically improving I'll walk through through workflow through automating all assay.

Bringing that new automated workflow to all major jurisdictions worldwide.

And in a variety of fruit puts to suit customers of different sizes.

Thirdly, improving the economics for all customers and us.

This is about reducing our cost of goods to our customers and our advantage, but its also about capturing more value from the products and services ecosystem created by automation.

Being part of the wider polka now my family is helping us to execute better in all three of those areas for.

For example, with.

We're already leveraging your immune presence in field forces to access new countries in South America.

Leveraging tulip's presence and relationships in the Indian subcontinent.

We are accelerating automation surety is put out somebody mentioned by adopting poking almost suite of automation.

From core Polk and Elba in the form of channels and by utilizing technology from acquired companies such as your immune next alone.

Well I'll say also able now to capture more of the value from automation, because we have a pathway through poker numbers, one source business and its global supply chain capabilities to sell automation consumables and automation service contracts, both things that we were not equipped to do on their own.

We're also exploring a number of additional cost reduction opportunities by in sourcing key raw materials that we currently purchase from third parties.

Bollywood legend in particular has a number of antibodies and other immunological reagents that were looking to incorporate until immunology bikes technology.

At the same time, we've been able to streamline our cost structure clearly, we're no longer supporting our public company infrastructure ourselves, but more.

Generally we've been able to reduce our G&A spend by leveraging cooking almost capabilities in those areas.

Putting all this together, even just six months since becoming pulse of the penumbra family, we're seeing intensified revenue growth and improved profitability on the bottom line.

We're also having growing success in deploying or T cell technology installs Kobe too.

Our testing service revenues continued to grow in support of the phase II and phase III licensure studies I didn't support the vaccine deployment decisions under the umbrella of the UK vaccines task force.

On the kit side, we're also seeing growing and maturing demand as the important role of T cells has become more widely recognized as a critical means of assessing vaccine efficacy.

Particularly in immuno suppressed and other high risk populations.

Supported by close to 15 peer reviewed publications on all technology T cell testing is now coming into the mainstream and several European countries.

We believe this testing will last well into 2022 and probably beyond as we learn to live with salt could be too as an endemic mutating global virus.

We also see an opportunity to grow our immunology testing services in support of vaccine and former clients more broadly outside of Salt Kobe.

Clearly, we have our own well respected capabilities in T cell testing, but it's Paul to pick a number we have two other distinct advantages.

Firstly, we can leverage the infrastructure of polka, they almost global network of specialty clinical laboratory to established wider worldwide coverage something of growing importance to vaccines and pharma clients that want to run trials all over the world.

Secondly, we're now partnering with violations.

The world leading portfolio of Immunology research reagents gives us the expertise to rapidly expand our service offering beyond our own core technology.

With that I'd like to hand, it back to prolonged.

Thank you Peter I look forward to seeing the traction we make over the coming quarters.

I also wanted to share with you more about our recent acquisition of immuno diagnostic systems.

Our ideas.

Which closed in early July and May have been a bit overshadowed by our analyst meeting and the announcement to acquire <unk> legend.

I want to make sure our shareholders know why we are so excited about ideas, becoming part of bucking Nomura and.

What we believe it brings to the overall company.

The addition of ideas is a great example of where you expect one plus one to equal at least three and hopefully more.

Let me first tell you a bit more about the company.

It's a developer and manufacturer of medium throughput committee luminescence analyzers and assays.

That was previously publicly traded in the UK.

It had been going through an evolution of its assay menu over the last several years.

But having the ibs.

We have significantly enhanced our in house chemiluminescence assay development expertise.

This expertise will provide even more resources to support the development and launch of Iranians high throughput random-access coming humanism system accented.

Which we expect to introduce next year.

Furthermore, by adding ibs's existing mid throughput on a turnkey can be human essence analyzer and its current installed base to the business.

Upon the launch of the <unk> platform. We will then be able to offer a spectrum upcoming new munition systems and assays to our customers.

Also in just the first few months since the acquisition closed.

We have started to leverage each others commercial and distribution strengths.

For example at the recent AACE meeting in Atlanta.

Diagnostics eurozone.

Ibs and Oxford, even though tech all jointly exhibited and met with customers in person for the first time.

And of course, the addition of bio legend.

Which closed in mid September and was the largest deal in our company's history has kept us busy.

To say the least.

I'm happy that we were able to close the deal several months before the end of the year. So that all teams and colleagues involved are ready to hit the ground running heading into next year.

While biologics has been a part of bucket or not for only about 45 days.

Its financial performance has continued to remain extremely strong and hasn't missed a beat as part of this transition.

This is a testament to the strong leadership towards the biologics team, who are doing a terrific job in running the business seamlessly for customers.

While also working tirelessly to ensure a successful transition to the <unk> family.

However, I am even more.

We're excited about the interaction and collaboration that are beginning to take place between the biologics team and the product bookings in the organization.

As I mentioned earlier, I'm, especially looking forward to our upcoming companywide innovation summit that is planned for later this year at <unk> campus in San Diego.

And this event will bring together R&D innovation commercial and operational leaders and experts from across the company for several days.

To collaborate strategize and just get to know one another.

I can't wait to see all of the impactful ideas and collections that come from this event.

As it relates to innovation.

In early October.

We received U S FDA emergency use authorization for our peak amp respiratory SaaS Colby PCR assay.

Which provides for the detection of flu RSV and covered in a single assay.

Which we and others expect will play a larger role in testing during the coming winter months in the northern hemisphere.

Additionally, our European business recently received FDA emergency use authorization for its quantitative serology assay, which targets the <unk> protein.

These two new Covid assay add to our existing strong portfolio of serology, and PCR assays, which are being used to in the ongoing fight.

Against this pandemic.

From a corporate responsibility standpoint, while the world of ESG is still an evolving place I wasn't used to see my colleagues. Therefore at our recent companywide global impact.

<unk> last month.

It was great to see over 350 different group initiate this take place.

All led by our colleagues around the world.

As you May recall, we outlined our initial ESG related targets at the analyst meeting in June.

And I'm delighted to see efforts already underway to work towards achieving them.

For instance.

We recently completed a new company wide employee engagement survey, which we will use to ensure pocket continues to be a great place to work and everyone is proud to be a part of.

The initial results look very positive on all fronts of engagement diversity, and inclusion and health and wellbeing perspective.

But I'm quite sure there is always room for improvement.

Additionally, in our recently released corporate social responsibility report.

We have begun reporting under a SaaS b, which is quickly being considered the leading industry standard platform.

With coconut almond now adhering to this framework.

Building on our historical reporting against the carbon disclosure project.

Which aligns with the task force on climate related financial disclosures.

I'm confident we have good plans and initial targets in place and I'm happy to see the company more formally value around these efforts.

In closing.

While there always seems to be various external pressures we must face.

Such as the current semiconductor shortage.

Logistics bottlenecks and potential global tax reform.

I am proud to see our team continue to proactively navigate these challenges.

Agility.

<unk>.

We are unique and dedicated focus on the customer of its strong global teamwork.

This corporate character has allowed us to successfully mitigate the impact of these various challenges.

And provide the opportunity for us to continue to achieve.

And even exceed our plans.

Like we did here again in the third quarter.

The end of the year is always a busy time.

Clearly with commercial activities strategic and operational planning.

And both professional and personal commitments.

And I expect it to be back again this year.

But I'm confident our teams are up for it.

I would now like to turn the call over to Jamie to provide more detail and perspective on our third quarter results.

And color as it relates to our guidance for the fourth quarter.

Jamie.

Thanks, a lot and good evening, everyone before turning to the financial results I want to remind everyone that our third quarter earnings call presentation has been posted on the investors section of our website under financial information.

As Todd mentioned it was quite a busy quarter for the company I believe the team performed extremely well and we continued to make great traction on executing the transformation of the business from both an organic and operational perspective, but also inorganically as well, which I will touch on in a bit.

Both our Covid and non Covid revenue performance exceeded our expectations with double digit growth in both our discovery and analytical solutions and diagnostics segments.

Additionally, the recent additions to the Perkin Elmer family remain on track. So we are set up well heading into the end of the year.

During the third quarter adjusted revenue grew 21% compared to last year to almost $1 2 billion and included a 1% foreign exchange tailwind and an 8% contribution from recent acquisitions.

Organic revenue grew 12% 17 percentage points better than our guidance and our non Covid revenue grew 16% organically ahead of our 12% assumption.

Our COVID-19 revenue did not fall off to the degree that we had anticipated.

As it relates to Covid, we generated approximately $300 million of revenue from a related products and services, which was close to double the $165 million, we had projected and down only slightly from the $365 million, we generated in the second quarter.

Approximately $170 million of our Covid related revenue in Q3 came from core products with the remainder coming from our Covid related lab services.

That is also highlighted by others, we saw a noticeable uptick in demand for our PCR test and RNA extraction kits and the latter half of the quarter.

And some contribution from recently awarded testing contracts.

As with the department of Health and human services and Mount Sinai.

As we had assumed in our guidance, we reduced capacity made available for the state of California in our lab and our lab offering at the beginning of the quarter.

Which brought down its revenue contribution as compared to the first half of the year. However, we did see average daily volumes in the lab increased significantly as the quarter progressed with a number of days in late September surpassing 40000 tests per day.

I'm extremely proud of what we've been able to accomplish that at our lab in California over the last year from setting it up from scratch in under 70 days to immediately and appropriately addressing all workflow challenges that may come up on getting something like this off the ground in such a short period of time and in the middle of a pandemic to.

To successfully meeting and delivering on varying levels of demand on a week by week and month by month basis.

