Q3 2023 Avantor Inc Earnings Call

Speaker 1: Good morning. My name is Emily and I'll be your conference operator today. At this time, I would like to welcome everyone to a Vans for a third quarter, 2023, earnings results conference call. After the prepared remarks, there will be the opportunity for any questions which you can ask by pressing start followed by the number one on your telephone keypad. If you require operator assistance at any time, these press start followed by zero. I will now turn the call over to Christina Jones Vice President of Investor Relations. Mrs. Jones, you may begin the conference.

Good morning, My name is M&A and I'll be your conference operator today at this time I would like to welcome everyone. <unk> third quarter 2023 earnings results conference call. After the prepared remarks, there will be the opportunity for any questions, which you can ask by pressing star followed by the number one on your telephone keypad, if you require opera.

Your assistance at any time, please press star followed by zero right.

I will now turn the call over to Christina Jones, Vice President of Investor Relations. Mr. James You May begin the conference.

Speaker 2: Good morning. Thank you for joining us. Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Brenna Jones, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our Investor Relations website at ir.avantoursciences.com. A replay of this webcast will also be made available on our website after the call.

Good morning, Thank you for joining us.

Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Brendan Jones, Executive Vice President and Chief Financial Officer.

The press release and the presentation accompanying this call are available on our Investor Relations website at IR data onto our sciences Dot Com AR.

A replay of this webcast will also be made available on our website after the call.

Speaker 2: Following our prepared remarks, we will open the line for questions.

Following our prepared remarks, we will open the line for questions.

Speaker 2: During this call, we will be making some forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future.

During this call we will be making some forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future.

Speaker 2: These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.

These forward looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.

Speaker 2: Actual results might differ materially from any forward-looking statements that we make today.

Actual results might differ materially from any forward looking statements that we make today.

Speaker 2: These forward-looking statements speak only as of the date that they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments.

These forward looking statements speak only as of the date that they are made we do not assume any obligation to update. These forward looking statements as a result of new information future events or other developments.

Speaker 2: This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the press release and in the supplemental disclosure package on our Investor Relations website. With that, I will now turn the call over to Michael.

This call will include a discussion of non-GAAP measures a reconciliation of these non-GAAP measures can be found in the press release and in the supplemental disclosure package on our Investor Relations website with that I will now turn the call over to Michael.

Speaker 3: Thank you, CJ, and good morning, everyone. I appreciate you joining us today. I'm starting on slide three.

C J and good morning, everyone. I appreciate you joining us today I'm starting on slide three.

Speaker 3: Third quarter business results were in line with our guidance across all key financial metrics, including core organic revenue contraction of 7.9% and adjusted EPS of 25 cents.

Third quarter business results were in line with our guidance across all key financial metrics, including core organic revenue contraction of seven 9%.

Adjusted EPS of <unk> 25 cents.

Speaker 3: As anticipated, market conditions in the third quarter were similar to the conditions in the second quarter. As inventory destocking and cautious customer spending continued to impact demand in our biopharma, healthcare and advanced technology and applied materials and markets.

As anticipated market conditions in the third quarter were similar to the conditions in the second quarter.

As inventory Destocking and cautious customer spending continued to impact demand in our biopharma healthcare and advanced technology and applied materials end markets.

Speaker 3: These headbands were partially offset by continued strong growth and cells to our higher education customers and in our biomaterials platform, where we delivered another quarter of double-digit growth.

Headwinds were partially offset by continued strong growth in sales of our higher education customers and then our biomaterials platform, where we delivered another quarter of double digit growth.

Speaker 3: cells of wild production materials for cell and gene therapies was another right spot in the quarter reflecting our relevance in this growing space.

Sales of bio production materials for cell and gene therapies was another bright spot in the quarter, reflecting our relevance in this growing space.

Speaker 3: Despite the industry-wide headwinds impacting the current environment, we are encouraged by the relative stability we have seen over the past couple of quarters, and remain focused on executing the actions that we outlined in July to accelerate our growth strategy and control costs.

Despite the industry wide headwinds impacting the current environment. We are encouraged by the relative stability, we have seen over the past couple of quarters.

We remain focused on executing the actions that we outlined in July to accelerate our growth strategy and control costs. This.

Speaker 3: This quarter, we continued those actions, including strength in our balance sheet by paying down more than $650 million of debt year to date, as free cash flow conversion in the quarter exceeded 110%.

This quarter, we continued those actions, including strengthening our balance sheet by paying down more than $650 million of debt year to date as free cash flow conversion in the quarter exceeded 110%.

Emily: Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Avantor's third quarter, 2023 earnings results conference call.

Speaker 3: winning several new customer contracts and renewals in bile form, education and healthcare as a result of our strong competitive position and enhanced commercial intensity.

Emily: After the prepared remarks, there will be the opportunity for any questions, which you can ask by pressing start followed by the number one on your telephone keypad. If you require operator assistance at any time, these press start followed by zero.

Winning several new customer contracts and renewals and Biopharma education, and health care as a result of our strong competitive position and enhanced commercial intensity.

Speaker 3: Conceering to add innovative proprietary products to the portfolio with our Avantor Magnetic Mixing System for single use mixing needs and JT Baker MCA tips for the TCAM Fluid Handling Platform. In addition, we generated strong momentum with Oxford Nanoport, one of our strategic suppliers for cell and gene therapy.

Continuing to add innovative proprietary products to the portfolio with our onshore magnetic mixing system for single use mixing needs and J T. Baker MCA tips for the TTM fluid handling platform and.

Christina Jones: I will now turn the call over to Christina Jones and vice president of investor relations.

Christina Jones: Mrs Jones, you may begin the conference. Good morning. Thank you for joining us.

Christina Jones: Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Bren Jones, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our investor relations website at ir.avontorciances.com. A replay of this webcast will also be made available on our website after the call.

In addition, we generated strong momentum with Oxford into Port one of our strategic suppliers for cell and gene therapies.

Speaker 3: Launching our Scientific Advisory Board, led by Dr. Jareb Rofi, including experts in Biologic Manufacturing and Technology, Chemistry, and Gene Therapy, who will guide our research and development efforts.

Launching our scientific Advisory Board led by Dr. Joe Brophy, including experts in biologic manufacturing and technology chemistry, and gene therapy, who will guide our research and development efforts and leveraging our onshore business system to continue executing on our productivity initiatives looking.

Speaker 3: and leveraging our Avant-Tour business system to continue executing on our productivity initiative.

Christina Jones: Following our prepared remarks, we will open the last line for questions. During this call, we will be making some forward-looking statements within the meaning of the federal security's laws, including statements regarding events or developments that we believe or anticipate 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 filing. 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. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments.

Speaker 3: Looking ahead to the fourth quarter, we are assuming that the demand trends we have experienced over the last couple of quarters continue. Although activity levels remain strong and overall inventory health is improving, we have not yet seen a change in order patterns.

Looking ahead to the fourth quarter, we are assuming that the demand trends we have experienced over the last couple of quarters continue.

Though activity levels remained strong and overall inventory health is improving we have not yet seen a change in order patterns. Nevertheless, customer sentiment does seem to be improving and we remain bullish on our outlook for the mid to long term given the strength of our platform and overall market positioning before I turn the call over to Brent I would remind you that.

Speaker 3: Nevertheless, customer sentiment does seem to be improving and we remain bullish on our outlook for the mid to long term, given the strength of our platform and overall market positioning. Before I turn the call over to Brent, I would remind you that he joined us in early August as part of our previously announced CFO transition.

He joined US in early August as part of our previously announced CFO transition.

Speaker 3: In the relatively short time that he has been with us, he has onboarded quickly and has already proven to be an excellent partner to me and to our leadership team as we work together to advance our growth strategy.

In a relatively short time that he has been with US. He is onboard it quickly and has already proven to be an excellent partner to me and to our leadership team as we work together to advance our growth strategy.

Christina Jones: This call will include a discussion of non-gab measures. A reconciliation of these non-gab measures can be found in the press release and in the supplemental disclosure package on our investor relations website.

Speaker 3: With that, let me turn it over to Brent to walk you through our third quarter results in more detail. Thank you, my

With that let me turn it over to Brent to walk you through our third quarter results in more detail.

Thank you Michael and good morning, everyone.

Speaker 4: Before I take you through our third quarter results, I would like to share some early observations. I know our end markets well for my days at Paul Corporation, and I'm thrilled to be back in the space at a company like a Vontor that is so well positioned to benefit from the long-term, secular growth opportunity that these markets offer.

Before I take you through our third quarter results I would like to share. Some early observations a newer end market as well from my days at Pall Corporation, and I'm thrilled to be back in the space at a company like <unk> that is so well positioned to benefit from the long term secular growth opportunity that these markets offer that.

Michael Stubblefield: With that, I will now turn the call over to Michael. Thank you, CJ, and good morning, everyone. I appreciate you joining us today.

Michael Stubblefield: I'm starting on slide three. Third-quarter business results were in line with our guidance across all key financial metrics, including core organic revenue contraction of 7.9%, and adjusted EPS of 25 cents. As anticipated, market conditions in the third quarter were similar to the conditions in the second quarter, as inventory destocking and cautious customer spending continued to impact demand in our bioforma, healthcare, and advanced technology and applied materials and markets. These headbands were partially offset by continued strong growth and sales to our higher education customers and in our bio materials platform, where we delivered another quarter of double-digit growth.

Speaker 4: That said, my excitement is about much more than the end markets. I'm very impressed at what the team has been able to build at a vontour. We have an incredibly strong foundation and the right core capabilities and talent to drive the growth and margin capture you have come to expect.

That said my excitement is about much more than the end markets I'm very impressed with what the team has been able to build in a van tour. We have an incredibly strong foundation and the right core capabilities and talent to drive the growth and margin capture you have come to expect.

Speaker 4: I also believe that a vato is unique within our space. The combination of our world-class channel and leading proprietary consumables portfolio is compelling. These make our revenue base both highly recurring and resilient, and we've shown the ability to convert strongly to cash no matter the weather. Finally, our capital intensity is relatively low. To me, this is a proven recipe to generate significant shareholder value.

I also believe that <unk> unique within our space the combination of our world class channel and leading proprietary consumables portfolio is compelling these make our revenue base, both highly recurring and resilient and we've shown the ability to convert strongly to cash no matter the weather.

Michael Stubblefield: Sales of our production materials for cell and gene therapies was another right spot in the quarter, reflecting our relevance in this growing space. Despite the industry-wide headwinds impacting the current environment, we are encouraged by the relative stability we have seen over the past couple of quarters, and remain focused on executing the actions that we outlined in July to accelerate our growth strategy and control costs. This quarter, we continued those actions, including strengthening our balance sheet by paying down more than $650 million of debt year-to-date, as free cash flow conversion in the quarter exceeded 110%.

Finally, our capital intensity is relatively low to me. This is a proven recipe to generate significant shareholder value.

Speaker 4: We do have work to do on business insights, capital allocation and business optimization.

We do have work to do on business insights capital allocation and business optimization part of what attracted me to <unk> is the opportunity to build on our strong foundation and leverage my operational experience to accelerate growth and performance.

Speaker 4: Part of what attracted me to a Vontor is the opportunity to build on our strong foundation and leverage my operational experience to accelerate growth and performance.

Speaker 4: I'm excited for what it's ahead and look forward to helping lead us through the next chapter.

Im excited for what is ahead and look forward to helping lead us through the next chapter.

Speaker 4: Now, moving into the third quarter numbers on slide four.

Now moving into the third quarter numbers on slide four.

Michael Stubblefield: Winning several new customer contracts and renewals in bioforma, education, and healthcare, as a result of our strong competitive position and enhanced commercial intensity. Continuing to add innovative proprietary products to the portfolio, with our Avantor Magnetic Mixing System for single use mixing needs, and JT Baker MCA tips for the TCAM fluid handling platform. In addition, we generated strong momentum with Oxford Nanoport, one of our strategic suppliers for cell and gene therapies, launching our scientific advisory board led by Dr. Jare Brofie, including experts in biologic manufacturing and technology, chemistry and gene therapy, who have to guide our research and development efforts, and leveraging our Avantor business system to continue executing on our productivity initiatives.

Speaker 4: Report Revenue was 1.72 billion for the quarter. While Revenue declined 7.9% on a core organic basis, it was essentially flat on a sequential as reported basis, consistent with what we told you in July .

Ported revenue was $1 72 billion for the quarter, while revenue declined seven 9% on a core organic basis. It was essentially flat on a sequential as reported basis consistent with what we told you in July the.

Speaker 4: The organic background has remained relatively static. We are navigating an environment with ongoing destocking and demand weakness in biopharma, as well as continued softness in the advanced technologies and applied materials and more.

The organic background has remained relatively static we are navigating an environment with ongoing destocking and demand weakness in biopharma as well as continued softness in the advanced technologies and applied materials end markets. We.

Speaker 4: We were encouraged to see modest incremental sales improvement at the end of the quarter from our semiconductor customers, suggesting that our OEM customers finished goods inventory levels are beginning to recover.

We were encouraged to see modest incremental sales improvement at the end of the quarter from our semiconductor customers, suggesting that our OEM customers finished goods inventory levels are beginning to recover.

Speaker 4: We also had another strong quarter in biomaterials, which was up double digits and provides a nice mixed tailwind to offset headwinds in our other high-margin visits.

We also had another strong quarter in biomaterials, which was up double digits and provides a nice mix tailwind to offset headwinds in our other high margin businesses.

Michael Stubblefield: Looking ahead to the fourth quarter, we are assuming that the demand trends we have experienced over the last couple of quarters continue, although activity levels remain strong, and overall inventory health is improving, we have not yet seen a change in order patterns. Nevertheless, customer sentiment does seem to be improving, and we remain bullish on our outlet for the mid to long term, giving us the strength of our platform and overall market positioning.

Speaker 4: Finally, we saw another strong quarter in higher education in the Americas, where we've seen a significant pickup over the last six months.

Finally, we saw another strong quarter in higher education in the Americas, where we've seen a significant pickup over the last six months.

Speaker 4: The just-egg-gr-us-profit for the quarter was $579 million, and our gross profit margin was 33.6% in line with last quarter on an absolute and rate-based.

Adjusted gross profit for the quarter was $579 million and our gross profit margin was 33, 6% in line with last quarter on an absolute and rate basis.

Michael Stubblefield: Before I turn the call over to Brent, I would remind you that he joined us in early August as part of our previously announced CFO transition. In the relatively short time that he has been with us, he has onboarded quickly, and has already proven to be an excellent partner to me and to our leadership team as we work together to advance our growth strategy.

Speaker 4: Year over year, agrous profit was impacted by lower sales volume, mix, inflation, and negative fixed cost levels.

Year over year, our gross profit was impacted by lower sales volume mix inflation and negative fixed cost leverage. However, we were able to partially bought these effects with our productivity efforts both on the plant floor and through targeted supply chain efficiencies.

Speaker 4: However, we were able to partially blunt these effects with our productivity efforts, both on the plant floor and through targeted supply chain efficiency.

Bren Jones: With that, let me turn it over to Brent to walk you through our third quarter results in more detail. Thank you, Michael.

Speaker 4: Adjusted EBITDA was approximately $318 million. Our Q3 adjusted EBITDA margin of 18.5% was in line with our expectations for the quarter. Year over year, our EBITDA margin performance was impacted by lower gross profit and negative fixed cost leverage on SG&A. We are working aggressively to offset these headwinds with productivity initiatives.

Adjusted EBITDA was approximately $318 million, our Q3 adjusted EBITDA margin of 18, 5% was in line with our expectations for the quarter.

Bren Jones: Good morning, everyone. Before I take you through our third quarter results, I would like to share some early observations. I know our end markets well for my days at Paul Corporation, and I'm thrilled to be back in the space at a company like Avantor that is so well positioned to benefit from the long term, secular growth opportunity that these markets offer. That said, my excitement is about much more than the end markets.

Year over year, our EBITDA margin performance was impacted by lower gross profit and negative fixed cost leverage on SG&A.

