Q1 2022 Danaher Corp Earnings Call
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Good day My name is Leo and I'll be your conference facilitator. This morning at this time I would like to welcome everyone to Danaher Corporation's first quarter 2022 earnings results Conference call.
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I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford You May begin your conference.
Good morning, everyone and thanks for joining us on the call.
With us today are writer Blair, our president and Chief Executive Officer, and Matt Mcgrew, Our executive Vice President and Chief Financial Officer.
I'd like to point out that our earnings release, the slide presentation, supplementing today's call and the reconciliations and other information required by SEC regulation G.
Relating to any non-GAAP financial measures provided during the call are all available on the investors section of our website www.
Got Danaher Dot com under the heading quarterly earnings.
The audio portion of this call will be archived on the investors section of our website later today.
Under the heading events and presentations.
Will remain archived until our next quarterly call.
This call will also be available until may 5th two.
2022.
During the presentation, we will describe certain of the more significant factors that impacted year over year performance.
The supplemental materials describe additional factors that impacted year over year performance.
Unless otherwise noted all references in these remarks and supplemental materials.
To company specific financial metrics relate to the first quarter of 2022.
And all references to period to period increases or decreases in financial metrics are year over year.
We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals.
Or are available only in certain markets.
During the call we will make forward looking statements within the meaning of the federal Securities laws.
Including statements regarding events or developments that we believe or anticipate will or may occur in the future.
These forward looking statements are subject to a number of risks and uncertainties.
Including those set forth in our SEC filings.
And our actual results might differ materially from any forward looking statements that we make today.
These forward looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward looking statements, except as required by law.
With that I'd like to turn the call over to Ryan.
Well, thank you John and good morning, everyone. We appreciate you joining us on the call today.
We're off to a good start in 2022 with the first quarter coming in ahead of our initial expectation.
The team navigated a challenging operating environment to deliver strong revenue earnings and cash flow growth.
Our performance was broad based with high single digit or better core revenue growth in each of our three segments.
Now during the first quarter, we continued to strengthen our competitive advantage through high impact growth investment and innovation and bio processing production capacity, both of which we believe are contributing to market share gains.
Now clearly our well rounded results are really a testament to our team's commitment to continuous improvement and to the unique positioning of our portfolio.
We just have an exceptional collection of businesses.
All powered by the Danaher business system that serve attractive end markets with durable secular growth drivers.
And it's this combination.
Forensic danaher today and provide a strong foundation for the future.
So with that let's turn to our first quarter results.
Sales were $7 $7 billion in the first quarter, and we delivered 12% core revenue growth.
Our base business was up 8% with broad based strength across the portfolio and COVID-19 testing contributing 4%.
Geographically revenue in both the U S and Western Europe grew mid teens, while high growth markets were up low single digit.
China declined low single digits.
Was up high single digits, excluding the impact of a previously called out significant bio processing project delivered in the prior year.
The COVID-19, driven Lockdowns that began in late March had a very modest impact on our first quarter results in China.
However, as these lockdowns extend further into April .
Being more of an impact in our businesses and we anticipate the situation will begin to ease in the coming weeks with an eventual return to normalized activity level by the end of June .
Our gross profit margin for the first quarter was 61, 2%.
The operating margin decline of 80 basis points to 28, 3% largely due to year over year changes in foreign currency exchange rates and product mix, primarily within our life Sciences segment.
Now adjusted diluted net earnings per common share of $2 76.
We're up nine 5% versus last year, and we generated $1 $7 billion of free cash flow in the quarter.
So now let's take a look at our results across the portfolio and give you some color on what we're seeing in our end market.
Let's start with life science.
Reported revenue grew nine 5% and core revenue was up seven 5% with broad based strength across the segment.
And by processing, we're seeing very robust activity level customers are accelerating their investments in research and production across all major therapeutic modalities.
Core revenue in our bio processing business, if thats, even Bob Pall biotech.
<unk> grew high single digits and was up low double digits, excluding the impact of.