Given the successful contributions I'm happy to report that our contract with the state for this Covid testing lab has been extended by another year through the end of October 2022.

As it relates to our business segments diagnostics generated $654 million of revenue in the third quarter, which represented 56% of total revenue and was up 21% year over year.

Organically the business grew 13% and was up 25% organically on a non COVID-19 basis.

Geographically, our diagnostics business was strong around the world with strong double digit non COVID-19 organic growth in all regions.

As it relates to our immuno diagnostics franchise total revenue was up more than 40% in the quarter with strong growth in both COVID-19 and non COVID-19 products and services.

You're on mute continued to grow robustly and was up more than 20% organically.

This is fantastic and one that we continue to invest in heavily.

As it is now on pace to do more than $500 million in revenue this year.

As Bob mentioned, we closed on our acquisition of <unk> in early July and are excited to see the R&D and commercial synergies it can provide with our existing neuro immune franchise.

Our applied genomics business, which also falls within our broader diagnostics segment continued to take share on our improved brand recognition.

While COVID-19 related sales in the business have fallen off as equipment related capacity has been built out we continue to see strong demand for Ngls reagents related to Covid variant detection.

Our high throughput realtime PCR workstation, the explorer G. III continues to see strong uptake.

Our non Covid revenue was up more than 50% that's core mgs in large molecule activities continues to bounce back after being initially hampered during the pandemic.

And funding continues to remain strong.

When I think about all the ways. The pandemic has impacted our business I believe our applied genomics business. In particular is one that is going to permanently benefit over the longer term as customers now have so much more experienced with our high quality instruments and kits and our sales force is now even better connected with key opinion leaders in this space.

Yeah.

In our reproductive health business, while we continue to face pressure globally from declining birth rates, particularly in China. We were again able to grow this business double digits overall in Q3 through a combination of menu and geographic expansion new product introductions growth within our labs business and a modest benefit from easier year.

<unk> comps, particularly in Asia.

Turning to our discovery and analytical solutions segment, the business generated $513 million in revenue in the quarter, which represented 44% of total revenue and was up 21% year over year.

Organically the business grew 10% led by continued strength in our life science business with double digit growth from pharma customers and mid single digit growth from academic and government end markets.

And our discovery business. We are pleased to have closed on our acquisitions of both cerium and bio legend in the quarter and are excited to see their contributions to our growth in large molecule in the years to come.

Sales into industrial and applied markets grew in the low double digits driven by strong growth in mass spec, while food was up mid single digits.

Looking at the company overall from a geographic basis, we saw double digit non COVID-19 growth in all regions and greater than 20% non COVID-19 organic growth in China.

This led to our total company non COVID-19 organic growth coming in at 16%, which was 400 basis points above our guidance.

Operationally, we are extremely pleased with our performance in light of various macro pressures.

Our adjusted operating margins of 31% remains strong driven by volume leverage favorable mix and productivity programs slightly offset by continued investment in our talent and culture research and development improved E Commerce network and security infrastructure digital capabilities and strengthening.

Our customer relationships, which we expect to help drive results in the years to come.

Overall adjusted earnings per share were $2 31.

Which is up 11% versus a year ago, and 43% above our Q3 guidance.

As it relates to the balance sheet, we have a lot of moving pieces this quarter with the closing of ideas in Syria, and the financing and closing a biologic.

We finished the quarter with $5 $1 billion of debt and approximately $500 million of cash.

Free cash flow was extremely strong in the quarter and so far this year.

We generated $324 million of adjusted free cash flow in the quarter, which equates to a 122% conversion of our net income.

Our adjusted free cash flow so far this year through the first nine months to over $1 billion with.

With a conversion rate of over 100%.

Given these strong cash flows and a better than expected earnings our leverage at the end of the quarter stood at two two times net debt to EBITDA on a trailing 12 month basis, as we added $2 $8 billion in new debt to fund the acquisition of biologics.

And maybe a little counterintuitive, but we expect our net leverage to increase over the next few quarters, even as we begin to aggressively de lever as we expected earnings related tailwind from our Covid revenues to come down.

As it relates to guidance, we are expecting Q4, adjusted revenues of approximately $1 2 billion, which assumes 8% non COVID-19 organic growth.

$200 million in Covid related revenues, and an 11% contribution from M&A and a neutral impact from foreign exchange.

On the bottom line, we are now expecting adjusted earnings per share of $2 five.

Which assumes approximately $26 million of interest expense, a tax rate of 22% and $126 million to $127 million of diluted shares outstanding.

Given our strong performance year to date and our confidence in our fourth quarter outlook I'm happy to report we are raising our full year revenue and earnings guidance for the third consecutive quarter. This year.

We now expect over $1 $4 billion of Covid revenue.

And at least 15% non COVID-19 organic revenue growth for the full year.

This brings our total adjusted revenue to just under $5 billion, including an 8% contribution from M&A and a 2% tailwind from foreign exchange.

We are now, bringing our adjusted earnings per share guidance for the year up nearly a dollar to $10 81 per share, which equates to 30% year over year growth.

All of this guidance as detailed on the second to last page of today's presentation as well.

As it relates to biologics, we expect total year sales this year of approximately $320 million, which would be up 33% from 2020.

Included in our fourth quarter adjusted revenue guidance is approximately $80 million of contribution.

Due to the faster than expected close of the deal we're even more confident in the previously announced accretion of 30.

And greater than 50, and 2022 and 2023, respectively.

While there will be a modest dilutive impact in the fourth quarter as a result of the earlier closing.

Importantly integration activities have commenced sooner than anticipated and as <unk> mentioned, we are excited about our upcoming companywide innovation summit in a few weeks at the <unk> headquarters.

Additionally, we were able to close on our financing at rates slightly below our deal model and current interest rate levels. So overall, a fantastic outcome and our teams are often running.

In closing I'm encouraged as our team continues to perform at a high level.

Our organic and inorganic investments are paying dividends now and set us up well looking forward in our transformation of the business to the new Perkin Elmer is well underway.

We're excited for a strong finish to the year and are well positioned heading into 2022 in the years ahead, not just financially, but also with our people and culture and most importantly for our customers.

I'd now like to turn it over to the operator to begin Q&A.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key.

These standby, while we compile the Q&A roster.

Our first question comes from Derik de Bruin with Bank of America. Your line is now open.

Hey, Thanks for taking the question. This is Mike <unk> on for Derik.

I want to start with your comments on the cover the lab contract being renewed that was all.

Always an option, but not something that is lesser price. Then so anything you could say in terms of expectation for testing volumes going forward.

<unk> and certainly into 'twenty, two is something in the $100 million a quarter range.

Fair assumption to start or are you being more conservative than that.

Yeah, Hey, Mike. So yes, we are proud to have this renewed.

Way I think about it is while it's renewed for a year really COVID-19 is such a fluid environment and we continue to work with the state that it's more like a quarter by quarter basis. So as you may know if you read the contract. The state has the ability to cancel within 45 days. So we really only have line of sight to the next 90 days at this point, we also restructured it.

To take down the capacity to 40000 tests per day.

We also restructured the variable fees so for the most part it's a pretty steady pace in terms of revenue.

Irregardless of whether its 20000 tests per day or 40000 tests per day. The revenue remains relatively stagnant in the fourth quarter is probably to the tune of about $90 million baked into our estimate.

Okay, Great and then on the.

The base business you had some comments on China in the prepared remarks, Doug you can go into little more detail on what you saw during the quarter and sort of how that's trended theres been a lot of noise there.

Both from a sort of a supply chain perspective, but also just underlying demand.

You could go into more detail on that.

For Das and diagnostics actually.

Yes, Mike Let me just takes it off for the noise that we're hearing.

Goes both ways distribution in China as you know some news came out this morning around lockdowns in certain provinces and areas. So it continues to remain fluid.

And I think but overall for us as we look at it.

In China, our end markets continued to remain strong and our backlog is the best that it has ever been in.

Both from a China perspective, and across we continued to execute well.

So mid to longer term.

Continue to feel good about China, I think we just have to keep our eyes open and be vigilant about what happens vis vis.

The lockdowns that are taking place.

Any chance you could give us the growth number that you saw in the quarter.

Yes, it's a little over 20%, Mike and I would say diagnostics led the way.

<unk> was still double digits, but that didn't go down as much last year, if you remember.

It was a little bit of an easier comp from a diagnostics perspective, because much of the reproductive health and autoimmune testing shut down really in the second quarter last year, a little bit in the first quarter by the third quarter. It started to come back, but I would say, it's a little bit of an easier comp on the diagnostics side, but both business grew nicely and have for the last three quarters here.

Alright, thanks, so much.

Thanks, Mike.

Thank you. Our next question comes from Tycho Peterson with Jpmorgan. Your line is open.

Hey, Thanks, sorry to press a little more on the China dynamic, but I think one of the questions. That's coming up is just on the tender front right.

And we and a handful.

A handful of the other regions, Sichuan Henan and the.

Again Kendra followed similar policy. So is your view that.

Tender headwinds around the IBD market.

Expand nationally over the next year or two and what type of pricing impact you expect in other offsets from your perspective with volume.

Yeah, I mean, just building off what <unk> said, Tycho I mean, I think we're prepared for that I think it's inevitable at some point I don't think localization has been a new thing and make it a little bit more of a discussion recently and now it's kind of impacted some of the diagnostics products, but.

We've got five sites there, we've we're localizing neuro immune there they should be ready to produce to produce locally in 2022.

We've got over 2000 people there we have terrific local brands.