We're working aggressively to offset these headwinds with productivity initiatives.

Speaker 4: Interest and tax expenses were in line with our expectations. As a result, adjusted earnings per share came in at 25 cents for the quarter, reflecting the flow-through of adjusted EBITDA performance.

Interest and tax expenses were in line with our expectations as a result adjusted earnings per share came in at 25 for the quarter, reflecting the flow through of adjusted EBITDA performance.

Bren Jones: I'm very impressed at what the team has been able to build at Avantor. We have an incredibly strong foundation and the right core capabilities and talent to drive the growth and margin capture you have come to expect. I also believe that Avantor is unique within our space. The combination of our world-class channel and leading proprietary consumables portfolio is compelling. These make our revenue base both highly recurring and resilient, and we've shown the ability to convert strongly to cash no matter the weather.

Speaker 4: Moving to cash flow, we generated $193 million in free cash flow, reflecting more than 110% conversion of adjusted net income in a quarter, and approximately 95% on a year-to-date basis. Our Q3 performance was enhanced by continued disciplined working capital management.

Moving to cash flow, we generated $193 million in free cash flow, reflecting more than 110% conversion of adjusted net income in the quarter and approximately 95% on a year to date basis. Our Q3 performance was enhanced by continued disciplined working capital management.

Speaker 4: Our adjusted net leverage ended the quarter at 3.9 times adjusted EBITDA and we have paid down over $650 million of debt this year, which represents a 10% reduction in total debt.

Our adjusted net leverage ended the quarter at three nine times adjusted EBITDA and we have paid down over $650 million of debt this year, which represents a 10% reduction in total debt.

Bren Jones: Finally, our capital intensity is relatively low. To me, this is a proven recipe to generate significant shareholder value. We do have work to do on business insights, capital allocation, and business optimization. Part of what attracted me to Avantor is the opportunity to build on our strong foundation and leverage my operational experience to accelerate growth and performance.

Speaker 4: Deleveraging remains our top capital allocation priority and we continue to target an adjusted net leverage ratio below three times.

Deleveraging remains our top capital allocation priority and we continue to target an adjusted net leverage ratio below three times.

Speaker 4: Slide five outlines the components of our third quarter revenue performance.

Slide five outlines the components of our third quarter revenue performance core organic revenue declined seven 9% in the quarter.

Speaker 4: Core organic revenue declined 7.9% in the quarter. COVID-related revenues represented and approximately 1.7% headwind for the quarter, reflecting the expected rolloff of approximately 30 million of COVID-related sales from the third quarter last year. Net net, this results in a 9.6% organic revenue decline.

Bren Jones: I'm excited for what is ahead and look forward to helping lead us through the next chapter.

Bren Jones: Now, moving into the third quarter numbers on slide four. Reported revenue was 1.72 billion for the quarter. While revenue declined 7.9% on a core organic basis, it was essentially flat on a sequential as reported basis, consistent with what we told you in July. The organic background has remained relatively static. We are navigating an environment with ongoing destocking and demand weakness and biopharma, as well as continued softness in the advanced technologies and applied materials and more.

Covid related revenues represented an approximately one 7% headwind for the quarter, reflecting the expected roll off of approximately $30 million of Covid related sales from the third quarter last year net net this results in a nine 6% organic revenue decline.

Speaker 4: Foreign exchange translation represented a 2.3% tailwind driven by a modest appreciation of the euro, resulting in a reported revenue decline of 7.3% for the quarter.

Foreign exchange translation represented a two 3% tailwind driven by a modest depreciation of the euro resulting in a reported revenue decline of seven 3% for the quarter.

On to slide six.

Bren Jones: We were encouraged to see modest environmental sales improvement at the end of the quarter from our semiconductor customers, suggesting that our OEM customers finish goods to inventory levels are beginning to recover. We also had another strong quarter in biomaterials, which was up double digits, and provide the nice mixed tailwind to offset headwinds in our other high-margined businesses. Finally, we saw another strong quarter in higher education in the Americas where we've seen a significant pick-up over the last six months.

Speaker 4: From a regional perspective, the Americas declined 7.9% on a core organic basis, largely consistent with Q2, as we continue to experience pressure in the biopharma and advanced technologies and applied materials and market.

From a regional perspective, the Americas declined seven 9% on a core organic basis, largely consistent with Q2 as we continue to experience pressure in the Biopharma and advanced technologies and applied materials end markets.

Speaker 4: Our increased commercial intensity in education and government is driving share gains and led to the third consecutive quarter of growth, with higher education growing high single digits in the quarter. In addition, biomaterial sales were up double digits, driven by strong demand for our custom formulated silicone solutions in medical implants and healthcare applications.

Our increased commercial intensity and education and government is driving share gains and led to the third consecutive quarter of growth with higher education growing high single digits in the quarter. In addition, bio materials sales were up double digits driven by strong demand for our custom formulated silicones solutions.

Bren Jones: Adjusted gross profit for the quarter was $579 million, and our gross profit margin was 33.6% in line with last quarter on an absolute and rate basis. Year over year, our gross profit was impacted by lower sales volume, mix, inflation, and negative fixed cost leverage. However, we were able to partially blunt these effects with our productivity efforts, both on the plant floor, and through targeted supply chain efficiencies. Adjusted EBITDA was approximately $318 million.

And medical implants, and health care applications.

Speaker 4: Europe declined 8.6% on a core organic basis in the quarter, consistent with our expectations. On a year-over-year basis, Europe's performance was again driven by weakness in the biopharma and healthcare end markets, with softer demand for lab consumables and single-use solutions driven by ongoing destocking.

Europe declined eight 6% on a core organic basis in the quarter consistent with our expectations on a year over year basis. Europes performance was again driven by weakness in the Biopharma and health care end markets with softer demand for lab consumables and single use solutions driven by ongoing destocking.

Speaker 4: AMIA declined 5.4% on a core organic basis in the third quarter, driven by declines in lab consumables and single-use solutions, as well as formulated solutions for our semiconductor customers.

EMEA declined five 4% on a core organic basis in the third quarter driven by declines in lab consumables and single use solutions as well as formulated solutions for our semiconductor customers. Despite the macroeconomic challenges, particularly in China, our business saw solid growth in Bioproducts.

Bren Jones: Our Q3 adjusted EBITDA margin of 18.5% was in line with our expectations for the quarter. Year over year, our EBITDA margin performance was impacted by lower gross profit and negative fixed cost leverage on SGNA. We were working aggressively to offset these headwinds with productivity initiatives. Interest and tax expenses were in line with our expectations. As a result, adjusted earnings per share came in at 25 cents for the quarter, reflecting the flow through of adjusted EBITDA performance.

Speaker 4: Despite the macroeconomic challenges, particularly in China, our business saw solid growth in bioproduction process ingredients, services, and biomaterials.

<unk> process ingredients services and biomaterials.

Speaker 4: Slide 7 shows our core organic revenue change for the quarter by end market and product.

Slide seven shows our core organic revenue change for the quarter by end market and product group.

Speaker 4: Biopharma, representing almost 55% of our annual revenue, declined high single digits with similar performance in both research and production.

Biopharma, representing almost 55% of our annual revenue declined high single digits with similar performance in both research and production.

Bren Jones: Moving to cash flow, we generated $193 million in free cash flow, reflecting more than 110% conversion of adjusted net income in the quarter, and approximately 95% on a year-to-date basis. Our Q3 performance was enhanced by continued, disciplined, working capital management. Our adjusted net leverage ended the quarter at 3.9 times adjusted EBITDA, and we have paid down over 650 million of debt this year, which represents a 10% reduction in total debt. Deleveraging remains our top capital allocation priority, and we continue to target an adjusted net leverage ratio below 3 times.

Speaker 4: In the research environment, we saw a continuation of the conservative approach to customer spending that we witnessed in the second quarter. This is negatively impacting activity levels in research labs and constraining capital purchases, putting pressure on both consumables and equipment and instrumentation sales.

In the research environment, we saw a continuation of the conservative approach to customer spending that we witnessed in the second quarter. This.

This is negatively impacting activity levels in research labs, and constraining capital purchases, putting pressure on both consumables and equipment and instrumentation sales.

Speaker 4: Sales to mid-cap and large-cap pharma customers appear to have stabilized relative to last quarter, and the sales rate to our biotech customer base has been relatively consistent since the beginning of the year. While spending is constrained, customers continue to advance meaningful R&D pipelines and fund promising science.

Sales to mid cap and large cap pharma customers appear to have stabilized relative to last quarter and the sales rate to our biotech customer base has been relatively consistent since the beginning of the year, while spending is constrained customers continue to advance meaningful R&D pipelines and fund promising science.

Speaker 4: In the production environment, sales were similar to our second quarter results as demand continues to be impacted by inventory destocking and customer campaign delays. However, the environment does seem to be stabilizing, and we continue to see encouraging signals from our customers.

In the production environment sales were similar to our second quarter results as demand continues to be impacted by inventory destocking and customer campaign delays. However, the environment does seem to be stabilizing and we continue to see encouraging signals from our customers anecdotally inventory health.

Bren Jones: Slide 5 outlines the components of our third quarter revenue performance. Core organic revenue declined 7.9% in the quarter. COVID-related revenues represented and approximately 1.7% headwind for the quarter, reflecting the expected roll-off of approximately 30 million of COVID-related sales from the third quarter last year. Net net, this results in a 9.6% organic revenue decline. Foreign exchange translation represented a 2.3% tailwind driven by a modest appreciation of the euro, resulting in a reported revenue decline of 7.3% for the quarter.

Speaker 4: Anecdotally, inventory health continues to improve, and single-use engineering drawing activity remains strong.

<unk> continues to improve and single use engineering, drawing activity remains strong our focus on cell and gene therapy is paying dividends, yielding double digit growth in several critical product lines targeting. These workflows. We are confident that these signals will translate into improved order book trends and sales.

Speaker 4: Our focus on saline gene therapy is paying dividends yielding double digit growth in several critical product lines targeting these workflows. We are confident that these signals will translate into improved order book trends and sales in the coming quarters and continue to have high conviction in the fundamental drivers for biopharma, including a robust pipeline of trials and approvals across maps, saline gene therapy, and other modalities.

In the coming quarters and continue to have high conviction in the fundamental drivers for biopharma, including a robust pipeline of trials and approvals across maps cell and gene therapy and other modalities.

Bren Jones: On to slide 6. From a regional perspective, the America declined 7.9% on a core organic basis, largely consistent with Q2, as we continue to experience pressure in the biopharma and advanced technologies and applied materials and more. Our increased commercial intensity in education and government is driving share gains and led to the third consecutive quarter of growth with higher education growing high single digits in the quarter. In addition, bio material sales were up double digits, driven by strong demand for our custom formulated silicone solutions in medical implants and healthcare applications.

Speaker 4: Health care, which represents approximately 10% of our annual revenue, declined high single digits on a core organic basis. Consumable sales declines in Europe and the Americas were partially offset by continued strength in biomaterials, where sales of our high purity formulated silicones were up double digits in the quarter.

Health care, which represents approximately 10% of our annual revenue declined high single digits on a core organic basis consumable sales declines in Europe, and the Americas were partially offset by continued strength in biomaterials, where sales of our high purity formulated silicones were up double digits in the quarter.

Speaker 4: Education and government, representing approximately 10% of our annual revenue, grew low single digits on a core organic basis in the third quarter, the third consecutive quarter of growth, driven by high single digit higher education growth in the Americas.

<unk> and government, representing approximately 10% of our annual revenue grew low single digits on a core organic basis in the third quarter, the third consecutive quarter of growth driven by high single digit higher education growth in the Americas. We are encouraged by our recent commercial wins and the supportive funding.

Bren Jones: Europe declined 8.6% on a core organic basis in the quarter, consistent with our expectations. On a year over year basis, Europe's performance was again driven by weakness in the biopharma and healthcare end markets with softer demand for lab consumables and single use solutions driven by ongoing destocking. Amy had declined 5.4% on a core organic basis in the third quarter, driven by declines in lab consumables and single use solutions, as well as formulated solutions for our semiconductor customers. Despite the macroeconomic challenges, particularly in China, our business saw solid growth in bio production process ingredients, services, and biomaterials.

Speaker 4: We are encouraged by our recent commercial wins and the supportive funding environment and expect continued momentum in this platform. Advanced technologies and applied materials, representing approximately 25% of our annual revenue, declined low double digits on a core organic basis in the third quarter, driven by declines in the Americas and AMIA, largely attributable to inventory destocking at our semiconductor customers. For more information, visit www.fema.gov or call 1-866-325-7483.

<unk> and expect continued momentum in this platform.

Advanced technologies and applied materials, representing approximately 25% of our annual revenue declined low double digits on a core organic basis in the third quarter driven by declines in the Americas and EMEA largely attributable to inventory destocking at our semiconductor customers. However, there are.

Speaker 4: However, there are early signs that OEM inventory health is improving, and we are beginning to see modest sequential improvements in the outlook for this business.

Early signs that OEM inventory health is improving and we are beginning to see modest sequential improvements in the outlook for this business.

Speaker 4: By product group, proprietary materials and consumables offerings were down low double digits in the quarter, with destocking and reduced demand for bioproduction products and formulated solutions for semiconductor customers partially offset by strong biomaterials sales.

By product group proprietary materials, and consumables offerings were down low double digits in the quarter with destocking and reduced demand for bio production products in formulated solutions for semiconductor customers, partially offset by strong biomaterials sales.

Bren Jones: Flight 7 shows our core organic revenue change for the quarter by end-market and product group. Biopharma, representing almost 55% of our annual revenue, declined high single digits with similar performance in both research and production. In the research environment, we saw a continuation of the conservative approach to customer spending that we witnessed in the second quarter. This is negatively impacting activity levels and research labs in constraining capital purchases, putting pressure on both consumables and equipment and instrumentation sales.

Speaker 4: Sales of third-party materials and consumables declined high single digits, impacted by continued destocking of lab consumables, and reduced demand across research settings.

Sales of third party materials and consumables declined high single digits impacted by continued Destocking of lab consumables and reduced demand across research settings services, and specialty procurement, which integrate us directly in our customers' critical operations grew mid single digits for the third consecutive.

Speaker 4: Services and specialty procurement, which integrate us directly in our customers' critical operations, grew mid-single digits for the third consecutive quarter, while equipment instrumentation declined high single digits, reflecting constrained capital spending in the current macro environment. Slide 8 provides an update on our full-year guidance. As Michael noted in his overview comments, the backdrop for Q4 is relatively consistent.

Quarter, while equipment and instrumentation declined high single digits, reflecting constrained capital spending in the current macro environment Slide eight provides an update on our full year guidance as Michael noted in his overview comments the backdrop for Q4 is relatively consistent so.

Bren Jones: Sales to mid-cap and large-cap pharma customers appear to have stabilized relative to last quarter and the sales rate to our biotech customer base has been relatively consistent since the beginning of the year. While spending is constrained, customers continue to advance meaningful R&D pipes. In the production environment, sales were similar to our second quarter results as demand continues to be impacted by inventory destocking and customer campaign delays. However, the environment does seem to be stabilizing and we continue to see encouraging signals from our customers.

Speaker 4: So in terms of our full-year outlook, we're maintaining our revenue guidance, but tightening our range around the midpoint, adjusting our margin expectations, and raising the midpoint of our free cash flow guidance.

In terms of our full year outlook, we're maintaining our revenue guidance, but tightening our range around the midpoint adjusting our margin expectations and raising the midpoint of our free cash flow guidance.

Speaker 4: To get into specifics, we expect full year core organic revenue growth of negative 6% to negative 5% and organic revenue growth of negative 8.5% to negative 7.5%.

To get into specifics, we expect full year core organic revenue growth of negative 6% to negative, 5% and organic revenue growth of negative eight 5% to negative seven 5% in.

Bren Jones: Anticdotally, inventory health continues to improve and single-use engineering drawing activity remains strong. Our focus on saline gene therapy is paint dividends yielding double-digit growth and several critical product lines targeting these workflows. We are confident that these signals will translate into improved order book trends and sales in the coming quarters and continue to have high conviction in the fundamental drivers for biopharma, including a robust pipeline of trials and approvals across maps, saline gene therapy and other modalities.