That significant onetime project in China last year.
So orders remain very healthy and we continue to build backlog across both businesses during the quarter.
Now for the last two years, our customers prioritize the development of COVID-19 vaccine and therapy to rapidly accelerate their time to market.
Today these programs require less investment in manufacturing capacity as they mature and become a part of our customers' core business.
And as a result, our customers are starting to reallocate resources back to previously paused and new programs for other modalities.
Notably monoclonal antibody based therapies or mast cell and gene therapy.
Mrna based technology.
And bio processing today monoclonal antibodies are the largest investment area for our customers as they are becoming the standard of care in the treatment of many diseases.
Customers are adding manufacturing capacity to support both novel lab in clinical trials and the rapid growth of approved treatment.
Biosimilar development and production are also increasing.
At patents on higher volume therapies expire.
This trend is making life saving treatment more accessible and helping to accelerate adoption and underserved market.
Now we continue to make substantial investments in manufacturing capacity to help meet our customers' accelerating demand and bio processing, an important focus area of our expansion has been with single use technology.
Which are key enablers to scale, the development and manufacturing of biologics and genomics based medicine.
And this first quarter, our newest plan dedicated to the manufacturing of single use technology came online in Cardiff Wales.
Now this plant along with recently opened facility in South Carolina, and Beijing are critical to support our customers demand today.
Long term they provide additional capacity for one of the fastest growing product categories within bio processing.
So turning to our life Sciences instrument businesses we're.
We're seeing strong levels of activity in all major end market demand is particularly robust at our pharmaceutical CRO and academic research customers were a healthy funding environment is accelerating the initiation of new projects.
In the first quarter, Leica Microsystems, IDT and <unk> each grew over 10%.
Assai the.
Zeno top 7600, Triple Quad 7500 continued to perform well and are Great example of how our investments in innovation are driving market share gains and enhancing our growth trajectory.
At Leica Microsystems Mika is another example of impactful innovation for our customers.
It integrates wide field and can focal imaging in a single instrument, while leveraging machine learning and automation to dramatically simplify the imaging workflow for our researchers.
So clearly across the life Sciences portfolio, we're investing in innovation to bring meaningful solutions to our customers and to strengthen our competitive position.
I'll then Ron continued its great start as part of Danaher delivering over 40% growth in the first quarter.
Since joining danaher in late August the team has embraced the danaher business system and its putting DBS tools to work.
Recently completed kaizen event, which focused on increasing throughput and further reducing lead time are already generating terrific results.
We're excited about the early progress that aldebaran and thrilled with the great work the team is doing.
So now let's move to diagnostics, where reported revenue was up 21, 5%.
And core revenue grew 22, 5% led by over 50% growth at Cepheid.
Our non COVID-19 clinical diagnostic businesses collectively grew mid single digits.
Notably Leica biosystems delivered their seventh consecutive quarter of double digit order growth driven by strength in core histology and advanced staining and digital pathology.
The clinical diagnostic market volumes remain at healthy level and most geographies as patients are returning for wellness checks routine screening and other elective procedures.
Our customers are effectively managing through periodic outbreaks by adapting their protocols and procedures, allowing them to continue providing critical health care services.
Now in China, We're currently seeing regional Lockdowns impact patient volume and we expect our diagnostics business to be the most affected in the second quarter.
In molecular diagnostics respiratory testing volumes have moderated globally as the omicron outbreak has subsided in most regions.
However demand for Cepheid testing at the point of care remains very strong and we believe we're taking market share.
Our continued growth and share gains are a testament to the significant value. The unique combination of fast accurate lab results and a best in class workflow is providing to a clinician at the point of care.
So as COVID-19 moves towards an endemic disease state.
We're seeing increased demand for cepheid broader testimony.
In the first quarter non respiratory testing revenue grew double digit led by hospital acquired infection virology and infectious disease testing.
Customers, including several who initially purchased our gene expert system for COVID-19 testing are expressing increased interest in expanding their menu utilization.