We've got a long standing relationship and I think it still comes down to every challenge is a bit of an opportunity. So yes, there might be pricing discussions on tenders, but if you have the best value prop you can also gain a lot of share so inevitably that will come someday and we'll manage through it but we have two terrific businesses and autoimmune testing as well as <unk>.

<unk> health.

And it Hasnt hit us yet, but I don't think I think it will hit us at some point here.

And Tycho I think as we've shared in the past we've already transitioned most of our reproductive health reagents manufacturing in Taichung.

That transition has already taken place over several years as Jamey pointed out this is not something new.

This has been an immuno diagnostics is a very small component of our overall revenue so.

And I think maybe you saw it Tycho that the government has come out and tried to say theres no disadvantage for multinational companies that are local in China. So to <unk> point, we have.

So thats local there in the European side will be local by the start of 'twenty two.

Okay.

Okay. That's helpful. And then a follow up on just guidance here for the fourth quarter or are you, implying that instruments might be down sequentially and then as we think about 2022, you obviously laid out the 2023 bridge at the Analyst day, and then any of the underlying assumptions for 2020 to change.

In terms of kind of non COVID-19 revenue growth in the 5% to 7% range.

Yeah. So on the instrument side, yes, they will come down really in two areas Tycho. So our applied genomics business from a core perspective, our non COVID-19 I should say has been growing like gangbusters.

I think over 50% ahead in my.

Prepared remarks, so I don't think I think it's still strong, but I don't think it's going to continue at the 50% level. So we kind of took that down a little bit looking forward here and then really we've just put a little bit of cushion on all of our instruments in terms of some of the supply chain disruption that's out there. So we feel pretty confident about the guide and instruments will come down a little bit, but we have been.

<unk> able to manage through it today and hopefully youll see us beat the guide again here.

Okay.

Yes, yes.

Yes, not too much.

I think the way, we think about the business in terms of the core growing 5% to 7% and then the numerous acquisitions have all been met.

Mid teens to high double digit.

Growers and I don't think anything has changed there so as we head into 2020 to the end market still seems strong and feel pretty confident about the five to seven years.

Okay. Thank you.

Thank you. Your next question comes from Matt <unk> with Goldman Sachs. Your line is open.

Hello, Thanks for taking my questions Hi, everybody.

Hey, Matt I, just want Hey.

Just wanted to maybe a big picture question I was curious the comments you made about.

Oxford in tech in sourcing some mobile engines Prada.

Products. So I'm just wondering from a big picture standpoint, as you integrate these companies.

Where you potentially see in sourcing opportunities and do you think they are much greater than what you think today.

And like anything that you can provide context around maybe quantification of potentially in sourcing opportunities and benefits going forward as you further integrate these companies.

Hey, Matt This is Phil.

So I'll, let Peter talk specifically around Oxford in biology, and how that's panning out, but I think overall you know in most cases, what we have seen you know whether it's around the horizon <unk>.

I think in the <unk>.

Actually when we started putting the story together.

Too bad we are now more and more we get to know these companies and the more and more we get to northern technologies.

It's easy it's easy for us to foresee that one plus one is definitely more equal more than two and then probably more cases more than three distinct look at horizon, and how <unk> fits into the BRIC right. The licensing technology that allows us to bring the cell and gene therapy markets together.

Going to our customers being able to look at small molecules and biologics now at the same time.

<unk> from a commercial perspective technology perspective, it continues to help bolster the story that we have seen on the diagnostic side with the addition of ideas.

<unk> was working on next centers is a big automated platform the ability to leverage their audio 10 platform and at the same time, the several assays, which they have already qualified now being able to do that both on the smaller platform in a fully automated platform that gives you a much more expensive.

<unk> menu than what we thought we could leverage. So these are just a couple of examples.

Peter to talk specifically around Oxford and biologic Peter.

Peter.

Yes, thanks plot spectrum.

From my perspective.

Look more and more about the different aspects of the tokonoma family.

The opportunity set for US just continues to grow.

The economics very unusual in having a huge amount of life science reagents, which a lot of diagnostic companies, obviously consumes raw materials and production of that kit.

It goes it goes far beyond that.

Hoping to benefit from booking that was purchasing power as a combined entity.

We also have the fact that it makes instruments and a lot of different kind of instruments, which is very helpful. Ethanol automation journey.

We also have the fact that <unk> has a great service infrastructure and all of those things mean that companies like us to have joined the family doesn't have to replicate and duplicate those capabilities. So.

From my perspective.

I'm seeing ever increasing opportunities to in source the pro.

<unk> will materials or services from the Waterpark in the family.

Seeing more synergy opportunities that grow as a consequence.

Great. Thanks for that that's very helpful. And then just a specific question just gas margins you guys have made a lot of progress over the past year and a half and you cited a couple of things with the improvement in operating margins for das mix volume leverage productivity.

Of those elements, which can we kind of.

It seems to be fairly durable and where do you think the limit might be for.

Increased margin expansion within das.

I think theyre, all durable, Matt I would say mix is probably the biggest beneficiary, particularly in the discovery and life Sciences side as that becomes a bigger portion of gas. It typically comes with higher margins.

The addition of bio legit, and now having a $700 million reagent business sitting in <unk>.

In terms of life Sciences, those generally come with pretty high profit margins.

So I would say mix going forward will be durable and probably the biggest driver certainly there are programs that we've been putting in place that we've been talking about in terms of better procurement as we rollout NPI is refreshing all the.

The configurations in the number of configurations, we have and the simplicity of them.

We've been doing a little bit around sites and we've been doing a lot with our service team to be more efficient from a service perspective, So I think all our durable, but I think the quickest biggest impact you get is from mix.

I think thats, what youre seeing in this quarter with life sciences growing double digits there.

Right.

Great. Thank you guys appreciate it.

Thanks, Matt Thank you.

Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.

Hey, guys. Thanks for taking my question.

Jamie one on guidance and I had one for a prolonged the picture on the.

Q4 here, so the base non COVID-19 business organic of 8%.

Considering that you guys just at 16% and that PQ.

The comps don't get materially harder so I'm curious what that 8% is contemplating in Q4 is there some China noise or is this just conservatism on your part.

Yes, it's a good question Vijay I think it's probably more towards the conservatism side. So I'd start by saying the end markets are terrific right now all of them had been growing at least mid single digit for us many.

Well north of double digits.

Our backlog has grown substantially this year and even over the last quarter I think the little bit that we put into the fourth quarter here you can call. It conservatism has two things basically.

Any impact from any potential supply chain disruption, which we can talk about more but we haven't seen too much of today and.

And that includes transportation as well.

And then anything that's going on around Covid lockdowns, particularly in APAC. So we have seen pockets of it particularly in our newborn screening business in places like the Philippines, and Vietnam, where screening has just been reduced so those are the two factors that we put in otherwise the end markets have been strong we're not too concerned about the backlogs up so.

Hopefully it proves to be conservative, but I think it's a prudent thing to do at this time.

That's helpful Jamie.

One for you I think most of your peers, we've had a number of analyst days.

Heading into the earnings season, and the message from our peers as well.

Emerging stronger from the pandemic and if I look at your business.

All of the acquisitions, you guys have done DSO growth.

And some of them, perhaps even transformational.

And I think I just heard you guys.

Talk about.

'twenty fiscal 'twenty, two as being in line with SRP, 5% to 7% is there something different about brick and why you guys shouldnt be in this emerging stronger from pandemic bandwagon.

Sure.

Curious on now.

The 5% to seven versus have your peers or messaging.

I mean I think.

Extensively talked about this at the analyst day, and then even at the end.

At the end of the last earnings call.

I could not be more confident about the future of booking number than I am today.

And markets that we are playing in the portfolio alignment that we have done around growth markets of life Sciences and diagnostics.

The team and the talent that we have put in place and that's executing on all cylinders.

So there is no hesitancy on our part in saying that the future is very bright and if you're asking specifically around 2022 I don't think we are doing guidance right now but.

Jeremy It's Ben let me just clarify one thing Vijay is just about the 5% to 7% the 5% to 7% is on the core business before all the acquisitions yes.

Just to make sure everybody is good about that the 5% to 7% ultimately will not be 5% to 7% when we roll on the acquisitions. So Oxford overall in there in 2022 and two organic base like horizon excellent. All of these that will raise the 5% to seven we're just going back to our long range plan to say look we broke it up into two things at the time one was.

As before the acquisitions that goes five to seven then here's the nine acquisitions, we've done that goes obviously more than five to seven and then biologics by itself is obviously very impactful as well so the 5% to seven was prior to the acquisitions the acquisitions will ultimately make that higher.

That's very helpful guys. Thank you.

Thank you.

Our next question comes from Patrick Donnelly with Citi. Your line is open.

Thanks for taking the questions guys.

Maybe picking up on that last one on the acquisition growth rate side, I know biologics only been closed for about a month and a half but can you just talk about the revenue synergy opportunity there, particularly with some of the more recent acquisitions. It seems like a pretty significant one and now that you've had some people in the same room can you just talk about how you're feeling about those opportunities and what we can.

Yes, I mean, you heard from Peter around Oxford, Patrick you know, what I mean, he elucidate it pretty well the technology synergies the opportunities around service commercial.

And then I think the team is the same across the board whether you look at Mexico normal horizon.

Ability to be able to leverage our commercial presence, which is directed more than 180 plus countries. You know rich most of these companies do not have access to that our distributor markets.

Second one is around technologies the portfolio that we bring together around instruments around service.

As much it's very helpful for the acquired companies and the third one obviously is around technology as these discussions and interactions happen I think Peter given example around a couple of them and even with buyer legend you become one of our primary source of our raw material supplier that we won.

Antibodies.

Those are the key elements that I would I would point out too.