Speaker 4: In each case, this tightens our range, but retains the same midpoint. After accounting for a 50 basis point tail end from FX, we anticipate full year 2023 reported growth of negative 8% to negative 7%.

In each case this tightened our range, but retains the same midpoint after accounting for a 50 basis point tailwind from FX, We anticipate full year 2023 reported growth of negative 8% to negative 7%.

Speaker 4: This tightened guidance reflects the themes we've discussed so far this morning. We continue to perform solidly against the end market backdrop, and things appear to have stabilized, evidenced by our sequential performance and expectations, but have not yet shown significant signs of improvement. Our long-term bullishness remains intact and is well-supported by the markets we serve, but the near term remains challenged from a growth perspective.

<unk> tightened guidance reflects the themes we've discussed so far this morning, we continue to perform solidly against the end market backdrop and things appear to have stabilized evidenced by our sequential performance and expectations, but have not yet shown significant signs of improvement are long term bullishness remains <unk>.

Bren Jones: Healthcare, which represents approximately 10% of our annual revenue, declined high single digits on a core organic basis. Consumable sales declined in Europe and the Americas were partially offset by continued strength and biomaterials where sales of our high-purity formulated silicones were up double digits in the quarters. Education and government, representing approximately 10% of our annual revenue, grew low single digits on a core organic basis in the third quarter, the third consecutive quarter of growth, driven by high single digit higher education growth in the Americas.

<unk> and is well supported by the markets, we serve but the near term remains challenged from a growth perspective.

Speaker 4: While top line is behaving as expected, we are facing some margin headwinds. We now expect adjusted EBITDA margins of approximately 18.5 to 18.8% lowering our midpoint by about 50 basis points. This is due to incremental pressure from manufacturing absorption, inventory charges, and modest mix impact from growth in the lower margin education end mark.

While top line is behaving as expected we are facing some margin headwinds. We now expect adjusted EBITDA margins of approximately 18, 5% to 18, 8% lowering our midpoint by about 50 basis points. This is due to incremental pressure from manufacturing absorption inventory charges and.

Modest mix impact from growth in the lower margin education end market.

Bren Jones: We are encouraged by our recent commercial wins in the supportive funding environment and expect continued momentum in this platform. Advanced technologies and applied materials, representing approximately 25% of our annual revenue to client low double digits on a core organic basis in the third quarter, driven by declines in the Americas and Amia, largely attributable to inventory destocking at our semiconductor customers. However, there are early signs that OEM inventory health is improving and we are beginning to see modest sequential improvements in the outlook for this business.

Speaker 4: Interest expense and tax expectations are unchanged for our Q2 update, so the resulting flow through to adjusted EPS results in a revised range of $1.2 to $1.6 with the midpoint at the bottom end of our previous guide.

Interest expense and tax expectations are unchanged from our Q2 update so the resulting flow through to adjusted EPS results in a revised range of $1 two to $1 six with the midpoint at the bottom end of our previous guide we expect our strong free cash flow performance to continue the working cap.

Speaker 4: We expect our strong free cash flow performance to continue. The working capital management you saw in Q3 will continue to drive strong conversion to cash. As a result, we are raising the midpoint of our free cash flow guidance. Free cash flow for the full year is anticipated to be 625 to 675 million. With that, I will turn the call back to Michael. Thank you, Brent. It's great to have you here.

Management you saw in Q3 will continue to drive strong conversion to cash as a result, we are raising the midpoint of our free cash flow guidance free cash flow for the full year is anticipated to be $625 million to $675 million.

Bren Jones: By product group, proprietary materials and consumables offerings were down low double digits in the quarter with destocking and reduced demand for bio production, products and formulated solutions for semiconductor customers partially offset by strong bio material sales. Sales of third-party materials and consumables declined high single digits impacted by continued destocking of lab consumables and reduced demand across research settings. Services and specialty procurement which integrate us directly in our customers critical operations, grew mid-single digits for the third consecutive quarter, while equipment instrumentation declined high single digits, reflecting constrained capital spending in the current macro environment.

With that I will turn the call back to Michael.

Thank you Brent it's great to have you here.

Without question, we are operating in a dynamic environment.

Speaker 3: We are responding by driving initiatives to accelerate growth, enhance productivity, and control costs.

We are responding by driving initiatives to accelerate growth enhance productivity and control costs, which together will put us in an even stronger position when the end markets turn.

Speaker 3: which together will put us in an even stronger position when the end markets turn.

Speaker 3: We're also in the midst of the golden age of scientific discovery driven by rapid innovation and the promise of new biologic therapies that have the potential to change lives.

We're also in the midst of the Golden age of scientific discovery, driven by rapid innovation and the promise of new biologic therapies that have the potential to change lives.

Speaker 3: There are currently more than 260 phase 2 clinical trials in gene therapy underway. More cell and gene therapies are expected to be approved in 2023 than in the past five years combined. And the Nobel Prize winning research led by Katalin Kariko and Drew Weissman has opened up a whole new field of synthetic biology.

There are currently more than 260 phase II clinical trials in gene therapy underway more cell and gene therapies are expected to be approved in 2023 than in the past five years combined.

Bren Jones: Slide 8 provides an update on our full-year guidance. As Michael noted in his overview comments, the backdrop for Q4 is relatively consistent. So in terms of our full-year outlook, we're maintaining our revenue guidance but tightening our range around the midpoint, adjusting our margin expectations and raising the midpoint of our free cash flow guidance. To get into specifics, we expect full-year core organic revenue growth of negative 6% to negative 5% and organic revenue growth of negative 8.5% to negative 7.5%.

The Nobel Prize, winning research led by capital and cargo and drew Wiseman has opened up a whole new field of synthetic biology.

Speaker 3: I know I speak for our leadership team, ensuring that we have both a deep sense of responsibility and pride for the role we play in helping set science and motion.

I know I speak for our leadership team ensuring that we have both a deep sense of responsibility and pride for the role we play in helping set science in motion.

Speaker 3: I'd like to thank our associates for their commitment to our mission and for their focus on commercial and operational execution.

I would like to thank our associates for their commitment to our mission and for their focus on commercial and operational execution.

Speaker 3: Finally, I'll close with a reminder that we are hosting an Investor Day on December 8th at 9 a.m. at the New York Stock Exchange. We look forward to seeing many of you in person or on the webcast.

Finally, I'll close with a reminder, that we are hosting an investor day on December eight at nine a M. At the New York Stock Exchange, we look forward to seeing many of you in person or on the webcast.

Bren Jones: In each case, this tightens our range but retains the same midpoint. After accounting for a 50 basis point tail end from FX, we anticipate full-year 2023 reported growth of negative 8% to negative 7%. This tightened guidance reflects the themes we've discussed so far this morning. We continue to perform solidly against the end market backdrop and things appear to have stabilized, evidence by our sequential performance and expectations, but have not yet shown significant signs of improvement.

Speaker 3: I will now turn it over to the operator to begin the question and answer portion of our call.

I will now turn it over to the operator to begin the question and answer portion of our call.

Speaker 1: Thank you. If you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. When preparing to ask your question, please ensure that your device is unmuted locally.

Thank you.

I would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind I would like to be remains Tim Mchugh. Please press star and then K when preparing to ask a question. Please ensure that your device is unmatched.

Speaker 1: Our first question today comes from the line of Dan Brennan with TD Cohen. Dan please go ahead your line is now open.

Our first question today comes from the line of Dan Brennan with TD Cohen.

Please go ahead. Your line is now open.

Speaker 5: Great, thank you. Congrats on the quarter. Brent, nice to meet you. Look forward to seeing you in person. Maybe first for Michael, just maybe we can just start with bioprocess. Obviously, it's a big part of your business and you guys have, you know, talked pretty favorably on this call about stabilization and activity. Could you just give us a sense of, like, the underlying growth rate this quarter, kind of what you're assuming in the fourth quarter and then importantly, as you look at, like, your order book and the stabilization, like, how we might think about the outlook for twenty four.

Great. Thank you congrats on the quarter Brent Nice to meet you look forward to seeing you in person.

Bren Jones: Our long-term bullishness remains intact and is well supported by the markets we serve but the near-term remains challenged from a growth perspective. While top line is behaving as expected, we are facing some margin headwinds. We now expect adjusted EBITDA margins of approximately 18.5 to 18.8% lowering our midpoint by about 50 basis points. This is due to incremental pressure from manufacturing absorption, inventory charges, and modest mixed impact from growth in the lower margin education and work.

Maybe first of all Michael just.

Maybe we can just start with bioprocess.

Obviously, it's a big part of your business and you guys have.

<unk> talked pretty favorably on this call about stabilization in activity could you just give us a sense of like the underlying growth rate this quarter.

Kind of what Youre, assuming in the fourth quarter and then importantly, as you look at like your order book and the stabilization like how we might think about the outlook for 'twenty four.

Speaker 3: Yeah, good to hear from you, Dan. I hope you're doing well. And thanks for the question. Bioprocessing is an important part of our business. As we've talked before, it's roughly 25% of our business are there about.

Yes, good to hear from you, Dan I hope Youre doing well and thanks for the question Bob processing is an important part of our business as we've talked before it's roughly 25% of our our business or thereabouts and I think we are encouraged that we have.

Bren Jones: Interest expense and tax expectations are unchanged for our Q2 update, so the resulting flow through to adjusted EPS results in a revised range of $1.2 to $1.6, with the midpoint at the bottom end of our previous guide. We expect our strong free cash flow performance to continue. The working capital management you saw in Q3 will continue to drive strong conversion to cash. As a result, we are raising the midpoint of our firm. Free cash flow guidance, free cash flow for the full year is anticipated to be 625 to 675 million.

Speaker 3: And I think we are encouraged that we seem to have caught the bottom here. Trends and order books have been stable over the last.

It seemed to have cut the bottom here.

<unk> and order books have been stable over the last.

Speaker 3: a couple of quarters and we continue to be encouraged by some of the momentum we see, you know, particularly in things like, you know, Selenzean Terrible, where we had another, you know, really good quarter. I would say customer sentiment continues to be strong. You know, the work that we do to

A couple of quarters, we continue to be encouraged by some of the momentum we see particularly.

Particularly in things like cell and gene therapy, where we had another really good quarter I would say customer sentiment continues to be strong.

Work that we do.

Speaker 3: understand inventory trends and production trends and such. I think all the signals are all pointing in the right directions and certainly the help of our customers inventory is definitely improving.

Understand inventory trends and production trends and such I think all the signals are all pointing in the right directions, and certainly the health of our customers inventory.

Michael Stubblefield: With that, I will turn the call back to Michael. Thank you, Brent. It's great to have you here.

Is definitely improving.

Speaker 3: Uh, you know, we talked last quarter a lot about, you know, some of the leading indicators for our single use business, things like engineering drawings and, you know, I continue to be encouraged by the strong level of activity that we see in that part of the business as well. And certainly the.

We talked last quarter, a lot about some of the leading indicators for our single use business things like engineering drawings.

Michael Stubblefield: Without question, we are operating in a dynamic environment. We are responding by driving initiatives to accelerate growth, enhance productivity, and control costs, which together will put us in an even stronger position when the end markets turn. We're also in the midst of the golden age of scientific discovery driven by rapid innovation and the promise of new biologic therapies that have the potential to change lives. There are currently more than 260 phase two clinical trials in gene therapy underway.

And I continue to be encouraged by the strong level of activity that we see in that part of the business as well and certainly the.

Speaker 3: The pipelines continue to advance and, you know, I would say the end market there continues to be quite solid. So, we are, you know, continue to be bullish about, you know, the mid to long term prospects for that, for that business. We're anxious to see, you know, order books turned as we, you know, indicated in the call.

The pipeline is continuing to advance.

I would say the end markets there continues to be quite solid so we are.

Seems to be bullish about the mid to long term prospects for that for that business. We're anxious to see order books earned.

<unk> indicated in the call.

Michael Stubblefield: More cell and gene therapies are expected to be approved in 2023 than in the past five years combined. And the Nobel Prize-winning research led by Catalan Carico and Drew Weisman has opened up a full new field of synthetic biology. I know I speak for our leadership team, ensuring that we have both a deep sense of responsibility and pride for the role we play in helping set science in motion. I'd like to thank our associates for their commitment to our mission and for their focus on commercial and operational execution.

Speaker 3: prepared remarks, we've not yet seen that happen, and we're certainly keeping a close eye on that.

Our prepared remarks.

We've not yet seen that happen.

We're certainly keeping a close eye on that and we.

Speaker 3: you know, would anticipate that that would happen in the coming quarters. But the, you know, the business is playing out about as we had anticipated, you know, with relative stability over the last couple of quarters. And as we think about, you know, the quarter ahead in Q4, you know, I think the way we've guided it is, you know, more of the same in a continuation of the trends that we've been seeing. As we think about 2024, you know,

We'd anticipate that that would happen in the coming quarters, but the.

The business is playing out about as we had anticipated.

With relative stability over the last couple of quarters and as we think about.

The quarter ahead in Q4, I think the way we've guided it is.

More of the same and a continuation of the trends that we've been.

<unk> as we think about 2024.

Michael Stubblefield: Finally, I'll close with a reminder that we are hosting an investor day on December 8th at 9 a.m, at the New York Stock Exchange. We look forward to seeing many of you in person or on the webcast.

<unk>.

Speaker 3: You know, it's a little bit early for us to call that, you know, we're right in the middle of our annual planning process and we'll take advantage of the next couple of months.

A little bit early for us to call that we're right in the middle of our annual planning process and you will take advantage of the next couple of months.

Speaker 3: you know, to put that plan together and, you know, we'll be prepared to give, you know, our formal 2024 guidance when we get into our Q4 call in February . But as I think about, you know, bioprocessing as it relates to 2023, we've talked about our core organic growth rate being off, you know, mid to high single digits for the year. And, you know, that's still my expectation. And when I think about that in the context of the broader space.

Emily: I will now turn it over to the operator to begin the question and answer portion of our call. Thank you. If you would like to ask a question today, please do so now by pressing start followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. Once pairing to ask your question, please ensure that your device is unmuted locally.

To put that plan together and we'll be prepared to give.

Our formal 2024 guidance when we get into our Q4 call in.

In February, but as I think about bio processing as it relates to 2023.

Talked about our core organic growth rate being up mid to high single digits for the year.

And.

That's still my expectation when I think about that in the context of the broader space.

Dan Brennan: Our first question today comes from the line of Dan Brennan with TD Cohen. Dan, please go ahead. Your line is now open. Great. Thank you. Congrats on the quarter. Brent, nice to meet you. Look forward to seeing you in person.

Speaker 3: I think you see the relevance and the positioning that we have here holding up well.

I think youll see the relevance and the positioning that we have here holding up well.

Great. Thank you and then maybe just as a follow up.

Speaker 5: You know, your smaller, tiny exposure and instrument orientation obviously is a nice benefit given the volatility that appears to be ongoing there. You know, Thermo talked about, you know, the end market being kind of negative right now in terms of a growth rate and they assume that continues at least for the 24 base. You guys seem more optimistic. I'm just trying to think through, is this more of a mixed basis? Is it more execution? Maybe just broadly, is you define like your end market and kind of how it's doing like

Your smaller China exposure and instrument orientation, obviously is a nice benefit given the volatility that it.

Michael Stubblefield: Maybe first from Michael, just maybe we can just start with file process. Obviously it's a big part of your business and you guys have, you know, talked pretty favorably on this call about stabilization and activity. Could you just give us a sense of like the underlying growth rate, this quarter, kind of what you're assuming in the fourth quarter. And then importantly, as you look at like your order book in the stabilization, like how we might think about the outlook for 24.

Appears to be ongoing there.

Thermo talked about the end market being kind of a negative right now in terms of a growth rate and I assume that continues at least for the 24 base.

Do you guys see more optimistic I'm just trying to think through is this more of a mixed basis is more execution, maybe just broadly as you define like your end market and kind of how it's doing like four.