As our customers free capacity from respiratory testing, we believe there are significant opportunities to leverage our market, leading installed base and testing menu to drive broader utilization and demand for Cepheid point of care molecular testing solutions.
Now on respiratory testing revenue of $900 million in the quarter exceeded our expectations as customers showed an increased preference for cepheid foreign one combination of debt during the respiratory season.
Our combination test for COVID-19 flu, a flu b and RSV represented approximately 65% of the $17 million of respiratory cartridges shipped in the quarter with Covid only test accounting for approximately 35%.
So now, let's move to our environmental and applied solutions segment.
<unk> reported revenue grew two 5% with core revenue up six 5%, including <unk>.
Water quality and mid single digit growth at product identification.
At water quality Camp Street delivered its fourth consecutive quarter of double digit core growth accelerating demand for our analytical chemistries in consumables was driven by activity across municipal chemical food and beverage end market.
Equipment order rates also remained strong as customers are continuing to invest in larger municipal projects.
Net product identification, our marking and coding business was up high single digits, partially offset by slight declines in our packaging and color management business.
Video jet was up high single digits with strong demand in food beverage and industrial end markets.
So stepping back our water quality and product identification platforms have done an exceptional job of leveraging the danaher business system to improve their positioning both from a cost and growth perspective.
While supply chain pressures have been modestly more pronounced in Eas. Our teams are using DBS tools, such as daily management to work with suppliers and ensure production component availability.
We're also using visual project management to help us reengineer, our products faster with a focus on moving from difficult to source electronic component to newer more cost effective next generation chipset.
Now, we believe DBS enabled us to deliver faster and more reliably than many of our competitors.
Now our teams are also using DBS growth tools to accelerate innovation and deliver more impactful solutions to the market innovations such as video jet <unk> dollars 80 printer and Hawks HQ series portable meters are helping our customers solve the many challenges they face.
From increasing regulatory requirements to skilled labor shortages.
And we're seeing the impact in our core growth, which has averaged mid single digit annually over the past 10 years at Eas.
So we believe this combination of the rigorous application of DBS tools paired with our proactive growth investment is driving meaningful market share gains and enhancing our long term competitive advantage.
Yes.
So now let's briefly look ahead to our expectations for the second quarter and the full year.
In the second quarter, we expect to deliver mid single digit core revenue growth in our base business, which includes a headwind of approximately two to 300 basis points from the ongoing COVID-19 related shutdowns in China.
For the full year 2022.
There is no change to our previous guidance of high single digit core revenue growth in our base business as we expect the shutdowns in China to normalize as we move through the remainder of the year.
We continue to expect both a low single digit core growth headwind from COVID-19 testing and overall mid single digit core revenue growth.
So to wrap up.
Had a good start to the year and look forward to building on this foundation as we move through 2022.
Our first quarter results are a testament to the dedication of our outstanding team and their commitment to executing with the Danaher business system.
And these results also reflect the unique positioning of our portfolio and the exceptional collection of high quality franchises that comprise danaher today, we believed the durability of our businesses, where consumables now represent 75% of revenue.
Thats exceptionally well in today's dynamic operating environment.
So this powerful combination of our talented team the strength of our portfolio and the Danaher business system differentiate danaher and reinforces our sustainable long term competitive advantage.
So with that I'll turn the call back over to you John .
Thanks, Ryder that concludes our formal comments Leah, where we're now ready for questions.
At this time, if you would like to ask a question. Please press star one now on your telephone keypad.
Draw yourself from the queue you May press the pound key once again star one to enter the queue.
We will take our first question from Derik Debruin of Bank of America.
Hi, there good morning.
Hi, good morning, Thanks for taking my question.
Just.
Just a couple of sort of like your incoming some clients I think first of all just a little bit more on that.
The difference between I think you mentioned $19 million on the Cepheid Guide and it came in at 17, just a little bit more color on the volume difference there and I think also a related question just are you seeing any.
Sort of stockpiling.
In terms of either.