Just to give you an example, and I think Jamie what I mentioned during our prepared remarks, we are having an innovation summit.

Our biologic campus.

A couple of weeks.

There are approaches around three three verticals our three pillars.

Cell and gene therapy, diagnostics, and everything else around genomics and what the opportunity is for us to leverage.

Leverage the <unk>.

Synergies that we can see.

I'm really from a technology perspective.

So I think we will continue and then hopefully over the next couple of months, we will be able to provide more detail around that.

Patrick hopefully that gives you a sense of how we are looking at this.

No that's definitely helpful. I appreciate it and then Jamie.

And one of the responses you've kind of offered to touch a little bit on the supply chain I'll take you up on that offer.

Yes, if you could just talk about what youre seeing there any potential pressures and then secondarily just on the classic inflation labor question in terms of how that's impacting margins, we pass them along to customers would be helpful.

Yes, sure I mean, we certainly see it both on the disruption side and I would say, it's a little bit easier for us, we're mostly air versus any kind of water travels from a shipping standpoint.

From a supply perspective, we've been all over it the team has done an amazing job I think there was a very minor impact to the third quarter and our backlog obviously.

Grew substantially as well inflation, we started to see it you know we're looking at what we're doing around price and putting some things into effect right now, but we also had some good things to do as you may remember, we've been talking about a refreshed procurement process. So we've been able to mitigate some of this so it's certainly there Patrick and we're dealing with it but we've got.

Happy medium here, where we've got a good size from a scale perspective company, but also we operate very in a very agile fashion. So the team's been doing a great job managing through it we put a little bit of buffer into the fourth quarter here as I mentioned.

It'll be a non impact for us.

We're sort of reemphasize that I really feel strongly that our size and scale gives us a more speed and agility than one would imagine to be able to do.

Rapidly.

Marshal resources around some of these challenges and then I think the COVID-19.

The Covid pandemic has stopped us hard to become much more reasonable and much more reactive to two such challenges.

That's helpful. Thanks, Jamie Yeah.

Thank you. Our next question comes from Brandon Couillard with Jefferies. Your line is open.

Hey, Thanks, good afternoon.

Jamie just a two part question for you given all the moving parts and I'll, let the acquisitions can you just help us sort of frame how to look at gross margins and opex in the fourth quarter and then secondarily is 20% tax rate a good assumption.

To pencil in for next year.

Yeah. Thanks, Brandon So gross margin specific to the fourth quarter.

I would assume it comes down a little bit here, Brandon So with Covid being you know three.

$300 million in the third quarter going down to $200 million in the fourth quarter Youll see that come down a little bit and then the core it comes up so we always have a bigger volume quarter in the fourth quarter. So I would expect gross margins to tick down a little bit.

Tax rate for 2022, I think is anybody's guess based on tax reform out there. So.

During the week.

Got into 21% this year versus you know a couple of years ago, I think we were 16% or something like that.

And obviously Covid has played a big role in that with greater income and higher tax jurisdictions. So I think our tax rate in 2022 is dependent upon two things one your view on Covid and how much revenue will be there from that because it comes typically with a higher tax rate and to what happens with tax reform. So today.

It has not been changed but none of our assumptions have taken into account any kind of particular tax reform changes.

So hopefully that helps Brandon.

Thank you.

Yeah.

Thank you. Our next question comes from Josh Wolfson with Cleveland Research. Your line is open.

Good evening, Thanks for taking my questions just two for you.

First a follow up on the non Covid business.

Obviously came in well ahead of ahead of your guide just wondering if you could provide more context on where all you experienced upside versus plan was this solely tied to kind of better than expected growth in non Kobe Dx sorted das also outperformed.

So that definitely outperformed as well I would say life Sciences continues to remain strong.

Applied markets or analytical technology products was strong for us again.

And on the Dx side, I mean really euro immune to has done extremely well and is continuing to do well, but I'd just say our applied genomics business ex Covid has continued to be quite strong. So I think that probably surpass our expectation to have the third quarter in a row that I think we have been over 30%, 40%. So.

It's probably continues to hang in there and I mentioned in my prepared remarks that that business. Our brand recognition. There is probably one of the biggest benefits that we have coming out of Covid here.

Got it and then as we think about the longer term guide you laid out at the analyst meeting in June I guess, given the improved FY 'twenty, one outlook since that time and it sounds like a higher level of expected cost synergies going forward I mean should we view. This is positively impacting how you're thinking about the long term targets or is it more.

Just kind of a de risking of of those targets.

Okay I think it can be both give me both Josh.

I mean, we've continued to invest through this and certainly.

And in my prepared remarks, we're investing in our talent and culture, we're investing an extra R&D, particularly on our core business as a percent of sales that is far up we're investing in digital and all of these things will be and we believe benefit us moving forward here and should there be extra sales in extra income, we still feel confident in the margin expansion targets, but it all.

Also provides for an opportunity to continue to reinvest back in the business. So I think it's a bit of both it's either de risks and or we can make additional investments or youll see some upside come through versus our long range plan.

Got it thank you.

Thank you. Our next question comes from Paul Knight with Keybanc. Your line is open.

Hi, Thanks for the question.

Discovery <unk> analytical very strong growth could you talk about what where the technologies I would assume that applied due to petrochemical must be strong.

Color there would be great.

Sure, Yes, I mean, hey, Paul well know life Sciences makes up over 60% of deaths. So I'll start there and in particular, our discovery business, but we've done a lot of the NPI as we've had in terms of our high content screening business. Some of our in vivo products had been operating terrifically.

On the reagent side, it's been strong across all regions who've had a nice cadence of Mti's dip.

Different application areas in terms of oncology and cell and gene therapy had been strong for us. So life Sciences. Those are a few of the areas.

In the analytical side in applied markets also it's been more on the semiconductor side I would say chemicals and energy was pretty strong for us.

And so we launched our triple Quad and so our ICP and ICP Ms business has been extremely strong for us, but I think in general the hole in a lot of analytical technologies portfolio. We've got a better cadence of Mpls, which has been proven to benefit the das business and so that's why I see continued strength there.

Do you think youre gaining share on the das side of the business.

Sure.

We've said in the life Sciences side on the analytical technology side, I think particularly in spectroscopy. We've always had good share hard to say, whether we're gaining a lot of share at this point okay. Thanks.

Thank you Adam.

I'm currently showing no further questions at this time I would like to hand, the conference back over to Mr. <unk> for closing comments.

Thank you Norma and thank you all for dialing in today.

We are very excited and remain very excited with the trajectory on which the new parking on mirrors embarked on.

We're very proud of the accomplishments that the team have achieved in the third quarter.

And I'm very thankful to my 15000 colleagues around the world for their continued hard work and contributions.

I look forward to speaking to you all soon please.

Please stay safe and healthy thank you.

And this concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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Good day, and thank you for standing by and welcome to the Perkins almost third quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, this conference is being recorded if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Stephen Willoughby Vice President of Investor Relations.

Please go ahead.

Good afternoon, everyone and welcome to <unk> third quarter 2021 earnings conference call on the call with me today are prolonged thing are present.

And Chief Executive Officer, Jamey, mock senior Vice President and Chief Financial Officer, and Peter <unk>, Smith, founder and Chief Executive of Oxford immune attack.

You have not yet received a copy of our earnings press release or slide presentation. You may find copies of them on the investors section of our website at Perkin Elmer Dot Com. Please note that this call is being webcast and will be archived on our website.

Before we begin I'd like to remind everyone of the safe Harbor statements that we've outlined in our earnings press release issued earlier. This afternoon and also those in our SEC filings statements or comments made on this call will be forward looking statements, which may include but are not necessarily limited to financial projections or other statements of the companys plans.

Objectives expectations or intentions. These matters involve certain risks and uncertainties.

The company's actual results may differ significantly from those projected or suggested by any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

Any forward looking statements made today represent our views as of today, we disclaim any obligation to update these forward looking statements in the future even if our estimates change. So you should not rely on any of today's forward looking statements as representing our views as of any date after today.

During this call we will be referring to certain non-GAAP financial measures a reconciliation of the non-GAAP financial measures. We plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release to the extent, we use non-GAAP financial measures. During this call that are not reconciled to GAAP in that.

Catchment, we will do so promptly.

With that I'll now turn it over to our President and Chief Executive Officer of prolonged thing a lot.

Thank you, Steve and good afternoon, everyone.

Reflecting on the third quarter of 2021, I can confidently say that our efforts are investments in our business performance together truly reflected defense and impact of the new booking that Amar.

A concept we introduced at the analyst meeting back in June.

The operational improvements recent acquisitions in life Sciences and diagnostics.

R&D investments in food and applied markets.

Accelerated innovation across the board and have ramped up focus on culture employee engagement and technological innovation has collectively been bearing fruit.

While there is still significantly more to come I think between our very strong financial results and the additional color that Jamie Peter and I will share with you today.

We will further illustrate the image.

It's incremental value, we are delivering to all our stakeholders now and are positioned to do so well into the future.

To stay on this idea for a moment.

Ongoing portfolio transformation into higher growth end markets continued during the third quarter.

As we closed on our previously announced acquisitions of CDN biotech and immuno diagnostics system.

We also announced and were able to fairly quickly close on our largest acquisition to date bio legend three months ahead of schedule.

I'll touch more on these great recent additions in a bit.

But I'm trying to see the initial team work that is already occurring between these businesses.

And the rest of booking that Amar.

While collaborations are already underway and expect they will only be expanded and turbocharge coming out of a company wide innovation summit, we are hosting in a couple of weeks.

I am very proud of how our now 15000 employees around the world have continued to execute during the third quarter.