Michael Stubblefield: Yeah, good to hear from you, Dan. Hope you're doing well. And thanks for the question. Well, processing is an important part of our business is we've talked before it's roughly 25% of our business are there about. And I think we are encouraged that we seem to have caught the bottom here. Trends and order books have been stable over the last couple of quarters, and we continue to be encouraged by some of the momentum we see, you know, particularly in things like, you know, sell and gene therapy, where we had another, you know, really good quarter.

Speaker 5: you know, if we're thinking about as we turn the page into 2024, even though you're not guiding is the right outlook to think like we're stable in the first half improvement, just any, any color on that kind of addressable market and the broader demand trend you're seeing. Thank you.

We're thinking about as we turn the page into 2024, even though youre not guiding is the rate outlook to think like were stable in the first half improvement just any any color on that kind of addressable market and the broader demand trends youre seeing thank you.

Speaker 3: I think, you know, I don't think we have any particular insights that would enable us to call, you know, when we see the end markets turning, we are encouraged by the relative stability that we've seen and market and customer sentiment does seem to be improving. So, you know, I don't want to get ahead of our of our process here yet on on 2024, but, you know, I think we are.

Yes.

I don't think we have any particular insights that would enable us to call. When we see the end markets. Turning we are encouraged by the relative stability that we've seen in market and customer sentiment does seem to be.

Michael Stubblefield: I would say customer sentiment continues to be strong, you know, the work that we do to understand inventory trends and production trends and such. I think all the signals are all pointing in the right directions and certainly the health of our customers inventory is definitely improving. We talked last quarter a lot about some of the leading indicators for our single use business, things like engineering drawings, and I continue to be encouraged by the strong level of activity that we see in that part of the business as well.

Improving so I don't want to get ahead of our of our process here yet on 2024, but I think we are.

Speaker 3: Uh, you know, encouraged by what we are saying, I would also say that the, you know, the actions that are that we're taking are within our control the doubling down on, you know, commercial intensity, you know, to accelerate growth and the, the cost actions that we're taking, you know, are are taking hold, you know, our teams are working incredibly hard to get, you know, our teams in front of our customers.

Encouraged by what we're seeing I would also say that the actions that we're taking that are within our control the doubling down on commercial intensity to accelerate growth and the cost actions that we're taking.

Are taking hold.

Our teams are working incredibly hard to get.

Our teams in front of our customers.

Speaker 3: You know, we've made some significant investments in our digital capabilities that, you know, are enabling, you know, more personalized, you know, marketing and campaigning at scale that that we're getting some nice traction on.

We've made some significant investments in our digital capabilities that are enabling.

Michael Stubblefield: And certainly the pipelines continue to advance and I would say the end market there continues to be quite solid. So we are continued to be bullish about the mid to long-term prospects for that, for that business. We're anxious to see, you know, order books turned as we, you know, indicated in the call, you know, prepared remarks, you know, we've not yet seen that happen. And we're certainly keeping a close eye on that and, you know, would anticipate that that would happen in the coming quarters.

More personalized marketing and campaigning at scale.

We're getting some nice traction on.

Speaker 3: And so when I think about just where we're at in the backdrop and where we've come from, the investments that we've made in growth and the actions we're taking to control costs certainly will have us positioned to emerge from the current environment stronger when the end markets do ultimately turn.

And so when I think about just where we're at in the backdrop and where we've come from.

The investments that we've made in growth in the actions were taken to control costs. Certainly we will have us positioned to emerge from the current environment stronger when the end markets do ultimately turn.

Michael Stubblefield: But the, you know, the business is playing out about as we had anticipated, you know, with relative stability over the last couple of quarters. And as we think about, you know, the quarter ahead in Q4, you know, I think the way we've guided it is, you know, more of the same in a continuation of the trends that we've been seeing.

Speaker 1: Our next question comes from the line of Vijay Kumar with Evercore ISI. Vijay please go ahead your line is now open.

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

Jay. Please go ahead. Your line is now open.

Michael Stubblefield: As we think about 2024, you know, it's a little bit early for us to call that, you know, we're right in the middle of our annual planning process and we'll take advantage of the next couple of months, you know, to put that plan together and, you know, would be prepared to give, you know, our formal 2024 guidance when we get into our Q4 call in February. But as I think about, you know, file processing as it relates to 2023, we've talked about our core organic growth rate being off, you know, mid to high single digits for the year.

Speaker 6: Hi Michael, good morning and thanks for taking my question. I didn't want to touch on the Martin's share Michael for Q4. I think that was sequential to step down of 100 basis points for adjusted EBITDAL margins.

Hi, Michael Good morning, and thanks for taking my question.

Morning, I just wanted to touch on the margins margins here Michael for Q4, I think the sequential step down 100 basis points for adjusted EBITDA margins.

Speaker 6: Looks like your revenue sequentially are stable. Is this a gross margin issue sequentially or a a use of you having an SKA and a step up here in Q4? Maybe some dots and not. What's driving the Q4 margins would be helpful?

It looks like your revenues sequentially are stable is this a gross margin issue sequentially all around.

Assuming an SG&A step up here in Q4, maybe some thoughts on what's.

Whats driving that Q4 margins would be helpful.

Michael Stubblefield: And, you know, that's still my expectation. And when I think about that in the context of the broader space, you know, I think you see the relevance and the positioning that we have here, you know, holding up well. Great. Thank you.

Speaker 3: Yeah, happy to give you some color on that, VG and things for the question. You are right. And as we signal, we are signaling a bit of incremental margin pressure as we work through the balance of the year here and how the justice are are fully or outlook by about 50 basis points or so. It is mostly a gross margin dynamic.

Yes happy to give you some color on that Vijay. Thanks for the question you are right and as we signaled we are.

Signaling a bit of incremental margin pressure as we.

Michael Stubblefield: And then maybe just as a follow up, you know, your smaller tiny exposure and instrument orientation, obviously is a nice benefit given the volatility that appears to be ongoing there. You know, thermo talked about, you know, the end market being kind of negative right now in terms of a growth rate and they assume that continues at least for the 24 base. You, you guys seem more optimistic. I'm just trying to think through is this more of a mixed basis is a more execution.

Worked through the balance of the year here and have adjusted our full year outlook by about 50 basis points or so it is mostly a gross.

Margin dynamic.

Speaker 3: related to a couple of key themes here, VJ.

Relative to related to a couple of.

The key themes here Vijay Firstly, hopefully you noticed.

Speaker 3: Firstly, hopefully you've noticed that the strong free cash flow performance that we generated in the third quarter.

The strong free cash flow performance that we generated in the third quarter.

Speaker 3: And, you know, that continues to be an important area of focus for us as we think about, you know, managing working capital in this.

And that continues to be an important area of focus for us as we think about managing working capital in this.

Michael Stubblefield: Maybe just broadly as you define like your end market and kind of how it's doing like, you know, if we're thinking about as we turn the page into 2024, even though you're not guiding is the right outlook to think like we're stable in the first half improvement. There's any any color on that kind of addressable market in the board of the man trend you're seeing. Thank you. I don't think we have any particular insights that would enable us to call, you know, when we see the end markets, you know, turning we are encouraged by the relative stability that we've seen in market and customer sentiment does seem to be improving.

Speaker 3: environment and you know so part of what we're reflecting here in our margins is

Environment and.

So part of what we're reflecting here in our margins is.

Speaker 3: you know, again, you know, strong focus on managing our own, you know, working capital and inventory levels and throttling back, you know, production levels, you know, incrementally, which is resulting in a bit more under absorption than what we had originally planned. We've all taken, you know, a pretty close look at just our overall inventory health. There's a bit of inventory cleanup here as we work towards the end of the year. And then I would say maybe 12 less or extent.

Again strong focus on managing our own.

Working capital and inventory levels, and throttling back production levels incrementally, which is resulting in a bit more under absorption than what we had originally planned. We have also taken a pretty close look at just our overall inventory health, there's a bit of inventory clean up here.

As we work towards the end of the year and then I would say maybe to a lesser extent.

Speaker 3: A third factor being a modest impact from some of the customer wins that I mentioned that are driving some of our above market growth in the education space.

Michael Stubblefield: So, you know, I don't want to get ahead of our of our process here yet on on 2024, but you know, I think we are, you know, encouraged by what we are seeing. I would also say that the, you know, the actions that are that we're taking are within our control, the doubling down on, you know, commercial intensity, you know, to accelerate growth and the cost actions that we're taking. You know, our taking hold, you know, our teams are working incredibly hard to get, you know, our teams in front of our customers.

A third factor being a modest impact from some of the customer wins that I mentioned that.

That are driving some of our.

Market growth in.

The education space.

Speaker 3: I think those are probably the key factors. As I go below the GM line, there is, you know, some modest, you know, step up in SG&A, you know, really particularly on a sequential basis as we think about, you know, maybe not some of the transactional effects.

I think those are probably the key factors as I go below the GM line there is.

Some modest.

Step up in.

And SG&A really particularly on a sequential basis.

As we think about maybe some of the transactional FX tailwind as we saw in Q3 repeating.

Michael Stubblefield: You know, we've made some significant investments in our digital capabilities that, you know, are enabling, you know, more personalized, you know, marketing and campaigning at scale, that we're getting some nice traction on. And so, you know, when I think about, you know, just where we're, where we're at in the, in the backdrop and, you know, where we've come from, you know, the investments that we've made in growth and, you know, the actions we're taking to control costs certainly will have us position. And to emerge, you know, from the current environment, you know, stronger wind the end markets, you know, do ultimately turn.

Speaker 3: at Calwinds we saw in Q3 repeating and you know some you know one time SNA benefits that we saw in Q3 that we don't expect to repeating Q4 but it's primarily all held up at the at the gross margin level VG.

And some.

Onetime SG&A benefits that we saw in Q3 that we don't expect to repeat in Q4, but it's primarily all held up at the gross margin level Vijay.

Speaker 6: That's helpful Michael and yes I didn't notice if we cash performance certainly at the high end of the industry So if that's not fee cash maybe one for our brand here on Brent what's the right way to think about 24 I'm not asking for guidance. It's more. What is the right jumpoff point should I be looking at two four? Trenton is that the jumpoff point or are there some one-off items here in two four? That thing that implied us you know

That's helpful. Michael and yes, I did notice your free cash performance certainly at the high end of.

The interface of fastener fee cash maybe one for our branch here on.

What's the right way to think about 24, I'm not asking for guidance. It's more what is the right jump off point should I be looking at Q4 trends is that the jump off point or are there. Some one off items here in Q4, because I think that imply to us.

Vijay Kumar: Our next question comes from the line of Vijay Kumar with Evercore IFI. Vijay Tees, go ahead, your line is now open. Hi, Michael, good morning, and thanks for taking my question.

Speaker 6: maybe 17 and a half, sub 17 and a half, but just for the Eberdon margins. Is that the right jump off point we should be thinking of for RAP next year?

Maybe it's MTN have sub $17 five adjusted EBITDA margins.

The right jump off point, we should be thinking of next year.

Speaker 4: Yeah, I'll want to get good to speak with you. I think falling on Michael's comments, it's too early to get to the exact jump off for 24, we're in the middle of our budget process. There are so many puts and takes there. So I don't think it's the right time to make the call, but we will be talking to everyone again soon. And we'll definitely go on our normal guidance.

Yes.

<unk> good to speak with you.

Michael Stubblefield: I didn't want to touch upon the margins, margins here, Michael, for Q4, I think there's sequential step down of 100 basis points for adjusted EBITL margins. It looks like your revenue sequentially are stable. Is this a growth margin issue sequentially or are you assuming an SKNA step up here in Q4? Maybe some thoughts on that, what's driving the Q4 margins would be helpful? Yeah, happy to give you some color on that, Vijay and thanks for the question.

I think following on Michael's comments, it's too early to get to the exact jump off for 24 were in the middle of our budget process Theres somebody puts and takes there. So I don't think its the right time to make the call, but we will we'll be talking to everyone again soon.

We will definitely go on a normal cadence.

Speaker 4: No gains pardon me and give you clarity in the months of thought.

Cadence pardon me and give you clarity in the months at all.

Yes.

Understood. Thanks, guys.

Yes.

Speaker 1: Our next question comes from Jack Mehan with Neffron Research. Jack please go ahead, your line is now open.

Our next question comes from Jack Meehan with Nephron research. Please.

Michael Stubblefield: You are right. And was we signal we are, you know, signaling a bit of incremental margin pressure as we, you know, work through the balance of the year here and, you know, have adjusted our full year outlook by about 50 basis points. Or, or so it is mostly a gross dynamic, gross margin dynamic, relative to related to a couple of, you know, key themes here, Vijay. Firstly, you know, hopefully you noticed that, you know, the strong free cash flow performance that we, that we generated in the third quarter.

Please go ahead. Your line is now open.

Speaker 7: Thank you. Good morning. Michael, I wanted to ask about what you're seeing at large pharma and large biotech. You described it as stable. We have seen some headlines around budget cuts from some large players. I was just curious what you're seeing and what you're assuming kind of for the fourth quarter. Yeah, good to hear.

Thank you good morning.

Michael one is the <unk>.

Ask about what youre seeing at large pharma and large biotech.

You described it as stable.

<unk> seen some headlines around budget cuts from some large players.

Curious, what you're seeing and what Youre assuming.

For the fourth quarter.

Yes, good to hear your voice Jack Thanks for the question.

Michael Stubblefield: And, you know, that continues to be an important area of focus for us is we think about, you know, managing working capital in this environment. And, you know, so part of what we're reflecting here in our margins is, you know, again, you know, strong focus on managing our own. You know, working capital and inventory levels and, and throttling back, you know, production levels, you know, incrementally, which is resulting in a bit more under absorption than what we had originally planned.

Speaker 3: I think as you look at the results that we just printed and the reconformation of our guide for the fourth quarter, we really are seeing the trends that we originally discussed maybe back in the second quarter, persisting through the back half of the year. And that's including the research environment within Biopharma.

I think as you look at the results that we just printed in the.

The reconfirmation of our of our guide for the fourth quarter, we really are seeing the trends that we originally discussed maybe back in the second quarter persisting through the back half of the year.

Including the research environment within Biopharma.

Speaker 3: You know, the funding had wins that we ran into earlier in the year on biotech, you know, seemed to have bottomed out in the second quarter. We saw relative, you know, stable, you know, revenue performance in that customer segment in the third quarter and we're assuming something similar for the fourth quarter. You know, under the head.

The funding headwinds that we ran into earlier in the year on biotech seemed to have bottomed out in the second quarter, we saw relative stable.

Michael Stubblefield: We've also taken, you know, a pretty close look at just our overall inventory health. There's a bit of inventory cleanup here as we work towards the end of the year. And then I would say maybe to a lesser extent, a third factor being a modest impact from some of the customer wins that I mentioned that are driving some of our, you know, above market growth in, you know, the education space. I think those are probably the key factors.

Revenue performance in that customer segment in the third quarter, and we're assuming something similar for.

For the fourth quarter.

Under the heading of.

Speaker 3: I would say positive signals and sentiment. I think if you look at funding for biotech, there is maybe some incremental bright spots in that space here over the last quarter to the keep us optimistic about that space. But we've caught the bottom there and we're assuming stability here in the fourth quarter. Large pharma, mid to large pharma, is an area where we also were starting to see some cautionary spending.

I would say positive signals in the sentiment I think if you look at funding for biotech there is maybe some some incremental bright spots in that space here over the last.

Michael Stubblefield: You know, as I go below the GM line, there is, you know, some modest, you know, step up in, in, in S, DNA, you know, really, you know, particularly on a sequential basis. As we think about, you know, maybe not some of the transactional effects. We saw in Q3 repeating, and, you know, some, you know, one time S, DNA benefits that we saw in Q3 that we don't expect to repeating Q4, but it's primarily all held up at the, at the gross margin level.

Quarter two.

Keep us optimistic about that space, but we've cut the bottom there and we're assuming stability here in the fourth quarter.