Lenders for either bio processing ore on the diagnostic side and I've got one more follow up.
Got it thanks Derek.
Start off with the cartridge shipment.
In the first quarter.
Early.
In the quarter as many we suffered from some absenteeism related to the omicron outbreak in our manufacturing plants and that affected.
The production levels on the one hand on the other hand.
The mix shift.
Larger than anticipated towards the 401 test, 65% versus our assumption of 50% ended up resulting in a beat in terms of in terms of revenue. So really short term contained issue that affected manufacturing volumes ultimately the mix.
And the strength of the teams recovery ended up resulting in a 17 million cartridges of shipment.
Now if we switch gears briefly and go to the topic of stockpiling.
We are very very sensitive to this particular topic.
Stay extremely close with our customers.
As an example in the first quarter to quarter Cepheid continued to be sold out. If you think about Bioprocess, Inc. This is an area where there continued to be in the industry manufacturing constraints. So we are very very close to our customers working together with them with their manufacturing schedules to.
Ensure that we're able to not only meet their needs, but also to ensure that we don't have.
Inventory buildup in the system, so could there be pockets of that perhaps on the margin, but generally speaking we don't see a significant buildup in the supply chain.
Right.
Just can you.
On the China headwind in the quarter that tenders, maybe basis points what supply versus demand.
Okay.
This is entirely related to supply accessibility of customers. So the demand in China continues to be very robust.
As you May have noted without.
In the first quarter without this large project in the prior year, China was up high single digits for US orders very strong. So this is really related to customer accessibility in hospitals and labs and of course, the one or the other manufacturing plants that are affected.
<unk> shut down now as we sit here today, we're already receiving the news from our team that we're able to open up not just our plan.
And so those are starting to open up here as well fully but surely as well as we would expect throughout the quarter clients or I'm sorry, yes.
As well as lab accessibility to improve already in May and then get back to more normal levels here by the end of the quarter.
Great and if I can sneak one more in.
<unk> hit you.
Nice to see you're reiterating the full year guidance that is that we expect as you expect.
All of that China business to come back or is it or are you.
Thank you, we'll see stronger growth in other regions offsetting it.
I'm done.
This is mostly about China getting back to normal activity levels and in both customers as well as our plans having them make us capacity to make up for what we think are relatively short shutdown periods, having said that the business is.
Large one and there is always pockets that will grow faster so.
Between the two things we feel confident that our guide for the full year holds.
Yeah.
We'll take our next question from Vijay Kumar of.
Evercore ISI.
Good morning Vijay.
Good morning, Brian Congrats on a.
Solid Q1 print.
Maybe one on <unk>.
The vaccine side.
Brian or I know, it's part of the base.
I guess yesterday J&J did put out their vaccine guidance there, we're not guiding to a vaccine.
Revenues anymore.
Obviously, there's been a lot of questions on.
On the vaccine side in base via pricing, So maybe just talk about.
You buy a promising trends in the Q4 order trends where orders about revenues.
Are you still confident about the 2 billion vaccine outflow for fiscal 'twenty two.
Sure well thanks P J.
So, let's just level set on on the numbers briefly here, we think about bio processing.
Q1, and as I mentioned during my opening commentary, we extract that that very large Q1 shipment last year in China.
Bio processing business was up.
Low double digit here in Q1, very very strong order activity and I'll come back to that in a minute now if you. If you look at R. R.
First quarter last year, our sales were up over 70% and so if you look at the two year stack for Q1 were in the 35% to 40% growth area, which we think is very robust and more than representative of what is going on in the market and think that that's the fact.
Parents extreme.
Extremely well in fact, we still think that we're taking share there. So that's sort of one marker that I want you to have.
And then the second point is the order activity.
<unk> to be very very strong last year.
Orders in the first quarter were up over 90% and so we anticipated that our or in Q1 of this year would be down, but nonetheless, we continue to build backlog here in Q1 as well.
<unk> processing.
This is this is why.