Despite facing existing challenges and even starting to come across some new ones.

While Jamie will provide more details in a bit.

Like to highlight the 16% non covered organic growth we generated in the quarter, which was again solidly ahead of our guidance.

Our corporate revenues came in close to twice our expectation.

As testing remained similar to the levels, we experienced in the second quarter.

And our teams were again, well supplied and ready to meet the incremental demand.

This led to adjusted earnings per share in the quarter up $2 31.

Rich was over 40% above our guidance.

Despite the ongoing strong investments back in the business.

Overall, we continued to see strong non COVID-19 demand trends across the business with double digit growth in all major regions.

So while we may be facing a few new headwinds I assume the team is proactively responding in executing for our customers.

Just as we have successfully done over the past few years.

Went up against numerous other pressures across our business and the global economy.

While I'm pleased with our strong performance in the third quarter and excited about all of our recent acquisitions.

Wanted to spend a little more time today shedding some insight into two of the newer additions as we haven't had the opportunity to discuss them in greater detail with investors up until this point.

First I'd like to touch on Oxford immune attack, which we closed back in March.

As Steve mentioned.

Oxford, <unk> founder and CEO, Peter <unk> Smith has joined us on today's call.

As many of you may know so much days as a standalone publicly traded company.

Oxford is currently the number two player in the latent tuberculosis testing market globally.

And I think with some of our core capabilities and broader regulatory distribution and service offerings.

The business is well positioned to gain share in the years ahead.

In terms of what's been happening since Oxford joined the <unk> family earlier this year.

Im extremely pleased to share that it is on pace to exceed its revenue targets for this year.

And it has been making great progress on rolling out its automation workflows around the world.

With the anticipated approval for this new workflow in the U S next year.

I thought it might be helpful to share just some of the latest the two companies have been already been collaborating.

Within the first six months of being under the same roof.

I hope it will give you a fee for the synergy potential we both believe exists.

With the help of our integration transformation office, which was set up last year.

Oxford and partner already reaching each other's capabilities in a number of ways such as integrating our Janus liquid handlers into Oxford medium throughput automation workflow.

That is currently seeking and receiving regulatory approvals around the world.

Our Oxford utilizing <unk> <unk> <unk> cel counting instruments and this new high throughput automation workflow.

In addition.

Oxford is also already starting to leverage <unk> existing field service force.

To assist with the installation of these automation offerings.

Oxford is now beginning to transition from being a developer and manufacturer of diagnostic kits.

Now offering customers fully automated workflows for TB testing.

While it is still early and we have many other plans in process that will play out over the longer term.

Those are just a few examples of the initial progress that we are quite excited about.

Now I'd like to turn it over to Peter to share some thoughts on the business is becoming part of the <unk> family.

And maybe some perspective on where he sees the business going in the coming years.

Peter.

Thank you Carlos.

Our strategy for advancing in the attractive growing latent TB testing market is based on a number of key pillars.

Lastly, expanding our commercial presence to maximize our penetration of existing and new countries.

Secondly, dramatically improving our work through work.

Flow through automating all assay I'm, bringing that new automated workflow to all major jurisdictions worldwide and in a variety of throughput to suit customers of different sizes.

Thirdly, improving the economics for all customers and thus.

This is about reducing our cost of goods to our customers and our advantage, but its also about capturing more value from the products and service ecosystem created by automation.

Being part of the wider polka now my family is helping us to execute better in all three of those areas for example.

We're already leveraging your immune presence in field forces to access new countries in South America.

And leveraging tulip's presence and relationships in the Indian subcontinent.

We are accelerating our automation journey as plots already mentioned by adopting poking almost suite of automation.

Both from core poker noma in the form of channels and by utilizing technology from acquired companies such as your immune and Exelon.

We're also <unk> also able now to capture more of the value from automation as we have a pathway through poker numbers, one source business and its global supply chain capabilities to sell automation consumables and automation service contracts.

Both things that we were not equipped to do on our own.

We're also exploring a number of additional cost reduction opportunities by in sourcing key raw materials that we currently purchase from third parties.

Legend in particular has a number of antibodies and other immunological reagents that were looking to incorporate into our own immunology based technology.

At the same time, we've been able to streamline our cost structure clearly, we're no longer supporting our public company infrastructure ourselves.

More generally we've been able to reduce our G&A spend by leveraging <unk> capabilities in those areas.

Putting all this together, even just six months since becoming part of the Penumbra family, we're seeing intensified revenue growth and improved profitability on the bottom line.

Yeah.

We're also having growing success in deploying our T cell technology and solve Kobe too.

Our testing service revenues continued to grow and support of the phase II and phase III licensure studies.

And in support of vaccine deployment decisions under the umbrella of the UK vaccines task force.

On the kit side, we're also seeing growing and maturing demand as the important role of T cells has become more widely recognized as a critical means of assessing vaccine efficacy.

Particularly in immunosuppressed and other high risk populations.

Supported by close to 15 peer reviewed publications on our technology T cell testing is now coming into the mainstream and several European countries.

We believe this testing will last well into 2022 and probably beyond as we learned to live with solids could be too as an endemic mutating global virus.

We also see an opportunity to grow our immunology testing services in support of vaccine and pharma clients more broadly outside of Salt Kobe.

Clearly, we have our own well respected capabilities in T cell testing, but as part of <unk>, we have two other distinct advantages.

Firstly, we can leverage the infrastructure of <unk> Global network of specialty clinical laboratory to established wider worldwide coverage something of growing importance to vaccines and pharma clients that want to run trials all over the world.

Secondly, we're now partnering with violations.

Our world leading portfolio of Immunology research reagents gives us the expertise to rapidly expand our service offering beyond our own core technology.

With that I'd like to hand, it back to per lot.

Thank you Peter I look forward to seeing the traction we make over the coming quarters.

I also wanted to share with you more about our recent acquisition of immuno diagnostic systems.

Our ideas.

Which closed in early July and May have been a bit overshadowed by our analyst meeting and the announcement to acquire <unk> legend.

I want to make sure our shareholders know why we are so excited about ideas, becoming part of <unk>.

And what we believe it brings to the overall company.

The addition of ideas is a great example of revenue you expect one plus one to equal at least three and hopefully more.

Let me first tell you a bit more about the company.

It's a developer and manufacturer of medium throughput community munitions analyzers and assays.

That was previously publicly traded in the UK and had been going through an evolution of its assay menu over the last several years.

By adding the Ibs.

We have significantly enhanced our in house chemiluminescence assay development expertise.

This expertise will provide even more resources to support the development and launch of Iranians high throughput random-access chemiluminescence system accented.

Which we expect to introduce next year.

Furthermore, by adding ibs's existing mid throughput on a turnkey chemiluminescence analyzer and its current installed base to the business.

Upon the launch of the <unk> platform. We will then be able to offer a spectrum of Kelly's new munition systems and assays to our customers.

Also in just the first few months since the acquisition closed.

Have started to leverage each others commercial and distribution strengths.

For example at the recent AACE meeting in Atlanta.

OMA diagnostics European.

Ibs and Oxford, even though tech all jointly exhibited and met with customers in person for the first time.

And of course, the addition of bio legend.

Which closed in mid September and was the largest deal in our company's history has kept us busy to say the least.

I am happy that we were able to close the deal several months before the end of the year. So that all teams and colleagues involved are ready to hit the ground running heading into next year.

While biologics has been a part of bucket or not for only about 45 days.

Its financial performance has continued to remain extremely strong and hasn't missed a beat as part of this transition.

This is a testament to the strong leadership throughout the <unk> team, who are doing a terrific job in running the business seamlessly for our customers.

While also working tirelessly to ensure a successful transition to the pocket number family.

However, I am even more.

We're excited about the interactions and collaborations that are beginning to take place between the biologics team and the product bookings in the organization.

As I briefly mentioned earlier I'm, especially looking forward to our upcoming companywide innovation summit that is planned for later this year at <unk> campus in San Diego.

And this event will bring together RMB innovation commercial and operational leaders and experts from across the company for several days.

To collaborate strategize and just get to know one another.

I can't wait to see all of the impactful ideas and collections that come from this area.

As it relates to innovation.

In early October.

We received U S FDA emergency use authorization for our P. GAAP respiratory SaaS <unk> Pcr assay.

Which provides for the detection of flu RSV and covered in a single assay.

Which we and others expect will play a larger role in testing during the coming winter months in the northern hemisphere.

Additionally, our European business recently received FDA emergency use authorization for its quantitative cobot, serology assay, which targets the <unk> protein.

These two new Covid assays add to our existing strong portfolio of serology, and PCR assays, which are being used to in the ongoing fight against this pandemic.

From a corporate responsibility standpoint, while the world of ESG is still an evolving place I wasn't used to see my colleagues. Therefore at a recent companywide global impact.

<unk> last month.

It was great to see over 350 different group initiate their stack place.

All led by our colleagues around the world.

As you May recall, we outlined our initial ESG related targets at our analyst meeting in June.

And I am delighted to see efforts already underway to work towards achieving them.

For instance.

Our recently completed a new company wide employee engagement survey, which we will use to ensure pocket continues to be a great place to work and the team everyone is proud to be a part of.

The initial results look very positive on all fronts of engagement diversity and inclusion and has been wellbeing perspective.

But I'm quite sure that is all visit room for improvement.

Additionally, in our recently released corporate social responsibility report.

We have begun reporting under SaaS, B, which is quickly being considered the leading industry standards platform.

With Tokonoma now adhering to this framework, we are building on our historical reporting against the carbon disclosure project, which.

Which aligns with the task force on climate related financial disclosures.