<unk> pharma mid to large pharma is an area, where we also were starting to see some cautionary spending.

Speaker 3: you know, trends, you know, creeping to the business there as we emerged from the second quarter. It played out largely in line with expectations in the third quarter and we're assuming that those trends continue. You know, here in the fourth quarter.

Trends creep into the business there as we emerged from the second quarter.

It played out largely in line with expectations in the third quarter and we're assuming that those trends continue.

Bren Jones: [inaudible] That's helpful, Michael, and yet I didn't notice a free cash performance, certainly at the high end of the industry, if that's not a free cash, maybe one for our Brent here on what's the right way to think about 24? I'm not asking for guidance, it's more, what is the right jumpoff point? Should I be looking at Q4? Trenton, is that the jumpoff point or are there some one-off items here in Q4?

Here in the fourth quarter.

Speaker 3: You know, and I think when I step above, you know, funding and budgets and, you know, kind of the cautionary posture that we see in the market right now, that, you know, we ultimately hang our hat on, you know, just the promising science that is being funded, the pipelines are incredibly robust.

I think when I step above funding and budgets and kind of a cautionary posture that we see in the market right now.

Ultimately hang our hat on.

Just a promising science that is being funded the pipelines are incredibly robust.

Speaker 3: There's a number of blockbusters moving their way through the pipeline activity level continues to be quite strong. And as I've referenced a couple of times, the commercial intensity that we're applying and have been applying over the last number of months really has this position well here.

And there is a number of blockbusters moving their way through the pipeline activity level continues to be quite.

Quite strong and as I referenced a couple of times the commercial intensity that we're applying and have been applying over the last number of months really has us positioned well here.

Bren Jones: Because I think that implied us, you know, maybe 70 and a half, sub 70 and a half, but Justin Ebert on margins, is that the right jumpoff point we should be thinking of for RAP next year? Yeah, I'll want to get good to speak with you. I think fully on Michael's comments, it's too early to get to the exact jumpoff for 24. We're in the middle of our budget process, there are some where he puts and takes there, so I don't think it's the right time to make the call, but we'll be talking to everyone again soon, and we'll definitely go on our normal cadence, pardon me, and give you clarity in the months that's all.

Activity levels with our customer.

We think about heading into the year end here is as strong as it's been all.

All year, so we continue to be.

Cautiously optimistic here as we as we close out the year.

Great and then.

Speaker 7: Great. And then, was wondering if you could share your thoughts on capital equipment and instrumentation, just what your expectations are for the fourth quarter. And maybe more broadly, we're seeing a little bit of a used market emerge for equipment that was placed the last few years. I was curious if you're seeing any examples of that and just what you think's going on. Thanks.

I was wondering if you could share your thoughts on capital equipment instrumentation.

Just what your expectations are for the fourth quarter and maybe more broadly.

Seeing a little bit of a used market emerge for equipment that was placed the last few years I was curious if you're seeing any examples of that and just what you think is going on.

Unknown Executive: Thank you guys.

Jack Meehan: Next question comes from Jack Mehen with Neffon Research. Jack, please thank you.

Speaker 3: So as you know, the capital equipment part of our business is relatively modest. It's less than 15% of our revenues. And it tends to be focused on kind of the lower dollar value purchases within our customers. You know, budgets think less than $50,000 type equipment and instruments. And we've seen a-

So as you know.

The capital equipment part of our business is relatively modest it is often less than 15% of our.

Michael Stubblefield: Good morning. Michael, wouldn't that ask about what you're seeing at large Pharma and large biotech? You described it as stable. We have seen some headlines around budget cuts from some large players. I was just curious what you're seeing and what you're assuming kind of for the fourth quarter. Yeah, good to hear your voice, Jack. Thanks for the question. I think as you look at the results that we just printed and the reconformation of our guide for the fourth quarter, we really are seeing the trends that we originally discussed maybe back in the second quarter, persisting through the back half of the year, and that's including the research environment within Pharma.

Of our revenues and it tends to be focused on kind of the lower.

Dollar value purchases within our customers.

But just think less than $50000 type equipment and instruments.

And we've seen I would say relative.

Speaker 3: stable performance on a dollar basis over the last couple of quarters. I think you know when we look at how we reported the quarter. You know there's a lot of step down on a percentage basis that's more driven off of you just the year over your comps but the revenue has been relatively consistent. You know over the last couple of quarters and.

Stable performance on a dollar basis over the last couple of quarters.

When we look at how we've reported the quarter.

Step down on a percentage basis, but that's more driven off of just the year over year comps, but the revenue has been relatively consistent.

Over the last couple of quarters and we're.

Speaker 3: Our expectation is that continues into the fourth quarter.

Our expectation is that continues into the fourth quarter and of course as we as we get into the fourth quarter.

Speaker 3: And of course, as we as we get into the fourth quarter, it's not, you know, it's quite.

Michael Stubblefield: The funding had wins that we ran into earlier in the year on biotech. It seemed to have bottomed out in the second quarter. We saw relative stable revenue performance in that customer segment in the third quarter, and we're assuming something similar for the fourth quarter. Under the heading of, I would say positive signals and sentiment. If you look at funding for biotech, there is maybe some incremental bright spots in that space here over the last quarter to keep us optimistic about that space, but we've caught the bottom there and we're assuming stability here in the fourth quarter.

Got it.

It's quite.

Speaker 3: topical or timely to talk about, you know, year end budget flushes and

Topical or timing to talk about year end budget flushes and.

Speaker 3: You know, which is a dynamic that we would typically experience that, you know, towards year end and it's primarily concentrated in this, this area of capital equipment as customers look to.

As a dynamic that we would typically experience it towards year end.

Primarily concentrated in this this area of capital equipment as customers look to.

<unk>.

Speaker 3: close out the year and use their available budgets. As we signal to the second quarter and consistent with the way we've guided the back half of the year, we're not expecting a year in budget flush. And so as I think about the fourth quarter on a relative revenue rate or performance, we would anticipate a capital equipment spending in Q4 to be similar to what we saw in the third quarter. Spring starter line...!

Close out the year and use their available budgets as we signaled in the second quarter and consistent with the way we've guided the back half of the year, we're not expecting a year end budget flush and so as I think about the fourth quarter on a relative revenue range.

Michael Stubblefield: Large pharma, mid to large pharma, as an area where we also were starting to see some cautionary spending trends creeping into the business there as we emerged from the second quarter. It played out largely in line with expectations in the third quarter and we're assuming that those trends continue here in the fourth quarter. I think when I step above funding and budgets and the cautionary posture that we see in the market right now, we ultimately hang our hat on just the promising science that is being funded.

Our performance we would anticipate.

Capital equipment spending in Q4 to be similar to what we saw in the third quarter.

Sounds good thank you.

Speaker 1: Our next question comes from Michael Riskin with Bank of America. Michael, please go ahead. Your line is now open.

Our next question comes from Michael <unk> with Bank of America. Michael. Please go ahead. Your line is now open.

Speaker 8: Great, thanks for taking my question, guys. And great to work with you, Brian . Looking forward to it. First, I want to talk a little bit about

Great. Thanks for taking my question guys and great to work with you Brian looking forward to it.

First I wanted to talk a little bit about.

Sort of.

Michael Stubblefield: The pipelines are incredibly robust. There's a number of blockbusters moving their way through the pipeline activity level continues to be quite strong. And as I've referenced a couple of times, the commercial intensity that we're applying and have been applying over the last number of months really has this position well here, our activity levels with our customer as we think about heading into the year end here as strong as it's been all year. So we continue to be cautious. We often as the carers we close out the year.

Speaker 8: Herve improvement as it shows up going forward. I think this quarter you guys really, you know, talked about encouraging trends, sentiment improvements, just more positive feedback, not so much orders improvement or anything like that. But as we think through, you know, going into next year and beyond, how should we visualize that curve of...

The curve of improvement as it shows up going forward I think this quarter you guys really talked about encouraging trend.

Michael Stubblefield: Great.

Trends sentiment improvements just more positive feedback not so much orders and further than that but as we think through going into next year and beyond how should we visualize that curve of the rebound.

Speaker 8: been more than four quarters of challenges in the marketing for you in terms of declines and destocking some of these pressures. So once things do inflect back up, is it going to take four quarters to get back to normal or is it going to move a little bit faster than that just because?

It's been it's been more than four quarters of challenges in the market and for you in terms of declines in Destocking from these pressures. So once things do inflect back up is it going to take four quarters to get back to normal.

I was going to move a little bit faster than that just because once it's washed out it'll come back quickly.

Michael Stubblefield: And then I was wondering if you could share your thoughts on capital equipment instrumentation, just what your expectations are for the fourth quarter. And maybe more broadly, we're seeing a little bit of a used market emerge for equipment that was placed the last few years. I was curious if you're seeing any examples of that and just what you think's going on. Thanks. So as you know, the capital equipment part of our business is relatively modest.

Speaker 3: I certainly understand the question. Michael, where is anxious as you are and everyone else is to, you know, try to understand and get some clarity as to how the shape of this recovery is ultimately going to unfold. Unfortunately, when we think about the short order cycle of our business, particularly in the lab part of our business, you know, which is a bit urgent.

Alright, I certainly understand the question Michael Quinn was anxious as you are in everyone else's.

Try to understand and get some clarity as to how the shape of this recovery is ultimately going to.

<unk>.

Unfortunately, when we think about.

The short order cycle of our of our business, particularly in the lab part of our business.

Michael Stubblefield: It's less than 15% of our revenues and it tends to be focused on kind of the lower dollar value purchases within our customers. You know, budgets think less than $50,000 type equipment and instruments. And we've seen, I would say, relative stable performance on a dollar basis over the last couple of quarters. I think when we look at how we've reported the quarter, there's a modest step down on a percentage basis, but that's more driven off of just the year over your comps.

Speaker 3: you know, days and weeks, we really don't have a, you know, a crystal ball that tells us.

Sure.

Days and weeks, we really don't have a crystal ball that tells us.

Speaker 3: you know, when these orders were ultimately going to, you know, turn around. And so, you know, we end up then, you know, trying to triangulate, you know, just based on, you know, what customers are telling us about their expectations for next year, you know, how the destocking trends are playing out and what's the health of their overall inventory. And as I look at the feedback that we've aggregated here coming out of the third quarter,

When these these orders were ultimately going to.

Turnaround and so we ended up then youre trying to triangulate just based on what customers are telling us about their expectations for next year.

The destocking trends are playing out and what's the health of their overall inventory and as I look at the feedback that we've aggregated here coming out of the third quarter.

Speaker 3: and look at the sentiment and the expectations from our customers, particularly in Biopharma, overwhelmingly, they're anticipating next year to be a stronger year than 2023. Undoubtedly, inventory levels are improving, many customers reporting normal inventories at this stage.

And look at the sentiment and the expectations from our customers, particularly within Biopharma.

Overwhelmingly they are anticipating next year to be a stronger year than 2023.

Michael Stubblefield: But the revenue has been relatively consistent, you know, over the last couple of quarters and where our expectation is that continues into, you know, the fourth quarter. And of course, as we get into the fourth quarter, it's not, you know, it's quite topical or timely to talk about, you know, year end budget flushes and, you know, which is a dynamic that we would typically experience that, you know, towards year end. And it's primarily concentrated in this area of capital equipment as customers look to close out the year and use their available budgets.

Undoubtedly inventory levels are.

Improving many customers reporting normal inventories at this stage.

Speaker 3: And the percentage of customers that are holding outsized inventories has, you know, has declined, you know, significantly. So the signals continue to be positive, but, you know, with a short order cycle business.

And the percentage of customers that are holding outsized inventories is.

Has declined significantly so the signals continued to be positive, but with a short order cycle business.

Speaker 3: Like we have, it is difficult for us to get really specific, particularly, you know, where we sit here, you know, in October to call, you know, what the timing of a turnaround would be going into next year. So we'll take the benefit of the next couple of months and we'll be back to you on how we think about twenty four when we get into February .

Like we have it is difficult for us to get really specific, particularly where we sit here.

In October to call.

Michael Stubblefield: As we signaled in the second quarter and consistent with the way we've guided the back half of the year, we're not expecting a year end budget flush. And so as I think about the fourth quarter on a relative revenue rate performance, you know, we would anticipate a capital equipment spending in Q4 to be similar to what we saw in the third quarter.

The timing of the turnaround would be going into next year. So we'll take the benefit of the next couple of months and we'll be back to you on how we think about 'twenty four when we get into February.

Michael Stubblefield: Sounds good.

February.

Speaker 8: And then just kind of follow up on that, Michael just to your point on the short order, the short cycle nature of the business and some of that limited visibility. There's been a lot of updates and bioform in the last couple months in terms of major cuts, reorg.

Okay Fair enough and then just kind of a follow up on that Michael.

And Michael just to your point on the short quarter, the short cycle nature of the business and some of that limited visibility.

There's been a lot of updates in Biopharma in the last couple of months in terms of major cuts.

Michael Ryskin: Thank you.

Patrick Donnelly: Our next question comes from Michael Riskin with Bank of America. Michael, please go ahead. Your line is now open. Great. Thanks for taking the question guys and great to work with you, Brian. We're looking forward to it. First, I want to talk a little bit about sort of, you know, the curve improvement as it shows up going forward. I think this quarter, you guys really, you know, talked about encouraging trends, sentiment improvements, just more positive feedback, not so much orders improvement like that.

Thanks.

Speaker 8: provides our announcement a couple of weeks ago, certainly was the most notable one, but not the only one. So can you sort of contrast that with your commentary on improving tone and improving sentiment? Is that some of those cuts that we're seeing in FARMA? Is that something that you've already been experiencing for a couple quarters? So it's not really incremental? Or why does that not correspond to what you're hearing from?

The Pfizer announcement, a couple of weeks ago, certainly was the most notable one but not the only one so can you sort of contrast that with your commentary on improving tolerant of improving sentiment I mean is that some of those cuts that we're seeing in pharma is that something that you've already been experiencing for a couple of quarters. So it's not really incremental or why why does that not correspond to.

What you're hearing from your customers now.

Speaker 3: I think that's what I think about it, Michael, is, you know, we've been calling those headwinds out now for a couple of quarters, and have had that baked into our outlook in the second half. So, you know, the fact that, you know, particularly those that had, you know, outsized COVID exposure are starting for tail activities and reset their outlook.

I think thats right way to think about it Michael as we've been calling those headwinds out now for a couple of quarters and have had that baked into our outlook in the second half so.

Patrick Donnelly: But as we think through, you know, going into next year and beyond, how should we visualize that curve of The Rebound. It's been more than four quarters of challenges in the market and for you in terms of the client and the stockings and some of these pressures. So, one thing to reflect back up, is it going to take four quarters to get back to normal? Or is it going to move a little bit faster than that?

The fact that particularly those that had outsized COVID-19 exposure are starting to curtail activities and reset their outlooks.

Speaker 3: and adjust their activities accordingly, is not incremental information for us. It's a trend that has fueled this cautionary posture that we've seen from large farm over the last couple of quarters. And with some of those reset.

And adjust their activities accordingly.

Not incremental information for us it's a trend that has fueled this cautionary posture that we've seen from large pharma over the last couple of quarters and with some of those resets now.

Patrick Donnelly: Just because once it's washed out, it'll come back quickly. Right. I certainly understand the question. Michael Clinton, whereas anxious as you are and everyone else is to try to understand and get some clarity as to how the shape of this recovery is ultimately going to unfold. Unfortunately, when we think about the short order cycle of our business, particularly in the lab part of our business, you know, which is a certain days and weeks, we really don't have a crystal ball that tells us, you know, when these orders are ultimately going to turn around.

Speaker 3: you know, now in place and, you know, I would say the reprioritization of pipelines and focus on things like spell and gene therapy, it really does favor our model where we're, you know, well positioned, you know, with a pretty compelling offering, you know, into that space. So, yeah, I think the way you're thinking about it is, is about right. These are not incremental to what we've already been experiencing last month.

Now in place and.