We're so confident in our core growth guide here for the year of bio processing of high single digit low double digits between the robust growth that we're seeing and the backlog that we have that.
That's really important so now, let's unpack that a little bit and think about what's going on and why.
Covid, it's sort of one variable, but that there are other variables here that are incredibly important and explain why we talk about the bio processing business and its growth in aggregate.
So first of all as you.
If you think about the activity level outside of Covid in the bio processing business, it's important to see what's going on in clinical trials and I've talked about this but you know that project pipeline.
For monoclonal antibodies is 50% larger today than it was five years ago for cell and gene therapy, It's tenex larger driving extraordinary activity here in the clinical trials area and what you see and as I mentioned in the opening comments you see customers really starting to focus on the new <unk>.
Project.
Ross all modalities and not just allocating the resources to Covid, but to these new modality. So that's really important to note that customer activity level continues to be very very high and that plays through in the clinic clinical trials.
Now another point to take here is monoclonal antibodies are becoming the standard of care and the predominant class of biologic drugs. So what's going on in manner monoclonal antibody is the primary growth driver.
In the market and also for our business and recently launched products that are ramping.
Two new treatments and new indication are driving an exceptional amount of volume here and then you add to that that emerging market in.
In high growth markets, such as China, and India are starting to have access to these monoclonal antibody treatment.
That provides additional and significant volume leverage at.
At the same time, you have biosimilar growth Vijay. So these biosimilars are leveraging the fact that some of the biologic drugs monoclonal antibodies that are higher volume are starting to come off patent and that's increasing the penetration of those drugs.
Throughout the world, where the penetration has been lower and thats, providing another growth emphasis.
And then lastly, and I'll I'll stop with this now we've been talking a lot about single use technology in their adoption is a watt for a while which is an additional leverage growth vector within the bio processing business. So all of that helped the activity that we talked about provides for volume but.
On top of that is substituting more traditional technologies and is growing even faster than we had well over $1 billion of single use technology, and we've just announced that.
Our third new plants come on for single use technologies in Cardiff Wales, So we feel very confident.
On the basis of what's going on outside of Covid and that's why we look at it together because it's the aggregate that we look at and that really ultimately count.
That will drive that high single digit low double digit growth here.
Here for 2022, and also supports our high single digit perspective beyond that.
That's helpful Ryan and maybe one quick one for the group.
Incremental margins.
We were looking at perhaps mid Thirty's.
Q1 came in below.
This was this supply chain inflation.
The impact in Q1, or perhaps FX or maybe just talk about incrementals and have expectations shooting for Rob fiscal 'twenty two.
Yes, no for Q1, I mean, we kind of came through about 25% I think that was pretty much in line with what we thought Vijay.
So no no real difference I think from.
From a year over year perspective, the difference between that 35 to 40 that we normally talk to them is 25. It was all FX right. So in the quarter. I mean, you think about it it was kind of like a 7% headwind here for us. So I don't think we saw anything obviously supply chain is what it is but I think we were able to kind of work our way through that I really think it was all <unk>.
FX here.
Excuse me.
In the quarter in the first quarter.
As far as I think you bring up a good point that as far as the full year goes so I would say there is no change to the full year fall through other than the FX impact that we're seeing and just to kind of.
Lay that out we continue to expect mid single digit core growth from kind of a core and acquisitions and that will have that 35 or 40% fall through.
In January we thought that FX was going to bring that 35% to 40% down to say, 30% to 35%.
But given the currency moves we've seen since January .
As we sit here today, I think it's going to be more like 20%, 25% fall through for the year versus the 30% to 35%, we sort of guided to the last time so.
Look it's still leaves us.
If we deliver that that still leaves us with low single digit EPS growth for the year. Despite what I think is some pretty significant FX headwinds year over year, and maybe just to give you color on the sizing of that headwind I mean, right now FX is going to be a 35 EPS headwind year over year, and that's a pretty meaningful number for us.
Here during the years, it's probably half of what we are what we initially thought so it's a pretty big headwind here for the year and it was a little bit here in the quarter too.