I'm confident we have good plans and initial targets in place and I am happy to see the company more formally value around these efforts.

In closing.

While there always seems to be various external pressures, we must face such.

Such as the current semiconductor shortage.

Logistics bottlenecks and potential global tax reform.

I am proud to see our team continue to proactively navigate these challenges.

<unk> innovation and a unique and dedicated focus on the customer with strong global teamwork.

This corporate character has allowed us to successfully mitigate the impact of these various challenges.

And provide the opportunity for us to continue to achieve.

Even exceed our plans.

Like we did here again in the third quarter.

The end of the year is always a busy time for us.

With commercial activities strategic and operational planning.

And both professional and personal commitments.

And I expect it to be back again this year.

But I'm confident our teams are up for it.

I would now like to turn the call over to Jamie to provide more detail and perspective on our quarter results.

And color as it relates to our guidance for the fourth quarter.

Jamie.

Thanks for that and good evening, everyone before turning to the financial results I want to remind everyone that our third quarter earnings call presentation has been posted on the investors section of our website under financial information.

As Todd mentioned it was quite a busy quarter for the company I believe the team performed extremely well and we continued to make great traction on executing the transformation of the business from both an organic and operational perspective, but also inorganically as well, which I will touch on in a bit.

With our Covid and non Covid revenue performance exceeded our expectations with double digit growth in both our discovery and analytical solutions and diagnostics segments.

Recently, the recent additions to the Perkin Elmer family remain on track. So we are set up well heading into the end of the year.

During the third quarter adjusted revenue grew 21% compared to last year to almost $1 $2 billion and included a 1% foreign exchange tailwind and an 8% contribution from recent acquisitions.

Organic revenue grew 12% 17 percentage points better than our guidance as our non Covid revenue grew 16% organically ahead of our 12% assumption in our Covid revenue did not fall off to the degree that we had anticipated.

As it relates to Covid, we generated approximately $300 million of revenue from a related products and services, which was close to double the $165 million, we had projected and down only slightly from the $365 million, we generated in the second quarter.

Approximately $170 million of our Covid related revenue in Q3 came from core products with the remainder coming from our Covid related lab services.

And also highlighted by others, we saw a noticeable uptick in demand for our PCR test and RNA extraction kits and the latter half of the quarter.

And some contribution from recently awarded testing contracts, such as with the department of Health and human services and Mount Sinai.

As we had assumed in our guidance, we reduced capacity made available for the state of California in our lab and our lab offering at the beginning of the quarter.

Which brought down its revenue contribution as compared to the first half of the year. However, we did see average daily volumes in the lab increased significantly as the quarter progressed with a number of days in late September surpassing 40000 tests per day.

I'm extremely proud of what we've been able to accomplish at our lab in California over the last year from setting it up from scratch in under 70 days to immediately and appropriately addressing all workflow challenges that may come up on getting something like this off the ground in such a short period of time and in the middle of a pandemic.

To successfully meeting and delivering on varying levels of demand on a week by week and month by month basis.

Given the successful contributions I'm happy to report that our contract with the state for this Covid testing lab has been extended by another year through the end of October 2022.

As it relates to our business segments diagnostics generated $654 million of revenue in the third quarter, which represented 56% of total revenue and was up 21% year over year.

Organically the business grew 13% and was up 25% organically on a non COVID-19 basis.

Geographically, our diagnostics business was strong around the world with strong double digit non COVID-19 organic growth in all regions.

As it relates to our immuno diagnostics franchise total revenue was up more than 40% in the quarter with strong growth in both COVID-19 and non COVID-19 products and services.

Youre on mute continued to grow robustly and was up more than 20% organically. This business is fantastic and one that we continue to invest in heavily.

As it is now on pace to do more than $500 million in revenue this year.

As Rob mentioned, we closed on our acquisition of <unk> in early July and are excited to see the R&D and commercial synergies it can provide with our existing franchise.

Our applied genomics business, which also falls within our broader diagnostics segment continued to take share on our improved brand recognition.

While COVID-19 related sales in the business have fallen off as equipment related capacity has been built out we continue to see strong demand for Ngls reagents related to Covid variant detection and our high throughput real time PCR workstation. The explorer G. III continues to see strong uptake.

Our non Covid revenue was up more than 50% as core mgs in large molecule activities continues to bounce back after being initially hampered during the pandemic.

And funding continues to remain strong.

When I think about all the ways. The pandemic has impacted our business I believe our applied genomics business. In particular is one that is going to permanently benefit over the longer term as customers now have so much more experienced with our high quality instruments and kits and our sales force is now even better connected with key opinion leaders in this space.

And our reproductive health business, while we continue to face pressure globally from declining birth rates, particularly in China. We were again able to grow this business double digits overall in Q3 through a combination of menu and geographic expansion new product introductions growth within our labs business and a modest benefit.

Easier year ago comps, particularly in Asia.

Turning to our discovery and analytical solutions segment, the business generated $513 million in revenue in the quarter, which represented 44% of total revenue and was up 21% year over year.

Organically the business grew 10% led by continued strength in our life science business.

With double digit growth from pharma customers and mid single digit growth from academic and government end markets.

And our discovery business. We are pleased to have closed on our acquisitions of both CRM and <unk> engine in the quarter and are excited to see their contributions to our growth in large molecule in the years to come.

Sales into industrial and applied markets grew in the low double digits driven by strong growth in mass spec, while food was up mid single digits.

Looking at the company overall from a geographic basis, we saw a double digit non COVID-19 growth in all regions and greater than 20% non COVID-19 organic growth in China.

This led to our total company non COVID-19 organic growth coming in at 16%, which was 400 basis points above our guidance.

Operationally, we are extremely pleased with our performance in light of various macro pressures.

Our adjusted operating margins of 31% remains strong driven by volume leverage favorable mix and productivity programs.

Slightly offset by continued investments in our talent and culture research and development improved E Commerce network and security infrastructure digital capabilities and strengthening our customer relationships, which we expect to help drive results in the years to come.

Overall adjusted earnings per share were $2 31.

Which is up 11% versus a year ago, and 43% above our Q3 guidance.

As it relates to the balance sheet, we have a lot of moving pieces this quarter with the closing of <unk> and the financing and closing a biologic.

We finished the quarter with $5 $1 billion of debt and approximately $500 million of cash.

Free cash flow was extremely strong in the quarter and so far this year.

We generated $324 million of adjusted free cash flow in the quarter, which equates to a 122% conversion of our net income.

Brings our adjusted free cash flow so far this year through the first nine months to over $1 billion with a conversion rate of over 100%.

Given these strong cash flows and a better than expected earnings our leverage at the end of the quarter stood at two two times net debt to EBITDA on a trailing 12 month basis.

We added $2 8 billion in new debt to fund the acquisition of biologics.

And maybe a little counterintuitive, but we expect our net leverage to increase over the next few quarters, even as we begin to aggressively de lever as we expected earnings related tailwind from our Covid revenues to come down.

As it relates to guidance, we are expecting Q4 adjusted revenues of approximately $1 2 billion.

Which assumes 8% non COVID-19 organic growth.

$200 million in Covid related revenues, and an 11% contribution from M&A and a neutral impact from foreign exchange.

On the bottom line, we are now expecting adjusted earnings per share of $2 five.

Which assumes approximately $26 million of interest expense, a tax rate of 22% and $126 million to $127 million of diluted shares outstanding.

Given our strong performance year to date and our confidence in our fourth quarter outlook I'm happy to report we are raising our full year revenue and earnings guidance for the third consecutive quarter. This year.

We now expect over $1 $4 billion of Covid revenue and at least 15% non COVID-19 organic revenue growth for the full year.

This brings our total adjusted revenue to just under $5 billion, including an 8% contribution from M&A and a 2% tailwind from foreign exchange.

We are now, bringing our adjusted earnings per share guidance for the year up nearly $1 to $10 81 per share, which equates to 30% year over year growth.

All of this guidance as detailed on the second to last page of today's presentation as well.

As it relates to biologics, we expect total year sales this year of approximately $320 million, which would be up 33% from 2020.

Including our fourth quarter adjusted revenue guidance is approximately $80 million of contribution.

Due to the faster than expected close of the deal we're even more confident in the previously announced accretion of 30.

And greater than 50, and 2022 and 2023, respectively.

While there will be a modest dilutive impact in the fourth quarter as a result of the earlier closing.

Importantly integration activities have commenced sooner than anticipated and as for Lard mentioned, we are excited about our upcoming companywide innovation summit in a few weeks at the biologic headquarters.

Additionally, we were able to close on our financing at rates slightly below our deal model and current interest rate levels. So overall, a fantastic outcome and our teams are often running.

Sure.

In closing I'm encouraged as our team continues to perform at a high level.

Our organic and inorganic investments are paying dividends now and set us up well looking forward in our transformation of the business to the new Perkin Elmer is well underway.

We are excited for a strong finish to the year and are well positioned heading into 2022 in the years ahead, not just financially, but also with our people and culture and most importantly for our customers with that I'd now like to turn it over to the operator to begin Q&A.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw.

Your question. Please press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Derik de Bruin with Bank of America. Your line is now open.

Hey, Thanks for taking the question. This is Mike Ruskin on for Derek.

I want to start with your comments on the cover the lab contract being renewed that.

That was always an option, but nothing that was not surprised and so and you could say in terms of expectation for testing volumes going forward.

<unk> and certainly 'twenty two is something in the $100 million a quarter range.

Fair assumption to start or are you being even more conservatives on that.

Yeah, Hey, Mike. So yes, we are proud to have this renewed.