Through the re prioritization of pipelines and focus on things like cell and gene therapy. It really does favor our model where were well positioned with a pretty compelling offering into that space. So I.

I think the way you are thinking about it is is about right. These are not incremental to what we've already been experiencing the last couple of quarters.

Got it thanks, so much.

Okay.

Speaker 1: The next question comes from Patrick Donnelly with City. Patrick, please go ahead. Your line is now open.

The next question comes from Patrick Donnelly with Stifel. Patrick. Please go ahead. Your line is now open.

Patrick Donnelly: And so, you know, we end up then trying to triangulate, you know, just based on, you know, what customers are telling us about. Their expectations for next year, you know, how the stocking trends are playing out and what's the health of their overall inventory. And as I look at the feedback that we've aggregated here coming out of the third quarter and look at, you know, the sentiment and the expectations from our customers, particularly while pharma, you know, overwhelmingly, you know, they're anticipating, you know, next year to be a stronger year than 2023.

Hey, guys. Good morning, Thanks for taking the questions.

Speaker 3: Hey guys, good morning. Thanks for taking the questions. Brent, maybe you want for you on the, hey, good morning, Michael. Brent, maybe just on the margin side, just trying to get a little more granularity in terms of the moving pieces for 4Q. Would you be able to quantify, you know, what feels more one time? So again, particularly the inventory charges.

Brian maybe one for you on the Hey, good morning, Michael Brent.

Brent maybe just on the margin side, just trying to get a little more granularity in terms of the moving pieces for <unk>, yes.

Would you be able to quantify what feels more one times again, particularly the inventory charges is it fair to kind of ballpark that around the cash flow increase bridge like that $12 5 million, maybe just try to flush that out a little bit for us as we try to think about again.

Speaker 4: Is it fair to kind of ballpark that around the cash flow increase bridge, like, that 12 and a half million, maybe just try to flesh that out a little bit for us to try to think about again, kind of that that core for a few number, maybe outside some of the one timers.

Patrick Donnelly: Undoubtedly inventory levels are improving, you know, many customers reporting normal inventories at this stage. And the percentage of customers that are holding outsized inventories has, you know, has declined significantly. So the signals continue to be positive, but, you know, with a short order cycle business. Like we have, it is difficult for us to get really specific, particularly, you know, where we sit here, you know, in October to call, you know, what the timing of a turnaround would be going into next year.

Core <unk> number maybe outside kind of the one timers.

Yes, I mean.

Speaker 4: Thinking about it one timers versus on a rate basis, you know, absolutely for sure, you know, absorption is an issue. You always have to manage as Michael indicated there. I mean, that will depend a lot on the going forward. But, you know, we're, we're playing pretty tight attention to that. So, I think that has a decent one time nature as well as the inventory is definitely a one time nature. So, on a rate basis, probably at least half of it, I would put to one time and the rest of it is real based on the underlying activity.

Thinking about of one timers versus on a rate basis, absolutely for sure absorptions and issue you always have to manage as Michael indicated there that will depend a lot on the going forward, but we're we're pretty tight attention to that so I think that has a decent onetime nature as well as the inventory is definitely.

Onetime nature, so on a rate basis, probably at least half of it I would put two to one time and the rest of it is real based on the underlying activity.

Patrick Donnelly: So we'll take the benefit of the next couple of months and we'll be back to you on how we think about 24 when we get into February. Okay, but fair enough. And then just kind of follow up on that micro just to your point on the short order, the short cycle nature of the business and some of that limit of its ability. There's been a lot of updates and bioform and the last couple months in terms of major cuts, reorgs, you know, the Pfizer announcement a couple of weeks ago certainly was the most notable one, but not the only one.

Speaker 9: Okay, that's helpful. And then, Michael, maybe a similar vein, just on the pricing outlook, you know, you mentioned some of the kind of contracts you got on the academic education side, but maybe just talk about overall pricing, what you're seeing in the business, you know, how much discounting you guys are doing versus seeing pricing increases. And then similarly, I guess, in that bioprocessing market, as that comes back, how you think about the pricing environments as you work your way towards the recovery?

Okay. That's helpful and then Michael maybe a similar vein just on the pricing outlook you mentioned in some of the kind.

The contracts you've got on the academic education side, but maybe just talk about overall pricing what you're seeing in the business.

How much discounting you guys are doing versus seeing pricing.

Increases and then similarly, I guess in that bioprocess market as that comes back how you think about the pricing environment as you work your way towards the recovery.

Patrick Donnelly: So can you sort of contrast that with your commentary on improving tone and improving sentiment? I mean, is that some of those cuts that we're seeing in far is that something that you've already been experiencing for a couple quarters. So it's not really incremental. Or, you know, why, why does that not correspond to what you're hearing from your customers now. I think that's what we'd think about it Michael is, you know, we've been calling those headwinds out now for a couple of quarters and have had that baked into our outlook in the in the second half.

Speaker 3: So, pricing for us has been relatively stable, you know, throughout the year. You know, we did our customary, you know, increases early in the year, you know, have been quite frankly pleased that we haven't had to go back to the market multiple times this year. And, you know, I know our customers appreciated the relative stability we've been able to bring to them this year. And so, it's been relatively quiet throughout the year.

So pricing for us has been relatively stable throughout the year, we did our customary.

<unk> early in the year.

I have been quite frankly pleased that we haven't had to go back to the market multiple times this year.

And I know our customers have appreciated the relative stability, we've able been able to bring to them.

This year.

Patrick Donnelly: So, you know, the fact that, you know, particularly those that had, you know, outsized COVID exposure are starting to curtail activities and reset their outlooks and adjust their activities accordingly. You know, is not incremental information for us. It's a trend, you know, that has fueled this cautionary posture that we've seen from large farm up over the last couple of quarters and, you know, with some of those resets. You know, now in place and, you know, the reprioritization of pipelines and focus on things like spell and gene therapy, it really does favor our model where we're well positioned, you know, the pre compelling offering into that space. So, yeah, I think the way you're thinking about it is, is about right. These are not incremental to what we've already been experiencing last couple of quarters.

And so it's been relatively quiet throughout the year.

Speaker 3: from a pricing standpoint and, you know, we're getting the traditional price over COGS contribution to our margins that we would have seen historically and that are, you know, underpin our long-term growth algorithm. So, as I think ahead, you know, to the pricing environment, you know, I would say it's constructive.

From a pricing standpoint.

We're getting the traditional price over Cogs contribution to our margins that we would have seen historically and that are underpinning our long term growth algorithm. So as I think ahead to the pricing environment I would say it's constructive.

Speaker 3: And ultimately, as we think about the actions, we'll take next year, going into next year.

And ultimately as we think about the actions, we'll take next year going into next year.

Speaker 3: You know, it's going to somewhat depend on, you know, where inflation, you know, starts to settle up and we're right in that process now of getting, you know, the quotes and, you know, pricing terms with our suppliers.

It's going to somewhat depend on where inflation starts to settle out and we're right in that process now of getting the.

The quotes.

Pricing terms with our suppliers, which is an important input into how we think about setting our customer pricing going into next year, but it's been I would say constructive and stable and in line with our expectations.

Speaker 3: which is an important input into how we think about then setting our customer pricing going into next year. But it's been, I would say, constructive and stable and in line with our expectations.

Brent Jones: The next question comes from Patrick Donnelly with City. Patrick, please go ahead. Your line is now open. Hey, guys, good morning. Thanks for taking the questions. Brent, maybe you want for you on the good morning, Michael.

Understood. Thank you guys.

Speaker 1: The next question comes from Rachel Vansdell with J.P. Morgan. Rachel, please go ahead, your line is open.

The next question comes from Rachel <unk> with J P. Morgan please.

Please go ahead your line is open.

Brent Jones: Brent, maybe just on the margin side, just trying to get a little more granularity in terms of the moving pieces for 4Q. Would you be able to quantify, you know, what feels more one time? Again, particularly the inventory charges. Is it fair to kind of ballpark that around the cash flow increased bridge, like that 12 and a half million. Maybe just try to flesh that out a little bit for us as we try to think about again, kind of that that core 4Q number, maybe outside some of the one timers.

Okay.

Speaker 10: Perfect. Thank you for taking the question. So I want to ask on healthcare just given the high single digit decline. We're stepped down from the mid single digit growth into Q so you'd plan some biometriol strength, but that was more than offset by the consumables weakness in the Americas in Europe . So please just walk us through some more color on why there was that sequential step down and then are you expecting healthcare to return to growth into forking beyond.

Perfect. Thank you for taking the question. So I wanted to ask on healthcare just given the high single digit decline.

<unk> gone from the mid single digit growth in QQ stayed flat environment curious strength, but that was more than offset by the consumables weakness in the Americas and Europe. So can you just walk us through some more color on why there was that sequential step down and then are you expecting how cash returned to growth and <unk> and beyond.

Speaker 3: Yeah, thanks for the question. Ratesville pretty perceptive actually. The healthcare platform for us, which is about 10% of our overall revenues has a couple of critical components. One, a little more than half of the revenues are going to be in the content that we provide to our diagnostic customers and then the other.

Yes, thanks for the question Rachel pretty perceptive actually.

Brent Jones: Yeah, I mean, when thinking about a one timers versus on a rate basis, you know, absolutely for sure, you know, absorption is an issue. You always have to manage as Michael indicated there. I mean, that will depend a lot on the going forward, but, you know, we're, we're playing pretty tight attention to that. So I think that has a decent one time nature as well as the inventory is definitely one time nature. So on a rate basis, probably at least half of it. I would put to to one time and the rest of it is real based on the underlying activity.

The healthcare platform for us, which is about 10% of our overall revenues has a couple of critical components one a.

A little more than half of the revenues are going to be in the content that we provide to our to our diagnostic.

Customers and then the.

Speaker 3: third or 40% would be in our biomaterials platform, which, as you called out, has been a real source of strength for us throughout 2023. We delivered yet another quarter of strong double-digit growth and continue to be excited about the innovation and the positioning of our technology offering in that space and anticipate that that momentum certainly continues.

The other third or 40% would be in our biomaterials platform, which as you called out has been a real source of strength for us throughout 2023, we delivered yet another quarter of strong double digit growth and continue to be excited about the innovation in the positioning of our technology offering in that space and anticipate.

Michael Stubblefield: Okay, that's helpful. And then Michael, you know, maybe a similar vein just on the pricing outlook, you know, you mentioned in some of the kind of contracts you got on the academic education side, but maybe just talk about overall pricing, what you're seeing in the business, you know, how much discounting you guys are doing versus seeing pricing. Increased and then similarly, I guess in that bioprocessing market that comes back, how do you think about the pricing environment as you work your way towards the recovery.

That momentum.

Certainly continues.

Speaker 3: The issue on a, you know, within the third quarter was not really on a relative, you know, revenue basis that it actually printed right in line with how we would have, you know, incorporated into our guidance. We are running into a year over your comparable issue. If you look back into the third quarter of last year, I think we call it out at the time, particularly to our Ritter Business.

The issue on AR.

Within the third quarter was not really on a relative.

Revenue basis.

Printed right in line with how we would have.

Incorporated into our guidance, but we are running into a year over year comparable issue. If you look back into the third quarter of last year and I think we called it out at the time.

Particularly to our <unk> business.

Speaker 3: There was some pretty meaningful revenues that we had anticipated to come into Q4 that made it in under the shipping deadlines for Q3. So we had a little bit of an outsized performance in our Ritter platform, which is reported in this healthcare segment.

There was some pretty meaningful revenues that we had anticipated to come into Q4 that made it in under the shipping deadlines for Q3, So we had a little bit of an outsized performance in our <unk> platform, which is reported in this healthcare segment.

Michael Stubblefield: So pricing for us has been relatively stable, you know, throughout the year, you know, we did our our customary, you know, increases early in the year. You know, have been quite frankly pleased that we haven't had to go back to the market multiple times this year. And, you know, I know our customers appreciated the relative stability was able to have been able to bring to them this year. And so it's been relatively quiet throughout the year from a pricing standpoint.

Speaker 3: in the third quarter of last year, that was really more timing as opposed to underlying demand. So that's probably the biggest factor driving the reported percentages there, Rachel in the quarter. And we would anticipate fourth quarter on a percentage basis returning to a more normal.

In the third quarter of last year.

That was really more timing as opposed to underlying demand. So that's probably the biggest factor.

Driving the rips.

Michael Stubblefield: And, you know, we're getting the traditional price over COGS contribution to our margins that we would have seen historically and that are, you know, underpinned or long term growth algorithms. So if I think I had, you know, to the pricing environment, you know, I would say it's constructive. And, you know, ultimately, as we think about the actions will take next year, going into next year, you know, it's going to somewhat depend on, you know, where inflation starts to settle out.

Our reported percentages there Rachel in the quarter.

And we would anticipate fourth quarter on a percentage basis, returning to a more normal.

Speaker 3: more normal print for us. But just to be clear, that platform for us played out of the segment or end market played out for us as we would have anticipated.

More normal print for us, but just to be clear.

That platform for US played out of the segment or end market played out for us as we would have anticipated.

Okay.

Speaker 3: That's an extended basis returning to a more normal, you know, more normal print for us, but just to be clear, you know, that platform for us, you know, played out of the segment or end market played out for us as we would have anticipated.

Michael Stubblefield: And we're right in that process now of getting, you know, the quotes and, you know, pricing terms with our suppliers, which is an important input into how we think about, you know, then setting our customer pricing going into next year. But it's been that, you know, I would say constructive and stable and, you know, in line with our expectations.

Percentage basis, returning to a more normal.

More normal print for us, but just to be clear.

That platform for US played out of the segment or end market played out for us as we would have anticipated.

Michael Stubblefield: Understood. Thank you, guys.

Speaker 10: That's helpful. Thanks. And then I wanted to follow up on Dan's question just to push on 2024 a little bit more.

That's helpful. Thanks, and then I wanted to follow up on Dan's question. Just a question on 2024, a little bit more.

Speaker 10: So Dan mentioned one of your peers earlier this week noted that they're expecting market growth in 2024. So your previous long-term core growth organic guide was roughly in percent. So given those comments from your peer pointing towards market declines, is it reasonable assume that top line will decline for you guys next year on a core basis? Or given that minimal China exposure, having left COVID had wins, is it possible for you to grow top line next year?

So as Dan mentioned, one of your peers earlier. This week noted that theyre expecting market growth in 2024.

Rachel Vanstel: The next question comes from Rachel Vanstel with JP Morgan. Rachel, please go ahead. Your line is open. Thank you. Perfect. Thank you for taking the question. So I want to ask on health care, just given the high single digit declines, we're stepped down from the mid single digit growth in two kills. So you'd plan some biomaterial strength, but that was more than offset by the consumables weakness in the Americas in Europe.

He has long term core growth organic guidance roughly percent. So given those comments from your peer pointing towards market declines is it reasonable to assume that top line will decline for you guys next year on a core basis or given that China exposure, having lack COVID-19 headwinds is it possible for you to grow top line next year.

Michael Stubblefield: So please just walk us through some more color on why there was that sequential step down, and then are you expecting health care to return to growth and to fork you beyond? Yeah, thanks for the question. Rates feel pretty perceptive actually. The health care platform for us, which is about 10% of our overall revenues, has a couple of critical components. One, a little more than half of the revenues are going to be in the content that we provide to our diagnostic customers.

Speaker 3: Yeah, so, you know, firstly, I'm not sure it's especially productive for me to try to impact comments that, you know, one of my peers has has made in wood.

Yes, so firstly I'm not sure it's specialty productive for me to try to impact comments that one of my peers as it.

<unk> has made and would caution just to try to do the comparison and the definition of <unk>.

Speaker 11: Coshkin, just to try to take the comparison and the definition of how each of us look at the market, our portfolios, as you suggest, are vastly different, our end-market exposures are vastly different, as is our geographic exposure is vastly different. So it'll probably hard for us to try to reconcile how others might be trying to call, quote-on-quote, market growth for next.

How each of US look at at the market our portfolios as you suggest are vastly different.