That's helpful. Thank you.
We will take our next question from Scott Davis of Melius research.
Scott Good morning, Good morning, guys. Thanks for all the detail here.
The price dynamic I mean, I know FX is FX can't do much about that perhaps but.
Are you still out there capturing additional price to offset the general inflation and general cost and logistics issues that are so prevalent.
Scott, we have been working price directly and indirectly and we are seeing very good traction. Let me, let me lay that out for you here and let me start off with the fact that there are inflationary pressures out there we've talked about that in the past.
That moved from sort of the classic topics.
Memory chips and other types of chips.
Chip set.
And freight and perhaps labor to seeing more broadly inflation.
But nonetheless with the Danaher business system, our teams have been able to do a number of things here in order to contain this one of course is related to ensuring the robustness of the supply in many of our businesses today are gaining share because we are able to continue our supply have shorter lead time.
Because we are able to access and secure the components necessary to drive our manufacturing and our business. So it's an important aspect to this entire equation of growth and share gain.
The DBS tool sets that we have been putting in place are also helping us offset cost in the sense and as I mentioned in the introductory comments that.
Look we are able to now reengineer more quickly to other types of again I'll use. The example of chipset to Nextgen chipset more broadly consolidate those and not only gained supply, but then also reduce our costs. So there is an entire.
DBS machine, if you will that is driving to secure supply and to offset costs.
At the same time of course, we're driving price and we see strong traction there in fact, we're well over 200 basis points of price here in.
In the first quarter and that's a quarter that's still had a fair amount of if you will 2021 backlog in it right. So we have now worked through the majority of that backlog and expect to see continued momentum there so thinking about price.
At these levels.
200 plus basis points.
That's the right way to think about that and it's just another testament to the strength of our portfolio. The degree of differentiation of our product and the leverage that this razor razor blade business model provides us with 75% consumable many of which are specced in are keyed into.
The equipment or instruments that they supply.
Yeah.
We'll move next to Dan Brennan of Cowen.
Hi, Dan good morning.
Good morning, Good morning, and thank you Ryan and thanks for taking the questions here and congrats on the quarter.
So if I can just go back to bioprocess, obviously really nice quarter with the high single digit growth against an extremely tough comp.
ATCA Covid, it's part of the base and what's great about all that robust demand, obviously ex COVID-19 , which is a big driver of long term.
But given the interest in plumbing dissecting COVID-19 at this point from investors it would be helpful to learn.
If the 2022 high single low double digit guidance continues to incorporate 2 billion from Covid.
And if you guys any color you can provide there about like how much of that $2 billion is blocked into firm orders.
Thanks, Dan you know really the way, we're thinking about that business.
Again in aggregate.
We do believe that both the.
Underlying strength of the markets as I just laid out.
As well as the strength of our backlog, which continues to grow.
Port.
The high single digit low double digit bio processing guide for the year and as you think about COVID-19 within that.
It's going to do what it does but there is a larger market that is growing.
Rapid Leigh and we're going to continue to see fluctuation as it relates to COVID-19 volumes, whether there's a decision on booster.
Or a different age groups, whether it becomes part of an annualized immunization regimen.
All of these are open question and our belief is that Covid is a part of our business, but there is another part of this business, which is larger is growing at a faster rate.
And we are making investments to ensure that we capture that we capture.
The appropriate shares here so.
Dan.
Single digit low double digit bio processing growth for 2022.
Politically.
So I'll go on a really strong quarter out of the gate maybe.
Maybe can you give us a little color on how the integration is going.
And in light of the really strong first quarter or how do we think about the full year in 2022 and beyond.
I mean, we couldnt be more pleased with the team.
<unk> been up there several times working with the team seeing how they're growing bringing on capacity, we continue to invest in expansions, there and that 40% growth exceeded our expectations and gives you a sense of how quickly. The danaher business system has gained traction and that's a combination of a couple of things first.