Way I think about it is while it is renewed for a year really COVID-19 is such a fluid environment and we continue to work with the state that it's more like a quarter by quarter basis. So as you may know if you read the contract. The state has the ability to cancel within 45 days. So we really don't have line of sight to the next 90 days at this point, we also restructured it.

To take down the capacity to 40000 tests per day.

We also restructured the variable fees so for the most part it's a pretty steady pace in terms of revenue.

Irregardless of whether its 20000 tests per day or 40000 tests per day. The revenue remains relatively stagnant in the fourth quarter is probably to the tune of about $90 million baked into our estimate.

Okay, Great and then on the <unk>.

The base business you had some comments on China in the prepared remarks, Doug If you can go into a little more detail on what you saw during the quarter and sort of how that's trended theres been a lot of noise there.

Both from a sort of a supply chain perspective, but also just underlying demand.

You could go into more detail on that.

For Das and diagnostics actually.

Yes, Mike Let me just takes it up for what the noise that we're hearing.

Goes both ways the secretion in China as you know some news came out this morning around lockdowns in certain provinces and areas. So it continues to remain fluid.

And I think but overall for us as we look at it.

In China, our end markets continued to remain strong and our backlog is the best at it has ever been in.

Both from a China perspective, and across we continued to execute well.

So mid to longer term.

Continue to feel good about China, I think we just have to keep our eyes open and be vigilant about what happens vis vis.

The lockdowns that are taking place.

And Jay if you could give us the growth number that you saw in the quarter.

Yes, it's a little over 20%, Mike and I would say diagnostics led the way.

<unk> was still double digits, but that didn't go down as much last year, if you remember.

It was a little bit of an easier comp from a diagnostics perspective, because much of the reproductive health and autoimmune testing shut down really in the second quarter last year, a little bit in the first quarter by the third quarter is starting to come back, but I'd say, it's a little bit of an easier comp on the diagnostic side, but both business grew nicely and have for the last three quarters here.

Great. Thanks, so much.

Thanks, Mike.

Thank you. Our next question comes from Tycho Peterson with Jpmorgan. Your line is open.

Hey, Thanks, sorry to press a little more on the China dynamic, but I think one of the questions. That's coming up is just on the tender front rate you're seeing on <unk>.

And a handful of the other regions Sichuan Henan and again Kendra followed similar policy. So is your view that the <unk>.

Vendor headwinds around the IV market.

Expand nationally over the next year or two and what type of pricing impact you're expecting other offsets from your perspective with volume.

Yes, I mean, just building on a flip <unk> said Tycho I mean, I think we're prepared for that I think it's inevitable at some point I don't think localization has been a new thing and make it a little bit more of a discussion recently as now it's kind of impacted some of the diagnostics products, but.

We've got five sites there, we've we're localizing neuro immune there they should be ready to produce to produce locally in 2022.

We've got over 2000 people there we have terrific local brands.

Got a longstanding relationship and I think it still comes down to every challenge is a bit of an opportunity. So yes, there might be pricing discussions on tenders, but if you have the best value prop you can also gain a lot of share so inevitably that will come someday and we'll manage through it but we have two terrific businesses and autoimmune testing as well as <unk>.

<unk> health.

It Hasnt hit us yet, but I don't think I think it will hit us at some point here.

And Tycho I think as we've shared in the past you know we've already transitioned most of our reproductive health reagents manufacturing and digestion.

That transition has already taken place over several years as Jamey pointed out this is not something new.

This has been an immuno diagnostics is a very small component of our overall revenue so.

And I think maybe you saw Tycho that the government has come out and tried to say theres no disadvantage for multinational companies that are local in China. So that's why we have the report.

Sorry, that's local there and year on year, so it'll be local by the start of 'twenty two.

Okay.

Okay. That's helpful and then a follow up on this.

This guidance here for the fourth quarter.

Net instruments might be down sequentially.

And then as we think about 2022, you obviously you laid out the 2023 bridge at the Analyst day, and then any of the underlying assumptions for 2022 change.

In terms of kind of non covered revenue growth in the 5% to 7% range.

Yes, so on the instrument side, yes, they will come down really in two areas Tycho. So our applied genomics business from a core perspective, our non COVID-19 I should say has been growing like gangbusters.

I think over 50% ahead in my.

Prepared remarks, so I don't think I think it's still strong, but I don't think it's going to continue at the 50% level. So we kind of took that down a little bit looking forward here and then really we've just put a little bit of cushion on all of our instruments in terms of some of the supply chain disruption that's out there. So we feel pretty confident about the guide and instruments will come down a little bit, but we have been.

<unk> able to manage through it today and hopefully youll see us beat the guide again here.

Okay, and then on 'twenty three to 2022 yes, not too much.

I think the way, we think about the business in terms of the core growing 5% to 7% and then the numerous acquisitions have all been.

Mid teens to high double digit.

Growers and I don't think anything has changed there so as we head into 2020 to the end market still seems strong and feel pretty confident about the 5% to 7%.

Okay. Thank you.

Thank you. Your next question comes from Matt <unk> with Goldman Sachs. Your line is open.

Hello, Thanks for taking my questions Hi, everybody.

Hey, Matt I, just want to Hey, I just wanted to maybe a big picture question I was curious the comments you made about.

Oxford immune tech in sourcing some mobile legends Prada.

Products. So I'm just wondering from a big picture standpoint, as you integrate these companies.

Where you potentially see in sourcing opportunities and do you think they are much greater than what you think today.

And like anything that you can provide context around maybe quantification of potentially in sourcing opportunities and benefits going forward as you further integrate these companies.

Hey, Matt This is Phil.

So I'll, let Peter talk specifically around Oxford, and bioenergy, and then how that's panning out but I think overall in most cases, what we have seen whether it's around the horizon <unk>.

Nope.

Initially when we started putting the story together.

To where we are now more and more we get to know these companies and the more and more we get to northern technologies.

It's easy it's easy for us to foresee that one plus one is definitely more equal more than two and then probably more cases more than three.

Look at Horizon, and how Syrian fits into the right. The licensing technology that allows us to bring the cell and gene therapy markets together.

Going to our customers being able to look at small molecules and biologics now at the same time.

<unk> from a commercial perspective technology perspective, it continues to help bolster the story that we have seen on the diagnostic side with the addition of Ibs.

While <unk> was working on next centers is a big automated platform the ability to leverage their audio 10 platform and at the same time, the cellular assays, which they have already qualified now being able to do that both on a smaller platform in a fully automated platform that gives you a much more expensive.

<unk> menu than what we thought we could leverage. So you know these are just a couple of examples in Arizona.

Peter to talk specifically around Oxford, and Byron legend Peter.

Peter.

Yes, thanks plot spectrum.

From my perspective.

We've learned more and more about the different aspects of the tokonoma family.

The opportunity set for US just continues to grow.

Okay numbers very unusual in having a huge amount of life science reagents, which a lot of diagnostic companies, obviously consumed as raw materials and production of that kit.

It goes far beyond that.

Hoping to benefit from <unk> and that was purchasing power as a combined entity.

We also have the fact that it makes instruments and a lot of different kind of instruments, which is very helpful for hospital automation journey.

We also have the fact that Oklahoma has a great service infrastructure and all of those things mean that companies like ours, who have joined the family you don't have to replicate and duplicate those capabilities. So.

From my perspective.

I'm seeing ever increasing opportunities to in source either.

<unk> raw materials or services for the water perking up a family.

Sitting by synergy opportunities that grow as a consequence.

Great. Thanks for that that's very helpful. And then just a specific question just gas margins you guys have made a lot of progress over the past year and a half and you cited a couple of things with the improvement in operating margins for das mix volume leverage productivity.

Of those elements, which can we kind of proceed to be fairly durable and where do you think the limit might be for.

Increased margin expansion within das.

I think theyre, all durable, Matt I would say mix is probably the biggest beneficiary, particularly in the discovery and life Sciences side as that becomes a bigger portion of gas. It typically comes with higher margins.

With the addition of bio legit, and now having a $700 million reagent business sitting in das.

In terms of life Sciences.

Normally come with pretty high profit margins.

So I'd say mixed going forward will be durable and probably the biggest driver certainly there are programs that we've been putting in place that we've been talking about in terms of better procurement as we rollout NPI is refreshing all the.

The configurations in the number of configurations, we have and the simplicity of them.

We've been doing a little bit around sites and we've been doing a lot with our service team to be more efficient from a remote service perspective, So I think all our durable, but I think the quickest biggest impact you get is from mix.

I think thats, what youre seeing in this quarter with life Sciences is growing double digits there.

Right.

Great. Thank you guys appreciate it.

Thanks, Matt Thank you.

Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.

Hey, guys. Thanks for taking my question.

Jamie one on guidance and I had one for a prolonged the picture on the.

Q4 here, so the base non COVID-19 business organic of 8%.

Considering that you guys just at 16% and that PQ.

Your comps don't get materially harder so I'm curious what that 8% is contemplating in Q4 is there some China noise or is this just conservatism on your part.

Yes. So good question Vijay I think it's probably more towards the conservatism side. So I'd start by saying the end markets are terrific right now all of them had been growing at least mid single digit for us many well north of double digits.

Our backlog has grown substantially this year and even over the last quarter I think the little bit that we put into the fourth quarter here you can call. It conservatism has two things basically.

Any impact from any potential supply chain disruption, which we can talk about more but we haven't seen too much of today and.

And that includes transportation as well.

And then anything thats going on around Covid lockdowns, particularly in APAC. So we have seen pockets of it particularly in our newborn screening business in places like the Philippines, and Vietnam, where screening has just been reduced so those are the two factors that we put in otherwise the end markets have been strong we're not too concerned about the backlogs up so.