End market exposures are vastly different as is our geographic exposure is vastly different so you'll probably hard for us to try to reconcile how others might be trying to call quote unquote market growth for.

Michael Stubblefield: And then the other third or 40% would be in our biomaterials platform, which, as you called out, has been a real source of strength for us throughout 2023. We delivered yet another quarter of strong double digit growth and continue to be excited about the innovation and the positioning of our technology offering in that space and anticipate that that momentum certainly continues. The issue within the third quarter was not really on a relative revenue basis, but it actually printed right in line with how we would have incorporated into our guidance.

For next year.

Speaker 11: But what I can say, for our portfolio and mix, certainly limited China exposures are good thing right now. We are bullish on the region long-term and we'll continue to make and seed growth investments, particularly in the biologic space, but not having China exposure today is obviously a good thing and we'll be a tail in force as we move into 2024.

But what I can say.

For our for our portfolio and mix certainly limited China exposure is a good thing right now.

We are bullish on the region long term and.

We will continue to make in seed growth investments, particularly in the biologics space.

But not having China exposure today is obviously, a good thing and will be a tailwind for us as we move into <unk>.

2024.

Speaker 11: Having a consumables driven portfolio, I think is also a real positive and strength for our platform. We've certainly been plagued by destocking and the inventory headwinds over the last number of quarters, but we do see that coming to the end. And the underlying demand in our end markets is stronger than what we've been realizing given that inventory drawdown. And then the last thing I would just reiterate.

Having a consumables driven portfolio I think is also.

A real positive and strength of our platform.

Michael Stubblefield: We are running into a year over your comparable issue. If you look back into the third quarter of last year, and I think we called it out at the time, particularly to our Ritter business, there was some pretty meaningful revenues that we had anticipated to come into Q4 that made it in under the shipping deadlines for Q3. So we had a little bit of an outsized performance in our Ritter platform, which is reported in this healthcare segment.

We've certainly been plagued by Destocking in the inventory headwinds over the last.

Number of quarters, but we do see that coming to the end and.

The underlying demand in our end markets is stronger than what we've been realizing given that inventory.

Drawdown and then the last thing I would just reiterate.

Speaker 11: is the sentiment is improving. I like our positioning. I like the funnel of activities that our teams have been able to build and we're anxious to see the order books turn, which would then give us a little bit more clarity on the shape of 2024, but probably a bit early for us to try to call that or give any more clarity than that from where we see.

The sentiment is improving.

And I like our.

Michael Stubblefield: In the third quarter of last year, that was really more timing as opposed to underlying demand. So that's probably the biggest factor driving the reported percentages there, Rachel, in the quarter, and we would anticipate fourth quarter on a percentage basis returning to a more normal at more normal print for us. But just to be clear, that platform for us played out of the segment in our market played out for us as we would have anticipated.

Positioning certainly I like the funnel of activities that our teams of.

<unk> been able to build in.

Michael Stubblefield: That's a percentage basis returning to a more normal more normal print for us. But just to be clear, that platform for us played out of the segment in our market played out for us as we would have anticipated. That's all folks. Thanks.

We're anxious to see the order books turn which will then.

Give us a little bit more clarity on the shape of 2024.

But probably a bit early for us to try to call that or give any more clarity than that from where we sit.

Okay.

Speaker 1: Our next question comes from Luke Sergott with Barclays. Luke please go ahead your line is now open.

Our next question comes from Alex <unk> with Barclays.

Please go ahead. Your line is now open.

Speaker 12: Great thanks for more and Brent welcome aboard. I promise it's not usually this is bad in this space. You certainly joined during an interesting time.

Great. Thanks, Good morning, Brent.

Welcome aboard.

It's not usually this is bad in this space.

And you certainly joined during an interesting time.

Speaker 12: So, I guess I just want to follow up here on the 4Q margin. If we kind of back out the inventory and your commentary on that, is it safe to assume that it's closer to – you guys would have put up closer to about an 18% EBITDA margin run rate? And is that safe for us to use from a modeling perspective on a jump-off?

So I guess I just wanted to follow up here on the <unk> margin, if we kind of back out the inventory in your commentary on that is it safe to assume that it's closer to you guys would have put up closer to about 18% EBIT margin run rate and is that safe for us to use from a modeling perspective on a jump off.

Michael Stubblefield: And then I wanted to follow up on Dan's question just to push on 2024 a little bit more. So Dan mentioned one of your peers earlier this week noted that they're expecting market growth in 2024. So your previous long-term core growth organic guide was roughly in a percent. So given those comments from your peer pointing towards market declines, is it reasonable as soon that top line will decline for you guys next year on a core basis?

<unk>.

Speaker 4: Again, I think you're triangulating something that makes chance in terms of taking the one time out. We really aren't making a call on 24 right now, so I...

Again, it's I mean.

I think youre triangulating to something that makes sense in terms of taking the one time out.

Really aren't making a call on 24 right now so I.

Michael Stubblefield: Or given that minimal China exposure having less COVID had wins, is it possible for you to grow the top line next year? Yeah, so, you know, firstly, I'm not sure it's especially productive for me to try to impact comments that, you know, one of my peers has has made and would caution, you know, just to try to take the comparison and the definition of, you know, how each of us look at at the market are portfolios, as you suggest, are vastly different are, you know, and market exposures are vastly different as is our, you know, geographic exposure is vastly different.

Speaker 4: You know, Michael's made those comments, I think, very astutely on it, but again, we'll give more color going forward. And you can say, oh, you know, you're just avoiding 24 on me, but the reality is there are so many puts and takes on that. There are volumes, absorption, all the rest of it, the growth in other businesses. So it's a complicated look, and just one quarter of the exit of a challenging environment, I don't want to...

Michael has made those comments I think we're very astutely on it.

But again, we'll give more color going forward there and you could you can say Oh youre just avoiding 24 on me, but the reality is there are so many puts and takes on that their volumes absorption all the rest of it the growth in other businesses. So it's a it's a complicated look and just one quarter of the exit of a <unk>.

<unk> environment I don't want to start your thinking for 'twenty four kind of off the cuff.

Speaker 4: start your thinking for 24 kind of off the cuff.

Michael Stubblefield: So, you know, probably hard for us to try to reconcile you know, how others might be trying to, you know, call, you know, quote-unquote market growth for, you know, for next year. But, you know, what I can say, you know, for our portfolio and mix certainly, you know, limited China exposure is a good thing right now. You know, we are bullish on the region long term and will continue to make and seed, you know, growth investments, particularly in the biologic space, but not having China exposure today is obviously a good thing and will be a tailwind for us as we move into, you know, 2024.

Speaker 12: Yeah, perfect. Thanks. And then lastly, here, you know, how are you guys thinking about or can you talk a little bit about the conversations you're having with biopharma customers? You guys, I assume that you still don't assume a budget flush. And is that really the conversations you're having? Is there a chance that that's getting pushed out or, you know, or is pharma starting to talk to you guys more about?

Okay perfect. Thanks, and then.

Lastly here.

How are you guys thinking about or can you just talk a little bit about the conversations you're having with biopharma customers you got it.

Soon that you still don't assume a budget flush.

And is that really.

The conversations you are having is there a chance that that's getting pushed out or.

Or is pharma starting to talk to you guys more about thank.

Speaker 12: things starting to come online next year. Give us a sense of, it's kind of like another way to ask Risken's question on kind of the curve, but...

<unk> is starting to come online next year give us a sense of it's kind of like a another way to ask risking question on kind of the curve but.

Speaker 12: If pharma's showing a lot more interest, you're starting to see a lot faster decision making. We can get a little bit more positive on that recovery portion.

If farmers showing a lot more interest youre starting to see a lot faster decision, making and we can get a little bit more positive on on that recovery portion.

Michael Stubblefield: You know, having a consumables driven portfolio, I think is also, you know, a real positive and strength for our platform. You know, we've certainly been plagued by, you know, destocking and the inventory headwinds over the last, you know, number of quarters, but we do see that, you know, coming to the end and, you know, the underlying demand in our end markets is stronger than what we've been realizing given that inventory drawdown.

Speaker 11: A couple of comments to address your question. When I think about, you know, budget flush, as I mentioned earlier, we haven't contemplated that in our, in our guidance. And certainly that would be upside to our current plan if it were to occur, but we don't really anticipate it. And for us.

Yeah, a couple of comments.

To address your question when you think about budget flush as I mentioned earlier, we haven't contemplated that in our in our guidance and certainly that would be upside to our current plan. If it were to occur, but we don't really anticipate it and for us.

Michael Stubblefield: And then, you know, the last thing I would just reiterate is, you know, the sentiment is improving, you know, I like our, you know, positioning certain, I like the funnel of activities that our teams have, you know, been able to build and, you know, we're anxious to see the order books, you know, turn, which would then, you know, give us a little bit more clarity on the shape of 2024. But probably a bit early for us to try to call that or give any more clarity than that from where we sit.

Speaker 11: You know, this topic of budget flush really is concentrated to our equipment and instrument category, which is less than 15% of our revenues. So not the primary driver of our business.

<unk> of budget flush really is concentrated to our equipment and instrument category, which is less than 15% of our.

Revenues so not.

The primary driver of our.

Of our business, but as we talk to our customers about activity levels, and such and clearly from a consumables.

Speaker 11: But as we talk to our customers about, you know, activity levels and such, and, you know, clearly from a consumables, you know, perspective, as I mentioned before, you know, the underlying demand for our products is higher than what we've been, you know, printing in our last couple of quarter results, or actually over the last year or more, just given the inventory draw, you know, that we've seen at our customers. And, you know, as that is, you know, starting to normalize, and we talk to our customers about, you know, specific, you know, their.

<unk> as I mentioned before the underlying demand for our products is higher than what we've been printing in our last couple of quarter results are actually over the last year or more.

Just given the inventory draw that we've seen at our at our customers and as that is starting to normalize and we talk to our customers about specific.

Michael Stubblefield: Our next question comes from Luke. Sir, got with Barclays. Luke, please go ahead. Your line is now open. Great. Thanks more, Brent. Welcome aboard. I promise it's not usually this, this bad in the space. You certainly joined during an interesting time. So I guess I just want to follow up here on the, the 4Q margin. If we kind of back out the inventory and your commentary on that, is it safe to assume that it's closer to, you guys would have put up closer to about 18%.

Sure.

Speaker 11: expectations for next year for activity level. I think the sentiment is just given the...

Expectations for next year for activity level.

I think the sentiment is just given the.

Speaker 11: pipelines that they're working on, the areas of focus that they have, the anticipation is that activity levels will be higher next year. And as these inventories are normalized, we'll not only benefit from a higher level of activity, but certainly we'll also be able to capture the underlying demand that's been satisfied here over the last year or two with inventory. So our customers continue to be quite encouraged, I would say, by what they're working on. And you know,

The pipelines that they're working on.

Areas of focus that they have the anticipation is that activity levels will be higher next year and as these inventories are normalized will not only benefit from a higher level of activity, but certainly will also be able to capture the underlying demand thats been satisfied here over the last year or two with.

Michael Stubblefield: Even a margin run rate, and is that safe for us to use from a modeling perspective on a jump off? Again, it's a, I mean, I think you're triangulating to something that makes chance in terms of taking the one time out. We really aren't making a call on 24 right now. So I, you know, Michael's made those comments. I think very, very astutely on it. Again, we'll give more color going forward there.

With inventory so our customers continued to be quite encouraged I would say by what they are working on.

And the end market.

Speaker 11: you know demands and themes continue to be quite strong. And you know, I like our positioning. I like the amount of activity, the commercial intensity we've applied, you know, to keep ourselves relevant and in front of our customers, our innovation engines are hitting on all cylinders.

<unk> and themes continue to be quite strong and I like our positioning I like the.

The amount of activity the commercial intensity we've applied.

To keep ourselves relevant and in front of our customers. Our innovation engines are hitting on all cylinders.

Michael Stubblefield: And you could, you can say, oh, you know, you're just avoiding 24 on me. But the reality is there are so many puts and takes on that. There are volumes, absorption, all the rest of it, the growth and other businesses. So it's a complicated look and just one quarter of the action of a challenging environment. I don't want to start your thinking for 24 or kind of off the cup. Yeah, perfect, thanks.

Speaker 11: you know, and giving us the right products to solve our customers' challenges. So, you know, I couldn't be more excited about our positioning. And, you know, I think we're doing all the right things to control, you know, costs and, you know, the other things that are within our control here that will only strengthen us as, you know, these end markets will ultimately turn.

And giving us the right products to solve our customers' challenges so.

I couldnt be more excited about our positioning and I think we're doing all the right things to control.

Cost and the other things that are within our control here that will only strengthen us as.

These end markets will ultimately turn.

Great. Thank you.

Speaker 1: The next question comes from Dan Leonard with UBS. Please go ahead, Dan. Your line is now open.

Michael Stubblefield: And then lastly here, you know, how are you guys thinking about, or can you talk a little bit about the conversations you're having with biopharma customers, you guys? I assume that you still don't want to assume a budget flush. And is that really the conversations you're having, is there a chance that that's getting pushed out or, you know, or as far as starting to talk to you guys more about. Things starting to come online next.

The next question comes from Dan Leonard with UBS. Please go ahead, Dan Your line is now open.

Yes.

Thank you for the time.

Speaker 6: Michael, I have a question on Celenjian therapy. Can you help me reconcile your commentary there with the market trends? That market's been hit especially hard by biotech funding constraints. Other suppliers have recently lowered their long range plans in the past two months and you sound very bullish. So I'd love to learn more about your things.

Michael I have a question on cell and gene therapy.

Can you help me reconcile your commentary there with the market trends that market's been hit, especially hard by biotech funding constraints. Other suppliers have recently lowered their long range plans in the past few months and you sound very bullish so I'd love to learn more about your thinking.

Michael Stubblefield: Next year, give us a sense of kind of like another way to ask Ryskin's question on kind of the curve. But if farmers showing a lot more interest, you're starting to see a lot faster decision making, we can get a little bit more positive on that recovery portion. A couple of comments to address your question. When I think about budget flush, as I mentioned earlier, we haven't contemplated that in our guidance, and certainly that would be upside, you know, to our current plan, if it were to a curve, but we don't really anticipate it.

Speaker 11: Yeah, so when I talked about the, you know, the optimism around cell and gene therapy, and, you know, the impact that it had on our 3rd quarter, you know, results, really talking about, you know, the commercialized platforms that are in the market, you know, that are that are being produced today. You know, there is, you know, I would say, incremental traction in that area. There's been a number of approvals this year and, you know.

Yes, so we've.

Talked about that.

Optimism around cell and gene therapy, and the impact that it had on our third quarter results really talking about the commercialized platforms that are in the market.

That are that are being produced today.

There is I would say incremental traction in that area, there's been a number of approvals.

This year.

<unk>.

Speaker 11: Given our offering and the work that we've seen it over the last number of years, we are incredibly well positioned, notwithstanding some of the manufacturing challenges and inefficiencies associated with launching these new modalities, we continue to be very well positioned there with an extremely relevant offering and the specifications that we want as we've run our model here.

Given our offering and the work that we've seeded over the last number of years, we are incredibly well positioned notwithstanding some of the manufacturing.

Michael Stubblefield: And for us, you know, this topic of budget flush really is concentrated to our equipment and instrument category, which is less than 15% of our revenues. So not, you know, the primary driver of our of our business. But as we talk to our customers about, you know, activity levels and such and, you know, clearly from a consumables perspective, as I mentioned before, you know, the underlying demand for our products is higher than what we've been, you know, printing in our last couple of quarter of results.

Challenges and inefficiencies associated with launching these new modalities and we continue to be very well positioned there with an extremely relevant.

Offering and the specifications that we won.

As we've run our model here and.

Speaker 11: you know, collaborating with our customers, you know, is resulting in strong double-digit growth of that platform.

Collaborated with our customers.

<unk> is resulting in strong double digit growth of that.

Of that platform.

Speaker 11: When I look at the pipeline, which is driving our R&D activities, the pipeline has never been stronger either. Are there customers that are optimizing and are programs falling out, certainly as usual as programs progress through that funnel. But as I indicated in my prepared remarks, the number of.