Thing is the leadership and her team and all that Ron that is pulling and open to applying the danaher business system as fast as possible to fortify their competitive advantage and lead times and quality.
To ensure that we drive this business.
To the growth of its potential and we think for 2022, we continue to think that the 500 million dollar revenue number is a good number 40, 40% in Q1, we certainly expect it to be.
In the first half year, well over our expectation.
20% plus.
That we've previously talked about the $500 million for the years is a good number.
And that team is firing in all cylinders.
And then if I can sneak one more in just on China. Obviously, good news that you guys are managing through this and hopefully you've.
Maybe if you could just give me some update in Q2.
We're actually expecting for China, you know, maybe you said the number I missed it and kind of how do you think about China for the full year. Since you are expecting a nice rebound exiting Q2. Thank you.
Sure so.
Just to revisit we've talked about China and here in the first quarter.
It was really the end of March where we started to see the impact of some of these larger scale shut down and we continue to see those here in the first week of April although we've just spoken to the team here yesterday and they received approval to start opening up a plant and we also see more acts.
<unk> at our customers and so we do expect to work through.
The shutdowns here in the second quarter.
Again that that was the two to 300 basis point headwind that we included in our Q2 guide of mid single digits.
So as we think about.
The quarter here and for China Remember, we haven't had a very strong.
Activity level in Q1 up high single digit growth minus that large transaction last year.
And we expect that in China will probably be down in Q2.
Mid to high single digit.
Percentages.
The quarter now once again, we expect that to unwind in Q2.
Then continue to catch back up here.
Through the through the year, where we continue to see China as a high single digit market.
Great. Thank you.
We'll take our next question from Jack Meehan of Nephron research.
Good morning, Jack how are you. Thank you.
Good morning.
So on life Sciences wanted to turn some of the capital heavy businesses like micro Pall industrial can you just talk about the durability of the growth Youre seeing there how are the order trends and any change to the growth expectations for the year.
So.
<unk> says.
If we now pivot from bio processing and more to the life science analytical businesses as you suggest Jack.
Being very strong underlying activity.
In the various sectors of the business if you think about.
The pharmaceutical.
<unk> Crows.
Crows academic research customers, our funnels are strong and continue to outpace.
Order over quarter, what we've seen in 2021, I think that buttressed for us, particularly because of the strong innovation track record and the recent launches that we've had I've talked to those at <unk> Casino top.
The accurate math instrument as well as the 7500 Triple Quad. Those are those are class, leading innovation that are growing exceptionally well and driving market share gains Beckman life sciences with their site of flex benched up sell sort of the most recent launch.
And then of course, we talked about <unk>, which is that combination of why wide field and kind of focal.
Leveraging machine learning.
So we're firing on all cylinders here in a strong.
<unk> environment, and we think that Thats sustainable here for the foreseeable future as we continue to see investment from both.
<unk> sector, but also academic sectors as well as institutions that are very very bullish.
On the innovation and the science that they want to drive forward.
Great.
And then just a broader question on M&A, it's been obviously, a very choppy macro environment.
Look at the cash flow statement. It was a light quarter for you on M&A just.
Just curious how youre seeing assets in the market do you feel like expectations have changed at all from sellers and just your own willingness to do M&A kind of in a choppy environment. Thanks.
Well Jack I'll tell you.
We've excelled in these kind of environments historically from an M&A perspective.
These environments of dislocation.
Inevitably show up opportunity.
And we feel very good about how we're positioned with our funnel now having said that the volatility that we're seeing today is while it might not feel that way relatively recent and its probably a little too early to see the full impact of that volatility.
Said that we're sitting here at <unk>.
With two X turn.
Very strong free cash flow of over $7 billion and.
And over $10 billion of EBITDA. So we feel like we're in a very good position.
Both in terms of the strength of our balance sheet as well as the opportunities that lie ahead.
Okay.
We will take our next question from Patrick Donnelly of Citi.
Good morning, Patrick.
Hey, good morning, Ryan and thanks for taking the questions.