Hopefully it proves to be conservative, but I think it's a prudent thing to do at this time.

That's helpful Jamie.

One for you I think most of your peers, we've had a number of analyst days.

Heading into the earnings season, and the message from our peers as well.

We are emerging.

Longer from the pandemic and if I look at your business.

All of the acquisitions, you guys have done DSO growth.

And some of them, perhaps even transformational.

And I think I just heard you guys.

Talk about.

'twenty fiscal 'twenty, two as being in line with <unk>, 5% to 7% is there something different about brick and why you guys shouldnt be in this emerging stronger from pandemic bandwagon.

Sure.

Curious on now.

The 5% to seven versus have your peers or messaging.

Hello, Vijay I think.

Extensively talked about this at the analyst day, and then even at the end.

At the end of the last earnings call.

I could not be more confident about the future of broken number than I am today.

And markets that we are playing in the portfolio alignment that we have done around growth markets of life Sciences and diagnostics.

The team and the talent that we have put in place and that's executing on all cylinders.

So there is no hesitancy on our part in saying that the future is very bright and if you're asking specifically around 2022 I don't think we are doing guidance right now but.

Jimmy Let me just clarify one thing Vijay just about the 5% to 7% the 5% to 7% is on the core business before all the acquisitions.

Just to make sure everybody is good about the 5% to 7% ultimately will not be 5% to 7% when we roll on the acquisitions. So Oxford overall in there in 2022 into organic base in the horizon excellent. All of these that will raise the 5% to seven we're just going back to our long range plan to say look we broke it up into two things at the time one was.

As before the acquisitions that goes five to seven then here's the nine acquisitions, we've done that goes obviously more than five or seven and then biologics by itself is obviously very impactful as well so the 5% to seven was prior to the acquisitions the acquisitions will ultimately make that higher.

That's very helpful guys. Thank you.

Thank you.

Our next question comes from Patrick Donnelly with Citi. Your line is open.

Thanks for taking the questions guys.

Rob maybe picking up on that last one on the acquisition growth rate side, I know biological and close for about a month and a half but can you just talk about the revenue synergy opportunity there, particularly with some of the more recent acquisitions. It seems like a pretty significant one and now that you've had some people in the same room can you just talk about how you're feeling about those opportunities and what we can.

Yes, I mean, you heard from Peter around Oxford, Patrick you know what I mean.

Elucidate it pretty well the technology synergies the opportunities around service commercial and a 19. The team is the same across the board whether you look at Mexico normal horizon.

Ability to be able to leverage our commercial presence, which is directed more than 180, plus countries, which most of these companies do not have access to that or distribute demand.

Second one is around technologies the portfolio that we bring together around instruments around service.

As much as really helping for the acquired companies and the third one obviously is around technology as these discussions and interactions happen I think Peter gave an example around a couple of them and even with buyer legend, we become one of our primary source of our raw material supplier that we won from.

Antibodies. So I think those are the key elements.

I would point out too.

Just to give you an example, and I think Jamie as I mentioned during our prepared remarks, we are having an innovation summit.

Biologic campus.

A couple of weeks.

Our approach is around three key verticals, our three pillars.

Cell and gene therapy, diagnostics, and everything else around genomics and what the opportunity is for us to leverage.

Leverage the synergies that we can see primarily from a technology perspective.

So I think we will continue and then hopefully over the next couple of months, we will be able to provide more detail around that.

But Patrick hopefully that gives you a sense of how we are looking at this.

No that's definitely helpful. I appreciate it and Jamie and.

And one of the responses you've kind of offered to touch a little bit on the supply chain I'll take you up on that offer.

Yes, if you could just talk about what youre seeing there any potential pressures and then secondarily just on the classic inflation labor question in terms of how that's impacting margins and pass them along to customers would be helpful.

Yes, sure I mean, we certainly see it both on the disruption side and I would say, it's a little bit easier for us, we're mostly air versus any kind of water travels from our shipping standpoint.

From a supply base perspective, we've been all over the team has done an amazing job I think there was a very minor impact to the third quarter and our backlog obviously.

Grew substantially as well inflation, we started to see it.

Looking at what we're doing around price and putting some things into effect right now, but we also had some good things to do as you may remember we've been talking about our refresh procurement process. So we've been able to mitigate some of this so it's certainly there Patrick and we're dealing with it but we've got a happy medium here, where we've got a good size from a scale perspective company, but also.

We operate very in a very agile fashion. So the team's been doing a great job managing through it we put a little bit of buffer into the fourth quarter here as I mentioned.

It'll be a non impact for us.

We're sort of reemphasize that I really feel strongly that our size and scale gives us a more speed and agility than one would imagine to be able to.

Rapidly.

Marching resources around some of these challenges and then I think the COVID-19.

The Covid pandemic has stopped us hard to become much more agile and much more reactive to two such challenges.

That's helpful. Thanks, Jamie Yeah.

Thank you. Our next question comes from Brandon Couillard with Jefferies. Your line is open.

Hey, Thanks, good afternoon.

Give me just a two part question for you given all the moving parts and I'll, let the acquisitions can you just help us sort of frame how to look at gross margin and opex in the fourth quarter and then secondarily is 20% tax rate a good assumption.

The pencil in for next year.

Yes, thanks, Brandon So gross margin specific to the fourth quarter.

I would assume it comes down a little bit here, Brandon so with Covid being.

$300 million in the third quarter going down to $200 million in the fourth quarter Youll see that come down a little bit and then the core comes up so we always have a bigger volume quarter in the fourth quarter. So I would expect gross margins to tick down a little bit.

Tax rate for 2022, I think is anybody's guess based on tax reform out there. So yes certainly.

Got it to 21% this year versus a <unk>.

Couple of years ago, I think we were 16% or something like that.

And obviously Covid has played a big role in that with greater income in higher tax jurisdictions. So I think our tax rate in 2022 is dependent upon two things one your view on Covid and how much revenue will be there from that because it typically with a higher tax rate and to what happens with tax reform. So today.

It has not been changed but none of our assumptions have taken into account any kind of particular tax reform changes.

So hopefully that helps Brandon.

Thank you.

Thank you. Our next question comes from Josh Wolfson with.

Cleveland Research your line is open.

Good evening, Thanks for taking my questions just two for you.

First a follow up on the non Covid business.

Obviously came in well ahead of ahead of your guide just wondering if you could provide more context on where all experienced upside versus plan was this solely tied to kind of better than expected growth in non <unk> Dx sorted das also outperformed.

So that definitely outperformed as well I would say life Sciences continues to remain strong.

Applied markets or analytical technology products was strong for us again.

And on the Dx side, I mean really euro immune has done extremely well and is continuing to do well, but I'd just say our applied genomics business ex Covid has continued to be quite strong. So I think that probably surpass our expectation to have the third quarter in a row that I think we have been over 30%, 40%. So.

That's probably continues to hang in there and I mentioned in my prepared remarks that that business. Our brand recognition. There is probably one of the biggest benefits that we have coming out of Covid here.

Got it and then as we think about the longer term guide you laid out at the analyst meeting in June.

Given the improved FY 'twenty, one outlook since that time and it sounds like a higher level of expected cost synergies going forward.

We view this is positively impacting how you're thinking about the long term targets or is it more just kind of a de risking of of those targets.

I think it can be both can be both Josh.

Yes, I mean, we've continued to invest through this and certainly yes I meant.

And in my prepared remarks, we're investing in our talent and culture, we're investing an extra R&D, particularly on our core business as a percent of sales that is far up we're investing in digital and all these things will be and we believe benefit us moving forward here and should there be extra sales in extra income.

We still feel confident in the margin expansion targets, but it also provides for an opportunity to continue to reinvest back in the business. So I think it's a bit about this either de risks and or we can make additional investments or youll see some upside come through versus our long range plan.

Got it thank you.

Thank you. Our next question comes from Paul Knight with Keybanc. Your line is open.

Hi, Thanks for the question on the discovery and analytical.

Very strong growth could you talk about what where the technologies I would assume that applied due to petrochemical must be strong.

Color there would be great.

Sure, Yes, I mean, hey, Paul.

Well now life Sciences makes up over 60% of that so I'll start there and in particular, our discovery business. Both on a lot of the NPA as we've had in terms of our high content screening business. Some of our in vivo products had been operating terrifically.

On the reagent side, it's been strong across all regions. We have had a nice cadence of mti's differ.

Different application areas in terms of oncology and cell and gene therapy have been strong for us. So life Sciences. Those are a few of the areas.

In the analytical side in applied markets also it's been more on the semiconductor side I would say chemicals and energy was pretty strong for us.

And so we launched our triple Quad and so our ICP and ICP Ams business has been extremely strong for us, but I think in general the hole in a lot of analytical technologies portfolio. We've had a better cadence of MPI, which has been proven to benefit the das business and so that's why I see continued strength there.

Do you think youre gaining share on the das side of the business.

Sure.

We've said in the life Sciences side on the analytical technology side, I think particularly in spectroscopy. We've always had good share hard to say, whether we're gaining a lot of share at this point, yes, okay. Thanks.

Thank you.

And I'm currently showing no further questions at this time I would like to hand, the conference back over to Mr. <unk> for closing comments.

Thank you Norma and thank you all for dialing in today.

We're very excited and remain very excited with the trajectory on which the new <unk> embarked on and are very proud of the accomplishments that the team have achieved in the third quarter.

And I'm very thankful to my 15000 colleagues around the world for their continued hard work and contributions.

I look forward to speaking to you all soon.

Please stay safe and healthy thank you.

And this concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.