Michael Stubblefield: Or actually over the last year or more, just given the inventory draw, you know, that we've seen at our customers. And, you know, as that is, you know, starting to normalize and we talked to our customers about, you know, specific, you know, their expectations for next year for activity level. You know, I think the sentiment is, you know, just given the pipelines that they're working on, you know, the areas of focus that they have.

When I look at the pipeline.

Which is driving our R&D activities the pipeline has never been stronger either.

Are there customers that are optimizing.

Our programs falling out certainly as as is usual as programs progress through that funnel, but as I indicated in my prepared remarks.

The number of.

Speaker 11: promising programs there that are advanced to stage two and working their way through the pipeline here. The curve is accelerating meaningfully and we have a relevant offering and

Promising programs, there that or if advance to stage, two and working their way through the pipeline here.

Michael Stubblefield: The anticipation is that activity levels will be, you know, higher next year. And as, you know, these inventories are normalized will not only benefit from a higher level of activity, but, you know, certainly will also be able to capture the underlying demand that's been satisfied here over last year to with, with inventory. So our customers continue to be quite encouraged, I would say, by, you know, what they're working on. And, you know, the end market, you know, demands and themes continue to be quite strong.

Curves is accelerating meaningfully.

We have a relevant offering and.

Speaker 11: You know, this is going to be an important growth driver for us over the long term. You know, MABS from a revenue standpoint is still, you know, driving, you know, the bulk of our revenues, but it is nice to be able to already start to see, you know, the next waves of growth and where they're ultimately going to come from, you know, for our industry and certainly sell in gene therapy. And particularly gene therapy is going to be one of those areas for us.

This is going to be important growth driver for us over the over the long term <unk> from a revenue standpoint is still driving.

The bulk of our of our revenues, but it is nice to be able to already start to see.

The next waves of growth and where they're ultimately going to come from for our industry and certainly cell and gene therapy, and particularly gene therapy is going to be one of those areas for us.

Michael Stubblefield: And, you know, I like our positioning. I like the, you know, the amount of activity, the commercial intensity we've applied, you know, to keep ourselves relevant in front of our customers are innovation engines are hitting on all cylinders. You know, and giving us the right products to solve our customers challenges. So, you know, I couldn't be more excited about our positioning. And, you know, I think we're doing all the right things to control cost and, you know, the other things that are within our control here that will only strengthen us as, you know, these end markets will ultimately turn.

Luke Sergott: Great, thank you.

Okay.

Speaker 13: That's helpful color. And a follow up on bio production more broadly, are you seeing any differential trends across your product offering in that space, whether it be formulation products versus single use versus pumps, and is there any forward insight to be gleaned from those trends, whether one is more reflective of end customer demand versus another?

That's helpful color and a follow up on bio production more broadly are you seeing any differential trends across your product offering in that space, whether it be formulation products versus single use versus pumps and is there any forward insight to be gleaned from those trends, whether one is more reflective.

As of end customer demand versus another.

Speaker 11: Yeah, I think we're seeing similar trends across, you know, our offering there, your right to touch on, you know, our process ingredients and excipients and chromatography resins and, and such. And, you know, we're seeing, you know, headwinds in those categories, not really related to inventory, because we don't think there's been a stocking issue on those categories, but more just related to our customers managing their end

Yes, I think we're seeing similar trends across our offering there.

To touch on our process ingredients, an excipient some chromatography resins.

Michael Stubblefield: The next question comes from Dan, Leonard with UBS. Please go ahead, Dan, your line is now open. Thank you for the time. Michael, I have a question on cell and gene therapy. Can you help me reconcile your commentary there with the market trends? That market's been hit especially hard by biotech funding constraints. Other suppliers have recently lowered their long range plans in the past two months and you sound very bullish. So I'd love to learn more about your thinking.

And such and we are seeing headwinds in those categories not really related to inventory because we don't think there was theres been a stocking issue on those categories, but more just related to our customers managing their end.

Speaker 11: uh you know their end product revenues and you know resulting in just

They are in product revenues and resulting in just.

Speaker 11: you know, campaign, you know, pushouts and delays and, you know, maybe cutting batches, you know, in their campaign schedules.

Campaign push outs and delays and maybe cutting batches in their campaign schedules and then on the single use side not only do you see the activity.

Speaker 11: And then on the single use side, not only do you see the activity, you know, headwinds that are that are hitting our.

Michael Stubblefield: Yeah, so when I talked about the optimism around cell and gene therapy and the impact they had on our third quarter[inaudible] These associated with launching these new modalities, we continue to be very well positioned there with an extremely relevant offering and the specifications that we want as we've run our model here and collaborated with our customers is resulting in strong double digit growth of that platform. When I look at the pipeline, which is driving our R&D activities, the pipeline has never been stronger either, are there customers that are optimizing and our programs falling out, certainly as usual as programs progressed through that funnel.

Headwinds that are that are hitting our.

Speaker 11: you know, process ingredients business, but you also then have, you know, the double whammy there with the inventory stocking that we've talked about that, you know, does continue to be improving. So I wouldn't call out anything specific in terms of differences between the different components of our of our portfolio.

Processed ingredients business, but you also then have the double whammy there with the inventory stocking that we've that we've talked about that does continue to be improving so I wouldn't call out anything specific.

In terms of differences between the different components of our of our portfolio.

Speaker 11: But, you know, under the, again, under the heading of.

But under the again under the heading of.

Speaker 11: anecdotally good evidence, good sentiment, the engineering activity that front runs are, you know.

Anecdotally good evidence.

Good sentiment.

The engineering activity that front runs are.

Speaker 3: single-use order book, you know, continues to be, you know, quite strong.

Single use order book continues to be.

Speaker 3: And, you know, when I look into, you know, forecasts and things we're getting from our customers for 2024 overall, you know, this is a space that's growing. You know, some of my team's been in, you know, talking in the region in Asia here recently. And if you look at, you know, some of the growth that some of those customers are reporting, it's impressive.

<unk> strong.

And when I look into forecast and things we are getting from our customers for 2024 overall.

This is a space that's growing.

Some of my team has been in.

Talking in the region and Asia here recently, and if you look at some of the growth that some of those customers are reporting it's impressive.

Speaker 3: You know, we just finished another great quarter in Asia on bioprocessing, you know, excluding China, which is modest for us in any event. So there are a number of bright spots in this space that give us reason to believe that, you know, brighter days are ahead here.

We just finished another great quarter in Asia on bio processing, excluding China, which is modest for us in any event.

So there are a number of bright spots in this space that give us reason to believe that.

Brighter days are ahead here.

Michael Stubblefield: But as I indicated in my prepared remarks, the number of promising programs there that are advanced to stage two and working their way through the pipeline here, the curve is accelerating meaningfully. We have a relevant offering and this is going to be an important growth driver for us over the long term. Maps from a revenue standpoint is still driving the bulk of our revenues, but it is nice to be able to already start to see the next ways of growth and where they're ultimately going to come from for our industry and certainly selling gene therapy, and particularly gene therapy is going to be one of those areas for us.

I appreciate all that color. Thank you.

Speaker 1: Our next question comes from Catherine short with bed. Please go ahead, Catherine. Your line is now open.

Our next question comes from Catherine Schulte with Baird.

Please go ahead Catherine your line is now open.

Speaker 2: Hey, guys. Thanks for the questions. Michael, you mentioned that the percentage of customers that are holding outsized inventories has declined significantly. Can you just give some numbers around where that is today based on your surveys or conversations with customers and how that metric has trended throughout the year?

Hey, guys. Thanks for the question.

Michael you mentioned that the percentage of customers holding outlets inventories have declined significantly can you just give some numbers around where that is today based on your surveys or conversations with customers and how that metric has trended throughout the year.

Speaker 3: Happy to do so. When we first started to look at, you know, inventory health and, you know, trying to really get insights to try to help us triangulate, you know, just the trends.

Yes happy to do so.

When we first started to look at inventory health and trying to really get insights, let's try to help us triangulate just.

The trends.

Speaker 3: you know, there were, you know, a number of customers, both in the lab, you know, with our lab consumables, as well as in bioprocessing, particularly in single-use that were reporting, you know, excess of, you know, a year's worth of inventory. It wasn't everyone, but, you know, certainly a meaningful number of customers that were signaling they had more than a year's worth of inventory, you know, certainly our Ritter platform has, you know, you know, suffered under that, you know, pressure of excess inventory, as an example.

There were a number of customers.

Michael Stubblefield: That's helpful color and a follow up on bio production more broadly. Are you seeing any differential trends across your product offering in that space, whether it be formulation products versus single use versus pumps, and is there any forward insight to be gleaned from those trends, whether one is more reflective of and customer demand versus another. I think we're seeing similar trends across our offering there. You're right to touch on our process ingredients and acceptance and chromatography resins and such and we're seeing headwinds and those categories, not really related to inventory because we don't think there's been a stocking issue on those categories, but more just related to our customers managing their end product revenues.

Both in the lab.

With our lab consumables as well as in bio processing, particularly within single use that reporting.

Excess of a year's worth of inventory it wasn't everyone, but certainly a meaningful number of customers that we're signaling they have more than a year's worth of inventory.

Certainly our <unk> platform has.

Suffered under that pressure.

Pressure of excess inventory as an example.

And as I look at the.

Speaker 3: The work that we've done on both the lab side of our business as well as bioprocessing, we have no customers that are reporting those levels of inventory. So it's all come in under a year. And I would say the overwhelming majority of our customers.

The work that we've done on both the lab side of our business as well as bio processing, we have no customers that are reporting those levels of inventory. So it's all come in under.

A year and I would say the overwhelming majority of our customers.

Speaker 11: you know, find themselves in that we're right where we want to be or, you know, less than three months of excess inventory that's in their stock. So, I would say, you know, just the absence of customers that are sitting on more than a year of inventory is a real bright spot for us, and the fact that.

Find themselves in that we're right, where we want to be or less than three months of excess inventory.

That's in there.

In their stock so I.

Michael Stubblefield: And resulting in just campaign pushouts and delays and maybe cutting batches in their campaign schedules. And then on the single use side, not only do you see the activity headwinds that are hitting our process ingredients business, but you also then have the double whammy there with the inventory stocking that we've talked about that does continue to be improving. So I wouldn't call out anything specific in terms of differences between the different components of our of our portfolio, but you know, under that again, under the heading of anecdotally good evidence, you know, good sentiment, you know, the engineering activity that front runs are, you know, single use order book, you know, continues to be, you know, quite strong.

I would say just the absence of color.

Customers that are sitting on more than a year.

Inventory is a real bright spot for us and the fact that.

Speaker 3: Almost all of the customers are now signaling, you know, less than three months, if not already where they want to be is, you know, another data point fueling our optimism for, you know, our recovery here.

Almost all of the customers are now signaling less than three months, if not already where they want to be.

As another data point fueling our optimism for.

A recovery here in the coming quarters.

Yeah.

Speaker 14: Great. And then if you go back to the prior question, you know, if you look at the delta between excipients and other products going into biologics and then single use where you've seen more inventory destocking, you know, has that performance spread narrowed at all? You know, how have the items that didn't see stocking performed, and what does that tell you in terms of underlying activity levels?

Great and then if you go back 10.

Yeah, if you look at the Delta between Excipient and other products going into biologics and then single use <unk> seen more inventory destocking.

Is that pro forma spread narrowed at all.

The items that didn't destocking performed in and what does that tell you in terms of underlying activity levels.

Speaker 3: So that was one of the surprises I think that we talked a little bit about in the second quarter was, you know, kind of a turn down and some of the excipients and, you know, process ingredients, which, you know, really linked to, you know, our customers starting to more aggressively manage their.

So that was one of the surprises I think that.

Michael Stubblefield: And when I look into forecast and things we're getting from our customers for 2024 overall, you know, this is a space that's growing, you know, some of my team's been in, you know, talking in the region in Asia here recently, and if you look at some of the growth that some of those customers are reporting it's impressive. We just finished another great quarter in Asia on bioprocessing, you know, excluding China, which is modest for us in any event, so there are a number of bright spots in this space to give us reason to believe that brighter days are ahead.

We talked a little bit about in the second quarter.

Was kind of a turndown in some of the excipient.

Process ingredients, which really linked to our customers starting to more aggressively manage there.

Speaker 3: you know, end product revenues and not really linked to, you know, stocking of our products. And we've seen that continue in the third quarter, and our anticipation as is that continues in the fourth quarter as well. That's certainly how we've guided the quarter.

And product.

Revenues and not really linked to stocking.

Michael Stubblefield: Thank you. Appreciate all that color.

Stocking of our of our products and we've seen that continue in the third quarter and our anticipation is that continues in the fourth quarter as well and that's certainly how we've guided the quarter.

Speaker 11: So I wouldn't say that the spread has changed as we've moved through the third quarter or into the fourth quarter. I think we're way we've called this here as you see us reaffirming our revenue guide. It has things relatively stable at the moment.

So I wouldn't say that the spread has has changed as we've moved through the third quarter.

To the into the fourth quarter.

I think were way we've called this year as you see us reaffirming our our revenue guide has things relatively stable at the moment.

Catherine Schulte: Thank you. Next question comes from Catherine Schulte with bed. Please go ahead, Catherine, your line is now open. Hey guys, thanks for the questions. Michael, you mentioned that the percentage of customers that are holding out those inventories is declined significantly. Can you just give some numbers around where that is today based on your surveys or conversations with customers and how that metric has trended throughout the year? Happy to do so. When we first started to look at inventory health and trying to really get insights to try to help us triangulate the trends, there were a number of customers, both in the lab with our lab consumables as well as in bioprocessing particularly in single use reporting access of years worth of inventory.

Okay. Thank you.

Speaker 1: Those are all the questions we have time for today, so I'll turn the call back over to Michael for any closing remarks.

Those are all the questions. We have time for today, So I'll turn the call back over to Michael for any closing remarks.

Speaker 3: Yeah, thank you all for participating in our call today. Certainly look forward to updating you at our Investor Day on December 8th. Hope many of you can join us at that event, and until then, be well, everyone.

Yes. Thank you all for participating in our call today, certainly look forward to updating you at our Investor day on December eight many of you can join us at that event and until then be well everyone.

Thank you everyone.

Catherine Schulte: It wasn't everyone, but certainly a meaningful number of customers that were signaling they had more than a year's worth of inventory. Certainly our written platform has suffered under that pressure of access inventory as an example. As I look at the work that we've done on both the lab side of our business as well as bioprocessing we have no customers that are reporting those levels of inventory. It's all come in under a year and I would say the overwhelming majority of our customers find themselves in that we're right where we want to be or less than three months of access inventory that's in their stock.

Catherine Schulte: I would say just the absence of customers that are sitting on more than a year of inventory is a real bright spot for us. And the fact that almost all of the customers are now signaling less than three months if not already where they want to be is another data point, fueling our optimism for our recovery here in the coming quarters.

Michael Stubblefield: Great. And then if you go back to the prior question, if you look at the delta between acceptance and other products going into biologics and then single use where you've seen more inventory destocking, has that performance spread narrowed at all? How are the items that didn't see stocking performed and what does that tell you in terms of underlying activity levels? So that was one of the surprises. I think that we talked a little bit about in the second quarter was kind of a turn down in some of the acceptance and process ingredients, which really would link to our customer starting to more aggressively manage their end product revenues and not really linked to stocking of our products.

Michael Stubblefield: And we've seen that continue in the third quarter and our anticipation is that continues in the fourth quarter as well, certainly how we've guided the quarter. So I wouldn't say that the spread has changed as we've moved through the third quarter or into the fourth quarter. I think we're way we've called this here as you see us reaffirming our revenue guide has things relatively stable. Thank you.

Michael Stubblefield: Those are all the questions we have time for today. So I'll turn the call back over to Michael for any closing remarks. Yeah, thank you all for participating in our call today. Certainly look forward to updating you at our investor day on December 8th. Hope many of you can join us at that event and until then be well everyone. Thank you everyone.