Maybe you wanted to kind of jump from away from China on the geographic spot over in Europe , you, obviously, a lot going on there on the geopolitical side can you just talk about if you've seen any change in customer behavior or any change in funding over there.
What are your guys' perspective is on that region as we work through this.
So western Europe .
Continued to perform very well for us as I mentioned in our opening comments here, we had strong growth.
In the mid teens and western Europe here in the first quarter.
And while we think that moderates a little bit here in Q2, just because of some of the prior year.
Performance at.
The activity levels remain very strong.
Certainly in Western Europe , that's the case and as you think about in your reference to the geopolitical side Eastern Europe , just has not been that large of a factor in the life Science research in bio processing area. As an example, and from a diagnostics perspective, we continue to see very high.
Let's say close to normal activity levels as well so western Europe for us continues to perform as expected.
Okay. No. That's helpful. And then maybe on the diagnostics business just looking at the core performance there ex Covid looks pretty strong can you just talk about that and then maybe Matt can talk about the diagnostics margins also really strong just the sustainability there.
Sure.
Think about the business momentum really in all regions with the exception of China, which I talked about.
Seeing patient levels activity levels really at.
At or very close to pre pandemic levels.
And so from a macro perspective in patient volume.
It's a positive environment for US and then if you put on the back of that the recent.
Product launches that we've had.
D H.
H 900, hematology as well as the Dx a fit.
Automation for small and medium sized labs.
Also continuing to benefit from that NPI pace that we have invested in here over the past year. So for US diagnostics continues to be a strong forward momentum.
Did you want to.
Yeah, I mean on the margin front of me.
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You think about that is going to be a big part of that will be cepheid and the volume that we're seeing there so as long as we've got that volume and we expect to have.
A touch last year into into into next quarter, but I think those margins are pretty pretty sustainable at that level, we've talked about and importantly, I think.
The margin profile of the Cepheid respiratory is no different than the margin profile of other stuff at Cepheid tests right. It's actually very similar to the to the flu. So I think it's I think it's a sustainable.
Sustainable number here as we look forward.
Thanks, guys.
We will take our final question from Luca <unk> of Barclays.
Good morning, Luke.
Good morning, Thanks again for the question here so.
So I guess I just wanted to kind of dig in on the long term growth targets of Biopharma high single digits.
I'm really trying to figure out.
Where the offsets are coming from you talked about the maps I know, you're adding new capacity, but as COVID-19 kind of is completely up in the air and that rolls off give us a sense of.
How much that could roll off and you guys continue to maintain that long term growth target.
I'm happy to so so look the way we're thinking about that is this.
The strength of our underlying business, which I laid out here in some detail clinical trial math biosimilar volumes keep in mind, it's the commercialized drugs that really drive volume here in this business and then of course that additional growth accelerator single use technology.
Adoption those are really the foundation that are driving the growth of this business and the Colgate business.
We will do what it does but that variation is within the realm of.
What we have been testing as the overall growth rate of the business and so you take the backlog, which continues to grow quarter over quarter and you take the growth drivers that I've laid out that is what supports the high single digit low double digit.
Growth for.
2022, and the high single digit longer term growth guide that we've talked about.
Great. Thanks, that's helpful.
And also back to I'll Dev Ron here.
I know that they are continuing to add capacity is that still does that coming in faster than you guys expected or should we still expect that the pace out through 'twenty, three and 'twenty four.
That's going to continue to pace out as we add line after line after line.
But I would say that these these are programs that are coming on at an.
On or better than schedule as the team continues to gain speed here not only with their subject matter expertise, which is differentiated so unique in the marketplace, but also with there.
Adaption adoption.
The Danaher business system.
So we look for that $500 million here in.
2022.
Okay, great. Thanks, that's all for me. Thank you.
And this does conclude our question and answer session I'd be happy to return the call to our hosts for any concluding remarks.
Thanks, everyone will be around the rest of the week for questions.
This does conclude today's call you may now disconnect your lines and everyone have a great day.
Yeah.
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